5,155
2.1
(4.8)
million €
962
897
7.2
2.0
million €
349
(0.9)
4 For more information, see page 101.
5 Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes
6 Excluding emissions from oil and gas production
Audits along the value chain
2015
346
million metric tons
(9.2)
31.5
metric tons
25.1
21.5
16.7
Emissions of greenhouse gases
Emissions to air (air pollutants)6
Waste
Operating costs for environmental protection
Investments in environmental protection plants and facilities
million metric tons of CO2 equivalents
22.2
22.4
(0.9)
thousand metric tons
28.6
2014
Change in %
Suppliers
Number of on-site sustainability audits of raw material suppliers
Board of Executive Directors
9
The Board of Executive Directors of BASF SE
12
BASF on the capital market
14
Management's Report
The BASF Group
21
Our strategy
Innovation
Investments, acquisitions and divestitures
Business models and customer relations
Working at BASF
24
Letter from the Chairman of the
(6.3)
To Our Shareholders
10.4
135
120
12.5
Responsible Care Management System
Number of environmental and safety audits
130
121
7.4
Number of short-notice audits
68
73
(6.8)
Number of occupational medicine and health protection audits
53
48
Contents
3.2
3.0
thousand metric tons
56.2
45.4
23.8
2015
2014
Change in %
Safety, security and health
Transportation incidents with significant impact on the environment
0
1
(100)
Process safety incidents
per one million working hours
2.1
2.2
million €
(4.5)
8.2
9,982
Apprentices at year-end
Personnel expenses
Society
Donations and sponsorship
Safety, security, health and the environment
2015
2014
Change in %
112,435
113,292
(0.8)
3,240
3,186
1.7
million €
9,224
34
Lost-time injuries
1.4
Emissions of organic substances to water
Emissions of nitrogen to water
Emissions of heavy metals to water
million cubic meters
1,686
1,877
(10.2)
million cubic meters
22.1
22.7
(2.6)
thousand metric tons
17.3
18.7
(7.5)
Withdrawal of drinking water
per one million working hours
Total water withdrawal
588
1.5
(6.7)
0.97
0.91
6.6
Health Performance Index4
Environment
Primary energy use
million MWh
57.3
59.0
(2.9)
Energy efficiency in production processes
kilograms of sales product/MWh
599
1.9
39
41
42
November 20-30
D-BASF
Cigator Space
creator-pace
Creator Space
Welcome to Creator Space™ online!
Cator Space Sur
Creator Space™ online
A wide variety of people shared and discussed their
opinions, ideas and suggestions on the interactive
online platform set up for our anniversary year.
Visit us at creator-space.basf.com
750 discussions
12,700 participants
1,700
contributions
I
1
Mumbai
January 16-23
Ludwigshafen
Shanghai
6
5
2
3
Ludwigshafen
March 9-10
New York
May 26-31
Barcelona
October 26-30
4
São Paulo
August 17-23
6
Creator Space™ tour stops
The Creator Space TM tour circumnavigated the
globe, offering a broad program of presentations,
workshops and cultural events for customers,
partners, experts and employees.
LO
1
Watch a video on our anniversary year by searching youtube.com for: "BASF Creator Space - the year 2015 in review"
March 20-27
2
150 YEARS OF BASF
Which ideas emerged
黑气安全知识问卷
URBAN LIVING
A clean air app
How does growing urbanization affect
our planet? And how can we as
individuals lead a sustainable lifestyle?
These were the questions addressed at
the "Creatathon" in Shanghai. The idea:
People engage in a highly creative activity
for a sustained, uninterrupted
period of time. Just like in Shanghai,
when BASF invited six college teams to
spend 24 hours devoting themselves to
developing an app-based, sustainable
mobility solution. The goal of the app was
to help city dwellers minimize their carbon
footprint by selecting the most environ-
mentally friendly mode of transportation.
In the end, first place went to the team
from East China Normal University:
With their "Carbon Coin" idea, consumers
can cash in their personal contribution to
sustainability as "currency" on an online
platform - similar to emissions trading
between companies.
The green way to go: Megacities like Shanghai are already home to over
20 million people today. That means public transit and other alternate modes of
transportation will play an even greater role in reducing emissions in the future.
ORM
3,987
25 countries
150 YEARS OF BASF
50 co-creation activities in
International researchers and experts met in global
science conventions to discuss new findings and
work together on approaches for solutions.
3
Shanghai
November 10-11
Co-creation activities
"Co-creation" is a form of creative collaboration
between different groups of people, such as
customers, partners and employees.
SUVIMOVEL
BENEFICIOS
EQUIPE
E
Idea contests
Participants contributed ideas and suggestions in
worldwide idea contests. Panels of judges reviewed
the entries and selected the winners.
Jamming sessions
Not only musical jam sessions give rise to
creative compositions. We hosted people from
various disciplines as they exchanged ideas and
developed concepts together.
3
Creator Space™ science symposia
1.4 million visitors
10,000 people at
Employees at year-end
The knowledge and creativity of many minds can give rise to extraordinary
ideas. This was the inspiration behind our anniversary program. Dubbed
Creator Space™, it was a very special way to celebrate 150 years of BASF.
We organized a tour around the world, bringing scientists, customers, employees
and partners from all over the globe together at one table and launching an online
platform to connect everyone. Ideas were proposed surrounding three main
themes: urban living, smart energy and food. We call this "co-creation." It is one
way to fill our idea pipeline for the future and create value.
150 YEARS OF BASF
152
Consolidated Financial Statements
Statement by the Board of Executive Directors
155
Auditor's report
156
Statement of income
-157
Statement of income and expense recognized in equity - 158
Balance sheet
159
Statement of cash flows
Statement of equity
161
Notes
148
162
140
- 136
Social commitment
48
The business year at BASF
49
Responsibility along the value chain
Forecast
94
113
Corporate Governance
Corporate governance report
Compliance
Management and Supervisory Boards
Compensation report
Report of the Supervisory Board
Declaration of Conformity
129
138
What an anniversary
can do
Supplementary Information on the Oil & Gas Segment
Overviews
00000000000
000
BBE a Part of
Creator space
00000000000000000
SH
Cover photo:
Experts on food and urban living from a variety of fields
exchanged ideas at our Creator Space TM tour in São Paulo.
Among them was Eduardo Sekita de Oliveira, Executive
Director of Production for an agricultural customer in Brazil,
shown here talking with BASF's Maria Isabel Motta Hoffmann.
On this page:
Jamming session in New York: "Graphic recording" was a
popular way to keep track of new ideas at this and many
other anniversary events in 2015.
Chicago
June 23-24
I
I
I
I
I
To do so, we have relied on
collaboration with strong partners
for 150 years. This key to success
was the focus of our anniversary year
in 2015. Together, we developed
promising contributions to add value.
A few of these are outlined on the
pages that follow.
Supplementary information on the Oil & Gas segment - 225
products and solutions for our
customers, which we use to meet
global challenges.
"We add value as one
company" - this principle
is firmly embedded in our
strategy.
Ten-year summary
Trademarks
Glossary
Index
Detailed tables of contents can be found on each colored
chapter divider
235
237
238
243
Table of Contents
Welcome to BASF
Our integrated corporate
report combines financial
and sustainability reporting
to inform shareholders,
employees and the
interested public about
the 2015 business year.
24
creator
Our actions are centered on
developing innovative, sustainable
Employees
160
(6.4)
EBITDA
3
6,546
6,747
Performance Materials
6
2,984
3,166
12
2,060
2,304
Construction Chemicals
Coatings
3
6,135
6,306
2,228
Thereof Catalysts
1,678
Income from operations
5,820
Sales
EBITDA
2014 Change in %
2015
Key data Agricultural Solutions (in million €)
The Agricultural Solutions segment provides innovative
I solutions in the areas of chemical and biological crop
protection, seed treatment and water management as
well as solutions for nutrient supply and plant stress. Our
research in plant biotechnology concentrates on plants
for greater efficiency in agriculture, better nutrition, and
use as renewable raw materials.
៣_ Page 82
Agricultural Solutions
40
1,150
1,607
Income from operations (EBIT)
38
1,197
1,649
before special items
33
5,446
5
18,523
EBITDA
1
4,068
4,121
Performance Chemicals
(2)
2,029
1,998
Nutrition & Health
1
4,835
4,900
Care Chemicals
3
4,501
2,289
17,725
2,232
Income from operations
Sales
2014 Change in %
2015
Key data Functional Materials & Solutions (in million €)
Page 76
In the Functional Materials & Solutions segment, we
bundle system solutions, services and innovative prod-
ucts for specific sectors and customers, especially the
automotive, electrical, chemical and construction indus-
tries, as well as for household applications and sports
and leisure. Our portfolio comprises catalysts, battery
materials, engineering plastics, polyurethane systems,
automotive and industrial coatings and concrete admix-
tures as well as construction systems like tile adhesives
and decorative paints.
Functional Materials & Solutions
(5)
1,417
1,340
Income from operations (EBIT)
(6)
1,455
1,366
before special items
3
4,629
1,321
7
2
(8.4)
7,357
6,739
million €
(3.6)
11,043
10,649
million €
Income from operations before depreciation and amortization (EBITDA)
Income from operations (EBIT) before special items
(5.2)
74,326
70,449
million €
Sales
Change in %
Income from operations (EBIT)
2014
million €
7,626
million €
Employees and society
(23.0)
7,203
5,548
million €
Earnings per share
Net income
Income before taxes and minority interests
(85.8)
1,368
194
million €
Income from operations (EBIT) after cost of capital
(18.1)
6,248
1,297
2015
BASF Group 2015 at a glance
2014 Change in %
2015
12,998
Key data Oil & Gas (in million €)
Page 86
We focus on exploration and production in oil and
gas-rich regions in Europe, North Africa, Russia, South
America and the Middle East. Together with our Russian
partner Gazprom, we are active in the transport of
natural gas in Europe. At the end of the third quarter of
2015, we exited the natural gas trading and storage
business previously operated together with Gazprom
and, in exchange, are expanding our oil and gas produc-
tion in western Siberia.
Oil & Gas
(2)
1,108
1,083
Income from operations (EBIT)
(2)
1,109
1,090
before special items
Income from operations
15,145
Economic data
(14)
2,587
(28)
1,464
1,050
Net income
(36)
1,688
1,072
Income from operations (EBIT)
(24)
1,795
1,366
before special items
Income from operations
(1)
2,626
EBITDA
Thereof Dispersions & Pigments
Sales
15,433
(14,787) (13,259)
3
Cost of raw materials and merchandise
(37,323) (42,978)
4
Value added
16,470 17,404
2
Use of value added
4.1
Employees
4.2
Government
4.3 Creditors
4.4
Services purchased, energy costs
and other expenses
Minority interests
2
2014
77,058
%
8.7
11.7
Return on equity after tax
%
14.4
19.7
1 For more information, see page 55.
2 Including acquisitions
Value added 20153
Creation of value added (in million €)
1
Business performance
Amortization and depreciation
2015
72,981
(4,401) (3,417)
Return on assets
4.5
2015
4.5
3 Value added results from the company's performance minus goods and services purchased, depreciation and amortization. Business performance includes sales revenues,
other operating income, interest income and net income from shareholdings. Value added shows the BASF Group's contribution to both private and public income as well as
its distribution among all stakeholders.
Innovation
2015
2014
Change in %
Research expenses
million €
1,953
1,884
3.7
Number of employees in research and development at year-end
1
10,010
10,697
4
Shareholders (dividend and retention)
4.4
4.2
60.6%
2014
53.0%
11.4%
3.9%
4.1%
1.9%
1.9%
24.2%
29.6%
3
Business
performance
€72,981 million
2014:
€77,058 million
4.1
1
4.3
28.8
9.4%
4,401
2
2,799
2,849
Intermediates
(4)
6,337
6,093
Monomers
(27)
7,832
5,728
Thereof Petrochemicals
(14)
16,968
14,670
EBITDA
2014 Change in %
3,090
Income from operations
Sales
2014 Change in %
3,417
2015
Key data Performance Products (in million €)
Our Performance Products lend stability, color and bet-
ter application properties to many everyday products.
Our product portfolio includes vitamins and other food
additives in addition to ingredients for pharmaceuticals,
personal care and cosmetics, as well as hygiene and
household products. Other products from this segment
improve processes in the paper industry, in oil, gas and
ore extraction, and in water treatment. They furthermore
enhance the efficiency of fuels and lubricants, the effec-
tiveness of adhesives and coatings, and the stability of
plastics.
៣_Page 69
Performance Products
(11)
2,396
2,131
Income from operations (EBIT)
(9)
2,367
2,156
before special items
(4)
2015
3,212
Key data Chemicals (in million €)
2.90
2.80
15,648
3.6
Cash provided by operating activities
9,446
6,958
€
35.8
million €
6,013
7,285
Sales
million €
(17.5)
Depreciation and amortization²
Additions to property, plant and equipment and intangible assets²
Dividend per share
million €
Q-BASF
Chemicals
Page 63
The Chemicals segment comprises our business with
basic chemicals and intermediates. Its portfolio ranges
from solvents, plasticizers and high-volume monomers
to glues and electronic chemicals as well as raw materi-
als for detergents, plastics, textile fibers, paints and
coatings, crop protection and medicines. In addition to
supplying customers in the chemical industry and
numerous other sectors, we also ensure that other BASF
segments are supplied with chemicals for producing
downstream products.
BASF Report 2015
Economic, environmental and
social performance
(22.7)
€
We create chemistry
4.34
5.61
(22.6)
Adjusted earnings per share¹
€
5.00
5.44
(8.1)
Sales including intersegmental transfers
19,396
12.0
832
873
3
6,546
5
18,557
33
Income from operations before depreciation and amortization (EBITDA)
2,228
1,678
EBITDA margin
%
Income from operations (EBIT) before special items
9.5
6,747
5
6
Construction Chemicals
3,166
The BASF Group business year - Functional Materials & Solutions
Segment data (in million €)
1,649
2015
2014
Sales to third parties
Thereof Catalysts
Coatings
Performance Materials
Intersegmental transfers
18,523
17,725
Change in %
5
6,306
6,135
3
2,304
2,060
12
2,984
1,197
Catalysts - Sales by region
Income from operations (EBIT)
In the Catalysts division, sales to third parties rose by
€171 million to €6,306 million in 2015, mostly through highly
positive currency effects from the U.S. dollar (volumes -2%,
prices -8%, portfolio 1%, currencies 12%).
The decline in volumes and prices in the Catalysts divi-
sion was largely attributable to lower volumes and prices in
precious metal trading, reducing this business's contribution
by €187 million to €2,388 million. Greater sales volumes of
mobile emissions catalysts in Europe and Asia positively
affected sales. We posted a decline in volumes of chemical
and refinery catalysts, especially in Asia.
Income from operations before special items dropped
considerably compared with the previous year, due in partic-
ular to lower contributions from precious metal trading and
battery materials. The decline in precious metal trading
was essentially the result of lower precious metal prices. In
the battery materials business, fixed costs rose partly on
account of increased investment in research and develop-
ment. The gradual startup of plants in Środa Śląska, Poland,
80 Management's Report
The BASF Group business year - Functional Materials & Solutions
BASF Report 2015
and Ludwigshafen, Germany, for mobile emissions catalysts
and chemical catalysts also contributed significantly to the
rise in fixed costs. Special charges arose mainly through an
impairment on intangible assets.
In February 2015, we acquired from TODA KOGYO
CORP. a 66% share in a company that specializes in cathode
materials for lithium-ion batteries in Japan, thus expanding
our global battery materials network.
(Location of customer)
1 Europe
-234
North America
4
38%
3
33%
Asia Pacific
Management's Report 79
€6,306 million
Sales rise by €171 million to €6,306 million,
boosted mainly by positive currency effects
Considerable earnings decline due in part to
lower contribution from precious metal trading
■
Catalysts
For 2016, we expect continuing high demand from our key
customer industries, automotive and construction, and are
planning on volumes increases in all divisions. We do, how-
ever, anticipate negative effects from continuing declines in
precious metal prices and predict overall that sales will match
the prior-year level. We aim to slightly raise income from
operations before special items.
1,607
1,150
40
Income from operations (EBIT) after cost of capital
96
(240)
Assets
Research expenses
Additions to property, plant and equipment and intangible assets
38
13,341
3
392
379
3
854
650
31
Functional Materials & Solutions
In the Functional Materials & Solutions segment, we increased
sales to third parties by €798 million to €18,523 million as
compared with the previous year. This development was
essentially due to positive currency effects in all divisions.
Prices dipped slightly overall, while volumes remained stable
(volumes 0%, prices -4%, portfolio 0%, currencies 9%).
Higher demand, especially from the automotive industry, was
not able to offset lower sales volumes in precious metal trad-
ing. At €1,649 million, income from operations before special
items exceeded 2014 levels by €452 million, primarily thanks
to the sharp earnings increases in the Performance Materials
and Construction Chemicals divisions. Despite higher special
charges in the Catalysts division, income from operations for
the segment grew by €457 million to €1,607 million.
12,987
BASF Report 2015
One focus of our strategy is the ongoing optimization of our
product portfolio and structures according to different regional
market requirements as well as trends in our customer indus-
tries. We are positioning ourselves to profitably grow faster
than the market.
2015
Operating division
Catalysts
Construction Chemicals
Coatings
Performance Materials
Products
Automotive and process catalysts
Battery materials
Precious and base metal services
Concrete admixtures, cement additives, underground
construction solutions, flooring systems, sealants, solutions
for the protection and repair of concrete, high-performance
mortars and grouts, tile-laying systems, exterior insulation
and finishing systems, expansion joints, wood protection
Coatings solutions for automotive and industrial applications
Decorative paints
Engineering plastics, biodegradable plastics, standard foams,
foam specialties, polyurethane, epoxy systems for fiber-rein-
forced composites
Customer industries and applications
Automotive and chemical industries, refineries, battery
manufacturers
Solutions for the protection of air quality as well as the
production of fuels, chemicals, plastics and battery materials
Cement and concrete producers, construction companies,
craftspeople, builders' merchants
Solutions for new building construction, maintenance, repair
and refurbishment of commercial and residential buildings as
well as infrastructure
Automotive industry, body shops, steel industry, painting
businesses and private consumers, wind power industry
Automotive manufacture, electrical engineering, packaging,
games, sports and leisure, household, mechanical engineering,
construction, medical technology, sanitation and water
industry, solar thermal energy and photovoltaics, wind energy
BASF Report 2015
Products, customers and applications
The BASF Group business year - Functional Materials & Solutions
78 Management's Report
plus €452 million
21%
BASF Report 2015
How we create value - - an example
Management's Report 77
The BASF Group business year - Functional Materials & Solutions
MasterSeal® 6100 FX
A new generation of cement-based waterproofing
Value for BASF
Capital expenditures
Expected sales growth
through 2020
Concrete structures that collect, store and transport water are
designed to have a service life of more than 20 years. To keep
maintenance costs at a minimum, specific protection from
water damage is needed. MasterSeal® 6100 FX is a water-
proofing membrane with unmatched performance on the
market. With this product, we expect sales growth of up to
30% by 2020.
Value for our customers and the environment
Reduced material
consumption
up to 50%
MasterSeal® 6100 FX's high-yielding formulation requires up to
50% less material than typical applications to form a water-
proofing membrane. For users, this reduces storage and
transportation costs and allows for easier handling. Compared
with other formulations, the product reduces greenhouse gas
emissions by up to 70%. Its quick hardening time also mini-
mizes construction and maintenance time for our customers.
Strategy
Development of innovative products and technolo-
gies in close collaboration with our customers
Focus on specialties and system solutions that allow
customers to stand out from the competition
We use BASF's expertise as the world's leading chemical
company to develop innovative products and technologies in
close cooperation with our customers. Our aim is to find the
best solution in terms of cost and functionality, helping our
customers contribute to sustainable development. Our spe-
cialties and system solutions enable customers to stand out
from the competition.
We aim to secure our leading market position in Europe, to
profitably expand our position in the North American market
and to selectively extend our activities in the growth regions of
Asia, South America, Eastern Europe and the Middle East.
up to 30%
2015
Location
Startup
Construction: mobile emissions catalysts plant
2017
Expansion: mobile emissions catalysts plant
2015
Construction: coating resins
2015
Capacity expansion: Cellasto®
2016
Schwarzheide, Germany
Totsuka, Japan
Trostberg, Germany
Wyandotte, Michigan
Yesan, South Korea
Capacity expansion: dry mortars
Construction: compounding plant for UltramidⓇ and UltradurⓇ
Capacity expansion: compounding plant for UltramidⓇ and UltradurⓇ
2017
Optimization: coating production
2016
2015
Capacity expansion: thermoplastic polyurethanes (TPU)
2015
2015
2015
Construction: concrete admixtures
Bangpoo, Thailand
Coatings technical competence center
2015
Caojing, China
Chennai, India
Geismar, Louisiana
Kolkata, India
Lagos, Nigeria
Lemförde, Germany
Münster, Germany
Rayong, Thailand
Shanghai, China
Slentite pilot plant
Project
Expansion: coating resins
2016
Construction: automotive coatings
2017
Construction: mobile emissions catalysts plant
2016
Construction: polyurethane systems
2015
Construction: concrete admixtures
2016
Construction: chemical catalysts
South America, Africa, Middle East
from urea-based fertilizers
into the atmosphere
Construction Chemicals
2015:
€5,820 million
Change:
7%
2014:
€5,446 million
Fungicides
€2,499 million
Change:
Percentage of sales:
4%
Income from operations before special items
(in million €)
2015 1,090
2014
1,109
43%
Change:
minus €19 million
BASF Report 2015
༄」⌘」g」༄」」
How we create value - an example
Sales
Portfolio
and beyond
Functional Crop Care
Biological crop
protection, seed
treatment, polymers
and colorants
Change:
-2%
Insecticides
€829 million
Percentage of sales:
14%
Functional Crop Care
€343 million
Change:
11%
Percentage of sales:
6%
Herbicides
€2,149 million
Percentage of sales:
37%
Factors influencing sales
Volumes
Prices
Currencies
Management's Report 83
The BASF Group business year - Agricultural Solutions
LimusⓇ
Fungicides
Herbicides
Insecticides
Functional Crop Care
Applications
Protecting crops from harmful fungal infections;
improving plant health
Reducing competition from weeds for water and nutrients
Combating insect pests in agriculture and beyond, such as
in the fields of public health, professional pest control and
landscape maintenance
Products for plant health and increased yield potential that
go beyond traditional crop protection, such as biological
crop protection, seed treatments, polymers and colorants
Example products
Boscalid, metiram, dimethomorph, Initium®, metrafenone,
F 500®, Xemium®, AgCelenceⓇ (umbrella brand)
Kixor, dicamba, pendimethalin, imazamox, topramezone,
ClearfieldⓇ herbicide tolerance system, dimethenamid-P
Fipronil, alpha-cypermethrin, chlorfenapyr, teflubenzuron,
NealtaⓇ, TermidorⓇ to guard against termite infestation,
InterceptorⓇ mosquito nets to protect against malaria
Standak Top, BiostackedⓇ, Flo Rite®, VaultⓇ HP plus
Integral, Subtilex® NG, LimusⓇ
Investments
In 2015, we invested €334 million in property, plant and
equipment. A major portion of this total consisted of invest-
ments to expand production capacities for the dicamba and
KixorⓇ herbicides, as well as the fungicide XemiumⓇ. Further-
more, we continue to invest in the expansion of our capacities
in Functional Crop Care. Examples include our new research
and development center for seed solutions in Limburgerhof,
Germany, and the ramped up production facility in Little-
hampton, England, that strengthens our portfolio of biological
solutions for agriculture and gardening. In order to continue
meeting ongoing high demand for our innovative products in
the future, we will invest around €810 million in developing
and expanding our production and formulation capacities for
active ingredients between 2016 and 2020.
BASF Plant Science
Plant biotechnology at BASF
BASF Plant Science is one of the world's leading suppliers of
plant biotechnology for agriculture. Our headquarters at the
Research Triangle Park site near Raleigh, North Carolina,
ensure our proximity to our main markets in North and South
America. With our global network of research sites, we help
farmers meet the growing demand for increased agricultural
productivity as well as better nutrition. BASF invested around
€150 million for this purpose in 2015. Research expenses,
sales, earnings and all other data of BASF Plant Science are
not included in the Agricultural Solutions segment; they are
reported in Other.
With a pioneering platform for gene identification, BASF Plant
Science has specialized in the development of plant charac-
teristics such as higher yield, herbicide tolerance and disease
resistance. Our goal is to optimize crops so that farmers can
achieve greater and more secure yields. In this way, we make
an important contribution to securing a better food supply for
a growing world population. We also contribute to sustainable
agriculture, as the cultivation of these plants significantly
reduces the amount of land, water and energy required to
produce each metric ton of harvested crops. One example is
the drought-resistant corn launched on the market in 2013,
which can protect farmers in the United States from harvest
losses in times of drought.
For more on innovations in BASF Plant Science, see page 38
Change:
Indications and sectors
Products, customers and applications
BASF Report 2015
The BASF Group business year - Agricultural Solutions
Innovative combination of active ingredients for efficient fertilizer utilization
Value for BASF
Annual market growth for
urease inhibitors from
2015 to 2020
>10%
Limus, our patented formulation from the Functional Crop
Care business unit, both improves the ecological profile of
urea-based fertilizers and makes them more efficient. LimusⓇ
blocks urease enzymes more effectively than comparable
products. This improves plants' nitrogen supply and fulfills
increased legal mandates to reduce nitrogen loss. We antici-
pate annual market growth of over 10% for urease inhibitors
from 2015 to 2020.
Value for the environment
Reduced loss of nitrogen
up to 90%
Combating insect
pests in agriculture
Farmers use mainly urea-based fertilizers to ensure sufficient
nitrogen supply, which is crucial for plant growth. However,
urease enzymes break down about 50% of the nitrogen con-
tained in the fertilizer into gaseous ammonia. Released into the
atmosphere, this negatively impacts the environment. LimusⓇ
is an innovative combination of two urease inhibitors able to
reduce nitrogen loss from fertilizers by up to 90%.
Helping to feed a growing world population
- Long-term innovation strategy ensures future growth
Development of solutions that go beyond
conventional crop protection
-
Our strategy is based on long-term market trends. A key chal-
lenge of the future will be to ensure sufficient food for a growing
world population. To do so, farmers around the world will need
to increase their yields and yet the natural resources for
doing so, such as water and arable land, are limited. We see it
as our duty to provide farmers with professional support in
producing more - and more nutritious - food as efficiently as
possible.
We are committed to the responsible treatment of our
products and the environment. We offer our customers a
broad portfolio of integrated solutions and continually invest in
our development pipeline to create chemical and biological
innovations in crop protection.
Our research and development activities range from solu-
tions for protecting plants against fungi, insects and weeds, to
seeds and soil management, to plant health.
For example, the Functional Crop Care business unit not only
provides products for improving seeds and innovations for
better soil management, but also biological and chemical
technologies that make plants better able to withstand stress
factors like heat, cold and nutrient deficiency.
We are intensifying our investment in growth markets and
continuing to expand our good position in our core markets.
In collaboration with seed companies, we benefit from the
technological competence of BASF Plant Science. In addition,
we work together with other BASF divisions and with external
partners to be able to offer the best solutions for our customers.
Together with John Deere, we collaborate with farmers to
further the development of integrated IT applications for preci-
sion agriculture. These will provide not only more exact infor-
mation on crop development, but also support farmers in
carrying out the legally required procedures for application and
documentation of crop protection measures. In Brazil, our
customers can already make use of the DigiLab application to
easily diagnose plant diseases and access information on
possible and recommended treatments.
84 Management's Report
Strategy
8%
Insecticides
Herbicides
2
North America
18%
€3,166 million
3
Asia Pacific
23%
4
South America, Africa, Middle East
19%
3
2
-234
1
Europe
35%
North America
29%
€2,304 million
1
3
40%
1
■
Currency and volumes-related sales growth of
€244 million to €2,304 million
Considerable rise in earnings as a result of
volumes growth and positive currency effects
1
In the Construction Chemicals division, sales to third parties
rose by €244 million year-on-year to €2,304 million. This was
predominantly the result of positive currency effects in almost
every region, as well as higher volumes (volumes 5%, prices
-1%, portfolio 0%, currencies 8%).
In Europe, sales especially increased on account of greater
demand. In North America, considerable year-on-year sales
growth was mainly attributable to positive currency effects,
in addition to slightly higher volumes and prices. Positive
currency effects and a rise in volumes were largely responsible
for considerably improved sales in the region South America,
Africa, Middle East. Demand for our products grew particularly
in the countries of the Middle East. Sales in Asia increased
predominantly on account of positive currency effects, with
volumes growing slightly and prices down.
Income from operations before special items considerably
surpassed the level of 2014, especially because of higher
volumes and positive currency effects.
Construction Chemicals - Sales by region
(Location of customer)
4
Coatings
■ Sales improve by €182 million to €3,166 million,
driven mostly by currencies
■ Earnings rise slightly, mainly through contribution
from automotive OEM coatings
In the Coatings division, sales to third parties grew by
€182 million to €3,166 million in 2015, predominantly through
positive currency effects. Portfolio effects, along with higher
volumes and prices, also contributed to this sales increase
(volumes 1%, prices 1%, portfolio 1%, currencies 3%). We
raised prices in all business areas. Increased volumes espe-
cially in North America and Europe more than compensated
for a volumes decline in South America.
Our sales of automotive OEM coatings saw considerable
growth, driven both by currency effects and by higher volumes
in Europe and North America. For automotive refinish coat-
ings, we were able to more than offset weaker demand in
South America and Asia through higher sales prices and
positive currency effects. The rise in sales in the industrial
coatings business was partly attributable to positive currency
effects. Sales fell sharply in the decorative paints business in
Brazil, despite increased sales prices. This was predominantly
the result of negative currency effects as well as overall weak
demand.
We were able to slightly raise income from operations
before special items, mostly through the contribution from
automotive OEM coatings.
In 2015, we began operations at our new coating resins
plant in Shanghai, China, to support our growth in the region
with innovative products from local production.
Coatings - Sales by region
(Location of customer)
4
Europe
Asia Pacific
19%
South America, Africa, Middle East
€6,747 million
3
Asia Pacific
26%
4
South America, Africa, Middle East
4%
2
82 Management's Report
The BASF Group business year - Agricultural Solutions
Agricultural Solutions
BASF Report 2015
The Agricultural Solutions segment consists of the Crop Protection division. We develop
and produce innovative solutions for the improvement of crop health and yields, and market
them worldwide. The Plant Science competence center conducts research in the field of
plant biotechnology. The activities of Plant Science are reported in “Other.”
Indications and sectors
Fungicides
Protecting crops
against harmful fungi
Sales
14%
1
24%
North America
2
17%
2
1
BASF Report 2015
Management's Report 81
The BASF Group business year - Functional Materials & Solutions
Performance Materials
■ Sales up by €201 million to €6,747 million
through positive currency effects
Considerable earnings growth due to higher margins
We increased sales to third parties by €201 million to
€6,747 million in the Performance Materials division in 2015
(volumes 0%, prices -4%, portfolio 0%, currencies 7%). This
I was largely the result of positive currency effects in North
America and Asia. While volumes shrank in South America
and Asia, we achieved higher volumes in Europe and North
America. Sales prices fell as a consequence of lower raw
material prices.
Reducing
competition from
weeds for water
and nutrients
We considerably increased sales to the automotive indus-
try thanks to significantly higher demand in Europe, Asia and
North America. With currency effects positive overall, we were
able to raise sales volumes, particularly in the businesses with
engineering plastics, polyurethane (PU) systems, and the
special elastomer CellastoⓇ.
Sales to the construction industry declined, however, due
primarily to the divestiture of our white expandable polystyrene
(EPS) business in North and South America. Volumes rose
in the polyurethane systems business despite a decrease in
Asia.
We achieved considerably higher income from operations
before special items. This was predominantly because of
higher margins resulting from lower raw material prices as well
as the positive development of our high-margin specialties
businesses.
In 2015, we expanded our specialties business, especially
CellastoⓇ, through investments at the site in Shanghai, China.
Moreover, we started operations at a new compounding plant
for UltramidⓇ and UltradurⓇ at the site in Yesan, South Korea,
and at a new polyurethane system house in Geismar, Louisiana.
With the acquisition of Taiwan Sheen Soon Co. Ltd. completed
in 2015, we have expanded our portfolio of thermoplastic
polyurethanes.
Performance Materials - Sales by region
(Location of customer)
4
3
1
Europe
46%
Our business with the consumer goods industry also
developed well, despite lower volumes in Asia and South
America. This was essentially thanks to volumes growth for
polyurethane systems in Europe and North America as well as
for thermoplastic polyurethanes (TPU) and biopolymers.
5%
Change:
9%
South America, Africa, Middle East
4
44%
1
21%
3
€1,998 million
26%
9%
2
Asia Pacific
1
37%
234
North America
27%
3
€4,121 million
Asia Pacific
26%
South America, Africa, Middle East
10%
Europe
North America
Europe
1234
Sales
BASF Report 2015
Management's Report 75
The BASF Group business year - Performance Products
Nutrition & Health
■ Sales decrease by €31 million to €1,998 million due
mainly to lower prices
■
Earnings considerably down due to margin pressure,
plant shutdowns and divestitures
Sales volumes were slightly up compared with 2014,
thanks to a large extent to increased volumes in our businesses
with human and animal nutrition as well as flavors and fra-
grances.
Income from operations before special items declined
considerably. This was mainly because of margin pressure, in
addition to effects from plant shutdowns and divestitures. We
were able to stabilize fixed costs on the prior-year level by
implementing further efficiency measures.
We carried out numerous measures to increase our com-
petitiveness. Special charges arose from, for example, the
closure of the sterol site in Pasadena, Texas, at the end of
2015. These charges were contrasted by special income from
the disposal of parts of our pharmaceutical ingredients and
services business.
Performance Chemicals
■
■
Sales grow by €53 million to €4,121 million through
positive currency effects
Higher margins lead to significant earnings increase
In the Performance Chemicals division, sales to third parties
rose by €53 million to €4,121 million compared with 2014.
This was mainly the result of positive currency effects with
lower volumes and prices (volumes -3%, prices -2%, portfolio
-2%, currencies 8%).
In all regions except Europe, we achieved considerable
sales growth, which was supported to a large extent by our
business with plastic additives. Sales volumes were in total
slightly below 2014 levels. This is mostly attributable to the
unscheduled shutdown of a polyisobutene plant in Antwerp,
Belgium, as well as the significant, oil-price-related decrease
in demand for oilfield chemicals. We also posted a volumes
decline in the portion of our paper chemicals business that has
been allocated to the division since 2015. Our sales prices fell
particularly as a result of a drop in raw material costs. In addi-
tion, sales were weighed down by the disposal of our textile
chemicals business at the end of June 2015.
Income from operations before special items rose consid-
erably compared with 2014. Higher margins in almost every
business area were able to more than offset a currency-driven
rise in fixed costs.
Special income arose from the sale of our textile chemicals
business. Special charges came in part from measures to
restructure our businesses with water, oilfield, mining, and
paper chemicals.
Performance Chemicals - Sales by region
(Location of customer)
4
Nutrition & Health - Sales by region
(Location of customer)
2
1
In the Nutrition & Health division, sales to third parties
decreased by €31 million to €1,998 million despite positive
currency effects (volumes 1%, prices -7%, portfolio -3%,
currencies 7%). Intense competitive pressure, especially in the
vitamin E business, along with decreased raw material costs in
the aroma chemicals business, led to a decline in prices. Sales
were furthermore reduced by the disposal of parts of our
pharmaceutical ingredients and services business, which
involved the custom synthesis business and parts of the active
pharmaceutical ingredients portfolio.
The BASF Group business year - Functional Materials & Solutions
Change:
6%
Factors influencing sales
Coatings
€3,166 million
Percentage of sales:
17%
Construction Chemicals
€2,304 million
Change:
12%
Percentage of sales:
13%
Income from operations before special items
(in million €)
Volumes
0%
Prices
(4%)
1,649
1,197
Portfolio
0%
76 Management's Report
Currencies
34%
Percentage of sales:
2015
2014
Change:
3%
The Functional Materials & Solutions segment comprises the Catalysts, Construction
Chemicals, Coatings and Performance Materials divisions. They develop and market
system solutions, services and innovative products for specific sectors and customers,
particularly for the automotive, electronics, chemical and construction industries as well
as for household applications, sports and leisure.
Functional Materials & Solutions
Catalysts
Automotive and
process catalysts,
battery materials,
precious metal trading
Sales
Construction Chemicals
Solutions for building
structure and envelopes,
interior construction and
infrastructure
Coatings
Coatings solutions
for automotive and
industrial applications,
decorative paints
Performance Materials
Polyurethanes, thermo-
plastics, foams and
epoxy resins
Performance Materials
Divisions
3%
Catalysts
€6,306 million
Change:
€17,725 million
2014:
5%
BASF Report 2015
€18,523 million
2015:
Percentage of sales:
36%
Change:
€6,747 million
15,390
4,362
4,397
South America, Africa, Middle East
(33)
614
409
0
12,341
1
11,643
11,712
Asia Pacific
1,566
1,425
1
15,213
1
12,334
(9)
70,449
5,828
■
15,467
■
Europe
By location of company
1
(8)
7,357
6,739
(5)
74,326
(5)
74,326
70,449
(10)
418
378
(1)
5,861
1
15,665
in %
2
2015
in %
2014
2015
Change
Change
Change
Income from operations
before special items¹
by location of customer
Sales
by location of company
Sales
BASF Report 2015
Regions (in million €)
Regional results
The BASF Group business year - Regional results
92 Management's Report
Income from operations before special items considerably
exceeded the level of the prior year. Lower contributions from
both the storage and transport businesses were more than
offset by higher earnings from the trading business.
At €38,675 million, sales down by 10% from level of
previous year
2014
North America
2015
in %
1,994
2,038
(11)
15,126
13,483
(12)
32,241
28,229
Thereof Germany
(5)
4,759
4,527
(10)
40,911
36,897
(10)
42,854
38,675
Europe
2014
Ludwigshafen Verbund site strengthened by further
investments
2
The Chemicals segment saw a mainly price-related decline
in sales. With volumes stable, sales in the Performance Prod-
ucts segment were slightly below the previous year's level. In
the Functional Materials & Solutions segment, we were able to
compensate for lower prices through higher demand and
positive currency effects. Sales rose slightly in the Agricultural
Solutions segment. This was primarily the result of positive
price developments.
Companies in Africa and in the Middle East showed con-
siderable sales growth, driven by volumes and currencies. In
Africa, we raised sales primarily in the Functional Materials &
Solutions segment. In the Middle East, substantially increased
demand in the Construction Chemicals division had a positive
effect on sales.
Gross domestic product shrank in South America as a
consequence of the recession in Brazil and the deteriorating
economic environment in other countries in the region. Our
sales declined slightly under these conditions. We were only
partly able to offset negative currency effects, especially from
the depreciation of the Brazilian real, by raising prices. Sales
decreased in the chemicals business but rose in the crop
protection business and in the Oil & Gas segment.
Sales at companies headquartered in the region South America,
Africa, Middle East grew by 1% to €4,397 million compared
with 2014. In local currency terms, sales were up by 7%.
New production complex for acrylic acid and
superabsorbents inaugurated in Camaçari, Brazil
■ Sales grow by 1% to €4,397 million
South America, Africa, Middle East
As part of our regional strategy, we are striving to further
raise the proportion of sales coming from local production in
Asia Pacific in the years ahead. We once again made progress
toward this goal: In China, we started operations at new pro-
duction sites and plants in Chongqing, Nanjing, Maoming and
Shanghai. Further investment projects are currently in the
construction phase, as planned. The continuing expansion of
our Innovation Campus Asia Pacific in Shanghai, China,
strengthens the presence of this growth region within the
global Research Verbund. To improve profitability in Asia
Pacific, we intensified our measures to increase efficiency and
effectiveness.
Income from operations before special items fell by 33% to
€409 million. Significant factors here were higher fixed costs
stemming from the startup of new plants and from lower plant
capacity utilization, which was mainly attributable to several
scheduled maintenance shutdowns in the first half of the year.
Income from operations before special items declined by
10% to €378 million, essentially because of higher fixed costs
in the Petrochemicals and Care Chemicals divisions from
starting up the acrylic acid and superabsorbent production
complex in Camaçari, Brazil, in the second quarter of 2015.
Considerable sales increases, primarily in the Catalysts,
Coatings and Care Chemicals divisions, were able to more
than compensate, in particular, for declines in the Petrochem-
icals and Monomers divisions as well as in Other. Currency
effects positively influenced sales, especially in the first half of
the year. In the Chemicals segment in particular, lower raw
material costs and higher production capacities on the market
resulted in falling prices. Sales were furthermore weighed
down by the disposal of our shares in the Ellba Eastern Private
Ltd. joint operation in Singapore and by the divestiture of our
textile chemicals business.
Local production bolstered by startup of several
plants in China
■
■ Sales grow by 1% to €11,712 million
Asia Pacific
2
In the Natural Gas Trading business sector, sales to third
parties decreased by 17% million to €10,189 million. This
was due to the asset swap completed with Gazprom on
September 30, 2015, through which the contributions from
trading and storage activities were discontinued in the fourth
quarter. In the first three quarters of 2015, these activities had
contributed around €10.1 billion to sales. In the same period,
497 billion kilowatt hours in volumes were generated, which
was 88 billion kilowatt hours more than in the same period of
the previous year. As a consequence of the transaction, sales
volumes decreased by 64 billion kilowatt hours compared with
the full 2014 business year. WINGAS provided 3% of its vol-
umes to BASF Group companies outside of the Oil & Gas
segment.
6%
South America, Africa, Middle East
With decelerating market growth, sales at companies head-
quartered in the Asia Pacific region rose by 1% to €11,712 mil-
lion. In local currency terms, sales declined by 12%.
In addition to our growth strategy, we implemented a
series of structural measures in South America that increase
our productivity and sharpen the focus on our customers'
needs. With operations beginning at the production complex
in Camaçari, Brazil, we are well positioned to take part in the
region's growing demand, viewed over the long term.
We continued to expand our local presence in Africa in
2015 with a range of measures. This included inaugurating a
production plant for concrete additives in Lagos, Nigeria, in
October 2015.
94 Management's Report
The BASF Group business year - Agricultural Solutions
Management's Report 85
Segment data¹ (in million €)
BASF Report 2015
■
What we expect from our suppliers
70%
suppliers evaluated for their
sustainability performance
Percentage of relevant
2020 Goal
With our sustainability-oriented supply chain management, we
contribute to risk management by boosting our suppliers'
awareness of our expectations and standards, and by sup-
porting them in carrying out our specifications. We count on
reliable supply relationships and want to make our suppliers'
contribution to sustainable development transparent. In order
to achieve this, we set ourselves an ambitious goal: By 2020,
we aim to evaluate the sustainability performance of 70% of
the BASF Group's relevant suppliers¹ pursuant to our risk-
based approach and develop action plans for any necessary
improvements. The proportion of evaluated relevant suppliers
was at 31% by the end of 2015. Furthermore, our Procure-
ment competence center supports BASF's business units in
developing solutions to stand out from the competition in
addressing market-specific requirements.
Strategy
Our objective is to secure competitive advantages for
BASF through professional procurement structures. Our
suppliers are an important element of our value chain.
Together with them, we aim to create value and minimize
risks.
BASF Report 2015
Customers
Production
Suppliers
Responsibility along the value chain
Suppliers
Responsibility along the value chain - Suppliers
6%
Asia Pacific
€6,739 million
21%
1
4
5
5
by region
(Location of company)
Income from operations before special items
Management's Report 93
The BASF Group business year - Regional results
Sales by region
BASF Report 2015
Our chemicals business comprises the Chemicals, Performance Products and Functional Materials & Solutions segments.
In this region, we continue to focus on innovation, attrac-
tive market segments and cross-business initiatives in order to
ensure profitable growth. At the same time, we are enhancing
our operational excellence through ongoing improvements.
Attractive growth prospects in North America and cost-
effective raw material prices are strengthening our investment
plans in the region. At our site in Freeport, Texas, we com-
menced operations at a new dispersions plant and began
construction of a new ammonia plant together with Yara.
Our production facility for formic acid started up in Geismar,
Louisiana, making us the first formic acid producer in North
America. We are exploring an investment in a world-scale
methane-to-propylene complex on the U.S. Gulf Coast.
In 2015, income from operations before special items fell
to €1,425 million and therefore decreased by 9% compared
with the previous year, mainly as a result of unfavorable sales
and margin developments in the Chemicals segment. A lower
contribution came from the Performance Products segment,
as well. Considerable earnings improvement in the Functional
Materials & Solutions segment and a slight increase in Agricul-
tural Solutions partially offset the decrease.
Sales at companies headquartered in North America grew by
1% year-on-year to €15,665 million. In local currency terms,
they fell by 15% in the region. The sales increase was essen-
tially due to positive currency effects in all divisions, which
more than compensated for raw material cost-related price
drops in the chemicals business especially in the Petro-
chemicals division - as well as an overall slight decline in sales
volumes.
■Startup of dispersions plant in Freeport, Texas, and
formic acid production in Geismar, Louisiana
Sales rise by 1% to €15,665 million compared with
previous year
North America
We want to continue expanding our position on the market
and with our customers through investments and innovations.
For this reason, we strengthened the Ludwigshafen Verbund
site with further investments. A multiple-product facility for
special amines with multifaceted applications began produc-
tion in 2015, and the new TDI complex gradually started
operations beginning in November 2015.
Income from operations before special items amounted to
€4,527 million, a decrease of 5% compared with 2014. This
was mainly because of the significantly lower contribution from
the Oil & Gas segment on account of the lower price of oil as
well as considerably lower earnings in Other. The sharp earn-
ings improvement in the chemicals business¹ could only partly
offset this.
Germany
At €38,675 million, sales at companies headquartered in the
region Europe in 2015 were 10% below the level of 2014. This
was largely due to lower sales prices in addition to the asset
swap with Gazprom completed at the end of September,
through which the the natural gas trading and storage busi-
ness in particular ceased its contributions to the Oil & Gas
segment in the fourth quarter of 2015.
40%
2
North America
3
37%
Europe (excl. Germany)
30%
Germany
12345
3
6%
South America, Africa, Middle East
17%
Asia Pacific
€70,449 million
22%
North America
345
1
15%
Europe (excl. Germany)
4
Earnings rise significantly through contribution
from trading business
2 For more on net income in the Oil & Gas segment, see reconciliation reporting for Oil & Gas in the Notes to the Consolidated Financial Statements on page 180.
Natural Gas Trading
2015
4 million BOE
2016
9 million BOE
Startup
per year¹
Plateau/peak production
Development of Knarr field
Development of Maria field
Development of Vega-Pleyade field
Management's Report
The BASF Group business year — Oil & Gas
2 Year completed
1 BASF's share in barrels of oil equivalent (BOE)
Siberia, Russia
North Sea, Norway
Argentina
Location
Capital expenditures
Project
7 million BOE
Development of Edvard Grieg field
Development of Aasta Hansteen field
Segment data¹ (in million €)
The BASF Group business year - Oil & Gas
90 Management's Report
89
In order to carry out the Nord Stream 2 pipeline project, we
signed the contracts in September 2015 to build two additional
offshore pipelines through the Baltic Sea. The project will be
developed by the company Nord Stream 2 AG. Gazprom
holds a 50% share in the project company; BASF/Wintershall,
ENGIE, E.ON, OMV and Shell will each hold a 10% share upon
approval by the relevant authorities.
We hold a 15.5% share in the Nord Stream Pipeline
through Nord Stream AG, which is accounted for in the BASF
Group's financial statements using the equity method. Other
shareholders are Gazprom (51%) and E.ON (15.5%), as well
as N.V. Nederlandse Gasunie and GDF Suez (9% each). With
a total capacity of 55 billion cubic meters of natural gas per
year, this pipeline, which stretches from Russia to the German
coast over the Baltic Sea, helps shore up supply security in
Europe.
The companies under the WIGA umbrella operate a
3,300 kilometer long-distance network that includes the pipe-
line links to the Nord Stream Pipeline, the Baltic Sea Pipeline
Link (OPAL) and the North European Gas Pipeline (NEL).
As a holding company for the German subsidiaries in nat-
ural gas transport, WIGA Transport Beteiligungs-GmbH & Co.
KG (WIGA) mainly fulfills a reporting and financing capacity.
GASCADE Gastransport GmbH, OPAL Gastransport GmbH &
Co. KG, and NEL Gastransport GmbH all act as independent
subsidiaries under the umbrella of the holding company. This
organizational structure allows us to meet the unbundling
requirements set down by the German Energy Act. The widely
regulated transport sector is characterized by stable condi-
tions and yields based on approved costs and tariffs.
Our natural gas trading and storage activities were transferred
to Gazprom with the asset swap completed in September
2015. We will continue our joint activities in the gas transport
sector with Gazprom in the Oil & Gas segment, but they will
not be separately reported.
Natural gas transport activities to be continued
together with Gazprom
Gas trading and storage business transferred to
Gazprom in asset swap
■
Natural Gas Trading
2008/2019²
43 million BOE
Achimgaz, development of Achimov horizon in Urengoy natural
gas and condensate field
2018
2018
2015/2018²
5 million BOE
12 million BOE
BASF Report 2015
For more on current reserves, see pages 91 and 225
South America: We hold shares in a total of fifteen onshore
and offshore fields in Argentina. We began two shale drillings
as operator in the Vaca Muerta formation in the Neuquén
province in March, as stipulated in the joint operation agree-
ment between Wintershall Energía and Gas y Petróleo del
Neuquén. In December 2015, we increased our share in the
Aguada Federal block - part of the Vaca Muerta formation in
the Neuquén province - from 50% to 90%. In Chile, we hold
10% of the San Sebastian block.
In Abu Dhabi, we completed our first exploration drilling as
operator in the development of the Shuweihat sour gas field;
preparations are underway for a further exploration well. Our
activities in Qatar were suspended in May of 2015 with the
expiration of the concession license.
Strategy
In the Maria oilfield, a subsea tieback will connect two well-
head installations on the sea floor to three platforms over a
distance of up to 45 kilometers. This consumes significantly
less material than the construction of a new production facility.
Existing infrastructure is put to its best possible use, and less
energy is required for oil production and processing, thereby
reducing carbon emissions by more than half.
>50%
Through an innovative development concept and the involve-
ment of other companies, we can develop the Maria oilfield in
Norway without building a new production platform. Instead,
we are using external partners' existing infrastructure and
have developed intelligent technical solutions for this. Doing so
allows us to increase profitability and reduce development
costs by around half when compared with new construction.
50%
around
Reduction of
carbon emissions
Value for the environment
investment costs
Reduction of
Value for BASF
Efficient use of existing platforms instead of building a new production facility
Production in Norway's Maria oilfield
The BASF Group business year - Oil & Gas
Management's Report 87
How we create value - - an example
BASF Report 2015
minus €429 million
(14%)
■
BASF Report 2015
Pursuit of our growth strategy through
exploration, acquisitions, strategic partnerships
and technological expertise
Contribution to securing Europe's natural gas supply
North Africa / Middle East: In Libya, we are the operator
of eight oilfields in the onshore concessions 96 and 97. Due to
difficult political conditions, we were only able to produce in
concession 96 from February to May 2015 and from Septem-
ber to the beginning of November 2015, for a total of 125 days.
Operations were able to continue uninterrupted at the Al Jurf
offshore oilfield in Libya, in which we have a stake.
Russia: The Yuzhno Russkoye natural gas field in western
Siberia, in which we have a 35% economic interest, has been
operating at plateau production since 2009. The first wells
were successfully drilled for the development of the Turon
horizons, a further formation in this natural gas field. We hold a
50% stake in the development of Block IA of the Achimov
formation in the Urengoy field in western Siberia. The gradual
development of this field was continued; 62 wells were pro-
ducing at the end of 2015. We will develop blocks IV and V of
the Achimov formation together with Gazprom.
We began production of natural gas at the unmanned
L6-B "minimum facility" platform in the Dutch North Sea.
This miniplatform is one of a new generation of facilities that
can be deployed in especially shallow waters, enabling eco-
nomic yield from even very small deposits. We ceased the
production of crude oil from the Kotter and Logger develop-
ments in the Dutch North Sea, as the limited volumes remain-
ing can no longer be produced in an economical manner.
forms via subsea ties.
We began production in the Knarr field in the Norwegian
North Sea in March 2015. We continued work on developing
the Edvard Grieg oilfield, and the first volumes were produced
at the end of November. At the beginning of September, the
Norwegian Ministry of Petroleum and Energy approved the
plan for development and operation of the Maria field submit-
ted by Wintershall, the field's operator. The plan involves linking
the field to the Kristin, Heidrun and Åsgard B production plat-
With the acquisition of shares in the Vega and Gjøa fields
in Norway at the end of 2014, Wintershall established itself as
one of the largest producers on the Norwegian continental
shelf. In March 2015, Wintershall Norge AS took over opera-
torship of the Vega oil and gas field from Statoil.
Europe: The Mittelplate field off the North Sea coast is the
cornerstone of our crude oil production in Germany. We own
a 50% stake in this field, the largest known oil deposit in the
country. At the Bockstedt oilfield, the field test for increasing
recovery rates using the biopolymer Schizophyllan was
continued.
Active portfolio management, including
expansion of our position in Norway
Exploration & Production
Our cooperation with Gazprom in the natural gas transport
business will continue unaltered. With western Europe's
demand for natural gas steadily on the rise while its local
production simultaneously decreases, it is becoming more
and more important to secure sufficient imports. For this
reason, we and other European partners want to participate
in the expansion of the Nord Stream Pipeline. The Nord
Stream 2 project intends to build two additional offshore
pipelines from Russia to Germany through the Baltic Sea,
helping ensure a long-term and reliable supply of natural gas
to the European Union.
Jemgum, Germany; and WINGAS Holding GmbH, Kassel,
Germany, including its share in the natural gas storage facility
in Haidach, Austria. BASF also transferred its 50% share in
each of the natural gas trading companies Wintershall Erdgas
Handelshaus GmbH & Co. KG, Berlin, Germany, and
Wintershall Erdgas Handelshaus Zug AG, Zug, Switzerland.
Gazprom furthermore became a 50% shareholder in Winters-
hall Noordzee B.V. in Rijswijk, Netherlands, which is active in
the exploration and production of natural gas and crude oil
deposits in the North Sea. In the first three quarters of 2015,
these activities contributed a total of around €10.1 billion to
sales, about €260 million to income from operations before
special items, and approximately €650 million to EBITDA. This
EBITDA figure includes special income from the asset swap.
BASF Report 2015
The BASF Group business year - Oil & Gas
88 Management's Report
In return, BASF transferred its shares in the previously
jointly run natural gas trading and storage business to Gazprom.
This included the 50.02% shares in the following: the natural
gas trading company WINGAS GmbH, Kassel, Germany; the
storage company astora GmbH & Co. KG, Kassel, Germany,
which operates natural gas storage facilities in Rehden and
On September 30, 2015, we and our partner Gazprom
completed the swap of assets of equivalent value that had
originally been planned for the end of 2014. The swap took
place with retroactive financial effect to April 1, 2013. This
transaction gave BASF the economic equivalent of 25.01% of
the blocks IV and V in the Achimov formation of the Urengoy
natural gas and condensate field in western Siberia. These
two blocks will be developed jointly by Gazprom and Winters-
hall. According to the development plan originally confirmed
by Russian authorities, they contain total hydrocarbon
resources of 274 billion cubic meters of natural gas and
74 million metric tons of condensate. As these figures are still
undergoing review, new findings may give rise to adjustments.
Production is scheduled to start in 2018.
every project before we begin. Together with experts, contrac-
tors and relevant stakeholders, we develop methods and
implement measures to be able to use resources even more
efficiently and minimize the impact on the environment. In
doing so, we act in accordance with international agreements,
legal requirements and our own, self-imposed high standards.
Selected collaborations, strategic partnerships, innovative
technologies and the responsible development and produc-
tion of hydrocarbons all form the basis of our growth-oriented
strategy. Through the continuous optimization of our cost
structure and portfolio of oil and gas activities, we ensure our
future competitive viability, even in times when oil and gas
prices are low. Measured by production volumes as well as by
contribution to income from operations before special items,
gas activities comprised around 70% of our portfolio in 2015.
Handling hydrocarbons in a responsible manner demands
special measures for the protection of people and the environ-
ment. We therefore carefully assess the potential effects of
In the future, crude oil and natural gas will continue to
contribute significantly toward covering the rising energy
demand of a growing world population. That is why we invest
in the exploration and production of oil and gas, primarily in
our core regions Europe, North Africa, Russia and South
America, thereby continuing along our growth course. We also
aim to establish the Middle East as another core region in our
portfolio.
Asset swap with Gazprom
■ Sales decline by 17% to €10,189 million as
contribution from trading and storage activities
ceases in fourth quarter
2015
Change in %
€12,998 million
0%
North America
2
96%
Europe
1
4
3
Oil & Gas - Sales by region
(Location of customer)
At €12,998 million, the Oil & Gas segment's sales to third
parties were €2,147 million lower than in 2014 (volumes 15%,
prices/currencies -9%, portfolio -20%). This was largely a
result of the asset swap with Gazprom completed at the end
of September, which meant that contributions from the natural
gas trading and storage business, as well as from Wintershall
Noordzee B.V., ceased starting in the fourth quarter of 2015.
The significant drop in the price of oil led to slightly lower sales
in the Exploration & Production business sector. However,
sales were positively impacted by a volumes increase in both
the Exploration & Production and Natural Gas Trading business
sectors. The drop in sales meant a decline in income from
operations before special items by €429 million to €1,366 mil-
lion. Special charges totaled €636 million in 2015; these arose
predominantly from impairments on exploration and produc-
tion projects and on goodwill as a result of our reduced oil and
gas price assumptions. Special income of €342 million, partic-
ularly from the asset swap with Gazprom, was only partly able
to compensate for this. Income from operations therefore
decreased by €616 million to €1,072 million. Net income
declined by €414 million to €1,050 million.
Oil & Gas
(28)
1,464
1,050
(42)
3,162
1,823
Our planning for the 2016 business year is based on an
average oil price of Brent crude of $40 per barrel and an
exchange rate of $1.10 per euro. On average, gas prices are
likely to hover considerably below the level of 2015. We expect
to expand production; however, sales and income from oper-
ations before special items are likely to see a considerable
decline compared with 2015, largely on account of the signifi-
cant drop in oil and gas prices as well as the divestiture of the
gas trading and storage business. Furthermore, we will gener-
ate lower sales and earnings from our share in the Yuzhno
Russkoye natural gas field, as the surplus quantities produced
over the last ten years will be compensated in 2016 as
contractually agreed with our partner Gazprom.
Asia Pacific
0%
4
see page 225 onward
For more on our crude oil and natural gas reserves,
Our proven crude oil and natural gas reserves increased
by 2% compared with the end of 2014, to 1,744 million BOE.
We replenished 123% of the volumes produced in 2015. The
reserve-to-production ratio is around 11 years (2014: 13 years).
This is based on Wintershall's share of production in 2015 and
refers to the reserves at year-end.
In the search for new crude oil and natural gas deposits,
we finished drilling a total of 25 exploration and appraisal wells
in 2015, of which 17 were successful.
We increased our crude oil and natural gas production by
13%, up to 153 million barrels of oil equivalent (BOE). Produc-
tion rose substantially both in Norway and in our joint operation
Achimgaz in Russia. Despite difficult political conditions, we
were were able to produce in onshore concession 96 in Libya
from February to May and from September to the beginning of
November 2015 for a total of 125 days. Contrasting this was
the further decrease of production in Germany, which was
influenced by both a natural production decline and the autho-
rization logjam for fracking plans in conventional deposits that
has continued for more than four years.
Income from operations before special items fell consider-
ably compared with the previous year, mainly as a result of
lower prices.
The price of Brent crude oil fell by 47% compared with
2014, to $52 per barrel. In euro terms, this was a decrease of
37% to €47 per barrel (2014: €74 per barrel).
Sales to third parties in the Exploration & Production business
sector amounted to €2,809 million, 4% below the level of the
previous year. Higher volumes in Russia and portfolio-driven
growth in Norway were unable to offset the sharp drop in
prices. Furthermore, sales at Wintershall Noordzee B.V. have
not been included in BASF Group sales since the fourth quar-
ter of 2015, as the asset swap with Gazprom resulted in
accounting for the company using the equity method instead
of full consolidation.
■ Earnings below prior-year level, mainly weighed down
by prices
authorization status for fracking plans
■ Declining production in Germany due to
■Crude oil and natural gas production up by 13%
■ At €2,809 million, sales down by 4%, mainly owing
to lower prices
Exploration & Production
Management's Report 91
The BASF Group business year — Oil & Gas
BASF Report 2015
1
4%
South America, Africa, Middle East
48
132
195
50
19.9
%
EBITDA margin
(1)
2,626
2,587
Income from operations before depreciation and amortization (EBITDA)
(14)
16,052
13,764
Sales including intersegmental transfers
(16)
907
766
(14)
15,145
12,998
Intersegmental transfers
Sales to third parties
17.3
2014
Income from operations (EBIT) before special items
1,795
50
(10)
13,686
12,373
2015
1 Supplementary information on the Oil & Gas segment can be found from page 225 onward
Net income²
Additions to property, plant and equipment and intangible assets
Exploration expenses
Research expenses
Assets
369
(443)
Income from operations (EBIT) after cost of capital
(36)
1,688
1,072
Income from operations (EBIT)
(24)
1,366
Sales to third parties
154
5,820
15%
Prices/currencies
(9%)
2015
2014
1,366
1,795
Portfolio
(20%)
Change:
Sales
1 We define relevant suppliers as those showing an elevated sustainability risk potential as identified by risk matrices and with respect to corresponding country risks. Our suppliers are
evaluated based on risk due to the size and scale of our supplier portfolio.
From our suppliers, we obtain raw materials, technical goods,
and services from technical to logistics and building facility
services. BASF acquired raw materials, goods and services for
our own production totaling approximately €35 billion in value
from more than 75,000 suppliers around the world in 2015.
Around 90% of this was locally sourced. With regard to our
suppliers, there were no substantial changes in our value chain
in 2015.
Worldwide procurement
In addition, we instructed 363 procurement employees on
sustainability-oriented supplier management. These are ways
in which potential supply chain risks can be identified and
minimized together with our suppliers.
A country-based risk analysis forms the basis of our selec-
tion process for new suppliers. As a result of the country-
related risks identified in South America and Asia, we queried
around 1,500 suppliers in 2015 on their commitment to the
values of our Supplier Code of Conduct. Moreover, we pro-
vided training to a total of 525 suppliers with an elevated
sustainability risk, especially in Asia and South America.
Both new and existing suppliers are selected and evaluated
not only on the basis of economic criteria, but also on environ-
mental, social and corporate governance standards. Our
Supplier Code of Conduct is founded on internationally recog-
nized guidelines, such as the principles of the United Nations'
Global Compact, the International Labor Organization (ILO)
conventions and the topic areas of the Responsible Care
Initiative. Available in 26 languages, the Code of Conduct
covers environmental protection as well as compliance with
human rights, labor and social standards, and antidiscrimina-
tion and anticorruption policies.
Country-specific risk analysis forms basis of new
supplier selection
Global Supplier Code of Conduct
2
23%
South America, Africa, Middle East
4
3
9%
Asia Pacific
3
€5,820 million
32%
Volumes
Income from operations before special items
(in million €)
Factors influencing sales
22%
Intersegmental transfers
86 Management's Report
The BASF Group business year - Oil & Gas
BASF Report 2015
Oil & Gas
BASF's oil and gas activities are bundled in the Wintershall Group. In 2015, Wintershall
and its subsidiaries were active in the Exploration & Production and Natural Gas Trading
business sectors.
Sectors
Exploration & Production
We focus our exploration and production on
oil and gas-rich regions in Europe, North Africa,
Russia, South America and the Middle East.
Natural Gas Trading
Together with our Russian partner Gazprom,
we are active in the transport of natural gas in
Europe. We transferred our shares in the formerly
jointly run gas trading and storage business to
Gazprom at the end of September 2015.
Sales
Natural Gas Trading
North America
Change:
€10,189 million
Percentage of sales:
2015:
€12,998 million
Change:
-14%
2014:
€15,145 million
Exploration & Production
€2,809 million
Change:
Percentage of sales:
-4%
-17%
2
78%
Europe
1,090
1,109
(2)
Income from operations (EBIT)
1,083
1,108
(2)
Income from operations (EBIT) after cost of capital
287
(46)
Assets
8,435
Research expenses
514
7,857
Income from operations (EBIT) before special items
511
23.8
EBITDA margin
2014
5,446
36%
Change in %
7
28
37
(24)
Sales including intersegmental transfers
5,848
5,483
7
Income from operations before depreciation and amortization (EBITDA)
1,321
1,297
2
%
7
22.7
Additions to property, plant and equipment and intangible assets
In the Agricultural Solutions segment, we raised sales to third
parties by €374 million to €5,820 million in 2015, primarily
through higher sales prices. We observed decreased demand
for crop protection products over the course of the year, as
crop commodity prices remained at a low level. A volatile
environment and the depreciation of local currencies,
especially in the emerging markets, had a negative effect on
our business. In this challenging environment, income from
operations before special items declined by €19 million to
€1,090 million. Income from operations fell by €25 million to
€1,083 million.
4
Crop Protection
■
Sales improve by €374 million to €5,820 million,
driven mainly by prices
At €1,090 million, earnings 2% below prior-year level
due to higher fixed costs
We improved sales to third parties by €374 million to
€5,820 million compared with the previous year. This was
primarily attributable to higher contributions from the herbicide
business in North America and from the fungicide business in
Europe and South America. In the second half of the year, we
were able to offset the depreciation of emerging-market
currencies by raising prices (volumes 1%, prices 5%, curren-
cies 1%).
Agricultural Solutions
In Europe, sales rose by €61 million to €2,107 million,
mainly through strong demand for fungicides as well as higher
prices in the first half of the year. This allowed us to more than
Sales in North America exceeded the previous year's
level by €296 million, reaching €1,870 million. Higher herbicide
sales, especially of KixorⓇ, and positive currency effects from
the U.S. dollar supported this growth. In the fungicides busi-
ness, sales declined on account of lower crop commodity
prices and unfavorable weather conditions.
At €525 million, sales in Asia matched prior-year levels as
positive currency effects compensated for a sharp drop in
volumes. Lower demand for soy herbicides in India was a
major factor behind the volumes decline, and was attributable
to reduced soybean acreage, a very dry season, and increased
competition from generic manufacturers.
Our sales in South America grew by €18 million to
€1,318 million, while the total South American crop protection
market shrank in 2015. In this difficult environment, we consid-
erably increased sales volumes of fungicides, especially
XemiumⓇ. In the second half of the year, price increases were
unable to fully offset currency losses from the depreciation of
the Brazilian real.
Income from operations before special items amounted to
€1,090 million, which was €19 million below the level of the
previous year. This slight decrease was attributable to higher
fixed costs arising mainly from lower plant capacity utilization
as a result of the startup of new capacities and inventory
reduction at the same time.
Crop Protection - Sales by region
(Location of customer)
1
1
compensate for weaker demand in the second half of the year
due to dry conditions in western Europe. Our business in
Russia and Ukraine grew, despite a difficult political environ-
ment.
1 Research expenses, sales, income and all other data of BASF Plant Science are not included in the Agricultural Solutions segment; these are reported in Other
For 2016, we expect continued slow market growth and
high exchange rate volatility in some of our key growth mar-
kets. Despite this difficult economic environment, we plan to
increase our sales volumes, especially of innovative herbi-
cides. Through increased sales and continued strict cost
management, we aim to slightly improve sales and income
from operations before special items.
402
391
3
The BASF health checks form the foundation of our global
health promotion program and are offered to employees at
regular intervals.
■ Regular health promotion programs
offered to employees
Our global health management serves to promote and main-
tain the health and productivity of our employees. This was
supported by numerous emergency drills and health promo-
tion measures in 2015.
We measure our performance in health protection using
the Health Performance Index (HPI). The HPI comprises five
components: confirmed occupational diseases, medical
emergency drills, first aid training, preventive medicine and
health promotion. Each component contributes a maximum of
0.2 to the total score. The highest possible score is 1.0. Our
goal is to reach a value of more than 0.9 every year.
Annual goal
Health protection
Health Performance Index
Maximum score 1.0
>0.9
102 Management's Report
1 Deviation from BASF Report 2014 (2.1) due to information that became known over the course of the year
≤0.5
2025 Goal
The number of Process Safety Incidents has served as an
important key performance indicator since 2008, and is largely
based on the definition set by the European Chemical Industry
Council (CEFIC). This KPI mainly tracks the release of
substances, in addition to fire and explosions. In 2015, we
recorded 2.1 process safety incidents per one million working
hours (2014: 2.2¹). In order to constantly improve, we set
ourselves the goal in 2015 of achieving a rate of 0.5 or below
by 2025. To this end, we began a worldwide initiative focusing
on plant maintenance, repair and operation. We perform a
detailed investigation into every incident, analyzing root causes
and using the findings to derive suitable measures to take.
In order to constantly improve the safety of our production
facilities worldwide, we regularly update the safety concepts in
all of our plants. We review their implementation in ten-year
intervals in plants with a medium to high hazard potential. The
documentation of these safety reviews was standardized
through software in 2014, and introduced all over the world in
2015. Moreover, we further continued to supervise the pro-
cess safety management system in all regions. We completed
the worldwide implementation of our requirements for explo-
sion protection in 2015.
We have implemented a worldwide guideline for the safe con-
struction and operation of our plants as well as the protection
of our employees and the environment. Our safety strategy is
based on prevention. That is why, when designing a new
facility, we apply a five-step review system from conception to
startup. It involves early consideration of the most important
aspects of safety and protection of health and the environ-
ment, and monitors these in every stage of planning. We use a
risk matrix to assess potential incident probability and impact,
and determine the appropriate protective measures.
Initiative begun to reduce process safety incidents
Special training methods introduced
New process safety goal
■
-
■
Process safety
For more on occupational medicine, health promotion campaigns and
the HPI, see basf.com/health_protection
With an HPI of 0.97, we were once again able to fulfill the
ambitious goal of exceeding 0.9 each year (2014: 0.91). Our
2015 global employee health campaign centered on nutrition.
Numerous offers and initiatives promoting good nutrition sup-
port our employees' health and performance, while making a
contribution to BASF's voluntary commitment to the United
Nations' Global Nutrition Compact. In 2016, the global health
campaign will focus on heart attack and stroke prevention. We
raise employee awareness of these topics through offers
tailored toward specific target groups.
Reduction of worldwide
process safety incidents
per one million working hours
2015 focuses on nutrition
1.4
Health protection
2015
2014
2012 2013
2002 2010 2011
Lost-time injury rate per one million working hours
For more on occupational safety, see basf.com/occupational_safety
2025 Goal
Going beyond legally prescribed safety instructions, we
provided more than 77,000 participants around the world with
training on occupational safety in 2015. For example, we
trained more than 13,000 participants at our "Safety
Champions Training Center" at the Ludwigshafen site in order
to promote safety-conscious behavior and prevent work-
related accidents.
We bolstered our safety culture in 2015 through intensive
exchange and a worldwide safety initiative - the Global Safety
Days - involving over 700 activities that focused on key topics
like risk assessment and business travel safety. Around
75,000 employees and contractors actively participated at
over 400 sites.
We revised our global directive for contract manufacturing in
2015, including the new definition of audit processes on com-
pliance with stipulated standards on safety, security, health
and environmental protection.
≤0.5
per one million working hours
Reduction of worldwide
lost-time injury rate
2025 Goal
Unfortunately, there were two fatal work-related accidents in
2015. In May, one employee of a contracting company suc-
cumbed to injuries sustained after falling from a scaffolding in
Nanjing, China. In October, an employee in Ludwigshafen,
Germany died from inhaling a low-oxygen gas mixture.
3.3
Responsibility along the value chain - Safety, security, health and the environment - Production
0,5
1.4
1.5
1.7
2.0
1.9
BASF Report 2015
Management's Report
101
Responsibility along the value chain - Safety, security, health and the environment - Production
■
BASF Report 2015
Global goal
Hazard prevention and corporate security
REACH and other legal requirements
Third registration phase of REACH in progress
We are working continuously on registering substances pro-
duced in annual volumes between one and one hundred
metric tons for the third phase of the E.U. chemicals regulation,
REACH. We have already registered over 200 substances to
this end. The registration phase should be completed by May
of 2018. At the same time, we also constantly update the
existing registration dossiers and support the relevant E.U.
member state authorities in evaluating an increasing number
of substances. When it comes to REACH, we maintain close
contact with our customers and suppliers.
Another contribution BASF makes to international chemical
safety is through our support of the United Nations' initiative to
implement a Globally Harmonized System of Classification
and Labeling of Chemicals. This has already been implemented
in nearly every country in the world. It was also made manda-
tory in the United States in the middle of 2015, which was the
reason we reclassified 36,000 products there.
For more on auditing of suppliers, see page 95
104 Management's Report
BASF Report 2015
Responsibility along the value chain - Safety, security, health and the environment - Product stewardship
Environmental and toxicological testing
Use of alternative and complementary methods
for animal studies
In 2015, we expanded our goal for occupational safety. We
want to reduce the worldwide lost-time injury rate per million
working hours to at least 0.5 by 2025 (previous 2020 goal:
0.65). In order to achieve this ambitious goal, we rely on the
further development of our global safety culture, the commit-
ment of all employees, and clearly defined safety standards.
In 2015, 1.4 work-related accidents per one million working
hours occurred at BASF sites worldwide (2014: 1.5), of which
8% were related to chemicals. We conduct special training in
this area in order to enhance our employees' qualifications.
The work-related lost-time injury rate for contractors was 1.5
in 2015 (2014: 1.8).
For more on biotechnology, see basf.com/biotechnology
>99%
Before launching products on the market, we subject them to
a variety of environmental and toxicological testing. We apply
state-of-the-art knowledge in the research and development
of our products. We only conduct animal studies when they
are required by law. In some cases, animal studies are
stipulated by REACH and other national legislation outside the
European Union in order to obtain more information on the
properties and effects of chemical products.
In 2015, our Experimental Toxicology and Ecotoxicology
department received, together with partners, a grant to con-
duct one of the largest European collaborative projects for
alternative methods. The project aims to develop alternative
methods to the point that chemical risk assessments can be
efficiently conducted with the least amount of animal testing
possible.
For more on alternative methods, see basf.com/alternative_methods
Management of new technologies
-
Continual safety research on
nano- and biotechnology
Technologies such as nanotechnology or biotechnology offer
solutions for key societal challenges – for example, in the areas
of climate protection or health and nutrition.
-
We developed a "Nanotechnology Code of Conduct" that
stipulates the safe handling of nanomaterials. We are con-
stantly expanding our knowledge of nanomaterial safety. Over
the past years, we have conducted more than 230 toxico-
logical and ecotoxicological studies and participated in over
30 different projects related to the safety of nanomaterials. We
published the results in 71 scientific articles. One important
finding is that toxicity is determined not by the size of the
particles but by the intrinsic properties of the substance.
In 2015, we published a framework for the specific testing
of nanomaterials together with the European Centre for Eco-
toxicology and Toxicology of Chemicals (ECETOC). We are
working with the European Chemicals Agency (ECHA), the
OECD and national authorities on its further development. In
an E.U. project, we are collaborating with partners from
science, industry and the authorities to develop an approach
for the analytical identification of nanomaterials.
In the use of biotechnology, we follow the code of conduct
of EuropaBio, the European association for biotechnology
industries. We constantly improve our product safety activities
in the field of biotechnology in order to effectively minimize
potential risks and ensure that all standards and national laws
are met. Our internal risk management is based on the protec-
tion of people, animals and the environment. To monitor the
risks of working with biotechnology, we implemented a system
that ensures compliance with standards and transparent
processes at BASF.
For more on nanotechnology and the Nanotechnology Code of Conduct,
see basf.com/nanotechnology
We adhere to the specifications laid down by the German
Animal Welfare Act as well as the requirements of the Associ-
ation for Assessment and Accreditation of Laboratory Animal
Care-the highest standard for laboratory animals in the world.
We are continually developing and optimizing alternative and
complementary methods, and we put these into practice
wherever it is possible and approved by the authorities. BASF
spent €2.7 million for this purpose in 2015. We use alternative
and complementary methods in more than a third of our tests.
Currently, 30 alternative methods are being used in our labs
and another 12 are in the development stage. One focus area
of our research in 2015 and subsequent years is the develop-
ment of alternative methods for testing the potential of
substances that negatively affect organisms' growth and
development.
Risk assessment of products
that we sell in quantities of more
than one metric ton per year
2020 Goal
By 2020, we will conduct risk assessments for all substances
and mixtures BASF sells worldwide in quantities of more than
one metric ton per year. We already reached 67.8% of this
goal in 2015 (2014: 61.4%). The risk associated with using
a substance is determined by the combination of its
hazardous properties and its potential exposure to people
and the environment.
■
Requirements implemented for emergency
response and fire prevention
SPIDER Emergency Response and Information
Center Verbund enhanced in Europe
Online training introduced for information protection
In order to ensure uniformly high standards around the world
for safety, security, health and environmental protection, we
implemented our requirements for emergency response plan-
ning and fire prevention in the BASF Group in 2015. To be
prepared for a potential incident in our production plants, we
work with specific emergency response plans that involve -
depending on the situation - partners and suppliers as well as
cities, communities and neighboring companies.
We regularly check our emergency systems and drill pro-
cedures with employees, contractors and local authorities.
Through 224 drills and simulations in 2015, we trained the
participants in our emergency response measures, such as
preventive fire protection.
In 2015, we enhanced our SPIDER Emergency Response
and Information Center Verbund in Europe by improving expert
involvement. This enables our specialists from the site fire
department, emergency medical team, site security and envi-
ronmental protection around Europe to work together even
more quickly and reliably across different sites. Our central
emergency response supports local emergency response
units around the world and around the clock. We also have
been using the KATWARN system at the Ludwigshafen site
since 2015, an app-based warning system that serves as an
additional communication channel to inform site employees of
dangerous situations.
Through audits and reviews, we monitor the implementation of
measures for the comprehensive protection of our employees
and the company - for example, from loss of knowledge - as
Iwell as for the worldwide protection of our sites against
third-party interference. All of our security personnel have
been instructed on aspects of human rights related to site
security, such as the right to liberty and security of person.
We also require all contractors involved in this area to comply
with human rights and we conduct regular inspections. As part
of investment projects, we are performing comprehensive
analyses of potential risks. In 2015, we standardized the use
of security services even more across our European sites in
order to increase effectiveness and efficiency. Business travel-
ers, transferees, and local employees in countries with elevat-
ed security risks are informed about appropriate protection
measures and individually counseled where necessary.
Due to the increasing risks associated with the use of
information technology, we started a global campaign for
employees to even better protect our company knowledge.
This includes a new online platform that educates employees
as to how they can use available information and communica-
tions technology in a secure manner. Our worldwide network
of information protection officers comprises more than 600
employees. They support the implementation of our globally
mandatory requirements and conduct seminars on secure
behaviors. We provided information protection instruction to
more than 3,000 participants in 2015. At the end of 2015, we
began the introduction of an online training module for infor-
mation and knowledge protection that is mandatory for all
employees.
For more on corporate security, see basf.com/corporate-security
For more on emergency response, see basf.com/emergency_response
BASF Report 2015
Management's Report 103
Responsibility along the value chain - Safety, security, health and the environment - Product stewardship
Product stewardship
Suppliers
Production
Customers
We review the safety of our products from research to
production, all the way to our customers' use of the prod-
ucts. We work continually to ensure that our products
pose no risk to people or the environment when they are
used responsibly and in the manner intended.
Strategy
■
Global directives with uniformly high standards for
product stewardship
We ensure uniformly high standards for product stewardship
worldwide and our voluntary initiatives go beyond legal
requirements. We monitor the compliance of our guidelines
with regular audits.
We provide extensive information on our chemical sales
products to our customers with safety data sheets in more
than 30 languages. This is achieved with the help of a global
database in which we maintain and evaluate continuously
updated environmental, health and safety data for our sub-
stances and products. Our global emergency hotline network
provides information around the clock.
We offer our customers training in the safe use of our
products and keep them informed early on of any changes in
regulations. For example, we were one of the first companies
to offer product-specific information and solutions to pharma-
ceutical manufacturers on the topic of metallic contaminants,
as well as web-based consultation to customers in the phar-
maceutical industry and authorities. In the Crop Protection
division, we provide special safety training to farmers. We
expanded our stewardship program for banana farmers to
Latin America, China and the Philippines, where on-site BASF
experts show how crop protection products can be used and
stored in an effective and safe manner for people and the
environment.
With an eye on consumer protection criteria, we also work
continuously with our customers on the optimization of our
products. Furthermore, we use our Eco-Efficiency Analysis
to advise our customers on the evaluation of product risks
and support them in improving the carbon footprint of their
products.
With our global risk assessment goal, we are supporting
the implementation of initiatives such as the Global Product
Strategy (GPS) of the International Council of Chemical Asso-
ciations (ICCA). GPS is establishing worldwide standards and
best practices to improve the safe management of chemical
substances.
In addition, we are also involved in workshops and training
seminars in developing countries and emerging markets.
In 2015, for example, we conducted training sessions for
chemical industry representatives on GPS in China and Thai-
land. In order to facilitate public access to information, we are
participating in the setup of an ICCA online portal that provides
more than 4,600 GPS safety summaries.
For more on GPS, see basf.com/en/gps
To strengthen safety awareness, we developed new training
methods, global recommendations for training measures in
2015 and instructed more than 19,000 participants that year.
For more on process safety, see basf.com/process_safety
■ Directive updated for contract manufacturing
BASF Report 2015
■ Expanded occupational safety goal
We also further promoted our "mass balance" method on
the market in 2015. This approach uses renewable raw mate-
rials from certified sustainable production from the very begin-
ning of the value chain in the existing Production Verbund in
order to save fossil resources. The proportion of renewable
raw materials is allocated to customer-selected products
according to their formulations. The quality of the final product
remains unchanged. This method is currently being applied for
numerous BASF products – for example, for superabsorbents,
dispersions, plastics such as polyamides and polyurethanes,
and for intermediates available on the market as "drop-in
products." These can be used in place of previously employed
products in the production process without having to change
the process itself.
Since 2013, we have provided our customers with 1,4-butane-
diol (BDO) on a commercial scale using sugars as a renewable
feedstock based on a licensing agreement with the U.S.
company Genomatica Inc. BDO and its derivatives are
used, for example, to manufacture plastics for the automotive
and textile industries. We use BDO produced with the
Genomatica license to make bio-based polytetrahydrofuran
1000 (PolyTHFⓇ 1000), which we offered to customers for
testing purposes for the first time in 2015. PolyTHF® 1000
primarily serves as a chemical component in thermoplastic
polyurethane (TPU), an ingredient used to manufacture skis
and roller skates, shoe soles, dashboard films in the automo-
tive industry, and many other products.
In 2015, we completed our joint project with Cargill and
the German governmental agency for international coopera-
tion on the sustainable production of coconut oil in the Philip-
pines. Small farmers now produce the world's first Rainforest
Alliance-certified dried coconut meat (copra), from which the
oil is extracted.
Palm oil, palm kernel oil, and their derivatives are some of
our most important renewable raw materials. We want to
ensure that the raw materials we use stem from sustainable,
certified sources and actively support the Roundtable on
Sustainable Palm Oil (RSPO). In 2015, we revised and
expanded our voluntary commitment to the sustainable
procurement of palm oil products. This is to contain guidelines
for procuring palm oil and palm kernel oil, as well as their
primary derivative products. The guidelines involve require-
ments for protecting and preserving forests and peatland,
along with the involvement of local residents in decision-
making processes. In order to further increase the availability
of sustainable, RSPO-certified palm oil and palm kernel oil, we
will involve more and more small farmers by supporting suit-
able projects. Our goal is to exclusively obtain palm oil and
palm kernel oil that has been certified by the RSPO insofar as
this is available on the market. The voluntary commitment has
been expanded to include the most important intermediate
products based on palm oil and palm kernel oil up through
2025; these include fractions and primary oleochemical deriv-
atives as well as edible oil esters.
For more on our voluntary commitment, see basf.com/en/palm-dialog
■ Employees and contractors worldwide receive
training on safe behavior
Mineral raw materials
We procure a number of mineral raw materials, like precious
metals, that we use to produce process and mobile emissions
catalysts. In suspected cases, we investigate the origins of
minerals - as defined in the Dodd Frank Act - to see if they
come from conflict mines. We reserve the right to conduct an
external audit and, if necessary, terminate our business rela-
tionship. The suppliers addressed have confirmed to us that
they do not source minerals matching this definition from the
Democratic Republic of Congo or its neighboring countries.
Preserving ecosystems
Our production sites reviewed for proximity
to internationally protected areas
BASF partnership supports preservation
of biodiversity
In 2015, around 5.8% of the raw materials we purchased
worldwide were from renewable resources. To make the use of
these materials more competitive, we work on product
innovations based on renewable raw materials as well as on
enhancing production processes in reaction technology and
preparation.
Biodiversity forms the foundation of ecosystem services. Inter-
nationally protected areas play a critical role in maintaining
biodiversity around the world. This is why, in 2015, we once
again investigated our production sites to discover which are
located near internationally protected areas: 2% of production
sites (excluding Oil & Gas) are adjacent to a Ramsar Site and
2% to a Category I, II or III protected area of the International
Union for Conservation of Nature (IUCN). None of our produc-
tion sites are adjacent to a UNESCO protected area. Our 2015
analyses revealed no impact of our activities on biodiversity in
these areas. In 2016, we will review the evaluation methods
Iwe have used up to now in order to even better identify any
relevant impacts in the future.
Management's Report 97
Responsibility along the value chain - Raw materials
98 Management's Report
Responsibility along the value chain - Safety, security, health and the environment - Responsible Care Management System
Safety, security, health and the environment
Responsible Care Management System
Suppliers
Production
Customers
BASF Report 2015
We act responsibly as an integral part of society and have
set out the framework for our voluntary commitments in
our Responsible Care Management System. We never
compromise on the safety and security of our employees,
contractors and neighbors as well as our facilities, trans-
portation and products.
Strategy
Revised and updated goals for safety, security, health
and environmental protection
BASF's Responsible Care Management System comprises the
global rules, standards and procedures for safety, security,
health and environmental protection for the various stations
along our value chain. Our regulations cover the transportation
of raw materials, activities at our sites and warehouses, and
distribution of our products as well as our customers' applica-
tion of the products. At our sites, we address energy and
climate protection as one of the topics covered by our energy
management. Specifications for implementing these measures
are laid out in binding directives that are introduced in consul-
tation with employee representatives. These describe the rele-
vant responsibilities, requirements and assessment methods.
We regularly conduct audits to monitor our performance and
progress. We use the findings from these audits for continual
improvement.
Furthermore, we promote projects that contribute to the
preservation of biodiversity. These include, for example, the
"Farm Network" - a partnership brought to life by BASF in
2002 between independent farms, environmental protection
organizations, universities and agricultural technology suppli-
ers. The partners concentrate on strengthening biodiversity as
well as responsible use of water and soil in commercial agri-
culture. By developing practical and locally adaptable mea-
sures for modern farms, the Farm Network has already helped
numerous farmers increase the biodiversity of birds and
insects in their fields and save water and soil resources.
The first Farm Network conference took place in 2015,
where BASF invited experts from six European countries to
share their experiences with new agricultural practices and
strengthen their network.
We set ourselves ambitious goals for safety, security,
health and environmental protection. Our guidelines and
requirements are constantly updated. We revised our goals in
2015. For example, we replaced our previous goals for water
with an expanded goal for sustainable water management. We
introduced a new, ambitious goal for process safety, which
aims to reduce the number of plant safety incidents. In addi-
tion, we set ourselves a new energy and climate protection
goal for the global implementation of our energy management
system. In this way, we can identify and launch measures to
increase energy efficiency in an even more flexible manner,
depending on local raw material and energy prices.
■ New voluntary commitment and goals for procuring
palm oil products
Renewable resources
BASF Report 2015
Management's Report 95
Responsibility along the value chain - Suppliers
Evaluating our suppliers
"Together for Sustainability" initiative aims to
harmonize and standardize supplier assessments
and audits
■ 135 raw material supplier sites audited
BASF is a founding member of the Together for Sustainability
(TFS) initiative of leading chemical companies for the global
standardization of supplier evaluations and auditing. With the
help of TfS, we advance sustainability in the supply chain. The
initiative aims to develop and implement a global program for
the responsible supply of goods and services and improve
suppliers' environmental and social standards. The evaluation
process is simplified for both suppliers and TfS member com-
panies by a globally uniform questionnaire. The initiative's
members conducted a total of 2,580 sustainability assess-
Iments and 179 audits in 2015. The number of members rose
from twelve to 18. Together with the TfS initiative, we con-
ducted a Supplier Day in São Paulo, Brazil, in 2015. Tfs also
held a joint conference in Shanghai, China, with the China
Petroleum and Chemical Industry Federation (CPCIF) with the
goal of enhancing mutual understanding of the challenges
associated with sustainability.
In 2015, we held our first global Supplier Day in Ludwigs-
hafen in order to set up new modes of collaboration together
with selected suppliers.
Using TFS evaluations, we pursue a risk-oriented approach
with clearly defined, BASF-specific follow-up processes. We
drive these processes through a sustainability-oriented IT tool.
Suppliers with an elevated sustainability risk are identified
using risk matrices. Furthermore, our purchasers indicate the
suppliers for whom they see a potentially elevated sustainability
risk. We additionally check various information sources to
see if any suppliers have been observed in connection with
negative sustainability incidents. Based on these analyses,
we conducted sustainability standard audits for a total of 135
raw material supplier sites and initiated 1,044 sustainability
assessments through an external service provider in 2015.
In 2015, for example, we audited a supplier of mineral raw
materials in South Africa and identified room for improvement
primarily in the areas of environment and safety.
If we identify potential for improvement, we support suppliers
in developing measures to fulfill our standards. We conduct
another review according to a defined timeframe based on the
sustainability risk measured. If the weak points discovered
were particularly severe and we are unable to confirm any
improvement, we reserve the right to terminate the business
relationship.
This occurred in four cases in 2015. We use this approach
to evaluate suppliers with an elevated sustainability risk at
least every five years. The approach itself is reviewed every
two years to identify possibilities for optimization.
Supplier training
■ Bio-based PolyTHFⓇ 1000 offered for testing
purposes for the first time
In 2015, we continued the collaborations begun in China and
Brazil in 2014 to instruct suppliers on sustainability standards.
We have developed a training program together with the East
China University of Science and Technology in Shanghai, and
plan to educate around 2,000 suppliers by 2019. We are pur-
suing the same approach in Brazil together with the Espaço
ECO® Foundation. Through these cooperations, 485 suppliers
already received training in 2015.
Our audits have revealed some deviations with respect to
working hours and payment of the minimum wage, especially
in China. Here, we have called for improvements on the part of
our suppliers. None of our 2015 audits identified instances of
child labor. For the suppliers we reviewed, persons under 18
were excluded from overtime, night shifts and dangerous
work. We did not find any incidences of forced labor or other
human rights violations in 2015.
For more on sustainability in procurement, see basf.com/suppliers
96 Management's Report
Responsibility along the value chain - Raw materials
Raw materials
Suppliers
Production
Customers
BASF Report 2015
Responsible resource management is an integral part of
our strategy. It is applied within the company through our
Verbund concept, our innovative products and the use of
renewable raw materials. In the search for alternative raw
materials, we employ solutions that contribute to sustain-
ability. We as a company are dependent on ecosystem
services and also have an impact on them. Examples
include the availability of clean water and renewable
resources, or even the effects of ecosystem services on
the preservation of air, water and soil quality.
Strategy
The Verbund system is an important cornerstone of our
resource efficiency strategy: The by-products of one plant
often serve as feedstock elsewhere, thus helping us to use
raw materials more efficiently. In 2015, BASF purchased a
total of around 30,000 different raw materials from more than
6,000 suppliers. Some of our most important raw materials
are naphtha, natural gas, methanol, ammonia and benzene.
We apply the "mass balance approach" in our Verbund system
for the use of renewable raw materials. Furthermore, we are
involved in the responsible cultivation and utilization of renew-
ables in numerous projects along the value chain.
Audit results
We assess potential risks and weak points in all areas
ranging from research and production to logistics, and how
these could affect the environment, the surrounding community
or the safety and security of our employees. In our databases,
we document accidents, near misses and safety-related inci-
dents at our sites as well as along our transportation routes.
We foster awareness of workplace safety and safe behavior in
every individual with our worldwide safety initiatives.
BASF Report 2015
Audits
Accident prevention and emergency response
Revised questionnaire for assessing transportation
safety of chemicals and gases on seagoing vessels
■ Risk assessment conducted for shipments involving
high hazard potential
We stipulate worldwide requirements for our logistics service
providers and assess them in terms of safety and quality. In
2015, we evaluated around 500 companies in all regions. Our
experts use our own evaluation and monitoring tools as well as
internationally approved schemes.
We revised our questionnaire for the transportation of
chemicals and gases on seagoing vessels to align with that of
the Chemical Distribution Institute in 2015. Particular empha-
sis is placed on crew training and experience, especially in the
selection of service providers.
We regularly evaluate the risks in transporting raw materi-
als with high hazard potential using our global guideline. This
is based on the guidelines of the European Chemical Industry
Council, CEFIC.
Activities in external networks
We are actively involved in external networks, which quickly
provide information and assistance in emergencies. These
include the International Chemical Environmental (ICE) initiative
and the German Transport Accident Information and
Emergency Response System (TUIS), in which BASF plays a
coordinating role. In 2015, we provided assistance to other
companies in around 200 cases worldwide. We apply the
experience we have gathered to set up similar systems in
other countries: For example, in 2015 we were able to connect
our site in India to just such a system.
For more, see basf.com/distribution_safety and
basf.com/emergency_response
100 Management's Report
Responsibility along the value chain - Safety, security, health and the environment - Production
Production
Suppliers
In 2015, there were two incidents resulting in product spillage
of more than 200 kilograms of dangerous goods (2014: 5).
None of these transportation incidents had a significant impact
on the environment (2014: 1).
Production
BASF Report 2015
We never compromise on safety. For occupational and
process safety as well as health protection and corporate
security, we rely on comprehensive preventive measures
as well as on the involvement of all employees and con-
tractors. Our global safety and security concepts serve to
protect our employees, contractors and neighbors as well
as to prevent property damage and protect information
and company assets. In this way, we help prevent produc-
tion outages and damage to the environment.
Strategy
■
■
New or updated goals
For more on Responsible Care, see basf.com/en/responsible-care
Enhancement of safety culture
We have set ourselves ambitious goals for safety and health
protection. In 2015, we revised our goal for occupational
safety, making it even more ambitious. We continue to pursue
our health protection goal. We have furthermore defined a new
goal for process safety.
In our guidelines and requirements, we stipulate globally
mandatory standards for safety, security and health protec-
tion. A global network of experts supports us in their imple-
mentation through standardized processes. We regularly
conduct audits on safety, security, health and environmental
protection in order to monitor our performance. We especially
promote safe conduct at work through systematic risk assess-
ments and specific qualification measures.
Based on our corporate values, leaders serve as safety
role models for our employees. Together, they contribute to
the constant development of our safety culture.
Occupational safety
Customers
Transportation incidents
Worldwide safety standards
■ New reporting approach on transportation incidents
In 2014, we had already nearly achieved our goal of reducing
the number of worldwide transportation accidents per 10,000
shipments by 70% from 2003 to 2020. That is why we rede-
signed our reporting on transportation accidents in 2015.
From now on, we are focusing on transportation incidents with
dangerous goods spillages that significantly impacted the
environment. We will report on dangerous goods leaks of
BASF products in excess of 200 kilograms on public transpor-
tation routes, provided BASF arranged the transport. The
global requirement for reporting on transportation incidents
was adjusted accordingly and implemented worldwide.
130 environmental, safety and security audits
conducted at 82 sites
Regular audits help ensure that standards are met for safety,
security, health and environmental protection. We carry out
audits at BASF sites and at companies in which BASF is a
majority shareholder. We have defined our regulations for
Responsible Care audits in a global Group directive. During
our audits, we create a safety and environmental profile that
shows if our performance is sufficient to properly address
the existing hazard potential. If this is not the case, we agree
on measures and conduct follow-up audits on their implemen-
tation soon afterward. One result of the audits showed the
necessity of swiftly implementing new guidelines and processes,
for example.
For more on occupational safety and health protection,
see page 100 onward
Costs and provisions for environmental protection in the
BASF Group (in million €)
2015
2014
Operating costs for environmental protection
Investments in new and improved
962
897
environmental protection plants and facilities¹
Provisions for environmental protection
346
349
Our internal audit system complies with the standards for
external auditing procedures ISO 19011 and OHSAS 18001.
Worldwide, 180 BASF production sites are certified in accor-
dance with ISO 14001 (2014: 191)¹. We conducted short-notice
audits on various topics worldwide in 2015, which included
facility inspections and document reviews. In 2015, 130 envi-
ronmental, safety and security audits were carried out at
82 sites, along with 68 short-notice audits on various topics at
44 sites in the BASF Group. We audited 53 sites with respect to
occupational medicine and health protection.
538
measures and remediation²
Our regulations and measures for transportation and
warehouse safety cover the delivery of raw materials, the
storage and distribution of chemical products among
BASF sites and customers, and the transportation of
waste from our sites to the disposal facilities.
Strategy
Production
Suppliers
Transportation and storage
Customers
In addition to changes in the site portfolio, the decrease mainly resulted from the sites' aim to be certified in accordance with ISO 50001 due to our energy efficiency goal.
1
621
2 Values shown refer to December 31 of the respective year.
1 Investments comprise end-of-pipe measures as well as integrated environmental
protection measures.
Management's Report 99
Responsibility along the value chain - Safety, security, health and the environment - Transportation and storage
Legal, Taxes, Insurance
& Intellectual Property
Regions
Divisions
Corporate Units
Strategic Planning
& Controlling
Corporate
Controlling
Finance
Chief Compliance Officer
Board of Executive Directors
Supervisory Board
Corporate Audit
1 Using a 95% confidence interval per risk factor based on planned values;
summation is not permissible.
Forecast Opportunities and risks report
114 Management's Report
Ultimately, however, residual risks remain in all entrepre-
neurial activities which even comprehensive risk management
cannot exclude.
According to our assessment, there continue to be no signifi-
cant individual risks that pose a threat to the continued
existence of the BASF Group. The same applies to the sum of
individual risks, even in the case of another global economic
crisis.
2016 +
Outlook
€1,000 million < €1,500 million
=
BASF Report 2015
Organization of BASF Group's risk management
External Auditors
- The management of specific opportunities and risks is largely
delegated to the business units and is steered at a local
level. Risks relating to exchange rates and raw material
prices are an exception. In this case, there is an initial con-
solidation at a Group-wide level before derivative hedging
instruments, for example, are used.
Competence Centers
≥ €500 million < €1,000 million
- Company management is informed about operational
opportunities and risks (observation period of up to one
year) in the monthly management report produced by the
Corporate Controlling unit. In addition, the corporate units
Corporate Controlling and Finance provide information twice
a year about the aggregated opportunity/risk exposure of
the BASF Group. Furthermore, if a new individual risk is
identified which bears reputational risks or has a more than
- We use standardized evaluation and reporting tools for the
identification and assessment of risks. The aggregation of
opportunities, risks and sensitivities at the business and
Group level using a Monte Carlo simulation helps us to iden-
tify effects and trends across the company.
- A catalog of opportunity and risk categories helps to identify
all relevant opportunities and risks as comprehensively as
possible.
- The Risk Management Process Manual, applicable through-
out the Group, forms the framework for risk management
and is implemented by the business units according to their
particular business conditions.
Instruments
- The internal auditing unit (Corporate Audit) is responsible for
regularly auditing the risk management system established
by the Board of Executive Directors in accordance with
Section 91(2) of the German Stock Corporation Act. Further-
more, as part of its monitoring of the Board of Executive Di-
rectors, the Supervisory Board considers the effectiveness
of the risk management system. The suitability of the early
detection system we set up for risks is evaluated by our
external auditor.
progress in the program's implementation as well as on any
significant results. Furthermore, the CCO provides a status
report to the Supervisory Board's Audit Committee in at least
one of its meetings each year, including any major develop-
ments. In the event of significant incidents, the Audit Com-
mittee is immediately informed by the Board of Executive
Directors.
- BASF's Chief Compliance Officer (CCO) manages the imple-
mentation of our Compliance Management System, suppor-
ted by additional compliance officers worldwide. The CCO
regularly reports to the Board of Executive Directors on
Verbund Sites
- A network of risk managers in the business and corporate
units advances the implementation of appropriate risk
management practices in daily operations.
Organization and responsibilities
The BASF Group's risk management process is based on the
international risk management standard COSO II Enterprise
Risk Management Integrated Framework (2004), and has
the following key features:
Aggregation at a Group level
Decentralized management of specific opportunities
and risks
and reporting
■
■
■ Integrated process for identification, assessment
Risk management process
- Risk management is the responsibility of the Board of
Executive Directors, which also determines the processes
for approving investments, acquisitions and divestitures.
- The Board of Executive Directors is supported by the corpo-
rate units Finance; Corporate Controlling; Strategic Planning
& Controlling; Legal, Taxes, Insurance & Intellectual Property;
and the Chief Compliance Officer. They coordinate the risk
management process at a Group level and provide the
structure and appropriate methodology. Opportunity and
risk management is thus integrated into the strategy, plan-
ning and budgeting processes.
≥ €100 million < €500 million
Our Raw Material Verbund helps us prevent and reduce
waste. We regularly carry out audits to inspect external waste
management companies, ensuring that our hazardous waste
in particular is properly disposed of. In this way, we are also
contributing to preventive soil protection and keeping today's
waste from becoming tomorrow's contamination.
Other financial opportunities and risks
0.2 million MWh
Coal
1.0 million MWh
Residual fuels
5.1 million MWh
37.1 million MWh
Steam supply
-23
1
Internally generated
53%
Waste heat
44%
2
Steam
39.0 million
MWh¹
13.7%
1
Purchased
3%
1 Conversion factor: 0.75 MWh per metric ton of steam
Energy supply and efficiency
Verbund system as important component of our
energy efficiency strategy
Heating oil
Gas and steam turbines in our combined heat and power
plants enable us to fulfill around 70% of the electricity demand
of the BASF Group. Compared with separate methods of
generating steam and electricity, we saved 13.5 million MWh
of fossil fuels and prevented 2.7 million metric tons of carbon
emissions in 2015. The Verbund system is an important com-
ponent of our energy efficiency strategy: Waste heat from one
plant's production process is used as energy in other plants. In
this way, we saved around 17.6 million MWh in 2015, which
corresponds to a savings of 3.5 million metric tons' worth of
carbon emissions. With combined power and steam genera-
tion as well as our continuously enhanced Energy Verbund, we
were thus able to prevent a total of 6.2 million metric tons of
carbon emissions in 2015.
30.8 million MWh
Total:
2014
2015
Goal 2020
1 The selection of relevant sites is determined by the amount of primary energy used and local energy prices.
BASF Report 2015
Management's Report 107
Responsibility along the value chain - Safety, security, health and the environment - Energy and climate protection
Energy supply of the BASF Group 2015
Electricity supply
2
1
Internally generated
69%
2
Purchased
31%
Electricity
15.0 million
MWh
3
Fossil and residual fuels used for power generation in
power plants of the BASF Group
83.0%
0.6%
2.7%
Natural gas
We were able to further optimize the resource and energy
consumption of our production in numerous projects around
the world in 2015. Various process improvements led to steam
and electricity savings. At the Ludwigshafen site, for example,
we implemented an integrated steam network between the
ethanolamine facility and the UltrasonⓇ plant, making use of
significant amounts of heat. The startup of the new, gas-based
combined heat and power plant at the Münster site of BASF
Coatings additionally supported our endeavors toward efficient
and environmentally friendly energy sourcing practices.
We also rely on locally available energy sources for energy
supply at our sites. Especially in the growing Asian market, we
and our energy suppliers also utilize coal as an energy source
since the more climate-friendly natural gas is not available in
sufficient quantities at competitive prices.
-
■Customers' use of climate protection products
sold in 2015 avoids 530 million metric tons of
CO₂ equivalents
BASF has been publishing a comprehensive corporate carbon
footprint since as early as 2008. This reports on all emissions
along the value chain and shows the volume of emissions
prevented through the use of our climate protection products.
We plan our climate protection activities along the value chain
based on our corporate carbon footprint.
Through various measures to reduce our raw material and
energy requirements, the emission of greenhouse gases
associated with producing the raw materials was decreased
by a total of around 160,000 metric tons in 2015.
We completed the systematic evaluation of our product
portfolio in terms of sustainability considerations in 2015. This
included identifying solutions whose application makes a
positive contribution in terms of climate protection and energy.
Dubbed "Accelerator" products, these are what we focus on
when referring to climate protection products. They help us
offer solutions to our customers to avoid greenhouse gas
emissions over their entire lifecycle as compared with reference
products. One example is our KeropurⓇ line of fuel additives,
which reduces fuel consumption by optimizing combustion in
comparison with conventional fuels.
Greenhouse gas emissions along the BASF value chain in 20151
(in million metric tons of CO2 equivalents)
54 Suppliers
Purchased products,
services and capital
goods (C 1, 2, 3a)
22 BASF
Production (including genera-
tion of steam and electricity)
18 Disposal
Incineration with energy
recovery, landfilling (C 12)
4 Transport
Transport of products,
employees' commuting and
business travel (C 4, 6, 7, 9)
43 Customers
Emissions from
the use of end
products (C 11)
4 Other
(C 3b, 3c, 5,
8, 13, 15)
1 According to Greenhouse Gas Protocol, Scope 1, 2 and 3; categories within Scope 3
are shown in parentheses
An analysis of 25 climate protection product groups revealed
that customers' use of products sold in 2015 helped to avoid
530 million metric tons of CO2 equivalents. Every product
makes an individual contribution in the value chain of customer
solutions. Value chains are assessed in terms of BASF's eco-
nomic share of the respective customer solution. On average,
11% of the emissions avoided were attributable to BASF in
2015. The calculation of avoided greenhouse gas emissions
was based on the chemical industry standard of the Interna-
tional Council of Chemical Associations (ICCA) and the World
Business Council for Sustainable Development (WBCSD).
For more on our emissions reporting, see
basf.com/corporate_carbon_footprint
For more on the sustainability analysis of
our product portfolio, see page 32 onward
Prevention of greenhouse gas emissions through the use of
BASF products (in million metric tons of CO2 equivalents)
Emissions along the entire value chain
Without the use of BASF's
climate protection products
1,210
Emissions avoided
■ Reporting on greenhouse gas emissions along
the entire value chain
Corporate carbon footprint and climate
protection products
3 Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes
2 Scope 1 and Scope 2 (location-based) according to the GHG Protocol Standard, excluding emissions from the generation of steam and electricity for sale to third parties;
information on market-based Scope 2 emissions can be found in the GRI and Global Compact Index; see basf.com/en/gri_gc
We are exploring the use of renewable energies. These
can only become a permanent part of our energy mix if they
are competitive in terms of supply security and cost. Our
research also contributes to increasing the efficiency of tech-
nologies for the use of renewable energy sources. For exam-
ple, Deutsche Nanoschicht GmbH a 100% subsidiary of
BASF has developed an innovative method for producing
high-temperature superconductors in a more efficient and
environmentally friendly manner. Deutsche Nanoschicht will
start operations at a further pilot plant at its Rheinbach, Ger-
many, site in 2016. In cooperation with the Karlsruhe Institute
of Technology, high-temperature superconductors are to be
optimized for various applications in energy technology.
108 Management's Report
Responsibility along the value chain - Safety, security, health and the environment - Energy and climate protection
Key indicators for energy and climate protection in BASF operations excluding Oil & Gas
Greenhouse gas emissions² (million metric tons of CO2 equivalents)
Specific greenhouse gas emissions (metric tons of CO, equivalents per ton of sales product)
Primary energy demand³ (million MWh)
Energy efficiency (kilograms of sales product per MWh)
1
The values for baseline 2002 were not adjusted to reflect the currently applied global warming potential factors.
BASF Report 2015
2013
Baseline 20021
24.713
20.550
2015
20.133
0.897
0.593
0.587
55.759
494
57.262
599
2014
With the use of BASF's
climate protection products
2012
90
Baseline
-28.9
-34.6
-33.4 -34.1
-33.9
-34.6
-40.0
The figures for the 2010 and 2011 business years were not adjusted to the scope of
consolidation as per the new accounting and reporting standards IFRS 10 and 11.
For more information on our data collection methods, see page 6.
2 The figures for the 2012 business year and earlier were not adjusted to the currently
applied factors for global warming potential. For more information on our data
collection methods, see page 106.
106 Management's Report
Responsibility along the value chain - Safety, security, health and the environment - Energy and climate protection
BASF Report 2015
BASF Group's greenhouse gas emissions according to the Greenhouse Gas Protocol¹ (1,000 metric tons of CO2 equivalents)
BASF operations including Oil & Gas
2002
2014
2015
Scope 12
CO2 (carbon dioxide)
N2O (nitrous oxide)
CH(methane)
2020 Goal
HFC (hydrofluorocarbons)
2015
2013
BASF Report 2015
Management's Report 105
Responsibility along the value chain - Safety, security, health and the environment - Energy and climate protection
Energy and climate protection
Suppliers
Production
Customers
As an energy-intensive company, we are committed to
energy efficiency and global climate protection. We want
to reduce emissions along the value chain and utilize, for
example, efficient technologies for generating steam and
electricity, energy-efficient production processes, and
comprehensive energy management. Our climate protec-
tion products make an important contribution toward
helping our customers avoid emissions.
Strategy
We are committed to energy efficiency and global
climate protection along the value chain
We want to reduce greenhouse gas emissions in our produc-
tion and along the entire value chain. To this end, we have
thoroughly analyzed the greenhouse gas emissions from our
production in the past few years and implemented compre-
hensive reduction measures. This is how, for example, we
have been able to significantly reduce nitrous oxide emissions
since 1997.
Comparisons with European emissions trading bench-
marks show that our greenhouse gas-intensive chemical
plants operate at above-average efficiency. To supply our
production sites with energy, we rely on highly efficient com-
bined heat and power plants with gas and steam turbines, and
on the use of heat released by production processes. Around
50% of BASF Group emissions in 2015 resulted from steam
and electricity generation in our power plants as well as in our
energy suppliers' power plants.
Our success also depends on the long-term security and
competitiveness of our energy supplies. Furthermore, we are
committed to energy management that helps us analyze and
continue to improve the energy efficiency of our plants.
We offer our customers solutions that help prevent green-
house gas emissions and improve energy and resource effi-
ciency. About half of our total annual research spending goes
toward the development of these products and the optimiza-
tion of our processes.
Our climate protection activities are based on comprehensive
emissions controlling. We report on greenhouse gas emissions
in accordance with the Greenhouse Gas Protocol Standard,
as well as the sector-specific standard for the chemical indus-
try. We applied the new Scope 2 standard for the first time in
2015. According to CDP, an international organization that
analyzes companies' climate protection data, BASF is among
the top companies in the world in terms of transparency and
completeness in climate protection reporting. In reporting to
CDP, our experts perform an annual analysis of the opportuni-
ties and risks that climate change poses for BASF.
We also advocate economically efficient and environ-
mentally effective climate protection by supporting endeavors
to this effect. For example, we joined the U.N.'s Caring for
Climate initiative in 2015 - with over 400 companies from 60
countries, this is the largest global business movement in the
search for climate change solutions. BASF also advocates the
Paris Agreement on climate protection and a global carbon
price.
For more on climate protection, see basf.com/climate_protection
Reduction of greenhouse gas emissions per metric ton of sales
product in BASF operations excluding Oil & Gas 1,2 (in %)
2002
2010
2011
2012
2014
SF (sulfur hexafluoride)
Scope 23
Total
<€100 million
1 BASF reports separately on direct and indirect emissions from the purchase of energy. Scope 1 emissions encompass both direct emissions from production and generation
of steam and electricity, as well as direct emissions from the generation of steam and electricity for sale. Scope 2 emissions comprise indirect emissions from the purchase of
energy for BASF's use.
2 Emissions of N2O, CH, HFC and SF have been translated into CO2 emissions using the Global Warming Potential, or GWP, factor. GWP factors are based on the
Intergovernmental Panel on Climate Change (IPCC) 1995 (2002 emissions) and IPCC 2007, errata table 2012 (2014 and 2015 emissions). HFC (hydrofluorocarbons) are
calculated using the GWP factors of the individual components.
3 Location-based approach. Information on the calculation of market-based Scope 2 emissions can be found in the GRI and Global Compact Index; see basf.com/en/gri_gc
4 Includes sale to BASF Group companies; as a result, emissions reported under Scope 2 can be reported again in some cases.
1,071
22,170
Global goals
■Specific greenhouse gas emissions reduced
New goal for energy management system
We aim to reduce our greenhouse gas emissions per metric
ton of sales product by 40% by 2020, compared with baseline
2002. In 2015, we achieved a reduction of 34.6% (2014:
reduction of 33.9%). Since 1990, we have been able to lower
our overall greenhouse gas emissions from BASF operations
(excluding Oil & Gas) by 49.8% and even reduce specific
emissions by 74.4%.
We set ourselves a new energy efficiency goal in 2015
covering both the chemicals and the oil and gas businesses.
By 2020, we want to have introduced certified energy
management systems (DIN EN ISO 50001) at all relevant
production sites¹. Taken together, this represents 90% of
BASF's primary energy demand. This is one of the ways in
which we intend to identify and carry out improvements in
energy efficiency, reducing not only greenhouse gas emissions
and saving valuable energy resources, but also increasing the
BASF Group's competitive ability. In 2015, we were able to
complete the ISO 50001 energy management system certifi-
Ication of two additional sites in Germany. This brings the
current total to 27 certified sites worldwide, representing
39.5% of our primary energy demand.
2020 Goal
Reduction of greenhouse
gas emissions per metric
ton of sales product
Baseline 2002
BASF operations excl. Oil & Gas
-40%
2020 Goal
Coverage of our primary
energy demand by introducing
certified energy management
systems at all relevant sites
BASF operations incl. Oil & Gas
90%
Introduction of certified energy management systems (ISO 50001)
at BASF Group sites worldwide, in terms of primary energy demand
(in %)
38.6
39.5
27.3
838
347
26,936
21,099
21,523
CO₂
Sale of energy to third parties (Scope 1)4
CO
Total
14,634
16,774
16,496
6,407
669
600
0.1
244
88
61
99
119
0
0
1
5,243
26,589
3,911
3,795
70
680
22,361
BASF Report 2015
Waste management in the BASF Group (in million metric tons)
2015
2014
Total waste generation¹
2.02
2.07
Thereof from oil and gas exploration
0.05
0.05
Waste recovered
0.68
0.71
Recycled
0.27
0.30
Thermally recovered
0.41
0.41
Waste disposed of
1.34
1.36
We have been documenting relevant sites in a contamin-
ated site database since 2013. Ongoing remediation work
around the world continued on schedule and planning was
concluded on future landfill remediation projects.
In underground landfills
We develop remediation solutions in order to combine
nature conservation, climate protection concerns, costs, and
social responsibility. This means making decisions on a case-
by-case basis, founded on the legal framework and current
technological possibilities. We set out global standards for our
approach to contaminated site management. A worldwide
network of experts ensures their proper implementation.
■ Systematic processing of contaminated sites ensured
11,697
NMVOC (nonmethane volatile organic compounds)
5,140
4,881
SO (total various sulfur oxides)
3,028
4,506
Dust
3,330
3,456
NH3 / other (NH3 [ammonia] and other inorganic
substances)
2,216
2,321
Total
28,585
31,505
112 Management's Report
Responsibility along the value chain - Safety, security, health and the environment - Air and soil
BASF Report 2015
Management of waste and contaminated sites
- Reduction of total waste volume
We regularly explore possibilities for preventing waste. If waste
is unavoidable, we perform an analysis for recycling or energy
recovery. Total waste volume declined slightly in 2015 (-2.4%).
0.14
0.12
In surface landfills
Identifying opportunities
and risks as early as possible
and planning effective
courses of action
The goal of BASF's risk management is to identify and
evaluate opportunities and risks as early as possible and
to take appropriate measures in order to seize opportuni-
ties and limit business losses. The aim here is to avoid
risks that pose a threat to BASF's continued existence
and to make improved managerial decisions to create
lasting value. We understand risk to be any event that can
negatively impact the achievement of our short-term
operational or long-term strategic goals. We define
opportunities as possible successes that exceed our
defined goals.
In order to effectively measure and manage identified opportu-
nities and risks, we quantify these in terms of probability and
economic impact in the event they occur. We use statistical
methods to aggregate opportunities and risks into risk factors.
This way, we achieve an overall view of opportunities and risks
at a portfolio level, allowing us to take effective measures for
risk management.
Overall assessment
Significant risks and opportunities arise from
overall economic developments and volatility
in exchange rates and margins
No threat to continued existence of BASF
We expect the global economy to continue to grow in the next
two years. We continue to see significant risks in a consider-
able slowdown of the Chinese economy. Such a development
would negatively impact demand for intermediate goods and
investment goods, and affect emerging markets that export
raw materials as well as the advanced economies. Any esca-
lation of geopolitical conflicts also poses risks to the global
economy. Important opportunities and risks for our earnings
are also associated with uncertainty regarding growth in
Europe, the development of key customer industries, and
volatility in foreign currency exchange rates and margins.
Potential short-term effects on EBIT of key opportunity
and risk factors subsequent to measures taken¹
Possible variations related to:
Business environment and sector
Market growth
Margins
Competition
Regulation/policy
Company-specific opportunities and risks
Purchasing/supply chain
Investments/production
Personnel
Acquisitions/cooperations
Information technology
Law
Finance
Exchange rate volatility
530 million metric tons
Risk management
Events that can negatively
impact the achievement
of our goals
Risks
Potential successes that
exceed our defined goals
0.48
0.52
Through incineration
0.72
0.72
Classification of waste for disposal²
Nonhazardous waste
0.44
0.42
Hazardous waste
11,058
0.90
Transported hazardous waste
0.27
0.23
1 Comprises all production waste and hazardous waste from construction activities
2 The classification of waste into hazardous and nonhazardous waste is performed
according to local regulations.
BASF Report 2015
Forecast
Opportunities and risks report
Management's Report 113
Forecast Opportunities and risks report
Opportunities
0.94
[nitrogen monoxide], calculated as NO2)
58.962
588
4,635
Production
6,010
85%
Cooling
Discharge
BASF Report 2015
1,626
Surface water / freshwater
1,564
Brackish water / seawater
23
Groundwater
76
Cooling
5,752
Drinking water
22
Thereof recirculating
4,570
once-through
1,182
15%
Use
1,686
withdrawal
NO (total NO, [nitrogen dioxide] + NO
Water
Suppliers
Production
Management's Report 109
Responsibility along the value chain - Safety, security, health and the environment - Water
Customers
Water is of fundamental importance in chemical produc-
tion. It is used as a coolant, solvent and cleaning agent, as
well as to make our products. We are committed to its
responsible use in our production sites' water catchment
areas, and along the entire value chain. We have set our-
selves a global goal for sustainable water management.
Strategy
BASF products contribute to sustainable water
management
We aim to use water as sparingly as possible and further
reduce emissions to water. To do so, we have set out a Group
directive with globally applicable standards. We are exploring
measures for implementing sustainable water management,
especially at production sites in water stress areas. One of our
aims here is to identify savings potential in order to use as little
water as possible, particularly in water stress areas. We con-
sider this topic from all aspects, including societal implications.
Surface water / freshwater
Brackish water / seawater
Groundwater
We offer our customers solutions that help purify water,
use it more efficiently and reduce pollution. Seawater desalina-
tion plants make an important contribution to supplying the
world's population with water. The Middle East's dry climate,
for example, makes the region particularly dependent on this
technology. The largest desalination plant in the United Arab
Emirates is located in Jebel Ali. BASF supplies it with more
than 3,000 metric tons of SokalanⓇ PM 151 per year; this prod-
uct prevents the buildup of deposits, enabling the plant to
generate up to 2 million cubic meters of desalinated water
each day.
For more on the CDP water survey, see basf.com/en/cdp
Global goal
Goals achieved for reducing emissions
■ Goal expanded for sustainable water management
We have already achieved our 2020 goal of decreasing emis-
sions to water of organic substances and nitrogen by 80% and
of heavy metals by 60% compared with baseline 2002. In
2015, we reached 28.2% (2014: 26.3%) of our goal to halve
the withdrawal of drinking water for production purposes from
2010 to 2020. We integrated this target into our goal for sus-
tainable water management in 2015. We are analyzing water
management practices at relevant production sites with
respect to sustainability criteria. Our aim to establish sustain-
able water management at all sites in water stress areas was
expanded in 2015: We now also want to introduce sustainable
water management at all Verbund sites by 2025. This will
cover 92% of BASF's entire water abstraction. We achieved
36.2% of this goal in 2015, and are pursuing it through the
application of the European Water Stewardship (EWS) stan-
dard. After introducing the standard at our European sites in
2013, we furthered its implementation in China and North and
South America in 2015. This once again earned gold-level
certification in 2015 for our production site in Tarragona, Spain,
after an external audit.
Water stress areas around the world
Source: Pfister et. al., 2009
110 Management's Report
Water in the BASF Group 2015 (million cubic meters per year)
Abstraction/
In order to ensure transparency in our reporting on water, we
once again took part in CDP reporting in 2015 and received a
very good score. According to CDP, this was particularly
because of our implementing a range of best-practice mea-
sures in water management, as well as our risk minimization
- both in our production and beyond it.
1,414
Responsibility along the value chain - Safety, security, health and the environment - Water
13
Production
Management's Report 111
Responsibility along the value chain - Safety, security, health and the environment - Air and soil
Customers
We want to further reduce emissions to air from our pro-
duction, protect the soil and prevent waste. We have set
ourselves standards for doing so in a global directive. If
no recovery options are available, we dispose of waste in
a correct and environmentally responsible manner.
Strategy
■
■
Raw Material Verbund helps prevent and
reduce waste
Professional disposal of hazardous waste
Regular monitoring of our emissions to air is a part of environ-
mental management at BASF. Aside from greenhouse gases,
we also measure emissions of other pollutants into the atmo-
sphere. Our reporting does not take into account air pollutant
emissions from oil and gas operations due to their substantial
fluctuation during exploration phases.
Further reduction of emissions
We were able to reduce absolute emissions of air pollutants
from our chemical plants to 28,585 metric tons in 2015. This
is a decrease of 66.6%, which means that our goal of a 70%
reduction worldwide from 2002 to 2020 has almost been
achieved. Emissions of ozone-depleting substances as
defined by the Montreal Protocol totaled 23 metric tons in
2015 (2014: 36 metric tons). Emissions of heavy metals
amounted to 4 metric tons (2014: 4 metric tons).
We were able to reduce emissions of sulfur oxides in
2015, particularly at our site in Hannibal, Missouri: There, we
exchanged coal-fired boilers for gas-powered burners, saving
around 1,000 metric tons of sulfur oxide.
Our product portfolio contains a variety of catalysts used in
the automotive sector and in industry to reduce the emission
of air pollutants. BASF's CametⓇ series of CO catalysts, for
example, decreases the amount of carbon monoxide released
by gas turbine plants in partial-load mode. As a complement
to the use of renewable energies, this now environmentally
friendly partial-load mode will become increasingly necessary
in the future.
Emissions to air (in metric tons)
Air pollutants from BASF operations excluding Oil & Gas
CO (carbon monoxide)
2015
179
3,813
2014
Suppliers
Air and soil
Emissions to air
For more, see basf.com/water
from third parties
1
BASF Report 2015
Reusable wastewater
Production²
258
External treatment plant
20
Around 22% of our production sites were located in water
stress areas in 2015, and around 1% of BASF's total water
supply was abstracted from these areas.
2025 Goal
Introduction of sustainable
water management at all
production sites in water stress
areas and at all Verbund sites
1 The difference between the volume of water drawn and the volume discharged is primarily attributable to evaporation losses during closed-circuit cooling.
2 Total from production processes, graywater, rinsing and cleaning in production
Further reduction of emissions
100%
■ Reduction of emissions to water achieved
The supply, treatment, transportation and recooling of
water is associated with a high energy demand. We employ
various means in our efforts to keep this as low as possible.
We are constantly working to optimize our energy consump-
tion and the amount of water we use, and to adapt to the
needs of our business and the environment.
A total of around 207 million cubic meters of wastewater were
discharged from BASF production sites in 2015 (2014: 194 mil-
lion cubic meters). Emissions of nitrogen to water amounted
to 3,000 metric tons (2014: 3,200 metric tons). We were able
to make this improvement by optimizing processes and
exchanging products, for example. Around 17,300 metric tons
of organic substances were emitted in wastewater (2014:
18,700 metric tons). Our wastewater contained 25 metric tons
of heavy metals (2014: 21.5 metric tons). Phosphorus emis-
sions amounted to 460 metric tons (2014: 341 metric tons).
Our wastewater is treated through different methods depending
on the type and degree of contamination - including biological
processes, oxidation, membrane technologies, precipitation or
adsorption.
In order to prevent unanticipated emissions and the pollu-
tion of surface or groundwater, we create water protection
strategies for our production sites. This is mandatory for all
production plants as part of the Responsible Care initiative. The
wastewater protection plans involve evaluating wastewater in
terms of risk and drawing up suitable monitoring approaches.
We use audits to check that these measures are being imple-
mented and complied with.
Water use
■Using water responsibly
BASF operations excl. Oil & Gas
We recirculate water as much as is feasible in order to with-
draw less from supply sources. Our larger sites have recooling
plants that allow water to be reused several times and that
reduce the temperature of used cooling water before it is dis-
charged back into a body of water.
For more on energy and climate protection, see page 105 onward
For more on opportunities and risks from energy policies, see page 116
■
-
■
Trends in the global economy in 2016
Economic environment in 2016
Management's Report 121
Forecast Economic environment in 2016
For BASF as an energy-intensive company, opportunities
and risks arise particularly from regulatory changes in carbon
prices through emissions trading systems, taxes or energy
legislation.
BASF Report 2015
Stable growth expected for the European Union
Economic cooldown in China with dampening effects
on Asia's emerging markets
The global economy will presumably grow by 2.3% in
2016, about as fast as in 2015 (+2.4%). Growth in the
European Union will remain comparable with prior-year
levels. In the United States, growth is expected to slow
down somewhat. We forecast that Chinese economic
growth will continue to decelerate slightly and that the
recession will ease up somewhat in Russia and Brazil.
Global chemical production is likely to grow by 3.4% in
2016, slower than 2015 (+3.6%). The global economy
continues to face increasing risks. For 2016, we assume
an average price of $40 per barrel for Brent blend crude oil
and an exchange rate of $1.10 per euro.
Recovery of Japanese economy unlikely
Continued, but milder, deceleration predicted for
South America
5.7%
Growth in the United States will probably slacken some-
what in the face of slower industrial growth. Benefiting from
the positive job market situation and low inflation rates, private
consumption will provide some stability. Experience shows
that rising real estate value also has a positive effect on con-
sumption. Increasingly better production capacity utilization
along with continuing low interest rates are likely to support
the propensity to invest.
In the emerging markets of Asia, we assume that growth
will weaken to a moderate level overall. Gross domestic prod-
uct growth will continue to slow in China. The government's
Outlook for gross domestic product 2016
(Real change compared with previous year)
World
European Union
United States
2.3%
1.7%
2.1%
Emerging markets of Asia
Japan
0.8%
South America
The material aspect "energy and climate" is analyzed as
part of our risk management process in order to allow us
to identify, assess and direct climate-related risks and oppor-
tunities.
(1.7%)
For 2016, we anticipate growth in the European Union's
economy on approximately the same level as the previous
year. Low oil prices, largely stable prices, reduced interest
rates and favorable euro exchange rates will support this
development, although these factors do not represent addi-
tional growth stimulus as they have already been in effect
since 2015. The economy will stabilize noticeably in southern
Europe. In northwestern Europe and the eastern European
E.U. countries, growth will hover at prior-year levels. We
expect the recession to continue in Russia and Ukraine,
although the decline is likely to ease off compared with 2015.
In terms of upcoming opportunities and risks, material
aspects identified included: energy and climate, water,
resources and ecosystems, responsible production, and
employment and employability. In addition to specific require-
ments for these aspects, discussion is growing surrounding
the internalization of external effects.
We optimize the efficiency and effectiveness of our
research activities through our global Know-How Verbund as
well as through collaboration with partners and customers.
Furthermore, in a program and project management process,
we continuously review the chances of success and the
underlying assumptions of research projects; this review
includes all phases from idea generation to product launch.
The trust of customers and consumers is essential for the
successful introduction of new technologies. That is why
we enter into dialog with stakeholders at an early stage of
development.
Identification of upcoming opportunities and risks
Risk management established for material aspect
"energy and climate"
Trends in gross domestic product 2016-2018
(Average annual real change)
In order to remain competitive, we continuously improve
our operational excellence. Our new strategic excellence pro-
gram, DrivE, also contributes to this aim. Starting at the end of
2018, we expect this program to contribute around €1 billion
in earnings each year compared with baseline 2015.
In order to achieve long-term profitable growth, our
research and business focus is on highly innovative business
areas, which we sometimes enter into through strategic coop-
erative partnerships.
Innovation
Chances of success in research and development
increased by Know-How Verbund
We are observing a trend toward more sustainability in our
customer industries. We want to take advantage of the result-
ing opportunities with innovations. In the long term, we aim to
continue significantly increasing sales of new and improved
products.
To achieve this goal, we continue to aim to invest around
3% of our sales (excluding Oil & Gas) in research and develop-
ment. At the beginning of 2015, we pooled the central research
areas Process Research & Chemical Engineering, Advanced
Materials & Systems Research and Bioscience Research into
three global platforms headquartered in one of the regions
particularly significant for us: Europe, Asia Pacific and North
America. Stronger regional presence opens up new opportu-
nities to participate in local innovation processes and gain
access to local talent. We also address the risk of the technical
or economic failure of research and development projects
by maintaining a balanced and comprehensive project port-
folio, as well as through professional, milestone-based project
management.
For more on innovation, see page 34 onward
120 Management's Report
Forecast Opportunities and risks report
BASF Report 2015
Portfolio development through investments
■ 2016-2020: More than a quarter of our investing
volume to go into emerging markets
We expect the increase in chemical production in emerging
markets in the coming years to be significantly above the
global average. This will create opportunities that we want to
exploit by expanding our presence in these economies; there-
fore, more than a quarter of our investment volume will be
spent in emerging markets over the next five years. We also
want to intensify investment in North America in light of the
attractive growth prospects and low raw material prices: for
example, we are constructing an ammonia production plant
with Yara in Freeport, Texas. In addition, we are exploring an
investment in a world-scale methane-to-propylene complex
on the U.S. Gulf Coast.
Our decisions on the type, size and locations of our invest-
ment projects are based on assumptions related to the long-
term development of markets, margins and costs, as well as
raw material availability and country, currency and technology
risks. Opportunities and risks arise when actual developments
deviate from our assumptions.
In the implementation phase, we use our experience in
project management and controlling to minimize short-term
technical risks as well as risks from cost overruns or missed
deadlines.
For more on our investment plans, see page 125 onward
Acquisitions
Detailed assessment of opportunities and risks
as part of due diligence
In the future, we will continue to refine our portfolio through
acquisitions that promise above-average profitable growth,
are innovation-driven and offer added value for our customers
while reducing the cyclicality of our earnings.
The evaluation of opportunities and risks already plays a
significant role during the assessment of potential acquisition
targets. A detailed analysis and quantification are conducted
as part of due diligence. Examples of risks include increased
staff turnover, delayed realization of synergies, and the
assumption of obligations that were not precisely quantifiable
in advance. If our expectations in this regard are not fulfilled,
risks could arise, such as the need to impair intangible assets;
however, there could also be opportunities, for example, from
additional synergies.
For more on our acquisitions, see page 39 onward
Recruitment and long-term retention of qualified employees
Risk of retirement-related loss of expertise
BASF, too, is adjusting to a medium to long-term shortage of
skilled employees due to demographic changes, especially in
North America and Europe. As a result, there is an increased
risk that job vacancies may not be filled with suitable appli-
cants, or only after a delay. We address these risks through
our Best Team Strategy and the global initiatives derived
from it, covering demographic and knowledge management,
Diversity + Inclusion, employee and leadership development,
intensified employer branding, and supplementary regional
initiatives. With these measures, we increase BASF's attrac-
tiveness as an employer and retain our employees in the long
term.
For more on the individual initiatives and our goals, see page 42 onward
Sustainability
BASF uses sustainability management tools to identify
upcoming opportunities and risks that arise in connection with
the topic areas environment, society and governance. Their
long-term effect on our business activities and their associated
relevance are assessed through such instruments as our
materiality analysis, along with our experiences from continu-
ous dialog with our stakeholders. We have established global
monitoring systems which also include our suppliers – these
enable us to check adherence to laws and our voluntary
commitments in the areas of environment, safety, security,
society, and governance.
World
1.0%
European Union
The global growth rate of the chemical market will be
largely determined by developments in China, which accounts
for more than a third of worldwide production. China will pre-
sumably contribute more than two percentage points to the
rate of global chemical industry growth in 2016. All growth
forecasts for China are currently fraught with high levels of
uncertainty; this applies to our prognosis for global chemical
growth, as well.
Chemical production in the European Union is likely to
grow only slowly in 2016. Demand from customer industries in
the region will grow moderately, yet we do not anticipate any
additional growth stimulus beyond this from the export busi-
ness for Europe's chemical producers. Overall, competitive
pressure could remain high on an international level, even as
European chemical sites - as in the previous year - benefit
from low oil prices compared with U.S. competitors whose
production is based on gas.
We expect chemical production to expand in the United
States against the backdrop of solidly growing demand overall
from customer industries. However, momentum let up consid-
erably over the course of 2015, which may be reflected in a
lower growth rate for 2016.
Chemical growth will decelerate somewhat overall in the
emerging markets of Asia. While it will probably continue to
shrink in China, it will hover around prior-year levels in the
region's other countries. The higher growth rates we expect for
the automotive industry will support demand for chemicals.
Slower construction activity in China will presumably have a
dampening effect. In Japan, we anticipate a weak economic
environment overall and minimal growth in chemical produc-
tion.
The chemical industry in South America will stagnate
overall. Demand is likely to remain weak in Argentina; in Brazil,
it will continue to decline. In the other South American coun-
tries, however, we expect solid growth on average.
Outlook for chemical production 2016 (excl. pharmaceuticals)
(Real change compared with previous year)
World
3.4%
European Union
United States
0.9%
1.7%
Emerging markets of Asia
5.9%
We are addressing this risk through active portfolio manage-
ment. We exit markets where risks outweigh opportunities,
and in which we do not see satisfactory long-term opportuni-
ties to stand out from our competitors.
(0.2%)
Japan
South America
Trends in chemical production 2016-2018 (excl. pharmaceuticals)
(Average annual real change)
World
3.6%
European Union
1.1%
United States
2.5%
Emerging markets of Asia
5.9%
Global chemical production (excluding pharmaceuticals) will
probably grow by 3.4% in 2016, slightly slower than in 2015
(+3.6%). We expect production in the advanced economies to
expand by 1.3%, somewhat slower than in the previous year
(+1.6%). At 5.0%, overall growth in the emerging markets will
also approximate prior-year levels.
■ Global growth slightly below the level of 2015
Outlook for the chemical industry
123
1.8%
United States
2.4%
Emerging markets of Asia
5.8%
Japan
South America
0.7%
0.6%
monetary and fiscal easing measures could bolster the real
estate market and automotive sector, but the growth stimulus
will remain modest. China's economic cooldown will continue
to negatively impact trading partners in the region. Currently,
the greatest risk for the global economy would be posed
by growth in China that proves even weaker than our expecta-
tions.
Japan's gross domestic product is expected to continue
growing only minimally in 2016. Despite the weak yen, the
current global economic environment gives no cause to believe
that exports will significantly increase. Domestic demand may
also grow only modestly. The sales tax increase expected for
the spring of 2017 could, however, stimulate private con-
sumption to grow faster than usual toward the end of 2016.
For South America, we expect a continued, if somewhat
weaker, decline in gross domestic product overall. Structural
reforms in Argentina should revive the economy in the medium
term; in the short term, however, they will weaken private
demand. We therefore anticipate a slight decrease in gross
domestic product. Leading indicators do not yet point to an
upswing in Brazil. We nevertheless do not expect the down-
ward trend to continue unabated, especially since the sharp
depreciation of the Brazilian real will support the export busi-
ness.
122 Management's Report
2.7%
Forecast Economic environment in 2016
Outlook for key customer industries
■ Same level of growth expected in global industrial
production for 2016
Global industrial production will probably grow by 2.0%, no
stronger than in 2015. Industry in the advanced economies will
keep growing modestly, by around 1%. In the emerging mar-
kets of Asia, we anticipate industrial growth at a level some-
what below that of 2015 (+4.7%). After a decline in the previous
year, we anticipate slight growth again for the remaining
emerging markets in 2016 (+0.7%).
We foresee overall recovery for the transportation sector
compared with 2015. After two years of dynamic development
in western Europe, we assume that growth will slow down in
2016. It will probably slacken in the United States, as well. By
contrast, China's automotive industry will show moderate
recovery as a result of the decrease in purchase taxes for
small-motor vehicles. This should mean a slight increase in
automobile production in Asia's other emerging markets for
this reason, as well. Slight growth in the automotive industry is
also anticipated in Japan after the previous year's considerable
decline. In Brazil, automobile production is likely to decrease
once again and Russia's market could grow slightly at best.
Production in the energy and raw materials sector will
see only marginal gains in 2016 in light of lower raw material
prices and moderate growth in the global economy. We antici-
pate only marginal production increases in western and east-
ern Europe as well as in the Middle East. In Asia, domestic
energy and raw material production is likely to see slight
growth. We expect production to decline in North and South
America.
For the construction industry, we predict stable growth
rates on a global level, with regions varying widely. Construc-
tion activity will likely continue to stabilize in western Europe.
Low interest rates and increased real income will be a boon to
housing construction in northwestern Europe. The branch has
been shrinking for years in Italy and France and could bottom
out. In the United States, the industry saw a significant upswing
in 2015 and the number of construction starts increased
sharply. We therefore anticipate robust growth in 2016, as
well. In China, however, production growth will probably con-
tinue to slow; the housing market in particular is suffering from
oversupply. We expect the other Asian emerging markets to
show stable growth rates in the construction industry. The
South American market is likely to slightly shrink.
We assume that the consumer goods industry will grow
somewhat faster than in the previous year. In Asia, demand for
consumer goods is likely to remain stable: this prediction is
supported by the realignment of China's economy toward a
more consumer-oriented growth model and Japan's upcom-
ing sales tax increase in 2017. We anticipate restrained growth
in production in western Europe's consumer goods industries.
In the United States, production growth will remain far behind
private demand, as the strong U.S. dollar will favor the import
of consumer goods.
The electronics industry is set to grow as fast in 2016 as
it did in the previous year. We anticipate stable growth in Asia,
the global center of the electronic industry. We foresee slight
deceleration in China and South Korea, whereas Taiwan and
Japan will probably show rising growth rates. Growth is
expected to be slower in North America and stable in western
Europe.
We predict solid global growth roughly comparable with
prior-year levels for production in the health and nutrition
sector. In Europe, we anticipate slightly higher growth rates
overall. In North America, the industry is likely to be somewhat
outpaced by the growth rate of gross domestic product.
Growth rates in this sector will probably decline slightly in Asia,
but at a high level. Production in South America will continue
to decrease slightly.
For agriculture, we anticipate worldwide growth on par
with the average rate of the past few years. Rising demand
from China and India suggests solid production growth at
home as well as in Brazil and the United States, two major
exporting countries. In Europe, production growth will follow
the weak regional trends in demand. The severe economic
crisis in Ukraine and the ongoing conflict in the eastern part of
the country will be reflected in decreasing agricultural produc-
tion. The low price of oil will continue to curtail global demand
for bioethanol. We expect prices for agricultural raw materials
to remain under pressure in 2016.
BASF Report 2015
Management's Report
Forecast Economic environment in 2016
BASF Report 2015
We expect competitors from emerging markets to gain con-
siderable significance in the years ahead. Furthermore, we
predict that many raw material suppliers will expand their value
chains.
Information technology risks
Development of the competitive and customer landscape
The Consolidated Financial Statements are prepared by a unit
in the corporate division Finance. BASF Group's accounting
process is based on a standardized accounting guideline that
sets out accounting policies and the significant processes and
deadlines on a Group-wide basis. There are binding directives
for the internal reconciliations and other accounting opera-
tions. Standard software is used to carry out the accounting
processes for the preparation of the individual financial state-
ments as well as for the Consolidated Financial Statements.
There are clear rules for the access rights of each participant
in these processes.
Employees involved in the accounting and reporting pro-
cess meet the qualitative requirements and participate in
training on a regular basis. There is a clear assignment of
responsibilities between the specialist units, companies and
regional service units involved. We strictly adhere to the princi-
ples of segregation of duties and dual control, or the "four-eyes
principle." Complex actuarial reports and evaluations are pro-
duced by specialized service providers or specially qualified
employees.
An internal control system for financial reporting continu-
ously monitors these principles. To this end, methods are
provided for the structured and Group-wide uniform evaluation
of the internal control system in financial reporting.
The significant risks for the BASF Group regarding a reliable
control environment for proper financial reporting are reviewed
and updated on an annual basis. Risks are compiled into a
standardized questionnaire and presented in a central risk
catalog.
Moreover, a centralized selection process identifies com-
panies that are exposed to particular risks, that have a material
impact on the Consolidated Financial Statements of the BASF
Group, or that provide service processes. The selection pro-
cess is conducted annually. In the relevant companies, one
person is given the responsibility of monitoring the execution
of the annual evaluation process.
In these companies, the process comprises the following
steps:
-
- Evaluation of the control environment
Adherence to internal and external guidelines that are
relevant for the maintenance of a reliable control environment
is checked by means of a standardized questionnaire and
evidenced by sample taking.
- Identification and documentation of control activities
In order to mitigate the risks to the financial reporting pro-
cesses listed in our central risk catalog, critical processes
and control activities are documented.
- Assessment of the control activities
After documentation, a test is performed to verify whether
the described controls are capable of adequately mitigating
the risks. In the subsequent test phase, samples are taken
to test whether, in practice, the controls were executed as
described and effective.
- Monitoring of control weaknesses
The managers responsible receive reports on any control
weaknesses identified and their resolution, and an interdisci-
plinary committee investigates their relevance for the BASF
Group. The Board of Executive Directors and the Audit
Committee are informed once control weaknesses have
been identified that have a considerable impact on financial
reporting. Only after material control weaknesses have been
resolved does the company's managing director confirm the
effective internal control system.
- Internal confirmation of the internal control system
All managing directors and chief financial officers of each
consolidated Group company must confirm to the Board of
Executive Directors of BASF SE every half-year and at the
end of the annual cycle, in writing, that the internal control
system is effective with regard to accounting and reporting.
116 Management's Report
Forecast Opportunities and risks report
BASF Report 2015
Short-term opportunities and risks
Development of demand
■ Development of our sales markets among greatest
opportunities and risks
Negative impact from economic slowdown in China
and escalation of geopolitical conflicts possible
The development of our sales markets is one of the strongest
drivers of opportunities and risks. More details on our assump-
tions regarding short-term growth rates for the global
economy, regions and key customer industries, such as the
chemicals, automotive and construction sectors, can be found
from pages 121 to 123. In accordance with this scenario, we
are planning to achieve volumes growth in all segments exclu-
ding the effects of acquisitions and divestitures.
In addition to this scenario, we also consider risks from
deviations in assumptions. We continue to see a significant
macroeconomic risk in an increased slowdown of the Chinese
economy, which would have considerable impact on demand
for intermediate goods for industrial production as well as
investment goods. This would have an effect on emerging
markets that export raw materials as well as on advanced
economies that specialize in technological goods. Risks to the
global economy would also be posed by the possible escala-
tion of geopolitical conflicts.
Should the macroeconomic environment develop more
weakly than we predict, a further drop in the price of oil can be
expected. In this case, we would also expect the euro to
depreciate relative to the U.S. dollar as compared with our
planning assumptions, as the eurozone's economy shows a
high level of dependency on exports and, in times of global
economic weakness, the U.S. dollar is preferred by portfolio
investors as a safe haven.
Weather-related influences can result in positive or nega-
tive effects on our crop protection business.
Margin volatility
Possible oversupply could lead to lower margins
in some value chains
■ Annual evaluation of control environment and relevant
processes at significant companies
■ Opportunities and risks from decreasing raw
material costs
■ Segregation of duties, four-eyes principle, and clearly
regulated access rights
Significant features of the internal control and
risk management system with regard to the
Group financial reporting processs
1 Our chemicals business comprises the Chemicals, Performance Products and Functional Materials & Solutions segments.
In the Functional Materials & Solutions segment in 2016,
we expect demand to remain high from our key customer
sectors, the automotive and construction industries, and aim
to raise sales volumes in all divisions. We nevertheless foresee
negative effects from the continuing decrease in precious
metal prices and overall sales that remain at a prior-year level.
We aim to slightly raise our income from operations before
special items.
In an environment that remains challenging, we plan on
sales in the Performance Products segment that match
prior-year levels, despite lower prices. We want to raise sales
volumes in all divisions. Factors supporting this endeavor
include new production capacities in the Dispersions &
Pigments and Care Chemicals divisions. Income from opera-
tions before special items should slightly exceed the level of
2015, supported by strict cost discipline and measures to
increase competitiveness in all divisions.
Sales in the Chemicals segment are likely to decline slightly in
2016. Higher volumes in the Monomers and Intermediates
divisions due to the startup of plants will not be able to offset
the lower prices resulting from decreased raw material costs.
We continue to anticipate intense competitive pressure, espe-
cially in the markets for MDI, TDI, acrylic acid and caprolactam.
Income from operations before special items is expected to fall
considerably. We foresee higher fixed costs in the Monomers
and Intermediates divisions from plant startups and shrinking
margins, especially in the Petrochemicals division.
Sales and earnings forecast for the segments
For more on the cost of capital percentage, see page 30
likely to shrink considerably in 2016; we anticipate a slight
decrease in the chemicals business¹ and a slight gain in the
Agricultural Solutions segment. In Other, EBIT is forecast to
rise considerably. Yet because EBIT of Other is not factored
into the calculation of our EBIT after cost of capital, the BASF
Group's EBIT after cost of capital will presumably see a con-
siderable decline. We will still earn a premium on our cost of
capital. In the Performance Products, Functional Materials &
Solutions, and Agricultural Solutions segments, we anticipate
a considerable boost in EBIT after cost of capital.
The significant risks and opportunities that could affect our
forecast are described on pages 113 to 120.
We expect EBIT to decline slightly overall in 2016. In addi-
tion to a lower level of EBIT before special items, this assump-
tion reflects the charges expected to arise from restructuring
measures. The contribution from the Oil & Gas segment is
BASF Group sales will decrease considerably in 2016. As a
consequence of the asset swap with Gazprom, contributions
to the Oil & Gas segment have ceased from the natural gas
trading and storage business in particular. In the first three
quarters of 2015, these activities contributed a total of around
€10.1 billion to sales. Sales will be furthermore reduced by
lower prices for oil and gas. We want to increase sales vol-
umes in all segments, excluding the effects of acquisitions and
divestitures. Income from operations before special items is
expected to be slightly below 2015 levels. This is an ambitious
goal in the current volatile and challenging environment, and is
particularly dependent on oil price developments. We antici-
pate considerably lower contributions from the Chemicals and
Oil & Gas segments. In the other segments, we aim to slightly
increase earnings.
Income from operations before special items
expected at level slightly below 2015
Considerable sales decline due to divestiture of
gas trading and storage business
■
Sales and earnings forecast for the BASF Group
For more information on our expectations for the economic environment
in 2016, see page 121 onward
We expect conditions to remain challenging in 2016. The
global economy and industrial production will presumably
grow at a level approximating that of 2015. Chemical pro-
duction is likely to grow at a slower rate than in 2015. For
2016, we assume an average price of $40 for a barrel of
Brent blend crude oil and an exchange rate of $1.10 per
euro. The global economy continues to face increasing
risks. We nevertheless aim to raise sales volumes in all
segments. BASF Group sales will decline considerably,
however, especially as a result of the divestiture of the gas
trading and storage business as well as lower oil and gas
prices. We expect income from operations before special
items to be slightly below 2015 levels. This is an ambitious
goal in the current volatile and challenging environment,
and is particularly dependent on oil price developments.
BASF Report 2015
Outlook 2016
124 Management's Report
Forecast Outlook 2016
1.3%
South America
0.6%
Japan
BASF Report 2015
Management's Report 115
Forecast Opportunities and risks report
- As part of our strategy development, the Strategic Planning
& Controlling unit conducts strategic opportunity/risk analy-
ses with a ten-year assessment period. These analyses are
annually reviewed as part of strategic controlling and are
adapted if necessary.
- Our Group-wide Compliance Program serves to ensure
adherence to legal regulations and the company's internal
guidelines. Our global employee Code of Conduct firmly
embeds these mandatory standards into everyday business.
Members of the Board of Executive Directors are also
expressly obligated to follow these principles.
For more on our Group-wide Compliance Program,
see page 136 onward
Conducted in accordance with standardized Group
guidelines
We generally anticipate stable margins in 2016. For some
products and value chains, it is possible that margin pressure
could be increased by new capacities, for example. This would
have a negative effect on our EBIT.
The year's average oil price for Brent crude was around
$52 per barrel in 2015, substantially lower than in the previous
year. For 2016, we anticipate an average oil price of $40 per
barrel. We therefore expect the low price levels to continue for
the raw materials and petrochemical basic products that are
important to our business. Yet an oil price level below the
expected average would pose risks for our oil and gas
business, whose EBIT dips by approximately €20 million for
every $1 decrease in the average annual barrel price of Brent
crude.
Interest rate risks
-
Market interest rates and credit risk premiums to
be paid have major impact on financing costs
Interest rate risks result from potential changes in prevailing
market interest rates. These can cause a change in the present
value of fixed-rate instruments and fluctuations in the interest
payments for variable-rate instruments, which would positively
or negatively affect earnings. To hedge these risks, interest
rate swaps and combined interest rate and currency deriva-
tives are used in individual cases.
In addition to market interest rates, BASF's financing costs
are determined by the credit risk premiums to be paid. These
are mainly influenced by our credit rating and the market
conditions at the time of issue. In the short to medium term,
BASF is largely protected from the possible effects on its
interest result thanks to the well-balanced maturity profile of its
financial indebtedness.
Risks from metal and raw material trading
In the catalysts business, BASF employs commodity deriva-
tives for precious metals and trades precious metals on behalf
of third parties and on its own account. In addition, we use our
knowledge of the markets for crude oil and oil products to
generate earnings from the trade of raw materials. To address
specific risks associated with these trades, which are not part
of our operating business, we set and continuously monitor
limits with regard to the type and size of the deals concluded.
Liquidity risks
Risks from fluctuating cash flows are recognized in a timely
manner as part of our liquidity planning. We have access to
extensive liquidity at any time thanks to our good ratings, our
unrestricted access to the commercial paper market and
committed bank credit lines. In the short to medium term,
BASF is largely protected against potential refinancing risks by
a balanced maturity profile for financial indebtedness as well
as through diversification in various financial markets.
For more on financial risks, see the Notes to the Consolidated Financial
Statements from page 210 onward
For more on the maturity profile of our financial indebtedness, see the
Notes to the Consolidated Financial Statements on page 206
Risk of asset losses
We limit country-specific risks with measures based on inter-
nally determined country ratings, which are continuously
updated to reflect changing environment conditions. We
selectively use export credit insurance and investment guaran-
tees to limit specific country-related risks. We lower credit
risks for our financial investments by engaging in transactions
only with banks with good credit ratings and by adhering to
fixed limits. The credit ratings are continuously monitored and
the limits are adjusted accordingly. We reduce the risk of
default on receivables by continuously monitoring the credit-
worthiness and payment behavior of our customers and by
setting appropriate credit limits. Due to the global activities
and diversified customer structure of the BASF Group, there
are no major concentrations of credit default risk. Risks are
also limited through the use of credit insurance and bank
guarantees.
Impairment risks
The risk of an asset impairment occurs if the assumed interest
rate in an impairment test increases or the predicted cash
flows decline. In the current business environment, we
consider the risk of impairment of individual assets such as
customer relationships, technologies and brands, as well as
goodwill, to be nonmaterial. Nevertheless, a continuing decline
in the price of oil below our assumed planning level would
result in impairment risks for the Oil & Gas segment's assets,
especially the recently acquired fields measured at fair value.
Long-term incentive program for senior executives
Our executives have the opportunity to participate in a share-
price-based compensation program. The need for provisions
for this program varies according to the development of the
BASF share price and the MSCI World Chemicals Index; this
leads to a corresponding increase or decrease in personnel
costs.
BASF Report 2015
Management's Report 119
Forecast Opportunities and risks report
Risks from pension obligations
Most employees are granted company pension benefits from
either defined contribution or defined benefit plans. We
predominantly finance company pension obligations externally
through separate plan assets. This particularly includes BASF
Pensionskasse WaG and BASF Pensionstreuhand e.V. in
Germany, in addition to the large pension plans of our Group
companies in North America, the United Kingdom and
Switzerland. To address the risk of underfunding due to
market-related fluctuations in plan assets, we have investment
strategies that align return and risk optimization to the struc-
ture of the pension obligations. Stress scenarios are also
simulated regularly by means of portfolio analyses. An adjust-
ment to the interest rates used in discounting pension obliga-
tions leads immediately to changes in equity. To limit the risks
of changing financial market conditions as well as demographic
developments, employees have been almost exclusively
offered defined contribution plans for future years of service in
recent years.
Long-term opportunities and risks
Long-term demand development
Annual average growth of nearly 4% expected
for global chemical production
In our "We create chemistry" strategy, we assume that
chemical production (excluding pharmaceuticals) will grow by
nearly 4% each year through 2020. Chemical production
would therefore grow considerably faster than global gross
domestic product and at about the same level as the previous
five-year average. Through our market-oriented and broad
portfolio, which we will continue to strengthen in the years
ahead through investments in new production capacity,
research and development activities and acquisitions, we aim
to achieve sales growth that slightly exceeds this market
growth.
Should global economic growth see unexpected, consid-
erable deceleration, due for example to an ongoing weak
period in the emerging markets or to geopolitical crises, these
goals could prove too ambitious. As a result of our high degree
of diversification across various customer industries and
regions, we would still expect our growth to be above the
market average, even under these conditions.
For more on the "We create chemistry" strategy, see page 24 onward
Financial currency risks result from the translation of
receivables, liabilities and other monetary items in accordance
with IAS 21 at the closing rate into the functional currency of
the respective Group company. In addition, we incorporate
planned purchase and sales transactions in foreign currencies
in our financial foreign currency risk management. These risks
are hedged using derivative instruments, if necessary.
Our competitiveness on global markets is influenced by
fluctuations in exchange rates. For BASF's purchasing, oppor-
tunities and risks arise in particular when the U.S. dollar
exchange rate fluctuates. A full-year rise in the value of the
U.S. dollar/euro exchange rate by $0.01 would result in an
increase of around €40 million in BASF's EBIT, assuming other
conditions remain the same. On the production side, we
mitigate foreign currency risks by having production sites in
the respective currency zones.
■ Opportunities and risks especially from U.S. dollar
exchange rate fluctuations
Exchange rate volatility
Regulation and political risks
■ Risks posed by factors such as regulation of
chemicals use
■ Energy policy gives rise to both risks and
opportunities
Due to the European chemicals regulation REACH, which
came into force in 2007, BASF and our European customers
face the risk of being placed at a disadvantage to our non-
European competitors due to the cost-intensive test and
registration procedures.
Other risks for us would arise from further regulation, for
example, of the use of chemicals; the intensification of geopo-
litical tensions; the destabilization of political systems; and the
imposition of trade barriers, such as sanctions in Ukraine crisis
or OPEC quotas for oil production. Furthermore, we are closely
observing the political situation in Argentina, where economic
policy reforms could revitalize the business environment.
The German Renewable Energy Act (EEG) is poised for
reform in 2016. This regulates the expansion of electricity
generation from renewables and passing on costs to energy
customers through the EEG surcharge. Currently, existing
power plants for self-generated energy are not subject to the
EEG surcharge. Consequently, there is currently no additional
financial burden for the electricity BASF generates in its
existing power plants. The upcoming EEG amendment, how-
ever, means that the German federal government needs to
review, and possibly revise, this matter in accordance with the
E.U. Commission's mandate. It is possible that these plants
would need to pay a portion of the EEG surcharge in the
future, which would negatively affect the competitive ability of
the affected production sites. A proportional EEG surcharge of
20% would translate into additional charges of €75 million per
year (before taxes), and the complete EEG surcharge would
lead to expenses of around €400 million each year. It is
important that negotiations between the federal government
and the E.U. Commission find a solution that avoids putting a
considerable strain on the affected companies.
We view the worldwide support for the expansion of
renewable energy and measures to increase energy efficiency
as an opportunity for increased demand for our products. For
example, we offer diverse solutions for wind turbines in
addition to insulation foams for buildings. Our catalysts
business benefits from the tightening of automobile emissions
regulations.
BASF Report 2015
Management's Report 117
Forecast Opportunities and risks report
Production and delivery bottlenecks
We try to prevent unscheduled plant shutdowns by adhering
to high technical standards and continuously improving our
plants. We reduce the effects of unscheduled shutdowns
through diversification within our global production Verbund.
We minimize procurement risks through our broad
portfolio, global purchasing activities and the purchase of raw
materials on spot markets, as well. If possible, we avoid
procuring raw materials from a single supplier. When this
cannot be avoided, we try to foster competition or we know-
ingly enter into this relationship and assess the consequences
of potential nondelivery. We continuously monitor the credit
risk of important business partners.
- Global procedures and systems for IT security
Opportunities from active portfolio management
and focus on innovative business areas
■ Regular training for employees
Cyber Defense Center established
BASF relies on a number of IT systems. Their nonavailability,
violation of confidentiality or the manipulation of data in critical
IT systems and applications can all have a direct impact on
production and logistics processes. The threat environment
has changed in recent years, as attackers have become better
organized, use more sophisticated tools, and have far more
resources available. If data are lost or manipulated, this can,
for example, negatively affect process safety and the accuracy
of our financial reporting. Unauthorized access to sensitive
data, such as personnel records, competition-related informa-
tion or research results, can result in legal consequences or
jeopardize our competitive position. This would also be
accompanied by the associated loss of reputation.
To minimize such risks, BASF has implemented globally
applicable processes and systems to ensure IT security, such
as stable and redundantly designed IT systems, backup
processes, virus and access protection and encryption
systems as well as integrated, Group-wide standardized IT
infrastructure and applications. The systems used for informa-
tion security are constantly tested, continuously updated, and
expanded if necessary. In addition, our employees receive
regular training on information and data protection. IT-related
risk management is conducted using Group-wide regulations
for organization and application, as well as an internal control
system based on these regulations.
BASF also established a Cyber Defense Center in 2015; is a
member of the Cyber Security Sharing and Analytics e.V.
(CSSA); and is a founding member of the German Cyber
Security Organization (DCSO) together with Allianz SE,
Bayer AG and Volkswagen AG.
Litigation and claims
Regular reporting on risks from litigation
Risk assessment based on probability of occurrence
We constantly monitor current and potential legal disputes and
proceedings, and regularly report on these to the Board of
Executive Directors and Supervisory Board. In order to assess
the risks from current legal disputes and proceedings and any
potential need to recognize provisions, we prepare our own
analysis and assessment of the circumstances and claims
considered. In addition, in individual cases, we consider the
results of comparable proceedings and, if needed, indepen-
dent legal opinions. Risk assessment is particularly based on
estimates as to the probability of occurrence and the range of
possible claims. These estimates are the result of close coop-
eration between the affected operating and functional units
together with the Legal and Finance departments. If sufficient
probability is identified, a provision is recognized accordingly
for each dispute. Should a provision be unnecessary, general
risk management continues to assess whether these litigations
nevertheless present a risk for the EBIT of the BASF Group.
We use our internal control system to limit risks from
potential infringements of rights or laws. For example, we try
to avoid patent and licensing disputes whenever possible
through extensive clearance research. As part of our Group-
wide Compliance Program, our employees receive regular
training.
Financial opportunities and risks
The management of liquidity, currency and interest rate risks is
conducted in the Treasury unit. The management of commodity
price risks takes place in the Procurement competence center
or in the appropriately authorized Group companies. Detailed
guidelines and procedures exist for dealing with financial risks.
Among other things, they provide for the segregation of trading
and back office functions.
118 Management's Report
Forecast Opportunities and risks report
BASF Report 2015
■
€10 million impact on earnings, it must be immediately
reported.
For more on sustainability management, see page 31 onward
About This Report
14%
Other (infrastructure, R&D)
24%
Oil & Gas
4%
Agricultural Solutions
€19.5 billion
5
12%
Functional Materials & Solutions
16%
Performance Products
2
1
Chemicals
6
123456
Capital expenditures by segment, 2016-2020
For 2016, we plan total investments of around €4.2 billion,
particularly for the major projects in the countries listed above.
In the Oil & Gas segment, our currently planned investments
of around €4.8 billion between 2016 and 2020 will focus
mainly on the development of proven gas and oil deposits in
Argentina, Norway and Russia. The actual amount of expendi-
ture will depend on oil and gas price developments and be
reduced as needed.
BASF Report 2015
Forecast Outlook 2016
126 Management's Report
1 Excluding additions to property, plant and equipment from acquisitions, capitalized exploration, restoration obligations and IT investments
Capacity expansion: compounding plant for
UltramidⓇ and UltradurⓇ
Construction: mobile emissions catalysts
30%
Construction: 2-ethylhexanoic acid
3
-234
We stand by our ambitious dividend policy and offer our share-
holders an attractive dividend yield. We continue to aim to
increase our dividend each year, or at least maintain it at the
previous year's level.
Dividend
On February 17, 2016, we announced that a general agree-
ment had been reached with AkzoNobel on the sale of the
Coatings division's industrial coatings business for €475 mil-
lion. The transaction would include technologies, patents and
trademarks, as well as the transfer of two production sites in
1 England and South Africa. The planned transaction is subject
to the required consultation with employee representatives
and certain regulatory approvals. Our industrial coatings busi-
ness generated sales of approximately €300 million in 2015.
We intend to complete the transaction by the end of 2016.
Events after the reporting period
Information on our financing policies can be found on page 59
From the scheduled repayment of bonds, we expect cash
outflows in the equivalent amount of around €900 million in
2016. To refinance mature bonds and to optimize our maturity
profile, we continue to have medium to long-term corporate
bonds and our U.S. dollar commercial paper program at our
disposal.
Our financing policy is aimed at ensuring our solvency at all
times, limiting the risks associated with financing and optimiz-
ing our cost of capital. We strive to maintain at least a solid
"A" rating, which allows the BASF Group unrestricted access
to money and capital markets.
Financing
€19.5 billion
5
4
2
Capital expenditures by region, 2016-2020
1%
5
Alternative sites currently
9%
South America, Africa, Middle East
18%
Asia Pacific
3
26%
North America
46%
Europe
1
being investigated
Information on the proposed dividend can be found from page 14 onward
Rayong, Thailand
Schwarzheide,
Germany
Construction: aroma chemicals
12,998
Oil & Gas
5,820
Agricultural Solutions
slight increase
1,649
at prior-year level
18,523
Functional Materials & Solutions
slight increase
1,366
at prior-year level
Other
15,648
considerable decrease
2,156
slight decrease
14,670
Chemicals
Forecast 2016
2015
Forecast 2016
2015
before special items
Sales
Income from operations (EBIT)
Performance Products
Construction: polyisobutene
BASF Group
slight increase
considerable decrease
considerable decrease
considerable decrease
Expansion: butanediol
Geismar, Louisiana
Kuantan, Malaysia
Construction: chemical catalysts
Construction: automotive coatings
Expansion: dicamba and dimethenamid-P
Modification for new superabsorbent technology
platform
Project
Beaumont, Texas
Caojing, China
Location
Antwerp, Belgium
Capital expenditures: Selected major projects
Projects currently being planned or underway include:
The bulk of our spending in 2015 was on major facilities that
started operations during the reporting period, such as parts
of the TDI production complex in Ludwigshafen, Germany;
production plants for acrylic acid and superabsorbents in
Camaçari, Brazil; and an MDI plant in Chongqing, China. We
have planned capital expenditures totaling €19.5 billion for the
period from 2016 to 2020 and will invest more than a quarter
of this amount in emerging markets.
2,790
70,449
- Investments of around €4.2 billion planned for 2016
In Other, sales are likely to decline considerably due to
supply contracts in Asia that expired at the end of 2015. A
considerable rise is expected in income from operations
before special items, which should result in part from an
improved currency result.
The Oil & Gas segment is likely to see expanded produc-
tion, but a considerable drop in sales and income from oper-
ations before special items compared with 2015. Lower prices
for oil and gas, together with the divestiture of our gas trading
and storage business, are the major factors behind this fore-
cast. Moreover, we will achieve lower sales and earnings from
our share in the Yuzhno Russkoye natural gas field: In 2016,
the excess amounts produced over the last ten years will
be compensated, as contractually agreed with our partner,
Gazprom.
For 2016, we are anticipating continued slow market growth
in the Agricultural Solutions segment and high exchange
rate volatility in some of our key growth markets. Despite
this difficult economic environment, we aim to increase our
sales volumes, especially of innovative herbicides. Through
increased sales and continued strict cost management, sales
and income from operations before special items should both
improve slightly.
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies for changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight"
means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%).
slight decrease
6,739
considerable increase
(888)
considerable decrease
1,366
slight increase
1,090
Investments¹
3
Commitments to promote the participation of
women in leadership positions at BASF SE
To Our Shareholders
- When making recommendations for appointments to the
Board of Executive Directors, considers professional qualifi-
cations, international experience and leadership skills as well
as long-term succession planning, diversity, and especially
the appropriate consideration of women
- Prepares the appointment of members to the Board of
Executive Directors by the Supervisory Board as well as the
employment contracts to be entered into with members of
the Board of Executive Directors
Duties:
Dr. Jürgen Hambrecht (Chairman), Michael Diekmann, Robert
Oswald, Michael Vassiliadis
Members:
Corporate Governance
Corporate governance report
Nomination Committee
Personnel Committee
BASF Report 2015
Compensation of the Supervisory Board is described in the
Compensation Report from page 146 onward.
The members of the Supervisory Board of BASF SE, including their
membership on the supervisory bodies of other companies, are listed
on page 139.
For more on the Statutes of BASF SE and the Employee Participation
Agreement, see basf.com/en/cg/investor
- Prepares the resolutions made by the Supervisory Board
with regard to the system and determination of the amount
of compensation paid to members of the Board of Executive
Directors
BASF SE's Supervisory Board has established a total of
four Supervisory Board Committees: the Personnel Commit-
tee, the Audit Committee, the Nomination Committee and, as
of 2015, the Strategy Committee.
The Supervisory Board of BASF SE comprises twelve
members. Six members are elected by the shareholders at the
Annual Shareholders' Meeting. The remaining six members
are elected by the BASF Europa Betriebsrat (European Works
Council), the European employee representation body of the
BASF Group.
Together with the SE Council Regulation, the Statutes of
BASF SE and the Agreement Concerning the Involvement of
Employees in BASF SE (Employee Participation Agreement)
constitute the relevant legal basis for the size and composition
of the Supervisory Board. In November 2015, the Employee
Participation Agreement was supplemented by several stipula-
tions implementing the statutory regulations on the minimum
percentage of women and men in the Supervisory Board as of
January 1, 2016. The German Codetermination Act does not
apply to BASF as a European stock corporation (Societas
Europaea, SE).
The Supervisory Board appoints the members of the Board of
Executive Directors and supervises and advises the Board on
management issues. As members of the Supervisory Board
cannot simultaneously be on the Board of Executive Directors,
a high level of autonomy is already structurally ensured with
regard to the supervision of the Board of Executive Directors.
Four Supervisory Board committees
■Supervisory Board appoints, monitors and advises
Board of Executive Directors
Supervision of company management by the
Supervisory Board
For more on risk management, see the Forecast from page 113 onward
The members of the Board of Executive Directors, including their areas
of responsibility and memberships on the supervisory bodies of other
companies, are listed on page 138. Compensation of the Board of
Executive Directors is described in detail in the Compensation Report
from page 140 onward.
The Statutes of BASF SE define certain transactions that
require the Board of Executive Directors to obtain the Super-
visory Board's approval prior to their conclusion. Such cases
include the acquisition and disposal of enterprises and parts of
enterprises, as well as the issue of bonds or comparable finan-
cial instruments. However, this is only necessary if the
acquisition or disposal price or the amount of the issue in an
individual case exceeds 3% of the equity reported in the last
approved Consolidated Financial Statements of the BASF
Group.
elected by the Supervisory Board
Chairman
6 employee representatives
6 shareholder representatives elected
at the Annual Shareholders' Meeting
and
Resolutions of the Supervisory Board are passed by a
simple majority vote of the participating members. In the event
of a tie, the vote of the Chairman of the Supervisory Board,
who must always be a shareholder representative, shall be the
casting vote. This resolution process is also applicable for the
appointment and dismissal of members of the Board of Execu-
tive Directors by the Supervisory Board.
12 members
Audit Committee
Dame Alison Carnwath DBE (Chairwoman), Ralf-Gerd Bastian,
Franz Fehrenbach, Michael Vassiliadis
At least one independent member of the Supervisory Board
must have expertise in the fields of accounting or auditing as
per Section 100(5) of the German Stock Corporation Act. With
regard to diversity, the Supervisory Board shall consider a
variety of professional and international experience as well as
the participation of women. With regard to independence, the
Supervisory Board aims to ensure that all Supervisory Board
members are independent as defined by the terms of the
Code. Individuals who may have a conflict of interest shall not
be nominated for election to the Supervisory Board. The same
applies to candidates who will have reached the age of 70 by
the day of the election. Since October 2015, there has been
an additional objective for the composition: Membership on
the Supervisory Board should generally not exceed 15 years;
this corresponds to three regular statutory periods in office.
The members of the Supervisory Board elected at the Annual
Shareholders' Meeting already fulfill this new objective with
one exception.
- In the field of technical and scientific innovations in the
chemical sector and associated industries as well as in the
sectors using chemical products.
- In the management of an internationally operating company
- In cross-industry value creation along different value chains
- In the application of accounting principles and internal con-
trol procedures
On October 21, 2010, the Supervisory Board agreed upon
objectives for the composition of the Supervisory Board in
accordance with Section 5.4.1 of the German Corporate
Governance Code; these were supplemented in the Supervi-
sory Board meetings of December 20, 2012, and October 22,
2015. According to these objectives, the Supervisory Board
shall be composed in such a way that the members as a group
possess knowledge, ability and expert experience
One important concern of good corporate governance is to
ensure that seats on the responsible corporate bodies, the
Board of Executive Directors and the Supervisory Board, are
appropriately filled. Seats on the Board of Executive Directors
and Supervisory Board should be filled with members who
ensure a well-balanced consideration of all the knowledge,
skills and personal qualifications necessary to manage and
supervise BASF as a large, globally operating, capital mar-
ket-oriented company in the chemical industry.
Composition criteria: professional and personal
qualifications, diversity, and independence
Objectives for Supervisory Board composition
BASF Report 2015
Corporate governance report
132 Corporate Governance
131
- Handles the further development of the company's strategy
and prepares approval resolutions of the Supervisory Board
on the company's major acquisitions and divestitures
Members:
Duties:
Members:
Strategy Committee
- Prepares the recommendations made by the Supervisory
Board for the election of Supervisory Board members for the
Annual Shareholders' Meeting
- Identifies suitable candidates for the Supervisory Board
based on objectives for the composition decided on by the
Supervisory Board
Duties:
Dr. Jürgen Hambrecht (Chairman), Dame Alison Carnwath
DBE, Prof. Dr. François Diederich, Michael Diekmann, Franz
Fehrenbach, Anke Schäferkordt
Members:
- Is authorized to request any information that it deems neces-
sary from the auditor or Board of Executive Directors; can
also view all of BASF's business documents and examine
these and all other assets belonging to BASF. The Audit
Committee can also engage experts such as auditors or
lawyers to carry out these inspections
- Is responsible for business relations with the company's
external auditor: prepares the Supervisory Board's proposal
to the Annual Shareholders' Meeting regarding the selection
of an auditor, monitors the auditor's independence, defines
the focus areas of the audit together with the auditor, nego-
tiates auditing fees and establishes the conditions for the
provision of the auditor's nonaudit services
- Deals with monitoring the financial reporting process, the
annual audit, the effectiveness of the internal control system,
the risk management system, and the internal auditing
system as well as compliance issues
- Prepares the negotiations and resolutions of the Supervisory
Board for the approval of the Financial Statements and Con-
solidated Financial Statements, and discusses the quarterly
and first-half financial reports with the Board of Executive
Directors prior to their publication
Duties:
Dr. Jürgen Hambrecht (Chairman), Dame Alison Carnwath
DBE, Michael Diekmann, Robert Oswald, Michael Vassiliadis
Supervisory Board
BASF Report 2015
reports to Supervisory Board
Corporate Governance
152
Declaration of Conformity
148
Report of the Supervisory Board
140
Compensation report
139
Supervisory Board
138
Board of Executive Directors
138
BASF Report 2015
Management and Supervisory Boards
Compliance
129
Corporate governance report
233
223
Supplementary Information on the Oil & Gas Segment
Overviews
153
Consolidated Financial Statements
19
479
Corporate Governance
Management's Report
136
Corporate governance report
Corporate Governance
Corporate governance report
Board of Executive
advises the Board of Executive Directors
appointed by the Supervisory Board
Chairman
8 members
appointed by the Supervisory Board
monitors the Board of Executive Directors
appoints the Board of Executive Directors
Board of Executive Directors
Two-tier management system of BASF SE
Corporate governance report
130 Corporate Governance
129
The Board of Executive Directors informs the Supervisory
Board regularly, without delay and comprehensively, of all
issues important to the company with regard to planning,
business development, risk situation, risk management and
compliance. Furthermore, the Board of Executive Directors
coordinates the company's strategic orientation with the
Supervisory Board.
The Board can set up Board Committees to consult and
decide on individual issues; these must include at least three
members of the Board of Executive Directors. For the prepa-
ration of important decisions, such as those on acquisitions,
divestitures, investments and personnel, the Board has various
commissions at the level below the Board that carefully assess
the planned measure and evaluate the associated opportuni-
ties and risks, and based on this information, report and make
recommendations to the Board - independently of the affected
business area.
Decisions that are reserved for the Board as a whole by
law, through the Board of Executive Directors' Rules of Proce-
dure or through resolutions adopted by the Board, are made
at regularly held Board meetings called by the Chairman of the
Board of Executive Directors. Board decisions are generally
based on detailed information and analyses provided by the
business areas and specialist units, and, if deemed necessary,
by external consultants. Board decisions can generally be
made via a simple majority. In the case of a tied vote, the
casting vote is given by the Chairman of the Board. However,
the Chairman of the Board does not have the right to veto the
decisions of the Board of Executive Directors. Members of the
Board of Executive Directors are authorized to make decisions
individually in their assigned areas of responsibility.
The Board's actions and decisions are aligned with the com-
pany's best interests. It is committed to the goal of sustainably
increasing the company's value. Among the Board's responsi-
bilities is the preparation of the consolidated and individual
financial statements of BASF SE. Furthermore, it must ensure
that the company's activities comply with legal requirements
and internal corporate directives. This includes the establish-
ment of appropriate controls and risk management systems.
The Board of Executive Directors is responsible for the
management of the company, and represents BASF SE in
business undertakings with third parties. BASF's Board of
Executive Directors is strictly separated from the Supervisory
Board, which monitors the activity of the Board of Executive
Directors and decides on its composition. A member of the
Board of Executive Directors cannot simultaneously be a
member of the Supervisory Board. As the central duty of com-
pany management, the Board of Executive Directors agrees
on the corporate goals and strategic direction of the BASF
Group as well as their individual business areas; determines
the company's internal organization; and decides on the com-
position of management on the levels below the Board. It also
manages and monitors BASF Group business through the
planning and setting of the corporate budget, the allocation of
resources and management capacities, the monitoring and
decision-making regarding significant individual measures,
and the control of the operational management.
Determines corporate goals and strategic orientation
Reports to Supervisory Board
Board of Executive Directors strictly separated from
the Supervisory Board
Direction and management by the Board of
Executive Directors
The fundamental elements of BASF SE's corporate gover-
nance system are: its two-tier system, with a transparent and
effective separation of company management and supervision
between BASF's Board of Executive Directors and the Super-
visory Board; the equal representation of shareholders and
employees on the Supervisory Board; and the shareholders'
rights of co-administration and supervision at the Annual
Shareholders' Meeting.
Corporate governance refers to the entire system for
managing and supervising a company. This includes the
organization, values, corporate principles and guidelines
as well as internal and external control and monitoring
mechanisms. Effective and transparent corporate gover-
nance guarantees that BASF is managed and monitored
in a responsible manner focused on value creation. This
fosters the confidence of our domestic and international
investors, the financial markets, our customers and other
business partners, employees, and the public in BASF.
Exercise rights of
co-administration and
supervision at Annual
Shareholders' Meeting
Shareholders
Appoints, monitors and
advises Board of
Executive Directors
Supervisory Board
Manages company and
represents BASF SE in
business with third parties
Directors
Management's Report 125
Forecast Outlook 2016
Forecast by segment¹ (in million €)
BASF Report 2015
Minimum quota on Supervisory Board, target
figures for Board of Executive Directors and top
management
BASF supports the German Corporate Governance Code,
which is regarded as an important tool in the capital market-
focused continuing development of corporate governance
and control, and advocates responsible corporate governance
that focuses on sustainably increasing the value of the
company.
BASF SE follows all recommendations of the German
Corporate Governance Code in its most recently revised
version of May 2015. This also applies to the new recommen-
dations regarding the Supervisory Board, for example, the
determination of a maximum membership period on the
Supervisory Board. In the same manner, BASF has followed
nearly all of the nonobligatory suggestions of the German
Corporate Governance Code. We have not implemented the
suggestion to enable shareholders to follow the proceedings
of the entire Annual Shareholders' Meeting online. The Annual
Shareholders' Meeting is publicly accessible via online broad-
cast until the end of the speech by the Chairman of the Board
of Executive Directors. The subsequent discussion of items on
the agenda is not accessible online in order to preserve the
character of the Annual Shareholders' Meeting as a meeting
attended by our shareholders on-site.
The joint Declaration of Conformity 2015 by the Board of Executive
Directors and Supervisory Board of BASF SE is rendered on page 152.
For more on the Declaration of Conformity 2015, the implementation of
the Code's suggestions and the German Corporate Governance Code,
see basf.com/en/governance
134 Corporate Governance
Corporate governance report
BASF Report 2015
BASF SE follows all recommendations of German
Corporate Governance Code
Disclosure according to Section 315(4) of the
German Commercial Code and the explanatory
report of the Board of Executive Directors
according to Section 176(1) Sentence 1 of the
German Stock Corporation Act
The appointment and dismissal of members of the Board
of Executive Directors is legally governed by the regulations in
Article 39 of the SE Council Regulation, Section 16 of the SE
Implementation Act and Sections 84, 85 of the German Stock
Corporation Act, as well as Article 7 of the BASF SE Statutes.
Accordingly, the Supervisory Board determines the number of
members of the Board of Executive Directors (at least two),
appoints the members of the Board of Executive Directors,
and can nominate a chairperson, as well as one or more
vice-chairpersons. The members of the Board of Executive
Directors are appointed for a maximum of five years, and
reappointments are permissible. The Supervisory Board can
dismiss a member of the Board of Executive Directors if there
is serious cause to do so. Serious cause includes, in particular,
a gross breach of the duties pertaining to the Board of
Executive Directors and a vote of no confidence at the Annual
Shareholders' Meeting. The Supervisory Board decides
on appointments and dismissals according to its own best
judgment.
According to Article 59(1) SE Council Regulation, amend-
ments to the Statutes of BASF SE require a resolution of the
Annual Shareholders' Meeting adopted with at least a two-
thirds majority of the votes cast, provided that the legal provi-
sions applicable to German stock corporations under the
German Stock Corporation Act do not stipulate or allow for
larger majority requirements. In the case of amendments to
the Statutes, the Section 179(2) of the German Stock Corpo-
ration Act requires a majority of at least three-quarters of the
subscribed capital represented. Pursuant to Article 12(6) of
the Statutes of BASF SE, the Supervisory Board is authorized
to resolve upon amendments to the Statutes that merely con-
cern their wording. This applies in particular to the adjustment
of the share capital and the number of shares after the
redemption of repurchased BASF shares and after a new issue
of shares from the authorized capital.
-
Until May 1, 2019, the Board of Executive Directors of BASF SE
is empowered by a resolution passed at the Annual Share-
holders' Meeting of May 2, 2014, to increase the subscribed
capital with the approval of the Supervisory Board - by a
total amount of €500 million through the issue of new shares
against cash or contributions in kind (authorized capital). A
right to subscribe to the new shares shall be granted to share-
holders. This can also be done by a credit institution acquiring
the new shares with the obligation to offer these to sharehold-
ers (indirect subscription right). The Board of Executive Direc-
tors is authorized to exclude the statutory subscription right of
shareholders to a maximum amount of a total of 20% of share
capital in certain exceptional cases that are defined in Section
5(8) of the BASF SE Statutes. This applies in particular if, for
capital increases in return for cash contributions, the issue
price of the new shares is not substantially lower than the
stock market price of BASF shares and the total number of
shares issued under this authorization is not more than 10% of
the stock of shares on the date of issue or, in eligible individual
cases, to acquire companies or shares in companies in
exchange for surrendering BASF shares.
At the Annual Shareholders' Meeting on April 27, 2012,
the Board of Executive Directors was authorized to purchase
up to 10% of the shares existing at the time of the resolution
(10% of the company's share capital) until April 26, 2017. At
the discretion of the Board of Executive Directors, the pur-
chase can take place on the stock exchange or by way of a
public purchase offer directed to all shareholders. The Board
of Executive Directors is authorized to sell the repurchased
company shares (a) through a stock exchange, (b) through a
public offer directed to all shareholders and - with the approval
of the Supervisory Board - to third parties, (c) for a cash pay-
ment that is not significantly lower than the stock exchange
price at the time of sale and (d) for contributions in kind, par-
ticularly in connection with the acquisition of companies, parts
of companies or shares in companies or in connection with
mergers. In the cases specified under (c) and (d), the share-
holders' subscription right is excluded. The Board of Executive
Directors is furthermore authorized to redeem the shares
bought back and to reduce the share capital by the proportion
of the share capital accounted for by the redeemed shares.
In assessing independence, the Supervisory Board
assumes that neither election as an employee representative,
nor membership on the Board of Executive Directors more
than two years in the past, taken together or in isolation, pre-
cludes the classification as independent.
As of December 31, 2015, the subscribed capital of BASF SE
was €1,175,652,728.32 divided into 918,478,694 registered
shares with no par value. Each share entitles the holder to one
vote at the Annual Shareholders' Meeting. Restrictions on the
right to vote or transfer shares do not exist. The same rights
and duties apply to all shares. According to the Statutes,
shareholders are not entitled to receive share certificates.
There are neither different classes of shares nor shares with
preferential voting rights (golden shares).
Implementation of the German Corporate
Governance Code
On this basis, the Supervisory Board has determined that all
of its current members can be considered independent. We
firmly believe that the current composition fulfills the objectives
with the aforementioned exception regarding the period of
membership.
All shareholders entered in the share register are entitled to
participate in the Annual Shareholders' Meetings, to have their
say concerning any item on the agenda and to request infor-
mation about company issues insofar as this is necessary to
make an informed judgment about the item on the agenda
under discussion. Registered shareholders are also entitled to
file motions pertaining to proposals for resolutions made by
the Board of Executive Directors and Supervisory Board at the
Annual Shareholders' Meeting and to contest resolutions of
the Meeting and have them evaluated for their lawfulness in
court.
Shareholders who hold at least €500,000 of the compa-
ny's share capital, a quota corresponding to 390,625 shares,
are furthermore entitled to request that additional items be
added to the agenda of the Annual Shareholders' Meeting.
At BASF SE, this law is being put into practice as follows:
According to Section 17(2) of the SE Implementation Act, the
supervisory board of a publicly listed European society (SE)
that is composed of the same number of shareholder and
employee representatives must consist of at least 30% each of
women and men. The Supervisory Board of BASF SE currently
comprises nine men and three women. Two of the six share-
holder representatives elected at the Annual Shareholders'
Meeting are women. Should any reappointments be necessary
on the Supervisory Board of BASF SE, legal regulations - and
the stipulations of the BASF SE Employee Participation Agree-
ment based on them - dictate that the percentage of women
be increased from the current figure of 25% to at least 30%;
that is, four women. The legal minimum quota will therefore be
reached after the next regular Supervisory Board election in
2019 at the latest.
On April 24, 2015, the Law on Equal Participation of Women
and Men in Leadership Positions in the Private and Public
Sector came into force in Germany.
In addition, the Board of Executive Directors decided on
target figures for the proportion of women in the two manage-
ment levels below the Board of Executive Directors of BASF SE
as per the legal requirements in Section 76(4) of the German
Stock Corporation Act: Women are to make up 9.4% of the
leadership level directly below the Board, and the level below
that is to comprise 11.8% women. This corresponds to the
status at the time these target figures were determined.
The deadline for achieving these goals for the Board of
Executive Directors of BASF SE and both management levels
below has been set for December 31, 2016. After that, the
company will review the numbers and subsequently decide on
new target figures for BASF SE.
For more on women in executive positions in the BASF Group
worldwide, see page 45
BASF Report 2015
Furthermore, pursuant to Section 111(5) of the German
Stock Corporation Act, the Supervisory Board determined as
a target figure for the Board of Executive Directors of BASF SE
that the Board of Executive Directors should have at least one
female member. This represents 12.5% of currently eight
members of the Board of Executive Directors; the goal had
already been reached at the time the target figure was deter-
mined.
133
Shareholders' rights
-
Shareholders' rights of co-administration and
supervision at the Annual Shareholders' Meeting
One share, one vote
Shareholders exercise their rights of co-administration and
supervision at the Annual Shareholders' Meeting. The Annual
Shareholders' Meeting elects half of the members of the
Supervisory Board and, in particular, decides on the formal
discharge of the Board of Executive Directors and the Super-
visory Board, the distribution of profits, capital measures, the
authorization of share buybacks, changes to the Statutes and
the selection of the auditor.
Corporate Governance
Corporate governance report
Each BASF SE share represents one vote. All of BASF SE's
shares are registered shares. Shareholders are obliged to have
themselves entered with their shares into the company share
register and to provide the information necessary for registra-
tion in the share register according to the German Stock
Corporation Act. There are no registration restrictions and
there is no limit to the number of shares that can be registered
to one shareholder. Only the persons listed in the share regis-
ter are entitled to vote as shareholders. Listed shareholders
may exercise their voting rights at the Annual Shareholders'
Meeting either personally, through a representative of their
choice or through a company-appointed proxy authorized by
the shareholders to vote according to their instructions. There
are neither voting caps to limit the number of votes a share-
holder may cast nor special voting rights. BASF has fully
implemented the principle of "one share, one vote."
Total compensation
2,735
981
2,745
1 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
2 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
BASF Report 2015
Dr. Hans-Ulrich Engel
2,270
(399)
341
(132)
(478)
less service cost
1,023
1,340
Sanjeev Gandhi
1,340
compensation
plus allocated actual annual variable
(1,300)
(457)
Corporate Governance
Compensation report
2014
Michael Heinz
6621
6621
6161
(max)
(min)
(max)
(min)
(max)
(min)
2015
143
2015
2014
2015
2015
2015
(1,300)
2015
2015
2015
2014
Since December 1, 2014
2015
(433)
2,946
less granted annual variable target
compensation
2,695
Total
2,010
0
442
1,674
0
368
LTI program 2015 (2015-2023)
649
1,073
649
2,010
0
442
649
1,674
0
368
649
Multiple-year variable compensation
2,000
LTI program 2014 (2014-2022)
272
2,613
2,705
connection with GAS 17
Reconciliation reporting of total compensation
pursuant to Section 314(1)(6a) HGB in
5,214
1,204
6621
3,162
2,745
404
1,205
3,173
Total compensation in accordance with GCGC
399
399
399
457
132
132
132
478
Service cost
4,815
805
2,547
(1,300)
54
8122
5141
402
482
4,810
800
2,542
2,767
3,888
1,112
2,583
167
402
5,084
2,816
3,377
2,010
0
442
776
0
171
2,010
0
1,074
442
402
489
(1,300)
(108)
(1,300)
(1,300)
5,231
1,221
2,963
3,212
4,377
1,601
37
3,072
5,486
1,476
3,218
3,859
421
421
421
445
489
489
204
649
649
2,010
1,112
1,112
59
1,074
1,074
1,074
1,428
150
150
168
1,112
5982
5982
5
4122
4122
4122
650
650
650
650
5141
5982
818
800
800
0
442
649
776
0
171
2,010
0
442
649
2,000
0
1,300
1,300
2,000
0
1,300
108
2,000
0
1,300
1,300
800
5141
150
402
(1,300)
20,704
Margret Suckale
18,124
20,704
Total
173,064
193,172
1 Sanjeev Gandhi was not yet a member of the Board of Executive Directors
on July 1, 2014.
2 Dr. Andreas Kreimeyer was entitled to proportional participation in the LTI program
on the options grant date of July 1, 2015, due to his departure from the Board of
Executive Directors on April 30, 2015.
Compensation allocated in accordance with the German
Corporate Governance Code (GCGC)
The "Compensation allocated in accordance with the GCGC"
shown for 2014 and 2015 is comprised of the fixed and
variable compensation components actually allocated, plus
the service cost calculated for each member of the Board of
Executive Directors in the reporting years even though this
does not actually represent payment in the narrower sense.
Compensation allocated in accordance with the German Corporate Governance Code (GCGC) (in thousand €)
18,124
BASF Report 2015
Dr. Martin Brudermüller
Vice Chairman of the Board
of Executive Directors
Dr. Hans-Ulrich Engel
2015
2014
2015
2014
2015
2014
Fixed salary
1,300
1,300
8662
Dr. Kurt Bock
Chairman of the Board of
Executive Directors
8642
Wayne T. Smith
18,124
1 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
2 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
144 Corporate Governance
Compensation report
The table below shows the options granted to the Board of
Executive Directors on July 1 of both reporting years.
Number of options granted
2015
2014
Dr. Kurt Bock
36,248
41,412
Dr. Martin Brudermüller
20,704
24,104
Dr. Hans-Ulrich Engel
18,124
20,704
Sanjeev Gandhi
7,000
Michael Heinz
18,124
20,704
Dr. Andreas Kreimeyer
15,092²
20,704
Dr. Harald Schwager
27,536
6622
6162
Fringe benefits
LTI program 2008 (2008-2016)
LTI program 2009 (2009-2017)
LTI program 2010 (2010-2018)
Total
LTI program 2011 (2011-2019)
6,244
6,978
2,616
3,400
4,168
Service cost
Total compensation in accordance with GCGC
2,0715
605
6,849
529
587
4,665
482
3,145
3,987
4,570
5,147
The basis for the allocated actual annual variable compensation is the return on assets adjusted for special items and the performance factor. This includes contributions made to the
deferred compensation program.
2 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
3 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
4 At the end of the regular term of the LTI program 2006, exercise gains which were realized in 2010 or 2011 were allocated to Dr. Kurt Bock and Dr. Hans-Ulrich Engel in 2014
in accordance with the special conditions of the U.S. LTI program.
5 At the end of the regular term of the LTI program 2007, exercise gains which were realized in 2009, 2012 or 2013 were allocated to Dr. Kurt Bock, Dr. Hans-Ulrich Engel and
Wayne T. Smith in 2015 in accordance with the special conditions of the U.S. LTI program.
820
7,798
2,6835
LTI program 2007 (2007-2015)
1,8974
215
173
3893
7543
4123
8123
Total
1,515
1,473
1,255
1,618
1,074
1,428
Actual annual variable compensation¹
2,046
2,680
1,361
1,782
1,023
1,340
Multiple-year variable compensation
2,6835
2,8254
2,0715
1,8974
LTI program 2006 (2006-2014)
2,8254
2,195
0
2,710
(391)
(max)
(min)
(max)
650
6681
6681
6681
650
650
650
650
5832
(min)
2562
2562
71
80
80
80
1,233
924
924
924
721
730
730
2562
730
2015
2015
(1,300)
1,340
1,023
112
1,023
1,340
1,023
(482)
(402)
(37)
(489)
(445)
2015
(421)
2,539
171
2,306
2,807
2,265
Wayne T. Smith
Margret Suckale
2014
2015
2015
2015
2014
3,417
1,300
1,300
0
478
478
391
326
326
326
3,659
3,221
1,402
5,412
3,061
2,798
478
1,056
(1,300)
(1,300)
1,340
1,023
(477)
(478)
3,222
2,466
(1,300)
(1,300)
1,340
1,023
5,066
477
4,740
730
2,000
1,300
1,300
0
2,000
649
519
0
2,010
649
442
0
2,010
649
649
519
0
2,010
442
0
2,010
3,182
2,743
924
4,934
2,670
2,472
(326)
1,300
Reconciliation reporting of total compensation
pursuant to Section 314(1)(6a) HGB in
667
Michael Diekmann, Munich, Germany
Vice Chairman of the Supervisory Board of BASF SE
Former Chairman of the Board of Management of Allianz SE
Member of the Supervisory Board since: May 6, 2003
Supervisory Board memberships (excluding internal memberships):
Fresenius Management SE (member)
Fresenius SE & CO. KGaA (Vice Chairman)
Linde AG (Vice Chairman)
Siemens AG (member)
Comparable German and non-German controlling bodies:
Allianz Australia Ltd. (non-executive Director)
Allianz France S.A. (Vice Chairman of the Administrative Council
Daimler AG (member)
until February 9, 2015)
Robert Oswald, Altrip, Germany
1,300
Chairman of the Works Council of the Ludwigshafen site of BASF SE and
Chairman of BASF's Joint Works Council
Member of the Supervisory Board since: October 1, 2000
Ralf-Gerd Bastian, Neuhofen, Germany
Member of the Works Council of the Ludwigshafen site of BASF SE
Member of the Supervisory Board since: May 6, 2003
Dame Alison Carnwath DBE, Sidmouth, England
Senior Advisor Evercore Partners
Member of the Supervisory Board since: May 2, 2014
Comparable German and non-German controlling bodies:
Zurich Insurance Group AG (independent member of the Administrative Council)
Zürich Versicherungs-Gesellschaft AG (independent member of the
Administrative Council)
Living Bridge Equity Partners LLP (non-executive Chairman of the
Partnership Board)
Allianz S.p.A. (member of the Administrative Council until February 6, 2015)
Land Securities Group plc (non-executive Chairman of the Board of Directors)
Trumpf GmbH & Co. KG (Chairman)
Supervisory Board memberships (excluding internal memberships):
Michael Heinz
Degree: Business Administration (MBA); 51 years old; 32 years at BASF
Responsibilities: Dispersions & Pigments; Care Chemicals;
Nutrition & Health; Performance Chemicals; Advanced Materials & Systems
Research; Region South America; Perspectives
First appointed: 2011, Term expires: 2019
Internal memberships as defined in Section 100(2) of the German
Stock Corporation Act:
BASF Coatings GmbH (member of the Supervisory Board
until April 30, 2015)
The following member left the Board of
Executive Directors on April 30, 2015
Dr. Andreas Kreimeyer
Fuchs Petrolub SE (Chairman)
Degree: Biology; 60 years old; 29 years at BASF
Internal memberships as defined in Section 100(2) of the German
Stock Corporation Act:
BASF Coatings GmbH (Chairman of the Supervisory Board
until April 30, 2015)
BASF Report 2015
Supervisory Board
Corporate Governance
Management and Supervisory Boards - Supervisory Board
139
In accordance with the Statutes, the Supervisory Board of BASF SE comprises twelve members
The term of office of the Supervisory Board commenced follow-
ing the Annual Shareholders' Meeting on May 2, 2014, in which
the shareholder representatives on the Supervisory Board were
elected. It terminates upon conclusion of the Annual Share-
holders' Meeting which resolves on the discharge of members of
the Supervisory Board for the fourth complete financial year after
the term of office commenced; this is the Annual Shareholders'
Meeting in 2019. The Supervisory Board comprises the following
members:
Dr. Jürgen Hambrecht, Neustadt an der Weinstraße, Germany
Chairman of the Supervisory Board of BASF SE
Former Chairman of the Board of Executive Directors of BASF SE
(until May 2011)
Member of the Supervisory Board since: May 2, 2014
First appointed: 2003, Term expires: 2015
First appointed: 2014, Term expires: 2018
PACCAR Inc. (independent member of the Board of Directors)
Wolfgang Daniel, Heidelberg, Germany
Member of the Supervisory Board since: August 1, 2004
Supervisory Board memberships (excluding internal memberships):
K+S Aktiengesellschaft (Vice Chairman)
Steag GmbH (Vice Chairman)
Evonik Industries AG (Vice Chairman)
RAG AG (Vice Chairman)
RAG DSK AG (Vice Chairman)
since May 2015)
140 Corporate Governance
Compensation report
Compensation report
BASF Report 2015
Chairman of the Mining, Chemical and Energy Industries Union
This report outlines the main principles of the compensa-
tion for the Board of Executive Directors and discloses the
amount and structure of the compensation of each Board
member. Furthermore, it provides information on end-of-
service undertakings with respect to Board members, as
well as information on the compensation of Supervisory
Board members.
This report meets the disclosure requirements of the
German Commercial Code, supplemented by the additional
requirements based on the German Act on Disclosure of
Management Board Remuneration (Vorstandsvergütungs-
Offenlegungsgesetz) as well as the German Act on the Appro-
priateness of Management Board Remuneration (Gesetz zur
Angemessenheit der Vorstandsvergütung), and is aligned with
the recommendations of the German Corporate Governance
Code (GCGC) in its version of May 5, 2015.
Based on a proposal by the Personnel Committee, the
Supervisory Board determines the amount and structure of
compensation of members of the Board of Executive Directors.
The amount and structure of compensation is determined
by the company's size, complexity and financial position, as
well as the performance of the Board of Executive Directors.
Internal and external appropriateness of the Board's compen-
sation is reviewed by external auditors on a regular basis.
Globally operating companies based in Europe serve as an
external reference. For internal comparison, compensation is
considered in total as well as over time, especially for senior
executives.
For more on the Supervisory Board and its committees, see page 139
and from page 149 onward
Principles
The compensation of the Board of Executive Directors is
designed to promote sustainable corporate development. It is
marked by a pronounced variability in relation to the perfor-
mance of the Board of Executive Directors and BASF Group's
return on assets.
The compensation of the Board of Executive
Directors comprises:
1. Fixed salary
2. Annual variable compensation
3. Share-price-based, long-term incentive (LTI) program
4. Nonmonetary compensation and other additional
compensation
Compensation of the Board of Executive
Directors
Coller Capital Ltd. (non-executive member of the Board of Directors
Michael Vassiliadis, Hannover, Germany
Full-time trade union delegate
Vice Chairman of the Works Council of the Ludwigshafen site of BASF SE
Member of the Supervisory Board since: September 9, 1996
Prof. Dr. François Diederich, Zurich, Switzerland
Professor at the Swiss Federal Institute of Technology, Zurich, Switzerland
Member of the Supervisory Board since: May 19, 1998
Franz Fehrenbach, Stuttgart, Germany
Chairman of the Supervisory Board of Robert Bosch GmbH
Member of the Supervisory Board since: January 14, 2008
Supervisory Board memberships (excluding internal memberships):
Robert Bosch GmbH (Chairman)
Stihl AG (Vice Chairman)
Linde AG (member)
Comparable German and non-German controlling bodies:
Robert Bosch Corporation (member of the Board of Directors)
Stihl Holding AG & Co. KG (member of the Advisory Board)
Francesco Grioli, Ronnenberg, Germany
Regional manager of the Rhineland-Palatinate/Saarland branch of the
Mining, Chemical and Energy Industries Union
Member of the Supervisory Board since: May 2, 2014
Member of the Supervisory Board since: January 14, 2008
Supervisory Board memberships (excluding internal memberships):
Gerresheimer AG (Vice Chairman)
Comparable German and non-German controlling bodies:
V & B Fliesen GmbH (member)
Steag New Energies GmbH (Vice Chairman)
Anke Schäferkordt, Cologne, Germany
Member of the Executive Board of Bertelsmann SE & Co. KGaA
Co-CEO of RTL Group S.A.
Chief Executive Officer of RTL Television GmbH
Member of the Supervisory Board since: December 17, 2010
Supervisory Board memberships (excluding internal memberships):
Software AG (member until May 13, 2015)
Comparable German and non-German controlling bodies:
Groupe M6 (member of the Supervisory Board since April 28, 2015)
Denise Schellemans, Brecht, Belgium
Villeroy & Boch AG (member)
South & East Asia, ASEAN & Australia/New Zealand
Responsibilities: Greater China & Functions Asia Pacific;
Degrees: Chemical Engineering, Master of Business Administration (MBA);
49 years old; 22 years at BASF
-
Compliance standards integrated
into corporate values
Regular compliance training for employees
Based on international standards, BASF's Compliance Pro-
gram combines important laws and company-internal policies
themselves exceeding legal requirements with external
voluntary commitments to create a framework regulating how
all BASF employees interact with business partners, officials,
colleagues and society. At the core of our Compliance Program
is the global, standardized Code of Conduct received by every
employee. All employees and managers are obligated to
adhere to its guidelines, which describe proper conduct not
only in terms of corruption and antitrust legislation, but also
topics like human rights, labor and social standards, conflicts
of interest, trade control, and protection of data privacy.
Abiding by compliance standards is the foundation of
responsible leadership. This has been expressly embedded in
our values, where we state: "We strictly adhere to our compli-
ance standards." We are convinced that compliance with these
standards will not only prevent the disadvantages associated
with violations, such as penalties and fines; we also view
compliance as the right path toward securing our company's
long-term success.
Our efforts are principally aimed at preventing violations
from the outset. To this end, all employees are required within a
prescribed time frame to take part in basic compliance training,
refresher courses and special tutorials dealing with, for exam-
ple, antitrust legislation or trade control regulations. Training
takes place in different formats, including face-to-face training,
e-learning or workshops. In addition, we introduced a new
e-learning program on trade control in 2015, focusing on
export controls and embargos. In total, more than 64,000
employees worldwide took part in around 70,000 hours of
compliance training in 2015.
For more on the BASF Code of Conduct, see
basf.com/code_of_conduct
BASF's Code of Conduct
Protection of Company Property and
Property of Business Partners
■
Protection of Data Privacy
Antitrust Legislation
Human Rights, Labor
and Social Standards
BASF's Code of Conduct stipulates
how these topics are handled
Protection of Environment,
Health and Safety
Imports and Exports
Corruption
Conflicts of Interest
Information Protection
and Insider Trading Laws
Money Laundering
BASF Report 2015
Corporate Governance
Compliance
Gifts and Entertainment
137
Compliance Program and Code of Conduct
92 audits
Conducted internally
on compliance
BASF Report 2015
Corporate Governance
Corporate governance report
Bonds issued by BASF SE grant the bearer the right to request
early repayment of the bonds at nominal value if one person
- or several persons acting in concert - hold or acquire a
BASF SE share volume after the time of issuance which corre-
sponds to more than 50% of the voting rights (change of
control), and one of the rating agencies named in the bond's
terms and conditions withdraws its rating of BASF SE or the
bond, or reduces it to a noninvestment grade rating within 120
days after the change-of-control event.
In the event of a change of control, members of the Board
of Executive Directors shall, under certain additional condi-
tions, receive compensation (details of which are listed in the
Compensation Report on page 146). A change of control is
assumed when a shareholder informs BASF of a shareholding
of at least 25% or the increase of such a holding. In addition,
employees of BASF SE and its subsidiaries who are classed
as senior executives will receive a severance payment if their
contract of employment is terminated by BASF within 18
months of the occurrence of a change of control, provided the
employee has not given cause for the termination. The
employee whose service contract has been terminated in
such a case will receive a maximum severance payment of
1.5 times the annual salary (fixed component) depending on
the number of months that have passed since the change-
of-control event.
The remaining specifications stipulated in Section 315(4) of
the German Commercial Code refer to situations that are not
applicable to BASF SE.
For more on bonds issued by BASF SE, see
basf.com/en/investor/bonds
Directors' and Officers' liability insurance
BASF SE has taken out liability insurance that covers the
activities of members of the Board of Executive Directors and
the Supervisory Board (D&O insurance). This policy provides
for the level of deductibles for the Board of Executive Directors
as prescribed by Section 93(2)(3) of the German Stock
Corporation Act and for the level of deductibles for the Super-
visory Board as recommended in Section 3.8(3) of the German
Corporate Governance Code.
Share ownership by Members of the Board of
Executive Directors and the Supervisory Board
No member of the Board of Executive Directors or the Super-
visory Board owns shares in BASF SE and related options or
other derivatives that account for 1% or more of the share
capital. Furthermore, the total volume of BASF SE shares and
related financial instruments held by members of the Board of
Executive Directors and the Supervisory Board accounts for
less than 1% of the shares issued by the company.
Share dealings of the Board of Executive
Directors and Supervisory Board (Directors'
Dealings under Section 15a of German
Securities Trading Act)
With our Group-wide Compliance Program, we aim to
ensure adherence to legal regulations and the company's
internal guidelines. We have integrated compliance into
our "We create chemistry" strategy. Our employee Code
of Conduct firmly embeds these mandatory standards
into everyday business. Members of the Board of Execu-
tive Directors are also expressly obligated to follow these
principles.
In accordance with Section 15a of the German Securities
Trading Act (Wertpapierhandelsgesetz), all members of the
Board of Executive Directors and the Supervisory Board as
well as certain members of their families are required to dis-
close the purchase or sale of BASF shares and other related
rights to the Federal Financial Supervisory Authority (Bundes-
anstalt für Finanzdienstleistungsaufsicht) and to the company
if transactions within the calendar year exceed the threshold
of €5,000.
Information on the auditor
The Annual Shareholders' Meeting of April 30, 2015, elected
KPMG AG Wirtschaftsprüfungsgesellschaft as the auditor of
the BASF Group Consolidated Financial Statements and
Management's Report for the 2015 business year. KPMG is
also auditor of the Financial Statements of BASF SE, and
KPMG member firms audit the majority of companies included
in the Consolidated Financial Statements. KPMG has been
auditor of BASF SE since the 2006 Financial Statements.
Hans-Dieter Krauß has been the responsible auditor since
auditing the 2010 Financial Statements.
135
136 Corporate Governance
Compliance
Compliance
BASF Report 2015
Code of Conduct
Forms core of our
Compliance Program
More than 64,000
Employees participated
in compliance training
In 2015, a total of four purchases by members of the
Board of Executive Directors and the Supervisory Board and
members of their families subject to disclosure were reported
as Directors' Dealings, involving between 338 and 10,500
BASF shares. The price per share was between $75.99 and
€85.92. The volume of the individual trades was between
€28,184.13 and $797,895.00. The disclosed share transac-
tions are published on the website of BASF SE.
For more on securities transactions reported in 2015, see
basf.com/en/governance/sharedealings
Compliance culture at BASF
We firmly believe that for corporate responsibility to be a
success, there must be an active culture of living these guide-
lines within the company. This culture takes years to develop,
and requires the consistent, reliable application of compliance
standards. Because our Code of Conduct was introduced
early on, these standards are already established and undis-
puted. In the Global Employee Survey conducted in 2015, the
vast majority of our employees confirmed that their work envi-
ronment places high value on proper conduct in alignment with
internal company guidelines and standards. We consistently
investigate any cases in which the answer to the corresponding
question showed unit-specific anomalies.
Monitoring adherence to our Compliance
principles
Responsibilities: Finance; Oil & Gas; Procurement; Information Services &
Supply Chain Operations; Corporate Controlling; Corporate Audit
First appointed: 2008, Term expires: 2021
Internal memberships as defined in Section 100(2) of the German
Stock Corporation Act:
Wintershall Holding GmbH (Chairman of the Supervisory Board
since May 1, 2015)
Wintershall AG (Chairman of the Supervisory Board since May 1, 2015)
Comparable German and non-German controlling bodies:
Nord Stream AG (member of the Shareholders' Committee
since May 1, 2015)
Dr. Harald Schwager
Degree: Chemistry; 55 years old; 28 years at BASF
Responsibilities: Construction Chemicals; Crop Protection; Bioscience
Research; Region Europe
First appointed: 2008, Term expires: 2021
Internal memberships as defined in Section 100(2) of the German
Stock Corporation Act:
Degree: Law; 56 years old; 28 years at BASF
Wintershall Holding GmbH (Chairman of the Supervisory Board
Wintershall AG (Chairman of the Supervisory Board until April 30, 2015)
Comparable German and non-German controlling bodies:
Nord Stream AG (member of the Shareholders' Committee
until April 30, 2015)
Wayne T. Smith
Degrees: Chemical Engineering, Business Administration (MBA);
55 years old; 12 years at BASF
Responsibilities: Catalysts; Coatings; Performance Materials; Market &
Business Development North America; Regional Functions North America
First appointed: 2012, Term expires: 2020
Margret Suckale
Degrees: Law, Business Administration (MBA);
59 years old; 7 years at BASF
Responsibilities: Engineering & Maintenance; Environment, Health &
Safety; European Site & Verbund Management; Human Resources
First appointed: 2011, Term expires: 2017
Comparable German and non-German controlling bodies:
BASF Antwerpen N.V. (Chairwoman of the Administrative Council)
Sanjeev Gandhi
until April 30, 2015)
Dr. Hans-Ulrich Engel
First appointed: 2006, Term expires: 2021
Responsibilities: Petrochemicals; Monomers; Intermediates;
Process Research and Chemical Engineering; Corporate Technology &
Operational Excellence; BASF New Business
Central role of Chief Compliance Officer and
compliance officers
50 external hotlines worldwide
Numerous internal compliance audits
BASF's Chief Compliance Officer (CCO) manages the imple-
mentation of our Compliance Management System, supported
by 94 compliance officers worldwide. The CCO regularly
reports to the Board of Executive Directors on progress in the
program's implementation as well as on any significant findings.
Furthermore, the CCO reports to the Supervisory Board's Audit
Committee in at least one of its meetings each year on the
status of the Compliance Program as well as any major
developments. In the event of significant incidents, the Audit
Committee is immediately informed by the Board of Executive
Directors.
We particularly encourage our employees to actively and
promptly seek guidance if in doubt. For this, they can consult
not only their managers but also dedicated specialist depart-
ments and company compliance officers. We have also set up
50 external hotlines worldwide which our employees can turn
to anonymously. We make sure that all concerns are processed
and answered within a short amount of time.
-
In 2015, 357 calls and emails were received by our external
hotlines (2014: 276). Concerns involved questions ranging
from personnel management and handling of company
property, to information on the behavior of business partners or
human rights issues such as labor and social standards.
Increasing awareness was observed when it came to potential
conflicts of interest. We launched case-specific investigations,
in accordance with applicable law and internal regulations,
into all cases of suspected misconduct that we became aware
of. Confirmed violations were penalized, up to and including
dismissal.
This involved making sure that the necessary action was taken
in accordance with standardized company criteria. In the case
of suspected corruption we reported to the relevant authorities
in 2014, the penal proceedings against a former employee and
the employee of a customer company did not confirm the
corruption allegations.
BASF's Corporate Audit department monitors adherence
to compliance principles, covering all areas in which compli-
ance violations could occur. They check that employees uphold
regulations and make sure that the established processes,
procedures and monitoring tools are appropriate and sufficient
to minimize potential risk or preclude violations in the first place.
In 2015, 92 Group-wide audits of this kind were performed
(2014: 104), predominantly in the areas of antitrust law, imports
and exports, and gifts and entertainment. If compliance audits
reveal a need to optimize procedures or hone control measures,
we implement them immediately.
We introduced a new global guideline on April 1, 2015, on
"Due Diligence with Business Partners." Based on this guide-
line, all of our business partners in sales and marketing are
monitored for potential compliance risks. This is done by
means of a checklist, a questionnaire distributed to the
business partner, and an internet-based analysis; afterward,
we document the results. We furthermore expect all suppliers
to know of and act in accordance with our global Code of
Conduct.
We support the United Nations' Guiding Principles on
Business and Human Rights and are constantly working to
enhance our internal guidelines and processes in keeping with
these principles. For example, we established an interdisciplin-
ary, BASF-internal work group on this topic in 2015 in order to
pool responsibilities in this area. Also outside of our company,
we support the respect of human rights and the fight against
corruption: We are, for example; a founding member of the
United Nations Global Compact. As a member of Transparency
International Deutschland and the Partnering Against Corrup-
tion Initiative (PACI) of the World Economic Forum, we assist in
the implementation of these organizations' objectives. As a
member of the U.N. Global Compact LEAD, we report in
accordance with the Blueprint for Corporate Sustainability
Leadership.
For more on human rights and labor and social standards, see
basf.com/human_rights
m For more on suppliers, see page 94 onward
138 Corporate Governance
Management and Supervisory Boards - Board of Executive Directors
Management and Supervisory Boards
Board of Executive Directors
BASF Report 2015
There were eight members on the Board of Executive Directors of BASF SE as of December 31, 2015
Dr. Kurt Bock
Chairman of the Board of Executive Directors
Degree: Business Administration; 57 years old; 25 years at BASF
Responsibilities: Legal, Taxes, Insurance & Intellectual Property;
Strategic Planning & Controlling; Communications & Government Relations;
Global Executive Human Resources; Investor Relations; Compliance
First appointed: 2003, Term expires: 2021
Dr. Martin Brudermüller
Vice Chairman of the Board of Executive Directors
Degree: Chemistry; 54 years old; 28 years at BASF
5. Company pension benefits
The compensation components are shown in
detail below:
Vice Chairman of the Supervisory Board of BASF SE
2. The actual annual variable compensation (variable
bonus) is based on the performance of the entire Board of
Executive Directors and the return on assets. The return on
assets is also used to determine the variable compensation of
all other employee groups.
529
529
529
Total compensation in accordance with GCGC
6,192
5,604
2,120
10,140
4,798
4,101
1,784
587
7,117
less granted annual variable target
compensation
(2,600)
(2,600)
(1,729)
(1,729)
plus allocated actual annual variable
compensation
2,680
2,046
1,782
1,361
connection with GAS 17
less service cost
605
605
864
588
0
2,673
LTI program 2014 (2014-2022)
1,299
864
LTI program 2015 (2015-2023)
884
0
4,020
605
588
Total
5,372
4,999
1,515
9,535
4,211
3,572
1,255
6,588
Service cost
820
2,673
4,020
(820)
(587)
650
650
Fringe benefits
96
55
55
55
106
155
155
155
650
Total
272
272
272
756
805
805
805
Annual variable target compensation
1,300
433
0
746
(605)
650
217
(529)
Total compensation
5,452
4,445
4,264
3,204
Dr. Andreas Kreimeyer
Dr. Harald Schwager
1. The fixed salary is a set amount of yearly compensation
paid out in even installments. It is regularly reviewed by the
Supervisory Board and adjusted, if necessary.
2014
2015
217
2015
2014
2015
2015
2015
(min)
(max)
(min)
(max)
Fixed salary
650
217
2015
0
Until April 30, 2015
1,299
884
The fixed salary and annual variable target compensation
were last adjusted on January 1, 2014.
142 Corporate Governance
Compensation report
BASF Report 2015
Compensation granted in accordance with the German Corporate Governance Code (GCGC) (in thousand €)
Dr. Martin Brudermüller
Dr. Kurt Bock
Chairman of the Board of Executive Directors
Vice Chairman of the Board of Executive Directors
2014
2015
2015
2015
2014
2015
2015
The table "Compensation granted in accordance with GCGC"
shows: fixed salary, fringe benefits, annual variable target
compensation, LTI program measured at fair value at the grant
date, and service cost. The individual compensation compo-
nents are supplemented by individually attainable minimum
and maximum compensation.
2015
Compensation granted in accordance with the German
Corporate Governance Code (GCGC)
Amount of total compensation
In order to assess the sustainable performance of the
Board of Executive Directors, each year the Supervisory Board
sets a target agreement with the entire Board of Executive
Directors that primarily contains medium and long-term goals.
The Supervisory Board assesses the goal achievement of
the current year and the previous two years. A performance
factor with a value between 0 and 1.5 is determined on the
basis of the goal achievement ascertained by the Supervisory
Board. The variable bonus for the prior fiscal year is payable
after the Annual Shareholders' Meeting.
Board members, like other employee groups, may con-
tribute a portion of their annual variable bonus into a deferred
compensation program. For members of the Board of Execu-
tive Directors, as well as for all other senior executives of the
BASF Group in Germany, the maximum amount that can be
contributed to this program is €30,000. Board members have
taken advantage of this offer to varying degrees.
3. A share-price-based, long-term incentive (LTI) pro-
gram exists for members of the Board of Executive Directors.
It is also offered to all other senior executives of BASF Group.
Members of the Board of Executive Directors are subject to a
stricter set of rules than are contained in the general program
conditions: They are required to participate in the program
with at least 10% of their variable bonus. This mandatory
investment consisting of BASF shares is subject to a holding
period of four years. For any additional voluntary investment of
up to 20% of the variable bonus, the general holding period
of two years applies. Members of the Board of Executive
Directors may only exercise their options at least four years
after they have been granted (vesting period). This compensa-
tion component is limited, too, by the structure of the LTI pro-
Igram as well as by the upper limit on the options' exercise
value. Because the exercise period spans multiple years, it can
occur that gains allocated from several LTI program years all
accumulate into one year; there can also be years in which no
gains are allocated.
For more on share ownership by members of the Board of Executive
Directors, see page 135
For more on the LTI program, see page 47 and from page 218 onward
BASF Report 2015
Corporate Governance
Compensation report
141
4. Included in nonmonetary compensation and other
additional compensation (fringe benefits) are the following:
delegation allowances, accident insurance premiums and
other similar benefits, and benefits from means of transport
and security measures provided by the company. The mem-
bers of the Board did not receive loans or advances from the
company in 2015.
The members of the Board are covered by a directors' and
officers' liability insurance (D&O insurance) concluded by the
company, which includes a deductible.
For more on the D&O insurance of the Board of Executive Directors,
see page 135
5. As part of the pension benefits granted to the Board of
Executive Directors (Board Performance Pension), company
pension benefits are intended to accrue annual pension units.
The method used to determine the amount of the pension
benefits generally corresponds to that used for the other senior
executives of the BASF Group in Germany. The method is
designed such that both the performance of the company and
the progression of the individual Board member's career
significantly affect the pension entitlement.
The annual pension benefits accruing to Board members
in a given reporting year (pension unit) are composed of a fixed
and a variable component. The fixed component is calculated
by multiplying the annual fixed salary above the Social Security
Contribution Ceiling by 32% (contribution factor). The variable
component of the pension unit is the result of multiplying the
fixed component with a factor that is dependent on the return
on assets in the reporting year and the performance factor,
which is decisive for the variable bonus. The amount resulting
from the fixed and the variable component is converted into a
pension unit (lifelong pension) using actuarial factors based on
an actuarial interest rate (5%), the probability of death, invalid-
ity and bereavement according to Heubeck Richttafeln, 2005G
(modified), and an assumed pension increase (at least 1% per
annum).
The sum of the pension units accumulated over the report-
ing years determines the respective Board member's pension
benefit in the event of a claim. This is the amount that is pay-
able upon retirement. Pension benefits take effect at the end of
service after completion of the member's 60th year of age, or
on account of disability or death. Pension payments are
reviewed on a regular basis and adjusted by at least 1% each
year.
The pension units also include survivor benefits. Upon the
death of an active or former member of the Board, the surviv-
ing spouse receives a survivor pension amounting to 60% of
the Board member's pension entitlement. The orphan pension
amounts to 10% for each half-orphan, 33% for an orphan,
25% each for two orphans and 20% each for three or more
orphans of the pension entitlement of the deceased (former)
Board member. Total survivor benefits may not exceed 75%
of the Board member's pension entitlement. If the survivor
pensions exceed the upper limit, they will be proportionately
reduced.
Board members are members of the BASF Pensionskasse
WAG, as are generally all employees of BASF SE. Contribu-
tions and benefits are determined by the Statutes of the BASF
Pensionskasse WaG and the General Conditions of Insurance.
The tables on pages 142 to 145 show the granted and
allocated compensation as well as service cost of each mem-
ber of the Board of Executive Directors in accordance with
Section 4.2.5(3) of the German Corporate Governance Code
(GCGC) in its version of May 5, 2015.
(min)
Furthermore, a reconciliation statement for total compen-
sation to be reported is provided below the table "Compensa-
tion granted in accordance with GCGC" due to the disclosures
required by Section 314(1)(6a) of the German Commercial
Code (HGB) in connection with the German Accounting
Standard Number 17 (GAS 17).
1,515
1,473
1,515
1,515
1,618
1,255
1,255
1,255
Total
Annual variable target compensation
Multiple-year variable compensation
2,660
0
1,729
1,729
4,000
(max)
2,600
0
3892
3892
(min)
(max)
Fixed salary
1,300
1,300
1,300
1,300
8641
8661
2,600
866¹
8661
Fringe benefits
173
215
215
215
754²
3892
1,023
1,340
Total compensation in accordance with GCGC
1,340
1,023
1,340
1515
1515
1,828
399
2,227
721
1,023
730
650
1,233
Dr. Harald Schwager
Wayne T. Smith
Margret Suckale
2015
2014
2015
2014
2015
2014
650
650
6682
650
650
155
106
2563
5833
80
71
805
756
924
16.7
2,096
For more on the LTI program, see page 47 and from page 218 onward
457
BASF Report 2015
Dr. Andreas Kreimeyer €1,023 thousand (2014: expense of
€446 thousand); Dr. Harald Schwager €642 thousand (2014:
gain of €388 thousand); Wayne T. Smith €616 thousand (2014:
gain of €165 thousand); and Margret Suckale €419 thousand
(2014: gain of €145 thousand).
Service cost
Pension benefits
The values for service cost incurred in 2015 contain service
cost for BASF Pensionskasse WaG and Board Performance
Pension. Service cost for the members of the Board of Execu-
tive Directors is shown individually in the tables "Compensation
granted in accordance with GCGC" and "Compensation
allocated in accordance with GCGC."
The present value of pension benefits (defined benefit
obligation) is an accounting figure for the entitlements that the
Board members have accumulated in their years of service at
BASF. The defined benefit obligations up to and including
2015 were as follows: Dr. Kurt Bock €15,684 thousand (2014:
€18,571 thousand); Dr. Martin Brudermüller €13,148 thou-
sand (2014: €13,259 thousand); Dr. Hans-Ulrich Engel
€9,068 thousand (2014: €10,165 thousand); Sanjeev Gandhi
€1,588 thousand (2014: €1,193 thousand); Michael Heinz
€8,226 thousand (2014: €8,295 thousand); Dr. Andreas
Kreimeyer €13,502 thousand (2014: €14,582 thousand);
Dr. Harald Schwager €9,157 thousand (2014: €9,680 thou-
sand); Wayne T. Smith €2,355 thousand (2014: €1,933 thou-
sand); and Margret Suckale €3,518 thousand (2014:
€3,290 thousand).
End-of-service benefits
In the event that a member of the Board of Executive Directors
retires from employment before the age of 60, either because
their appointment was not extended or was revoked for an
important reason, they are entitled to pension benefits if they
Ihave served on the Board for at least ten years or if the time
needed to reach legal retirement age is less than ten years.
The company is entitled to offset compensation received for
any other work done against pension benefits until the legal
retirement age is reached.
The following applies to end of service due to a change-
of-control event: A change-of-control event, in terms of this
provision, occurs when a shareholder informs BASF of a
shareholding of at least 25%, or the increase of such a holding.
If a Board member's appointment is revoked within one year
following a change-of-control event, the Board member will
receive the contractually agreed payments for the remaining
contractual term of office as a one-off payment (fixed salary
and annual variable target compensation). The Board member
may also receive the fair value of the option rights acquired in
connection with the LTI program within a period of three
months or may continue to hold the existing rights under the
terms of the program. For the determination of the accrued
pension benefits from the Board Performance Pension, the
time up to the regular expiry of office is taken into consideration.
There is a general limit on severance pay (severance payment
cap) for all Board members. Accordingly, payments made to a
Board member upon premature termination of their contract,
without serious cause, may not exceed the value of two years'
compensation, including fringe benefits, nor compensate
more than the remaining term of the contract. The severance
payment cap is to be calculated on the basis of the total com-
pensation for the past business year and, if appropriate, also
the expected total compensation for the current business year.
If the appointment to the Board of Executive Directors is pre-
maturely terminated as the result of a change-of-control event,
the payments may not exceed 150% of the severance com-
pensation cap.
Former members of the Board of Executive
Directors
Total compensation for previous Board members and their
surviving dependents amounted to €10.4 million in 2015
(2014: €6.5 million). This figure also contains payments that
previous Board members have themselves financed through
the deferred compensation program and the expense or gain
for 2015 relating to options that previous members of the
Board still hold from the time of their active service period.
The continuation of the options that have not yet been
exercised at the time of retirement, along with the continuation
of the associated holding period for individual investment in
BASF shares under the conditions of the program, is intended
in order to particularly emphasize how sustainability is
incorporated into the compensation for the Board members.
Pension provisions for previous Board members and their
surviving dependents amounted to €126.5 million (2014:
€143.5 million).
Compensation of Supervisory Board members
The disclosure of compensation of the Supervisory Board is
based on the German Commercial Code and is aligned with
the recommendations of the German Corporate Governance
Code (GCGC). The compensation of the Supervisory Board is
regulated by the Statutes of BASF SE passed by the Annual
Shareholders' Meeting.
Each member of the Supervisory Board receives an annual
fixed compensation of €60,000 and a performance-related
variable compensation for each full €0.01 by which the
earnings per share of the BASF Group, as declared in the
BASF Group Consolidated Financial Statements for the year
for which the remuneration is paid, exceeds the minimum
earnings per share. For the 2015 business year, minimum
earnings per share amounted to €1.70 (2014: €1.65). The
performance-related variable remuneration is €800 for each
€0.01 of earnings per share up to an earnings per share of
€2.45, €600 for each further €0.01 of earnings per share up to
an earnings per share of €2.95, and €400 for each €0.01
beyond this. The minimum earnings per share and the
corresponding thresholds shall increase by €0.05 for each
subsequent business year. The performance-related variable
compensation is limited to a maximum amount of €120,000.
BASF Report 2015
Compensation report
146 Corporate Governance
145
The expenses for 2015 relating to all options issued were
as follows: Dr. Kurt Bock €1,058 thousand (2014: gain of
€97 thousand); Dr. Martin Brudermüller €788 thousand (2014:
gain of €333 thousand); Dr. Hans-Ulrich Engel €660 thousand
(2014: gain of €90 thousand); Sanjeev Gandhi €17 thousand;
Michael Heinz €517 thousand (2014: gain of €146 thousand);
478
2,553
2,576
2,573
477
3,050
1,753
326
2,061
391
2,079
2,098
2,452
2 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
3 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
4 At the end of the regular term of the LTI program 2006, exercise gains which were realized in 2010 or 2011 were allocated to Dr. Kurt Bock and Dr. Hans-Ulrich Engel in 2014
in accordance with the special conditions of the U.S. LTI program.
5 At the end of the regular term of the LTI program 2007, exercise gains which were realized in 2009, 2012 or 2013 were allocated to Dr. Kurt Bock, Dr. Hans-Ulrich Engel and
Wayne T. Smith in 2015 in accordance with the special conditions of the U.S. LTI program.
Accounting valuation of multiple-year variable
compensation (LTI programs)
While the options granted had resulted in a gain for BASF in
2014-except in the case of Dr. Andreas Kreimeyer - they led
to an expense in 2015. This expense refers to the total of all
options from the LTI programs 2007 to 2015 and is calculated
as the difference in the value of the options on December 31,
2015, compared with the value on December 31, 2014, con-
sidering the options exercised and granted in 2015. The value
of the options is based primarily on the development of the
BASF share price and its relative performance compared with
the benchmark index specified for the LTI programs 2007 to
2015. Because the value of options on December 31, 2015,
was greater than that of December 31, 2014, an expense
rather than a gain arose for 2015.
The expenses reported below are purely accounting figures
which do not equate with the allocated actual gains should
options be exercised. Each member of the Board may decide
individually on the timing and scope of the exercise of options
of the LTI programs, while taking into account the terms and
conditions of the program.
1 The basis for the allocated actual annual variable compensation is the return on assets adjusted for special items and the performance factor. This includes contributions made
to the deferred compensation program.
LTI program 2011 (2011-2019)
1,023
LTI program 2009 (2009-2017)
Total
Fringe benefits
Fixed salary
Dr. Andreas Kreimeyer
Michael Heinz
Sanjeev Gandhi
Compensation allocated in accordance with the German Corporate Governance Code (GCGC) (in thousand €)
Corporate Governance
Compensation report
BASF Report 2015
5983
5
150
168
55
96
1,112
59
Actual annual variable compensation¹
800
Multiple-year variable compensation
LTI program 2009 (2009–2017)
Corporate Governance
Compensation report
650
217
650
650
54
5142
2014
2015
2014
2015
2014
2015
Until April 30, 2015
Since December 1, 2014
LTI program 2011 (2011-2019)
LTI program 2010 (2010-2018)
LTI program 2006 (2006-2014)
LTI program 2007 (2007-2015)
LTI program 2008 (2008-2016)
LTI program 2010 (2010-2018)
818
746
2,523
478
Total compensation in accordance with GCGC
2,624
208
2,244
2,603
1,431
3,001
Fixed salary
Fringe benefits
Total
Actual annual variable compensation¹
Multiple-year variable compensation
LTI program 2006 (2006-2014)
LTI program 2007 (2007-2015)
LTI program 2008 (2008-2016)
Total
132
272
445
37
112
1,023
1,340
341
1,340
686
437
686
437
Total
2,135
171
1,823
2,158
1,299
Service cost
489
421
147
31.3
The chairman of the Supervisory Board receives two-and-
a-half times and a vice chairman one-and-a-half times the
compensation of an ordinary member. Members of the Super-
visory Board who are members of a committee, except for the
Nomination Committee, receive a further fixed compensation
for this purpose in the amount of €12,500. For the Audit
Committee, the further fixed compensation is €50,000. The
chairman of a committee shall receive twice and a vice chair-
man one-and-a-half times the further fixed compensation.
The Supervisory Board places great value on ensuring good
corporate governance: In 2015, it was therefore once again
intensely occupied with the corporate governance standards
practiced in the company, the implementation of the German
Corporate Governance Code's recommendations and
suggestions, and the implementation of the new law on the
participation of women on the Supervisory Board and the
Board of Executive Directors. At our meeting of October 22,
2015, we discussed the current recommendations and pro-
posals made for the German Corporate Governance Code
and their implementation at BASF.
Corporate governance and Declaration of
Conformity
Newly established in 2015, the Strategy Committee held
one meeting during the reporting period, attended by all
members. The discussion centered on possible significant in-
dividual measures for the internal implementation of BASF's
"We create chemistry" strategy and strategic options for the
further development of the BASF Group. Following this, the
Strategy Committee was informed of progress in the prepara-
tion of potential individual measures that may require Super-
visory Board approval should they be carried out.
The Nomination Committee is responsible for preparing
candidate proposals for the election of those Supervisory
Board members who are elected by the Annual Shareholders'
Meeting. The Nomination Committee is guided by the objec-
tives for the composition of the Supervisory Board adopted by
the Supervisory Board. No appointments to the Supervisory
Board, or reappointments of former Supervisory Board mem-
bers, took place in 2015. The Nomination Committee never-
theless met once in 2015 in order to focus especially on risk
provision for succession planning for the Supervisory Board,
and determine a control limit for the term of membership on
the Supervisory Board as recommended by the revised Ger-
man Corporate Governance Code. All committee members
attended the meeting.
The Audit Committee once again conducted a self-
evaluation of its activities in 2015. No new steps were found to
be necessary in terms of the duties of the committee or the
content, frequency and procedure of meetings.
At the meeting on February 23, 2016, the auditor reported
in detail on its audits of BASF SE's consolidated and separate
financial statements for the 2015 business year and discussed
the audit's results with the Audit Committee.
Other important activities included advising the Board of
Executive Directors on accounting issues and the internal
control system. The internal auditing system and compliance
in the BASF Group were each a focus at one meeting of the
Audit Committee. In these meetings, the head of the Corpo-
rate Audit department and the Chief Compliance Officer
reported to the Audit Committee and answered its questions.
One of the Committee's core tasks in 2015 was preparing a
proposal for the Annual Shareholders' Meeting on April 29,
2016, on the election of the auditor for the 2016 business year.
From August to December 2015, the Audit Committee
selected the auditor to be recommended at the Annual Share-
holders' Meeting by means of a tendering process conducted
in line with the regulations set forth by the new E.U. regulatory
framework on statutory audit, effective as of 2016. After
assessment and extensive discussion of the tenders submit-
ted through the tendering process by a total of five auditing
firms, the Audit Committee decided to recommend to the
Supervisory Board that the previous auditor, KPMG AG
Wirtschaftsprüfungsgesellschaft, once again be nominated for
election at the Annual Shareholders' Meeting. KPMG has been
auditor of BASF SE's separate and consolidated financial
statements since the 2006 business year.
BASF Report 2015
Report of the Supervisory Board
Corporate Governance
150
At its meeting of December 17, 2015, the Supervisory
Board approved the joint Declaration of Conformity by the
Supervisory Board and the Board of Executive Directors in
accordance with Section 161 of the German Stock Corpora-
tion Act, and carried out assessments of efficiency and inde-
pendence. BASF complies with the recommendations of the
German Corporate Governance Code in its version of May 5,
2015, without exception. This also applies to the Code's
recommendations made in 2015, such as the determination of
a control limit for the term of membership on the Supervisory
Board, which was fixed by the Supervisory Board at three
regular statutory periods in office, or around 15 years.
At the meeting on July 21, 2015, KPMG the auditor
elected at the Annual Shareholders' Meeting was charged
with the audit for the 2015 reporting year and auditing fees
were agreed upon. The focus areas for the annual audit were
discussed and defined together with the auditor. The Audit
Committee categorically excluded any service relationships
between auditor and BASF Group companies outside of the
audit of the annual financial statements, including beyond
prevailing legal limitations. These services may only be
performed upon approval by the Audit Committee. For certain
nonaudit services beyond the scope of the audit of the finan-
cial reports, the Audit Committee either granted approval for
individual cases or authorized the Board of Executive Directors
to engage KPMG for such services. The authorization of each
service applies for one reporting year and is limited in amount.
The Audit Committee is responsible for all the tasks listed
in Section 107(3)(2) of the German Stock Corporation Act and
in Subsection 5.3.2 of the German Corporate Governance
Code in its version of June 24, 2014. The Audit Committee
met five times during the reporting period. All committee mem-
bers attended all meetings. Its core duties were to review
BASF SE's Financial Statements and Consolidated Financial
Statements, as well as to discuss the quarterly and first-half
financial reports with the Board of Executive Directors prior to
their publication.
The Personnel Committee met three times during the
reporting period. With the exception of one meeting at which
one member was absent, all committee members participated
in the meetings. At its meeting on February 25, 2015, the
Personnel Committee advised on the targets for the Board of
Executive Directors for the 2015 business year. Topics at the
meeting on July 22, 2015, included succession planning for
the Board of Executive Directors, including the extension of
their terms for Dr. Kurt Bock, Dr. Martin Brudermüller,
Dr. Hans-Ulrich Engel and Dr. Harald Schwager, and the deter-
mination of target figures for the proportion of women on the
Board of Executive Directors of BASF SE. At the meeting on
December 17, 2015, the Personnel Committee particularly
focused on the Board of Executive Directors' performance
evaluation and matters concerning their compensation.
For more on the composition of the committees and the tasks assigned
them by the Supervisory Board, see the Corporate Governance Report
on page 131
The Supervisory Board of BASF SE has four committees:
1. the committee for personnel matters of the Board of
Executive Directors and the granting of loans in accordance
with Section 89(4) of the German Stock Corporation Act (Per-
sonnel Committee); 2. the Audit Committee; 3. the Nomination
Committee; and 4. the Strategy Committee, newly established
in 2015. Following each Committee meeting, the chairpersons
of the Committees reported in detail about the meetings and
the activities of the Committees at the subsequent meeting of
the Supervisory Board.
Committees
At its meetings on October 22 and December 17, 2015,
the Supervisory Board also addressed topics pertaining to its
own organization. For example, the Strategy Committee was
deployed at the meeting on October 22, 2015. At both meet-
ings, the Supervisory Board also advised on the change in
BASF SE's Employee Participation Agreement, which provides
the material legal foundation for the Supervisory Board. The
changes made to the Employee Participation Agreement
mainly concerned the implementation of the law introducing a
minimum percentage of women and men on the Supervisory
Board.
The Supervisory Board thoroughly considered the person-
nel issues of the Board of Executive Directors during the
meetings of February 25, July 22, and December 17, 2015.
Based on preparations conducted by the Personnel Com-
mittee, the Supervisory Board determined the targets for the
Board of Executive Directors for the 2015 business year at its
meeting on February 25, 2015. The meeting on July 22, 2015,
dealt with the composition of the Board of Executive Directors.
The terms of office expiring on April 29, 2016, for Chairman
Dr. Kurt Bock, Vice Chairman Dr. Martin Brudermüller, and
members Dr. Hans-Ulrich Engel and Dr. Harald Schwager
were each extended by five years, up to the conclusion of the
Annual Shareholders' Meeting in 2021. According to prepara-
tions made by the Personnel Committee, the Supervisory
Board determined the performance evaluation of the Board of
Executive Directors for the 2015 business year at its meeting
on December 17, 2015.
At its meeting of December 17, 2015, the Supervisory
Board discussed the Board of Executive Directors' operative
and financial planning including the investment budget for
2016, and as usual empowered the Board of Executive Direc-
tors to procure necessary financing in 2016. An additional
focus topic was consultation on the further development of the
Agricultural Solutions segment.
At the meeting on October 22, 2015, the Board of Execu-
tive Directors reported on the region Europe's organizational
and business-model enhancement as well as on the restruc-
turing of the business with paper, water, oilfield and mining
chemicals.
In addition to strategically significant individual measures, the
Supervisory Board also addressed BASF's strategy and long-
term business prospects in individual business areas and
regions. At its meeting on July 22, 2015, the Supervisory
Board, together with the Board of Executive Directors, reas-
sessed the implementation of the "We create chemistry"
strategy established in 2011. Focus areas included the
Agricultural Solutions and Oil & Gas segments, the further
development of research and development, and the opportu-
nities and risks for the company posed by Industry 4.0. The
restructuring of the pigments business was also conferred
upon.
149
Corporate Governance
Report of the Supervisory Board
-
The entire Declaration of Conformity is rendered on page 152 and can
also be found at basf.com/en/governance
An important aspect of good corporate governance is the
independence of Supervisory Board members and their free-
dom from conflicts of interest. According to estimations of the
Supervisory Board, all of its members can be considered inde-
pendent as defined by the German Corporate Governance
Code. The criteria used for this evaluation can be found in the
Corporate Governance Report on page 132. In cases where
Supervisory Board members hold supervisory or management
positions at companies with which BASF has business rela-
tions, we see no impairment of their independence. The scope
of these businesses is relatively marginal and furthermore
takes place under conditions similar to those of a third party.
To avoid an individual case of potential conflict of interest, one
Supervisory Board member refrained from participating in
consultation on a particular matter at a Supervisory Board
meeting in 2015. The Corporate Governance Report of the
BASF Group provides extensive information on BASF's corpo-
rate governance. It also includes the Compensation Report,
containing full details on the compensation for the Board of
Executive Directors and the Supervisory Board.
BASF Report 2015
29 Statement of cash flows and capital structure
management
217
30 Share-price-based compensation program
and BASF incentive share program
218
31 Compensation for the Board of Executive
Directors and Supervisory Board
220
32 Related-party transactions
220
33
Services provided by the external auditor
221
34
Declaration of Conformity with the German
Corporate Governance Code
The Supervisory Board
Ludwigshafen, February 24, 2016
Dr. Andreas Kreimeyer left the Board of Executive Directors
at the conclusion of the Annual Shareholders' Meeting on April
30, 2015. He had been a member since 2003 and served in
the end as Research Executive Director. The Supervisory
Board expresses its very sincere thanks to him.
The Supervisory Board thanks all employees of the BASF
Group worldwide and the management for their personal
contribution in the 2015 business year.
Thanks
At the Supervisory Board's accounts meeting on Febru-
ary 24, 2016, we approved the Financial Statements of
BASF SE and the Consolidated Financial Statements of the
BASF Group prepared by the Board of Executive Directors,
making the BASF SE Financial Statements final. We concur
with the proposal of the Board of Executive Directors regarding
the appropriation of profit and the payment of a dividend of
€2.90 per share.
The Audit Committee reviewed the Financial Statements
and Management's Report at its meeting on February 23,
2016, and discussed them in detail with the auditor. The Chair-
woman of the Audit Committee gave a detailed account of the
preliminary review at the Supervisory Board meeting on Febru-
ary 24, 2016. On the basis of this preliminary review by the
Audit Committee, the Supervisory Board has examined the
Financial Statements and Management's Report of BASF SE
for 2015, the proposal by the Board of Executive Directors for
the appropriation of profit as well as the Consolidated Financial
Statements and Management's Report for the BASF Group for
2015. The Supervisory Board has reviewed, acknowledged
and approved the auditor's reports. The results of the prelimi-
nary review by the Audit Committee and the results of the
Supervisory Board's examination fully concur with those of the
audit. The Supervisory Board sees no grounds for objection to
the management and submitted reports.
The documents to be examined and the auditor's reports
were sent in a timely manner to every member of the
Supervisory Board. The auditor attended the accounts review
meeting of the Audit Committee on February 23, 2016,
as well as the accounts meeting of the Supervisory Board on
February 24, 2016, and reported on the main findings of the
audit. The auditor also provided detailed explanations of the
reports on the day before the accounts meeting of the Super-
visory Board.
KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected
by the Annual Shareholders' Meeting for the 2015 reporting
year, has audited the Financial Statements of BASF SE and
the BASF Group Consolidated Financial Statements, including
the Management's Report and the accounting records from
which they were prepared, and have approved them free of
qualification. Furthermore, the auditor certified that the Board
of Executive Directors had taken the measures incumbent on
it under Section 91(2) of the German Stock Corporation Act in
an appropriate manner. In particular, it had instituted an appro-
priate information and monitoring system that fulfilled the
requirements of the company and is applicable for the early
identification of developments that could pose a risk to the
continued existence of the BASF Group.
Annual Financial Statements of BASF SE and
Consolidated Financial Statements
151
Corporate Governance
Report of the Supervisory Board
BASF Report 2015
Other explanatory notes
At its meeting of February 25, 2015, the Supervisory Board
reviewed and approved the Consolidated Financial State-
ments, Management's Report and the proposal for the appro-
priation of profit for the 2014 business year as presented by
the Board of Executive Directors. The meeting on April 30,
2015, served to prepare for the Annual Shareholders' Meeting.
A significant component of all Supervisory Board meetings
was the Board of Executive Directors' reports on the current
business situation with detailed information on sales and earn-
ings growth, as well as on opportunities and risks for business
development, the status of important current and planned
investment projects, developments on the capital markets,
and significant managerial measures taken by the Board of
Executive Directors. Innovation projects were also discussed,
including science symposia and the Creator Space tour as
part of the activities in honor of BASF's 150th anniversary.
1,785.0
65.6
120.0
120.0
1,740.0
892.5
870.0
Total
60.0
60.0
Michael Vassiliadis 2,4,7
75.0
50.0
332.8
25.0
180.0
180.0
120.0
120.0
60.0
60.0
Denise Schellemans
180.0
180.0
120.0
120.0
60.0
Ralf Sikorski, Supervisory Board member until May 2, 2014
62.5
323.0
242.5
2,942.8
The Supervisory Board held five meetings in the 2015 report-
ing year. With the exception of one meeting at which one
member of the Supervisory Board was absent, all Supervisory
Board members attended all Supervisory Board meetings in
2015. The members of the Supervisory Board elected by
shareholders and those elected by the employees prepared
for the meetings in separate preliminary discussions.
Supervisory Board meetings
visory Board regarding current developments and significant
items. The Supervisory Board was always involved at an early
stage in decisions of major importance. The Supervisory
Board passed resolutions on all of those individual measures
taken by the Board of Executive Directors which by law or the
Statutes required the approval of the Supervisory Board. In the
2015 business year, these concerned approval for the swap
with Gazprom of investments in WINGAS's natural gas trading
and storage business for further shares in a gas field in west-
ern Siberia, as well as the completion guarantee for the Nord
Stream 2 natural gas pipeline project.
The Supervisory Board discussed in detail the reports from
the Board of Executive Directors, and also deliberated on
prospects for the company and its individual business areas
with the Board of Executive Directors. Outside of Supervisory
Board meetings, the Chairman of the Board of Executive
Directors also promptly informed the Chairman of the Super-
In 2015, the Supervisory Board of BASF SE exercised its
duties as required by law and the Statutes with the utmost
care. We regularly monitored the management of the Board of
Executive Directors and provided advice on the company's
strategic development and important individual measures,
about which the Supervisory Board was regularly and
thoroughly informed by the Board of Executive Directors. This
occurred in the form of written and oral reports on, for exam-
ple, all of the company's and the segments' major financial
KPIs for the general economic situation in the main sales and
procurement markets, and on deviations in business develop-
ments from original plans. Furthermore, the Supervisory Board
tackled fundamental questions of corporate planning, includ-
ing financial, investment, sales volumes and personnel plan-
ning, as well as measures for designing the future of research
and development.
Monitoring and consultation in an ongoing
dialog with the Board of Executive Directors
For our anniversary in 2015 celebrating BASF's 150 years of
existence, we had expected more favorable conditions. Over
the course of the year, the business environment deteriorated
as political and macroeconomic challenges increased. Oil prices
and growth both dropped sharply. Sales and earnings fell in
this difficult environment, primarily from the divestiture of our
natural gas trading and storage business; cash flow was
increased. The entrepreneurially demanding journey to further
shape the "We create chemistry" strategy will be continued,
and has the full support of the Supervisory Board.
Dear Thareholder,
BASF Report 2015
Report of the Supervisory Board
Report of the Supervisory Board
148 Corporate Governance
For more on share ownership by members of the Supervisory Board,
see page 135
Beyond this, no other Supervisory Board members
received any compensation in 2015 for services rendered
personally, in particular, the rendering of advisory and agency
services.
mately €31,600) for consulting work in the area of chemical
research based on a consulting contract approved by the
Supervisory Board.
In 2015, as in 2014, the company paid the Supervisory
Board member Prof. Dr. François Diederich a total of
CHF 38,400 (2015: approximately €36,000; 2014: approxi-
Compensation for Supervisory Board membership and
membership of Supervisory Board committees is payable after
the Annual Shareholders' Meeting, which approves the
Consolidated Financial Statements upon which the variable
compensation is based. Accordingly, compensation relating to
the year 2015 will be paid following the Annual Shareholders'
Meeting on April 29, 2016.
4 Member of the Audit Committee
7 Member of the Strategy Committee
(since October 1, 2015)
Chairwoman/Chairman of the Audit Committee
6 Vice Chairman of the Strategy
Committee (since October 1, 2015)
5 Chairman of the Strategy Committee
(since October 1, 2015)
3
2 Member of the Personnel Committee
Chairman of the Personnel Committee
1
3,000.5
In its meetings, the Supervisory Board additionally dis-
cussed the further development of the BASF Group's business
activities through acquisitions, divestitures and investment
projects. Significant matters of consultation comprised the
divestiture of the pharmaceutical custom synthesis business
as well as portions of the active pharmaceutical ingredients
business to Siegfried Holding AG; the above-mentioned BASF
stake in the Nord Stream 2 project company for constructing
an additional natural gas pipeline through the Baltic Sea with
Gazprom, E.ON, ENGIE, Shell and OMV; the divestiture of the
industrial coatings business; and the conclusion of the sale of
the 25% share in the Solvin joint venture. Ongoing topics in
the Board of Executive Directors' reports furthermore included
major capital-intensive investment projects, such as the
construction of a TDI complex in Ludwigshafen, Germany; an
MDI plant in Chongqing, China; and an acrylic acid plant in
Camaçari, Brazil, all of which began operations in 2015.
Changes in the regulatory environment and their implications
for the company's business activities were also discussed.
216
28 Leasing
Juizen Hambreves
183
Other operating income
7
183
Functional costs
6
159
Balance sheet
182
Earnings per share
5
Notes on statement of income
Statement of cash flows
158
4 Reporting by segment and region
Statement of income and expense recognized
in equity
179
Commercial Code
accordance with Section 313(2) of the German
157
Statement of income
BASF Group List of Shares Held in
3
173
162
Scope of consolidation
179
160
8
Other operating expenses
Based on the earnings per share of €4.34 published in the
BASF Group Consolidated Financial Statements 2015, the
performance-related compensation reached the maximum
amount of €120,000 (2014: €120,000).
17
195
method and other financial assets
16 Investments accounted for using the equity
193
15 Property, plant and equipment
189
14 Intangible assets
189
13 Personnel expenses and employees
189
12 Minority interests
Notes on balance sheet
186
Income taxes
11
186
Financial result
10
185
the equity method
161
Statement of equity
Income from companies accounted for using
9
184
2
156
Auditor's report
Summary of accounting policies
18
Receivables and miscellaneous assets
196
19
Capital, reserves and retained earnings
198
20 Other comprehensive income
198
21 Minority interests
199
22 Provisions for pensions and similar
obligations
199
23
Other provisions
205
24
Liabilities
206
25
Other financial obligations
208
26 Risks from litigation and claims
209
27 Supplementary information on financial
instruments
210
195
60.0
Inventories
152 Corporate Governance
1
Policies and scope of consolidation
155
Statement by the Board of Executive Directors
Notes
233
223
Supplementary Information on the Oil & Gas Segment
Overviews
Statements
Consolidated Financial
Corporate Governance
Management's Report
To Our Shareholders
About This Report
4
BASF Report 2015
The Board of Executive Directors
of BASF SE
of BASF SE
The Supervisory Board
Ludwigshafen, December 2015
2. The recommendations of the Government Commission on
the German Corporate Governance Code as amended on
May 5, 2015, published by the Federal Ministry of Justice
on June 12, 2015, in the official section of the electronic Federal
Gazette, are complied with and will be complied with.
1. The recommendations of the Government Commission on
the German Corporate Governance Code as amended on
June 24, 2014, published by the Federal Ministry of Justice
on September 30, 2014, in the official section of the electronic
Federal Gazette, have been complied with since the submis-
sion of the last Declaration of Conformity in December 2014.
The Board of Executive Directors and the Supervisory
Board of BASF SE hereby declare pursuant to Section
161 AktG (Stock Corporation Act)
Declaration of Conformity 2015 of the Board of
Executive Directors and the Supervisory Board
of BASF SE
Section 161 AktG (Stock Corporation Act)
Declaration of Conformity as per
Declaration of Conformity as per Section 161 AktG (Stock Corporation Act)
Jürgen Hambrecht
Chairman of the Supervisory Board
Anke Schäferkordt
245.6
41.7
4
Consolidated Financial Statements
222
period
35 Nonadjusting events after the reporting
222
481.3
316.7
Dr. h. c. Eggert Voscherau, Chairman until May 2, 2014¹
Michael Diekmann, Vice Chairman², 6
62.5
125.0
10.4
197.9
90.0
90.0
180.0
180.0
17.2
287.2
282.5
Robert Oswald, Vice Chairman2.7
90.0
90.0
180.0
180.0
7
15.6
19
200.0
paid with regard to their activities as members of the Supervi-
sory Board or of a committee. The company further grants the
members of the Supervisory Board a fee of €500 for attending
a meeting of the Supervisory Board or one of its committees to
which they belong and includes the performance of the duties
of the members of the Supervisory Board in the cover of a
directors' and officers' liability insurance (D&O insurance)
concluded by it, which includes a deductible.
For more on the D&O insurance of the Supervisory Board, see page 135
Total compensation of the Supervisory Board for activities in
2015, including attendance fees, was around €3 million (2014:
around €3 million). The compensation of the individual Super-
visory Board members was as follows.
Compensation of the Supervisory Board of BASF SE (in thousand €)
Performance-
Compensation for
related variable
Fixed salary
compensation
committee
memberships
Total compensation
2015
The company reimburses members of the Supervisory
Board for out-of-pocket expenses and value-added tax to be
2014
116.7
2015
2014
2015
2014
2015
2014
Dr. Jürgen Hambrecht, Chairman since May 2, 20141,5
150.0
100.0
300.0
127
12.5
12.5
282.5
60.0
60.0
Franz Fehrenbach4
180.0
180.0
120.0
120.0
120.0
60.0
Prof. Dr. François Diederich
180.0
180.0
120.0
120.0
60.0
285.6
120.0
50.0
50.0
25.0
until May 2, 20143
Max Dietrich Kley, Supervisory Board member
120.0
180.0
50.0
80.0
40.0
60.0
since May 2, 2014
Francesco Grioli, Supervisory Board member
230.0
230.0
120.0
60.0
60.0
103.1
40.0
66.7
283.1
186.7
Wolfgang Daniel
60.0
Dame Alison Carnwath DBE, Supervisory Board member
since May 2, 20143,7
230.0
230.0
120.0
50.0
50.0
120.0
120.0
60.0
60.0
Ralf-Gerd Bastian4
80.0
20
1,198
114
[24]
Financial indebtedness
Other liabilities
4,020
4,861
[23]
2,540
2,844
[11]
Tax liabilities
1,082
1,079
[24]
4,074
3,545
2,520
(1)
Total income
and expense
(259)
Deferred taxes
68
681
2,270
(5,482)
in equity
recognized
Provisions
385
0
924
(273)
(403)
(259)
hedges
at fair value
Cash flow
of securities
Measurement
Foreign
currency
translation
adjustment
benefit plans
(4,840)
961
Releases
Additions
As of January 1, 2015
20
(13)
0
(91)
(10)
(4,840)
1,095
As of December 31, 2014
Deferred taxes
Releases
(3,280)
(463)
6
668
(3,491)
(3,400)
(54)
15
(917)
(2,444)
Additions
As of January 1, 2014
(3,521)
(109)
20
652
(4,084)
As of December 31, 2015
(377)
1 Reclassification to retained earnings in accordance with IAS 19.122; for more information, see Note 20 on page 198
Accounts payable, trade
1,176
25,055
2,193
[18]
1,720
1,498
46,270
43,939
Inventories
[17]
9,693
11,266
Accounts receivable, trade
1,791
[18]
10,385
Other receivables and miscellaneous assets
[18]
3,095
4,032
Marketable securities
21
19
Cash and cash equivalents¹
[1]
2,241
9,516
[11]
540
526
Remeasure-
ment of defined
(403)
(5,482)
BASF Report 2015
Balance sheet
BASF Group
Assets (in million €)
Intangible assets
Property, plant and equipment
Investments accounted for using the equity method
Other financial assets
Deferred tax assets
Other receivables and miscellaneous assets
Noncurrent assets
Consolidated Financial Statements
Balance sheet
Explanations in Note
[14]
Dec. 31, 2015
12,537
Dec. 31, 2014
12,967
[15]
25,260
23,496
[16]
4,436
3,245
[16]
1,718
27,271
Current assets
24,566
581
31,545
28,195
Provisions for pensions and similar obligations
[22]
6,313
7,313
Other provisions
[23]
3,369
3,502
629
Deferred tax liabilities
3,381
3,420
Financial indebtedness
[24]
11,123
11,839
Other liabilities
[24]
869
1,197
Noncurrent liabilities
[11]
[21]
27,614
30,916
27,420
70,836
71,359
Equity and liabilities (in million €)
Subscribed capital
Capital surplus
Retained earnings
Other comprehensive income
Equity of shareholders of BASF SE
Minority interests
Equity
Explanations in Note
Dec. 31, 2015
Dec. 31, 2014
[19]
1,176
[19]
3,141
3,143
[19]
30,120
28,777
[20]
(3,521)
(5,482)
Total assets
174
Reclassifications of realized gains/losses recognized in the income statement
3,073
(2)4
consolidation and other changes
Changes in scope of
2,095
202
1,893
1,893
recognized directly in equity
4,301
314
3,987
3,987
Changes to income and expense
Net income
(2,806)
(234)³
(2,572)
(2,572)
Dividend paid
achieved in stages
Effects of acquisitions
28,195
581
27,614
(5,482)
(72)5
28,777
686
(234)
5,155
(2,480)
Net income
Dividend paid
achieved in stages
Effects of acquisitions
27,673
630
27,043
(3,400)
26,102
3,165
1,176
918,478,694
January 1, 2014
31,545
629
30,916
(3,521)
30,120
3,141
1,176
918,478,694
December 31, 2015
(240)
(6)
3,143
Equity
Minority
interests
(286)
(234)
(2,480)
(2,572)
(5,760)
(7,870)
6,048
6,937
(8,062)
66
1 More information on the statement of cash flows can be found in the Management's Report (Financial Position) from page 60 onward.
Other information on cash flows can be found in Note 29 on page 217.
Cash and cash equivalents at the end of the year
Cash and cash equivalents at the beginning of the year
changes in scope of consolidation
From foreign exchange rates
Change in cash and cash equivalents
Net changes in cash and cash equivalents
Cash used in financing activities
minority shareholders
To shareholders of BASF SE
Additions to financial and similar liabilities
Repayment of financial and similar liabilities
Dividends paid
Capital increases/repayments and other equity transactions
(4,496)
(5,235)
Cash used in investing activities
(3,673)
(2,478)
538
(16)
BASF SE
income²
earnings
surplus
Equity of
share-
holders of
prehensive
Retained
Capital
Subscribed
capital
1,176
918,478,694
January 1, 2015
shares
outstanding
(2,480)
Other com-
Consolidated Financial Statements
Statement of equity
Statement of equity¹ (in million €)
Statement of equity
BASF Group
BASF Report 2015
1,718
2,241
1,827
1,718
(3)
4
(90)
(19)
Number of
1,558
(286)³
5,155
The IASB issued amendments to IFRS 11 on May 6, 2014.
IFRS 11 includes regulations on the recognition of assets and
liabilities and gains or losses of joint ventures and joint opera-
tions. Whereas joint ventures are accounted for using the
equity method, joint operations, according to IFRS 11, are
recognized in a similar fashion to proportional consolidation.
With the changes in IFRS 11, IASB regulates the accounting
for the acquisition of shares in a joint operation, which consti-
tutes a business according to IFRS 3 - Business Combinations.
In such cases, the acquirer shall apply the principles of the
accounting for business combinations according to IFRS 3.
Amendments to IFRS 11 - Accounting for Acquisitions of
Interests in Joint Operations
The IASB issued amendments to IFRS 10 and IAS 28 on
September 11, 2014. The amendments address a known
inconsistency between the requirements of IFRS 10 and
IAS 28 (2011) in the case of the sale of an asset to an
associated company or a joint venture or the contribution of an
asset to an associated company or a joint venture. According
to IFRS 10, if the disposal of a subsidiary by a parent company
results in a loss of control, it recognizes the gain or loss on the
sale of the subsidiary in the full amount in the income state-
ment. In contrast, the currently applicable IAS 28.28 requires
that a gain on sales transactions between an investor and an
investment accounted for using the equity method - whether
it be an associated company or joint venture – is recognized
only to the extent of the investor's interests in the associated
company or joint venture. In the future, the entire gain or loss
arising from a transaction shall only be recognized when the
assets sold or contributed constitute a business combination
according to IFRS 3. This applies regardless of whether the
transaction is a share or asset deal. Only a pro rata recognition
of gain is permissible if the assets do not constitute a business
combination. IASB has postponed the effective date of the
changes indefinitely. The potential impact on BASF is currently
being analyzed.
Amendments to IFRS 10 and IAS 28 - Sale or Contribution
of Assets between an Investor and its Associate or Joint
Venture
The IASB issued amendments to IAS 19 on November 11,
2013. The revisions clarify the requirements that relate to how
contributions from employees or third parties that are linked to
service should be attributed to periods of service. In addition,
practical expedients are permitted if the amount of the contri-
butions is independent of the number of years of service. The
European Union endorsed the changes on January 9, 2015. In
a deviation from the IASB's effective date (reporting periods
beginning on or after July 1, 2014), IFRS-based financial
statements of the European Union must apply the changes for
reporting periods beginning on or after February 1, 2015. The
amendments are not expected to have a material effect on
BASF.
Employee Contributions to
-
Defined Benefit Plans
Amendments to IAS 19
BASF Report 2015
Notes - Policies and scope of consolidation
Consolidated Financial Statements
164
Amendments to IAS 16 and IAS 38: Clarification of
Acceptable Methods of Depreciation and Amortization
The IASB issued amendments to IAS 16 and IAS 38 on
May 12, 2014. These revisions provide further guidance on
determining an acceptable method of depreciation and
amortization. Revenue-based methods are not permissible for
property, plant and equipment and are only permissible for
intangible assets in specific exceptional cases (rebuttable
presumption of inappropriateness). The changes will be effec-
tive for reporting periods beginning on or after January 1,
2016. The European Union's endorsement was issued on
December 3, 2015. The amendments are not expected to
have a material effect on BASF.
On December 18, 2014, the IASB issued amendments made
to IAS 1. The revisions pertain to various disclosure require-
ments, and clarify that information needs to be disclosed in the
notes only if it is material for the company. This explicitly
applies if a standard calls for a list of minimum disclosures.
Explanations are moreover provided on the aggregation and
disaggregation of line items in the balance sheet and income
statement. Furthermore, the revised standard clarifies how an
entity's share of the other comprehensive income of equity-
accounted companies is to be presented in the income state-
ment. The changes will be effective for reporting periods
beginning on or after January 1, 2016. An endorsement by the
European Union was issued on December 19, 2015. The
amendments are not expected to have a material effect on
BASF.
Disclosure Initiative (Amendments to IAS 1)
The IASB published standard IFRS 16 Leases on January 13,
2016. The rules and definitions of IFRS 16 supersede the
content of IAS 17, IFRIC 4, SIC 15 and SIC 27. The new
standard introduces a single lessee accounting model. It
requires a lessee to recognize assets and liabilities for all
leases with a term of more than twelve months, unless the
underlying asset is of low value. As for the lessor, the new
standard substantially carries forward the lessor accounting
requirements of IAS 17. The new standard will be effective for
reporting periods beginning on or after January 1, 2019. An
endorsement by the European Union is still pending. The
potential impact on BASF is currently being analyzed.
IFRS 16 - Leasing
The new standard will be effective for reporting periods
beginning on or after January 1, 2018. An endorsement by the
European Union is still pending. The potential impact on BASF
is currently being analyzed.
The new model for the determination of revenue recogni-
tion is based on five steps, whereby the contract with the
customer and the individual performance obligations within
the contract are initially identified. The transaction price is then
determined and allocated to the performance obligations in
the contract. Finally, sales are recognized for each perfor-
mance obligation in the amount of the allocated portion of the
transaction price as soon as the agreed-upon good or service
has been provided or the customer receives control over it.
Principles are set out for determining whether the good or
service has been provided over time or at one point in time.
The new standard does not differentiate between different
types of contracts and services, but rather introduces uniform
criteria for the timing of revenue recognition. According to
IFRS 15, sales revenue is recognized when control of the
agreed-upon goods or services and the benefits obtainable
from them are transferred to the customer. The transfer of
major risks and rewards of ownership of the goods is no longer
the deciding factor. Sales revenue is measured as the amount
the entity expects to receive in exchange for goods and
services.
IFRS 15 - Revenues from Contracts with Customers
The IASB published the new standard on revenue recognition,
IFRS 15-Revenues from Contracts with Customers, on May 28,
2014. The revised standard particularly aims to standardize
existing regulations and thus improve transparency and the
comparability of financial information. The rules and definitions
of IFRS 15 supersede the content of IAS 11, IAS 18, IFRIC 13,
IFRIC 15, IFRIC 18, and SIC 31.
The new standard will be effective for reporting periods
beginning on or after January 1, 2018. An endorsement by the
European Union is still pending. The new requirements could
have an impact on the accounting treatment of other share-
holdings. The further potential impact on BASF is currently
being analyzed.
The IFRS 9 regulations on hedge accounting aim for a
closer alignment of hedge accounting with the entity's risk
management strategy.
In the future, the recognition of financial asset impairments
is based on expected losses according to IFRS 9. The general
approach adopts a three-stage model to assess the provisions
for risks. The model requires different degrees of impairment
based on the credit default risk of the counterparties. For
certain financial instruments, such as trade accounts
receivable, operational simplifications for recognizing impair-
ment losses apply.
Furthermore, the disclosure requirements in IFRS 3 also apply
in such cases. The changes will be effective for reporting peri-
ods beginning on or after January 1, 2016. An endorsement
by the European Union was issued on November 25, 2015.
The amendments are not expected to have a material effect
on BASF.
IFRS 9 retains "amortized cost" and "fair value" as the criteria
for measuring financial instruments. Whether financial assets
are measured at amortized cost or fair value will depend on
two factors: the entity's business model for managing the
portfolio to which the financial asset belongs and the contrac-
tual cash flow characteristics of the financial asset.
IFRS Annual Improvements Cycle 2010-2012
Under its Annual Improvement Project, the IASB issued
amendments to several standards on December 12, 2013.
The affected standards are IFRS 2, IFRS 3, IFRS 8, IAS 16,
IAS 24, and IAS 38. The amendments address details of the
recognition, measurement and disclosure of business trans-
actions or serve to standardize terminology. The European
Union endorsed the changes on January 9, 2015. In a devia-
tion from the IASB's effective date (reporting periods beginning
on or after July 1, 2014), IFRS-based financial statements in
the European Union must apply the changes for reporting
periods beginning on or after February 1, 2015. The amend-
ments are not expected to have a material effect on BASF.
1.3 Group accounting principles
Scope of consolidation: The scope of consolidation is based
on the application of the standards IFRS 10 and 11.
(2,629)
273
251
[9]
Income from companies accounted for using the equity method
(3,640)
[8]
Other operating expenses
2,231
2,004
[7]
Other operating income
(1,884)
(1,953)
[6]
Research expenses
(1,359)
(1,429)
[6]
General administrative expenses
(7,493)
Based on corporate governance and potential supplementary
agreements, companies are analyzed for their relevant activi-
ties and variable returns, and the link between the variable
returns and the extent to which their relevant activities could
be influenced.
- The parent company can use its decision-making power to
affect the variable returns.
- The parent company has rights to variable returns from the
investee, and
- The parent company holds decision-making power over the
relevant activities of the investee,
According to IFRS 10, a group consists of a parent entity
and the subsidiaries controlled by the parent. “Control” of an
investee assumes the simultaneous fulfillment of the following
three criteria:
IFRS Annual Improvements Cycle 2012-2014
Under its Annual Improvement Project, the IASB issued
amendments to several standards on September 25, 2014.
The affected standards are IAS 19, IAS 34, IFRS 5 and IFRS 7.
The amendments address details of the recognition, measure-
ment and disclosure of business transactions or serve to
standardize terminology. The changes will be effective for
reporting periods beginning on or after January 1, 2016. An
endorsement by the European Union was issued on Decem-
ber 16, 2015. The amendments are not expected to have a
material effect on BASF.
163
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2015
2 Details are provided in the table "Income and expense recognized in equity" on page 158.
1 For more information on the items relating to equity, see Notes 19 and 20 from page 198 onward.
28,195
581
27,614
(5,482)
28,777
3,143
1,176
918,478,694
December 31, 2014
41
63
(22)
(22)4
consolidation and other changes
Changes in scope of
(2,245)
(163)
(2,082)
(2,082)
recognized directly in equity
Changes to income and expense
5,492
337
3 Including profit and loss transfers
4 Granting of BASF shares under the BASF share program "plus"
5 Including reclassification to retained earnings in accordance with IAS 19.122; for more information, see Note 19 on page 198
6 Reclassification to retained earnings in accordance with IAS 19.122; for more information, see Note 20 on page 198
On July 24, 2014, the IASB issued the final version of IFRS 9-
Financial Instruments, concluding the multiyear project to
replace IAS 39 - Financial Instruments: Recognition and
Measurement. IFRS 9 contains new requirements for the
classification and measurement of financial instruments,
fundamental changes regarding the accounting treatment of
financial asset impairments, and a reformed approach to
hedge accounting.
IFRS 9 - Financial Instruments
The effects on the BASF Group financial statements of the
IFRSS and IFRICs not yet in force or not yet endorsed by the
European Union in 2015 were reviewed and are explained
below. Other new standards or interpretations and amend-
ments of existing standards and interpretations have no
material impact on the BASF Group. Early adoption of the
standards before endorsement by the European Union is not
planned.
IFRSS and IFRICS not yet to be considered
To improve the presentation of net assets and the financial
position, the measurement of emission right certificates
granted free of charge was conducted according to the net
method for the first time as of December 31, 2015. According
to this method, emission right certificates are no longer
recognized at the applicable market prices (fair value) at the
time they are credited to the electronic register run by the
relevant governmental authority, but are recognized on the
balance sheet with a value of zero. Accordingly, the counter
items (deferred income and provisions for emission right certifi-
cates) are also reported with a value of zero. The conversion
from gross method to the net method led to balance sheet
contraction in the amount of €153 million with no effect on
income.
Changes in the measurement of emission right certificates
granted free of charge
In 2014, this led to an increase of €76 million in the line
item changes in receivables and a decrease in the line item
changes in pension provisions, defined benefit assets and
other items in the amount of €76 million.
The presentation in the statement of cash flows of hedges for
financial receivables and payables was adjusted as of
January 1, 2015. Without changing cash provided by operating
activities, hedging is now better reflected by offsetting
adjustment effects from underlying transactions with changes
in the market value of hedging transactions. The effects from
hedging transactions were previously contained in the item
"changes in receivables" and those from underlying transac-
tions in the item “changes in pension provisions, defined ben-
efit assets and other items." The figures for 2014 have been
adjusted accordingly.
Change in presentation of hedges for financial receivables
and payables in the statement of cash flows
Sales revenue for 2014 contained sales of €415 million
that, according to the new recognition method, would have
been eliminated against cost of sales. If the recognition method
had remained unchanged, sales and cost of sales for 2015
would each have been €76 million higher. A restatement of the
prior-year figures was not necessary, as this change in recog-
nition would have had no material impact on the presentation
of the net assets, financial position and results of operations of
the BASF Group in 2014.
At its meeting on March 24, 2015, the IFRS Interpretation
Committee determined that, according to IFRS 11.20(d), a
joint operator's share of the output purchased by another
partner cannot be recognized as revenue as long as these
sales correspond to the operator's share of ownership interest
in the joint operation. As a consequence of this determination,
this portion of the joint operation's sales to other partners
ceased to be recognized as of January 1, 2015. Partners'
share of the output purchased in excess of their ownership
interest will continue to be shown as sales to third parties in
the BASF Group Financial Statements. Sales by the joint
operation to BASF Group companies will also continue to be
eliminated.
Change in presentation of joint operation sales in BASF
Group Financial Statements
(2,766)
1.2 Changes in accounting principles
The individual financial statements of the consolidated
companies are prepared as of the balance sheet date of the
Consolidated Financial Statements. The accounting policies
that have been applied are largely the same as those in 2014,
with the exception of any changes arising from the application
of new or revised standards.
The Consolidated Financial Statements are presented in
euros. All amounts, including the figures for previous years, are
given in million euros unless otherwise indicated.
The Consolidated Financial Statements of BASF SE as of
December 31, 2015, have been prepared in accordance with
the International Financial Reporting Standards (IFRS) of the
International Accounting Standards Board (IASB) and Section
315a (1) of the German Commercial Code (HGB). IFRSS are
generally only applied after they have been endorsed by the
European Union. For the 2015 fiscal year, all of the binding
IFRSS and pronouncements of the International Financial
Reporting Interpretations Committee (IFRIC) were applied.
BASF SE is a publicly listed corporation headquartered in
Ludwigshafen am Rhein, Germany. Its official address is
Carl-Bosch-Str. 38, 67056 Ludwigshafen am Rhein, Germany.
General information
1.1
BASF Report 2015
1 Summary of accounting policies
Notes - Policies and scope of consolidation
Consolidated Financial Statements
162
161
In its meeting on February 22, 2016, the Board of Executive
Directors prepared the Consolidated Financial Statements,
submitted them to the Supervisory Board for approval, and
released them for publication.
516
1,061
1,336
Income before minority interests
4,301
5,492
Minority interests
[12]
(314)
(337)
Net income
3,987
5,155
Earnings per share (€)
[5]
4.34
5.61
Dilution effect (€)
[5]
(0.01)
(0.01)
Diluted earnings per share (€)
[5]
4.33
5.60
157
158
Consolidated Financial Statements
(1,711)
Statement of income and expense recognized in equity
(1,247)
Income taxes
Income from other shareholdings
Expenses from other shareholdings
Interest income
Interest expenses
Other financial income
Other financial expenses
Financial result
80
303
(71)
(25)
213
207
(638)
(711)
152
158
(436)
(355)
[10]
(700)
(423)
Income before taxes and minority interests
5,548
7,203
[11]
Statement of income and expense recognized in equity
BASF Group
Income before minority interests and income and expense recognized in equity¹ (in million €)
Income before minority interests
924
668
Deferred taxes for items that will be reclassified to the statement of income
(104)
103
Income and expense recognized in equity that will be
reclassified to the statement of income at a later date
1,205
314
Minority interests
Total income and expense recognized in equity
Income before minority interests and income and expense recognized in equity
Thereof attributable to shareholders of BASF SE
attributable to minority interests
1 For more information on other comprehensive income, see Note 20 on page 198.
2 For more information, see Note 22, "Provisions for pensions and similar obligations," from page 199 onward.
3 For more information, see Note 27, "Supplementary information on financial instruments," from page 210 onward.
Development of income and expense recognized in equity of shareholders of BASF SE (in million €)
Other comprehensive income
202
(163)
2,095
(2,245)
6,396
3,247
5,880
Foreign currency translation adjustment
(463)
385
Cash flow hedges, net³
Remeasurement of defined benefit plans²
Deferred taxes for items that will not be reclassified to the statement of income
Income and expense recognized in equity that will not be
reclassified to the statement of income at a later date
BASF Report 2015
2015
2014
4,301
5,492
961
(3,491)
(273)
1,095
7,626
688
Unrealized gains/losses from fair value changes in available-for-sale securities
1
7
(1)
(1)
Fair value changes in available-for-sale securities, net³
Unrealized gains/losses from cash flow hedges
6
38
(510)
Reclassifications of realized gains/losses recognized in the income statement
347
47
(2,396)
Payments from the disposal of noncurrent assets and securities
6,248
Income from operations
Gross profit on sales
Cost of sales
Sales revenue
2014
2015
Explanations in Note
Consolidated Financial Statements
Statement of income
Statement of income (in million €)
BASF Group
Statement of income
BASF Report 2015
Wirtschaftsprüfer
Krauẞ
Wirtschaftsprüfer
Rega
Wirtschaftsprüfungsgesellschaft
KPMG AG
Frankfurt am Main, February 23, 2016
In our opinion, based on the findings of our audit, the
consolidated financial statements comply with IFRSS as
adopted by the E.U., the additional requirements of German
commercial law pursuant to Section 315a(1) HGB and full
IFRS and give a true and fair view of the net assets, financial
position and results of operations of the Group in accordance
with these requirements. The Group Management's Report
is consistent with the Consolidated Financial Statements and
as a whole provides a suitable view of the Group's position
and suitably presents the opportunities and risks of future
development.
Our audit has not led to any reservations.
assurance. Knowledge of the business activities and the
economic and legal environment of the Group and expecta-
tions as to possible misstatements are taken into account
in the determination of audit procedures. The effectiveness
of the accounting-related internal control system and the
evidence supporting the disclosures in the Consolidated
Financial Statements and the Group Management's Report
are examined primarily on a test basis within the framework of
the audit. The audit includes assessing the annual financial
statements of those entities included in consolidation, the
determination of entities to be included in consolidation, the
accounting and consolidation principles used and significant
estimates made by the Board of Executive Directors, as well
as evaluating the overall presentation of the consolidated
financial statements and the group management report. We
believe that our audit provides a reasonable basis for our
opinion.
We conducted our audit of the Consolidated Financial
Statements in accordance with Section 317 HGB and German
generally accepted standards for the audit of financial
statements promulgated by the Institute of Public Auditors
in Germany (Institut der Wirtschaftsprüfer, IDW). Those
standards require that we plan and perform the audit such
that misstatements materially affecting the presentation of
the net assets, financial position and results of operations in
the Consolidated Financial Statements in accordance with
the applicable financial reporting framework and in the
Group Management's Report are detected with reasonable
We have audited the consolidated financial statements
prepared by BASF SE, Ludwigshafen am Rhein, Germany,
comprising the statement of income, statement of income
and expense recognized in equity, balance sheet, statement
of cash flows, statement of equity and the Notes to the
Consolidated Financial Statements together with the Group
Management's Report for the business year from January 1 to
December 31, 2015. The preparation of the Consolidated
Financial Statements and the Group Management's Report in
accordance with IFRSS as adopted by the European Union,
and the additional requirements of German commercial law
pursuant to Section 315a(1) of the German Commercial Code
(HGB) are the responsibility of the parent company's manage-
ment. Our responsibility is to express an opinion on the Con-
solidated Financial Statements and on the Group Manage-
ment's Report based on our audit. In addition, we have been
instructed to express an opinion as to whether the consoli-
dated financial statements comply with full IFRS.
BASF Report 2015
Auditor's report
Selling expenses
Auditor's report
[4]
74,326
651
Payments from divestitures
(963)
(215)
Payments for acquisitions
(1,131)
(920)
(5,296)
(5,812)
Payments for property, plant and equipment and intangible assets
Payments for financial assets and securities
6,958
9,446
Cash provided by operating activities
(256)
(19)
Gains (-)/losses (+) from disposal of noncurrent assets and securities
(773)
(317)
Changes in pension provisions, defined benefit assets and other items
[6]
18,487
19,077
(55,839)
(51,372)
[6]
70,449
Consolidated Financial Statements
156
155
(606)
1,094
Changes in inventories
3,455
4,448
Depreciation and amortization of intangible assets, property, plant and equipment and financial assets
5,155
3,987
Net income
2014
2015
BASF Report 2015
Statement of cash flows' (in million €)
BASF Group
Statement of cash flows
Statement of cash flows
Consolidated Financial Statements
160
159
1 For a reconciliation of the amounts in the statement of cash flows with the balance sheet item "cash and cash equivalents," see page 160
71,359
70,836
Total equity and liabilities
15,893
14,236
Changes in receivables
1,463
173
Changes in operating liabilities and other provisions
Margret Suckale
Suckale
Dr. Harald Schwager
Sanjeev Gandhi
Dr. Martin Brudermüller
Vice Chairman
Pourdenalle
Wayne T. Smith
Cuti
Michael Heinz
Heinz
Dr. Hans-Ulrich Engel
Chief Financial Officer
Лири
[4]
Chairman
Ludwigshafen am Rhein, February 23, 2016
To the best of our knowledge, and in accordance with the
applicable reporting principles, the Consolidated Financial
Statements of the BASF Group give a true and fair view of the
net assets, financial position and results of operations of the
Group, and the Management's Report of the BASF Group
includes a fair review of the development and performance
of the business as well as position of the BASF Group,
together with a description of the principal opportunities
and risks associated with the expected development of the
BASF Group.
The risk management system we have set up is designed
such that the Board of Executive Directors can identify
material risks early on and take appropriate defensive
measures as necessary. The reliability and effectiveness of
the internal control and risk management system are
continually audited throughout the Group by our internal audit
department.
We have established effective internal control and steering
systems in order to ensure that the BASF Group's Consoli-
dated Financial Statements and Management's Report com-
ply with applicable accounting rules and to ensure proper
corporate reporting.
The Consolidated Financial Statements for 2015 were
prepared according to the International Financial Reporting
Standards (IFRS), which are published by the International
Accounting Standards Board (IASB), London, and have been
endorsed by the European Union.
The Board of Executive Directors of BASF SE is responsible
for preparing the Consolidated Financial Statements and
Management's Report of the BASF Group.
Statement by the Board of Executive Directors
and assurance pursuant to Sections 297(2) and 315(1)
of the German Commercial Code (HGB)
Consolidated Financial Statements
Statement by the Board of Executive Directors
BASF Report 2015
3,564
(190)
(1,210)
Dr. Kurt Bock
Current liabilities
Provisions for German trade income tax, German corpo-
rate income tax and similar income taxes are determined and
recognized in the amount necessary to meet the expected
payment obligations less any prepayments that have been
made. Other taxes to be assessed are considered accor-
dingly.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
19
0.1
70
Assets
(0.2)
(3)
0.2
4
Thereof cash and cash equivalents
0.1
16
0.2
41
Current assets
0.0
3
0.1
15
Thereof property, plant and equipment
0.0
3
0.1
29
Noncurrent assets
0.0
0.0
15
(7)
8
0.0
19
0.1
70
Total equity and liabilities
0.3
9
0.2
9
Thereof financial indebtedness
Current liabilities
0.1
11
0.6
80
Thereof financial indebtedness
0.0
0
0.0
0
0.0
(3)
Noncurrent liabilities
Equity
0.0
0.0
0.1
%
Million €
Thereof proportionally consolidated
4
5
4
1
First-time consolidations
8
7
1
309
281
24
54
39
65
164
6
Thereof proportionally consolidated
As of January 1
2014
2015
Middle East
Asia Pacific
Africa,
North
America
Thereof
Germany
Deconsolidations
24
11
2
%
2014
48
Million €
2015
Sales
Overview of impact of changes to the scope of consolidation (excluding acquisitions and divestitures)¹
7
7
1
6
Thereof proportionally consolidated
41
281
23
57
37
55
141
As of December 31
1
Thereof proportionally consolidated
32
28
1
1
258
0.1
7
0.1
Thereof financial indebtedness
54
84
Noncurrent liabilities
453
515
Equity
618
692
Assets
41
53
cash and cash equivalents
Thereof marketable securities,
172
152
Current assets
431
523
equipment
Thereof property, plant and
446
540
Noncurrent assets
1,263
Current liabilities
93
111
Thereof financial indebtedness
42
22
10
10
its approval is required for relevant board resolutions
- Although BASF only has a 15.5% share in Nord Stream AG,
Zug, Switzerland, this was classified as associated company,
as BASF exercises significant influence over the company as
- Wintershall AG, Kassel, Germany, which operates Libyan
exploration and production activities together with Gazprom
Libyen Verwaltungs GmbH (BASF stake: 51%). Despite an
investment of 51%, BASF does not exercise control accord-
ing to IFRS 10, as contractual arrangements with the Libyan
government strictly limit influence on variable returns after
income taxes.
Equity-accounted associated companies particularly comprise:
- Achim Development, a limited liability company in Novy
Urengoy, Russia (BASF stake: 25.01%) and Achim Trading,
a closed joint stock company in Moscow, Russia (BASF
stake 18.01%, economic share 25.01%), which together
with Gazprom, develop and market the output from blocks
IV and V of the Achimov formation
14
(36)
Cash used in provided by
(224)
1,593
(159)
252
205
Cash provided by operating activities
Statement of cash flows
Net changes in cash and cash
equivalents
financing activities
412
479
Other financial obligations
618
692
Total equity and liabilities
Cash used in investing activities
Europe
Investments accounted for using the equity
method as of the end of the year
(19)
1,218
1,263
Investments accounted for using the equity
method as of the beginning of the year
2014
2015
Joint ventures accounted for using the equity method (BASF stake)
(in million €)
- Wintershall Noordzee B.V., Rijswijk, Netherlands, which is
operated jointly with Gazprom (BASF stake: 50%) (effective
September 30, 2015)
- Heesung Catalysts Corporation, Seoul, South Korea, which
is operated jointly with Heesung (BASF stake: 50%)
– N.E. Chemcat Corporation, Tokyo, Japan, which is operated
jointly with Sumitomo Metal Mining Co. Ltd. (BASF stake:
50%)
- BASF-YPC Company Ltd., Nanjing, China, Verbund site
operated together with Sinopec (BASF stake: 50%)
2.3 Joint ventures and associated companies
Equity-accounted joint ventures particularly comprise:
A majority of the activities in the Oil & Gas segment's Explora-
tion & Production business sector take place through joint
activities which are not incorporated in separate companies.
This primarily relates to activities in Germany, Norway and
Argentina. These are generally accounted for as joint opera-
tions in accordance with IFRS 11 and contribute the largest
part of the sales, depreciation and amortization, and fixed
assets in the Oil & Gas segment.
Financial information on proportionally consolidated companies
(BASF stake, unconsolidated) (in million €)
In the following table, the previous year's income statement
and statement of cash flows include the share in Ellba Eastern
Private Ltd., Singapore, which was sold on December 31,
2014.
BASF holds a 50% share in each of these companies and
controls them jointly with the respective partner. The compa-
nies sell their products directly to the partners. The partners
ensure the ongoing financing of the companies by purchasing
the production. They were therefore classified as joint opera-
tions in accordance with IFRS 11.
- AO Achimgaz, Novy Urengoy, Russia, which is jointly
operated with Gazprom for the production of natural gas
and condensate
- BASF DOW HPPO Production B.V.B.A., Antwerp, Belgium,
which is operated jointly with The Dow Chemical Company
to produce propylene oxide
- Ellba C.V., Rotterdam, Netherlands, which is operated
jointly with Shell and produces propylene oxide and styrene
monomer
Proportionally consolidated joint operations particularly
comprise:
2.2 Joint operations
BASF Report 2015
Notes - Policies and scope of consolidation
Consolidated Financial Statements
174
1 The totals of the amounts from the deconsolidation of Wintershall Noordzee B.V. in connection with the asset swap with Gazprom are not shown in this table, but included in the
table of assets and liabilities transferred as a result of the asset swap with Gazprom in Note 2.4 on page 178.
Other financial obligations
2015
2014
Proportional net income
25
(35)
Other adjustments of income and expense
189
159
Net income
(119)
260
Capital measures/dividends/changes in the scope of
consolidation/other adjustments
222
202
interests
Income before taxes and minority
Balance sheet
BASF Report 2015
Total comprehensive income
220
195
Income from operations
96
80
Proportional change of other comprehensive
income
1,088
370
Sales
Income statement
87
105
South
America,
183
A list of companies included in the Consolidated Financial
Statements and a list of all companies in which BASF SE has
a shareholding as required by Section 313(2) of the German
Commercial Code is provided in the List of Shares Held.
For more information, see Note 3 on page 179
Average amortization in years
The estimated useful lives and amortization methods of
intangible assets are based on historical values, plans and
estimates. These estimates also consider the period and
distribution of future cash inflows and outflows. The amortiza-
tion methods, useful lives and residual values are reviewed at
each balance sheet date. The weighted average amortization
periods of intangible assets amounted to:
Internally generated intangible assets primarily com-
prise internally developed software. Such software and other
internally generated assets are measured at cost and
amortized over their estimated useful lives. Impairments are
recognized if the carrying amount of an asset exceeds the
recoverable amount. In addition to those costs directly
attributable to the asset, costs of internally generated intan-
gible assets also include an appropriate portion of overhead
costs. Borrowing costs are capitalized to the extent that they
apply to the purchase or the period of construction of qualify-
ing assets.
Intangible assets with indefinite useful lives are trade names
and trademarks that have been acquired as part of acquisitions.
These are measured at cost and tested for impairment annually,
or if there is an indication that their value has declined.
Impairments are recognized if the recoverable amount of the
asset is lower than the carrying amount. The recoverable
amount is the higher of either fair value less costs to sell or the
value in use. The value in use is determined on the basis of
future cash inflows and outflows and the weighted average cost
of capital after taxes, depending on tax rates and country-
related risks. If the reasons for an impairment no longer exist,
the write-downs are reversed up to the value of the asset, had
an impairment not been recognized. Depending on the type
of intangible asset, amortization is reported under cost of
sales, selling expenses, research expenses or other operating
expenses.
Acquired intangible assets (excluding goodwill) with defined
useful lives are valued at cost less scheduled straight-line
amortization. The useful life is determined using the period of
the underlying contract or the period of time over which the
intangible asset can be expected to be used.
Assets
Income relating to the sale or licensing of technologies or
technological expertise are recognized in the income state-
ment according to the contractually agreed-upon transfer of
the rights and obligations associated with those technologies.
Revenues from the sale of precious metals to industrial
customers as well as revenues from natural gas trading are
recognized at the time of shipment and the corresponding
purchase prices are recorded at cost of sales. In the trading of
precious metals and their derivatives with broker-traders,
where there is usually no physical delivery, revenues are netted
against their corresponding costs. Revenues from marketing
the natural gas from the Yuzhno Russkoye gas field are treated
in the same manner.
Revenues from the sale of goods or the rendering of services
are recognized upon the transfer of ownership and risk to the
buyer. They are measured at the fair value of the consideration
received. Sales revenues are reported without sales tax.
Expected rebates and other trade discounts are accrued or
deducted. Provisions are recognized according to the principle
of individual measurement to cover probable risks related to
the return of products, future warranty obligations and other
claims.
1.33
Distribution, supply and similar rights
Product rights, licenses and trademarks
Know-how, patents and production
technologies
Revenue recognition
1.21
1,398.14
1,255.98
1.11
1.21
1.09
United States (USD)
1,324.80
1,280.78
South Korea (KRW)
1.07
1.20
1.08
1.4 Accounting policies
2015
2014
14
10
23
Buildings and structural installations
Machinery and technical equipment
Long-distance natural gas pipelines
Miscellaneous equipment and fixtures
2015
24
2014
Average depreciation in years
Both movable and immovable fixed assets are for the most
part depreciated using the straight-line method, with the
exception of production licenses and plants in the Oil & Gas
segment, which are primarily depreciated based on use in
accordance with the unit of production method. The estimated
useful lives and depreciation methods applied are based on
historical values, plans and estimates. These estimates also
consider the period and distribution of future cash inflows and
outflows. The depreciation methods, useful lives and residual
values are reviewed at each balance sheet date. The weighted
average depreciation periods were as follows:
Expenditures related to the scheduled maintenance of
large-scale plants are separately capitalized and depreciated
using the straight-line method over the period until the next
planned turnaround. Costs for the replacement of components
are recognized as assets when an additional future benefit is
expected. The carrying amount of the replaced components is
derecognized. Costs for maintenance and repair as part of
normal business operations are recognized as an expense.
The cost of self-constructed plants includes direct costs,
appropriate allocations of material and manufacturing costs,
and a share of the general administrative costs of the divisions
involved in the construction of the plants. Borrowing costs are
capitalized to the extent that they apply to the purchase or the
period of construction of qualifying assets.
Property, plant and equipment are measured at cost
less depreciation and impairment over their useful lives. The
revaluation method is not applied. Low-value assets are fully
written off in the year of acquisition.
Goodwill is only written down if there is an impairment.
Impairment testing takes place once a year and whenever
there is an indication of an impairment.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2015
Emission rights: Emission right certificates, granted free of
charge by the German Emissions Trading Authority (Deutsche
Emissionshandelsstelle) or a similar authority in other coun-
tries, are recognized on the balance sheet with a value of zero.
Certificates purchased on the market are capitalized at cost as
intangible assets. Emissions generated create an obligation to
surrender the emission certificates. Emission certificates
purchased on the market are subsequently measured at fair
value, up to a maximum of the amount of the acquisition costs.
If the fair value is lower than the carrying amount on the
balance sheet date, the emission rights are impaired.
8
7
4
4
Internally generated intangible assets
Other rights and values
12
12
18
18
14
Switzerland (CHF)
4.34
17.66
50.95
68.02
72.34
2014
2015
2014
2015
Dec. 31, Dec. 31,
Closing rates
Selected exchange rates (€1 equals)
Average rates
BASF Report 2015
Notes - Policies and scope of consolidation
Consolidated Financial Statements
166
165
For certain companies outside the eurozone or U.S. dollar
zone, the euro or U.S. dollar is the functional currency. In such
cases the translation into the functional currency of financial
statements prepared in the local currency is done according to
the temporal method: All nonmonetary assets and related
depreciation and amortization as well as equity are translated
at the exchange rate applying to the respective transactions.
All other balance sheet items are translated using closing rates
on the balance sheet date; other expenses and income are
translated at monthly average rates. The resulting translation
differences are recognized in the income statement under
other operating income or expenses. If necessary, financial
statements in the functional currency are translated into the
presentation currency according to the closing rate method.
Translation of foreign currency financial statements:
The translation of foreign currency financial statements
depends on the functional currency of the consolidated
companies. For companies whose functional currency is not
the euro but a local currency, translation into the reporting
currency is based on the closing rate method: Balance sheet
items are translated into euros using closing rates on the
balance sheet date; expenses and income are translated into
euros at monthly average rates and accumulated for the year.
The difference between a company's translated equity at
historical rates at the time of acquisition and its equity at
closing rates on the balance sheet date is reported separately
in equity under other comprehensive income (translation
adjustments) and is recognized in income only upon the
company's disposal.
Foreign currency translations: The cost of assets
acquired in foreign currencies and revenue from sales in
foreign currencies are determined by the exchange rate on the
date of the transaction. Foreign currency receivables and
liabilities are valued at the exchange rates on the balance
sheet date. Changes in assets and liabilities arising from
foreign currency translation are recognized in the income
statement and reported under other operating expenses or
income, other financial result, and available-for-sale financial
assets in other comprehensive income.
The incidental acquisition costs of a business combination
are recognized in the income statement under other operating
expenses.
Capital consolidation is conducted at the acquisition date
according to the purchase method. Initially, all assets, liabilities
and additional intangible assets that are to be capitalized are
measured at fair value. Finally, the acquisition cost is com-
pared with the proportional share of the net assets acquired at
fair value. The resulting positive differences are capitalized as
goodwill. Negative differences are reviewed once more, then
recognized directly in the income statement.
Transactions between consolidated companies as well as
intercompany profits resulting from trade between consoli-
dated companies are eliminated in full; for joint operations,
they are proportionally eliminated. Material intercompany
profits related to companies accounted for using the equity
method are eliminated.
Consolidation methods: Assets and liabilities of con-
solidated companies are uniformly recognized and measured
in accordance with the principles described herein. For
equity-accounted companies, material deviations in measure-
ment resulting from the application of other accounting
principles are adjusted for.
Joint ventures and associated companies are accounted
for using the equity method in the Consolidated Financial
Statements. Associated companies are entities in which
significant influence can be exercised over their operating and
financial policies and which are not subsidiaries, joint ventures
or joint operations. In general, this applies to companies in
which BASF has an investment of between 20% and 50%.
Equity-accounted income is reported as part of income from
operations (EBIT).
Consolidation: In addition to BASF SE, the Consolidated
Financial Statements include all material subsidiaries on a fully
consolidated and all material joint operations on a proportion-
ally consolidated basis. Companies whose business is dor-
mant or of low volume, and are of secondary importance for
the presentation of a true and fair view of the net assets, finan-
cial position and results of operations, are not consolidated,
but rather are reported under other shareholdings. These
companies are carried at amortized cost and are written down
in the case of an impairment. The aggregate assets and equity
of these companies amount to less than 1% of the corre-
sponding value at the Group level.
Companies whose corporate governance structures
classify them as joint arrangements are analyzed to determine
if they meet the criteria for joint ventures or joint operations as
per IFRS 11. This requires an analysis of the joint arrange-
ment's structure and, if the arrangement is structured through
a separate vehicle, its legal form, contractual arrangements
and all other facts and circumstances are reviewed.
According to IFRS 11, which regulates the accounting of joint
arrangements, a distinction must be made between joint
ventures and joint operations. In the case of a joint venture, the
parties that have joint control of a legally independent company
have rights to the net assets of that arrangement. In joint
operations, the parties that have joint control have direct rights
to the assets and obligations for the liabilities relating to the
arrangement. This requirement is particularly fulfilled if the
production output of the joint arrangement is almost entirely
transferred to the partners, through which the partners guar-
antee the joint arrangements' ongoing financing.
Scope of consolidation
Brazil (BRL)
11
4.31
3.70
80.67
Russia (RUB)
17.61
17.87
18.91
Mexico (MXN)
4.33
4.25
4.70
Malaysia (MYR)
140.31
134.28
145.23
131.07
Japan (JPY)
0.81
0.73
0.78
0.73
Great Britain (GBP)
8.19
7.54
7.06
China (CNY)
3.12
3.22
25
6.97
7
171
Exploration expenses pertain exclusively to the Oil & Gas
segment and include all costs related to areas with unproven
oil or gas deposits. These include costs for the exploration of
areas with possible oil or gas deposits, among others. Costs
for geological and geophysical investigations are always
reported under exploration expenses. In addition, this item
includes valuation allowances for capitalized expenses for
exploration wells which did not encounter proven reserves.
Depreciation of successful exploratory drilling is reported
under cost of sales.
reserves.
The unit of production method is used to depreciate assets
from oil and gas production at the field or reservoir level.
Depreciation is generally calculated on the basis of the pro-
duction of the period in relation to the proven, developed
Production costs include all costs incurred to operate,
repair and maintain the wells as well as the associated plant
and ancillary production equipment, including the associated
depreciation.
Exploratory drilling is generally reported under construction
in progress until its success can be determined. When the
presence of hydrocarbons is proven such that the economic
development of the field is probable, the costs remain capital-
ized as suspended well costs. At least once a year, all sus-
pended wells are assessed from an economic, technical and
strategic viewpoint to see if development is still intended. If this
is not the case, the capitalized costs for the well in question
are impaired. When reserves are proven, the exploration wells
are reclassified as machinery and technical equipment when
production begins.
An exploration well is a well located outside of an area with
proven oil and gas reserves. A development well is a well
which is drilled to the depth of a reservoir of oil or gas within an
area with proven reserves.
Oil and gas production: Exploration and development
expenditures are accounted for using the successful efforts
method. Under this method, costs of successful exploratory
drilling as well as successful and dry development wells are
capitalized.
Groups of assets and liabilities held for disposal or dis-
posal groups: These comprise those assets and directly
associated liabilities shown on the balance sheet whose sale
in the context of a single transaction is highly probable. The
assets and liabilities of disposal groups are recognized at the
lower of the sum of their carrying amounts or fair value less
costs to sell; this does not apply to assets which do not fall
under the valuation principles of IFRS 5. Scheduled deprecia-
tion of noncurrent assets and the use of the equity method are
suspended.
Business combinations: In business combinations, the
acquired assets and liabilities are recognized at fair value on
the date the acquirer effectively obtains control. The fair value
of acquired assets and assumed liabilities at the date of
exchange, as well as the useful lives of the acquired assets,
are determined on the basis of assumptions. The measure-
ment is largely based on projected cash flows. The actual cash
flows can differ significantly from the cash flows used to
determine the fair values. Independent external appraisals
are used for the purchase price allocation of business combi-
nations. Valuations in the course of business combinations are
based on existing information as of the acquisition date.
Other accounting policies
The probable amount required to settle noncurrent provi-
sions is discounted if the effect of discounting is material. In
this case, the provision is recognized at present value.
Assumptions must be made in determining the discount rate
used for calculating noncurrent provisions. Financing costs
related to unwinding the discount on provisions in subsequent
periods are shown in other financial result.
For more information, see Note 26 from page 209 onward
Other provisions also cover risks resulting from legal dis-
putes and proceedings, provided the criteria for recognizing a
provision are fulfilled. In order to determine the amount of the
provisions, the Company takes into consideration the facts
related to each case, the size of the claim, claims awarded in
similar cases and independent expert advice as well as
assumptions regarding the probability of a successful claim
and the range of possible claims. The actual costs can deviate
from these estimates.
Provisions for long-service and anniversary bonuses are
predominantly calculated based on actuarial principles. For
contracts signed under the early retirement programs,
approved supplemental payments are accrued in installments
until the end of the exemption phase at the latest. Accounting
and measurement follow the German Accounting Standards
Committee e. V.'s Application Note 1 (IFRS) of December 2012.
Provisions are recognized for expected severance pay-
ments or similar personnel expenses as well as for demolition
expenses and other charges related to restructuring measures
that have been planned and publicly announced by manage-
ment.
Other provisions also include expected charges for the rehabil-
itation of contaminated sites, the recultivation of landfills, the
removal of environmental contamination at existing production
or storage facilities and other similar measures. If BASF is the
only responsible party that can be identified, the provision
covers the entire expected claim. At sites operated together
with one or more partners, the provision generally covers only
BASF's share of the expected claim. The determination of the
amount of the provision is based on the available technical
information on the site, the technology used, legal regulations,
and official obligations.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2015
Provisions are established for certain environmental
protection measures and risks if there exist present legal or
constructive obligations arising from a past event, and the
expected cash outflow can be estimated with sufficient
reliability. Provisions for restoration obligations primarily
concern the filling of wells and the removal of production
facilities upon the termination of production in the Oil & Gas
segment. When the obligation arises, the provision is mea-
sured at the present value of the future restoration costs. An
asset is capitalized for the same amount as part of the carrying
amount of the plant concerned and is depreciated along with
the plant. The discount on the provision is unwound annually
until the time of the planned restoration.
Other provisions: Other provisions are recognized when there
is a present obligation as a result of a past event and when
there is a probable outflow of resources whose amount can be
reliably estimated. Provisions are recognized at the probable
settlement value.
For more information on provisions for pensions and similar obligations,
see Note 22 from page 199 onward
Actuarial gains and losses from changed estimations with
regard to the actuarial assumptions used for calculating
defined benefit obligations, the difference between standard-
ized and actual returns on plan assets as well as the effects of
the asset ceiling are recognized directly in equity as other
comprehensive income.
The calculation of pension provisions is based on actuarial
reports.
Similar obligations, especially those arising from commit-
ments by North American Group companies to pay the
healthcare costs and life insurance premiums of retired staff
and their dependents, are reported under provisions for similar
obligations.
172
Provisions for pensions and similar obligations: Provisions
for pensions are based on actuarial computations made
according to the projected unit credit method, which applies
valuation parameters that include: future developments in
compensation, pensions and inflation, employee turnover and
the life expectancy of beneficiaries. The resulting obligations
are discounted on the balance sheet date using the market
yields on high-quality corporate fixed-rate bonds with a
minimum of one AA rating.
Consolidated Financial Statements
BASF Report 2015
While BASF does not hold majority shares in ZAO Gazprom
YRGM Trading, BASF is entitled to the earnings of the company
due to profit distribution arrangements, so that the company is
fully consolidated in the Group Consolidated Financial
Statements.
25
- Two additional companies which had previously not been
consolidated, headquartered in Germany and Peru
- Two newly established companies with headquarters in
Germany and China
First-time consolidations in 2014 comprised:
- An additional four companies which had previously not been
consolidated, headquartered in Germany, China, India and
Pakistan
- A newly acquired company headquartered in Japan
First-time consolidations in 2015 comprised:
In 2015, the scope of consolidation for the Consolidated
Financial Statements encompassed 258 companies (2014:
281). Of this number, five companies were first-time con-
solidations (2014: four). Since the beginning of 2015, a total of
28 companies (2014: 32) were deconsolidated due to
divestiture, merger, liquidation or immateriality.
Changes in scope of consolidation
2.1
173
Consolidated Financial Statements
Notes - Policies and scope of consolidation
2 Scope of consolidation
BASF Report 2015
The goodwill impairment test is based on cash-generating
units. At BASF, the cash-generating units are predominantly
the business units, or in certain cases, the divisions. If there is
a need for a valuation allowance, the existing goodwill is, if
necessary, completely written off as a first step. If there is
further need for a valuation allowance, this is allocated to the
remaining assets of the cash-generating unit. Goodwill
impairments are reported under other operating expenses.
Impairment reversals are not conducted for goodwill.
An impairment is recognized if the recoverable amount of
the asset is lower than the carrying amount. The impairment of
the asset (excluding goodwill) is made in the amount of the
difference between these amounts.
For more information, see Note 14 from page 189 onward
Impairment tests are based on a comparison of the carry-
ing amount and the recoverable amount. The recoverable
amount is the higher of fair value less costs to sell and the
value in use. Value in use is generally determined using the
discounted cash flow method. The estimation of cash flows
and the assumptions used consider all information available
on the respective balance sheet date on the future develop-
ment of the operating business. Actual future developments
may vary. Impairment testing relies upon the cash-generating
unit's long-term earnings forecasts, which are based on
economic trends. The weighted average cost of capital
(WACC) based on the Capital Asset Pricing Model plays an
important role in impairment testing. It comprises a risk-free
rate, the market risk premium and the spread for the credit
risk. Additional important assumptions are the forecasts for
the detailed planning period and the terminal growth rates
used.
Impairment tests on assets are carried out whenever certain
triggering events indicate that an impairment may be neces-
sary. External triggering events include, for example, changes
in customer industries, technologies used and economic
downturns. Internal triggering events for an impairment test
include lower product profitability, planned restructuring mea-
sures or physical damage to assets.
The assumptions for oil and gas prices concern internal
company projections. The projections are based on an
empirical analysis of the global oil and gas supply and demand.
Short-term estimates up to three years consider the current
prices on active markets or forward transactions. In long-term
estimates, assumptions are made regarding factors such as
inflation, production quantities and costs as well as energy
efficiency and the substitution of energy sources. Using exter-
nal sources and reports, the oil and gas price estimates are
regularly checked for plausibility.
The carrying amount of assets, liabilities and provisions,
contingent liabilities and other financial obligations in the
Consolidated Financial Statements depends on the use of
estimates, assumptions and use of discretionary scope.
Specific estimates or assumptions used in individual
accounting or valuation methods are disclosed in their
respective sections. They are based on the circumstances and
estimates on the balance sheet date and affect the reported
amounts of income and expenses during the reporting
periods. These assumptions particularly concern discounted
cash flows in the context of impairment tests and purchase
price allocations; the determination of useful lives of property,
plant and equipment and intangible assets; the carrying
amount of investments; and the measurement of provisions for
such things as employee benefits, warranties, trade discounts,
environmental protection and taxes. Although uncertainty is
appropriately incorporated in the valuation factors, actual
results can differ from these estimates.
Intangible assets in the Oil & Gas segment relate primarily
to exploration and production rights. During the exploration
phase, these are not subject to scheduled amortization but are
tested for impairment annually. When economic success is
determined, the rights are amortized in accordance with the
unit of production method.
The intangible asset from the marketing contract for natural
gas from the Yuzhno Russkoye natural gas field is amortized
based on BASF's share of the produced and distributed
volumes.
An Exploration and Production Sharing Agreement is a type of
contract in crude oil and gas concessions whereby the
expenses and profits from the exploration, development and
production phases are divided between the state and one or
more exploration and production companies using defined
keys. The revenue BASF is entitled to under such contracts is
reported as sales.
Notes - Policies and scope of consolidation
Debt
Use of estimates and assumptions in the preparation of
the Consolidated Financial Statements
Other comprehensive income
The fair value of a financial instrument is the amount that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. When pricing on an active market is avail-
able, for example on a stock exchange, this price is used for
the measurement. Otherwise, the measurement is based on
internal measurement models using current market parame-
ters or external measurements, for example, from banks.
These internal measurements predominantly use the net
present value method and option pricing models.
Financial assets and financial liabilities are recognized in the
balance sheet when the BASF Group becomes a party to a
financial instrument. Financial assets are derecognized when
the contractual rights to the cash flows from the financial asset
expire or when the financial asset, with all risks and rewards of
ownership, is transferred. Financial liabilities are derecognized
when the contractual obligation expires, is discharged or can-
celled. Regular way purchases and sales of financial instru-
ments are accounted for using the settlement date; in precious
metals trading, the day of trading is used.
Financial instruments
For more information, see Note 11 from page 186 onward
Deferred tax liabilities are recognized for differences
between the proportional IFRS equity and the tax base of the
investment in a consolidated subsidiary if a reversal of these
differences is expected in the foreseeable future. Deferred tax
liabilities are recognized for dividend distributions which are
planned for the following year if these distributions lead to a
reversal of temporary differences.
Changes in deferred taxes in the balance sheet are recorded
as deferred tax expense or income if the underlying trans-
action is not to be recognized directly in equity or in income
and expenses recognized in equity. For those effects which
have been recognized in equity, changes to deferred tax
assets and tax liabilities are also recognized directly in equity.
Deferred tax assets are offset against deferred tax liabilities
provided they are related to the same taxation authority and
have the same maturities. Surpluses of deferred tax assets are
only recognized provided that the tax benefits are likely to be
realized. The valuation of deferred tax assets is based on the
estimated probability of a reversal of the differences and the
ability to utilize tax loss carryforwards and unused tax credits.
This depends on whether future taxable profits will exist during
the period in which temporary differences are reversed and in
which tax loss carryforwards and unused tax credits can be
claimed. Based on experience and the expected development
of taxable income, it is assumed that the benefits of the recog-
nized deferred tax assets will be realized. The valuation of
deferred tax assets is based on internal projections of the
future earnings of the particular Group company.
Deferred taxes: Deferred taxes are recorded for tempo-
rary differences between the carrying amount of assets and
liabilities in the financial statements and the carrying amounts
for tax purposes as well as for tax loss carryforwards and
unused tax credits. This also comprises temporary differences
arising from business combinations, with the exception of
goodwill. Deferred tax assets and liabilities are calculated
using the respective country-specific tax rates applicable for
the period in which the asset or liability is realized or settled.
Tax rate changes enacted or substantively enacted on or
before the balance sheet date are taken into consideration.
The exception made by IAS 2 for traders is applied to the
measurement of precious metal inventories. Accordingly,
inventories held exclusively for trading purposes are to be
measured at fair value less costs to sell. All changes in value
are recognized in the income statement.
Inventories may be written down if the prices for the sales
products decline, or in cases of a high rate of days sales of
inventory (DSI). Write-downs on inventories are reversed if the
reasons for them no longer apply.
In addition to direct costs, cost of conversion includes an
appropriate allocation of production overhead costs based on
normal utilization rates of the production plants, provided that
they are related to the production process. Pensions, social
services and voluntary social benefits are also included, as
well as allocations for administrative costs, provided they
relate to the production. Borrowing costs are not included in
cost of conversion.
Inventories are measured at acquisition cost or cost of con-
version based on the weighted average method. If the market
price or fair value of the sales product which forms the basis
for the net realizable value is lower, then the sales products are
written down to this lower value. The net realizable value is the
estimated price in the ordinary course of business less the
estimated costs of completion and the estimated selling costs.
Notes - Policies and scope of consolidation
Consolidated Financial Statements
168
167
Investments accounted for using the equity-method:
The carrying amounts of these companies are adjusted
annually based on the pro rata share of net income, dividends
and other changes in equity. Should there be indications of a
permanent reduction in the value of an investment, an impair-
ment is recognized in the income statement.
Government grants: Government grants related to the
acquisition or construction of property, plant and equipment
reduce the acquisition or construction cost of the respective
assets. Other government grants or government assistance
are recognized immediately as other operating income or
treated as deferred income and reversed over the underlying
period.
Borrowing costs: Borrowing costs directly incurred as part
of the acquisition, construction or production of a qualifying
asset are capitalized as part of the acquisition or production
cost of that asset. A qualifying asset is an asset for which the
time period necessary to make it ready for its intended use or
sale is longer than one year. Borrowing costs are capitalized up
to the date the asset is ready for its intended use. The borrowing
costs were calculated based on a rate of 3.0% (2014: 4.0%),
adjusted on a country-specific basis. All other borrowing costs
are recognized as an expense in the period in which they are
incurred.
Leases can be embedded within other contracts. If sepa-
ration is required under IFRS, then the embedded lease is
recorded separately from its host contract and each compo-
nent of the contract is carried and measured in accordance
with the applicable regulations.
A lease is classified as a finance lease if it substantially
transfers all the risks and rewards related to the leased asset.
Assets subject to a finance lease are capitalized at the lower of
the fair value of the leased assets or the present value of the
minimum lease payments. A leasing liability is recorded in the
same amount. The periodic lease payments must be divided
into principal and interest components. The principal compo-
nent reduces the outstanding liability, while the interest com-
ponent represents an interest expense. Depreciation takes
place over the shorter of the useful life of the asset or the
period of the lease.
Assets subject to operating leases are not capitalized.
Lease payments are recognized in the income statement in
the period they are incurred.
Leases: A lease is an agreement whereby the lessor
conveys to the lessee the right to use an asset for an agreed
period of time in return for a payment or series of payments.
Leasing contracts are classified as either finance or operating
leases.
Investment properties held to realize capital gains or rental
income are immaterial. They are valued at the lower of fair value
or acquisition cost less depreciation.
The income and expenses shown in other comprehensive
income are divided into two categories. Items that will be
recognized in the income statement in the future (known as
"recycling") and those that will not. The first category includes
translation adjustments, the measurement of securities at fair
value, and changes in the fair value of derivatives held to
hedge future cash flows and net investments in a foreign
operation. Items in other comprehensive income that will not
be reclassified to the income statement at a future date include
effects from the remeasurement of defined benefit plans.
Impairments are recognized if the recoverable amount of the
asset is lower than the carrying amount. The measurement is
based on fair value less costs to sell or the value in use. The
value in use is determined on the basis of future cash inflows
and outflows, and the weighted average cost of capital after
taxes, depending on tax rates and country-related risks. An
impairment is recognized for the difference between the carry-
ing amount and the recoverable amount. If the reasons for an
impairment no longer exist, the write-downs are reversed up to
the value of the asset, had an impairment not been recognized.
7
If there is objective evidence of a permanent impairment of
a financial instrument that is not measured at fair value through
profit or loss, an impairment loss is recognized. If the reason
for the impairment of loans and receivables as well as
held-to-maturity financial instruments no longer exists, the
impairment is reversed up to the amortized cost and recog-
nized in the income statement. Impairments on financial
instruments are booked in separate accounts.
BASF Report 2015
BASF Report 2015
Revenue from interest-bearing assets is recognized on the
outstanding receivables on the balance sheet date using inter-
est rates calculated by means of the effective interest method.
Dividends from shareholdings not accounted for using the
equity method are recognized when the shareholders' right to
receive payment is established.
Financial guarantees of the BASF Group are contracts
that require compensation payments to be made to the
guarantee holder if a debtor fails to make payment when due
under the terms of the financial guarantee. Financial guaran-
tees given by BASF are measured at fair value upon initial
recognition. In subsequent periods, financial guarantees are
carried at the higher of amortized cost or the best estimate of
the present obligation on the financial reporting date.
Derivative financial instruments can be embedded within other
contracts. If IFRS requires separation, then the embedded
derivative is accounted for separately from its host contract
and measured at fair value.
BASF Report 2015
Notes - Policies and scope of consolidation
Consolidated Financial Statements
170
169
There were no reclassifications from one measurement cate-
gory to another in 2015 and 2014. The same applies for
transfers between levels in the fair value hierarchy.
- Cash and cash equivalents consist primarily of cash on
hand and bank balances with maturities of less than three
months.
- Financial liabilities which are not derivatives are initially
measured at fair value, which normally corresponds to the
amount received. Subsequent measurement is carried out at
amortized cost, using the effective interest method.
The measurement is carried out at fair value. Changes in
fair value are recognized directly in equity under the item
other comprehensive income and are only recognized in the
income statement when the assets are disposed of or have
been impaired. Subsequent reversals are recognized directly
in equity (other comprehensive income). Only in the case of
debt instruments are reversals up to the amount of the
original impairment recognized in the income statement;
reversals above this amount are recognized directly in equity.
If the fair value of available-for-sale financial assets drops
below acquisition costs, the assets are impaired if the decline
in value is significant and can be considered lasting. The fair
values are determined using market prices. Shareholdings
whose fair value cannot be reliably determined are carried at
acquisition cost and are written down in the case of an
impairment. When determining the value of these sharehold-
ings, the acquisition costs constitute the best estimate of
their fair value. This category of shareholdings includes
investments in other shareholdings, provided that these
shares are not publicly traded. There are no plans to sell
significant stakes in these shareholdings.
The derivatives employed by BASF for hedging purposes
are effective hedges from an economic point of view. Changes
in the fair value of the derivatives almost completely offset the
changes in the value of the underlying transactions.
- Available-for-sale financial assets comprise financial assets
which are not derivatives and do not fall under any of the
previously stated valuation categories. This measurement
category comprises shareholdings reported under the item
other financial assets which are not accounted for using the
equity method as well as short and long-term securities.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Held-to-maturity financial assets consist of nonderivative
financial assets with fixed or determinable payments and a
fixed term, for which there is the ability and intent to hold
until maturity, and which do not fall under other valuation
categories. Initial measurement is done at fair value, which
matches the nominal value in most cases. Subsequent
measurement is carried out at amortized cost, using the
effective interest method.
-
If, in a subsequent period, the amount of the valuation
allowance decreases and the decrease can be related
objectively to an event occurring after the valuation allow-
ance was made, then it must be reversed in the income
statement. Reversals of valuation allowances may not
exceed amortized cost. Loans and receivables are derecog-
nized when they are definitively found to be uncollectible.
In addition, valuation allowances are made on receivables
based on transfer risks for certain countries.
When fair value hedges are used, the asset or liability is
hedged against the risk of a change in fair value. Here, changes
in the market value of the derivative financial instruments are
recognized in the income statement. Furthermore, the carrying
amount of the underlying transaction is adjusted by the profit
or loss resulting from the hedged risk, offsetting the effect in
the income statement.
Cash flow hedge accounting is applied for selected
deals to hedge future transactions. The effective portion of the
change in fair value of the derivative is thereby recognized
directly in equity under other comprehensive income, taking
deferred taxes into account. The ineffective portion is recog-
nized immediately in the income statement. In the case of
future transactions that will lead to a nonfinancial asset or a
nonfinancial debt, the cumulative fair value changes in equity
are either charged against the acquisition costs on initial
recognition or recognized in profit or loss in the reporting
period in which the hedged item is recorded in the income
statement. For hedges based on financial assets or debts, the
cumulative fair value changes of the hedges are transferred
from equity to the income statement in the reporting period in
which the hedged item is recognized in the income statement.
The maturity of the hedging instrument is determined based
on the effective date of the future transaction.
If there is objective evidence for an impairment of a receiv-
able or loan, an individual valuation allowance is made.
When assessing the need for a valuation allowance, regional
and sector-specific conditions are considered. In addition,
use is made of internal and external ratings as well as the
assessments of debt collection agencies and credit insurers,
when available. A portion of receivables is covered by credit
insurance. Bank guarantees and letters of credit are used to
an insignificant extent. Valuation allowances are only recog-
nized for those receivables which are not covered by insur-
ance or other collateral. The valuation allowances for receiv-
ables whose insurance includes a deductible are not recog-
nized in excess of the amount of the deductible. Write-downs
are based on historical values relating to customer solvency
and the age, period overdue, insurance policies and
customer-specific risks. In addition, a valuation allowance
must be recognized when the contractual conditions which
form the basis for the receivable are changed through rene-
gotiation in such a way that the present value of the future
cash flows decreases.
- Financial assets and liabilities at fair value recognized in
the income statement consist of derivatives and other
trading instruments. At BASF, this measurement category
only includes derivatives. Derivatives are reported in other
receivables and miscellaneous assets or other liabilities.
BASF does not make use of the fair value option under
IAS 39. The calculation of fair values is based on market
parameters or measurement models based on such param-
eters. In some exceptional cases, the fair value is calculated
using parameters which are not observable on the market.
- Loans and receivables comprise financial assets with fixed
or determinable payments, which are not quoted on an
active market and are not derivatives or classified as
available-for-sale. This measurement category includes
trade accounts receivable as well as other receivables and
loans reported under other receivables and miscellaneous
assets. Initial measurement is done at fair value, which
generally matches the nominal value of the receivable or
loan. Interest-free and low-interest long-term loans and
receivables are recorded at present value. Subsequent
measurement recognized in income is generally made at
amortized cost using the effective interest method.
Financial assets and liabilities are divided into the following
measurement categories:
For BASF, there are no material financial assets that fall
under this category.
Intelligent
Verbund system
Verbund sites and
338
additional production sites worldwide
strategic business units
6
Our results
operating divisions
Our corporate purpose:
13
■■■ Oil & Gas
■ Agricultural Solutions
& Solutions
■ Functional Materials
■ Performance Products
84
We create chemistry
for a sustainable future
■ We form the best team
With our broad portfolio, we serve customers
from many different sectors - from major global
customers to local workshops.
€70.4 billion
in sales, around
€10 billion
Corporate Governance
of which from
innovations on the
market since 2011
■ Chemicals
■ Entrepreneurial
■ Open
■Responsible
Values as guideline for
our conduct and actions
■Creative
■ We drive sustainable solutions
■ We innovate to make our customers
more successful
■ We add value as one company
on strategic principles
Market success based
countries
80
BASF Group
companies
in more than
More than 300,000 customers
segments
health
protection
Our business model
3,240
employees
worldwide;
of these
112,435
occupational
medicine and
sites
audited on
53
Q
sites
82
environmental,
safety and
security audits
performed at
130
€6.2 billion
sites participate in
worldwide safety initiative
400
employees and
contractors at over
75,000
TT
apprentices
5
Around
10,000
employees in research
and development
2.5
hotlines
external
compliance
50
raw material
supplier sites
audited
135
of raw materials,
goods and services
for own production
sourced locally
-around 90%
suppliers
Over
75,000
and media.
Our stakeholders
include employees, customers,
suppliers and shareholders,
as well as experts in science,
industry, politics, society
employees make use of
these opportunities daily.
for example,
600
Numerous options for
work-life balance offered
worldwide; in Ludwigshafen,
of our senior
executives have
international
experience.
82.9%
days of further
training per
employee per year
Average of
in EBIT
,
in EBIT before
special items
How we create value
hotlines
phone calls and
emails received by
external compliance
357
performance
with suppliers
as a result of
unsatisfactory
sustainability
we terminated
our collaboration
How we create value
In 4 cases
institutions and
universities, research
600
Over
since 2000
U.N. Global Compact
Involved in
companies within our
global network
Financial and nonfinancial value drivers make an essential contribution
to BASF's success. We want to understand how these work together,
and derive targeted measures for increasing the positive impact of our
actions and further minimizing the negative effects. This intention
forms the basis of our integrated reporting.
The following overview provides examples of how we create value
for our company, the environment and society. It is modeled on the
framework of the International Integrated Reporting Council (IIRC).
Both financial and nonfinancial value drivers - such as environmental,
production-related, personnel and knowledge-based factors, along
with aspects of society and partnerships - form the foundation
of our actions. Through our business model, these inputs are
transformed into various outputs: the results of our actions.
BASF Report 2015
on process safety
PDF version available for download: basf.com/basf_report_2015.pdf
HTML version with additional features: basf.com/report
The BASF Report online
If the symbol is underlined, the entire chapter is relevant.
the Blueprint for Corporate Sustainability Leadership are implemented.
This section shows how the ten principles of the U.N. Global Compact and
You can find more information online.
You can find more information within the report.
The following symbols indicate important information for the reader:
Further information
This integrated report documents BASF's economic, environmental and social performance
in 2015. We use examples to illustrate how sustainability contributes to BASF's long-term
success and how we as a company create value for our employees, shareholders, business
partners, neighbors and the public.
Integrated reporting
BASF Report 2015
About This Report
About This Report
4
spent on donations
and sponsorship
€6.7 billion
workdays in our
anniversary year
€700,000 and
0
Number of lost-time injuries
per one million working
hours drops to
1.4
carbon emissions avoided through
customers' use of BASF products
530 million tons
fuel saved through Verbund system
17.6 million MWh
of CO2 equivalent
greenhouse gas
emissions generated
transportation incidents
with significant impact on
environment
22.2 million tons
1,626
in income
taxes
€1.2 billion
dividend
per share
€2.90
€4.0 billion
Net income of
million m3
of water discharged
Process safety
incidents: decline to
2.1
per one million
working hours
€56.2 million
charitable
projects with
Support of
150
35.6%
senior executives
non-German
Proportion of
Proportion of
women in
executive positions
19.5%
patents worldwide
newly registered
1,000
projects in
research pipeline
3,000
product applications
assessed and rated
for aspects of
sustainability
60,000
Over
400 employee
19,000
TRUCK
participants
instructed on
occupational safety
800
000000
00
CHA
CHARDS
DWIGHT ST
LORRAIN
DISTRIC
CREAMER
RICKS
Smart design: How can Red Hook's community be optimally
connected to public transportation and gain better access to social
and cultural amenities?
axcast
150 YEARS OF BASF
90 minutes of water a day: For some
residents of the Indian metropolis of
Mumbai, it is crucial to store drinking water
in containers. For one week, employees of
BASF and Save the Children learned in
person what this means for many families
on a daily basis.
URBAN LIVING FOOD
A change in perspective
How can we improve access to clean water in a rapidly growing
metropolis like Mumbai? Around 250 experts from industry, the
nonprofit sector, science and society all set to work on this question.
One example was a joint project initiated by BASF and Save the
Children, in which several employees dove into everyday life in Mumbai
for one week. Some were guests in families who have running water for
only 90 minutes a day. It is important for these families to store water
in containers. But space is often at a premium, and the water can
sometimes get contaminated. For Nitin Sharma, BASF India Ltd.,
joining a family for a week was an indispensable part of the project:
"We can then assess whether and how innovations from BASF can
contribute to the solution, whether it's a new material for stackable
water containers, an innovative filter system, or a combination of
existing systems. It's crucial - for commercial success as well - to
understand what the people in the community really need."
What if our
FUTURE
CHARE
SHARE
SHATO
fow
In Barcelona, employees from Switzerland won
first prize at the jamming session finals on energy
efficiency. Their impressive proposal, entitled
"Out of the darkness and into the light - intelligent
daylight management in buildings," addressed how
less than 40% of available daylight is used in
buildings today. The Swiss colleagues developed
an idea for electricity-free technology based on
microoptic foil that captures up to 95% of daylight
and redirects it into the building's interior. What
makes this technology unique is that it does not
rely on classic transparent building components,
like windows. The application could be used for
structures like multi-family houses and office
buildings, but also for factories and plants.
Watch videos of our tour stop in New York by searching youtube.com for:
"BASF Red Hook"
Putting daylight to good use
and
A group of mobility experts and fitness
fans from all over the world got together
for a jamming session between BASF
and adidas in New York. The topic: the
future of urban transportation. The
results of the exchange ranged from
a smartphone app that networks
bicyclists to a floating residential
neighborhood on the Hudson River.
One promising idea was to establish
a volunteer cyclists' association that
generates electricity by riding a bike.
This could supply schools, libraries and
other community organizations.
Moving for power
URBAN LIVING
Barcelona: For five
days, the building
played host to the
Creator Space™
tour.
The Museu del
Disseny in
SMART ENERGY
How can we improve urban development and the
housing situation in metropolises like New York, where
the population is booming? This was the question posed
by involved citizens, students, engineers and other
participants of a design competition in New York. The
assignment: How might Van Brunt Street in Red Hook,
Brooklyn, look in the future? The Red Hook neighborhood
is marked by limited access to public transportation.
Buildings in need of renovation, susceptibility to hurricane
and flood damage, and a high level of socio-economic
diversity all demand creative and practical solutions to
support the neighborhood's future. The winning concept
included an ingenious canal system and the idea of
invigorating the local economy with a "Made in Red Hook"
product label. BASF plans to continue these discussions
and use the ideas for concrete proposals to benefit Red
Hook and other cities.
New York's next trendy neighborhood?
URBAN LIVING
drought.
South America,
water is a precious
commodity. New
technologies aim
to help keep fields
irrigated even in
times of lengthy
Little drops that
make an impact:
In many parts of
and harvest losses? And how can
we combat drought and the effects
of water scarcity? Students, environ-
mental experts, engineers and city
planners were some of the participants
at a "creatathon" in São Paulo that
focused on solutions for more efficient
water use in town and country. First
prize went to the most innovative
suggestion with the potential for
future research and development.
The winning team's idea was to water
fields through drip irrigation, where
a sensor measures soil moisture to
calculate how much water is needed
at what time of day.
How can we reduce food waste
Smart watering
Global community: A new well for an orphanage
in Cameroon, a restored temple for residents of
Karak in Malaysia - employees around the world
got involved in numerous projects addressing
social needs.
FOOD
Environmentally friendly technologies,
comfortable interiors, a lighter chassis -
there was no lack of original ideas and
visions at a joint customer innovation
workshop. Together with experts from
Daimler Buses, BASF employees from
various fields discussed solutions for
future bus challenges, ranging from
special coatings and new lightweight
engineering concepts to possibilities for
preventing vandalism. This brainstorming
gave rise to project ideas providing new
inspiration for the bus of the future.
The bus to the future
SMART ENERGY
for making even
more efficient and
environmentally
friendly vehicles in
the future.
held by BASF and
Daimler discussed
new technologies
and materials
Safe and clean
through the city:
Participants at a
joint workshop
Watch how Daimler and BASF worked
together by searching youtube.com for:
"Co-creation with Daimler"
TRANSPORTATION
SMART ENERGY
In Japan, around 50 employees
FRAFLATE AT
254
ROUTE
LOCAL
STALLATIONS
V-GROOVINIC
KETAL & GLASS
An energetic partnership
Images
Employees get involved
FOOD URBAN LIVING
Care
Conected
150 YEARS OF BASF
from BASF and Panasonic Automotive &
Industrial Systems Company came
together in a co-creation workshop to
discuss current energy-related topics,
ranging from power electronics to sensors
and energy harvesting. From numerous
innovative suggestions, the companies
chose the most promising ideas
surrounding the topic "systems for storing
heat energy through chemical reactions"
as a basis for future collaboration and to
benefit from knowledge exchange.
Panasonic and BASF, who had not had a
partnership prior to the workshop, also
plan to work together in research and
development. The two companies are
currently hashing out the details of the
collaboration.
A community needs engaged
citizens in order to thrive. BASF
helped its employees carry out
charitable projects through its global
team competition, "Connected to
Care." Around 500 project proposals
were submitted from around the globe;
150 of these received up to €5,000
apiece, amounting to a total of
€700,000 in support. BASF also
promotes employees' volunteer work
outside of its anniversary celebrations,
through various regional projects.
SYSTEMS
150 YEARS OF BASF
Shoes that
personnel expenses
€9.98 billion
invested in fixed and
intangible assets
(including acquisitions)
billion
were created
by Adidas?
spent on research
€96 million
€1.95 billion
€31.5 billion
BASF Report 2015
Our foundation
How we create value
uses the energy generated from
pedaling for the public good.
an idea for a cycling association that
in equity
held by BASF and adidas developed
spent on further
education
invested in environmental
77.000
million MWh
of steam
demand
39.0
million MWh
of electricity
demand
15.0
million m3
of water
abstracted
€346 million
1,686
5.8%
different
raw materials
procured
30,000
protection
worth of raw materials,
goods and services
purchased for own
production
€35 billion
of raw materials
purchased worldwide
from renewable resources
Communal sportsmanship:
Participants in the jamming session
€6.0
SHOES
they look like?
roade
3 SHARE
RIDE
Boost
ADIDA
Flying
Use the
What would
い
Jer now
Super Bod
electrics
change ar
three
lane
Hybrid
Wheelies
the
Propelled by
human
SULERSTAR
design
Confort,
FEEL
AND
Look
Jun
Healthy
on
gear
to
walk/
Encourag
Casa FEECIA
WHEELS
energy
250
196
Proportional change of other comprehensive
income
Total comprehensive income
229
(17)
Capital measures/dividends/changes in the scope of
consolidation/other adjustments
Proportional net income
(21) (213)
2,956
-GASCADE Gastransport GmbH, Kassel, Germany (BASF
stake: 50.02%)
Investments accounted for using the equity
method as of the beginning of the year
2014
2015
Associated companies accounted for using the equity method
(BASF stake) (in million €)
Effective July 1, 2015, BASF sold its 25% share in Solvin to its
partner, Solvay.
- NEL Gastransport GmbH, Kassel, Germany (BASF stake:
50.02%). Due to the corporate governance structure of
GASCADE Gastransport GmbH, Kassel, Germany, and NEL
Gastransport GmbH in connection with requirements of
Section 10 of the Energy Management Act (EnWG), BASF
only exercises significant influence over both companies,
despite an investment of more than 50%.
- Shanghai Lianheng Isocyanate Co. Ltd., Shanghai, China
(BASF stake: 35%)
- OAO Severneftegazprom, Krasnoselkup, Russia (BASF
stake: 25%, economic share: 35%)
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2015
1,982
Expenses for restructuring measures were primarily
related to severance payments amounting to €69 million in
2015 and €40 million in 2014. Further expenses for restructur-
ing measures amounting to €15 million concerned one site in
the United States in the Petrochemicals division. In the
Dispersions & Pigments division, expenses arose in the
amount of €16 million in 2015 and €12 million in 2014; these
concerned several sites worldwide. Furthermore, expenses of
€15 million were incurred for a regional restructuring project in
South America as well as the outsourcing of the computer
centers. In 2014, expenses of €9 million had arisen from mea-
sures at several sites in the Care Chemicals division.
Intangible assets
(966)
Cost of sales includes all production and purchase costs of
the company's own products as well as merchandise which
has been sold in the period, particularly plant, energy and
personnel costs.
Cost of sales
For more on other operating expenses, see Note 8 from page 184
Under the cost-of-sales method, functional costs incurred by
the operating functions are determined on the basis of cost
center accounting. The functional costs particularly contain
the personnel costs, depreciation and amortization accumu-
lated on the underlying final cost centers as well as allocated
costs within the cost accounting cycle. Operating expenses
that cannot be allocated to the functional costs are reported
as other operating expenses.
183
Consolidated Financial Statements
Notes Notes on statement of income
6 Functional costs
BASF Report 2015
5.60
4.33
€
Diluted earnings per share
5.61
4.34
€
Earnings per share
918,479
918,479
1,000
outstanding shares
Weighted-average number of
2015
3,987
million €
Net income
In accordance with IAS 33, a potential dilutive effect must be
considered in the diluted earnings per share for those BASF
shares which will be granted in the future as a part of the BASF
share program "plus." This applies regardless of the fact that
the necessary shares are acquired by third parties on the
market on behalf of BASF, and the fact that there are no plans
for the issuance of new shares. The dilutive effect of the issue
of plus shares amounted to €0.01 in 2015 (2014: €0.01).
Selling expenses
2014
5,155
Selling expenses particularly include marketing and advertising
costs, freight costs, packaging costs, distribution manage-
ment costs, commissions, and licensing costs.
General and administrative expenses primarily include the
costs of the central units, the costs of managing business
units and divisions, and costs of general management, the
Board of Executive Directors and the Supervisory Board.
47
41
772
525
75
101
398
305
165
179
181
118
2014
2015
Other operating income
Income on the reversal of valuation allowances for business-related receivables
Other
Gains on the disposal of fixed assets and divestitures
Income from the translation of financial statements in foreign currencies
Income from foreign currency and hedging transactions
Income from the adjustment and reversal of provisions recognized in other operating expenses
Revenue from miscellaneous revenue-generating activities
Million €
7 Other operating income
For more on research and development expenses by segment, see
Note 4 on page 181
Research and development expenses include the costs result-
ing from research projects as well as the necessary license
fees for research activities.
Research and development expenses
General and administrative expenses
Earnings per share
5 Earnings per share
property, plant and equipment, and investments accounted
for using the equity method amounted to €9,262 million
compared with €7,983 million in the previous year.
3,279
4,638
7,172
13,979
property, plant and equipment
12,967
453
795
4,088
2,725
7,631
Thereof intangible assets
71,359
5,016
10,251
14,605
22,987
41,487
7,626
395
673
1,548
1,894
5,010
85,247
1,600
23,496
investments accounted for using the equity method
1,951
In the United States, sales to third parties in 2015 amounted to
€13,831 million (2014: €13,877 million) according to company
location and €13,302 million (2014: €13,329 million) according
to customer location. In the United States, intangible assets,
1 The sum of sales including intersegmental transfers for all the regions can differ from the sum of sales including intersegmental transfers for all the segments, as the segments are
viewed globally, and therefore shipments and services between regions within the same segment are not classified as transfers.
113,292
7,638
17,060
17,120
53,277
71,474
Employees as of December 31
3,417
120
331
735
662
2,304
7,285
653
835
917
1,774
4,880
Additions to property, plant and equipment and intangible assets
Amortization of intangible assets and depreciation of property, plant
and equipment
3,245
1,259
35
1,229
1,169
4,595
593
2,231
depreciation of property, plant and equipment
959
949
621
238
1,515
119
4,401
Thereof impairments
24
86
67
10
500
3
690
Segments 2014 (in million €)
Perfor-
mance
Chemicals
Products
Functional
Mate-
rials &
Solutions
Agri-
cultural
Solutions
Sales
Intersegmental transfers
16,968
6,135
Amortization of intangible assets and
15,433
489
6,013
1,823
2,589
425
4,436
Debt
3,550
4,639
3,511
1,628
2,214
23,749
39,291
Research expenses
207
383
392
514
50
407
1,953
Additions to property, plant and equipment and
intangible assets
1,859
964
854
402
111
Sales including intersegmental transfers
23,103
15,922
330
457
Environmental protection and safety measures, costs of demolition and removal, and planning
expenses related to capital expenditures that are not subject to mandatory capitalization
Amortization, depreciation and impairments of intangible assets and property, plant and equipment
Costs from miscellaneous revenue-generating activities
176
306
621
2014
2015
Restructuring measures
Million €
8 Other operating expenses
Moreover, income in both years was related to gains from
precious metal trading, the reversal of impairments on
property, plant and equipment, tax refunds, income from the
adjustment of pension plans, and a number of other items.
Further income resulted from refunds in the amount of
€254 million in 2015 and €122 million in 2014. These were
predominantly due in both years to insurance refunds arising
from a plant outage at the Ellba C.V. joint operation in Moerdijk,
Netherlands. In 2015, income also arose from a one-off
payment for a price revision relating to the previous year in
the Oil & Gas segment as well as a one-off payment from
Tellus Petroleum AS, Oslo, Norway, in connection with the
intended sale of selected assets on the Norwegian continen-
tal shelf, which was not completed. The previous year had
included income from reimbursement claims in the amount of
€43 million.
Other income included government grants and government
assistance from several countries amounting to €135 million in
2015 and €112 million in 2014. In both years, these were
primarily attributable to price compensation from the
Argentinian government for gas producers, which was
introduced in connection with the New Gas Price Scheme
(NGPS) in response to the lower, partly locally regulated gas
prices.
Income from the reversal of valuation allowances for
business-related receivables resulted mainly from the
settlement of customer-related receivables for which a valua-
tion allowance had been recorded.
Gains on the disposal of fixed assets and divestitures in
the amount of €314 million resulted from the asset swap with
Gazprom. Income of €71 million was related to the sale of the
global textile chemicals business to Archroma Textiles S.à r.l.,
Luxembourg. Additional income of €39 million was attribut-
able to the sale of the white expandable polystyrene (EPS)
business to Alpek S.A.B. de C.V., Monterrey, Mexico. Further-
more, income in the amount of €37 million arose from the sale
of buildings in China and India as well as income in the amount
of €29 million from the sale of the custom synthesis business
and parts of the active pharmaceutical ingredients portfolio to
Siegfried Holding AG, Zofingen, Switzerland. The previous
year mainly included gains from the sale of the 50% share in
Styrolution Holding GmbH, Frankfurt am Main, Germany, in
the amount of €458 million to INEOS. Further income of
€132 million was related to the sale of selected oil and gas
investments in the North Sea to the Hungarian MOL Group.
Additional income in the amount of €109 million resulted from
the sale to Shell of the share in the Ellba Eastern Private Ltd.
joint operation in Singapore, as well as €31 million from the
sale of the PolyAd Services business to Edgewater Capital
Partners, L.P., Cleveland, Ohio.
BASF Report 2015
Notes Notes on statement of income
Consolidated Financial Statements
184
Income from the translation of financial statements in
foreign currencies contained gains from the translation of
companies whose local currency is different from the func-
tional currency.
Income from foreign currency and hedging transac-
tions pertained to the foreign currency translation of receiv-
ables and payables as well as changes in the fair value of
currency derivatives and other hedging transactions. The
decline in comparison with the previous year was attributable
to lower income as a result of the depreciation of the Russian
ruble.
Revenue from miscellaneous revenue-generating activi-
ties primarily included income from rentals, property sales,
catering operations, cultural events and logistics services.
For more information, see Note 8 from page 184 onward
Furthermore, the reversal of provisions in both years was
largely related to closures and restructuring measures,
employee obligations, risks from lawsuits and damage claims,
and various other items as part of the normal course of
business. Provisions were reversed if the circumstances on
the balance sheet date were such that utilization was no longer
expected, or expected to a lesser extent.
Income from the adjustment and reversal of provisions
recognized in other operating expenses in 2014 included
income of €79 million from the reversal of the provision for the
long-term incentive (LTI) program; this was due to the decline
in the BASF share price in 2014. In 2015, however, an expense
of €53 million arose from the LTI program, and was recognized
in other operating expenses.
675
370
179
160
17,725
832
18,557
5,446
37
Oil & Gas
15,145
907
40,911
55.0
2,629
3,640
594
717
225
259
Other operating expenses
Other
2,004
Expenses from the addition of valuation allowances for business-related receivables
Expenses from the use of inventories measured at market value and the derecognition
of obsolete inventory
87
81
132
195
28
40
88
92
Losses from the translation of the financial statements in foreign currencies
Losses from the disposal of fixed assets and divestitures
439
639
Expenses from foreign-currency and hedging transactions as well as from the measurement of
LTI options
Oil and gas exploration expenses
12,270
17,981
38,346
17.5
8.3
100.0
38,675
28,229
15,665
11,712
4,397
70,449
46,056
34,297
18,311
12,384
4,623
81,374
Income from operations
4,174
2,303
1,295
445
334
6,248
Assets
38,993
20,307
21.8
15,968
19.1
%
Regions 2015 (in million €)
BASF Report 2015
South
America,
Europe
Thereof
Germany
North
America
Asia
Africa,
BASF
Pacific
Middle East
Group
Location of customers
Sales
Share
Location of companies
Sales
Sales including intersegmental transfers¹
36,897
13,483
15,390
12,334
5,828
70,449
52.4
11,002
4,873
70,836
422
179
4,401
Employees as of December 31
70,079
52,837
17,471
17,562
7,323
112,435
Regions 2014 (in million €)
Location of customers
Sales
Share
Location of companies
Sales
South
America,
Europe
Thereof
Germany
North
America
Asia
Pacific
Africa,
Middle East
BASF
Group
%
911
1,081
2,889
6,013
Thereof intangible assets
6,845
2,467
4,406
839
447
12,537
property, plant and equipment
13,877
6,942
5,613
4,053
Consolidated Financial Statements
Notes Notes on statement of income
1,717
investments accounted for using the equity method
3,009
1,182
113
1,314
4,436
Additions to property, plant and equipment and intangible assets
Amortization of intangible assets and depreciation of property, plant
and equipment
3,162
1,446
1,263
986
602
25,260
182
181
354
1,108
1,688
(133)
7,626
Assets
12,498
14,502
12,987
7,857
13,686
9,829
71,359
Thereof goodwill
59
2,099
2,218
1,931
1,765
69
8,141
other intangible assets
284
1,653
1,220
364
1,150
1,417
2,396
Income from operations
50,401
Assets
Income from operations
Sales including intersegmental transfers¹
74,326
4,362
11,643
15,467
32,241
42,854
100.0
7.9
1,248
74,326
12,341
16.6
15,213
20.5
Other
BASF
Group
3,609
74,326
16
8,416
5,483
16,052
3,625
82,742
5,861
387
57
property, plant and equipment
1,884
Additions to property, plant and equipment and
intangible assets
2,085
849
650
391
3,162
148
7,285
Amortization of intangible assets and
depreciation of property, plant and equipment
Thereof impairments
816
815
528
189
938
131
3,417
54
18
45
2
230
5
390
50
511
379
6,898
4,637
3,166
1,240
6,676
879
23,496
investments accounted for using
the equity method
841
177
348
4,826
1,480
3,245
Debt
3,920
5,049
3,508
1,687
3,669
25,331
43,164
Research expenses
185
369
399
195
15,126
20.4
the equity method
(1.1)
(250)
(5.1)
(1,276)
Thereof property, plant and equipment
(0.8)
(343)
(0.9)
Current assets
(408)
(0.2)
(157)
(5.6)
(3,948)
Sales
%
Million €
%
Noncurrent assets
(2,199)
(9.0)
(644)
185
Proceeds from divestitures
Total equity and liabilities
Thereof financial indebtedness
Current liabilities
Thereof financial indebtedness
Noncurrent liabilities
Equity
(1.4)
(987)
(3.7)
(2,607)
Total assets
0.0
(1)
(12.7)
(285)
Thereof cash and cash equivalents
(2.3)
Million €
2014
2015
Effects of divestitures and asset swap with Gazprom
The swap of assets of equal value is treated in accordance
with IAS 16.26. As per this regulation, the fair value of the
assets received is deemed to constitute their acquisition cost.
(344)
808
Proportion of net assets
Minority interests
1,152
Net assets
102
(recycled to income upon disposal)
Income and expense recognized directly in equity
2,451
Liabilities
1,079
Other liabilities
376
Negative fair values of derivatives
573
Accounts payable, trade
394
Other provisions
The acquisition of the 25.01% economic share in blocks IV
and V of the Achimov formation was conducted through a
capital share in two Russian companies that will be equity
accounted as associated companies in BASF's Consolidated
Financial Statements due to the material influence BASF
exercises over them. As of September 30, 2015, both
companies, together with the now-50% share in Wintershall
Noordzee B.V., were measured at fair value and reported as
investments accounted for using the equity method.
0.6
The following overview shows the individual components
of BASF's profit realization from the asset swap with Gazprom
and the reclassification of Wintershall Noordzee B.V.:
Fair value 25.01% Achimov IV/V
reflects the year-on-year decline resulting from divestitures. The
impact on equity relates mainly to gains and losses from dives-
titures.
The following overview shows the effects on the Consolidated
Financial Statements of the asset swap with Gazprom and the
divestitures conducted in 2015 and 2014. The line item sales
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2015
- On December 31, 2014, BASF completed the sale of its
50% stake in the joint operation Ellba Eastern Private Ltd.,
Singapore, which produces propylene oxide and styrene
monomers, to its partner Shell. The activities of Ellba Eastern
had been allocated to BASF's Petrochemicals division as
well as to Other.
- Effective as of November 17, 2014, BASF sold its 50% share
in Styrolution Holding GmbH, Frankfurt am Main, Germany,
to the INEOS Group. The partnership agreement of 2011
already included a cross option, giving BASF the option to
sell its share in Styrolution and INEOS the option to buy
BASF's share in Styrolution. The share in Styrolution and the
related income had been allocated to Other.
- On June 2, 2014, BASF completed the sale of its PolyAd
Services business to Edgewater Capital Partners, L.P. The
activities had been allocated to the Performance Chemicals
division.
On March 25, 2014, BASF concluded the sale of selected oil
and gas investments in the North Sea to the Hungarian MOL
Group, as agreed upon on December 12, 2013. In addition
to 14 licenses, MOL also purchased BASF's shares in the
infrastructure of the Sullom Voe Terminal and in the Brent
Pipeline System.
-
In 2014, BASF divested the following activities:
To determine the fair value of the investments in Achimov IV/V
and Wintershall Noordzee B.V. as per IAS 28, the proportional
share of assets and liabilities was measured in accordance with
IFRS 3. As per IFRS 3, the purchase price allocation is to be
adjusted accordingly if facts and circumstances become known
within the 12-month evaluation period that apply at the time of
sale or transfer. Accordingly, the determined fair values and the
resulting earnings arising from the asset swap and the transfer
from Wintershall Noordzee B.V. are to be seen as preliminary.
(64)
314
(808)
407
779
2015
Sep. 30,
Expected compensation payment and other expenses
Income from swap and reclassification
Fair value 50% Wintershall Noordzee B.V.
Disposed proportion of net assets
Profit realization from asset swap with Gazprom and
reclassification of Wintershall Noordzee B.V.
(in million €)
29
763
(942)
Financial assets
Assets of businesses included in Other
Assets of Other (in million €)
Miscellaneous income and expenses decreased espe-
cially as a result of expenses for BASF's 150th anniversary
celebrations in 2015.
also the result of expenses arising from the addition to provi-
sions for the long-term incentive program in the amount of
€49 million in 2015; in the previous year, by contrast, income
in the amount of €54 million had been recognized from the
reversal of such provisions.
Furthermore, the item foreign currency results, hedging
and other measurement effects declined in comparison with
2014. This was partly due to higher currency losses. It was
The previous year had primarily included disposal gains
of €458 million, shown under other businesses, from BASF's
share in Styrolution Holding GmbH, Frankfurt am Main,
Germany.
Income from operations of Other decreased by €852 million
year-on-year to minus €985 million.
Deferred tax assets
(133)
(114)
(300)
(2)
(220)
590
170
(218)
(233)
(985)
Cash and cash equivalents/marketable securities
Net interest income from overfunded pensions
Other liabilities/deferrals
1,737
2,262
2,193
1,791
540
526
2,241
December 31, 2014
December 31, 2015
2,097
Net income
Minority interests
Income before minority interests
Income taxes
Income before taxes and minority interests
Other income
Net income from shareholdings
Income from operations
Reconciliation reporting Oil & Gas (in million €)
Assets of Other
(389)
(402)
2014
2015
4 Reporting by segment and region
disclosure obligations are an integral component of the audited
Consolidated Financial Statements submitted to the electronic
Federal Gazette. The list of shares held is also published online.
For more information, see basf.com/en/governance
The list of consolidated companies and the complete list of all
companies in which BASF SE has a share as required by
Section 313(2) of the German Commercial Code and infor-
mation for exemption of subsidiaries from accounting and
3 BASF Group List of Shares Held in accordance with Section 313(2) of the German
Commercial Code
1,337
702
0.5
350
(2.7)
(1,905)
0.0
(1)
(1.9)
(309)
(8.1)
(1,148)
(0.4)
(104)
(3.8)
Since January 1, 2015, BASF's business has been conducted
by 13 operating divisions aggregated into five segments for
reporting purposes. The divisions are allocated to the
segments based on their business models.
2.7
The Chemicals segment entails the classical chemicals
business with basic chemicals and intermediates. It forms the
core of BASF's Production Verbund and is the starting point
for a majority of the value chains. In addition to supplying the
chemical industry and other sectors, the segment ensures that
other BASF divisions are supplied with chemicals for produc-
ing downstream products. The Chemicals segment comprises
the Petrochemicals, Monomers and Intermediates divisions.
The Functional Materials & Solutions segment bundles
system solutions, services and innovative products for specific
sectors and customers, in particular for the automotive,
electronic, chemical and construction industries. It is made
up of the Catalysts, Construction Chemicals, Coatings, and
Performance Materials divisions.
Income from operations of Other
Miscellaneous income and expenses
Foreign currency results, hedging and other measurement effects
Other businesses
Costs of corporate headquarters
Corporate research costs
Income from operations (EBIT) of Other (in million €)
Transfers between the segments are generally executed at
adjusted market-based prices which take into account the
higher cost efficiency and lower risk of Group-internal transac-
tions. Assets, as well as their depreciation and amortization,
are allocated to the segments based on economic control.
Assets used by more than one segment are allocated based
on the percentage of usage.
exchange risks. Furthermore, revenues and expenses from the
long-term incentive (LTI) program are reported here.
Earnings from currency conversion that are not allocated
to the segments are also reported under Other, as are earnings
from the hedging of raw material prices and foreign currency
With cross-divisional corporate research, BASF is creating
new businesses and ensuring its long-term competence with
regard to technology and methods. This includes plant bio-
technology research.
Activities not assigned to a particular division are reported
under Other. These include the sale of raw materials, engineer-
ing and other services, rental income and leases, the produc-
tion of precursors not assigned to a particular segment, the
steering of the BASF Group by corporate headquarters, and
corporate research.
BASF Report 2015
Notes - Policies and scope of consolidation
Consolidated Financial Statements
180
179
Until September 30, 2015, the Oil & Gas segment
comprised the Oil & Gas division with its Exploration &
Production and Natural Gas Trading business sectors. At the
end of the third quarter of 2015, BASF exited the natural gas
trading and storage business, operated together with
Gazprom to that point in time, and as of October 1, 2015, has
concentrated on the exploration and production of oil and gas
as well as on the transport of natural gas.
The Agricultural Solutions segment consists of the Crop
Protection division, whose products secure yields and guard
crops against fungal infections, insects and weeds, in addition
to serving as biological and chemical seed treatments. Plant
biotechnology research is not assigned to this segment; it is
reported in Other.
Until the end of 2014, the Performance Products segment
consisted of the Dispersions & Pigments, Care Chemicals,
Nutrition & Health, Paper Chemicals and Performance
Chemicals divisions. Customized products allow customers to
make their production processes more efficient or to give
their products improved application properties. The Paper
Chemicals division was dissolved as of January 1, 2015. The
paper chemicals business is being continued in the Perfor-
mance Chemicals and Dispersions & Pigments divisions.
Provisions for pensions and similar obligations
3,501
Total assets
Consolidated Financial Statements
176
175
- On February 18, 2015, BASF took over technologies,
patents and know-how for silver nanowires from Seashell
Technology LLC, based in San Diego, California. Through
this acquisition, BASF has extended its product portfolio for
displays in the Electronic Materials business unit, which is
part of the Monomers division.
industries. BASF can now offer its customers complete
solutions for TPUs and TPU adhesives. At BASF, the activi-
ties have been integrated in the Performance Materials
division.
- On February 12, 2015, BASF concluded the acquisition,
announced on December 8, 2014, of the business from
Taiwan Sheen Soon Co., Ltd. (TWSS), Lukang Town, Taiwan.
TWSS is a leading manufacturer of precursors for adhesives
based on thermoplastic polyurethanes (TPU). Following
receipt of the official approval, BASF also took over TWSS's
activities on the Chinese mainland, effective December 1,
2015. The takeover consolidated BASF's market position in
the areas of TPU extrusion and injection molding for various
In 2015, BASF acquired the following activities:
Acquisitions
Notes - Policies and scope of consolidation
2.4 Acquisitions and divestitures
Neither of the companies accounted for using the equity
method are deemed material for BASF. The table therefore
includes the totals of the amounts from the financial statements
of the companies accounted for using the equity method.
Deviations between proportional equity and the carrying
6,054
367
248
7,817
1,297
1,038
Thereof financial indebtedness
Total equity and liabilities
Current liabilities
amount of shareholdings accounted for using the equity
method are mainly a consequence of changes in equity not
affecting profit or loss.
BASF Report 2015
- On February 24, 2015, BASF acquired a 66% share from
TODA KOGYO CORP., based in Hiroshima, Japan, in a
company to which TODA had contributed its business with
cathode materials for lithium-ion batteries, patents and pro-
duction capacities in Japan. The transaction had been
announced on October 30, 2014. The company focuses
on the research, development, production, marketing and
sales of a number of cathode materials. At BASF, the activi-
ties were assigned to the Catalysts division.
- On March 31, 2015, BASF concluded the acquisition of the
polyurethane (PU) business from Polioles, S.A. de C.V.,
based in Lerma, Mexico, that was announced on July 10,
2014. Polioles is a joint venture with the Alpek Group. BASF
holds a 50% share, which is accounted for using the equity
method. The acquisition comprised marketing and selling
rights, current assets, and to a minor extent, production
facilities. The business has been assigned to the Perfor-
mance Materials division.
%
Million €
2014
2015
177
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Other intangible assets
Goodwill
Effects of acquisitions and changes in the preliminary purchase price allocations
BASF Report 2015
The following overview shows the effects of the acquisitions
conducted in 2015 and 2014 on the Consolidated Financial
Statements. If acquisitions resulted in the transfer of assets or
the assumption of additional liabilities, these are shown as a
net impact.
The purchase price allocation in connection with the
acquisition of a 2.5% stake in Brage from the previous year
was not adjusted.
The preliminary purchase price allocation from the previous
year for the acquisition of assets from Statoil on December 1,
2014, was reviewed at the end of the 12-month evaluation
period as per IFRS 3; parts were adjusted on the basis of more
detailed information on the production and cost profiles of the
acquired fields and licenses. This led to a €74 million reduction
in noncurrent assets to €1,089 million, and a €57 million
reduction in noncurrent liabilities to €517 million. Furthermore,
the expected value of the payment obligation to Statoil in
connection with the development of the Aasta Hansteen field
was reduced by €10 million to zero. Taking into account a
cash-effective adjustment of €4 million, the total purchase
price was €961 million. The adjustments led to a total increase
of goodwill in the amount of €7 million to €590 million. The
goodwill recognized was nearly entirely due to deferred tax
liabilities.
Along with Gjøa and Vega, Aasta Hansteen with Polarled
as its technical link to the European gas distribution network
- and Asterix were also classified as businesses according
to IFRS 3. Together with the exploration licenses, they were
measured in accordance with IFRS 3. The purchase price
amounted to $1.25 billion, or €1.0 billion. Furthermore, BASF
agreed to pay up to an additional $50 million if the Aasta
Hansteen field is developed according to the project plan.
_
- On October 31, 2014, BASF completed the acquisition of a
2.5% share in the Brage production field in the Norwegian
North Sea from Tullow Oil Norge AS, Oslo, Norway, in the
Oil & Gas segment. With this acquisition, BASF increased its
investment in Brage to a total of 35.2%.
-On December 1, 2014, in its Oil & Gas segment, BASF
concluded the acquisition agreed upon with Statoil Petrol-
eum AS (Stavanger, Norway) on September 12, 2014, of
shares in the Gjøa (5%) and Vega (24.5%) production fields,
the Aasta Hansteen development project (24%), the Asterix
discovery (19%) and the Polarled pipeline project (13.2%), in
addition to four exploration licenses near Aasta Hansteen.
In 2014, BASF acquired the following activities:
The purchase prices for businesses acquired in 2015 totaled
€224 million; as of December 31, 2015, payments made for
these amounted to €142 million. The purchase price alloca-
tions were carried out in accordance with IFRS 3. The resulting
goodwill amounted to €19 million. In the course of the acquisi-
tion from TODA, minority interests in the amount of €42 million
were recognized, measured at fair value. The purchase price
allocations consider all the facts and circumstances prevailing
as of the respective dates of acquisition which were known
prior to the preparation of the Consolidated Financial State-
ments. In accordance with IFRS 3, should further facts and
circumstances become known within the 12-month evaluation
period, the purchase price allocation will be adjusted accor-
dingly.
- On April 23, 2015, BASF concluded an agreement with
Lanxess Aktiengesellschaft, Cologne, Germany, on the
acquisition and use of technologies and patents for the
production of high-molecular-weight polyisobutene (HM
PIB). The transaction furthermore included the acquisition of
selling rights and current assets as well as a manufacturing
agreement in which Lanxess will produce HM PIB exclusively
for BASF. The activities were allocated to the Performance
Chemicals division.
1,148
813
Thereof financial indebtedness
2,152
383
338
455
427
9,133
4,686
2014
2015
Net income
Income before taxes and minority interests
Income from operations
Sales
Income statement information
Financial information on companies accounted for using the equity method (BASF stake) (in million €)
1,982
2,843
9
11
Other adjustments of income and expense
Investments accounted for using the equity
method as of the end of the year
275
Million €
283
Noncurrent assets
2,285
Noncurrent liabilities
2,605
4,494
Equity
6,054
7,817
Assets
299
334
Thereof marketable securities, cash and cash equivalents
1,971
1,819
Current assets
3,393
3,791
Thereof property, plant and equipment
4,083
5,998
Balance sheet information
%
26
0.3
Asset swap with Gazprom
In the first-half and third quarter interim reports for 2015, an
agreement was reported with Tellus Petroleum AS, Oslo,
Norway, to sell shares in several fields and exploration licenses
on the Norwegian continental shelf. On December 22, 2015,
BASF complied with the request from Tellus Petroleum to
release it from its obligation arising from the purchase contract,
announced on June 18, 2015. The disposal group created for
this planned transaction was dissolved.
On November 1, 2015, BASF divested its global paper
hydrous kaolin business to Imerys Kaolin, Inc., Roswell,
Georgia, as announced on June 8, 2015. The divestiture
included the kaolin processing production site in Wilkinson
County, Georgia. For a limited period of time, BASF will take
care of the order production for the paper hydrous kaolin
business on behalf of Imerys, in order to smooth the transfer
for the customers. The activities at BASF had been allocated
to the Performance Chemicals division.
- On September 30, 2015, BASF concluded the agreed-upon
sale of portions of its pharmaceutical ingredients and
services business to Siegfried Holding AG, based in
Zofingen, Switzerland. This involved the custom synthesis
business and parts of the active pharmaceutical ingredients
portfolio. The transaction comprised the divestiture of the
production sites in Minden, Germany; Evionnaz, Switzerland;
and Saint-Vulbas, France. At BASF, the activities had been
allocated to the Nutrition & Health division.
- Effective July 1, 2015, BASF sold its 25% share in Solvin to
its partner, Solvay. Solvin was established in 1999 by Solvay
and BASF for the production of polyvinylchloride (PVC). At
BASF, the SolVin investment and the income associated
with it had been allocated to the Monomers division.
- On June 30, 2015, BASF concluded the divestiture
announced on October 16, 2014, of its global textile chemi-
cals business to Archroma Textiles S.à r.l., Luxembourg. The
portfolio comprised products for pretreatment, printing and
coating. The transaction furthermore involved the transfer of
the subsidiary BASF Pakistan (Private) Ltd., based in Karachi,
Pakistan, completed in the third quarter of 2015. The textile
chemicals business had been part of the Performance
Chemicals division.
- On March 31, 2015, BASF sold its white expandable poly-
styrene (EPS) business in North and South America to Alpek
S.A.B. de C.V., Monterrey, Mexico. The sale comprised
customer lists and current assets in addition to production
facilities in Canada, Brazil, Argentina and the United States.
The disposed activities had been part of BASF's Perfor-
mance Materials division. The shares in Aislapol S.A., based
in Santiago de Chile, Chile, were also sold. Polioles, a joint
venture accounted for using the equity method, transferred
its white EPS business to Alpek.
In 2015, BASF divested the following activities:
Divestitures
1.2
841
963
0.1
97
146
Payments related to acquisitions
Total equity and liabilities
Thereof financial indebtedness
1.4
218
0.7
In its Oil & Gas segment, BASF concluded the swap of assets
of equal value with Gazprom on September 30, 2015, with
retroactive economic effect to April 1, 2013. As a result of the
transaction, BASF received an economic share of 25.01% in
blocks IV and V of the Achimov formation of the Urengoy
natural gas and condensate field in western Siberia. According
to the development plan originally confirmed by Russian
authorities, blocks IV and V have total hydrocarbon resources
of 274 billion cubic meters of natural gas and 74 million metric
tons of condensate. As these figures are still undergoing
review, new findings may give rise to adjustments. Production
is scheduled to start up in 2018.
95
178
Notes - Policies and scope of consolidation
284
Cash and cash equivalents
261
Other receivables and miscellaneous assets
569
328
Positive fair values of derivatives
Accounts receivable, trade
710
1,157
192
Sep. 30,
2015
Inventories
Property, plant and equipment
Expenses arose from environmental protection and safety
measures, demolition and removal, and planning expens-
es related to capital expenditures that are not subject to
mandatory capitalization according to IFRS. Expenses for
demolition, removal and project planning totaled €376 million
in 2015 and €286 million in 2014. These especially pertained
to the Ludwigshafen site in both years. Further expenses of
€37 million in 2015 and €19 million in 2014 were due to
additional environmental provisions. In both years, these pri-
marily concerned several discontinued sites in North America
and Switzerland.
Assets and liabilities retired as part of the asset swap with
Gazprom (Wintershall Noordzee B.V. included at 100%) (in million €)
The following table shows the balance sheet values of the
assets and liabilities that went to Gazprom as a result of the
swap, taking into account 100% of the balance sheet values
of Wintershall Noordzee B.V., as of the point of transfer from
full consolidation to the equity method:
As a result of the disposal of its 50% share in Wintershall
Noordzee B.V., BASF no longer exerts control over the
company alone, but rather shares joint control with Gazprom.
In accordance with IFRS 10, Wintershall Noordzee B.V. was
reclassified in the Consolidated Financial Statements from a
fully consolidated company to a joint venture accounted for
using the equity method from this point in time.
In return, BASF transferred its shares in the previously jointly
run natural gas trading and storage business to Gazprom. This
included the 50.02% shares in the following: the natural gas
trading company WINGAS GmbH, Kassel, Germany; the stor-
age company astora GmbH & Co. KG, Kassel, Germany,
which operates natural gas storage facilities in Rehden and
Jemgum, Germany; and WINGAS Holding GmbH, Kassel,
Germany, including its share in the natural gas storage facility
in Haidach, Austria. BASF also transferred its 50% share in
each of the natural gas trading companies Wintershall Erdgas
Handelshaus GmbH & Co. KG, Berlin, Germany, and
Wintershall Erdgas Handelshaus Zug AG, Zug, Switzerland.
Gazprom furthermore became a 50% shareholder in Winter-
shall Noordzee B.V. in Rijswijk, Netherlands, which is active in
the exploration and production of natural gas and crude oil
deposits in the North Sea. Because the transaction is
economically retroactive to April 1, 2013, BASF will pay
Gazprom a cash compensation estimated to total €50 million.
BASF Report 2015
Consolidated Financial Statements
840
Current liabilities
2.3
1.8
67
0.5
9
Current assets
Noncurrent assets
Other noncurrent assets
Financial assets
Property, plant and equipment
4.3
1,001
0.3
72
2.3
109
1.5
62
7.7
623
169
Thereof financial indebtedness
0.4
4.1
621
(0.2)
(40)
Noncurrent liabilities
0.0
2
0.1
42
Equity
2.5
1,804
0.3
243
Total assets
Thereof cash and cash equivalents
0.0
4
0.3
74
1,800
91
133
3,027
1,083
1,072
(985)
6,248
Assets
12,823
14,232
13,341
8,435
12,373
9,632
70,836
Thereof goodwill
58
2,201
2,326
2,048
1,660
70
8,363
other intangible assets
1,340
2,131
Income from operations
77,876
14,670
2,823
15,648
Intersegmental transfers
5,300
463
Sales including intersegmental transfers
19,970
16,111
18,523
873
19,396
155
5,820
28
Other
BASF
Group
2,790
70,449
766
(3)
7,427
5,848
13,764
2,787
Oil & Gas
12,998
1,428
1,607
342
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2015
1,464
1,050
(75)
(115)
1,539
(519)
(168)
2,058
The reconciliation reporting Oil & Gas reconciles the income
from operations in the Oil & Gas segment with the contribution
of the segment to the net income of the BASF Group.
1,333
267
246
(6)
1,688
1,072
2014
2015
1,181
9,632
9,829
124
Income from operations declined due to lower oil and
gas prices, and the currency-related decrease in earnings
contributions from BASF's share in the Yuzhno Russkoye
natural gas field. Impairments for exploration and production
licenses dampened earnings by €609 million in 2015 and
€230 million in 2014.
1,165
50% share in Wintershall Noordzee B.V., Rijswijk, Netherlands,
was no longer included in the income from operations in the
fourth quarter of 2015.
1,030
38
In 2015, the asset swap with Gazprom led to income in the
amount of €314 million. In 2014, the sale of oil and gas invest-
ments in the North Sea to the MOL Group resulted in income
of €132 million. As a result of the asset swap with Gazprom on
September 30, 2015, the share of earnings from the exited
natural gas trading and storage business as well as from the
property, plant and equipment
7,933
4,958
3,645
1,488
6,421
815
25,260
investments accounted for using
4,174
Agri-
cultural
Solutions
Functional
Mate-
rials &
Solutions
mance
Products
Chemicals
Perfor-
Segments 2015 (in million €)
Significantly lower earnings contributions from Norway,
due in part to the impairments recognized there as well as to
currency effects, led to a considerable decline in income tax
and the tax rate.
Other income in the oil and gas business relates to income
and expenses not included in the segment's income from
operations, interest result and other financial result. As in the
previous year, other income largely consisted of currency
effects from Group loans.
Sales
Income from shareholdings in the Oil & Gas segment
decreased significantly. This was due to the sale of VNG -
Verbundnetz Gas AG, Leipzig, Germany, to EWE AG in 2014.
Personnel expenses increased by 8.2%, from €9,224 million
in 2014 to €9,982 million in 2015, largely owing to currency
effects. The rise was also due in part to wage and salary
increases as well as expenses for the anniversary bonus to
employees and the long-term incentive (LTI) program.
Minority interests in profits
Minority interests in losses
Total
2015
The number of employees was 112,435 on December 31,
2015 and 113,292 employees on December 31, 2014.
The average number of employees was distributed over
the regions as follows:
Average number of employees
Personnel expenses
2014
Number of employees
13 Personnel expenses and employees
314
sales volumes and more favorable procurement conditions in
the natural gas trading business.
Lower minority interests in profits arose in 2015 mainly at
BASF Total Petrochemicals LLC, Port Arthur, Texas, due to
reduced prices. Higher minority interests in profits com-
pared with the previous year were mainly reported at
WINGAS GmbH, Kassel, Germany, as a result of greater
337
(37)
(29)
374
343
2014
2015
2015
Minority interests in losses in 2015 arose particularly
at Shanghai BASF Polyurethane Company Ltd., Shanghai,
China, due to margin pressure from declining sales prices. In
the previous year, companies active in natural gas trading
were the main contributors to minority interests in losses.
For more information on minority interests in consolidated companies,
see Note 21 on page 199
2014
7,557
70,922
Million €
South America, Africa, Middle East
560
658
Thereof for pension benefits
16,885
17,428
Asia Pacific
1,844
2,039
Europe
expenses for pensions and assistance
17,342
North America
Social security contributions and
52,726
52,987
Thereof Germany
7,380
7,943
Wages and salaries
71,128
16,980
Consolidated Financial Statements
Notes Notes on balance sheet
164
BASF Report 2015
3,420
346
3,381
256
597
439
2,193
1,791
(40)
(25)
(87)
(62)
Deferred taxes result from temporary differences between tax
balances and the measurement of assets and liabilities
according to IFRS as well as from tax loss carryforwards and
unused tax credits. The remeasurement of all the assets and
liabilities associated with acquisitions according to IFRS 3 has
resulted in significant deviations between fair values and the
values in the tax accounts. This leads primarily to deferred tax
liabilities.
Thereof current
Valuation allowances for deferred tax assets
Thereof for tax loss carryforwards
146
(3,160)
(2,873)
(3,160)
(2,873)
Netting
107
155
7,651
Other
Total
12 Minority interests
Undistributed earnings of subsidiaries resulted in temporary
differences of €9,241 million in 2015 (2014: €7,472 million) for
which deferred tax liabilities were not recognized, as they are
either not subject to taxation on payout or they are expected
to be reinvested for indefinite periods of time.
The regional distribution of tax loss carryforwards is as follows:
348
246
2,303
2,491
Total
348
246
2,302
2,490
Foreign
Tax loss carryforwards
1
Germany
2014
Deferred
tax assets
2015
2014
2015
Tax obligations primarily include assessed income taxes and
other taxes as well as estimated income taxes not yet
assessed for the current year. Tax obligations amounted to
€1,082 million in 2015 (2014: €1,079 million).
Tax obligations
Tax loss carryforwards exist in all regions, especially in Europe
and Asia. German tax losses may be carried forward
indefinitely. In foreign countries, tax loss carryforwards are in
some cases only possible for a limited period of time. The bulk
of the tax loss carryforwards will expire in Europe by 2018 and
in Asia by 2020. No deferred tax assets were recognized for
tax loss carryforwards of €1,767 million in 2015 (2014:
€1,441 million).
Tax loss
carryforwards
Tax loss carryforwards (in million €)
1
Personnel expenses
Consolidated Financial Statements
Notes Notes on balance sheet
9,224
Additions
56
23
11
45
135
Additions from acquisitions
(49)
47
32
19
136
Disposals
(94)
(43)
(137)
38
(1)
(53)
5
intangible
assets
271
Other rights
and values¹
Goodwill
Total
Balance as of
January 1, 2015
4,014
1,410
2,000
86
674
8,141
16,325
Changes in scope of
consolidation
(7)
production
technologies
(147)
(577)
91
450
8,500
16,373
Accumulated
amortization
Balance as of
1,951
January 1, 2015
379
809
59
232
Changes in scope of
consolidation
3
1,879
1,318
4,063
December 31, 2015
Transfers
(2)
(167)
34
1
(170)
(24)
(328)
Exchange differences
93
388
62
46
17
513
731
Balance as of
(149)
licenses and
trademarks
similar rights
generated
able changes in the assumptions would lead to an impairment.
An increase of 0.5% in the cost of capital rate would result in
impairments amounting to €163 million; a 10% decrease in
income from operations of the last detailed planning year -
used as the basis for the terminal value - would result in
impairments of €143 million.
In 2015, the recoverable amount of Catalysts (excluding
battery materials) exceeded the carrying amount by €708 mil-
lion. The weighted average cost of capital rate after taxes used
for the impairment testing of this unit was 7.66% (2014: 7.75%).
The recoverable value of the unit would equal the carrying
amount if the cost of capital rate increased by 0.73 percentage
points or if income from operations of the last detailed planning
year - as the basis for the terminal value - were 14.52% lower.
For impairment testing in the Exploration & Production
business sector in the Oil & Gas segment, assumptions regar-
ding expected price development were adjusted to reflect the
current oil price development. BASF now assumes an average
oil price of $40 per barrel (Brent) in 2016, and expects this to
rise again in subsequent years to over $100 per barrel (Brent)
in determining the terminal value. The revised assumptions
resulted in an impairment of goodwill for Exploration & Produc-
tion in the amount of €137 million. The recoverable amount
corresponds to the value in use of the unit, amounting to
€8,746 million as of December 31, 2015. A decrease of $10
per barrel of Brent crude in the average oil price assumption
would reduce income from operations by roughly €200 million
each year. Such a reduction over the entire planning period
would lead to an impairment of €1 billion in the Exploration &
Production cash-generating unit. Irrespective of the price of
oil, an increase in the cost of capital rate by 0.5% would lead
to an additional impairment of €526 million. Impairments may
be allocated to intangible assets, goodwill and property, plant
and equipment depending on the nature, timing and size of
changes in the individual parameters.
Goodwill of cash-generating units (in million €)
2015
2014
Cash-generating unit
Crop Protection division
The weighted average cost of capital rate after taxes used
for impairment testing for Pigments was 6.07% (2014: 6.64%).
In 2015, the recoverable amount of this unit exceeded the
carrying amount by €15 million, so that even slightly unfavor-
Exploration & Production in the Oil & Gas segment
Construction Chemicals division
Personal care ingredients in the Care Chemicals division
Pigments in the Dispersions & Pigments division
Other cash-generating units
Goodwill as of December 31
Goodwill
Growth rate¹
Catalysts division (excluding battery materials)
In the 2015 business year, the recoverable amount of the
Construction Chemicals unit exceeded the carrying amount by
around €397 million. Earnings in the Construction Chemicals
division are influenced by the growth of the construction
industry. The weighted average cost of capital rate after taxes
used for impairment testing was 7.67% (2014: 7.76%). The
recoverable amount would equal the unit's carrying amount if
the cost of capital rate increased by 0.96 percentage points
(2014: by 0.5 percentage points) or if income from operations
of the last detailed planning year. - as the basis for the terminal
value were lower by 16.65% (2014: by 9.10%).
In determining the value in use for the great majority of
cash-generating units, BASF generally anticipates that a rea-
sonably possible deviation from the key assumptions will not
lead to the carrying amount of the units exceeding their
respective recoverable amounts. For the goodwill of the
Construction Chemicals division and the cash-generating
units Pigments (in the Dispersions & Pigments division),
Catalysts (excluding battery materials), and Exploration &
Production (in the Oil & Gas segment), this is not the case.
peer group as well as the average tax rate of each cash-
generating unit. Impairment tests were conducted assuming a
weighted average cost of capital rate after taxes between
6.04% and 7.67% (2014: between 6.60% and 7.76%). This
represents a weighted average cost of capital rate before
taxes between 7.77% and 10.81% (2014: between 8.19%
and 10.30%). For the Exploration & Production business
sector in the Oil & Gas segment, a cost of capital rate after
taxes of 10.93% (2014: 9.46%) or before taxes of 16.66%
(2014: 17.72%) was applied, taking country-specific risks into
account.
BASF Group
113,249
112,644
Thereof apprentices and trainees
temporary staff
2,942
2,884
2,574
2,596
14 Intangible assets
Employees from joint operations are included in the average
number of employees relative to BASF's share in the company.
On average 398 employees worked for joint operations in
2015 (2014: 376 employees).
The goodwill of BASF is allocated to 21 cash-generating units
(2014: 23), which are defined either on the basis of business
units or on a higher level.
Annual impairment testing took place in the fourth quarter
of the year on the basis of the cash-generating units. Recov-
erable amounts were determined in each case using the value
in use. This was done using plans approved by company
management and their respective cash flows, generally for the
next five years. For the time period after the fifth year, a termi-
nal value was calculated using a forward projection from the
last detailed planning year as a perpetual annuity. The planning
is based on experience, current performance and manage-
ment's best possible estimates on the future development of
individual parameters, such as raw material prices and profit
margins. The oil price is also among the main input parameters
that provide the basis for the forecast of cash inflows in the
current financial plans. Market assumptions regarding, for
example, economic development and market growth are
included based on external macroeconomic sources as well
as sources specific to the industry.
The weighted average cost of capital rate after tax required
for impairment testing is determined using the Capital Asset
Pricing Model. It comprises a risk-free rate, a market risk pre-
mium, and a spread for credit risk based on the respective
industry-specific peer group. The calculation also takes into
account capital structure and the beta factor of the respective
189
190
BASF Report 2015
Goodwill
2,048
2.0%
1,931
1,523
0.0-2.0%
1,444
0.0-2.0%
8,363
8,141
1 Growth rates used in impairment tests to determine terminal values in accordance with IAS 36
BASF Report 2015
Development of intangible assets 2015 (in million €)
Cost
Consolidated Financial Statements
Notes Notes on balance sheet
Know-how,
Internally
Distribution,
supply and
Product rights,
patents and
2.0%
9,982
450
484
Growth rate¹
2.0%
1,660
(2.0%)
1,765
(2.0%)
1,411
2.0%
1,360
2.0%
700
1.5%
675
1.5%
537
2.0%
516
2.0%
2.0%
Personnel expenses (in million €)
Additions to property, plant and equipment from investment
projects in 2014 amounted to €5,368 million. Significant
investments particularly concerned the construction of a TDI
complex in Ludwigshafen, Germany; a production complex for
acrylic acid and superabsorbents in Camaçari, Brazil; an MDI
plant in Chongqing, China; and oil and gas production facilities
and wells in Europe and South America. Investments for
expansion purposes were particularly made at the sites in
Ludwigshafen, Germany; Antwerp, Belgium; Geismar, Loui-
siana; and Freeport, Texas. Property, plant and equipment
rose by €1,001 million primarily from the acquisition of assets
from Statoil, Stavanger, Norway.
Transfers
3,096
Changes in scope of
consolidation
15
15
Additions
338
55
158
20
76
265
647
(73)
(109)
(82)
(4)
(106)
(374)
Transfers
15
(20)
(5)
Exchange differences
Disposals
(65)
43
429
(192)
44
Exchange differences
(362)
58
57
1
34
610
398
Balance as of
695
December 31, 2014
1,410
2,000
86
674
8,141
16,325
Accumulated
amortization
Balance as of
January 1, 2014
1,664
4,014
4
23
17
193
Notes Notes on balance sheet
Machinery and technical equipment included oil and gas
deposits, such as related wells, production facilities and further
infrastructure, which were depreciated according to the unit of
production method.
Development of property, plant and equipment 2015 (in million €)
Thereof depre-
Cost
Land, land
rights and
buildings
Machinery and
technical
equipment
ciation accor-
ding to the unit
Consolidated Financial Statements
of production
method
equipment and Construction in
fixtures
progress
Total
Balance as of January 1, 2015
9,635
43,410
5,729
3,688
7,681
64,414
Miscellaneous
15 Property, plant and equipment
BASF Report 2015
In 2014, transfers included a write-up of €5 million.
(21)
Balance as of
December 31, 2014
1,879
379
809
59
232
3,358
Net carrying amount as
of December 31, 2014
2,135
1,031
1,191
27
442
8,141
12,967
1 Including licenses to such rights and values
Besides goodwill, intangible assets also include acquired
intangible assets as well as internally generated intangible
assets. In addition, they include rights belonging to the Oil &
Gas segment, which are amortized in accordance with the unit
of production method. As of December 31, 2014, their acqui-
sition costs amounted to €916 million and accumulated amor-
tization to €235 million; amortization in 2014 amounted to
€52 million.
In connection with the acquisition of assets from Statoil,
Stavanger, Norway, €704 million was added to intangible
assets in 2014. Of this amount, €121 million pertained to
exploration rights and licenses and €583 million to goodwill.
Concessions for oil and gas production under the category
product rights, licenses and trademarks with a net carrying
amount of €579 million in 2014 authorize the exploration and
production of oil and gas in certain areas. Some of these rights
entail obligations to deliver a portion of the production output
to local companies. At the end of the term of a concession, the
rights are returned.
In other rights and values, the line item transfers includes
additions and fair value adjustments of emission rights recog-
nized directly in equity as of the balance sheet date.
Disposals were largely attributable to the sale of selected
oil and gas investments in the North Sea to the Hungarian
MOL Group.
Impairments of €56 million were recognized in 2014. Due
to the weak development of the coal mining business in China,
impairments of €40 million relating to distribution, supply and
similar rights were recognized in the Construction Chemicals
division. The recoverable amount equals the value in use,
amounting to €10 million. The value in use was determined
using a weighted average cost of capital rate before taxes
of 11.02%.
(12)
1
247
Transfers
102
Balance as of
December 31, 2015
2,160
411
865
67
196
137
3,836
Net carrying amount as
(7)
of December 31, 2015
907
1,086
24
24
254
8,363
12,537
1 Including licenses to such rights and values
Besides goodwill, intangible assets also include acquired
intangible assets as well as internally generated intangible
assets. In addition, they include rights belonging to the Oil &
Gas segment, which are amortized in accordance with the
unit of production method. As of December 31, 2015, their
acquisition costs amounted to €835 million and accumulated
amortization to €246 million; amortization in 2015 amounted
to €41 million.
Additions from acquisitions amounted to €136 million in
2015. Significant acquisitions concerned the purchase of a
66% share in a company to which TODA KOGYO CORP.,
Hiroshima, Japan, contributed its business, and the purchase
of the polyurethane (PU) business from Polioles, S.A. de C.V.,
Lerma, Mexico. In connection with these transactions, addi-
tions to intangible assets amounted to €87 million. Moreover,
BASF concluded an agreement with Lanxess on the acqui-
sition and use of technologies and patents for the production
of high-molecular-weight polyisobutene (HM PIB), which
added €23 million to intangible assets.
Concessions for oil and gas production under the category
product rights, licenses and trademarks with a net carrying
amount of €480 million in 2015 authorize the exploration and
production of oil and gas in certain areas. At the end of the
term of a concession, the rights are returned. Aside from
transfers to property, plant and equipment, transfers in 2015
included €54 million from the subsequent adjustments of the
purchase price allocation for the acquisition of assets from
Statoil.
1,903
(389)
801
137
Tax loss carryforwards
(38)
Additions
302
71
193
14
Disposals
(92)
(43)
(125)
(6)
(123)
Transfers
(1)
8
Exchange differences
68
5
18
=S=
3,358
(1)
(36)
84
Other rights and values under transfers also included
derecognitions of €153 million resulting from the change in
accounting to the net method for emission right certificates
granted free of charge in 2015. Disposals of €17 million were
attributable to the asset swap with Gazprom.
Changes in scope of consolidation
Related to this, goodwill of €173 million was derecog-
nized, €32 million of which was reported under transfers.
In 2015, additions to accumulated amortization included
write-ups of €2 million.
6,936
15,420
Changes in scope of
consolidation
15
15
Additions
29
38
12
104
856
184
109
623
732
Disposals
(73)
(153)
(82)
(4)
(128)
(28)
(468)
Additions from acquisitions
77
1,984
1,366
191
192
Consolidated Financial Statements
Notes Notes on balance sheet
Development of intangible assets 2014 (in million €)
Cost
BASF Report 2015
Know-how,
Internally
Distribution,
supply and
Product rights,
patents and
generated
licenses and
similar rights
trademarks
production
technologies
intangible
assets
Other rights
and values¹
Goodwill
Total
Balance as of
January 1, 2014
4,201
In 2015, additions to accumulated amortization included
impairments of €205 million. These primarily concerned the
Oil & Gas segment. The revised assumptions for oil and gas
prices led to €137 million in goodwill impairments as well as
€27 million in impairments on a license in Norway. Further-
more, under the category know-how, patents and production
technologies, a once-advantageous supply contract of
€36 million in the Functional Materials & Solutions segment
was fully impaired due to lower market prices.
(2,919)
(32)
4
Transfers
(1,486)
(173)
(141)
(19)
(1,063)
(109)
Disposals
1,001
577
424
320
Additions from acquisitions
3,493
240
771
1,280
355
Additions
15
3
11
1
Changes in scope of consolidation
5,368
57,190
1,517
176
37,961
200
2,558
2,595
30,112
5,091
Balance as of January 1, 2014
Accumulated depreciation
64,414
7,681
3.688
180
5,729
9,635
Balance as of December 31, 2014
2,316
324
115
133
1,544
333
Exchange differences
10
(2,003)
43,410
5,463
3,295
4,664
3,145
12,840
5,074
Net carrying amount as of
December 31, 2015
41,974
220
3,152
2,827
32,965
5,637
Balance as of December 31, 2015
1,064
1,163
64
126
999
102
Exchange differences
(733)
19
176
(595)
(935)
7
(2)
6,282
25,260
Additions to property, plant and equipment arising from
investment projects amounted to €5,651 million in 2015.
Significant investments were primarily related to the
construction of a TDI complex in Ludwigshafen, Germany; a
production complex for acrylic acid and superabsorbents in
Camaçari, Brazil; and an MDI plant in Chongqing, China. Each
of these began operations either fully or partly in 2015. Further
significant investments included the construction of an inte-
grated aroma ingredients complex in Kuantan, Malaysia, and
oil and gas production facilities and wells in Europe and South
America. Investments for expansion purposes were particu-
larly made at the sites in Ludwigshafen, Germany; Freeport,
Texas; Geismar, Louisiana; and Antwerp, Belgium. Govern-
ment grants of €10 million related to tangible assets were
deducted. Due to acquisitions, property, plant and equip-
ment rose by €91 million primarily from the acquisition of
BASF TODA Battery Materials LLC, Tokyo, Japan.
39,697
8,735
Balance as of January 1, 2014
Total
progress
fixtures
equipment and Construction in
of production
method
technical
equipment
buildings
Miscellaneous
ciation accor-
ding to the unit
Land, land Machinery and
rights and
BASF Report 2015
Thereof depre-
Cost
Development of property, plant and equipment 2014 (in million €)
Notes Notes on balance sheet
Consolidated Financial Statements
194
Exchange differences arose particularly from the
appreciation of the U.S. dollar relative to the euro.
Disposals of property, plant and equipment were primarily
attributable to the asset swap with Gazprom and related
primarily to the transferred natural gas trading and storage
business. Furthermore, BASF's share in Wintershall Noord-
zee B.V., Rijswijk, Netherlands, was reduced to 50%. With this
loss of control, the company was reclassified as an investment
accounted for using the equity method. 50% of the property,
plant and equipment was reported in disposals and the
remaining 50% in transfers.
For more information on oil price sensitivity and property, plant and
equipment, see Note 14 from page 189 onward
€1,338 million. The weighted average cost of capital rate
before taxes used ranged between 9.13% and 88.83%. The
high cost of capital rates were due to the special income tax
for the oil and gas industry in Norway. The recoverable amount
for impaired property, plant and equipment equals their value
in use. In 2015, additions to accumulated depreciation con-
tained write-ups of €5 million.
In 2015, impairments of €485 million were included in
accumulated depreciation. Of this amount, €336 million
pertained to impairments on oil and gas fields in Norway, Libya
and Germany in the Oil & Gas segment. These impairments
arose particularly from the ongoing low oil and gas price level
and the resulting revision of planning assumptions. These
fields were written down to their recoverable amount, totaling
Changes in scope of consolidation
2
8
2
216
1,332
245
94
367
2,009
Balance as of December 31, 2015
10,711
45,805
5,972
4,216
Exchange differences
6,502
Accumulated depreciation
Balance as of January 1, 2015
5,391
32,463
3,203
2,774
290
40,918
Changes in scope of consolidation
(36)
(19)
67,234
(864)
(4,518)
391
(40)
Additions
396
1,474
492
226
3,555
5,651
Additions from acquisitions
25
46
1
19
91
Disposals
(263)
(2,974)
(977)
(184)
(606)
(4,027)
Transfers
734
2,529
483
(55)
(12)
Additions
2,707
99
1,144
130
Exchange differences
8
4
42
(38)
Transfers
(1,190)
(22)
79
(136)
(939)
(93)
Disposals
2,770
104
229
528
2,176
261
Additions
12
(19)
4
1,357
Balance as of December 31, 2014
959
303
261
3,600
Disposals
(156)
(2,250)
(866)
In 2014, transfers included a write-up of €3 million.
Disposals of property, plant and equipment were largely
attributable to the sale of selected oil and gas investments in
the North Sea to the Hungarian MOL Group.
€44 million. Furthermore, impairments of €94 million were
recognized on oil and gas fields in Norway and Germany. The
oil and gas fields were written down to their recoverable
amount of €554 million. The recoverable amounts for the indi-
vidual oil and gas fields were calculated using a weighted
average cost of capital rate before taxes ranging between
8.46% and 73.56%. The high cost of capital rates were due to
the special income tax for the oil and gas industry in Norway.
A plant in the Chemicals segment was written down to its
recoverable amount of €31 million, requiring the recognition of
an impairment in the amount of €27 million. The weighted
average cost of capital rate before taxes used was 9.38%. The
recoverable amount for impairments was determined on the
basis of value in use.
In 2014, the impairments of €298 million recognized
under accumulated depreciation primarily concerned the Oil &
Gas segment. They resulted mainly from the complete write-
down of property, plant and equipment from projects for the
development of a gas field in Qatar in the amount of €81 million
as well as an oilfield in the United Kingdom in the amount of
23,496
7,391
914
2,526
10,947
4,244
Net carrying amount as of
December 31, 2014
40,918
290
2,774
3,203
32,463
5,391
329
152
(165)
1,574
(151)
(196)
Net interest expense from underfunded pension plans and similar obligations
Net interest expense from other long-term personnel obligations
Interest compounding on other noncurrent liabilities
Miscellaneous financial expenses
Other financial expenses
Financial result
(2)
(18)
Write-downs on/losses from the disposal of securities and loans
158
152
Other financial income
Miscellaneous financial income
Income from the capitalization of borrowing costs
156
149
2
3
Net interest income from overfunded pension plans and similar obligations
(711)
(638)
Interest expenses
Interest income
207
213
Interest and dividend income from securities and loans
29
29
Interest income from cash and cash equivalents
178
184
(25)
(3)
(22)
(68)
(75)
Foreign income tax
528
514
Corporate income tax, solidarity surcharge and trade taxes (Germany)
1,645
1,610
Current tax expense
2014
2015
Million €
187
Consolidated Financial Statements
Notes Notes on statement of income
Tax expense
BASF Report 2015
(71)
been enacted in the previous year, the 30% rate used to calcu-
late deferred taxes for German Group companies remained
unchanged in 2015. The profits of foreign Group companies
are assessed using the tax rates applicable in their respective
countries. These are also generally used to calculate deferred
taxes to the extent that tax rate adjustments for the future have
not yet been enacted.
Income taxes
11
Miscellaneous financial expenses in 2015 predomi-
nantly included hedging costs from the hedging of loans in
U.S. dollars. In addition to expenses for hedging loans in
U.S. dollars, the previous year had included an expense of
€42 million for the market valuation of options for the disposal
of shares in Styrolution. Effective as of November 17, 2014,
BASF sold its share in Styrolution to the INEOS Group.
result of the startup of major investment projects, particularly
the TDI complex in Ludwigshafen, Germany; the production
complex for acrylic acid and superabsorbents in Camaçari,
Brazil; the MDI plant in Chongqing, China; and oil and gas
production facilities.
Compared with the previous year, income from the
capitalization of borrowing costs slightly decreased as a
The net interest expense from underfunded pension
plans and similar obligations increased compared with the
previous year, mainly as a result of the higher defined benefit
obligation as of December 31, 2014.
The interest result improved by €79 million compared with
the previous year. This was primarily attributable to lower
interest expenses as a result of more favorable refinancing
conditions.
Income from shareholdings was €269 million lower in 2015
than in the previous year. In 2014, higher income from the
disposal of shareholdings was reported, particularly
€220 million from the disposal of the share in VNG
Verbundnetz Gas AG, Leipzig, Germany.
(423)
(700)
(355)
(436)
(105)
(151)
In Germany, a uniform corporate income tax rate of 15.0% as
well as a solidarity surcharge of 5.5% thereon is levied on all
paid out and retained earnings. In addition to corporate income
tax, income generated in Germany is subject to a trade tax that
varies depending on the municipality in which the company is
represented. Due to an increase in the rate of assessment for
Ludwigshafen, Germany, the weighted average trade tax rate
was 14.1% in 2015 (2014: 13.4%). As the increase had already
(16)
(55)
(9)
(35)
Thereof joint ventures
(10)
(24)
Other adjustments of income and expense
196
250
associated companies
25
Thereof joint ventures
283
275
Proportional net income
2014
(19)
2015
The decline in income from companies accounted for
using the equity method was predominantly the result of an
impairment at Wintershall Noordzee B.V., Rijswijk, Nether-
lands. The reduction was partly alleviated by higher earnings
contributions from other shareholdings, particularly OAO Sever-
neftegazprom, Krasnoselkup, Russia, and BASF-YPC Com-
pany Ltd., Nanjing, China.
87
The previous year had included strike-related expenses in
connection with the construction of the acrylic acid and super-
absorbent production complex in Camaçari, Brazil, in the
amount of €16 million. Furthermore, in both years, expenses
arose from the implementation of further projects, REACH,
and the provision of services.
Other expenses included expenses of €121 million for
BASF's 150th anniversary.
Losses from the disposal of fixed assets and divestitures
in 2015 mainly stemmed from the sale of the global paper
hydrous kaolin business to Imerys Kaolin, Inc., Roswell,
Georgia. Losses in 2014 arose predominantly from losses of
€9 million in connection with the disposal of the Brattvåg site
in Norway in the Nutrition & Health division.
Expenses from foreign-currency and hedging transactions
as well as from the measurement of LTI options were
related to foreign currency translations of receivables and
payables as well as changes in the fair value of currency
derivatives and other hedging transactions. Compared with
the previous year, higher expenses particularly arose from the
appreciation of the U.S. dollar against various currencies. In
2015, there was also an expense for the long-term incentive
(LTI) program of €53 million. In 2014, an expense of €25 million
was recognized for newly issued LTI options at the end of the
year.
For more information, see Note 7 from page 183 onward
Costs from miscellaneous revenue-generating activities
concerned the respective item presented in other operating
income.
Amortization, depreciation and impairments of intangible
assets and property, plant and equipment arose from
impairments in the Oil & Gas segment in the amount of
€500 million in 2015 and €230 million in 2014. Further impair-
ments of €57 million concerned the Functional Materials &
Solutions segment in 2015 (2014: €42 million). Impairments
of €53 million were recognized the Performance Products
segment in 2015. Impairments in the Chemicals segment
amounted to €18 million in 2015 and €33 million in 2014.
185
Consolidated Financial Statements
Notes - Notes on statement of income
BASF Report 2015
(348)
177
Million €
1,231
associated companies
9
(16)
303
80
1
5
2
Expenses from other shareholdings
Write-downs on/losses from the sale of shareholdings
Losses from loss transfer agreements
Income from other shareholdings
Income from tax allocation to participating interests
Income from profit transfer agreements
Income from the disposal of shareholdings
245
11
31
47
Dividends and similar income
Million €
2014
2015
BASF Report 2015
10 Financial result
Notes Notes on statement of income
Consolidated Financial Statements
186
The Oil & Gas segment contributed €106 million to income
from companies accounted for using the equity method.
Especially contributing to this total were OAO Severnefte-
gazprom, Krasnoselkup, Russia; Nord Stream AG, Zug,
Switzerland; and GASCADE Gastransport GmbH, Kassel,
Germany. Further significant earnings contributions were
made by shareholdings in BASF-YPC Company Ltd., Nanjing,
China; Lucura Versicherungs AG, Ludwigshafen am Rhein,
Germany; and BASF SONATRACH Propanchem S.A.,
Tarragona, Spain.
273
251
Income from companies accounted for
using the equity method
52
1,244
9 Income from companies accounted for using the equity method
(135)
Deferred tax assets and liabilities (in million €)
Deferred taxes
Notes Notes on statement of income
Consolidated Financial Statements
188
Nondeductible expenses particularly included an impairment
of the goodwill of the Exploration & Production business sector.
Future reversals of temporary differences for shares in
investments that are assumed to have a planning horizon of
one year led to deferred tax income of €28 million in 2015
(2014: €7 million).
Gains from the asset swap with Gazprom did not result in tax
burdens. The previous year had included higher tax-exempt
income in connection with the disposal of investments,
especially of the shares in Styrolution and in VNG - Verbundnetz
Gas AG, as well as the sale of oil and gas fields in the North
Sea to the MOL Group.
23.8
1,711
22.5
1,247
(1.3)
(95)
0.2
BASF Report 2015
10
Other
(0.1)
(7)
(0.5)
(28)
Deferred tax liabilities for the future reversal of temporary differences
associated with shares in participating interests
(1.8)
(127)
(2.4)
(135)
Taxes for prior years
(0.6)
(45)
(0.7)
Income taxes / effective tax rate
(38)
Deferred tax assets
2015
Taxes for prior years
1,346
Other provisions and liabilities
487
472
2,687
2,410
766
517
294
251
Inventories and accounts receivable
87
106
Deferred tax liabilities
24
Financial assets
3,195
3,322
199
182
Property, plant and equipment
1,747
1,553
119
90
Intangible assets
2014
2015
2014
12
Income after taxes of companies accounted for using the equity method
Provisions for pensions
111
2014
2015
Reconciliation of the effective tax rate and the tax rate in Germany
Other taxes included real estate taxes and other compara-
ble taxes totaling €106 million in 2015 and €96 million in 2014.
Changes in valuation allowances on deferred tax assets for tax
loss carryforwards resulted in expenses of €4 million in 2015
and income of €3 million in 2014.
The BASF Group tax rate amounted to 22.5% in 2015 (2014:
23.8%). This lower rate was primarily attributable to lower
contributions to income from countries with higher tax rates,
especially Norway. Taxes for prior years primarily contained
reversals of long-term tax provisions.
1,977
1,549
266
302
1,711
1,247
3
3
Income before taxes and minority interests
Other taxes as well as sales and consumption taxes
Tax expense
From valuation allowances on deferred tax assets
38
7
From changes in the tax rate
(41)
(59)
From changes in tax loss carryforwards / unused tax credits
66
(314)
66
(363)
Deferred tax expense (+) / income (-)
1.5
(127)
Income taxes
Million €
5,548
From changes in temporary differences
Million €
%
Nondeductible expenses
(4.9)
(1.9)
(103)
4.3
Tax-exempt income
12.8
920
4.1
225
Foreign tax-rate differential
3.0
217
(354)
234
%
4.2
7,203
Expected tax based on German corporate income tax (15%)
832
15.0
1,080
239
Solidarity surcharge
0.2
15.0
11
German trade tax
0.2
11
62
Corporation, Shanghai, China
Shanghai GaoQiao Petrochemical
Shanghai, China, and Sinopec
237
40.00
249
40.00
Total Petrochemicals Inc., Houston, Texas
149
30.00
Shanghai Hua Yi (Group) Company,
40.00
221
Kuala Lumpur, Malaysia
Petroliam Nasional Bhd.,
36
26.67
26.67
Free float
(157)
49.98
(128)
Berlin, Germany
30.00
49.981
40.00
35
The minority interests in W & G Beteiligungs-GmbH & Co. KG,
Kassel, Germany; WINGAS GmbH, Kassel, Germany;
WINGAS Holding GmbH, Kassel, Germany; and WINGAS UK
TODA KOGYO CORP., Hiroshima, Japan
Shanghai HuaYi Fine Chemical Co., Ltd,
Shanghai, China
Description of the defined benefit plans
The strategy of the BASF Group with regard to financing
pension commitments is aligned with country-specific
supervisory and tax regulations.
Gazprom Germania GmbH,
BASF Report 2015
Notes Notes on balance sheet
Consolidated Financial Statements
200
199
The obligations and the plan assets used to fund the
obligations are exposed to demographic, legal and economic
risks. Economic risks are primarily due to unforeseen
developments on commodity and capital markets. They affect,
for example, pension adjustments based on the level of infla-
tion in Germany and in the United Kingdom, as well as the
impact of the discount rate on the amount of the defined
benefit obligation. In previous years, measures taken to close
plans with defined benefits for future service, especially
benefits based on final pay promises and the assumption of
healthcare costs for former employees, however, led to a
reduction in risk with regard to future benefit levels.
to cover pension obligations, which are based on actuarial
assumptions that may differ from those in IAS 19. Furthermore,
there are restrictions in qualitative and quantitative terms relat-
ing to parts of the plan assets for the investment in certain
asset categories. This could result in fluctuating employer
contributions, financing requirements and the assumption of
obligations in favor of the pension funds to comply with the
regulatory requirements.
In some countries especially in Germany, the United
Kingdom, Switzerland and Belgium - there are pension obliga-
tions subject to government supervision or similar legal restric-
tions. For example, there are minimum funding requirements
Economic and legal environment of the plans
The Group Pension Committee monitors the risks of all
pension plans of the Group. In this connection, it issues
guidelines regarding the governance and risk management of
pension plans, particularly with regard to the funding of the
pension plans and the portfolio structure of the existing plan
assets. The organization, responsibilities, strategy, implemen-
tation and reporting requirements are documented for the
units involved.
In addition to state pension plans, most employees are granted
company pension benefits from either defined contribution or
defined benefit plans. Benefits generally depend on years of
service, contributions or compensation, and take into
consideration the legal framework of labor, tax and social
security laws of the countries where the companies are
located. To limit the risks of changing financial market
conditions as well as demographic developments, employees
have been almost exclusively offered defined contribution
plans for future years of service in recent years.
22 Provisions for pensions and similar obligations
Limited, Richmond, England, were eliminated due to the asset
swap with Gazprom on September 30, 2015.
1 Equity stake in W & G Transportation Holding GmbH and OPAL Gastransport GmbH & Co. KG: 50.03%; voting rights and portion of earnings: 49.98%
581
629
96
102
35
40.00
49
40.00
39
34.00
71
114
Cash flow hedges
Million €
20 Other comprehensive income
28,777
30,120
Retained earnings
534
28,243
29,526
Other retained earnings
594
Legal reserves
Dec. 31,
2014
Dec. 31,
2015
Million €
In accordance with the resolution of the Annual Shareholders'
Meeting on April 30, 2015, BASF SE paid a dividend of €2.80
per share from the retained profit of the 2014 fiscal year. With
918,478,694 shares entitled to dividends, this amounts to a
total dividend payout of €2,571,740,343.20.
Payment of dividends
The acquisition of shares in companies which BASF
already controls or includes as a joint arrangement in the
Consolidated Financial Statements is treated as a transaction
between shareholders, as long as this does not lead to a
change in the consolidation method. There were no trans-
actions of this type in 2015, as in the previous year.
Due to the disposal of the 25% share in Solvin to partner
Solvay, of parts of the pharmaceutical ingredient business to
Siegfried Holding AG, Zofingen, Switzerland, and the asset
swap with Gazprom, an amount of €68 million resulting from
the remeasurement of defined benefit plans was transferred
from other comprehensive income into retained earnings.
Transfers from other retained earnings increased legal
reserves by €60 million in 2015 (2014: €46 million).
Capital surplus includes effects from BASF's share program,
premiums from capital increases and consideration for war-
rants and negative goodwill from the capital consolidation
resulting from acquisitions of subsidiaries in exchange for the
issue of BASF SE shares at par value.
Reserves and retained earnings
BASF SE has only issued fully paid-up registered shares
with no par value. There are no preferences or other restrictions.
BASF SE does not hold any treasury shares.
At the Annual Shareholders' Meeting on May 2, 2014,
shareholders authorized the Board of Executive Directors, with
the approval of the Supervisory Board, to increase the
subscribed capital by issuing new registered shares up to a
total of €500 million against cash or contributions in kind
through May 1, 2019. The Board of Executive Directors is
empowered, following the approval of the Supervisory Board,
to decide on the exclusion of shareholders' subscription rights
for these new shares in certain predefined cases covered by
the enabling resolution. Until now, this option has not been
exercised and no new shares have been issued.
Authorized capital
BASF Report 2015
19 Capital, reserves and retained earnings
Notes Notes on balance sheet
Germany
Consolidated Financial Statements
Translation adjustments
49.98
The strong decline in the value of the euro relative to the
U.S. dollar in the 2015 business year was the main factor
leading to an increase of €911 million in the translation adjust-
ment to €652 million.
Hedging future cash flows at Nord Stream AG, Zug,
Switzerland, a company accounted for using the equity
method, resulted in a change of €16 million in 2015 and of
minus €29 million in 2014.
%
Million €
Equity stake
Equity stake
%
December 31, 2014
December 31, 2015
Notes Notes on balance sheet
Consolidated Financial Statements
Total
Other
BASF TODA Battery Materials, LLC, Tokyo, Japan
BASF Shanghai Coatings Co. Ltd., Shanghai, China
BASF TOTAL Petrochemicals LLC, Port Arthur, Texas
Shanghai BASF Polyurethane Company Ltd.,
Shanghai, China
Shah Alam, Malaysia
BASF PETRONAS Chemicals Sdn. Bhd.,
Moscow, Russia
Gazprom Group,
Partner
BASF India Ltd., Mumbai, India
W & G Transport Holding GmbH, OPAL Gastransport
GmbH & Co. KG¹
W & G Beteiligungs-GmbH & Co. KG, WINGAS
GmbH, WINGAS Holding GmbH, WINGAS UK Limited
WIGA Transport Beteiligungs-GmbH & Co. KG,
Group company
21 Minority interests
BASF Report 2015
For more information on the remeasurement of defined benefit plans,
see Note 22 on page 199
Due to the disposal of the 25% share in Solvin to partner
Solvay, parts of the pharmaceutical ingredients and services
business to Siegfried Holding AG, Zofingen, Switzerland, and
the asset swap with Gazprom, an amount of €68 million result-
ing from the remeasurement of defined benefit plans was
reclassified from other comprehensive income into retained
earnings.
Remeasurement of defined benefit plans
For more information on cash flow hedge accounting, see Note 27.4 on
page 215
The significant decline in the hedging of future cash flows in
2015 was primarily a result of the disposal of the negative fair
values of commodity derivatives at WINGAS GmbH, Kassel,
Germany, in connection with the asset swap with Gazprom.
For BASF SE and German Group companies, a basic level of
benefits is provided by BASF Pensionskasse VVaG, a legally
independent funded plan, which is financed by contributions
of employees and the employer as well as the return on plan
assets. BASF SE ensures the necessary contributions to
adequately finance the benefits promised by BASF Pensions-
kasse WaG. Some of the benefits financed via the BASF
Pensionskasse WaG are subject to adjustments that must be
borne by its member companies to the extent that these
cannot be borne by BASF Pensionskasse WaG due to the
regulations imposed by the German supervisory authority. In
2004, the basic benefits plan at BASF was closed for new
employees at German BASF companies and replaced by a
defined contribution plan. At BASF SE, occupational pension
promises that exceed the basic level of benefits are financed
under a contractual trust arrangement by BASF Pensionstreu-
hand e. V.; at German Group companies, these benefits are
almost exclusively financed via pension provisions. The
benefits are largely based on cash balance plans. Furthermore,
employees are given the option of participating in various
deferred compensation schemes.
3.70
Employees are granted benefits based on defined contribution
plans.
2,100
2014
2015
2,000
2014
(1,850)
1,240
Decrease by 0.5 percentage points
Increase by 0.5 percentage points
2015
(1,750)
1,120
Projected pension increase
Discount rate
Sensitivity of the defined benefit obligation as of December 31 (in million €)
A change in the material actuarial assumptions would have the following effects on the defined benefit obligation:
Sensitivity analysis
S1PxA (standard actuarial mortality tables for
self-administered plans [SAPS])
BVG 2010 generation
Heubeck Richttafeln 2005G (modified)
RP-2014 (modified) with MP-2014 generational
projection
Switzerland
United Kingdom
Germany
United States
Actuarial mortality tables (significant countries) as of Dec. 31, 2015
The valuation of the defined benefit obligation is generally
made using the most recent actuarial mortality tables as of
December 31 of the respective financial year, which in
Germany and the United States are derived from the BASF
Group population and were last updated for the pension obli-
gations in Germany in 2015 and for the pension obligations in
the United States in 2014.
A Group-wide, uniform procedure is used to determine the
discount rates used for the valuation of material pension
obligations of the BASF Group. Accordingly, the discount
rates were derived from the yields on corporate bonds in the
respective currency zones with an issuing volume of more than
100 million units of the respective currency with a minimum
rating of AA- up to AA+ from one of the three rating agencies:
Fitch, Moody's, or Standard & Poor's.
The assumptions used to ascertain the defined benefit
obligation as of December 31 are used in the following year to
determine the expenses for pension plans.
3.10
2.90
2.00
1.75
4.40
2.40
1.00
(930)
4.80
(1,070)
amounts based on alternative changes in the assumptions as
198
2
(2)
(3)
149
196
560
658
274
273
286
385
2014
2015
BASF Report 2015
Expenses for pension benefits (recognized in the financial result)
Net interest expenses from underfunded pension plans and similar obligations
Net interest income from overfunded pension plans
Interest cost for the asset ceiling
Expenses for pension benefits (recognized in income from operations)
Expenses for defined contribution plans
Expenses for defined benefit plans
Composition of expenses for pension benefits (in million €)
Explanation of the amounts in the statement of income and balance sheet
Notes Notes on balance sheet
Consolidated Financial Statements
202
201
well as an addition of combined changes in the individual
assumptions is not possible.
An alternative valuation of the defined benefit obligation was
conducted in order to determine how changes in the
underlying assumptions would influence the amount of the
defined benefit obligation. A linear extrapolation of these
United States
3.90
2.40
2014
2015
2014
2015
United
Kingdom
Switzerland
United States
Germany
Notes Notes on balance sheet
Consolidated Financial Statements
Projected pension increase
Discount rate
Assumptions used to determine the defined benefit obligation as of December 31
The valuation of the defined benefit obligation is largely based on the following assumptions:
Actuarial assumptions
BASF Report 2015
In the case of subsidiaries in other countries, defined benefits
are covered in some cases by pension provisions, but mainly
by external insurance companies or pension funds.
Other countries
The financing of the pension plans is determined by the
provisions of the regulatory authority for pensions and the
relevant social and labor law requirements. The defined benefit
plans are administered by a trust company, whose Board of
Trustees, according to the trustee agreement and law,
represents the interests of the beneficiaries and ensures that
the benefits can be paid in the future. The required funding is
determined using technical valuations according to local
regulations every three years.
A part of the workforce received benefit increases
depending on service period in connection with a career
average plan until December 31, 2015. The BASF Group
maintains defined benefit plans in the United Kingdom, which
were closed for further increases in benefit from future years of
service. Adjustments to compensate for increases in the cost
of living until the beginning of retirement are legally required for
beneficiaries of defined benefit plans.
Employees are granted benefits based on a defined
contribution plan.
United Kingdom
The employees of the BASF Group in Switzerland receive a
company pension, which is financed through a pension fund
by employer and employee contributions as well as the return
on assets. The pension plan is accounted for as a defined
benefit plan, as the obligatory minimum pension guaranteed
by law according to the Swiss law "Berufliche Vorsorge (BVG)"
is included in the scheme. All benefits vest immediately.
According to government regulations, the employer is
obligated to make contributions, so that the pension fund is
able to grant minimum benefits guaranteed by law. The pen-
sion fund is managed by a board, where employer and
employees are equally represented, that steers and monitors
the benefit plan and assets.
Switzerland
Additional similar obligations arise from plans which
assume the healthcare costs and life insurance premiums of
retired employees and their dependents. Such plans are
closed to new entrants since 2007. In addition, the amount of
the benefits for such plans is frozen.
The legal and regulatory frameworks governing the plans
are based on the U.S. Employee Retirement Income Security
Act (ERISA), which requires the plan sponsor to ensure a
minimum funding level. Any employer contributions necessary
to meet the minimum funding level would be based on the
results of an actuarial valuation. Furthermore, there are
unfunded pension plans that are not subject to ERISA.
The existing defined benefit plans were closed to further
increases in benefits based on future years of service, and
benefits earned in the past have been frozen. There is no
entitlement to pension adjustments to compensate for
cost-of-living increases.
2015
3.90
2014
2014
2014
2015
2014
2015
2014
2015
2014
2015
United
Kingdom
Switzerland
United States
Germany
Projected pension increase
Discount rate
Assumptions used to determine expenses for pension benefits in each business year
2.90
2.90
1.75
1.50
3.70
4.00
1.00
0.80
3.90
4.20
2.40
2.50
2015
197
21
337
Other
10
16
Insurance compensation receivables
4
39
8
33
Receivables from finance leases
656
177
474
130
384
855
194
811
Derivatives with positive fair values
Loans and interest receivables
Noncurrent
Current
Noncurrent
December 31, 2014
December 31, 2015
Other receivables and miscellaneous assets (in million €)
18 Receivables and miscellaneous assets
Current
173
357
88
839
663
Other receivables and assets
Other receivables and assets which do not qualify as financial
instruments
Precious metal trading items
Other
29
11
193
Employee receivables
831
62
875
102
Tax refund claims
91
133
Defined benefit assets
238
49
176
61
Prepaid expenses
1,682
1,159
1,049
1,358
Other receivables and assets which qualify as financial instruments
Of total inventories, €770 million was measured at net
realizable value in 2015 and €1,320 million in 2014.
A write-up of inventory was recognized in the amount of
€22 million in 2015 and in the amount of €2 million in 2014.
Cost of sales included inventories recognized as an
expense amounting to €38,199 million in 2015, and
€43,841 million in 2014.
Work-in-process, finished goods and merchandise are
combined into one item due to the production conditions in
the chemical industry. Services-in-process primarily relate to
services not invoiced as of the balance sheet date.
(87)
53
(117)
398
(781)
40
(107)
847
16
4,174
3,245
2014
2015
Other financial assets
Other shareholdings
Long-term securities
Other financial assets (in million €)
Net carrying amount as of December 31
Exchange differences
Transfers
Disposals
Additions
Changes in scope of consolidation
Balance as of January 1
Investments accounted for using the equity method (in million €)
16 Investments accounted for using the equity method and other financial assets
Consolidated Financial Statements
Notes Notes on balance sheet
BASF Report 2015
4,436
933
3,245
December 31, 2014
BASF Report 2015
Consolidated Financial Statements
Notes Notes on balance sheet
196
195
11,266
94
69
9,693
8,358
6,680
2,814
December 31, 2014
December 31, 2015
2,944
Inventories
Advance payments and services-in-process
Work-in-process, finished goods and merchandise
Raw materials and factory supplies
Million €
17 Inventories
The change in other shareholdings resulted from additions
of €24 million and disposals of €57 million. Impairments
amounted to €47 million. Other shareholdings increased by
€26 million as a result of reclassifications and transfers. Cur-
rency effects amounted to €12 million.
For a detailed overview of income from companies accounted for using
the equity method, see Note 9 on page 185
for oil and gas and the resulting revision of planning assump-
tions, the share in Wintershall Noordzee B.V. was impaired by
€109 million. This amount is also reflected in transfers. The
recoverable amount of €291 million corresponds to the value
in use of the company, and was determined using the after-tax
cash flows from the oil and gas fields in which the company
has interests. They were discounted using a cost of capital
rate after taxes of 7.8%. In 2014, transfers had included
impairments of €25 million. Transfers additionally contains
income and dividend distributions from companies accounted
for using the equity method.
Transfers include €407 million from the first-time use of
the equity method to account for Wintershall Noordzee B.V.,
Rijswijk, Netherlands. As a result of the disposal of its 50%
share in Wintershall Noordzee B.V. to Gazprom, BASF no
longer exercises control over this company alone but rather
shares control with Gazprom. Wintershall Noordzee B.V. must
now therefore be accounted for using the equity method in the
Consolidated Financial Statements. Due to ongoing low prices
Disposals totaling €107 million were primarily attributable
to the sale of BASF's 25% share in SolVin to its partner Solvay,
effective July 1, 2015. In the previous year, the sale of BASF's
share in Styrolution Holding GmbH to the INEOS Group had
been primarily responsible for disposals of €781 million.
Additions of €847 million to investments accounted for using
the equity method were primarily due to the asset swap with
Gazprom. As a result, the closed joint stock company Achim
Trading in Moscow, Russia, and the limited liability company
Achim Development in Novy Urengoy, Russia, were accounted
for using the equity method for the first time.
462
78
540
106
526
420
December 31, 2015
66
311
126
In 2015, individual valuation allowances of €18 million were
recognized for other receivables. In 2014, individual valuation
allowances of €1 million were recognized for other receivables
and €1 million were reversed.
At BASF, a new comprehensive, global credit insurance
program covers trade accounts receivable incurred since
January 1, 2015. As part of a global excess of loss policy, an
essential part of future bad debts of the BASF Group are
insured. There were no compensation claims in 2015.
Even in the current economic environment, BASF has not
observed any material changes in the credit quality of its
receivables. In 2015, individual valuation allowances of
€57 million were recognized for accounts receivable, trade,
and valuation allowances of €17 million were reversed.
In 2014, individual valuation allowances of €65 million were
recognized for trade accounts receivable and valuation allow-
ances of €23 million were reversed.
The changes not recognized in income were primarily
related to changes in the scope of consolidation, translation
adjustments and derecognition of uncollectible receivables.
The changes recognized in income contained individual
valuation allowances, group-wise individual valuation allow-
ances and valuation allowances due to transfer risks.
445
70
49
48
87
427
108
18
25
1
1
101
337
52
24
47
86
326
2014
income
Balance as of
December 31,
Reversals not
recognized in
The recognition and reversal of individual valuation
allowances for trade accounts receivable and other receiv-
ables are recognized in the income statement.
Additions not
recognized in
income
Aging analysis of accounts receivable, trade (in million €)
Past due less than 30 days
10,722
298
9,814
301
424
265
422
3
136
8
135
4
697
3
435
29
9,465
22
8,822
Valuation allowances
December 31, 2014
Gross value
Valuation allowances
Gross value
December 31, 2015
Total
Past due more than 90 days
Past due between 30 and 89 days
Not yet due
As of December 31, 2015, there were no material other receivables classified as financial instruments that were overdue and for
which no valuation allowance was made.
income
2014
recognized in
recognized in
Reversals
Additions
Balance as
of January 1,
2015
Notes Notes on balance sheet
Consolidated Financial Statements
Total
Other receivables
Accounts receivable, trade
Valuation allowances for receivables 2015 (in million €)
BASF Report 2015
Other receivables and assets which qualify as financial
instruments include financial receivables, such as receivables
from the sale of assets. The decrease in 2015 was primarily
attributable to the settlement of the receivable in the amount of
€200 million arising from the sale of Styrolution Holding GmbH.
Precious metal trading items primarily comprise physical
items and precious metal accounts as well as long positions in
precious metals, which are largely hedged through sales or
derivatives. In comparison with the previous year, there was a
decline particularly relating to the physical items.
The increase in other receivables from tax refund claims
was largely due to higher income tax receivables as a result of
prepayments.
Prepaid expenses in 2015 included prepayments of €41 mil-
lion related to operating activities compared with €58 million in
2014, as well as €36 million in prepayments for license costs
in 2015 compared with €29 million in 2014. At €30 million,
prepayments for insurance in 2015 remained at the prior-year
level.
The increase in noncurrent derivatives with positive fair
values was largely attributable to the increase in interest rate
and currency swaps. The decrease in current derivatives with
positive fair values was mainly due to the disposal of
WINGAS GmbH, Kassel, Germany. In connection with this,
derivatives with positive fair values amounting to €158 million
were derecognized. This was partially offset by increasing fair
values of precious metal derivatives.
Noncurrent loans and interest receivables in 2015 predomi-
nantly included loans granted by WIGA Transport Beteili-
gungs-GmbH & Co. KG, Kassel, Germany, to NEL Gastrans-
port GmbH, Kassel, Germany, and GASCADE Gastransport
GmbH, Kassel, Germany, in the amount of €398 million to
finance the pipeline network, as well as loans granted by BASF
Belgium Coordination Center Comm. V., Antwerp, Belgium, in
the amount of €216 million mainly to finance the business
expansion of Asian companies. This item also included
receivables in favor of BASF SE from the BASF Pensions-
kasse arising from an agreement regarding the granting of
profit participation capital in the amount of €80 milion.
4,032
1,498
3,095
1,720
2,350
339
2,046
362
319
income
income
income
Reversals not
recognized in
Reversals
recognized in
Additions
recognized in
Balance as
of January 1,
Total
Other receivables
Accounts receivable, trade
Valuation allowances for receivables 2014 (in million €)
373
181
52
41
98
445
75
70
19
18
108
298
111
33
41
80
337
2015
income
Balance as of
December 31,
Additions not
recognized in
income
149
464
The net interest on the defined benefit liability is recognized
in the financial result. This results from the difference between
the interest cost of the defined benefit obligation and the
standardized return on plan assets as well as the interest cost
for the asset ceiling. The expected contribution payments and
Pension obligations
2015
2014
Plan assets
2015
Net defined benefit liability
2014
2015
2014
16,029
16,864
11,671
11,394
(4,358)
BASF Report 2015
(5,470)
4,131
2,717
2,604
(1,639)
(1,527)
2,108
2,019
1,939
1,875
(169)
(144)
1,780
1,769
4,356
1,890
Total
United Kingdom
397
148
12
37
(22)
Other changes
26
(26)
Currency effects
(175)
(164)
Net defined benefit liability as of December 31
(6,180)
Other
(7,222)
133
91
provisions for pensions and similar obligations
(6,313)
(7,313)
203
204
Consolidated Financial Statements
Notes Notes on balance sheet
Regional allocation of defined benefit plans as of December 31 (in million €)
Germany
United States
Switzerland
Thereof defined benefit assets
1,840
110
71
1
100
100
Cash and cash equivalents
Total
The asset class debt instruments comprises promissory notes
and debentures (Pfandbriefe) in addition to corporate and gov-
ernment bonds. Government bonds primarily concern bonds
from those countries enjoying the highest credit ratings, such as
the United States, United Kingdom, Germany and Switzerland.
Corporate bonds mainly comprise investment-grade bonds,
whereby particular high-yield bonds are also held to a limited
extent. In connection with the ongoing monitoring of default
risk based on a given risk budget and on the continuous
observation of the development of the creditworthiness of
issuers, an adjustment of plan asset allocation to a revised
market assessment may be made, if necessary. Alternative
investments largely comprise investments in private equity,
absolute return funds and senior secured loans.
Almost all of the equities are priced on active markets.
The category debt instruments includes promissory notes
and debentures (Pfandbriefe), which were acquired through
private placements with a market value in the amount of
€1,072 million as of December 31, 2015, and €1,381 million
as of December 31, 2014. For such securities, especially
those held by domestic pension plans, there is no active mar-
ket. The capital market compensates for this lack of fungibility
with yield premiums depending on the maturity. With only a
few exceptions, there is no active market for plan assets in
real estate and alternative investments.
On December 31, 2015, plan assets contained securities
issued by BASF Group companies with a market value of
€11 million in 2015 and €10 million in 2014. The market value
of the properties of legally independent pension funds rented
to BASF Group companies amounted to €151 million on
December 31, 2015, and €168 million on December 31, 2014.
Since 2010 there has been an agreement between
BASF SE and BASF Pensionskasse about the granting of
profit participation capital with a nominal value of €80 million,
which is used to strengthen the financing of the BASF Pen-
sionskasse. No material transactions beyond this took place
between the legally independent pension funds and BASF
Group companies in 2015.
The funding of the plans was as follows:
Current funding situation of the pension plans as of December 31 (in million €)
Unfunded pension plans
Funded pension plans
1
Total
2014
Defined benefit
obligation
2,611
Plan assets
Defined benefit
obligation
Plan assets
2,800
22,250
18,681
22,674
24,861
18,681
25,474
18,252
18,252
2015
13
15
Alternative investments
588
24,861
691
25,474
464
18,681
539
(124)
(152)
18,252
(6,180)
(7,222)
Explanations regarding plan assets
The target asset allocation has been defined by using asset
liability studies and is reviewed regularly. Accordingly, plan
assets are are aligned with the long-term development of the
obligations, taking into consideration the risks associated with
the specific asset classes and the regulations relating to the
investment of plan assets. The existing portfolio structure is
oriented towards the target asset allocation. In addition,
current market assessments are taken into consideration. In
order to mitigate risks and maximize returns, a widely spread
global portfolio of individual asset classes is held.
Liability-driven investment (LDI) techniques, such as hedg-
ing the risk of changes in interest rates and inflation, are used
in some pension plans, especially in the U.K. and U.S. plans.
Structure of plan assets (in %)
2015
Equities
26
27
Debt instruments
54
55
Thereof for government debtors
15
11
for other debtors
39
44
Real estate
4
4
284
Plan settlements
2014
Effects from acquisitions and divestitures
(48)
(37)
Plan settlements
(357)
Other changes
(65)
3
Currency effects
Defined benefit obligation as of December 31
795
628
24,861
25,474
Past service cost
In the Netherlands in 2014, pension obligations and plan assets
were transferred to an insurance company with discharging
effect in connection with a plan settlement.
BASF Report 2015
Development of plan assets (in million €)
Plan assets as of January 1
Standardized return on plan assets
Deviation between actual and standardized return on plan assets
Employer contributions
Participants' contributions
Benefits paid
Effects from acquisitions and divestitures
Past service cost
Plan settlements
Other changes
Currency effects
Plan assets as of December 31
As of December 31, 2015, the weighted average duration of
the defined benefit obligation amounted to 15.3 years (previ-
ous year: 16.1 years).
(313)
Effects from acquisitions and divestitures
38
Past service cost
benefits paid over the course of the financial year are
considered in the determination of net interest.
Net interest expense of the respective financial year is
based on the discount rate and the defined benefit obligation.
at the beginning of the year. The net interest expense from
underfunded pensions and similar obligations increased
compared with the previous year, mainly as a result of the
higher defined benefit obligation as of December 31, 2014.
Development of defined benefit obligation (in million €)
Defined benefit obligation as of January 1
Current service cost
Interest cost
Benefits paid
Participants' contributions
2015
2014
25,474
20,784
397
301
680
806
(1,006)
(959)
53
54
Actuarial gains/losses
for adjustments relating to financial assumptions
(868)
4,095
(135)
118
experience adjustments
(103)
Consolidated Financial Statements
Notes Notes on balance sheet
adjustments relating to demographic assumptions
2014
to plan sponsors. To the extent that these requirements are
not met, recognition is not possible due to the necessity of an
asset ceiling.
Development of the net defined benefit liability (in million €)
Net defined benefit liability as of January 1
2015
(7,222)
2014
(3,680)
Current service cost
(397)
(301)
Interest cost
(680)
(806)
Interest cost for the asset ceiling
(2)
Standardized return on plan assets
659
Deviation between actual and standardized return on plan assets
(145)
678
Actuarial gains/losses of the defined benefit obligation
1,106
(4,251)
Changes in asset ceiling recognized directly in equity
84
Benefits paid by unfunded plans
376
175
2015
Employer contributions
Assets from overfunded plans can only be recognized to the
extent that it is possible that the existing overfunded plans can
be used for the reduction of future contributions or the return
2
(84)
487
2014
17,186
82
487
659
(145)
678
284
397
18,252
54
(630)
(784)
(165)
(36)
53
Development of asset ceiling (in million €)
Changes recognized directly in equity in the business year
Asset ceiling as of December 31
(379)
Interest cost for the asset ceiling
Asset ceiling as of January 1
The estimated contribution payments for defined benefit plans
for 2016 are €300 million.
The standardized return on plan assets is calculated by multi-
plying plan assets at the beginning of the year with the dis-
count rate used for existing defined benefit obligation at the
beginning of the year, taking into account benefit and contribu-
tion payments expected to be made during the year.
2015
18,681
Expenses for defined benefit plans increased significantly in
comparison with the previous year, as the decline in the
discount rate in the course of 2014 led to an increase in the
current service cost in 2015.
620
(23)
(39)
18,252
Liabilities related to social security
2,463
814
Advances received on orders
447
443
374
171
218
95
148
23
Employee liabilities
147
Liabilities from precious metal trading positions
240
73
1,373
19
47
75
288
Deferred income
1,172
64
22
60
71
Loans and interest liabilities
331
265
303
632
Miscellaneous liabilities
732
43
969
Other liabilities which qualify as financial instruments
Miscellaneous liabilities
26
Other liabilities
For more information on liabilities arising from leasing contracts,
see Note 28 from page 216 onward
Secured liabilities (in million €)
Liabilities to credit institutions
Other liabilities
Secured liabilities
Dec. 31,
2015
Dec. 31,
2014
24
For more information on financial risks and derivative financial
instruments, see Note 27 from page 210 onward
24
50
116
Liabilities to credit institutions were secured primarily with
registered land charges. The decline in secured other liabili-
ties compared with December 31, 2014, is primarily attribut-
able to the disposal of WINGAS GmbH, Kassel, Germany, as
part of the asset swap with Gazprom. As in the previous year,
there were no secured contingent liabilities in 2015.
25 Other financial obligations
The figures listed below are stated at nominal value:
Liabilities from finance leases
Million €
92
The decline in other liabilities was primarily attributable to the
asset swap with Gazprom and largely affected the current
negative fair values arising from derivatives as well as non-
current loans and interest liabilities. The appreciation of the
U.S. dollar relative to the euro further led to a decrease in the
negative fair values arising from derivatives.
Other liabilities
1,197
73
18
71
163
154
179
265
21
167
10
1,147
426
1,101
383
2,520
869
3,564
Other liabilities which do not qualify as financial instruments
Derivative instruments with negative fair values
Following year 6 and maturities beyond this year
Total
Current
December 31, 2014
11,366
3,659
1,696
884
833
268
326
9,499
261
167
57
151
160
81
100
74
429
December 31, 2015
Notes Notes on balance sheet
Consolidated Financial Statements
Bills of exchange
Chinese renminbi
Argentinian peso
Norwegian krone
Indian rupee
Turkish lira
Ukrainian hryvnia
Swiss franc
Canadian dollar
Other currencies
Total
Maturities of financial indebtedness (in million €)
Following year 1
Following year 2
Following year 3
Following year 4
Following year 5
88
Noncurrent
65
166
Other bonds consist primarily of industrial revenue and
pollution control bonds of the BASF Corporation group that
were used to finance investments in the United States. Both
the weighted-average interest rate of these bonds as well as
their weighted-average effective interest rate amounted to
1.5% in 2015 and 1.6% in 2014. The average residual term
amounted to 210 months as of December 31, 2015 (Decem-
ber 31, 2014: 222 months).
Liabilities to credit institutions
In order to finance the natural gas trading and storage
business, a €1,650 million loan was incurred with a 5-year
term at an interest rate of 1.08% in the previous year.
As a result of higher volumes of loans in emerging
countries, the weighted average interest rate on loans
increased to 4.9% in 2015 compared with 4.0% in 2014.
Unused credit lines
BASF SE had committed and unused credit lines with variable
interest rates amounting to €6,000 million as of December 31,
2015 and as of December 31, 2014.
207
Other bonds
208
Notes Notes on balance sheet
Other liabilities (in million €)
BASF Report 2015
December 31, 2015
December 31, 2014
Current
Noncurrent
Consolidated Financial Statements
15,384
15,197
5,372
39
88
78
15,197
15,384
December 31, 2015
4,074
December 31, 2014
3,545
1,625
981
1,865
1,526
2,099
1,790
303
2,170
5,231
46
Guarantees
1,900
Collateral granted on behalf of third-party liabilities
The variable interest exposure, which also includes fixed
rate bonds set to mature in the following year, amounted to
minus €2,786 million as of December 31, 2015, compared
with minus €3,343 million as of December 31, 2014. An
increase in all relevant interest rates by one percentage point
would have raised income before taxes and minority interests
by €7 million as of December 31, 2015, and raised income
before taxes and minority interests by €12 million as of
December 31, 2014. The effect from the items designated
under hedge accounting would have increased equity before
income taxes by €20 million on December 31, 2015 (2014:
increase of €30 million).
Carrying amount of nonderivative interest-bearing financial instruments (in million €)
Loans
Securities
Financial indebtedness
December 31, 2015
Fixed
interest rate
258
69
Interest rate risks: Interest rate risks result from changes
in prevailing market interest rates, which can cause a change
in the fair value of fixed-rate instruments, and changes in the
interest payments of variable-rate instruments. To hedge these
risks, interest rate swaps and combined interest rate and
currency derivatives are used. While these risks are relevant to
the financing activities of BASF, they are not of material
significance for BASF's operating activities.
11,114
December 31, 2014
Fixed
interest rate
264
33
11,673
Nominal and fair values of interest rate swaps and combined interest and cross-currency swaps (in million €)
Interest rate swaps
Thereof payer swaps
Combined interest and cross-currency swaps
Thereof fixed rate
Variable
interest rate
760
Variable
interest rate
744
58
4,083
Due to the use of options to hedge currency risks, the sensi-
tivity analysis is not a linear function of the assumed changes
in exchange rates.
Total
Other
2015
2015
2014
Sensitivity
Dec. 31,
2014
USD
2,057
(260)
1,767
(261)
144
(28)
242
(42)
2,201
(288)
2,009
(303)
42
3,711
Exposure
Dec. 31,
December 31, 2015
Fair value
- BASF uses commodity derivatives to hedge the risks from
the volatility of raw material prices. These are primarily
options and swaps on crude oil, oil products and natural
gas.
- In order to secure margins, the Oil & Gas segment used
commodity derivatives, primarily swaps on oil products, up
to the completion of the asset swap with Gazprom. Risks to
margins arise in volatile markets when purchase and sales
contracts are priced differently.
The Catalysts division enters into both short-term and long-
term purchase contracts with precious metal producers. It
also buys precious metals on spot markets from a variety of
business partners. The price risk from precious metals pur-
chased to be sold on to third parties, or for use in the
production of catalysts, is hedged using derivative instru-
ments. This is mainly done using forward contracts which
are settled by either entering into offsetting contracts or by
delivering the precious metals.
- In the Crop Protection division, the sales prices of products
are sometimes coupled to the price of certain agricultural
commodities. To hedge the resulting risks, derivatives on
agricultural commodities are concluded.
In addition, BASF holds limited unhedged precious metal and
oil product positions, which can also include derivatives, for
trading on its own account. The value of these positions is
exposed to market price volatility and is subject to constant
monitoring.
In connection with CO2 emissions trading, various types of
CO2 certificates are purchased and sold using forward con-
tracts. The goal of these transactions is to benefit from market
price differences. These deals are settled by physical delivery.
As of December 31, 2015 as well as of December 31, 2014,
there were no deals outstanding. BASF utilizes emission certif-
icate derivatives on a limited scale.
By holding commodity derivatives and precious metal
trading positions, BASF is exposed to price risks. The valua-
tion of commodity derivatives and precious metal trading posi-
tions at fair value means that adverse changes in market prices
could negatively affect the earnings and equity of BASF.
Commodity price risks: Some of BASF's divisions are
exposed to strong fluctuations in raw material prices. These
result primarily from raw materials (for example, naphtha, pro-
pylene, benzene, lauric oils, titanium dioxide, cyclohexane,
methanol, natural gas, butadiene, LPG condensate and
ammonia) as well as from precious metals. BASF takes the
following measures to reduce price risks associated with the
purchase of raw materials:
BASF performs value-at-risk analyses for all commodity
derivatives and precious metals trading positions. Using the
value-at-risk analysis, we continually quantify market risk and
forecast the maximum possible loss within a given confidence
interval over a defined period. The value-at-risk calculation is
based on a confidence interval of 95% and a holding period of
one day. The value-at-risk calculation for precious metals is
based on a confidence interval of 99%. BASF uses the
variance-covariance approach.
Exposure to commodity derivatives (in million €)
Crude oil, oil products
and natural gas
December 31, 2015
Value at
risk
Exposure
December 31, 2014
Value at
Exposure
BASF uses value at risk as a supplement to other risk
management tools. Besides value at risk, BASF sets
volume-based limits as well as exposure and stop-loss limits.
Consolidated Financial Statements
Notes Notes on balance sheet
BASF Report 2015
142
December 31, 2014
Nominal value
Fair value
Brazilian real
(31)
1,900
(31)
1,900
(31)
1,900
(31)
2,047
315
1,979
142
1,856
297
1,979
Nominal value
Dec. 31,
Sensitivity
Exposure
Dec. 31,
The decline in initiated investment projects from
€6,955 million as of December 31, 2014 to €4,672 million as
of December 31, 2015 was primarily attributable to the
completion of several investment projects in 2015.
BASF Report 2015
Consolidated Financial Statements
Notes Notes on balance sheet
Assets used under long-term leases
Assets used under long-term leases primarily concerned build-
ings and IT infrastructure.
For more information on liabilities arising from leasing contracts, see
Note 28 from page 216 onward
79
Obligations arising from purchase contracts
Obligations arising from long-term leases
Obligations arising from purchase contracts (in million €)
(excluding finance leases) (in million €)
2016
413
2016
2017
Obligations arising from purchase contracts resulted primarily
from long-term purchase obligations for raw materials. Firm
purchase obligations as of December 31, 2015, were as
follows:
80
21
10
Initiated investment projects
Thereof purchase commitments
for the purchase of intangible assets
Payment and loan commitments and other financial obligations
December 31, 2015
December 31, 2014
6
3
49
52
87
58
1
4,672
6,955
1,429
1,761
284
2017
2018
220
On August 12, 2014, Metrogas S.A., Chile, filed its Statement
of Claim in the arbitration proceedings initiated in May 2013
against Wintershall Energía S.A., Argentina (WIAR), Total Aus-
tral S.A., Argentina, and Pan American Energy LLC, Argentina.
The defendants, as sellers, concluded a natural gas supply
contract with Metrogas in 1997. Metrogas claims damages
valued in an amount of €220 million as a result of insufficient
gas deliveries. WIAR's share of supply in the contract is 37.5%.
The defendants submitted their response to the proof of claim
on December 10, 2014. The first witness and expert hearing is
scheduled for May 2016. The defendants are of the opinion
that Metrogas does not have any claim for damages.
BASF Corporation has potential liability under the
Comprehensive Response, Compensation and Liability Act of
1980, as amended, and related state laws for investigation
and cleanup at certain sites. The Lower Passaic River Study
Area (LPRSA) is one such site comprising the lower 17 miles of
the Passaic River in New Jersey. BASF Corporation, along
with more than 60 other companies (The Lower Passaic River
Study Area Cooperating Parties Group, CPG), agreed with the
U.S. Environmental Protection Agency (USEPA) to perform a
remedial investigation and feasibility study of the LPRSA.
Based on the remedy concept proposed by the CPG and
BASF's estimates of its share of these costs, BASF now con-
siders its portion to be immaterial. It is currently anticipated
that the final decision on the remedy for the lower portion of
the LPRSA will be taken in the course of the year 2016, with a
decision for the upper portion thereafter.
Since November 2014, a putative class action lawsuit in the
United States District Court of the Southern District of New
York has been pending against BASF Metals Limited (BML),
along with other defendants, alleging violations of antitrust and
commodities laws stemming from the price discovery process
for platinum and palladium. BASF Metals Limited, based in the
United Kingdom, and the other three defendants are accused
of improper conduct concerning the calculation of the market
prices of platinum and palladium. Four additional lawsuits
were filed between November 2014 and March 2015. All these
matters were consolidated, and a Second Consolidated
Amended Class Action Complaint was eventually filed in July
2015. This Complaint also names as a defendant, among
others, BASF Corporation. On September 21, 2015, defen-
dants filed a Joint Motion to Dismiss the Second Consolidated
Amended Class Action Complaint, and BML and BASF Cor-
poration filed individual motions to dismiss. In addition, a pro
se complaint with similar allegations was filed in the same
court in September 2015, and is currently on a separate
schedule than the consolidated action. In spring 2015, the
European Commission conducted investigations into the alle-
gation of anticompetitive practices in precious metal spot
trading within the E.U. and European Economic Area made
toward BASF and various banks. This investigation has not yet
returned results.
Furthermore, BASF SE and its affiliated companies are
defendants in or parties to a variety of judicial, arbitrational or
regulatory proceedings on a recurring basis. To our current
knowledge, none of these proceedings will have a material
effect on the economic situation of BASF.
209
210
Consolidated Financial Statements
Notes Notes on balance sheet
27 Supplementary information on financial instruments
BASF Report 2015
27.1
Financial risks
Market risks
Foreign currency risks: Changes in exchange rates could
lead to negative changes in the value of financial instruments
and adverse changes in future cash flows from planned trans-
actions. Foreign currency risks from financial instruments result
from the translation at the closing rate of financial receivables,
loans, securities, cash and financial liabilities into the functional
currency of the respective Group company. Foreign currency
contracts in a variety of currencies are used to hedge foreign
exchange risks from primary financial instruments and planned
transactions.
The foreign currency risk exposure corresponds to the net
amount of the nominal volume of the primary and the deriva-
tive financial instruments which are exposed to currency risks.
In addition, planned purchase and sales transactions of the
respective following year are included, if they fall under the
currency risk management system. Opposite positions in the
same currency are offset against each other.
The sensitivity analysis is conducted by simulating a 10%
appreciation of the respective functional currency against the
other currencies. The effect on BASF's income before taxes
and minority interests would have been minus €340 million as
of December 31, 2015, and minus €351 million as of Decem-
ber 31, 2014. The effect from the items designated under
hedge accounting would have increased the equity of the
shareholders of BASF SE before income taxes by €52 million
on December 31, 2015 (2014: increase of €48 million). After
the completion of the asset swap with Gazprom, this only
refers to transactions in U.S. dollars. The currency exposure
amounted to €2,201 million on December 31, 2015 (Decem-
ber 31, 2014: €2,009 million).
Exposure and sensitivity by currency (in million €)
The year-on-year decrease of €97,711 million to €34,140 mil-
lion in obligations arising from purchase contracts was mainly
the result of the disposal of WINGAS GmbH, Kassel, Germany,
and its purchase obligations from natural gas purchasing
agreements.
Warranties
34,140
2,824
2018
2019
157
2019
2020
123
2020
2021 and maturities beyond this year
Total
357
2021 and maturities beyond this year
1,554
Total
26 Risks from litigation and claims
8,050
5,146
4,272
3,623
10,225
British pound
Variable
Euro
715
640
(543)
(42)
5
775
Restructuring measures
contracts
156
(62)
(32)
5
196
Litigation, damage claims, warranties
and similar commitments
112
129
Obligations from sales and purchase
1,569
(16)
(4)
(321)
1,266
Environmental protection and remediation
costs
621
63
7
(158)
(13)
18
538
Employee obligations
1,744
1,277
4
(1,365)
(75)
48
(70)
(26)
(19)
Nominal value
(million,
currency of issue)
Effective
interest rate
December 31,
2015
December 31,
2014
BASF SE
Commercial paper
Currency
USD
1,714
124
4.5%
Bond 2006/2016
EUR
500
4.62%
1,869
Carrying amounts based on
effective interest method
Financial indebtedness (in million €)
24 Liabilities
86
Other
1,570
312
2
(281)
(157)
33
1,479
Total
6,346
2,656
59
(2,505)
(352)
(295)
5,909
(29)
500
46
1,428
621
166
Employee obligations
1,569
1,150
1,744
1,333
59
Obligations from sales and purchase contracts
763
715
708
Restructuring measures
196
165
156
775
538
Environmental protection and remediation costs
Thereof current
84
BASF Report 2015
Consolidated Financial Statements
205
Notes Notes on balance sheet
Defined contribution plans and government pensions
The contributions to defined-contribution plans contained in
income from operations amounted to €273 million in 2015 and
€274 million in 2014.
Contributions to government pension plans were €609 million
in 2015 and €573 million in 2014.
23 Other provisions
December 31, 2015
December 31, 2014
Million €
Restoration obligations
Thereof current
1,266
72
1,428
103
187
Litigation, damage claims, warranties and similar commitments
29
Consolidated Financial Statements
Notes Notes on balance sheet
Development of other provisions in 2015 (in million €)
BASF Report 2015
Unwinding
of the
Other
206
Dec. 31,
Additions
discount
Utilization
Reversals
changes
2015
Restoration obligations
Jan. 1, 2015
The following table shows the development of other
provisions by category. Other changes include changes in the
scope of consolidation, acquisitions, divestitures, currency
effects and the reclassification of obligations to liabilities when
the amount and timing of these obligations became known.
Other largely includes noncurrent tax provisions.
Provisions for litigation, damage claims, warranties and
similar commitments contain anticipated expenses from
lawsuits in which BASF is the defendant party, as well as obli-
gations under damage claims against BASF and fines.
112
48
Other
Total
1,479
1,570
402
5,909
2,540
6,346
2,844
Restoration obligations primarily relate to the estimated
costs for the filling of wells and the removal of production
equipment after the end of production in the Oil & Gas
segment. Provisions for restoration obligations decreased by
€340 million as a result of the asset swap with Gazprom and
the reclassification of Wintershall Noordzee B.V., Rijswijk,
Netherlands, to the equity method.
Provisions for environmental protection and remedia-
tion costs cover expected costs for rehabilitating conta-
minated sites, recultivating landfills, removal of environmental
contamination at existing production or storage sites and
similar measures. The decrease in provisions was almost
entirely attributable to the changed accounting for emission
right certificates granted free of charge.
For more information about the measurement of emission right
certificates, see Note 1.2 on page 162
Provisions for employee obligations primarily include obliga-
tions for the granting of long-service bonuses and anniversary
payments, variable compensation including associated social
security contributions, as well as provisions for early retirement
programs for employees nearing retirement. The decline was
mainly attributable to lower accruals for variable compensation
components.
For more information on provisions for the long-term incentive program,
see Note 30 from page 218 onward
Obligations from sales and purchase contracts largely
include obligations arising from rebates granted and other
price discounts in the Agricultural Solutions segment,
warranties and product liability, sales commissions, expected
losses on committed purchases and onerous contracts.
The restructuring measures provisions include severance
payments to employees as well as expected costs for site
closures, including the costs for demolition and similar
measures. The increase in provisions resulted from higher
accruals for restructuring measures in North America. On the
balance sheet date, €115 million was attributable to provisions
for severance payments.
86
499
Variable Bond 2013/2016
EUR
EUR
200
3.27%
199
199
3.89%
US Private Placement Series A 2013/2025
Bond 2013/2043
USD
3.92%
229
205
4.09%
US Private Placement Series B 2013/2028
USD
700
250
3.25%
198
198
NOK
1,450
3.70%
151
160
3%
Bond 2013/2033
EUR
500
3.15%
490
490
2.875%
Bond 2013/2033
EUR
200
3.09%
4.11%
3.675% Bond 2013/2025
641
4.43%
449
438
Other bonds
672
618
Bonds and other liabilities to the capital market
12,201
4.88%
12,548
2,996
2,836
Financial indebtedness
15,197
15,384
BASF Report 2015
Breakdown of financial indebtedness by currency (in million €)
Liabilities to credit institutions
477
EUR
Ciba Specialty Chemicals Finance Luxembourg S.A.
4.875% Bond 2003/2018
US Private Placement Series C 2013/2034
USD
300
4.45%
275
246
BASF Finance Europe N.V.
3.625% Bond 2008/2015
CHF
200
3.77%
5.125% Bond 2009/2015
EUR
2,000
5.07%
166
2,001
575
496
496
2.60%
544
512
4.625% Bond 2009/2017
EUR
300
4.69%
300
6.04%
300
GBP
250
1.46%
340
320
risk
Bond 2013/2018
1.375% Bond 2014/2017
400
GBP
5.875% Bond 2009/2017
200
variable
200
200
4.25%
Bond 2009/2016
EUR
200
4.40%
200
199
Variable Bond 2014/2017
EUR
300
variable
300
300
EUR
300
variable
300
Bond 2013/2021
EUR
700
1.94%
698
697
2%
Bond 2012/2022
EUR
1,250
1.93%
1,256
1,257
2.5%
Bond 2014/2024
EUR
500
1.875%
U.S. dollar
300
variable
300
1.5%
Bond 2012/2018
EUR
1,000
1.51%
1,000
1,000
1.375% Bond 2014/2019
EUR
750
1.44%
749
748
Variable Bond 2013/2020
EUR
300
300
58
302
959
Cash and cash equivalents
97
97
Afs
97
97
Securities
1,965
LaR
1,965
1,718
4,654
749
61
61
n/a
61
61
Derivatives with hedge accounting
23
772
aFVtPL
772
Other receivables and other assets6
772
1,718
1,718
2,836
AmC
2,836
2,836
124
AmC
124
124
13,234
AmC
LaR
12,424
810
1,838
15,041
15,503
18,192
Liabilities to credit institutions
Commercial paper
Bonds
Total assets
1,718
12,424
Derivatives no hedge accounting
10,385
LaR
Carrying amounts and fair values of financial instruments as of December 31, 2014 (in million €)
341
22
21,655
21,033
22,606
1,371
AmC
1,371
2,944
Thereof
Total liabilities
29
29
n/a
29
29
Derivatives with hedge accounting
312
22
334
aFVtPL
Other liabilities 6
fair value
level 35
Total carrying
amount within
10,385
10,385
43
n/a
43
43
level 35
level 24
fair value
fair value
fair value
level 13
0
0
Afs
Fair value
Thereof
Thereof
Thereof
Valuation
category in
accordance
with IAS 39²
scope of
application of
IFRS 7
462
462
Receivables from finance leases
Accounts receivable, trade
Shareholdings¹
Carrying
amount
Liabilities from finance leases
Accounts payable, trade
Derivatives - no hedge accounting
Derivatives with hedge accounting
The table "Offsetting of financial assets and financial liabilities"
shows the extent to which financial assets and financial
liabilities are offset in the balance sheet, as well as potential
effects from the offsetting of instruments subject to a legally
enforceable global netting agreement or similar agreement.
For positive fair values from combined interest and cross-
currency swaps, the respective counterparties provided cash
collaterals in the amount of the outstanding fair values.
823
(77)
(297)
485
(6)
(293)
784
1,197
(4)
(4)
Deviations from the derivatives with positive and negative
fair values reported in other receivables and other liabilities at
the end of 2015 and 2014 arose mainly from embedded
derivatives as well as derivatives not subject to any netting
agreements and therefore are not included in the table above.
788
1,201
Relating to
financial
collateral
netting
agreements
Net amount
Amount offset
Gross amount
Derivatives with positive fair values
Derivatives with negative fair values
Amounts which cannot be offset
Due to global
Amounts which can be offset
Offsetting of financial assets and financial liabilities as of December 31, 2014 (in million €)
185
Potential
net amount
Net gains and losses from financial instruments comprise the
results of valuations, the amortization of discounts, the recog-
nition and reversal of impairments, results from the translation
of foreign currencies as well as interest, dividends and all other
effects on the earnings resulting from financial instruments.
The line item financial instruments at fair value through profit or
loss contains only those gains and losses from instruments
which are not designated as hedging instruments as defined
by IAS 39. Net gains or net losses from available-for-sale
financial assets contain income and expenses from write-
downs/write-ups, interest, dividends and the reclassification of
valuation effects from equity on the sale of the securities and
shareholdings.
Net gains and losses from financial instruments (in million €)
2015
2
(19)
595
Financial instruments at fair value through profit or loss
(421)
(375)
Thereof interest result
(1,056)
(1,127)
Financial liabilities measured at amortized cost
1
0
224
10
105
105
389
(31)
Thereof interest result
Available-for-sale financial assets
Thereof interest result
Loans and receivables
2014
258
334
(296)
(7)
326
1,952
AmC
1,952
23,523
3,435
25,006
609
614
614
n/a
614
614
13
24,333
622
622
622
4,861
90
n/a
AmC
4,861
90
90
Total liabilities
Other liabilities 6
aFVtPL
13
1,223
1 The difference between carrying amount and fair value results from shareholdings measured at acquisition cost, for which the fair value could not be reliably determined
(2015: €420 million; 2014: €462 million).
(134)
688
Potential
net amount
Relating to
financial
collateral
netting
agreements
Net amount
Amount offset
(22)
(22)
710
348
Derivatives with negative fair values
Derivatives with positive fair values
Gross amount
BASF Report 2015
Amounts which cannot be offset
Due to global
Amounts which can be offset
Offsetting of financial assets and financial liabilities as of December 31, 2015 (in million €)
Notes Notes on balance sheet
Consolidated Financial Statements
214
6 Not including separately shown derivatives as well as receivables and liabilities from finance leases
5 Determination of the fair value based on parameters for which there is no observable market data
4 Determination of the fair value based on parameters for which directly or indirectly quoted prices on active markets are available
3 Determination of the fair value based on quoted, unadjusted prices on active markets
2 Afs: available-for-sale (category: available-for-sale financial assets); LaR: loans and receivables (category: loans and receivables); aFVtPL: at-fair-value-through-profit-or-loss
(category: financial assets and liabilities at fair value recognized in the income statement); AmC: amortized cost (category: financial liabilities which are not derivatives);
a more detailed description of the categories can be found in Note 1 from page 162 onward.
(134)
334
4,861
4,020
to credit
institutions
Liabilities
Bonds and other
liabilities to the
capital market
Total
2020 and thereafter
2019
2018
2017
2016
2015
Liabilities
resulting from
derivative finan-
cial instruments
Maturities of contractual cash flows from financial liabilities as of December 31, 2014 (in million €)
1,680
6,863
2,287
3,040
14,574
6,497
1,351
2,001
11111
1,938
2,161
19,719
Miscellaneous
liabilities
Total
3
1,572
905
2,022
12
12
3
1,995
1,747
37
6
24
1,680
1,308
40
33
57
1,178
5,643
877
821
1,197
2,748
5,990
11
Total
1,414
For more information regarding financial risks and BASF's risk
management, see the chapter "Opportunities and risks report"
in the Management's Report from page 113 onward
The exposure corresponds to the net amount of all long and
short positions of the respective commodity category.
24
1,154
4
91
0
120
0
0
Default and credit risk
Total
14
1
10
1
61
1
23
Precious metals
Emission certificates
Agricultural
commodities
22
Derivatives no hedge accounting
1
Default and credit risks arise when counterparties do not fulfill
their contractual obligations. BASF regularly analyzes the
creditworthiness of each significant debtor and grants credit
limits on the basis of this analysis. Due to the global activities
and diversified customer structure of the BASF Group, there is
no significant concentration of default risk. The carrying
amount of all receivables, loans and interest-bearing securities
plus the nominal value of other financial obligations subject to
default risk represents the maximum default risk for BASF.
For more information on credit risks, see Note 18 from page 196 onward
Liquidity risks
1,738
2,979
Liabilities
to credit
institutions
Bonds and other
liabilities to the
capital market
Total
2021 and thereafter
2020
2019
2018
2017
2016
Maturities of contractual cash flows from financial liabilities as of December 31, 2015 (in million €)
Trade accounts payable are generally interest-free and due
within one year. Therefore the carrying amount of trade
accounts payable equals the sum of future cash flows.
Derivatives are included using their net cash flows, pro-
vided they have a negative fair value and therefore represent a
liability. Derivatives with positive fair values are assets and are
therefore not considered.
The interest and principal payments as well as other payments
for derivative financial instruments are relevant for the presen-
tation of the maturities of the contractual cash flows from
financial liabilities. Future cash flows are not discounted here.
Maturity analysis
27.2
BASF Report 2015
Notes Notes on balance sheet
Consolidated Financial Statements
212
211
BASF promptly recognizes any risks from cash flow fluctua-
tions as part of the liquidity planning. BASF has ready access
to sufficient liquid funds from our ongoing commercial paper
program and confirmed lines of credit from banks.
Miscellaneous
liabilities
1,258
2,491
Liabilities
resulting from
derivative finan-
cial instruments
8
14,711
17,119
Total assets
2,241
2,241
LaR
2,241
2,241
Cash and cash equivalents
127
2,410
127
127
127
Securities
1,508
LaR
1,508
3,916
Other receivables and other assets
608
208
208
Afs
816
Bonds
10,487
AmC
6,484
4,020
4,020
Accounts payable, trade
82
n/a
82
82
Liabilities from finance leases
2,996
AmC
2,996
2,996
Liabilities to credit institutions
1,714
AmC
1,714
1,714
Commercial paper
11,109
AmC
10,487
n/a
208
14,291
Derivatives with hedge accounting
Valuation
category in
accordance
with IAS 392
IFRS 7
amount
scope of
application of
Carrying
213
Notes Notes on balance sheet
Consolidated Financial Statements
Total carrying
amount within
BASF Report 2015
The fair value of financial indebtedness is determined on the
basis of interbank interest rates. The difference between carry-
ing amounts and fair values results primarily from changes in
market interest rates.
For trade accounts receivable, other receivables and miscella-
neous assets, loans, cash and cash equivalents, as well as
trade accounts payable and other liabilities, the carrying
amount approximates the fair value. Shareholdings which are
not traded on an active market and whose fair value could not
be reliably determined are recognized at amortized cost and
are reported under other financial assets.
instruments
27.3 Classes and categories of financial
20,371
1,601
919
2,861
14,990
7,160
208
624
44
Thereof
Thereof
Carrying amounts and fair values of financial instruments as of December 31, 2015 (in million €)
LaR
650
Fair value
aFVtPL
650
650
Derivatives no hedge accounting
9,516
9,516
9,516
42
n/a
41
41
Receivables from finance leases
Accounts receivable, trade
level 24
fair value
fair value
level 13
0
0
Afs
420
420
Shareholdings¹
41
December 31, 2015
Foreign currency forward contracts
Foreign currency options
Foreign currency derivatives
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Interest rate swaps
411
December 31, 2014
(104)
53
Fair value of derivative instruments (in million €)
80
56
The fair values of derivative financial instruments are
calculated using valuation models which use input parameters
observable on the market. Exceptions to this are some
commodity derivatives, whose valuation is based directly on
market prices.
BASF Report 2015
monitored. Where derivatives have a positive market value,
BASF is exposed to credit risks from derivative transactions in
the event of nonperformance of the other party. To minimize
the default risk on derivatives with positive market values,
transactions are exclusively conducted with creditworthy
banks and partners and are subject to predefined credit limits.
BASF is exposed to foreign-currency, interest-rate and com-
modity-price risks during the normal course of business.
These risks are hedged through a centrally determined stra-
tegy employing derivative instruments. Hedging is only
employed for underlying positions from the operating business,
cash investments, and financing as well as for planned sales,
raw material purchases and capital measures. The risks from
the underlying transactions and the derivatives are constantly
The use of derivative instruments
accounting
27.4 Derivative instruments and hedge
Future minimum lease payments to BASF from
operating lease contracts (in million €)
The gains and losses from the valuation of securities and shareholdings
recognized in the equity of the shareholders of BASF SE are shown in
the Statement of income and expense recognized in equity on page 158.
The net losses from loans and receivables as well as from
financial liabilities measured at amortized cost primarily relates
to the results from the translation of foreign currencies. Con-
trasting this were higher net gains from hedging transactions
as compared with the previous year.
Consolidated Financial Statements
Notes Notes on balance sheet
357
109
To ensure effective risk management, risk positions are
centralized at BASF SE and certain Group companies. The
contracting and execution of derivative financial instruments
for hedging purposes are conducted according to internal
guidelines, and subject to strict control mechanisms.
(24)
(403)
(45)
Some of the planned purchases of naphtha are hedged using
swaps and options on oil and oil products. Some of these
hedges were shown in the Consolidated Financial Statements
of the BASF Group by means of cash flow hedge accounting,
where gains and losses from hedges were initially recognized
directly in equity. Gains and losses from hedges are included
in cost of sales at the point in time at which the hedged item is
recognized in the consolidated statement of income.
Total
Furthermore, cash flow hedge accounting is used to a
minor extent for natural gas purchases.
Cash flow hedge accounting
495
(517)
1
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Derivative financial instruments
(490)
102
111
8
284
197
Commodity derivatives
Interest derivatives
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
142
315
(30)
(27)
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Combined interest and cross-currency swaps
(31)
(31)
39
1,554
A1
Future minimum lease payments from subleasing contracts
based on existing agreements amounted to €11 million in
2015 (2014: €11 million).
Cash and cash equivalents were not subject to any
utilization restrictions, as in the previous year.
For more information on cash flow from acquisitions and divestitures,
see Note 2.4 from page 175 onward
Capital structure management
The aim of capital structure management is to maintain the
financial flexibility needed to further develop BASF's business
portfolio and take advantage of strategic opportunities. The
objectives of the Company's financing policy are to secure
solvency, limit financial risks and optimize the cost of capital.
217
218
Consolidated Financial Statements
Notes - Other explanatory notes
BASF Report 2015
Capital structure management focuses on meeting the
requirements needed to ensure unrestricted access to capital
markets and a solid A rating. BASF's capital structure is
managed using selected financial ratios, such as dynamic
debt ratios, as part of the company's financial planning. The
equity of the BASF Group as reported in the balance sheet
amounted to €31,545 million as of December 31, 2015
(December 31, 2014: €28,195 million); the equity ratio was
44.5% on December 31, 2015 (December 31, 2014: 39.5%).
BASF prefers to access external financing on the capital
markets. A commercial paper program is used for short-term
financing, while corporate bonds are used for financing in the
medium and long term. These are issued in euros and other
currencies with different maturities. The goal is to create a
balanced maturity profile and diverse range of investors, and
to optimize our debt capital financing conditions.
As a part of risk management, activities in countries with
transfer restrictions are continuously monitored. This includes,
for example, regular analysis of the macroeconomic and legal
environment, shareholders' equity and the business models of
the operating units. The chief aim is the reduction of counter-
party, transfer and currency risks for the BASF Group.
The payments for property, plant and equipment, and
intangible assets in the amount of €5,812 million included
investments for 2015, to the extent that they already had an
effect on cash.
Currently, BASF has the following ratings:
Outlook
Dec. 31, 2015
Standard
& Poor's
Moody's
Dec. 31, 2014
Standard
& Poor's
A+
A1
A+
Cash flow hedge accounting was applied in the Natural
Gas Trading business sector for crude oil swaps concluded in
order to hedge price risks from purchase and sales contracts
for natural gas to the completion of the asset swap with
Gazprom. These contracts had variable prices and the price
formula was coupled with the oil price.
P-1
stable
Long-term financial
indebtedness
Short-term financial
indebtedness
Payments of €651 million were received for divestitures (2014:
€1,336 million) in relation to transactions such as the sale of
portions of the pharmaceutical ingredients and services
business to Siegfried Holding AG, Zofingen, Switzerland. In
the previous year, payments had been received particularly
from the sale of the 50% share in Styrolution Holding GmbH,
Frankfurt am Main, Germany, to the INEOS Group; this also
I gave rise to payments received in 2015.
Cash used in investing activities included €215 million in
payments made for acquisitions (2014: €963 million), especially
for the acquisition of a 66% share in a company into which
TODA KOGYO CORP., Hiroshima, Japan, contributed its busi-
ness with cathode materials for lithium-ion batteries, patents
and production capacities in Japan. In the previous year,
payments had been made for such purchases as shares in
producing oil and gas fields as well as exploration licenses
from Statoil Petroleum AS, Stavanger, Norway, and Tullow Oil
Norge AS, Oslo, Norway.
Cash provided by operating activities also included
€248 million in benefits paid (2014: €47 million), which are
covered by a contractual trust arrangement.
Nominal value of the future
minimum lease payments
Dec. 31, 2015
Dec. 31, 2014
Less than 1 year
1-5 years
17
20
43
51
More than 5 years
Total
23
29
83
29 Statement of cash flows and capital structure management
Statement of cash flows
Cash provided by operating activities contained the following
payments:
Million €
Income tax payments
Interest payments
Dividends received
2014
2015
1,550
1,231
458
219
490
244
Interest payments comprised interest payments received of
€194 million (2014: €187 million) and interest paid of
€652 million (2014: €677 million).
1,587
The planned transactions and their effect on earnings occur in
the year following the balance sheet date. In 2015, effective
changes in the fair value of hedging instruments of €35 million
(2014: minus €322 million) was recognized in the equity of the
shareholders of BASF SE. In 2015, effective changes in the fair
value of hedging instruments of €174 million were derecog-
nized from the equity of shareholders of BASF SE and recorded
as an expense in cost of sales. In 2014, there was an expense
of €19 million in this regard. The ineffective part in the change
in value of the hedge amounted to minus €2 million in 2015
and minus €4 million in 2014. This amount was reported in the
income statement in cost of sales, in other operating income
and in other operating expenses.
413
216
18
13
31
More than 5 years
7
3
10
7
3
10
Following year 5
38
10
13
8
3
11
Following year 4
14
4
18
13
3
16
3
Following year 3
15
Total
A-1
Moody's
More than 5 years
779
784
1-5 years
Dec. 31, 2014
397
Less than 1 year
Nominal value of the future
minimum lease payments
Dec. 31, 2015
In 2015, claims arising from operating leases amounted to
€83 million (2014: €100 million).
BASF acts as a lessor for finance leases to a minor extent only.
Receivables on finance leases were €41 million in 2015 (2014:
€43 million).
23
BASF as lessor
Commitments from operating lease contracts (in million €)
In addition, BASF is a lessee under operating lease
contracts. The lease commitments totaling €1,554 million in
2015 (2014: €1,587 million) are due in the following years:
In 2015 and in 2014, no additional lease payments exceeding
minimum lease payments due to contractual conditions for
finance leases were recognized in the income statement. In
2015 and 2014, leasing liabilities were not offset by any
significant future minimum lease payments from subleases.
Consolidated Financial Statements
Notes Other explanatory notes
BASF Report 2015
94
35
129
85
32
117
In 2015, minimum lease payments of €474 million (2014:
€384 million) were included in income from operations. In
2015, conditional lease payments of €1 million were also
included in income from operations (2014: €1 million). Further-
more, €4 million from sublease payments was included in
income from operations in 2015 (2014: €4 million).
20
4
24
31
117
30
43
25
45
Net book value
December 31, 2014
Acquisition cost
Net book value
Acquisition cost
December 31, 2015
118
Liabilities from finance leases (in million €)
Land, land rights and buildings
Machinery and technical equipment
Miscellaneous equipment and fixtures
Leased assets (in million €)
Property, plant and equipment include those assets which are considered to be economically owned through a finance lease.
They primarily concern the following items:
Leased assets
28 Leasing
Furthermore, BASF SE's fixed-rate U.S. private placement
of $1.25 billion, issued in 2013, was converted into euros
using currency swaps. This hedge was designated as a cash
flow hedge. The hedge was entirely effective. In 2015, the
change in values recognized in the equity of the shareholders
of BASF SE amounted to €157 million (2014: €38 million). In
2015, €119 million was derecognized from other comprehen-
sive income and recorded as income in the financial result
(2014: €110 million income in financial result).
The interest rate risk of the floating rate notes issued by
BASF SE in 2014 (€300 million variable-rate bond 2014/2017)
as well as the floating rate notes issued in 2013 were hedged
using interest rate swaps. The bonds and the interest rate
swaps were designated in a hedging relationship. In 2015, the
effective change in the fair value of the hedging instruments
was €3 million (2014: minus €22 million) and was recognized
in the equity of the shareholders of BASF SE. There were no
ineffective parts.
BASF also uses cash flow hedge accounting for some
foreign currency derivatives to hedge planned sales
denominated in U.S. dollars. The impact on earnings from the
underlying transactions will occur in 2016. In 2015, the
effective change in values of the hedges was minus €23 million
(2014: minus €66 million), which was recognized in the equity
of the shareholders of BASF SE. A total of €29 million (2014:
€37 million) was derecognized from the equity of shareholders
of BASF SE and was booked in expenses from foreign
currency transactions. The hedge was entirely effective.
BASF used cash flow hedge accounting for derivatives used
to hedge foreign currency risks from gas purchase and sales
contracts to the completion of the asset swap with Gazprom.
In 2015 up to the completion date, the effective change in
values of the hedges was minus €150 million (2014: minus
€110 million), which was recognized in the equity of the
shareholders of BASF SE. There were no ineffective parts. The
amounts derecognized from the equity of shareholders of
BASF SE increased cost of sales by €161 million to the
completion date (2014: €101 million).
BASF Report 2015
Consolidated Financial Statements
Notes Notes on balance sheet
Total
32
44
13
16
5
21
Following year 2
20
6
26
23
5
28
Following year 1
Leasing liability
Interest portion
Minimum lease
payments
Leasing liability
Interest portion
Minimum lease
payments
December 31, 2014
December 31, 2015
76
205
69
206
14
44
215
P-1
100
negative
120
December 31, 2014
120
86
517
641
203
178
BASF Report 2015
Consolidated Financial Statements
Notes Other explanatory notes
Sales and trade accounts receivable from and trade accounts
payable to related parties mainly included business with own
products and merchandise, agency and licensing businesses,
and other operating business.
Other receivables and liabilities primarily arose from
financing activities, outstanding dividend payments, profit-
and-loss transfer agreements and other finance-related and
operating activities and events.
The decline of €1,621 million in sales to associated
companies in 2015 was mainly due to the fact that transac-
tions with Styrolution Group companies were to be classified
as transactions with associated companies only until the sale
of Styrolution in November 2014.
160
The outstanding balances toward related parties were
generally not secured and settled in cash. As in the previous
year, there were no significant valuation allowances in 2015 for
trade accounts receivable from related parties. Valuation
allowances of €17 million were recognized as an expense for
other receivables from nonconsolidated subsidiaries. The bal-
ance of valuation allowances for other receivables from non-
consolidated subsidiaries therefore rose from €22 million as of
December 31, 2014, to €39 million as of December 31, 2015.
In 2014, there had been no material expenses from valuation
allowances for other receivables from related parties.
On December 31, 2015, obligations arising from purchase
contracts with associated companies amounted to €29 mil-
lion. There were no material obligations arising from purchase
contracts with joint ventures on December 31, 2015. On
December 31, 2014, purchase obligations with joint ventures
arising from natural gas purchasing contracts amounted to
€32,561 million. Their discontinuation is attributable to the
disposal of Wintershall Erdgas Handelshaus GmbH & Co. KG,
based in Kassel, Germany, which occurred on September 30,
2015, as part of the asset swap with Gazprom.
Effective December 31, 2015, the present value of the
outstanding minimum rental payments for an office building
including parking area payable by BASF SE to BASF Pen-
sionskasse WaG for the nonterminable basic rental period to
2029 amounted to €60 million.
There were no reportable related party transactions with
members of the Board of Executive Directors or the Supervisory
Board and their related parties in 2015.
For more information on subsidiaries, joint ventures and associated
companies, see the "List of Shares Held of the BASF Group 2015"
on page 179
For more information on defined benefit plans that share risks between
the Group companies (including nonconsolidated subsidiaries), see
"Provisions for pensions and similar obligations" from page 199 onward
For more information on the Board of Executive Directors and the
Supervisory Board, see Management and Supervisory Boards and
Compensation Report from page 138 onward
33 Services provided by the external auditor
BASF Group companies have used the following services from KPMG:
Million €
Annual audit
Thereof domestic
Audit-related services
There were obligations from guarantees and other finan-
Ocial obligations at BASF in favor of nonconsolidated sub-
sidiaries in the amount of €45 million in 2015 (2014: €8 million)
and in favor of associated companies in the amount of
€37 million in 2015 (2014: €27 million).
December 31, 2015
180
December 31, 2014
204
161
229
378
577
Associated companies
370
1,991
Trade accounts receivable from / trade accounts payable to related parties (in million €)
Nonconsolidated subsidiaries
Joint ventures
Associated companies
Accounts receivable, trade
December 31, 2015
139
71
34
December 31, 2014
141
145
88
Accounts payable, trade
December 31, 2015
60
54
December 31, 2014
62
238
44
50
Other receivables and liabilities with related parties (in million €)
Nonconsolidated subsidiaries
Joint ventures
Associated companies
Other receivables
Other liabilities
December 31, 2015
Thereof domestic
504
Tax consultation services
Other services
The annual Declaration of Conformity with the German
Corporate Governance Code according to Section 161 of the
German Stock Corporation Act was signed by the Board of
Executive Directors and the Supervisory Board of BASF SE in
December 2015, and is published online.
For more information, see basf.com/en/governance
35 Nonadjusting events after the reporting period
On February 17, 2016, BASF announced that a general agree-
ment had been reached with AkzoNobel on the sale of the
Coatings division's industrial coatings business for €475 milli-
on. The transaction would include technologies, patents and
trademarks, as well as the transfer of two production sites in
England and in South Africa. It is subject to consultation with
employee representatives and certain regulatory approvals. At
BASF, the industrial coatings business generated around
€300 million in sales in 2015. BASF and AkzoNobel intend to
complete the transaction by the end of 2016.
5
About This Report
To Our Shareholders
Management's Report
Corporate Governance
Declaration pursuant to Section 161 AktG
(Stock Corporation Act)
Consolidated Financial Statements
on the Oil & Gas Segment
Overviews
Supplementary information
on the Oil & Gas segment
225
Oil & Gas
233
127
153
7
A-1
4
Supplementary Information
BASF Report 2015
34 Declaration of Conformity with the German Corporate Governance Code
Notes - Other explanatory notes
Total
Thereof domestic
2014
21.0
19.2
7.2
7.3
0.4
0.4
0.2
0.1
0.1
0.2
0.1
0.7
0.6
0.7
0.2
22.2
20.4
The line item annual audit related to expenses for the audit
of the Consolidated Financial Statements of the BASF
Group as well as the legally required financial statements of
BASF SE and its consolidated subsidiary companies and
joint operations.
221
222
Consolidated Financial Statements
Thereof domestic
389
2015
2015
0.20
Volatility BASF share
%
29.11
19
25.41
Volatility MSCI Chemicals
%
19.92
15.90
Correlation BASF share price:
MSCI Chemicals
0.35
%
73.58
2015
2014
As of January 1
2,905,048
2,908,076
Newly acquired entitlements
533,825
589,220
Bonus shares issued
(509,168)
77.88
Rating agency Moody's last confirmed their rating of "A1/P-1
outlook stable" on November 4, 2015. Standard & Poor's
adjusted the outlook of their "A+/A-1” rating to "negative" on
April 10, 2015. This was mainly due to an increase in pension
provisions as a result of declining capital market interest rates.
Risk-free interest rate
LTI program of the year
2015
2014
20.03
3.96
stable
2014
stable
BASF continues to strive for at least a solid A rating, which
ensures unrestricted access to financial and capital markets.
For more information on financing policy and the Statement of Cash
Flows, see the Management's Report from page 59 onward
30 Share-price-based compensation program and BASF incentive share program
Share-price-based compensation program
In 2015, BASF continued its share-price-based compensation
program known as the long-term incentive (LTI) program for
senior executives of the BASF Group. This program has been
in place since 1999. Approximately 1,200 senior executives,
including the Board of Executive Directors, are currently
entitled to participate in this program. This program provides
for the granting of virtual options, which are settled in cash
when exercised.
Participation in the LTI program is voluntary. In order to
take part in the program, a participant must make a personal
investment: A participant must hold BASF shares amounting
to 10% to 30% of his or her individual variable compensation
for a two-year period from the granting of the option (holding
period). The number of shares to be held is determined by the
amount of variable compensation and the volume-weighted
average market price for BASF shares on the first business
day after the Annual Shareholders' Meeting, which was €88.72
on May 4, 2015.
The participant receives four option rights per invested
share. Each option consists of two parts, right A and right B,
which may be exercised if defined thresholds have been met:
The threshold of right A is met if the price of the BASF share
has increased by more than 30% in comparison with the base
price (absolute threshold). The value of right A will be the
difference between the market price of BASF shares on the
exercise date and the base price; it is limited to 100% of the
base price. Right B may be exercised if the cumulative
percentage performance of BASF shares exceeds (relative
threshold) the percentage performance of the MSCI World
Chemicals Index SM (MSCI Chemicals). The value of right B will
be the base price of the option multiplied by twice the
percentage outperformance of BASF shares compared with
the MSCI Chemicals Index on the exercise date. It is limited to
the closing price on the date of exercise minus the computed
nominal value of BASF shares. Beginning with the 2013 LTI
program, right B is only valuable if the price of BASF shares at
least corresponds with the base price. The options were
granted on July 1, 2015, and may be exercised following a
two-year vesting period, between July 1, 2017, and June 30,
2023. During the exercise period, there are certain times
(closed periods) during which the options may not be exer-
cised. Each option can only be exercised in full. This means
that one of the performance targets must be surpassed. If the
other performance target is not surpassed and the option is
exercised, the other option right lapses. A participant's
maximum gain from exercising an option is limited to five times
the original individual investment starting with the 2013 LTI
program. The maximum gain from exercising an option is
limited to ten times the original individual investment for
programs from previous years. Option rights are nontransfer-
able and are forfeited if the option holders no longer work for
BASF or have sold part of their individual investment before
the expiry of the two-year vesting period. They remain valid in
the case of retirement. For the members of the Board of
Executive Directors, the long-term orientation of the program
is significantly strengthened compared with the conditions.
applying to the other participants. The members of the Board
of Executive Directors are required to participate in the LTI
BASF Report 2015
Consolidated Financial Statements
Notes Other explanatory notes
program with at least 10% of their gross bonus. In view of this
binding personal investment (in the form of BASF shares), an
extended holding period of four years applies. Members of the
Board of Executive Directors may only exercise their options at
least four years after they have been granted (vesting period).
The 2008 to 2014 programs were structured in a similar
way to the LTI program 2015.
The models used in the valuation of the option plans are
based on the arbitrage-free valuation model according to
Black-Scholes. The fair values of the options are determined
using the binomial model.
Fair value of options and parameters used as of December 31, 2015
Fair value
BASF incentive share program
All employees are entitled to participate in the "plus" incentive
share program, with the exception of those entitled to partici-
pate in the LTI program. The “plus” incentive share program
was introduced in 1999 and is currently offered in Germany,
other European countries and Mexico. Each participant must
make an individual investment in BASF shares from his or her
variable compensation. For every ten BASF shares purchased
in the program, a participant receives one BASF share at no
cost after one, three, five, seven and ten years of holding the
BASF shares. As a rule, the first and second block of ten
shares entitles the participant to receive one BASF share at no
extra cost in each of the next ten years.
The right to receive free BASF shares lapses if a participant
sells the individual investment in BASF shares, if the participant
stops working for the Company or one year after retirement.
The number of free shares to be granted has developed as
follows:
Number of free shares to be granted
€
22.72
Dividend yield
%
3.96
(515,143)
Lapsed entitlements
As of December 31
%
(77,105)
Service costs for members of the Board of Executive Directors
3.8
4.2
Compensation for the Supervisory Board
Total compensation for former members of the Board of Executive Directors
and their surviving dependents
Pension provisions for former members of the Board of Executive Directors
and their surviving dependents
Guarantees assumed for members of the Board of Executive Directors and the Supervisory Board
3.0
3.0
6.5
126.5
143.5
Performance-related compensation for the Board of Executive
Directors is based on the return on assets, as well as the
performance of the entire Board. Return on assets corre-
sponds to earnings before taxes plus borrowing costs as a
percentage of average assets.
The members of the Board of Executive Directors were
granted 173,064 options under the long-term incentive (LTI)
program in 2015.
The market valuation of the options of active and former
members of the Board resulted in expenses of €6.6 million in
2015. In 2014, the market valuation of the options resulted in
income of €3.7 million.
For more information on the compensation of members of the Board of
Executive Directors, see the "Compensation Report" from page 140
onward
For more information on the members of the Supervisory Board and
Board of Executive Directors, including their memberships on other
boards, see page 138 onward
32 Related-party transactions
A related party is a natural person or legal entity which can
exert influence on the BASF Group or over which the BASF
Group exercises control or joint control or a significant
influence. In particular, this comprises nonconsolidated
subsidiaries, joint ventures and associated companies.
The following tables show the volume of business with
related parties that are included at amortized cost or accounted
for using the equity method.
Sales to related parties (in million €)
(100,184)
Nonconsolidated
subsidiaries
Joint ventures
27.5
22.7
10.4
6.0
2,905,048
As of December 31, 2015, the fair values and the valuation
parameters relate to the LTI programs 2015 and 2014. The fair
value calculation was based on the assumption that options
will be exercised in a manner dependent on their potential
gains. For the programs from preceding years, corresponding
fair values were computed and valuation parameters were
used.
Total compensation for the Board of Executive Directors
Volatility was determined on the basis of the monthly
closing prices over a historical period corresponding to the
remaining term of the options.
The number of options granted amounted to 1,807,532 in
2015 (2014: 1,870,440).
As a result of a resolution by the Board of Executive
Directors in 2002 to settle options in cash, options outstanding
from the programs 2008 to 2015 were valued with the fair
value as of the balance sheet date December 31, 2015. A
proportionate provision is recorded for programs in the vesting
period. The LTI provision increased from €207 million as of
December 31, 2014, to €222 million as of December 31,
2015, due to a higher number of outstanding options. The
utilization of provisions amounted to €34 million in 2015 (2014:
€106 million). Expenses arising from additions to the provision
amounted to €49 million in 2015. The previous year had
included income of €54 million.
The total intrinsic value of exercisable options amounted to
€34 million as of December 31, 2015, and €41 million as of
December 31, 2014.
The fair value of the free shares to be granted is recognized
as an expense with a corresponding increase in capital surplus
over the term of the program.
Personnel expenses of €27 million were recorded in 2015
for the BASF incentive share program "plus" (2014: €26 mil-
lion).
219
220
Consolidated Financial Statements
Notes Other explanatory notes
The free shares to be provided by the Company are measured
at the fair value on the grant date. Fair value is determined on
the basis of the stock price of BASF shares, taking into
account the present value of dividends, which are not paid
during the term of the program. The weighted-average fair
value on the grant date amounted to €71.55 for the 2015
program, and €64.73 for the 2014 program.
31 Compensation for the Board of Executive Directors and Supervisory Board
4.3
Fair value of options granted to the Board of Executive Directors in the fiscal year as of grant date
21.5
18.4
Board of Executive Directors
Performance-related and not performance-related cash compensation for the
2,829,521
2015
BASF Report 2015
Million €
2014
BASF Report 2015
1 Only fully consolidated companies
41
34
Number of suspended wells
306
Total
48
32
76
Wells capitalized more than one year
433
250
Total excluding equity-accounted companies
Future revenues
Future production/development costs
Future income taxes
Future net cash flows, not discounted
10% discount rate
Standardized measure of discounted
future net cash flows
Thereof equity-accounted companies
Supplementary Information on the Oil & Gas Segment 231
North Africa,
Supplementary Information on the Oil & Gas Segment
Rest of
Wells capitalized less than one year
Standardized measure of discounted future net cash flows 2015 (in million €)
135
Capitalized exploration drilling charged to expense
Wells for which drilling is not complete
433
532
Additions to exploration drilling of the year
247
152
(145)
(203)
Reclassification to successful exploration drilling
(121)
(48)
Change in scope of consolidation
(108)
As of December 31
306
433
1 Only fully consolidated companies
Standardized measure of discounted future
net cash flows relating to proven oil and gas
reserves
The following information was calculated in accordance with
the rules of U.S. GAAP standard SFAS 69 and the Securities
and Exchange Commission. Based on this, a standardized
measure of discounted future net cash flows with the relevant
revenues, costs and income tax rates is to be made. The
proven reserves are valued at the average price calculated
from the prices on the first day of the month. The values thus
determined are discounted at a 10% annual discount rate.
The projected values should not be understood as a real-
istic estimate of future cash flows. Furthermore, the total value
of future net cash flows should not be interpreted as repre-
senting the current enterprise value.
In the future, expected proven reserves may differ signifi-
cantly from current estimates. Development and production of
the reserves may not occur in the period assumed and actual
prices and costs may vary considerably.
BASF's operating decisions and the implementation of its
investment projects are not based on the information pre-
sented below, but on a wider range of reserve estimates, as
well as on different price and cost assumptions.
Beyond the above considerations, the "standardized mea-
sure of future net cash flows" is also not directly comparable
with asset balances appearing elsewhere in the Consolidated
Financial Statements because any such comparison would
require a reconciliation adjustment.
The following table provides an overview of the capitalization
period, amounts capitalized for exploration drilling, and the
number of suspended exploration wells.
Capitalized exploration drilling' (in million €)
2015
2014
198
Germany
Rest of
Europe
Russia
209
1,405
3,025
304
1,351
6,294
28
686
265
979
209
1,377
2,339
3,585
39
5,315
Standardized measure of discounted future net cash flows 2014 (in million €)
Germany
North Africa,
Russia
Middle East
South
America
Total
Future revenues
3,726
9,521
12,193
2014
1,351
639
143
2,109
Middle East
South
America
Total
1,861
10,154
7,992
4,245
4,051
28,303
1,761
6,593
1,766
1,304
1,359
12,783
(60)
1,413
1,092
2,494
702
5,641
160
2,148
5,134
447
1,990
9,879
(49)
743
Europe
2015
184
Capitalized exploration drilling¹ (in million €)
Proven oil and gas reserves
939
5,575
1,878
North Africa,
Middle East
876
South
America
Total
1,556
10,824
Unproven oil and gas reserves
52
653
3
Russia
114
1,089
Equipment and miscellaneous
800
875
25
1,700
Total gross assets
1,791
7,103
1,881
1,015
1,823
13,613
267
Accumulated depreciation, amortization and impairments
Rest of
Europe
2015 (in million €)
Germany
Rest of
Europe
Russia
North Africa,
Middle East
South
America
Total
957
957
14
174
17
70
31
Germany
306
571
6,960
20
207
1,075
107
1,702
201
90
238
2,338
Capitalized costs relating to oil and gas producing activities
Capitalized costs represent total expenditures on proven and unproven oil and gas deposits with related accumulated deprecia-
tion and amortization.
93
As of January 1
1,280
451
1,640
1,099
1,885
1,706
6,658
1,911
1,057
1,379
12,711
1,192
2,486
409
678
135
837
514
4,172
1,502
379
542
7,109
111710
25
230 Supplementary Information on the Oil & Gas Segment
Supplementary Information on the Oil & Gas Segment
BASF Report 2015
Capitalized exploration drilling:
Suspended well costs
Exploratory drilling costs are capitalized until the drilling of the
well is complete. If hydrocarbon reserves are found whose
commercial development is likely, the costs continue to be
capitalized as construction in progress, subject to further
appraisal activity that may include the drilling of further wells.
All such capitalized costs are subject to technical and com-
mercial review by the management at least once a year to
confirm the continued intent to develop or otherwise extract
value from the discovery. If this is no longer the case, the costs
are written off. If proven reserves of oil or natural gas are
determined and development is sanctioned, the relevant
expenses are transferred within property, plant and equipment
to machinery and technical equipment. Impairments for
unsuccessful exploration wells are recognized in exploration
expenses.
The following table indicates the changes to the capitalized
costs of exploration drilling.
5,602
2,517
1,270
9,186
685
910
5,843
Total net assets
511
4,586
1,430
330
913
7,770
2014 (in million €)
Proven oil and gas reserves
Unproven oil and gas reserves
48
Equipment and miscellaneous
Accumulated depreciation, amortization and impairments
Total net assets
1,244
Germany
Rest of
Europe
Russia
North Africa,
Middle East
South
America
Total
897
4,289
1,904
852
Total gross assets
2,461
4,355
Future production/development costs
(623)
(751)
(402)
at balance sheet date
Net changes in prices and production costs
(2,213)
(207)
(202)
(782)
(718)
(304)
Sales and transfers of oil and gas produced, net of production
costs in the current period
8,075
(466)
765
4,391
758
1,075
Balance as of January 1
Total
South
America
North Africa,
Middle East
Russia
Rest of
Europe
Germany
Summary of changes in standardized measure of discounted future net cash flows 2014 (in million €)
5,315
1,351
1,086
39
(245)
Net changes from extensions, discoveries and improved
(626)
130
Net change in income taxes
923
923
Puchase/sale of reserves
(1,090)
(123)
79
(691)
(262)
(93)
Changes in estimated investments in future periods
(2,487)
1,003
13
183
503
97
Investments in the period
2,483
20
(376)
1,435
1,298
106
Revisions of previous quantity estimates
recovery, less related costs
207
(44)
2,339
209
(522)
(226)
20
313
(603)
(26)
Changes in estimated investments in future periods
1,400
289
8
133
898
72
Puchase/sale of reserves
Investments in the period
278
(55)
197
539
43
Revisions of previous quantity estimates
50
50
recovery, less related costs
Net changes from extensions, discoveries and improved
(5,969)
730
Total expenditures
1,002
1,377
(32)
Net change in income taxes
Total excluding equity-accounted companies
979
265
686
28
Thereof equity-accounted companies
6,294
1,351
304
3,025
1,405
209
net cash flows
(32)
Standardized measure of discounted future
1,306
86
329
495
312
84
Accretion of discount
2,991
(262)
1,288
295
1,464
206
Other
363
109
(68)
923
678
8,028
Thereof equity-accounted companies
652
656
1,308
Total excluding equity-accounted companies
734
1,338
3,703
267
678
4,355
6,720
Summary of changes in standardized measure of discounted future net cash flows 2015 (in million €)
BASF Report 2015
Germany
Rest of
Europe
Russia
Balance as of January 1
734
1,338
4,355
North Africa,
Middle East
923
South
America
Total
678
232 Supplementary Information on the Oil & Gas Segment
Supplementary Information on the Oil & Gas Segment
8,028
1,338
future net cash flows
2,366
5,055
2,766
1,762
1,225
13,174
Future income taxes
273
2,722
1,663
4,564
294
9,516
734
Future net cash flows, not discounted
1,744
7,764
634
942
12,171
10% discount rate
353
406
3,409
(289)
264
4,143
Standardized measure of discounted
1,087
Sales and transfers of oil and gas produced, net of production
costs in the current period
(174)
(835)
678
267
3,703
1,338
734
Total excluding equity-accounted companies
1,308
656
652
Thereof equity-accounted companies
8,028
678
923
6,720
1,338
net cash flows
Standardized measure of discounted future
48
50
(2)
Other
1,354
102
426
486
213
127
Accretion of discount
734
6
About This Report
To Our Shareholders
(631)
(98)
(222)
(1,960)
Net changes in prices and production costs
at balance sheet date
(730)
(1,726)
223
153
127
19
7
4
– ཐཱསེ
Overviews
243
238
Index
Glossary
237
Trademarks
235
Ten-year summary
Overviews
Supplementary Information on the Oil & Gas Segment
Consolidated Financial Statements
Corporate Governance
Management's Report
34,861
Development expenditures
9
Acquisition expenditures
Proven developed and undeveloped oil reserves as of
January 1, in million barrels (MMbbl)
Revisions and other changes
Extensions and discoveries
Supplementary Information on the Oil & Gas Segment 227
Supplementary Information on the Oil & Gas Segment
Rest of
North Africa,
Germany
Europe
Russia
Middle East
South
America
Total
57
Oil 2014
43
117
11
317
3
29
103
(10)
1
126
Purchase/sale of reserves
15
15
Production
89
7
BASF Report 2015
4,884
393
122
632
Proven reserves as of December 31
132
658
5,263
60
941
7,054
Thereof equity-accounted companies
54
3,091
1 Natural gas can be converted with a factor of 5.6 BSCF per MMBOE (million barrels of oil equivalent).
59
Proven reserves excluding equity-accounted companies
132
604
2,172
1
941
3,850
Proven developed reserves as of December 31
102
272
3,746
52
712
3,204
96
9
4
Russia
North Africa,
Middle East
South
America
Total
208
334
4,773
68
1,009
6,392
(38)
38
1,004
Rest of
Europe
(7)
1,002
Extensions and discoveries
Purchase/sale of reserves
Production
Proven reserves as of December 31
Thereof equity-accounted companies
370
370
24
74
365
127
590
5
9
Germany
Proven developed and undeveloped gas reserves as of
January 1, in billion standard cubic feet (BSCF)1
Proven reserves as of December 31
53
78
183
103
10
20
31
427
Thereof equity-accounted companies
8
93
101
Revisions and other changes
Proven reserves excluding equity-accounted companies
78
175
10
10
326
Proven developed reserves as of December 31
43
42
112
89
7
293
Gas 2014
53
146
21
(45)
included on a
proportional
included in EBIT basis
included
not included
226 Supplementary Information on the Oil & Gas Segment
Supplementary Information on the Oil & Gas Segment
Oil 2015
BASF Report 2015
Rest of
Germany
Europe
Russia
North Africa,
Middle East
South
America
not included
Total
January 1, in million barrels (MMbbl)
Revisions and other changes
Extensions and discoveries
53
78
183
103
10
427
(5)
17
23
(3)
Proven developed and undeveloped oil reserves as of
1
income
included
equity-
BASF Report 2015
Supplementary Information on the Oil & Gas Segment 225
Supplementary Information on the Oil & Gas Segment
Supplementary Information on the Oil & Gas Segment
(Unaudited)
The following provides supplementary information on the
Exploration & Production business sector of the Oil & Gas
segment. In the absence of detailed disclosure rules in this
area under IFRS, the Group has elected to disclose the follow-
ing information in accordance with SFAS 69 (Disclosure of Oil
and Gas Producing Activities) and the Securities and Exchange
Commission. In order to present economically meaningful
reporting on the cooperation with Gazprom in the Yuzhno
Russkoye and Achimgaz projects in Russia, several modifica-
tions have been made to SFAS 69. BASF has a total interest of
35% in the economic rewards of the Yuzhno Russkoye field
through Severneftegazprom (SNG), the company which holds
the production license. SNG is accounted for using the equity
method. Marketing of the natural gas is carried out by a sepa-
rate, fully consolidated company. For the Achimgaz project,
in which BASF has an interest of 50%, full field development
was started after the successful completion of the pilot phase
in 2011.
In the course of the asset swap with Gazprom completed
in 2015, BASF received an economic share of 25.01% in
two additional blocks of the Achimov formation of the Urengoy
field in western Siberia. In return, Gazprom received the entire
gas trading and storage business - which was previously
jointly operated - as well as a share of 50% in Wintershall
Noordzee B.V.
In the following overviews, BASF's stake in both projects is
included under “Russia.” In addition, the values for SNG,
which is accounted for using the equity method, are presented
separately.
As a result of the application of IFRS 10/11, the German
Wintershall subsidiary with production and exploration rights in
the Libyan onshore concessions 96 and 97, in which BASF
has an interest of 51%, and Wintershall Noordzee B.V., are
accounted for using the equity method as per IAS 28. All fully
consolidated subsidiaries are included with 100%.
The following table provides an overview of the most important
differences between the information given for the Exploration &
Production business sector in the Consolidated Financial
Statement of the BASF Group and the supplemental informa-
tion for the Oil & Gas segment.
The regions include the following countries with operating
activities:
Region
Russia
Rest of Europe
North Africa / Middle East
South America
accounted
Exploration &
Production
United Kingdom,
the Netherlands,
Norway
Exploration
Denmark
Libya
Argentina
Abu Dhabi
Chile
Statistical information on the concession areas or the number
of wells is not given due to its limited informative value.
Oil and gas reserves
Proven oil and gas reserves are the volumes of crude oil, nat-
ural gas and condensate that, according to the geological,
engineering and economic conditions prevailing at the balance
sheet date, can be produced in future years. Accordingly,
reserve estimates based on this data could be materially differ-
ent from the volumes that are ultimately recovered. To reduce
uncertainties, Wintershall works together with independent,
internationally recognized reserve auditors to perform recur-
ring reserves audits of its major crude oil and natural gas fields.
The tables on the following pages show the company's
estimated proven and proven developed reserves as of
December 31, 2014, and December 31, 2015, as well as
changes attributable to production or other factors.
Supplementary
information on
BASF reporting Oil & Gas
Other activities in Exploration &
Production (e.g., trading business
and joint venture services)
Companies accounted for using the
equity method (Severneftegazprom,
Wolgodeminoil, Wintershall AG and
Wintershall Noordzee B.V.)
Corporate overhead costs and
financing costs
Russia
Production
33
65
8
330
Gas 2015
Germany
Rest of
Europe
Russia
North Africa,
Middle East
South
America
Total
Proven developed and undeveloped gas reserves as of
January 1, in billion standard cubic feet (BSCF)1
146
668
5,412
83
61
7,174
Revisions and other changes
7
100
244
(1)
176
526
Extensions and discoveries
31
31
Purchase/sale of reserves
(45)
887
65
141
36
Purchase/sale of reserves
Production
Proven reserves as of December 31
42
62
16
13
4
☐ 2
41
144
193
96
62
(2,111)
Thereof equity-accounted companies
1
4
91
96
Proven reserves excluding equity-accounted companies
42
143
189
5
9
388
Proven developed reserves as of December 31
484
668
5,412
61
642
Exploration expenses and technology
9
119
3
44
15
190
Depreciation, amortization and impairment
109
439
38
106
105
56
Other
10
(356)
61
12
(61)
(334)
Income before taxes
177
506
626
25
197
748
1,531
58
277
194
Middle East
249
South
America
Total
114
1,495
Sales natural gas
107
468
772
277
1,624
Local duties (royalties, export, etc.)
71
90
167
4
79
342
Net revenue (less duties)
436
985
799
245
312
2,777
Production costs
131
2
519
Income taxes
200
South
America
Total
Acquisition expenditures
41
779
820
Exploration and technology expenditures
12
230
16
54
79
391
Middle East
Development expenditures
59
912
143
8
330
1,452
71
1,183
938
62
409
2,663
2014 (in million €)
Total expenditures
59
Russia
Rest of
Europe
122
122
70
573
Operating income after taxes
118
306
504
(97)
127
958
Equity-accounted income
38
North Africa,
2
Income after taxes excl. equity-accounted income
118
306
466
(99)
127
918
BASF Report 2015
Supplementary Information on the Oil & Gas Segment 229
Supplementary Information on the Oil & Gas Segment
Period expenditures for acquisition, exploration and development of oil and gas deposits
Period expenditures include all amounts incurred in connection with the acquisition, exploration or development of oil and gas
deposits, regardless of whether these were capitalized or expensed.
2015 (in million €)
Germany
40
419
Sales crude oil (including condensate and LPG)
Russia
574
168
Middle East
150
South
America
Total
115
1,257
Sales natural gas
100
585
644
322
1,651
250
Local duties (royalties, export, etc.)
2
125
6
87
275
Net revenue (less duties)
295
1,157
687
144
350
2,633
Production costs
55
122
Sales crude oil (including condensate and LPG)
North Africa,
887
7,174
3,350
61
3,411
Proven reserves excluding equity-accounted companies
146
668
2,062
887
3,763
Proven developed reserves as of December 31
115
Russia
350
53
505
5,458
1 Natural gas can be converted with a factor of 5.6 BSCF per MMBOE (million barrels of oil equivalent).
228 Supplementary Information on the Oil & Gas Segment
Supplementary Information on the Oil & Gas Segment
BASF Report 2015
Operating income from oil and gas-producing
activities
Operating income represents only those revenues and
expenses directly associated with oil and gas production.
These amounts do not include financing costs (such as inter-
est expenses) or corporate overhead costs and therefore do
not correspond with the contributions to the Oil & Gas
segment. The deviations in sales compared with segment
reporting are the result of merchandise and service transac-
tions not shown here, as well as the proportional inclusion of
companies accounted for using the equity method in the
IFRS-based Financial Statements. Estimated income taxes
were computed using local applicable income tax rates.
2015 (in million €)
Germany
Rest of
Europe
4,435
345
60
63
101
29
83
246
Operating income after taxes
40
(76)
448
(101)
150
461
Equity-accounted income
Income after taxes excl. equity-accounted income
17
(3)
5
91
40
40
(73)
359
(106)
150
370
2014 (in million €)
Germany
Rest of
Europe
North Africa,
89
16
Income taxes
707
127
717
Exploration expenses and technology
8
194
6
37
16
261
Depreciation, amortization and impairment
99
990
40
114
72
1,315
Other
10
(313)
32
2
(98)
(367)
Income before taxes
56
(59)
549
(72)
233
Exploration and technology expenditures
(2,132)
4 Includes the change in reporting from 2009 onward of the effects of regular extensions of U.S. dollar hedging transactions
Ten-year summary
The EBITDA margin is the margin that we earn on sales from our
operating activities before depreciation and amortization. It is
calculated as income from operations before depreciation and
amortization as a percentage of sales.
Eco-Efficiency Analysis
The Eco-Efficiency Analysis is a method developed by BASF for
assessing the economic and environmental aspects of products and
processes. The aim is to compare products with regard to profitability
and environmental compatibility.
Ecosystem services
Companies simultaneously rely on, and have an impact on, ecosys-
tem services, such as the conservation of air, water and soil quality.
Biodiversity - or the variety of life forms on our planet - serves as a
basis of and indicator for the integrity of ecological systems.
BASF Report 2015
Overviews 239
Glossary
Enhanced oil recovery (EOR)
Enhanced oil recovery (EOR) methods, also called tertiary recovery
or tertiary production methods, are used to increase the recovery
factor from oil reservoirs. Different technologies are employed
depending on reservoir conditions; a distinction is generally made
between thermal and chemical EOR and miscible gas flooding,
which makes use of gases such as carbon dioxide.
Equity method
The equity method is used to account for shareholdings in joint
ventures and associated companies. Based on the acquisition costs
of the shareholding as of the acquisition date, the carrying amount is
continuously adjusted to the changes in equity of the company in
which the share is held.
European Water Stewardship (EWS) Standard
The European Water Stewardship (EWS) Standard enables busi-
nesses and agriculture to assess the sustainability of their water
management practices. The criteria are water abstraction volumes,
water quality, conservation of biodiversity and water governance.
The Europe-wide standard came into force at the end of 2011 and
was developed by nongovernmental organizations, governments
and businesses under the direction of the independent organization
European Water Partnership (EWP).
Exploration
Exploration refers to the search for mineral resources, such as crude
oil or natural gas, in the Earth's crust. The exploration process
involves using suitable geophysical methods to find structures that
may contain oil and gas, then proving a possible discovery by means
of exploratory drilling.
F
Global Product Strategy (GPS)
The Global Product Strategy aims to establish global product
stewardship standards and practices for companies. The program,
initiated by the International Council of Chemical Associations,
strives to ensure the safe handling of chemicals by reducing existing
differences in risk assessment.
Global Reporting Initiative (GRI)
The Global Reporting Initiative is a multistakeholder organization.
It was established in 1997 with the aim of developing a guideline
for companies' and organizations' voluntary reporting on their
economic, environmental and social activities. Since 2003, BASF
has followed this globally recognized standard in sustainability
reporting and is involved in the standard's further development.
Greenhouse Gas Protocol (GHG Protocol)
The Greenhouse Gas Protocol, used by companies in different sec-
tors as well as nongovernmental organizations and governments, is
a globally recognized standard to quantify and manage greenhouse
gas emissions. The reporting standards and recommendations for
implementing projects to reduce emissions are jointly developed by
companies, nongovernmental organizations and governments
under the guidance of the World Resources Institute and the World
Business Council for Sustainable Development.
H
Health Performance Index (HPI)
The Health Performance Index is an indicator developed by BASF to
provide more detailed insight into our approach to health manage-
ment. It comprises five components: confirmed occupational
diseases, medical emergency drills, first aid, preventive medicine
and health promotion.
Field development
Field development is the term for the installation of production
facilities and the drilling of production wells for the commercial
exploitation of oil and natural gas deposits.
EBITDA margin
Formulation
Earnings before interest, taxes, depreciation and amortization (EBIT-
DA): At BASF, EBITDA corresponds to income from operations
before depreciation and amortization (impairments and write-ups).
EBIT after cost of capital is calculated by deducting the cost of
capital from the EBIT of the operating divisions. The cost of capital
thereby reflects the shareholders' expectations regarding return (in
the form of dividends or share price increases) and interest payable
to creditors. If the EBIT after cost of capital has a positive value, we
have earned a premium on our cost of capital.
Consumer goods sector
The consumer goods sector includes, for example, the textiles and
leather industry, the electrical industry and domestic appliance
manufacturing, as well as the paper industry and the personal care
and cleaners sector.
D
Audits
Audits are a strategic tool for monitoring and directing standards.
During a site or plant audit, clearly defined criteria are used to create
a profile on topics such as environment, safety or health.
B
Backup line
A backup line is a confirmed line of credit that can be drawn upon in
connection with the issue of commercial paper if market liquidity is
not sufficient, or for the purpose of general corporate financing. It
is one of the instruments BASF uses to ensure it is able to make
payments at all times.
Barrel of oil equivalent (BOE)
A barrel of oil equivalent (BOE) is an international unit of measure-
ment for comparing the energy content of different fuels. It is equal
to one barrel of crude oil, or 6,000 cubic feet (169 cubic meters) of
natural gas.
Biotechnology
Biotechnology includes all processes and products that make use
of living organisms, such as bacteria and yeasts, or their cellular
constituents.
BDO
BDO stands for 1,4-Butanediol and is a BASF intermediate. BDO
and its derivatives are used for producing plastics, polyurethanes,
solvents, electronic chemicals and elastic fibers.
C
CO₂ equivalents
CO2 equivalents are units for measuring the impact of greenhouse
gas emissions on the greenhouse effect. A factor known as the
global warming potential (GWP) shows the impact of the individual
gases compared with CO2 as the reference value.
Commercial paper program
The commercial paper program is a framework agreement between
BASF and banks regarding the issuing of debt obligations on the
financial market (commercial paper). The commercial paper is issued
under a rolling program for which the terms can be determined indi-
vidually. This requires a good rating.
Compliance
Compliance is an important element of corporate governance. It
refers to the company's behavior in accordance with laws, guide-
lines and voluntary codices.
Dodd-Frank Act
The Dodd-Frank Act issued in 2010 comprises accounting and
disclosure obligations for publicly listed U.S. companies regarding
the use of certain raw materials that come from the Democratic
Republic of Congo or its bordering countries. The companies must
prove whether the materials they use are from conflict mines in these
areas. The definition of conflict minerals as per the Dodd-Frank Act
includes the following materials and their derivatives: Columbite-
tantalite (coltan), cassiterite, wolframite and gold.
E
EBIT
Earnings before interest and taxes (EBIT): At BASF, EBIT corresponds
to income from operations.
EBIT after cost of capital
EBITDA
Formulation describes the combination of one or more active
substances with excipients like emulsifiers, stabilizers and other
inactive components in order to improve the applicability and effec-
tiveness of various products, such as cosmetics, pharmaceuticals,
agricultural chemicals, paints and coatings.
Free cash flow
Free cash flow is cash provided by operating activities less pay-
ments related to property, plant and equipment and intangible
assets.
BASF uses the materiality analysis to gain information from internal
and external stakeholders about the significance of sustainability
topics. The results, which are grouped into eight material aspects of
sustainability, help BASF identify present and future opportunities
and risks for its business and develop strategies to address these at
an early stage.
MDI
MDI stands for diphenylmethane diisocyanate and is one of the
most important raw materials for the production of the plastic poly-
urethane. This plastic is used for applications ranging from the soles
of high-tech running shoes and shock absorbers for vehicle engines
to insulation for refrigerators and buildings.
Million British thermal unit (mmBtu)
The British thermal unit (Btu) is a unit of energy observed in the
Anglo-American measuring system. It is used for indicating values
such as the energy content gas. One mmBtu (million British thermal
units) is equal to approximately 1,003 cubic feet of gas or 28 cubic
meters of gas.
Monitoring system
Monitoring systems and tools serve to measure and ensure the
adherence to standards. One area that is monitored is our voluntary
commitments, such as the adherence to human rights and interna-
tionally recognized labor standards.
MSCI World Chemicals Index
The MSCI World Chemicals Index is a stock index that includes the
world's biggest chemical companies. It measures the performance of
the companies in the index in their respective national currencies,
thus considerably reducing currency effects.
N
Nanomaterials
The International Organization for Standardization defines nano-
materials as materials with one or more external dimensions on a
nanoscale or with internal structure or surface structure on a
nanoscale. For regulatory purposes, there are additional definitions
for nanomaterials worldwide.
Naphtha
Naphtha is petroleum that is produced during oil refining. Heavy
naphtha is the starting point for gasoline production. Light naphtha
is the most important feedstock for steam crackers.
NMVOC (Nonmethane Volatile Organic Compounds)
VOCS (volatile organic compounds) are organic substances that are
present in the air as gas at low temperatures. These include some
hydrocarbons, alcohols, aldehydes and organic acids. NMVOCs are
VOCs from which methane is excluded.
BASF Report 2015
Overviews 241
Glossary
OHSAS 18001
The Occupational Health and Safety Assessment Series (OHSAS)
includes the standard OHSAS 18001, which contains a manage-
ment system for occupational safety. This system can be integrated
into an existing quality and environmental protection management
system and certified accordingly.
Retention
Profits generated can be used in two ways: distributed to sharehold-
ers or kept within the company. The latter is referred to as retention.
Return on assets
Return on assets describes the return we make on the average
assets employed during the year. It is calculated as income before
taxes and minority interests plus interest expenses as a percentage
of average assets.
P
Patent Asset Index
The Patent Asset Index measures the strength of a company's
patent portfolio. It is made up of two factors: (1) portfolio size (the
number of worldwide active patent families) and (2) competitive
impact, which is the combination of technology relevance and
market coverage (weighted by market size).
Materiality analysis/material aspects
M
The long-term incentive program is a share-price-based compensa-
tion program for senior executives of the BASF Group and members
of the Board of Executive Directors. The program aims to tie a por-
tion of the participants' compensation to the long-term, absolute
and relative performance of BASF shares.
Long-term incentive program (LTI)
G
Global Compact
In the United Nations Global Compact network, nongovernmental
organizations, companies, international business and employee
representatives, scientists and politicians work on aligning global
business with the principles of sustainable development. As a
founding member of Global Compact, BASF is committed to
upholding the ten principles in the categories human rights, labor
relations, environmental protection and corruption. We regularly
report on our implementation of the principles.
I
IAS
IAS stands for International Accounting Standards (see also IFRS).
IFRS
The International Financial Reporting Standards (until 2001: Interna-
tional Accounting Standards, IAS) are developed and published
by the International Accounting Standards Board, headquartered
in London, England. The "IAS Regulation" made the application of
IFRSS mandatory for listed companies headquartered in the
European Union starting in 2005.
ILO Core Labor Standards
The ILO Core Labor Standards are set out in a declaration of the
International Labor Organization (ILO), comprising eight conventions
that set minimum requirements for decent working conditions. BASF
has a Group-wide system to monitor employees' and suppliers'
adherence to these labor standards.
ISO 14001
ISO 14001 is an international standard developed by the International
Organization for Standardization (ISO) that determines the general
requirements for an environmental management system for volun-
tary certification.
240
These are companies over whose operating and financial policies
BASF can exercise significant influence, and which are not subsidi-
aries, joint ventures or joint operations. In general, this applies to
companies in which BASF has an interest of 20% to 50%.
Overviews
Glossary
ISO 19011
ISO 19011 is an international standard developed by the International
Organization for Standardization (ISO) that determines requirements
for audits of quality management and environmental management
systems.
ISO 50001
ISO 50001 is an international standard developed by the International
Organization for Standardization (ISO) that determines the general
requirements for an energy management system for voluntary certi-
fication.
IUCN categories of protected areas
The International Union for Conservation of Nature (IUCN) is an inter-
national nongovernmental organization that aims to raise awareness
for the protection of species and to contribute to the sustainable use
and conservation of resources. IUCN classifies the world's protected
areas. Categories I, II and III refer to "Strict Nature Reserve and
Wilderness Area," "National Park" and "Natural Monuments or Fea-
tures," respectively.
J
Joint arrangement
A joint arrangement refers to joint ventures and joint operations, and
describes a jointly controlled arrangement of two or more parties.
This arrangement exists if decisions about relevant activities require
the unanimous consent of all parties sharing control.
Joint operation
A joint operation is a joint arrangement in which the parties that
share control have direct rights to the assets and liabilities relating to
the arrangement. For joint operations, the proportional share of
assets, liabilities, income and expenses are reported in the BASF
Group Consolidated Financial Statements.
Joint venture
A joint venture is a joint arrangement in which the parties that
I have joint control of a legally independent entity have rights to the
net assets of that arrangement. Joint ventures are accounted for
using the equity method in the BASF Group Consolidated Financial
Statements.
BASF Report 2015
Peak sales potential
Associated companies
BASF Report 2015
3,545
4,074
Other liabilities
1,824
1,976
3,434
2,240
2,802
3,036
2,623
2,292
3,564
2,520
Liabilities of disposal groups
17
195
87
Current liabilities
13,980 12,482
16,295 11,680
15,568
16,477
1,993
16,710
14,339 15,893
14,236
Total equity and liabilities
45,291
3,256
46,802 50,860 51,268 59,393 61,175
4,094
3,369
Provisions
2,848
2,697
3,043
3,276
3,324
3,210
2,628
2,670
2,844
2,540
Tax liabilities
858
881
860
1,003
1,140
1,038
870
968
1,079
1,082
Financial indebtedness
3,695
3,148
6,224
2,375
3,985
62,726 64,204 71,359
70,836
1 We have applied International Financial Reporting Standards 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013.
Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
F 500®
Flo Rite®
FSC®
HexamollⓇ
Initium®
IntegralⓇ
InterceptorⓇ
KeropurⓇ
Kixor®
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
1 Trademarks are not registered in all countries.
Trilon®
UltradurⓇ
UltramidⓇ
reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
UltrasonⓇ
reg. trademark of BASF Group
VaultⓇ
reg. trademark of BASF Group
Xemium®
.reg. trademark of BASF Group
XSparkⓇ
.reg. trademark of BASF Group
238
Overviews
Glossary
Glossary
Subtilex®
Espaço ECO® Foundation
StandakⓇ
.reg. trademark of BASF Group
2 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
BASF Report 2015
Trademarks¹
Overviews 237
Trademarks
Acronal®
AgCelenceⓇ
BioStackedⓇ
CametⓇ
CellastoⓇ
ClearfieldⓇ
Creator Space™
Cultivance®
DINCH®
ecovioⓇ
Elastocool®
ElastollanⓇ
EngeniaⓇ
.reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
A
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of Forest
Stewardship Council
MasterSeal®
NatuphosⓇ
NealtaⓇ
PaliocromⓇ
PolyTHFⓇ
QuiceⓇ
Responsible Care®
SeltimaⓇ
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
_reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
_reg. trademark of BASF Group
reg. trademark of Conseil
Européen de l'Industrie Chimique
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
Sustainable Solution SteeringⓇ reg. trademark of BASF Group
Synative®
TermidorⓇ
Slentite®
reg. trademark of BASF Group
SokalanⓇ
Epotal®
LimusⓇ
LIX®
The peak sales potential of the crop protection pipeline describes the
total peak sales generated and expected for individual products in
the pipeline. It comprises innovative active ingredients and system
solutions that have been on the market since 2015 or will be launched
on the market by 2025. The peak sales potential of individual prod-
ucts corresponds to the highest sales value to be expected from one
year of the observation period.
Propylene oxide (PO)
Propylene oxide (PO), a very reactive compound, is generated by
the oxidation of propylene and is used as basic chemical for further
processing in the chemical industry.
Employee representatives.
Employees.
14, 23, 27, 39, 49ff., 85, 113,
116, 119ff., 207
O
Oil & Gas.
26, 47
28, 30 ff., 34, 42ff., 98ff., 119f.,
136f., 189, 219, cover
21 f., 37 f., 39f., 52, 54, 56, 61f.,
86ff., 105f., 124ff., 167, 170 ff.,
174, 176f., 180 f., 225 ff., cover
244 Overviews
Index
P
Patents
Pensions
Performance Chemicals.
Performance Materials
Performance Products
Petrochemicals.
Procurement.
Production
Product stewardship.
R
Rating
35, 40, 166, 175f., 191f.
58, 159, 171, 179, 199f., 236
21, 69 ff., 124, 176ff., 179,
cover
21, 54, 56, 76ff., 175 ff., 179,
cover
21, 37, 39, 41, 52, 56, 61f.,
69 ff., 92, 124ff., 179, 181, cover
21, 52, 63 ff., 92f., 124, 178f.,
199, cover
28, 94f., 113, 117
22, 24ff., 28f., 37 ff., 49 ff., 92 ff.,
98f., 100ff.
28f., 103, 239
Emerging markets.
16f., 59, 118, 126, 218
21, 56, 69 ff., 177, 179, 185
104
21, 63 ff., 179, cover
27, 39f., 57, 66f., 72f., 78f.,
83 ff., 89f., 92, 98, 113f., 119f.,
125f., 181f., 193f., 232, 235,
cover
17, 21
26, 31, 47, 94, 136f.
28, 45f., 118
D
Derivative financial
instruments.
Dispersions & Pigments.
Diversity.
Divestitures
Dividend.
170, 212, 215
21, 69ff., 124, 179, 184, cover
25, 45, 131 f.
39f., 52, 54, 60, 160, 175 ff.,
184f., 202f., 217
10, 14f., 60, 126, 151,160f.,
167f., 174f., 186, 198, 217, 235,
cover
Donations and sponsorship.
48
E
M
Material aspects.
Materiality analysis.
Monitoring system.
Monomers.
N
Nanotechnology-
Natural Gas Trading.
Nutrition & Health.
5, 25, 31, 120, 240
5, 25, 31, 120, 240
26, 47, 120, 240
21, 37, 52, 63ff., 93, 124, 179,
cover
54, 86, 89 ff., 215
Raw materials.
REACH
Regions
17, 24ff., 30 ff., 41f., 44, 64, 70,
77, 83, 87, 119, 136
114, 129ff., 139f., 146f.,
148ff., 152
28, 94f., 96 f., 117, cover
5f., 16f., 25f., 31 ff., 94 ff., 120,
cover
T
Technology fields.
Transportation.
BASF Report 2015
27, 36
6, 21, 50, 77, 86 ff., 98, 99, 108,
112, 122, 241, cover
V
Value-based management.
Value chain.
30
Values
Verbund.
Vocational training.
W
Water
Wintershall
25, 28, 31 f., 41, 64, 94ff.,
116, 119, 132, 242
24ff., 46, 129, 136
22, 24, 26, 34f., 37f., 41, 43,
63f., 70, 92, 96, 107, 111, 114,
117, 119, 179, 242
43f.
29, 34, 70f., 77f., 96 ff., 109f.,
120, 239, 242, cover
21, 23, 40, 86ff., 173f., 178,
181, 185, 193, 195, 205, 209,
225
155
5f., 16, 26, 31, 47, 55, 94 ff.,
136f., 150, 162 ff., 238 ff.
5, 26, 31f., 47, 119f., 239
30, 52ff., 61 ff., 67 ff., 73 ff., 79 ff.,
85 ff., 90 ff., 124f., 241, cover
Research and development.
Renewable raw materials/
resources.
Responsible Care.
22, 24, 36f., 50f., 69f., 74, 94f.,
96f., 98f., 117f., 209, 211
103f., 116, 185
21, 27, 34f., 39, 49, 92f., 114,
119, 179, 182
34 ff., 92, cover
96, 241
26, 94, 98, 110, 237, cover
S
Safety and security.
Sales
Segment data.
Share
96, 119, cover
Shareholders.
Special items.
Stakeholders.
Standards
Statement by the Board
of Executive Directors.
Strategy.
Supervisory Board.
Suppliers.
Sustainability.
6, 21, 25f., 31, 37, 98ff., 117,
136, 184, 208, cover
21f., 27f., 34, 50, 52ff., 61f.,
63 ff., 69 ff., 76ff., 82 ff., 86 ff.,
92f., 118f., 124f., cover
73, 79, 85, 90, cover
14ff., 18, 47, 53ff., 60, 133,
135, 157, 161, 182, 198, 218f.,
235, cover
9ff., 30 f., 60, 126, 129 ff.,
148f., 158ff., 215f., cover
6, 22, 48, 65, 68, 71, 95, 97 ff.,
102, 106f., 109f., 112, 114,
171, 184f., 193f., 205
Sites.
24ff., 34ff., 64, 70, 77, 83, 87,
157f., 168, 170, 182ff., 202,
215
26, 31 f., 47, 94, 136f.
W
Water stress areas
Water stress areas are areas in which water represents a scarce
resource, and where people abstract more than 60% of the water
available. The most important factors leading to water scarcity are:
low precipitation, high temperatures, low air humidity, unfavorable
soil properties and high water abstraction rates.
White biotechnology
White biotechnology is an area of biotechnology, also called indus-
trial biotechnology, which uses microorganisms and/or enzymes to
produce chemical products that are utilized in many levels of the
value chain in the chemical industry.
BASF Report 2015
BASF Report 2015
Index
Overviews
243
Index
A
Acquisitions.
Agricultural Solutions.
Air and soil.
Auditor's report.
Audits.
B
39f., 52, 60, 87, 114, 119 f., 160,
175ff., 191 ff., 202, 217
21, 37f., 41, 54, 61f., 82ff.,
92f., 124ff., 179, cover
111f.
6, 151, 156
26, 95, 98ff., 137, 238, cover
Energy efficiency.
Environmental protection.
Equity.
Events after the reporting
period
Exploration & Production.
28f., 98, 105 ff., cover
In the BASF Verbund (pronounced "fair-boond"), production facili-
ties, energy flow, logistics and infrastructure are intelligently net-
worked with each other in order to increase production yields, save
resources and energy, and reduce logistics costs. We also make
use of the Verbund principle for more than production, applying it
for technologies, knowledge, employees, customers, and partners,
as well.
Verbund
A value chain describes the successive steps in a production pro-
cess: from raw materials through various intermediate steps, such
as transportation and production, to the finished product.
Value chain
R
Ramsar Site
Ramsar Sites were defined in the Ramsar Convention of 1971.
These are protected Wetlands of International Importance, such as
lagoons, moors, lakes, rivers and marshlands.
REACH
REACH is a European Union regulatory framework for the registra-
tion, evaluation and authorization of chemicals, and will be imple-
mented gradually until 2018. Companies are obligated to collect
data on the properties and uses of produced and imported
substances and to assess any risks. The European Chemicals
Agency reviews the submitted dossiers and, if applicable, requests
additional information.
Renewable resources
The term renewable resources refers to components from biomass
that originate from different sources (plants and microorganisms,
for example), and are used for industrial purposes. Renewable
resources are used for manufacturing numerous products and for
generating electricity and other forms of energy.
Responsible Care
Responsible Care refers to a worldwide initiative by the chemical
industry to continuously improve its performance in the areas of
environmental protection, health and safety.
S
Special items
Special items describe one-time charges or one-time income that
significantly affect the earnings of a segment or the BASF Group.
Special items include, for example, charges arising from restructur-
ing measures or earnings from divestitures.
Spot market (cash market)
_6, 98, 100 ff., 136, 170, 172,
184, 205, 216, 241, cover
30, 58, 119, 158ff., 161, 173ff.,
198, 235f.
A spot market is a market where an agreed-upon deal, including
delivery, acceptance and payment, occurs immediately, as opposed
to forward contracts, where the delivery, acceptance and payment
occurs at a point in time after the conclusion of the deal.
A steam cracker is a plant in which steam is used to "crack" naphtha
(petroleum) or natural gas. The resulting petrochemicals are the raw
materials used to produce most of BASF's products.
Sustainable Solution SteeringⓇ
We use Sustainable Solution SteeringⓇ to review and guide our
portfolio in terms of sustainability. The four categories - Accelerators,
Performers, Transitioners and Challenged - indicate how our prod-
ucts and solutions already comply with sustainability requirements
and how we can increase their contribution.
T
TDI
TDI stands for toluene diisocyanate and is a raw material for the
production of polyurethane. It is used primarily in the automotive
industry (for example, in seat cushions and interiors) and the furni-
ture industry (for example, for flexible foams for mattresses or
cushioning, or in wood coating).
TUIS
TUIS is a German transport accident information and emergency
response system jointly operated by around 130 chemical compa-
nies. The member companies can be reached by the public author-
ities at any time and provide assistance over the telephone, expert
on-site advice or special technical equipment.
U
UNESCO protected area
UNESCO protected areas, or World Heritage Sites, are natural sites
of exceptional value. These important habitats can be home to
endangered plant and animal species.
242 Overviews
Glossary
V
Steam cracker
4,020
126, 222
187, 190, 225, cover
6, 156
Global Reporting Initiative.
Goals
5, 239
Goodwill
Growth fields
H
Health protection.
Human rights.
|
31, 46f., 94, 104, 136f.
Income, statement of.
25f., 47, 114, 117, 129, 136f.,
150, 238
21, 76ff., 93, 179, cover
21, 76ff., 93, 179, 190,
cover
34f., 38, 95, 113, 119, 225
26, 94, 129 ff., 164f.
28, 30, 54, 56, 59, 67, 73, 79,
85, 90, 124, 126, 189 ff., 193f.,
217, 238, cover
21, 38, 82ff., 179, 190, 211
21 f., 24 ff., 31 ff., 35 ff., 41, 50,
92, 119
Innovation
Intermediates.
Investments.
Investor Relations
L
Labor and social standards
Leaders
4f., 26, 32, 94, 137f., 239
24 ff., 28ff., 34, 39, 42 ff., 113,
129, 132
39, 118, 176
27, 36, 41
98, 100 f., cover
Global Compact.
G
16f., 28f., 98, 105 ff.
63 ff., 92f., 124ff., 179, 181,
185, 194, cover
Balance sheet.
Biotechnology
Board of Executive Directors.
Brand
External audit.
57 ff., 115, 159, 161 ff., 236
36, 38, 82ff., 104, 179, 238,
242
F
Field development.
9ff., 12f., 114f., 129ff., 138,
140ff., 148ff., 152, 155
26, 237
39, 57, 88f., 171, 225
Functional Materials & Solutions_21, 37 ff., 41, 54, 56, 61 f., 76ff.,
92f., 124 ff., 179, 185, cover
Further training.
21, 54, 86 ff., 174, 179,
44
Care Chemicals.
21, 69ff., 124, 179,
184, cover
Cash flow.
Catalysts.
Chemicals.
Climate protection.
Coatings.
Code of Conduct.
Compliance.
Construction Chemicals.
Cooperation.
Corporate Governance.
Cost of capital.
Crop Protection.
Customers
60, 118, 158, 160, 170 ff., 198,
215f., 217, 230 ff., 235, 239,
cover
21, 76ff., 93, 179, 190, 211,
cover
21, 37, 39f., 52ff., 56, 61f.,
C
4,861
5,153
4,502
5,940
5,807
5,023
1.54
5,693
4.96
6.74
5.25
5.22
5.61
4.34
6,460 7,105
EBITDA margin
%
18.5
17.6
15.3
14.6
17.4
16.3
Return on assets
%
17.5
16.4
13.5
7.5
14.7
16.1
Cash provided by operating activities*
Return on equity after tax
3.13
3.19
Personnel expenses
95,247 95,175 96,924 104,779
88,160 94,893 95,885
109,140 111,141 110,782
103,612 104,043 110,403 109,969
112,206 113,292 112,435
111,844 112,644 113,249
6,210
6,648 6,364
7,107
8,228
8,576
8,963
9,285
9,224
9,982
Research and development expenses
1,277
1,380
1,355
1,398
1,492
1,605
1,732
1,849
1,884
1,953
Key data
Earnings per share³
€
4.16
%
19.2
22.4
9,446
13.9
14.1
14.9
15.1
11.0
11.5
11.7
8.7
19.9
19.2
19.7
14.4
2,880
2,826
5,853
2,158
2,388
2,480
2,572
2,664
2.60
2.70
2.80
2.90
Number of shares
as of December 313,6
6,958
8,100
6,602
༄༅༄༅ |
17.0
8.9
24.6
27.5
Appropriation of profits
Net income of BASF SE5
€
1,951
2,267
Dividends
1,484
1,831
Dividend per share³
Annual average
€
1.95
༄༅།
2,982
2,176
3,737
3,506
1,791
1,561
1.95
1.70
2,021
2.20
2,296
2.50
1.50
At year-end
Number of employees
3,600
7,316
6,463
3,677
7,761
8,586
6,742
7,160
7,626
6,248
Income before taxes
6,527
6,935
5,976
3,079
7,373
8,970
5,977
6,600
7,203
5,548
Income before minority interests
3,466
4,325
3,305
1,655
5,074
6,603
6,750
Income from operations (EBIT)
10,649
11,043
Million €
Overviews 235
Ten-year summary
2006
2007
2008
2009
2010
2011
20121
20132
2014
2015
5,067
Sales and earnings
52,610
57,951 62,304 50,693
63,873
73,497
72,129 73,973
74,326
70,449
Income from operations before
depreciation and amortization (EBITDA)
9,723 10,225
9,562
7,388 11,131
11,993 10,009 10,432
Sales
million
5,113
4,301
4,084
6,428
6,369
5,742
Depreciation and amortization of
property, plant and equipment and
intangible assets
2,973
2,909
3,099
3,711
3,370
3,407
3,267
3,272
3,417
4,401
Thereof property, plant and
equipment
2,482
2,294
2,481
2,614
2,667
2,618
2,594
2,631
2,770
3,199
3,294
4,126
2,809
Net income
3,215
4,065
2,912
1,410
4,557
6,188
4,819
4,792
5,155
3,987
Capital expenditures, depreciation
and amortization
5,492
Additions to property, plant and
10,039
4,425
3,634
5,972
5,304
3,646
5,263
7,726
7,285
6,013
Thereof property, plant and
equipment
4,068
2,564
equipment and intangible assets
BASF Report 2015
999.4
918.5
Capital surplus
3,141
3,173
3,241
3,229
3,216
3,203
3,188
3,165
3,143
3,141
Retained earnings
13,302
14,556
13,250 12,916
Other comprehensive income
325
174
Minority interests
531
Equity
18,578
(96)
971
1,151
20,098 18,722
15,817
156 1,195
1,132 1,253
18,609 22,657
23,708
(3,461)
19,446
314
(3,400) (5,482)
1,246 1,010
630
581
25,385 25,621 27,673 28,195
1,176
26,102 28,777
1,176
1,176
2,048
1,647
1,827
1,718
2,241
295
3,264
Current assets
18,392
18,908 21,274 19,587
24,861
27,088 27,467 25,951
27,420
24,566
Total assets
45,291
46,802 50,860 51,268
59,393
61,175 62,726 64,204 71,359
70,836
Subscribed capital
1,279
1,224
1,176
1,176
1,176
1,176
1,176
30,120
(3,521)
629
3,420
3,381
Financial indebtedness
5,788
6,954
Other liabilities
972
Noncurrent liabilities
12,733
901
917
14,222 15,843 20,979
8,290 12,444
898
11,670
9,019
8,704
11,151 11,839
11,123
901
21,168
1,142 1,111 1,194 1,197
19,313 20,395 22,192 27,271
869
25,055
Accounts payable, trade
4,755
3,763
2,734
2,786
4,738
5,121
2,894
2,234
2,628
2,467
31,545
Provisions for pensions and similar
obligations
1,452
1,292
1,712
2,255 2,778
3,189
5,421
3,727
7,313
6,313
Other provisions
21
3,080
2,757
3,289
3,352
3,335
2,925
3,226
3,502
3,369
Deferred taxes
1,441
2,060
2,167
2,093
3,015
19
17
14
12,967
12,537
25,260
Investments accounted for using
651
Other financial assets
Deferred taxes
1,190
622
Other receivables and miscellaneous
336
834
1,146
1,340
1,328
1,952
1,947
1,619
1,953
679
930
1,042
1,112
༅།༔།།
1,852
3,459
4,174
2015
2014
2011 2012¹ 20132
10,449 12,245 11,919 12,193 12,324
15,032 16,285 17,241 17,966 16,610 19,229 23,496
14,902 14,215
918.5
918.5
918.5
918.5
918.5
918.5
918.5
1 We have applied International Financial Reporting Standards 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013.
Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
2 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
3 We conducted a two-for-one stock split in the second quarter of 2008. The previous year's figures for earnings per share, dividend per share and number
of shares have been adjusted accordingly for purposes of comparison.
5 Calculated in accordance with German GAAP
6 After deduction of repurchased shares earmarked for cancellation
236
3,245
Overviews
BASF Report 2015
Balance sheet (IFRS)
Million €
Intangible assets
Property, plant and equipment
the equity method
2006
2007
8,922
9,559
2008
9,889
2009
2010
Ten-year summary
956.4
4,436
643
9,693
10,385
9,516
Other receivables and miscellaneous
current assets
2,607
2,337
3,948
3,223
Marketable securities
56
51
35
15
Cash and cash equivalents
834
767
2,776
1,835
Assets of disposal groups
614
3,883
16
1,493
614
3,781
19
3,455
3,714
4,032
3,095
9,581 10,160 11,266
9,506 10,233
8,688
10,059
10,167 10,886
6,776
7,738
7,752
540
526
1,473
1,006
2,193
1,791
noncurrent assets
Noncurrent assets
612
26,899
655
27,894 29,586
642
946
31,681
613
653
911
877
1,498
1,720
34,532 34,087 35,259 38,253 43,939
46,270
Inventories
6,672
6,578
6,763
Accounts receivable, trade
8,223
8,561
561
L
Design: Anzinger und Rasp, Munich
FSC
April 27, 2017 / May 12, 2017
Responsible Care®
OUR COMMITMENT TO SUSTAINABILITY
BASF supports the chemical industry's
global Responsible Care initiative.
Further information
Published on February 26, 2016
You can find this and other
BASF publications online at
basf.com
You can also order the reports:
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Contact
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ISSN 1866-9387
D-BASF
We create chemistry
Report 2015
Interim Report 1st Quarter 2017 / Annual Shareholders' Meeting 2017
February 24, 2017
ZOAC 1514 E
October 27, 2016
Full-Year Results 2016
www.fsc.org
MIX
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Publisher:
BASF SE
Communications & Government Relations
67056 Ludwigshafen
BASF Group 2015 at a glance ↑
Printing: Kunst- und Werbedruck, Bad Oeynhausen
Photography:
Paper from
responsible sources
Board of Executive
Directors and
Supervisory Board:
Cover and page 1:
Photo series:
July 27, 2016
April 29, 2016
Interim Report 1st Quarter 2016 / Annual Shareholders' Meeting 2016
Interim Report 1st Half 2016
Roderick Aichinger, Zhou Bin, Dominik Gigler,
Chris Marksbury, Andreas Pohlmann,
Chris Marksbury, Yasuo Nishizaki, Fang Shan Cheng,
Qilai Shen, Hartmut Unger
Roderick Aichinger, BASF, Daimler, Alfredo D'Amato,
Guillaume Gaudet, Dominik Gigler, jhphoto/
Imaginechina/laif, Gunnar Kenchtel/laif,
Roderick Aichinger, Chris Marksbury
Marcus Schwetasch
Interim Report 3rd Quarter 2016
Michael Heinz
Creator SpaceTM tour, São Paulo, Brazil
Margret Suckale
Dr. Martin Brudermüller
Employee celebration event,
Ludwigshafen, Germany
BASF Report 2015
Wayne T. Smith
Science symposium, Chicago, Illinois
BASF Report 2015
Dr. Hans-Ulrich Engel
Employee celebration event,
Ludwigshafen, Germany
Sanjeev Gandhi
To Our Shareholders
The Board of Executive Directors of BASF SE
13
Science symposium, Shanghai, China
Dr. Harald Schwager
Creator SpaceTM tour, Barcelona, Spain
Jugend forscht national youth science competition,
Ludwigshafen, Germany
14
Creator Space™ tour, Ludwigshafen, Germany
Dr. Kurt Bock
We will continue to actively manage our portfolio. In 2015, we made a number of
smaller, technology-driven acquisitions, but we also streamlined our portfolio. We
divested parts of our pharmaceutical ingredients business and are preparing the
sale of our industrial coatings business. As a result, we will be able to concentrate
even more closely on particularly promising areas of activity. In the future, we will
continue to review possible acquisitions very critically as to whether they actually
create value for our shareholders. Not everything that is en vogue meets this
criterion.
The Board of Executive Directors of BASF SE
To Our Shareholders
At the end of the third quarter, we completed the divestiture of our gas trading and
storage business to Gazprom. This business contributed approximately €10 billion
to sales and €260 million to EBIT before special items in the first three quarters of
2015. In combination with the further fall in oil prices, it became apparent at the
end of October that we would probably not reach our annual goals. In 2015, EBIT
before special items was 8% lower than in 2014, although we improved earnings in
the chemicals business as planned. EBIT fell by 18%, in particular due to price-
related impairments to assets in the Oil & Gas segment. As a result, oil prices
thwarted our plans in 2015.
As the Board of Executive Directors, we cannot be satisfied with last year's
performance. Nevertheless, the BASF team did a good job. On behalf of the
Board of Executive Directors, I thank all employees for their efforts in what was a
challenging year.
We remain committed to our ambitious dividend policy and will again propose to
the Annual Shareholders' Meeting to increase the dividend by €0.10 to €2.90 per
share. As a result, we would pay out almost €2.7 billion to our shareholders. Based
on the year-end price of €70.72 for 2015, BASF shares again offer a high dividend
yield of around 4.1%.
What do we expect in 2016? We assume that oil prices will remain low and are
basing our planning on $40 per barrel. As a consequence and in particular due
to the divestiture of our gas trading and storage business, sales will decline
significantly. We aim to increase sales volumes in our chemicals and agricultural
solutions businesses and above all ensure better utilization of the capacities that
came on stream in 2015. This is an ambitious goal because our markets are likely
to grow more slowly than in 2015.
BASF Report 2015
To Our Shareholders
Letter from the Chairman of the Board of Executive Directors
We expect to achieve a slightly lower level of EBIT before special items than in
2015. We want to again increase earnings in our chemicals and crop protection
businesses, but this will not be sufficient to compensate for the massive decline in
earnings in the oil and gas business. The oil price will continue to be the biggest
risk in 2016. If it should remain below our expected average of $40 per barrel,
then we will be unlikely to offset this by means of higher earnings in the chemicals
business.
Strict cost and expenditure discipline will therefore also be top priority in 2016. This
applies in particular to cutting back on capital expenditures, which we will reduce
significantly following the increase in 2013 to 2015. A special challenge in this area
will be in adjusting expenditures for the development of oil and gas fields.
Research and development and thus innovations remain at the heart of our
competitiveness. In 2015, we reached our goal of achieving sales of around
€10 billion with new and improved products that have been on the market for
less than five years. Following a significant increase in research and development
spending in the past years, we plan to maintain expenditure at the previous year's
level in 2016. Our goal is to convince our customers by continually offering new
products and solutions. Since customers are increasingly focusing on sustainability,
we see business opportunities that we want to seize through our innovations.
We will further increase the proportion of sales from products that contribute
particularly to sustainability.
Innovation and cooperation with our partners also played a central role in our
150th anniversary year. The wide range of activities, which you will also find in
this report, reflect the dynamics of our industry and the contributions that chemistry
and BASF - together with its customers - make towards enabling a better life,
technical progress and efficient use of resources. This power and dynamism are
hallmarks of BASF - both when the company was founded 150 years ago and also
today.
Yours,
Mert Barch
Kurt Bock
"We expect to achieve a slightly
lower level of EBIT before special
items than in 2015. The oil price
will continue to be the biggest risk
in 2016."
"Research and development and
thus innovations remain at the
heart of our competitiveness.
Our goal is to convince our
customers by continually offering
new products and solutions."
11
12
To Our Shareholders
The Board of Executive Directors of BASF SE
At events in our 2015 anniversary year
BASF on the capital market
140
BASF Report 2015
In such a situation it helps to build on the strengths of BASF and keep costs and
cash under control. We were quick to adapt production to reflect weaker demand,
reduced inventories and thus strengthened cash flow. Our STEP excellence
program, which had been running since 2012, was completed faster than originally
planned and we therefore launched a new program - DrivE - in September. It is
expected to contribute €1 billion to earnings annually by the end of 2018.
130
120
110
100
90
90
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
100
BASF on the capital market
110
130
€70.72
BASF share closing price up
by 1.2% year-on-year
€2.90
Proposed dividend per share
DJSI World, CDLI
BASF once again included
in sustainability indexes
Stock markets were marked by a high level of volatility in
2015. This was largely a factor of fickle economic devel-
opment, slowdown in the emerging markets and the threat
of Greece's payment default. In this volatile environment,
the BASF share rose by 1.2%, trading at €70.72 at the end
of 2015. We stand by our ambitious dividend policy and
will propose a dividend of €2.90 per share at the Annual
Shareholders' Meeting an increase of 3.6% compared
with the previous year. BASF enjoys solid financing and
good credit ratings.
BASF share performance
■ Stock markets fluctuate widely over course of year
BASF share gains 1.2% in 2015
■
■ Ten-year development continues to clearly
outperform benchmark indexes
The weak euro and the European Central Bank's (ECB)
announced intention to purchase large amounts of additional
bonds both provided the stock markets with a positive start to
2015. On April 10, 2015, new record highs were achieved as
the German benchmark index DAX 30 closed at 12,375 points
and the BASF share price at €96.72. As the second quarter
progressed, concerns especially about Greece's financial
solvency led to share price losses. The second half of the
year saw the market rebound as European finance ministers
approved the third bailout package for Greece and the
-
-
eurozone produced robust economic figures. This was fol-
lowed by considerable dips, due in large part to the weak
economic situation in China and severe recession in Brazil.
The further depreciation of the euro, positive economic devel-
opment and speculation as to a renewed expansion of the
ECB's monetary policy initially led to a fourth-quarter boost in
share prices, including the BASF share. Prices dropped again
in December, however, after the ECB announced intentions to
continue easing its monetary policy, a decision that disap-
pointed many investors who had anticipated more expansive
measures.
BASF shares traded at €70.72 at the end of 2015, 1.2%
above the previous year's closing price. Assuming that divi-
dends were reinvested, BASF shares gained 4.4% in value in
2015. This did not match the performance of the German and
European stock markets, whose benchmark indexes DAX 30
and DJ EURO STOXX 50 gained 9.6% and 6.4% over the
same period, respectively. As for the global industry indexes,
DJ Chemicals fell by 3.3% in 2015 while MSCI World Chemi-
cals declined by 0.6%. Viewed over a ten-year period, the
long-term performance of BASF shares still clearly outperforms
these indexes. The assets of an investor who invested €1,000
in BASF shares at the end of 2005 and reinvested the divi-
dends in additional BASF shares would have increased to
€3,195 by the end of 2015. This represents a yield of 12.3%
each year, placing BASF shares above the returns for the
DAX 30 (7.1%), EURO STOXX 50 (2.2%) and MSCI World
Chemicals (7.4%) indexes.
Change in value of an investment in BASF shares in 2015
(With dividends reinvested; indexed)
140
120
In our chemicals business, the oil price initially had a positive impact on margins.
Soon, however, it was clear that our customers were becoming increasingly
cautious. They held back from ordering - in the expectation of further declines
in prices for chemical products. Pressure on margins increased in the course of
the year, particularly in the fourth quarter.
Supplementary Information on the Oil & Gas Segment
"We remain committed to our
ambitious dividend policy and
will again propose to the Annual
Shareholders' Meeting to increase
the dividend by €0.10 to €2.90 per
share."
THE GLOBAL
COMPA
GLOBAL
COMPACT
WE SUPPORT
Global Compact
LEAD
PARTICIPANT
GRI
Organizational
Stakeholder
2015
6
About This Report
BASF Report 2015
Data
■ Relevant information included up to editorial
deadline of February 23, 2016
All information and bases for calculation in this report are
founded on national and international standards for financial
and sustainability reporting. The data and information for the
reporting period were sourced from the expert units responsible
using representative methods. The reporting period was the
2015 business year. To make this report as current as possible,
we have included relevant information available up to the edito-
rial deadline of February 23, 2016. The report is published each
year in English and German.
BASF Group's scope of consolidation for its financial
reporting comprises BASF SE, with its headquarters in
Ludwigshafen, Germany, and all of its fully consolidated material
subsidiaries and proportionally included joint operations. Shares
in joint ventures and associated companies are accounted for,
if material, using the equity method in the BASF Group Consoli-
dated Financial Statements.
BASF
For more on the Global Reporting Initiative, see globalreporting.org
For more on our selection of sustainability topics,
see page 31 onward and basf.com/materiality
The results of the materiality analysis and the material
topics derived from them - such as energy and climate, water,
resources and ecosystems, responsible production, and
employment and employability - define our report and provide
its focus.
The information on the financial position and performance of
the BASF Group is based on the requirements of International
Financial Reporting Standards (IFRS), and, where applicable,
the German Commercial Code as well as the German
Accounting Standards (GAS). Internal control mechanisms
ensure the reliability of the information presented in this report.
BASF's management confirmed the effectiveness of the
internal control measures and compliance with the regulations
for financial reporting.
BASF Report 2015
About This Report 5
■
Content and structure
As an integrated report, the BASF Report also
serves as progress report with regard to U.N.
Global Compact
Sustainability reporting follows Global Reporting
Initiative's G4 "comprehensive" international
guidelines
The BASF Report combines the major financial and non-
financial information necessary to thoroughly evaluate our
performance. We select the report's topics based on the
principles of materiality, sustainability context, completeness,
balance, and stakeholder inclusion. In addition to our integrated
report, we publish further information online. Links to this
supplementary information are provided in each chapter.
Our reporting on sustainability issues has been aligned with
the Global Reporting Initiative (GRI) framework since 2003.
In the BASF Report 2015, our sustainability reporting follows
the GRI's G4 "comprehensive" international guidelines. We
served as a pilot enterprise in the development of the frame-
work for integrated reporting of the International Integrated
Reporting Council (IIRC). Following this pilot phase, we have
been active in the IR Business Network since 2014 in order to
discuss our experience with other stakeholders and at the
same time receive inspiration for enhancing our reporting. This
report addresses elements of the IIRC framework by, for
example, illustrating connections between nonfinancial and
financial performance in the chapters for the segments.
The information in the BASF Report 2015 also serves as a
progress report on BASF's implementation of the ten principles
of the United Nations Global Compact and takes into consider-
ation the Blueprint for Corporate Sustainability Leadership of
the Global Compact LEAD platform.
The GRI and Global Compact Index can be found in the
online report, providing information on GRI indicators, topics
relevant to the Global Compact principles, and the auditor's
report of KPMG AG Wirtschaftsprüfungsgesellschaft.
The 2015 Online Report can be found at basf.com/report
For more on sustainability, see basf.com/sustainability
For more on the Global Compact, the implementation of the
Global Compact principles, Global Compact LEAD and Blueprint
for Corporate Sustainability Leadership, see globalcompact.org and
basf.com/en/global-compact
The GRI and Global Compact Index can be found at basf.com/en/gri-gc
An illustrated example of BASF's business model as geared toward
the IIRC framework can be found in the introduction under "How we
create value"
Requirements and topics
Financial reporting according to International
Financial Reporting Standards, German Commercial
Code and German Accounting Standards
■ Sustainability reporting focused on material topics
The chapter "Working at BASF" refers to employees active
in a company within the BASF Group scope of consolidation as
of December 31, 2015. Our data collection methods for envi-
ronmental protection and occupational safety are based on the
recommendations of the European Chemical Industry Council
(CEFIC). In the chapter on "Safety, Security, Health and the
Environment," we report all data on the emissions and waste of
the worldwide production sites of BASF SE, its subsidiaries, and
joint operations based on our stake. Work-related accidents at
all sites of BASF SE and its subsidiaries as well as joint opera-
tions and joint ventures in which we have sufficient authority in
terms of safety management, are compiled worldwide regard-
less of our stake and reported in full. Further data on social
responsibility and transportation safety refers to BASF SE and
its subsidiaries unless otherwise indicated.
For more on companies accounted for in the Consolidated Financial
Statements, see the Notes from page 173 onward
For more on emissions, see page 105
The Consolidated Financial Statements begin on page 153
the Board of Executive Directors
9
The Board of Executive Directors of BASF SE
12
BASF on the capital market
14
To Our Shareholders
BASF Report 2015
Dear Shareholder,
To Our Shareholders
Letter from the Chairman of the Board of Executive Directors
As this report goes to print, we are looking back at one of the most turbulent
starts to the year for decades. At times, oil prices fell to below $27 per barrel -
the lowest level since 2003. In 2015, oil prices averaged $52 per barrel, almost half
the previous year's figure. This price slump reflects not only an oil surplus but also a
slowdown in global economic growth, especially in emerging markets. Our share
price has also suffered from these developments. Since the beginning of the year it
has fallen significantly to below €60 and is thus substantially lower than the peak of
nearly €97 in April 2015.
These figures underline the level of uncertainty about the future performance of
the global economy. This raises some legitimate questions: How will demand for
chemical products develop? What will be the impact if oil prices remain low for any
length of time? How does one steer a company like BASF in such turbulent and
challenging times?
9
10
To Our Shareholders
Letter from the Chairman of the Board of Executive Directors
BASF Report 2015
"In our chemicals business, the oil
price initially had a positive impact
on margins. Soon, however, it was
clear that our customers were
becoming increasingly cautious."
Letter from the Chairman of
The start to 2015 confirmed these goals: Although volume growth weakened in the
first quarter, margins developed satisfactorily and oil prices moved in the direction
of the expected corridor. However, the first signs of an economic slowdown also
became apparent - especially in emerging economies. Important industries such
as agriculture and automotive developed more weakly than expected. In contrast,
the U.S. economy proved relatively robust. The weakness of the euro supported
the competitiveness of our European sites.
233
223
For an overview of the restated figures for 2014, see
basf.com/publications
External audit and evaluation
Our reporting is audited by a third party. KPMG AG Wirtschafts-
prüfungsgesellschaft has audited the BASF Group Consoli-
dated Financial Statements and the Management's Report
and has approved them free of qualification. The audit of the
Consolidated Financial Statements including the Notes is
based on the likewise audited financial statements of the
BASF Group companies.
Statements and figures pertaining to sustainability in the
Management's Report and Consolidated Financial Statements
are also audited. The audit was conducted using the Interna-
tional Standard of Assurance Engagements 3000 and the
International Standard of Assurance Engagements 3410,
the relevant auditing standards for sustainability reporting. The
additional content provided on the BASF internet sites
indicated in this report is not part of the information audited by
KPMG.
The Auditor's Report can be found on page 156
The Assurance Report on sustainability information in the
BASF Report 2015 can be found at basf.com/sustainability_information
Forward-looking statements
This report contains forward-looking statements. These state-
ments are based on current estimates and projections of
BASF management and currently available information. Future
statements are not guarantees of the future developments and
results outlined therein. These are dependent on a number of
factors; they involve various risks and uncertainties; and they
are based on assumptions that may not prove to be accurate.
Such factors include those discussed in the Opportunities and
Risks Report from pages 113 to 120. We do not assume any
obligation to update the forward-looking statements contained
in this report.
1
About This Report
To Our Shareholders
Management's Report
Corporate Governance
+
19
127
Consolidated Financial Statements
153
BASF share 4.4%
Overviews
DAX 30 9.6% ― MSCI World Chemicals -0.6%
A look back at the past year provides some initial answers to these questions.
Compared with 2014, our goals for 2015 were to increase sales slightly and match
the high level of income from operations (EBIT) before special items. This was
based on the assumption that higher earnings from our chemicals activities would
compensate for the expected decline in earnings in our Oil & Gas segment due to
lower oil prices. We planned with oil prices in the range of $60 to $70 per barrel.
€
200.8
224.5
264.5
4.7
3.3
2.8
2.9
3.3
Number of shares December 31
million shares
918.5
205.6
918.5
918.5
918.5
Market capitalization December 31
billion €
49.5
65.4
71.2
64.2
65.0
Earnings per share
€
918.5
265.7
million €
million shares
79.28
2014
2015
€
53.89
71.15
77.49
69.88
70.72
€
69.40
73.09
78.97
87.36
96.72
€
43.66
51.89
64.79
65.61
65.74
€
57.02
62.17
71.96
77.93
5.25
5.22
5.61
4.34
We add value as one company. Our Verbund concept is
unique in the industry. Encompassing the Production Verbund,
Technology Verbund and Know-How Verbund as well as all
relevant customer industries worldwide, this sophisticated and
profitable system will continue to be expanded. This is how we
combine our strengths and add value as one company.
We form the best team
We innovate to make our customers more successful
We drive sustainable solutions
We add value as one company
Our strategic principles
We therefore act in accordance with four strategic principles.
- Quality of life
- Food and nutrition
- Resources, environment and climate
Our leading position as an integrated global chemical company
gives us the chance to make important contributions in the
following three areas:
For us, this is what successful business is all about.
- Connecting creative minds to find the best solutions for
market needs
- Acting as a fair and reliable partner
We live our corporate purpose by:
- Sourcing and producing responsibly
We want to contribute to a world that provides a viable future
with enhanced quality of life for everyone. We do so by creat-
ing chemistry for our customers and society and by making
the best use of available resources.
We create chemistry for a sustainable future
Our corporate purpose
In 2050, nearly ten billion people will live on Earth. While the
world's population and its demands will keep growing, the
planet's resources are finite. On the one hand, population
growth is associated with huge global challenges; and yet we
also see many opportunities, especially for the chemical
industry.
With the "We create chemistry" strategy, BASF has set
itself ambitious goals in order to strengthen its position as
the world's leading chemical company. We want to
contribute to a sustainable future and have embedded
this into our corporate purpose: "We create chemistry for
a sustainable future."
As guideline for our
conduct and actions
Values
As strategic basis for our
success on the market
Principles
We create chemistry
for a sustainable future
Purpose
We innovate to make our customers more successful. We
want to align our business even more with our customers'
needs and contribute to their success with innovative and
sustainable solutions. Through close partnerships with cus-
tomers and research institutes, we link expertise in chemistry,
2013
World population growth
Europe
549 million
Adjusted earnings per share
€
6.26
5.64
5.31
5.44
5.00
Asia
5.3 billion
+270%
+340%
57 million
Oceania
Africa
2.5 billion
+990%
9.7 billion
Americas
1.2 billion
+250%
Europe
707 million
+30%
2050
Source: United Nations, 2015
13 million
229 million
Oceania
Africa
2.5 billion
Asia
1.4 billion
340 million
Americas
1950
BASF Report 2015
2012
BASF Report 2015
1 Germany
36%
5
5.9%
2
United States and Canada
16%
0.2%
3
United Kingdom and Ireland
11%
7.4%
4
Rest of Europe
21%
5
Rest of world
6
Not identified
5%
11%
Proposed dividend of €2.90 per share
At the Annual Shareholders' Meeting, the Board of Executive
Directors and the Supervisory Board will propose a dividend
payment of €2.90 per share. We stand by our ambitious divi-
dend policy and plan to pay out almost €2.7 billion to our
shareholders. Based on the year-end share price for 2015,
BASF shares offer a high dividend yield of around 4.1%. BASF
is part of the DivDAX share index, which contains the fifteen
companies with the highest dividend yield in the DAX 30. We
aim to increase our dividend each year, or at least maintain it
at the previous year's level.
Dividend per share¹ (€ per share)
Employees becoming shareholders
4
6
MSCI World Index
DJ Chemicals
Dividend per share
BASF Bericht 2015
To Our Shareholders
BASF on the capital market
15
Long-term performance of BASF shares compared with indexes
(Average annual increase with dividends reinvested)
2010-2015
7.1%
9.2%
6.4%
7.7%
2005-2015
12.3%
7.1%
2.2%
7.4%
BASF share
DAX 30
EURO STOXX
MSCI World Chemicals
Weighting of BASF shares in important indexes
as of December 31, 2015
Broad base of international shareholders
With over 500,000 shareholders, BASF is one of the largest
publicly owned companies with a high free float. An analysis of
the shareholder structure carried out at the end of 2015
showed that, at 16% of share capital, the United States and
Canada made up the largest regional group of institutional
investors. Institutional investors from Germany accounted for
9%. Shareholders from the United Kingdom and Ireland hold
just under 11% of BASF shares, while institutional investors
from the rest of Europe hold a further 21% of capital. Approx-
imately 27% of the company's share capital is held by private
investors, most of whom reside in Germany. BASF is therefore
one of the DAX 30 companies with the largest percentage of
private shareholders.
Shareholder structure (by region)
DAX 30
In many countries, we offer share purchase programs that turn
our employees into BASF shareholders. In 2015, for example,
around 21,600 employees (2014: 23,200) purchased employee
shares worth about €60 million (2014: €62 million).
For more on employee share purchase programs, see page 47
2.50
2.60
17
Close dialog with the capital market
■
■
Roadshows for institutional investors and talks
with rating agencies
Investor Day in Ludwigshafen
Information events for retail investors
BASF's Investor Relations receives multiple awards
Our corporate strategy aims to create long-term value. We
support this strategy through regular and open communica-
tion with all capital market participants. To keep institutional
investors and rating agencies informed, we host numerous
one-on-one meetings and roadshows worldwide. We also
hold informational events to provide private investors with
insight into BASF.
At the end of September, we discussed the implemen-
tation of our "We create chemistry" strategy with analysts
and investors at an Investor Day held in Ludwigshafen. The
members of our Board of Executive Directors as well as our
divisional presidents presented all five segments and their
operating divisions to around a hundred guests. We used
numerous examples to illustrate how BASF's innovations are
used in key customer industries.
For more on our "We create chemistry" strategy, see page 24 onward
In 2015, we once again put on roadshows geared specifically
toward investors who base their investment decisions on
sustainability criteria. There, we especially outlined our mea-
sures for climate protection and energy efficiency. In addition,
we conducted several special creditor relations roadshows,
where creditors and credit analysts could learn more about our
business and our financing strategy.
Investors can find comprehensive information about BASF
and BASF shares on our website and on social media plat-
forms.
Analysts and investors have confirmed the quality of our
communication work: We took several leading rankings in
Institutional Investor Magazine's annual survey in 2015. These
included first prize in the Best Analyst Days in Europe (Chemi-
cals) category for the Chemicals Investor Day held in London
in 2014. Moreover, our investor relations activities were
honored by the U.K.'s Investor Relations Society with first
place in the "International" category.
For more on investor relations, see basf.com/share
Register for the newsletter with current topics and dates at
basf.com/share/newsletter
Contact the Investor Relations team by phone at +49 621 60-48230
or email ir@basf.com
18 To Our Shareholders
BASF on the capital market
Key BASF share data¹
Year-end price
Year high
Year low
Year average
Daily trade in shares²
To Our Shareholders
BASF on the capital market
2011
BASF Report 2015
Around 25 financial analysts regularly publish studies on BASF.
At the end of 2015, 32% recommended buying our shares
(end of 2014: 41%) and 40% recommended holding them
(end of 2014: 38%), while 28% had a sell rating (end of 2014:
21%). On December 31, 2015, the average target share price
according to analyst consensus estimates was €76.86.
2.80
2.70
2.90
2.20
1.95 1.95
1.70
2006 2007 2008 2009 2010 2011
2012
2013 2014 2015
1 Adjusted for two-for-one stock split conducted in 2008
16
To Our Shareholders
BASF on the capital market
BASF Report 2015
BASF a sustainable investment
■ BASF once again part of DJSI World in 2015
CDLI: inclusion once again shows BASF's
transparent reporting on climate protection
■
In September 2015, BASF shares were included in the Dow
Jones Sustainability World Index (DJSI World) for the fifteenth
year in succession. As one of the most well-known sustain-
ability indexes, the DJSI World represents the top 10% of the
2,500 largest companies in the S&P Global Broad Market
Index based on economic, environmental and social criteria.
CDP, an international organization that analyzes compa-
nies' climate protection data, has placed BASF among the
leading companies in the world for climate protection report-
ing. With the highest possible ratings for reporting transparency
and completeness, we achieved top scores among DAX
companies and in the Energy & Materials sector in 2015, thus
qualifying for the Climate Disclosure Leadership Index (CDLI)
for the eleventh time. The CDP represents 822 institutional
investors with around $95 trillion in assets under management.
Investors use CDP indexes as assessment tools.
In 2015, BASF was unable to qualify for the Carbon Perfor-
mance Leadership Index (CPLI), which judges companies'
climate protection activities. Inclusion in the CPLI requires a
considerable reduction in greenhouse gas emissions com-
pared with the previous year (-4%). Measures already taken in
previous years are not eligible for consideration. BASF has
already implemented numerous greenhouse gas reduction
measures in the past that have decreased absolute emissions
by just under 50% since 1990 (BASF business excluding the
Oil & Gas segment). Further significant improvements at this
high level can only be achieved with difficulty, which meant
that we were unable to meet the CPLI's high reduction
requirements.
For more on the key sustainability indexes, see
basf.com/sustainabilityindexes
For more on energy and climate protection, see page 105 onward
Good credit ratings and solid financing
BASF has good credit ratings, especially in comparison with
competitors in the chemical industry. BASF was rated "A1/P-1/
outlook stable" by rating agency Moody's and "A+/A-1/out-
look negative" by Standard & Poor's. We have solid financing.
At the end of 2015, the financial indebtedness of the BASF
Group was €15.2 billion with liquid funds of €2.2 billion. The
average maturity of our financial indebtedness was 5.2 years.
The company's medium to long-term debt financing is pre-
dominantly based on corporate bonds with a balanced matu-
rity profile. For short-term debt financing, BASF SE has a
commercial paper program with an issuing volume of up to
$12.5 billion. As backup for the commercial paper program,
there are committed, broadly syndicated credit lines of €6 bil-
lion available; these are not being used at this time.
For more on financial indebtedness and maturities, see page 58 onward
and the Notes from page 206 onward
Analysts' recommendations
Continuously updated consensus estimates on BASF are available at
basf.com/share
Our strategy
Corporate strategy
6.74
24 Management's Report
113
Opportunities and risks report
Economic environment in 2016
Outlook 2015
113
121
124
82
86
Forecast
92
77246162NEZ ZE Z
94
96
98
98
99
48
48
94
111
109
Air and soil
Financial position
58
Business review by segment
Chemicals
63
69
Regional results
Responsibility along the value chain
Suppliers
Raw materials
Safety, security, health and the environment
Responsible Care Management System
Transportation and storage
Production
100
Product stewardship
103
Energy and climate protection
105
Water
Management's Report
57
BASF Report 2015
Management's Report 21
The BASF Group
21%
5
- Care Chemicals
2
Performance Products
22%
- Nutrition & Health
-
Dispersions & Pigments
- Performance Chemicals
Catalysts
Functional Materials & Solutions
- Construction Chemicals
Coatings
26%
4
- Performance Materials
4
Agricultural Solutions
5
3
- Intermediates
- Petrochemicals
- Monomers
Chemicals
Global leader
BASF is the world's leading
chemical company
In 80+ countries
Employees contribute to
our success
Broad portfolio
5 segments
13 divisions
84 strategic business units
At BASF, we create chemistry for a sustainable future.
As the world's leading chemical company, we combine
economic success with environmental protection and
social responsibility. The approximately 112,000 employ-
ees in the BASF Group work on contributing to the
success of our customers in nearly all sectors and almost
every country in the world. Our portfolio is arranged
into five segments: Chemicals, Performance Products,
Functional Materials & Solutions, Agricultural Solutions
and Oil & Gas.
Organization of the BASF Group
■ Thirteen divisions grouped into five segments
■ Regional divisions, corporate units and competence
centers support our business
Since the beginning of 2015, thirteen divisions divided into five
segments bear operational responsibility and manage our 61
global and regional business units. The divisions develop
strategies for our 84 strategic business units and are orga-
nized according to sectors or products.
At the end of September, we rearranged our activities in the
Oil & Gas segment, which are bundled into the Wintershall
O Group. As part of the asset swap with our partner Gazprom,
we handed over our shares in the previously jointly run natural
gas trading and storage business and in return are expanding
our oil and gas production in western Siberia. We continue to
operate the natural gas transport business together with
Gazprom, but do not report on it separately.
The regional divisions contribute to the local development
of our business and help exploit market potential. They are
also responsible for optimizing infrastructure for our business.
For financial reporting purposes, our divisions are organized
into the following four regions: Europe; North America; Asia
Pacific; and South America, Africa, Middle East.
Three central divisions, six corporate units and ten compe-
tence centers provide services for the BASF Group in areas
such as finance, investor relations, communications, human
resources, research, engineering, and site management, as
well as environment, health and safety.
BASF structure
Percentage of total sales in 2015
1
The BASF Group
Net assets
52
Results of operations
12.5
16.3
1 The figures for the 2011 business year were not restated according to the new accounting and reporting standards IFRS 10 and 11.
2 Average, Xetra trading
3 Based on year-end share price
Further information on BASF share
Securities code numbers
Germany
14.8
Great Britain
BASF11
0083142
323600
055262505
United States (CUSIP Number)
ISIN International Securities Identification Number
DE000BASF111
International ticker symbol
Deutsche Börse
Switzerland
13.6
8.0
Price-earnings ratio (P/E ratio)³
2.50
2.60
2.70
2.80
2.90
Dividend yield³
%
4.64
3.65
3.48
4.01
4.1
Payout ratio
%
37
50
52
50
67
London Stock Exchange
Swiss Exchange
BAS
BFA
30
31
Innovation
34
Investments, acquisitions and divestitures
39
Business models and customer relations
41
Working at BASF
42
42
Social commitment
Performance Products
Functional Materials & Solutions
Agricultural Solutions
Oil & Gas
The BASF Group business year
49
Economic environment
49
28
Oil & Gas
24
Sustainability management
AN
2
About This Report
To Our Shareholders
Management's Report
Corporate Governance
Consolidated Financial Statements
47
127
Our strategy Corporate strategy
Supplementary Information on the Oil & Gas Segment
Overviews
223
233
The BASF Group
Our strategy
Corporate strategy
Goals
21
Value-based management
24
Crop Protection
153
2
Regional centers
Selected sites
Singapore
Kuantan
Ludwigshafen
Antwerp
Geismar
Florham Park
Freeport
BASF sites
The BASF Group
Verbund sites
22 Management's Report
6
4%
3
Other
6
Natural Gas Trading)
19%
(Exploration & Production;
Oil & Gas
8%
1
Selected research and development sites
São Paulo
- Hong Kong
Management's Report 23
The BASF Group
The Compensation Report can be found from page 140 onward, and the
disclosures required by takeover law in accordance with Section 315(4)
of the German Commercial Code (HGB) from page 134 onward. They
form part of the Management's Report audited by the external auditor.
Compensation Report and disclosures in
accordance with Section 315(4) of the
German Commercial Code
For more information, see the Notes to the Consolidated Financial
Statements from page 173 onward
Nanjing
Corporate legal structure
BASF holds one of the top three market positions in around
70% of the business areas in which it is active. Our most
important global competitors include AkzoNobel, Clariant,
Covestro, Dow Chemical, DSM, DuPont, Evonik, Formosa
Plastics, Reliance, Sabic, Sinopec, Solvay and many hundreds
of local and regional competitors. We expect competitors from
emerging markets to become increasingly significant in the
years ahead.
Competitive environment
BASF Report 2015
➡ For more on the Verbund concept, see basf.com/en/verbund
As the publicly traded parent company, BASF SE takes a
central position: Directly or indirectly, it holds the shares in the
companies belonging to the BASF Group, and is also the
largest operating company. The majority of Group companies
cover a broad spectrum of our business. In some, we concen-
trate on specific business areas: The Wintershall Group, for
example, focuses on oil and gas activities. In the BASF Group
Consolidated Financial Statements, 251 companies including
BASF SE are fully consolidated. We consolidate seven joint
operations on a proportional basis, and account for 32 com-
panies using the equity method.
The Verbund system is one of BASF's great strengths. Here,
we add value as one company by making efficient use of our
resources. The Production Verbund, for example, intelligently
links production units and energy demand so that waste
heat can be used as energy in other plants. Furthermore,
by-products of one plant can serve as feedstock elsewhere.
In this system, chemical processes run with lower energy
consumption and higher product yield. This not only saves us
raw materials and energy, it also avoids emissions, lowers
logistics costs and makes use of synergies.
Intelligent plant networking in the Production Verbund
■ Technology and Know-How Verbund
Verbund
We operate six Verbund sites and 338 additional produc-
tion sites worldwide. Our Verbund site in Ludwigshafen is the
world's largest integrated chemical complex. This was where
the Verbund principle was originally developed and steadily
honed before being put into practice at additional sites.
BASF has companies in more than 80 countries and supplies
products to a large number of business partners in nearly
every part of the world. In 2015, we generated 42% of our
sales (excluding Oil & Gas) with customers in Europe. In addi-
tion, 27% of sales were achieved in North America; 22% in
Asia Pacific; and 9% in South America, Africa, Middle East.
Based on the entire BASF Group, 52% of our sales were to
customers in Europe, 22% in North America, 18% in Asia
Pacific and 8% in South America, Africa, Middle East.
BASF with companies in more than 80 countries
Six Verbund sites and 338 additional production
sites worldwide
■
Markets and sites
BASF Report 2015
We also make use of the Verbund principle for more than
production, applying it for technologies, knowledge, employ-
ees, customers, and partners, as well. Expert knowledge is
pooled into our global research platforms.
34%
2015
Sales' in emerging markets
For more on our goals, see page 28 onward
Compared with 2014, sales at our companies headquar-
tered in the emerging markets rose by 3% to €16,230 million.
This was largely the result of positive currency effects and
increased volumes. Measured by customer location, sales
(excluding the Oil & Gas segment) in the emerging markets
grew by 2% to €19,572 million. This brought sales to custom-
ers in emerging markets to around 34% of total sales (exclud-
ing Oil & Gas) in 2015. In the years ahead, we want to continue
expanding this percentage.
The weakening of the emerging markets continued in
2015. In China, growth slowed down as part of the orientation
toward a more consumption-oriented growth model. This
dampened growth not only in Asia, but also in the emerging
markets of South America that export raw materials. While the
Argentinian economy was able to stabilize at a low level, Brazil
slid into a sharp recession that intensified toward the end of
the year as domestic and foreign demand weakened. Russia,
too, experienced a significant decline in its gross domestic
product in light of low oil prices and ongoing mutual trade
sanctions on the part of the E.U. and United States.
Innovations for a sustainable future
Business expansion in emerging markets
For more on innovation, see page 34 onward
Management's Report 27
Our strategy Corporate strategy
Innovations in chemistry are necessary to meet the needs of
the growing world population on a long-term basis. The devel-
opment of innovative products and solutions is, therefore, of
vital significance for BASF. In the long term, we aim to continue
significantly increasing sales of these products and solutions,
and earn higher margins with them than the rest of our port-
folio. This means effective and efficient research is becoming
increasingly important. Aside from the research and develop-
ment activities in our established business, we are also work-
ing on growth fields to tap new business areas for BASF.
Through these, we can make a decisive contribution to inno-
vative solutions for global challenges and contribute to sus-
tainable development. We regularly review the growth fields in
terms of their attractiveness for BASF. We will tailor our tech-
nology fields even more closely to the BASF Group's needs
and reorganize them into key technologies. Key technologies
combine skills and knowledge in order to maintain the long-
term competitiveness of our business and products.
2005
Our worldwide research expertise is pooled into three
platforms each headquartered in one of the regions particu-
larly significant for us: Europe, Asia Pacific and North America:
Process Research & Chemical Engineering (Ludwigshafen,
Germany), Advanced Materials & Systems Research (Shang-
hai, China) and Bioscience Research (Research Triangle Park,
North Carolina). In the long term, we aim to conduct half of our
research and development activities outside of Europe and are
continuing to expand our R&D activities in both Asia and
America. This means focusing on growth in regional markets.
Our stronger global presence opens up new opportunities to
participate in regional developments in innovation and gain
access to local talent.
In the years ahead, we want to grow even more vigorously in
the emerging markets and further expand our position there.
Today's emerging markets are expected to account for around
60% of global chemical production in 2020. We aim to benefit
from the above-average growth in these regions and therefore
plan to invest more than a quarter of our capital expenditures
there between 2016 and 2020.
27%
Responsible: We act responsibly as an integral part of society.
In doing so, we strictly adhere to our compliance standards.
And in everything we do, we never compromise on safety.
Industrialized countries²
BASF
Procurement
Suppliers
BASF Report 2015
focusing on issues through which we as a company can make
a significant contribution. We updated and revamped our
goals to this effect in 2015.
Goal areas along the value chain
| Emerging markets
We carry out our corporate purpose, "We create chemistry for
a sustainable future," by pursuing ambitious goals along our
entire value chain. In this way, we aim to achieve profitable
growth and take on social and environmental responsibility,
Goals
Our strategy Goals
28 Management's Report
2 Comprises EU15, Norway, Switzerland, United States, Canada, Japan, South Korea,
Australia, New Zealand
1 Percentage of BASF Group sales (excluding Oil & Gas) by location of customer
66%
73%
BASF Report 2015
For more on Responsible Care Management, see page 98
For more on corporate governance, see page 127 onward
For more on compliance, see page 136 onward
The BASF brand
Our business partners are expected to uphold prevailing laws
and requirements and to align their actions with internationally
recognized principles. We have established monitoring sys-
tems to ensure this.
Together with researchers from Harvard University - also
a member of UNIQUE, as well as of our North American Center
for Research on Advanced Materials (NORA) - BASF researchers
developed a new method for making amorphous nanoparti-
cles with increased solubility. This property improves the effi-
cient uptake of, for example, vitamins and drugs in the human
body. The new process is well suited to a number of different
pharmaceutical, food and crop protection applications.
Our focus areas
We set ourselves goals along the value chain for our
focus areas
We used a materiality analysis to identify and rank relevant
sustainability issues for BASF. These topics include, for exam-
ple, energy and climate, water, resources and ecosystems,
responsible production, and employment and employability.
We updated our sustainability goals to this effect in 2015 and
aligned them along the entire value chain. We practice respon-
sible procurement. We design our production to be efficient
and safe for people and the environment. We treat both our
employees and our partners with respect and fairness. We
drive sustainable products and solutions.
For more on our materiality analysis, see basf.com/materiality
For more on our goals, see page 28 onward
26 Management's Report
Our strategy Corporate strategy
BASF Report 2015
Growth and profitability; employees;
production; product stewardship;
energy and climate protection; water
Above-average awareness of, and trust in,
BASF brand in chemical industry
We rely on a strong brand in order to further expand our posi-
tion as the world's leading chemical company. Our brand is
derived from our strategy and our corporate purpose - "We
create chemistry for a sustainable future". - as well as our
strategic principles and values.
-
"Connected" describes the essence of the BASF brand.
Connectivity is one of BASF's great strengths. Our Verbund
concept realized in production, technologies, knowledge,
employees, customers and partners enables innovative
solutions for a sustainable future. The claim that "We create
chemistry," as stated in the BASF logo, helps us embed this
solution-oriented strategy in the public consciousness. Our
brand creates value by helping communicate its benefits for
our stakeholders as well as our values.
Wherever our stakeholders encounter our brand, we want
to convince them that BASF stands for connectivity, intelligent
solutions, value-adding partnerships, an attractive working
environment and sustainability. This contributes to our cus-
tomers' confidence in their buying decisions and to our com-
pany value.
We are constantly developing our brand image by measur-
ing awareness of and trust in our brand, and therefore in our
company. A global market research study conducted every
two years showed in 2014 that, in terms of awareness and
trust, BASF is above the industry average in numerous coun-
tries. The study collected data on respondents' aided aware-
ness of BASF and our most important competitors. Our goal is
to continue increasing awareness of BASF in all of our relevant
markets.
Global standards
■
- Close dialog with our stakeholders, such as employee repre-
sentatives and international organizations
- The annual survey of our Group companies
- External compliance hotlines
We stipulate rules for our employees with standards that apply
throughout the Group. We set ourselves ambitious goals with
voluntary commitments and review our environmental, health
and safety performance using our Responsible Care Manage-
ment System. A worldwide monitoring system ensures our
compliance with labor and social standards. At its core are
three main pillars:
- The German Corporate Governance Code
- The OECD Guidelines for Multinational Enterprises
- The Responsible Care Global Charter
For more on labor and social standards, see page 47
- The ILO's core labor standards and its Tripartite Declaration
of Principles Concerning Multinational Enterprises and Social
Policy (MNE Declaration)
- The ten principles of the U.N. Global Compact
Our standards fulfill or exceed existing laws and regulations
and take internationally recognized principles into account. We
respect and promote:
We review our performance with regular audits and
a three-pronged monitoring system
beyond laws and regulations
We act according to clearly defined values and
standards of conduct that comply with or go
■
- The United Nations' Universal Declaration of Human Rights
and the two U.N. human rights covenants
Customers
2021 Goal
Growth and profitability
Page 44
2 The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive
status by virtue of special expertise.
BASF Report 2015
Production
Reduction of worldwide lost-time injury rate
per one million working hours
Reduction of worldwide process safety incidents
per one million working hours
Health Performance Index
Product stewardship
Risk assessment of products sold by BASF worldwide in quantities of
more than one metric ton per year
Energy and climate protection
Covering our primary energy demand through the introduction
of certified energy management systems (ISO 50001) at all
relevant sites³
Management's Report 29
Page 45
Our strategy Goals
Status at end of 2015
More on
≤0.5
1.4
Page 100
≤0.5
2.1
Page 101
Annual goal
>0.9
0.97
Page 101
2020 Goal
Entrepreneurial: All employees contribute to BASF's success
- as individuals and as a team. We turn market needs into
customer solutions. We succeed in this because we take
ownership and embrace accountability for our work.
Status at end of 2015
2025 Goals
82.9%
Page 45
35.6%
In 2011, we set ourselves sales and earnings goals for 2015
and 2020 as part of the "We create chemistry" strategy. In
October 2014, we announced that we would not reach the
financial goals for 2015, primarily because gross domestic
product and industrial and chemical production had grown at
a considerably slower average rate from 2010 to 2015 than
our strategy had anticipated.
In September 2015, we reduced our expectations for the
global economic environment from 2015 to 2020 (previous
forecast in parentheses):
- Growth of gross domestic product: 3.0% (3.2%)
- Growth in industrial production: 3.5% (3.7%)
- Growth in chemical production: 3.9% (4.0%)
As a consequence, we no longer adhere to the financial goals
previously stated for 2020.
Our aim for the years ahead is, on average, to grow sales
slightly faster and EBITDA considerably faster than global
chemical production, and to earn a significant premium on our
cost of capital. Moreover, we strive for a high level of free cash
flow each year, either raising or at least maintaining the divi-
dend at the prior-year level.
Procurement
Assessment of sustainability performance of relevant suppliers¹ according to our
risk-based approach; development of action plans where improvement is necessary
2020 Goal
Status at end of 2015
More on
70%
31%
Page 94
1 We define relevant suppliers as those showing an elevated sustainability risk potential as identified by risk matrices and with respect to corresponding country risks. Our suppliers are
evaluated based on risk due to the size and scale of our supplier portfolio.
Employees
Page 45
19.5%
More on
Status at end of 2015
Systematic, global employee development as shared responsibility
of employees and leaders based on relevant processes and tools
Proportion of senior executives with international experience
over 80%
Products and solutions
Increase in proportion of non-German senior executives
(baseline 2003: 30%)
22-24%
Our global network with more than 600 excellent universities,
research institutes and companies is an important part of our
Know-How Verbund. We collaborate with them in many differ-
ent disciplines in order to achieve our growth targets. In our
excellence program UNIQUE, we are working particularly
intensively with fifteen leading universities around the world.
This program will strengthen and expand our portfolio with
creative new projects by giving us even more direct access to
scientific expertise, new technologies and talented minds from
various disciplines. Also involved in UNIQUE is Heidelberg
University, with whom we signed a collaboration agreement
for our joint "Catalysis Research Laboratory" (CaRLa) in the
spring of 2015. The research cooperation, which began in
2006, addresses current issues in homogeneous catalysis and
was extended to October 2017.
Employee development
Senior executives with international
experience
Proportion of international senior executives²
Proportion of women in leadership positions
with disciplinary responsibility
Long-term goals
Successful collaboration with leading universities
within UNIQUE excellence program
The project has been
implemented for around
60,000 employees
worldwide.
■
2014 1,368
194
2015
Five-year summary
EBIT after cost of capital' (in million €)
1
Earnings before interest and taxes (EBIT) after cost of capital is
a key performance and management indicator for the BASF
Group and its operating divisions and business units. This
figure combines the company's economic situation as sum-
marized in EBIT with the costs for the capital made available to
us by shareholders and creditors. When we earn a premium
on our cost of capital, we exceed the return expected by our
shareholders.
Performance and management indicator
EBIT after cost of capital
"We add value as one company" is one of the four princi-
ples of our "We create chemistry" strategy. To create
value in the long term, a company's earnings must exceed
the cost of stockholders' equity and borrowing costs.
This is why we strive to earn a high premium on our cost
of capital. To ensure BASF's long-term success, we
encourage and support all employees in thinking and
acting entrepreneurially in line with our value-based
management concept. Our goal: to create awareness as
to how each and every employee can find value-oriented
solutions in the company's day-to-day operations and
implement these in an effective and efficient manner.
BASF Report 2015
Value-based management
Our strategy Value-based management
30 Management's Report
Page 32
26.6%
28%
More on
Status at end of 2015
2013 1,768
2012
1,164
2011
6,391
7,039
(133)
(985)
7,626
6,248
2014
2015
2 In 2014 and 2015, the cost of capital percentage was 11%.
2020 Goal
1 The projected net expense is already provided for by an increase
in the cost of capital percentage.
- Less cost of capital²
- Less EBIT for activities not assigned to the
segments¹
EBIT BASF Group
Calculation of EBIT after cost of capital (in million €)
EBIT after cost of capital, which we use as a steering para-
meter, is a pretax figure. Therefore, we use the current average
tax rate to derive the pretax cost of capital percentage from
the WACC. In 2015, this cost of capital percentage was 11%;
in 2016, this figure will be 10% due to lower capital market
interest rates. Based on this, an EBIT threshold is calculated
which must then be reached by all operating units put together
in order to earn the cost of capital of the BASF Group.
The cost of capital percentage (weighted average cost of
capital, WACC) is determined using the weighted cost of capi-
tal from equity and borrowing costs. The cost of equity is
ascertained using the Capital Asset Pricing Model. Borrowing
costs are determined based on the financing costs of the
BASF Group.
Calculation of cost of capital percentage
The figure for 2011 was not restated in accordance with IFRS 10 and 11.
2,551
EBIT after cost of capital
194
Page 110
100%
biology, physics, materials science and engineering to jointly
develop customized products, functional materials, and sys-
tem solutions as well as processes and technologies.
We drive sustainable solutions. In the future, sustainability
will more than ever serve as a starting point for new business
opportunities. That is why sustainability and innovation are
becoming significant drivers for our profitable growth.
We form the best team. Committed and qualified employees
around the world are the key to making our contribution to a
sustainable future. Because we want to form the best team,
we offer excellent working conditions and inclusive leadership
based on mutual trust, respect and dedication to top perfor-
mance.
For more on innovation, see page 34 onward
For more on business opportunities with sustainability,
see page 31 onward
For more on the Best Team Strategy, see page 42 onward
Our values
■ Creative
■
Open
■
■
Responsible
Entrepreneurial
Network with over 600 universities, research institutes
and companies
Our conduct is critical for the successful implementation of our
strategy: This is what our values represent. They guide how
we interact with society, our partners and with each other.
Creative: In order to find innovative and sustainable solutions,
we have the courage to pursue bold ideas. We link our areas
of expertise from many different fields and build partnerships
to develop creative, value-adding solutions. We constantly
improve our products, services and solutions.
Open: We value diversity - in people, opinions and experi-
ence. That is why we foster dialog based on honesty, respect
and mutual trust. We develop our talents and capabilities.
Management's Report 25
Our strategy Corporate strategy
BASF Report 2015
More on
>99%
More on
Status at end of 2015
Increase the proportion of sales generated by products that make a
particular contribution to sustainable development ("Accelerators")
Products and solutions
Introduction of sustainable water management at all production sites
in water stress areas and at all Verbund sites (excluding Oil & Gas)
Water
3 The selection of relevant sites is determined by the amount of primary energy used and local energy prices.
Page 106
-34.6%
36.2%
-40%
Reduction of greenhouse gas emissions per metric ton of sales
Page 106
39.5%
90%
More on
Status at end of 2015
2020 Goals
Page 103
67.8%
product (excluding Oil & Gas, baseline 2002)
1,368
2025 Goal
Exercising a value-oriented mindset in day-to-day
business by every employee
Meets basic sustainability standards
Our strategy - Sustainability management
Management's Report 33
ગાપ
2.2% 0.2%
beBua euo
Transitioner
Performer
SteeringⓇ
Sustainable
Solution
71.0%
Substantial sustainability contribution
in the value chain
Accelerator
26.6%
Sustainable Solution SteeringⓇ: How BASF's products contribute to sustainability
BASF Report 2015
28%
Increase proportion of
sales generated by
Accelerator products to
2020 Goal
on the market
Specific sustainability issues which are being
actively addressed
Significant sustainability concern identified
and action plan in development
The chelating agent Trilon® M is another Accelerator,
having established itself as a high-performance alternative to
phosphate in dishwashing machine detergents. European
Union regulations will almost entirely prohibit the use of phos-
phates for this application in Europe starting 2017. Chelating
agents' most important task is to intercept metal ions in dish-
washer water in order to inhibit calcium buildup on dishes.
TrilonⓇ M is readily biodegradable, and also improves cleaning
power while fulfilling the criteria for the E.U. Ecolabel.
Our innovative strength is based on our global team of highly
qualified employees with various disciplines. We had around
10,000 employees involved in research and development in
2015. At the beginning of 2015, we arranged the central
research units Process Research & Chemical Engineering,
Advanced Materials & Systems Research, and Bioscience
Research into three global platforms each headquartered in
one of the regions particularly significant for us: Europe, Asia
Pacific and North America. As knowledge and competence
centers, they form the core of our global Know-How Verbund,
joined by the development units in our operating divisions.
BASF New Business and BASF Venture Capital supplement
this network. Their task is to develop attractive new markets
and new business models for BASF based on new technolo-
gies.
For more on our goals, see page 28
We set ourselves ambitious goals: In 2015, we wanted to
achieve sales of around €10 billion with new and improved
products or applications that had been on the market since
2011. Despite the challenging market environment, we have
achieved this sales goal. EBITDA from innovative products and
processes on the market since 2011 was below the targeted
amount of €2.5 billion in 2015, according to current estimates.
Yet we nevertheless reached our associated goal, which was
to achieve margins with innovations that exceeded those of
the rest of the product portfolio. In the long term, we aim to
continue significantly increasing sales and earnings with new
and improved products.
Value-based management throughout the
company
A growing need for energy, food and clean water, limited
resources and a booming world population - reconciling all
these factors is the greatest challenge of our time. Innovations
based on chemistry play a key role here, as they contribute
decisively to new solutions.
Innovations based on effective and efficient research and
development are an important growth engine for BASF.
We work in interdisciplinary teams on innovative
processes and products for a sustainable future. This
is how we ensure our long-term business success
with chemistry-based solutions for almost all sectors of
industry.
Projects in the
research pipeline
Around 3,000
BASF Report 2015
We want to increase the proportion of "Accelerator" prod-
ucts in the long term: in other words, products that contribute
particularly to sustainability in the value chain, and are charac-
terized by, on average, higher growth rates and profitability.
We have therefore set ourselves a concrete goal in 2015: By
2020, we aim to raise the proportion of sales from Accelerator
products to 28%. At 26.6%, this figure already closely
approached the 2020 target in 2015. This development is
mainly based on portfolio measures undertaken in 2015,
especially in the Oil & Gas segment.
Spent on research and
development
€1,953 million
Around 10,000
Innovation
Innovation
34 Management's Report
For more on our sustainability instruments, see
basf.com/measurement-methods and page 96
For more on Sustainable Solution SteeringⓇ, see
basf.com/en/sustainable-solution-steering
The products for which we have developed action plans
include, for example, polyfluorinated substances that are often
used in paper packaging coatings for their water and oil-
resistant properties. Although European authorities regard any
hazard to people or the environment as very low, stricter regu-
lations are anticipated in the future as these substances biode-
grade with difficulty. As a result, the Sustainable Solution
SteeringⓇ method has classified them as Challenged in their
use for paper coatings. BASF decided early on not to continue
selling these substances. The new product solutions use
substances whose chemical properties prevent them from
accumulating in the environment. Furthermore, paper coated
with these new materials is biodegradable and can either be
processed into compost by composting facilities (ecovioⓇ) or
recycled (UltramidⓇ and EpotalⓇ). We will market oil-proof
barriers based on these products in the future; they are classi-
fied as Accelerators.
For all products that are classified as "Challenged" and do
not fulfill our major sustainability criteria, we want to develop
prompt plans of action. These action plans can include
research projects, reformulations or even replacing one prod-
uct with an alternative product. Based on the results of the
initial analyses, action plans had been created for 99% of all
Challenged products by the end of 2015.
Employees worldwide in
research and development
For the 2015 business year, BASF conducted sustainability
assessments and ratings for 95.4% of its entire portfolio of
more than 60,000 specific product applications which
account for €64.9 billion in sales - I using the Sustainable
Solution SteeringⓇ method. This externally validated procedure
allows us to determine how our products contribute to sus-
tainability, and we consider their application in various markets
and industries.
One of these Accelerator products is Elastocool® Advanced -
an innovative insulation material for refrigerators and freezers.
It boasts a high level of resource efficiency while also possess-
ing improved insulation properties. Elastocool® contributes to
achieving the E.U.'s top energy efficiency levels in refrigerators
and freezers.
We promoted sustainability topics in 2015 through various
projects together with partners along the value chain. With the
help of our ecoefficiency analysis, for example, we analyzed
the economic and environmental implications of various coat-
ing processes in a study conducted with Dürr, a machine and
plant manufacturing company, and with our customer BMW.
The goal was to discover ways to improve the ecoefficiency of
serial coating methods, such as by saving resources. The
study showed that the "integrated process" - a coating proce-
dure that saves a paint layer - represents a more economical
and ecological alternative to other processes evaluated.
safety and security, product stewardship, compliance, and
labor and social standards that frequently go beyond legal
requirements. Internal monitoring systems and complaint
mechanisms enable us to check compliance with these stan-
dards: these include, for example, questionnaires, audits and
compliance hotlines. All employees and managers are required
to abide by our global Code of Conduct, which defines a
mandatory framework for our business activities.
We take advantage of business opportunities by offering
our customers innovative products and solutions that contrib-
ute to sustainable development. We ensure that sustainability
criteria are integrated into our business units' development
and implementation of their strategies, research projects, and
innovation processes. For example, we identify the sustain-
ability value drivers and risks for specific value chains. We
analyze the sustainability strategies of competitors and
customers in order to tap new business opportunities.
In order to properly account for changing conditions and
requirements, we initiated an internal analysis in 2015 to review
the results of the materiality analysis. We have already started
involving numerous colleagues and in 2016, we want to
exchange with external stakeholders.
We used a materiality analysis in 2013 to identify and pri-
oritize relevant sustainability topics for BASF. Material aspects
derived from this include, for example, energy and climate,
water, resources and ecosystems, responsible production,
and employment and employability. These are the focus areas
of our reporting. We have also integrated them into our steer-
ing processes and used them as the basis for working out our
new global sustainability goals.
Through our materiality analysis, continuous dialog with
stakeholders, and our many years of experience, we are
always developing a better understanding of significant topics
and trends as well as potential opportunities and risks along
our value chain.
As the world's leading chemical company, we aim to add value
in the long term for our company, the environment, and
society. Sustainability is simultaneously an essential part of our
risk management and a driver for growth. That is why we
incorporate aspects of sustainability into our decision-making
processes and define clear responsibilities for this in our
organization.
■ Taking advantage of business opportunities
■ Minimizing risks
Identifying significant topics and trends
Strategy
Sustainability is embedded into our corporate strategy.
We employ the various tools of our sustainability manage-
ment toward living out our company purpose: "We create
chemistry for a sustainable future." This is how we
underpin the strategic principle, "We drive sustainable
solutions." By integrating sustainability aspects into our
core business, we take advantage of business opportuni-
ties and minimize risks along the value chain.
Management's Report 31
Our strategy - Sustainability management
Global network in science and industry
Sustainability management
BASF Report 2015
According to our value-based management concept, all
employees can make a contribution in their business area to
help ensure that we earn the targeted premium on our cost of
capital. We pass this value-based management concept on to
our team around the world through seminars and training
events, thereby promoting entrepreneurial thinking at all levels
within BASF.
All this forms a consistent system of value drivers and key
indicators for the individual levels and functions at BASF. In
addition to EBIT after cost of capital, EBIT and EBIT before
special items are the most significant performance indicators
for measuring economic success as well as for steering the
BASF Group and its operating units.
-
An important factor in ensuring the successful implemen-
tation of value-based management is linking the goals of BASF
to the individual target agreements of employees. In the oper-
ating units, the most important performance indicators are the
achievement of a positive EBIT after cost of capital and a
competitive level of profitability. By contrast, the functional
units' contribution to value is assessed on the basis of effec-
tiveness and efficiency.
For us, value-based management means the daily focus
placed on value by all of our employees. To this end, we have
identified value drivers that show how each and every unit in
the company can create value. We develop performance indi-
cators for the individual value drivers that help us to plan and
pursue changes.
Our investment decisions for property, plant and equip-
ment and financial assets also involve sustainability criteria.
Our decision-making is supported by expert appraisals that
assess economic implications as well as potential effects on
the environment, human rights or local communities.
For more on the organization of our sustainability management,
see basf.com/sustainabilitymanagement
Our risk management supports our long-term business
success. We aim to reduce risks by setting ourselves globally
uniform requirements for environmental and health protection,
Engaging stakeholders
■ Creating value along the entire value chain
New goal for products that make a particular
contribution to sustainability
Creating value
For more on palm kernel oil, see page 96
For more on our human rights position, see
basf.com/humanrights and pages 47 and 136
For more on sustainability in procurement, see page 94 onward
For more on our guidelines for responsible lobbying, see
basf.com/guidelines_political_communication
For more on stakeholder dialog, see basf.com/en/dialog
For more on the Stakeholder Advisory Council, see
basf.com/en/stakeholder-advisory-council
Our lobbying and political communications are conducted
in accordance with transparent guidelines and in keeping with
our publicly stated positions. BASF does not in principle sup-
port political parties. The BASF Corporation Employees Politi-
cal Action Committee, established by our employees in the
United States, is an independent, federally registered employee
association that collects donations for political purposes and
independently decides how these are used.
For more on our materiality analysis, see basf.com/materiality
For more on our financial and sustainability goals, see page 28 onward
For more on our production standards, see page 100 onward
For more on standards in our supply chain, see page 94 onward
For more on Compliance and our Code of Conduct,
see page 136 onward
We have been part of the Global Business Initiative on
Human Rights since 2012, a group of globally operating com-
panies from different industries whose goal is to advance
respect for human rights in business. This included presenting
examples of how to implement the U.N. Guiding Principles on
Business and Human Rights. In 2015, we were also involved
in the consultation process of the German government's
national plan of action on this topic.
BASF is also involved in worldwide initiatives with various
stakeholder groups, such as the U.N. Global Compact. The
U.N. Secretary General appointed BASF's Chairman of the
Board of Executive Directors as a member of the U.N. Global
Compact Board for another three years. In the worldwide
network of Global Compact LEAD, we are participating in the
implementation of the "Agenda 2030" adopted by the United
Nations in 2015, along with its Sustainable Development
Goals. BASF is also active in local Global Compact networks.
Furthermore, BASF is a founding member of a cross-
industry initiative of the World Business Council for Sustainable
Development (WBCSD). Together, a method was developed
for evaluating the societal impact of products throughout their
entire life cycle.
Our stakeholders include employees, customers, suppliers
and shareholders, as well as experts in science, industry, poli-
tics, society and media. Parts of our business activities, such
as the use of new technologies, are frequently viewed by our
stakeholders with a critical eye. In order to increase societal
acceptance for our business activities, we take on critical
questions, assess our business activities in terms of their
sustainability, and communicate transparently. Such dialogs
help us to even better evaluate which measures we should
pursue to keep people informed on these topics, establish
trust, and form partnerships.
Constant dialog with our stakeholders
BASF Report 2015
To get our stakeholders even more closely involved, the
Board of Executive Directors once again met with international
experts from science and industry - the Stakeholder Advisory
Council in 2015 to discuss important aspects of sustain-
ability. These included topics like the influence of externalities
and the challenges of renewable raw materials, especially
palm kernel oil.
We primarily comment on EBIT before special items on a
segment and division level in our financial reporting because
this figure is adjusted for influences not associated with typical
business operations. This makes it particularly suitable for
describing financial development over time. In addition to EBIT
before special items, we also report on sales as a further main
driver for EBIT after cost of capital. BASF's nonfinancial targets
are focused more on the long term, and are not used for short-
term steering.
32 Management's Report
Our strategy - Sustainability management
We have a particular responsibility toward our production
sites' neighbors. With the established community advisory
panels, we aim to promote open exchange between citizens
and our site management, and strengthen trust in our activi-
ties. In 2015, for example, we tackled a concrete recommen-
dation made by the Stakeholder Advisory Council in 2014 and
developed global recommendations for the community advi-
sory panel system.
19
5,786
227
6,013
Chemicals
91
12345
5,651
5,742
Oil & Gas
Performance Products
16%
5
Functional Materials & Solutions
13%
€5,742 million
Agricultural Solutions
7%
19
31%
6 Other (infrastructure, R&D)
2%
31%
271
For the period from 2016 to 2020, we have planned capital
expenditures of €19.5 billion. We want to invest more than a
quarter of this amount in emerging markets and expand our
local presence in order to benefit from the growth in these
regions. In North America, attractive growth prospects and
cost-effective raw material prices are strengthening our invest-
ment plans in the region. Furthermore, we are continuing to
develop our portfolio through innovation-driven acquisitions
that promise above-average profitable growth. Investments
and acquisitions alike are prepared by interdisciplinary teams
and assessed using diverse criteria. In this way, we ensure
that economic, environmental and social concerns are
included in strategic decision-making. We also continuously
improve the efficiency of our production processes by invest-
ing in our plants.
135
In investments
made in 2015
2
€5,786 million
€227 million
Used for acquisitions
in 2015
Optimization
Of our portfolio through
acquisitions and divestitures
In addition to innovations, investments and acquisitions
make a decisive contribution toward achieving our ambi-
tious growth goals. We are intensifying our investment in
emerging markets and in North America. We use targeted
acquisitions to supplement our organic growth.
Investments and acquisitions 2015² (in million €)
In Ludwigshafen, Germany, we constructed an integrated TDI
complex with a capacity of 300,000 metric tons per year
and expanded the plants for its associated precursors. The
gradual startup of the complex began in November 2015. TDI
is an important basic chemical product that is used primarily
for soft polyurethane foams.
The acrylic acid and superabsorbent production complex
in Camaçari, Brazil, began operations in the second quarter
of 2015, and the MDI plant in Chongqing, China, started up
in August 2015. In Kuantan, Malaysia, we are building an
aroma ingredients plant. The expansion of our Verbund site in
Nanjing, China, is proceeding well. With these major invest-
ments, we are expanding our presence in the emerging
markets of Asia and South America.
136
Together with Yara International ASA, based in Oslo,
Norway, we began construction on an ammonia production
plant in Freeport, Texas.
For more on investments within the segments, see page 63 onward
Intangible assets
Thereof goodwill
Property, plant and equipment
Total
Additions to property, plant and equipment by segment in 2015
6
Invest-
ments
Acquisi-
tions
Total
In the Oil & Gas segment, we invested primarily in field
development projects in Argentina, Norway and Russia in
2015.
3
Divestitures
Investments
On March 31, 2015, BASF concluded the acquisition of
the polyurethane (PU) business from Polioles, S.A. de C.V.,
based in Lerma, Mexico. Polioles is a joint venture with the
Alpek Group in which BASF holds a 50% share and which is
accounted for using the equity method. The acquisition com-
prised marketing and selling rights, current assets, and to a
minor extent, production facilities.
On April 23, 2015, BASF concluded an agreement with
Lanxess Aktiengesellschaft, based in Cologne, Germany, on
the acquisition and use of technologies and patents for the
production of high-molecular-weight polyisobutene (HM PIB).
The transaction furthermore includes the acquisition of selling
rights and current assets as well as a manufacturing agree-
ment in which Lanxess will produce HM PIB exclusively for
BASF.
For more information on acquisitions, see the Notes to the
Consolidated Financial Statements from page 175 onward
On June 30, 2015, we concluded the divestiture of our global
textile chemicals business to Archroma Textiles S.à r.l., Luxem-
bourg. The portfolio comprised products for pretreatment,
printing and coating. The transaction furthermore involved the
transfer of the subsidiary BASF Pakistan (Private) Ltd., based
in Karachi, Pakistan, completed in the third quarter of 2015.
Effective July 1, 2015, we sold our 25% share in Solvin to
our partner, Solvay.
On September 30, 2015, we concluded the sale of portions
of the pharmaceutical ingredients and services business to
Siegfried Holding AG, based in Zofingen, Switzerland. This
involved the custom synthesis business and parts of the
active pharmaceutical ingredients portfolio. The transaction
comprised the divestiture of the production sites in Minden,
Germany; Evionnaz, Switzerland; and Saint-Vulbas, France.
We concluded the sale of our global paper hydrous kaolin
business to the Roswell, Georgia-based company Imerys
Kaolin Inc. on November 1, 2015. The transaction involved the
divestiture of the production site for kaolin processing in
Wilkinson County, Georgia.
For more information on divestitures, see the Notes to the
Consolidated Financial Statements from page 177 onward
Asset swap
In the Oil & Gas segment, we concluded the swap of assets of
equal value with Gazprom on September 30, 2015, with retro-
active economic effect to April 1, 2013. The transaction gave
BASF an economic share of 25.01% in blocks IV and V of the
Achimov formation of the Urengoy natural gas and condensate
field in western Siberia. Production is scheduled to start up in
2018.
In return, BASF transferred its share in the previously jointly
operated gas trading and storage business to Gazprom.
Gazprom furthermore became a 50% shareholder in Winters-
hall Noordzee B.V. in Rijswijk, Netherlands, which is active in
the exploration and production of natural gas and crude oil
deposits in the North Sea.
For more information on the asset swap, see the Notes to the
Consolidated Financial Statements from page 177 onward
Effective February 24, 2015, BASF acquired a 66% share
from TODA KOGYO CORP., based in Hiroshima, Japan, in a
company to which TODA had contributed its business with
cathode materials for lithium-ion batteries, patents and pro-
duction capacities in Japan. The company will focus on the
research, development, production, marketing and sales of a
number of cathode materials.
On March 31, 2015, we sold our business with white expand-
able polystyrene (EPS) in North and South America to Alpek
S.A.B. de C.V., based in Monterrey, Mexico. The divestiture
comprised customer lists and current assets in addition to
production facilities in Canada, Brazil, Argentina and the
United States. The share in Aislapol S.A., based in Santiago de
Chile, Chile, was also sold to Alpek.
Business models and customer relations
Management's Report 41
Business models and customer relations
Cost-effective
And reliable supplier
of classic chemicals
Customized
With products and formulations
for specific industries
BASF's customer portfolio ranges from major global
customers and medium-sized businesses to local work-
shops. We align our business models and sales channels
with the respective customer groups and market
segments. In line with our strategic principle, "We add
value as one company," we tightly bundle our products
and services to target the specific needs of customers
from various sectors and release innovations more quickly
to the market.
Management's Report 39
Investments, acquisitions and divestitures
Innovative
In close partnership
with our customers
BASF Report 2015
2 Including additions to property, plant and equipment resulting from acquisitions,
capitalized exploration, restoration obligations and IT investments
On February 18, 2015, BASF took over technologies,
patents and know-how for silver nanowires from Seashell
Technology LLC, based in San Diego, California. Through this
acquisition, BASF has extended its product portfolio for
displays.
We gained €91 million worth of property, plant and equipment
through acquisitions in 2015. Additions to intangible assets
including goodwill amounted to €136 million.
■
Investment volume exceeds prior-year level
Several major plants begin operations
We invested €5,651 million in property, plant and equipment in
2015. Total investments therefore exceeded the previous
year's level by €283 million, due in part to currency effects. We
presume that average yearly investment between 2016 and
2020 will be lower compared with 2015, after having started
up operations at several major plants. Our investments in
2015 focused on the Chemicals, Oil & Gas and Performance
Products segments.
Additions to property, plant and equipment by region in 2015
-23
1
Europe
North America
Asia Pacific
53%
21%
16%
In Taiwan on February 12, 2015, and on the Chinese
mainland on December 1, 2015, we concluded the acquisition
of the business of Taiwan Sheen Soon Co. Ltd. (TWSS), based
in Lukang Town, Taiwan. TWSS is a leading manufacturer of
precursors for adhesives based on thermoplastic polyure-
thanes.
3
4 Middle East
10%
1 Excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments
2
4
€5,742 million
1
40 Management's Report
Investments, acquisitions and divestitures
BASF Report 2015
Acquisitions
South America, Africa,
Investments, acquisitions and divestitures
UNIQUE - global partnership program with leading universities
Together with an external partner, we have employed a
new and efficient method in the Staffhorst natural gas field in
Germany for recovering remaining potential in an economi-
cal manner. The conventional drilling rig that would have been
used to extend the well by the necessary 170 meters would
have been too time and cost-intensive; in addition, production
would need to have been halted while the work was in prog-
ress. Instead, the drilling was accomplished through the exist-
ing production tubing, using flexible steel coiled tubing and the
world's smallest drilling turbine to drive the drill head. We were
thus able to deepen the well at low cost and without stopping
production.
■ Strong customer and market orientation
Forward-looking project portfolio
■
Strategic focus - examples
Management's Report 35
Innovation
BASF Report 2015
ETH Zürich
Zurich, Switzerland
Asia
Dalian Institute of Chemical Physics
Chinese Academy of Science
Dalian, China
Fudan University
Shanghai, China
Institute of Chemistry
Chinese Academy of Science
Beijing, China
Kyoto University
Kyoto, Japan
36 Management's Report
Innovation
BASF Bericht 2015
Research focus areas - examples
■ Chemistry-based innovations play important role
in answering questions of the future
■
Growth fields with attractive sales potential
Science symposia strengthen university network
■
Worldwide presence and expansion of research
and development centers
Our research pipeline comprised approximately 3,000 projects
in 2015. We increased our spending on research and develop-
ment by €69 million to €1,953 million (2014: €1,884 million);
the operating divisions were responsible for 79% of total
research and development expenditures. The remaining 21%
was allocated to cross-divisional corporate research focusing
on long-term topics of strategic importance to the BASF
Group. Innovations based on chemistry require market-
oriented research and development that is sharply focused on
the needs of our customers. In order to bring promising ideas
even faster to market, we regularly assess our research
projects using a multistep process and focus our topics
accordingly.
Another vital factor for our success is a global research
and development presence. We continued to broaden our
activities in 2015, especially in Asia. In May, we opened a new
agricultural research station in Pune, India. The new facility
focuses on global research in the areas of herbicides, fungi-
cides and insecticides, as well as on solutions going beyond
classic crop protection. In addition, we are also addressing
topics there that are especially relevant for India.
Karlsruhe, Germany
KIT Karlsruhe Institute of Technology
In the classical chemicals business, we mostly sell the
chemicals produced in our Verbund in bulk. These comprise
basic products from the Chemicals segment, such as steam
cracker products, sulfuric acid, plasticizers, caprolactam and
TDI. For these basic chemicals, our priority is on supplying
customers reliably and cost effectively. Marketing is carried
out partly via e-commerce.
Heidelberg, Germany
Heidelberg University
Berlin, Germany
UNICAT Berlin
Europe
College Station, Texas
Texas A&M University
Amherst, Massachusetts
Our focus areas in research are derived from the three major
areas in which chemistry-based innovations will play a key role
in the future: resources, environment and climate; food and
nutrition; and quality of life. In order to develop future business
fields with high sales potential for BASF, we develop specific
growth fields. These are regularly reviewed in terms of their
attractiveness for BASF. When they mature, they are trans-
ferred to the operating divisions and new ones are promoted.
We will tailor our technology fields even more closely to the
needs of the BASF Group and rearrange them into key tech-
nologies. Key technologies pool competencies in order to
uphold the long-term competitiveness of our businesses and
products.
University of Massachusetts
Massachusetts Institute of Technology
Cambridge, Massachusetts
Harvard University
Stanford, California
Stanford University
University of California
Berkeley, California
United States
For a multiyear overview of research and development expenditures,
see the Ten-Year Summary on page 235
The number and quality of our patents attest to our power
of innovation and long-term competitiveness. We filed around
1,000 new patents worldwide in 2015. For the seventh time in
succession, we headed the rankings in the Patent Asset
Index in 2015 a method which compares patent portfolios
industry-wide. This once again underscores BASF's power of
innovation.
We aim to keep strengthening our research and develop-
ment activities in Asia as well as in North and South America.
Our plan is to conduct half of our research and development
activities outside of Europe in the long term. We are adapting
this to the growth in regional markets. This increased presence
outside Europe creates new opportunities for fortifying and
expanding customer relations and scientific collaborations,
shoring up our Research and Development Verbund and mak-
ing BASF an even more attractive partner and employer in the
regions. Ludwigshafen remains the largest site in our Research
Verbund. This was emphasized by the investment we made in
a new research building opened in July. It creates modern
workspaces and ideal cooperation conditions for around 200
employees in the platform Advanced Materials & Systems
Research.
The extension of our Innovation Campus Asia Pacific in
Shanghai, China, was inaugurated in November, strengthen-
ing regional research capacity for new materials and systems,
as well as our power of innovation for both the region and the
world.
Cambridge, Massachusetts
We held three interdisciplinary science symposia in the
year of our 150th anniversary: in Ludwigshafen, Germany;
Chicago, Illinois; and Shanghai, China. There, a total of 1,500
renowned experts from more than 37 countries engaged with
each other on the topics "smart energy," "food" and "urban
living," developing concrete approaches for interdisciplinary
solutions. Nobel laureates Steven Chu of Stanford University in
California and Jean-Marie Lehn of the University of Strasbourg
in France contributed with keynote speeches. The symposia
strengthened our academic network and marked the high-
lights among the co-creation activities we used to link people
and ideas around the globe in order to find new solutions
together for global challenges. We plan symposia in the future,
as well, in order to foster scientific exchange.
We also successfully maintain close cooperations with
others in the area of energy. For example, we have developed
new materials for energy-saving cooling together with leading
universities and partners from industry around the world.
Thanks to their special properties, these magnetocaloric
materials warm up when introduced to a magnetic field and
cool off again when the field is removed. Compared with
today's usual compressor technology, cooling systems based
on these widely available and affordable materials have the
potential to reduce energy consumption by up to 35%. They
are also quieter and operate without gaseous coolants.
Together with the U.S. technology company Astronautics and
the Chinese appliance manufacturer Haier, we introduced the
first prototype of a magnetocaloric wine cooler and are now
developing it jointly to achieve commercial readiness. We offer
our customers magnetocaloric products for their cooling
applications under the brand name Quice®.
For us, the development of innovative materials also involves
3-D printing - that is, additive manufacturing. Many complex
plastic components have been made using injection molding.
By contrast, 3-D printing offers distinct advantages: lower
small-batch production costs and considerably less time,
since no mold is necessary. Complex structural elements can
be built in a single step, allowing for completely new design
options like branching internal cavities. And yet the materials
currently available on the market often do not meet the high
demands of functional components for industrial applications.
This is especially true of components optimized for shape and
weight, like those in the aviation, automotive, and consumer
goods industries. We are therefore developing improved mate-
rials together with partners, such as plastics and resins, and
optimizing the interplay between the material and 3-D printer.
123456
3
Chemicals: Over the last few years, we have been constantly
improving our production process for isononanol (INA), an
important precursor for products like plasticizers. We have
been able to raise the production and energy efficiency of this
process and expand its raw material base, so that in addition
to steam cracker products, side streams from refineries can
also be used as a raw material. This increases our supply
security and improves our cost structure. Together with our
partner Sinopec, we started up a new INA production plant in
October 2015 in Maoming, China, in which the new process
has already been successfully implemented.
In the Monomers division, we are constantly on the lookout
for innovative and large-volume applications for our existing
products. An example of this is the successful introduction of
polymer MDI as a binding agent for various wood-based
products. Laminate flooring especially benefits from improved
performance properties, with increased moisture resistance.
Our globally active team of specialists proved a key success
factor for this new application, as they supported customers in
North America and Asia in converting their production.
In 2015, we supplied the first PolyTHFⓇ 1000 produced
using renewable raw materials to selected partners for
testing purposes in various applications. This precursor is
made using a license from Genomatica, and its quality is on a
level with conventionally produced PolyTHF® 1000 based on
petrochemicals. It can therefore be employed as a chemical
2
component in thermoplastic polyurethane (TPU), which is used
to make such products as ski boots, shoe soles, films, hoses
and cable jacketing. This enables our customers to develop
innovative products based on renewable raw materials.
Performance Products: Paint manufacturers want to offer
products that can be applied in a short amount of time without
compromising on high quality and attractive appearance. Our
Acronal® EDGE 4750 dispersion in the North American deco-
rative paint portfolio allows our customers to combine the
demands of both primer and top coat into a single paint:
Acronal® EDGE 4750 adheres well and prevents stains from
penetrating the paint while providing coverage, durability and
stain resistance. Painters can therefore dispense with a whole
process step and still achieve the highest-quality results.
The minty taste of menthol, the world's top-selling flavor,
can be found in countless everyday products. Unlike other
flavorings that remain in liquid form, menthol crystallizes to a
solid at room temperature. Customers first have to melt it
again before using it. Yet we already supply our menthol in
liquid form by transporting and storing the still-hot menthol
from the production facility in containers with a mobile heating
element. This saves our customers several processing steps
along the value chain, allowing them to put it to direct use:
a sustainable business model with both economic and envi-
ronmental benefits.
The high-performance polymer SokalanⓇ HP 20 gets
laundry clean with fewer resources. It can be used in both
conventional and highly concentrated liquid laundry deter-
gents, removing stains from textiles even at low washing
temperatures. SokalanⓇ HP 20 also prevents the redeposition
of removed soil onto the washed fabric, keeping colors bright
and white laundry from turning grey.
-
21%
Since 2014, the United States has had very stringent reg-
ulations for the environmental friendliness of certain lubricants
in the shipping industry such as those used for marine
propulsion and steering systems. Our Synative® ES TMP
ester base stocks contain a large amount of renewable raw
materials, are biodegradable, and are nontoxic to marine
organisms. Because they work effectively and yet also in a
more environmentally friendly manner than many comparable
products in the marine industry, they help protect marine life
and are employed in many applications subject to especially
strict regulations.
BASF Report 2015
Functional Materials & Solutions: BASF has developed a
catalyst technology that allows refineries to increase yields of
valuable products like gasoline, diesel and other fuels from
crude oil. The nickel contained in crude oil presents a particu-
lar challenge to further processing, as it significantly increases
the generation of undesirable by-products like petroleum coke
and hydrogen. Combined with an optimized pore structure,
our new catalyst based on the metalloid boron intercepts
nickel in processing, thus preventing undesirable chemical
reactions.
The MasterEase range of concrete additives greatly
improves the flow properties of the building material. This is
especially true of modern high-performance concrete. Its
lower water and cement content improves stability and
increases buildings' longevity, but also makes the material
sticky and harder to pump. Developed by BASF, polymers
contained in MasterEase products reduce the concrete's vis-
cosity by up to 30%. From mixing and pumping to sealing and
smoothing, processing therefore becomes easier, quicker and
more economical.
With XSparkⓇ, we have developed an exclusive color
effect for automotive OEM coatings that sparkles with particu-
lar brilliance in direct sunlight. Tiny glass particles that reflect
light more precisely than other effect pigments are applied
together with the paint layer in a single step. The resulting
homogeneous surface provides a pure, solid-color reflection
with particular depth, a complex paint effect that creates a
high-quality, elegant-looking coating without being intrusive.
This innovative product has already won several international
awards.
Together with our partner ContiTech Vibration Control, we
have developed the world's first plastic transmission cross-
beam in the rear axle subframe of vehicles for the S-Class from
Mercedes-Benz. Made of UltramidⓇ engineering plastic, the
component reduces noise and is 25% lighter than typical
models made of aluminum, which means a reduction in vehicle
fuel consumption. Thanks to our ElastollanⓇ thermoplastic
polyurethane, the company Schwalbe has been able to reduce
weight in its "Evo Tube" inner tube designed for mountain
bikes by up to 65% compared with conventional, butyl-based
inner tubes.
Agricultural Solutions: We work together with farmers to
keep their farmland arable for future generations and to
accommodate society's rising expectations. To do so, we
constantly invest in our development pipeline in order to
expand our portfolio both in and beyond conventional crop
protection such as in biological solutions. In 2015, we
invested €514 million in research and development in the Crop
Protection division, representing around 9% of sales for the
segment.
-
Our innovation pipeline comprises products launched
between 2015 and 2025. With a current peak sales potential
of €3 billion, the pipeline comprises innovations from all
business areas. The herbicide EngeniaⓇ, for example, is being
introduced in the United States as a key component of
dicamba- and glyphosate-tolerant cropping systems. In 2016,
we will apply for approval of a new fungicide that can be used
in many crops around the world. We are also bolstering our
insecticide portfolio with novel high-performance ingredients.
Our SeltimaⓇ formulation from the Functional Crop Care
portfolio offers farmers an efficient, yet environmentally friendly,
solution for guarding rice crops against fungal infections. The
special encapsulation technology developed in the BASF
Verbund ensures the precise release of its active ingredient
exclusively on the rice leaf's surface, enabling better protection
of both plant and environment.
BASF Plant Science: We collaborate with numerous
biotechnology and seed companies, research institutes, and
universities worldwide on developing crops with higher yields
and improved resistance to unfavorable environmental factors,
such as drought. We also work closely together with the Crop
Protection division to research and bring to market innovative
herbicide tolerance solutions. In 2015, we launched the
CultivanceⓇ production system, a combination of genetically
modified soybeans and the corresponding herbicide.
CultivanceⓇ therefore provides farmers with a complete solu-
tion for weed control in soybean cultivation.
Oil & Gas: Our research and development activities focus on
improving the discovery rate of oil and gas reservoirs, develop-
ing technologies for reservoirs with challenging development
and production conditions, and increasing the recovery factor
of reservoirs.
38 Management's Report
Innovation
BASF Report 2015
Corporate research, Other
Oil & Gas
Process optimization is our goal in the E.U.-supported
projects PRODIAS1 and RECOBA², in which we have been
closely collaborating with partners from industry, academia
and research institutions since the spring of 2015.
With PRODIAS, we intend to further unlock the potential of
products in white biotechnology. This involves methods and
processes that allow products based on renewable raw mate-
rials to be produced efficiently and with fewer resources. The
project focuses particularly on processing diluted aqueous
systems, which are generated in large quantities by the manu-
facture of such products and which demand energy-intensive
steps for separation and purification. In PRODIAS, we are
developing methods and process steps optimally suited for
biotechnological processes, increasing the competitive ability
of these products.
-
The RECOBA research project pursues the goal of improv-
ing product quality, efficiency, and flexibility in complex batch
processes such as for emulsion polymerizations thus
saving energy and raw materials. Typically, the process control
runs through repetitions according to a fixed schedule. We
want to replace this by developing a model-based online con-
trol system that can adjust to current conditions and calculate
the optimal trajectory for any point in time. Product properties,
such as the texture of product particles, can therefore be
better controlled, and the reactor's productivity and energy
consumption optimized.
For more on research and development, see basf.com/innovations
1 The acronym PRODIAS stands for Processing Diluted Aqueous Systems.
2
The acronym RECOBA stands for Real-time sensing, advanced Control and Optimization of Batch processes, saving energy and raw materials.
BASF Report 2015
Management's Report 37
Innovation
Innovation in the segments - examples
2%
Innovations are an important success factor for BASF's long-
term growth. In developing new products, we look at the
needs of our customers as well as at market trends, and take
advantage of the opportunities arising from value chains in the
BASF Verbund. We want to become even more competitive
through innovative production methods. We never stop
improving our existing products, applications and processes.
With chemistry, we can sustainably create value for customers
and society.
1
Chemicals
6
11%
Performance Products
20%
Functional Materials & Solutions
20%
€1,953 million
4 Agricultural Solutions
26%
Research and development expenses by segment
We create a broad range of customized products, partic-
ularly in the Performance Products segment - from vitamins,
personal care ingredients and color pigments to paper chemi-
cals and plastic additives. In joint projects, we start working
closely together with customers already at an early stage in
order to develop new products or formulations for a specific
industry. A worldwide network of development laboratories
allows us to quickly adapt our products to local needs.
London, England
For information on customer relations in the Oil & Gas segment,
see page 86 onward
■Life-long learning concept focuses on learning from
on-the-job experience
Learning and development
BASF Report 2015
Working at BASF
44 Management's Report
43.3
27.9
23.7
Thereof women %
December 31, 2015
106,901
3,240
2,294
Temporary staff
Apprentices
Permanent staff
BASF Group employees by contract type (total: 112,435)
Moreover, we began a program in 2015 to integrate refu-
gees into German life. In its initial phase, "Start Integration" is
offering 50 participants prospects for beginning their career
through the BASF Training Verbund. With its modular struc-
ture, the program is geared toward refugees with a high
probability of being granted the right to remain in Germany.
For more information, see basf.com/apprenticeship
Furthermore, 20 Spanish apprentices once again began
their vocational training in Tarragona, Spain, on the basis of the
German vocational training model. The theoretical and practi-
cal phases take place in Tarragona and in Ludwigshafen. The
apprentices are then placed in production plants after their
vocational training is finished. In 2015, 16 Spanish apprentices
successfully completed their training and began employment
at the Ludwigshafen site at the start of 2016. We consider this
program a way of expanding our recruiting pool.
In 2015, 886 apprentices started their vocational training
at BASF SE and German Group companies, filling almost all
available program slots in Germany. The current shortage of
skilled labor nevertheless presents a challenge that we address
with various programs and initiatives. These include Start in
den Beruf and Anlauf zur Ausbildung, in which 249 young
people in the BASF Training Verbund participated in coop-
eration with partner companies in 2015. The goal of these
programs is to prepare participants for a subsequent appren-
ticeship within one year, making a contribution to the long-
term supply of qualified employees in the Rhine-Neckar Metro-
politan Region. Because the number of open vocational
training placements in some fields outweighs demand, some
placement slots in these programs remain unfilled. At the
Ludwigshafen site, we also offer a part-time training program
for newcomers from other fields, so that they can qualify for a
career in chemical production even while working at their
current job.
As of December 31, 2015, BASF was training 3,240 people in
15 countries and around 60 occupations. We spent a total of
around €107 million on vocational training in 2015, as well as
about €9 million on the BASF Training Verbund as part of our
social commitment in the Rhine-Neckar Metropolitan Region.
3,240 apprentices in around 60 occupations worldwide
Around €107 million spent on vocational training
■
Vocational training
Worldwide, the percentage of employees who resigned
during their first three years of employment was 1.1% on
average in 2015. This turnover rate was 0.4% in Europe, 1.9%
in North America, 3.3% in Asia Pacific and 1.1% in South
America, Africa, Middle East. Our turnover rates are therefore
lower than those of many other companies.
We score well in worldwide employer rankings. In a 2015
study conducted by Universum, BASF was once again
selected by science and engineering students as one of the 50
most attractive employers in the world. Furthermore, BASF
Corporation in the United States received the Talent Board's
Candidate Experience Award for the third time in a row for our
excellent performance in the management of external candi-
dates. In Asia Pacific, we were awarded for measures such as
our interactive career website.
In the global competition for the best employees and leaders,
we want to recruit qualified talent in order to achieve our
ambitious growth targets. This is why we have expanded the
measures that make our total offer package attractive for
employees. For example, we added 34 countries to our new
career website in 2015, and are making even greater use of
social media to reach potential candidates.
■ Good scores in employer rankings worldwide
Career website established globally
Competition for talent
Management's Report 43
Working at BASF
BASF Report 2015
■Learning Campus promotes further education in
■
worldwide networks
Specific further training for employees in production
and technical fields
Imperial College
Women
55 years and up
Between 40
and 54 years
Between 26
and 39 years
16.4%
18,777
83.6%
Men
Up to and including
25 years
71.8%
28.2%
8,135
69.7%
23.6%
78.1%
37,040
21.9%
48,483
BASF Group employee age structure
(Total: 112,435, thereof 24.2% women, as of December 31, 2015)
We offer functionalized materials and solutions tailored
to customers' requirements, particularly in the Functional
Materials & Solutions and Agricultural Solutions segments.
These include, for example, engineering plastics, concrete
additives, coatings and crop protection products. We engage
in close partnerships with customers and develop innovations
together that help them optimize their processes and applica-
tions. Our understanding of the entire value chain as well as
our global setup and market knowledge are key success
factors here.
Active knowledge management and effective
succession planning
as a part of leadership duties
■
■"Leadership in times of demographic change"
Managing demographic changes
We support the large number of employees in production
and engineering worldwide with job-specific qualifications and
further training. We have further strengthened our in-plant
qualification measures with in-plant trainers who promote the
continuous professional development of employees in produc-
tion and engineering through individual learning assignments.
Moreover, we expanded our programs on safety culture and
knowledge management as well as team and organizational
development.
We spent around €96 million on further training in 2015
(2014: €101 million). Our measures for further training are
based on the learning needs of our employees. Local and
international seminars and workshops enable the acquisition
and exchange of knowledge and promote networking. Each
employee spent an average of 2.5 days on further training in
2015. Internal specialists provide our employees with career
counseling.
In regular development meetings, our employees and
leaders outline prospects for individual professional develop-
ment together and determine measures for further training and
development. This approach was implemented for around
60,000 employees by the end of 2015. Our goal is to introduce
these development meetings for all BASF employees by 2017.
They supplement the annual employee dialogs that are con-
ducted in all BASF Group companies worldwide, which include
an employee performance assessment component.
Our learning and development opportunities support the Best
Team Strategy and have a direct connection to business. We
want to enable life-long, learner-centric learning; in so doing,
we follow the "70-20-10" philosophy. That means applying the
elements "learning from experience" (70%), "learning from
others" (20%) and "learning through courses and media"
(10%). Our global Learning Campus is the central platform
for the programs on offer for life-long learning. It allows
employees to find the courses relevant for them. Our goal is to
create a common-ground, inspiring learning experience that
enables employees to connect with the company and with
each other. The options cover a range of learning goals: start-
ing a career, expanding knowledge, personal development,
and leadership training. As a platform for exchange as well as
for strategic and cultural shift, the concept of the Learning
Campus also facilitates thinking and acting as one company.
30.3%
73.7%
The demographic situation within the BASF Group varies
widely by region. Particularly in Germany and North America,
an aging population presents us with challenges. We are also
intensely occupied with future issues like new technologies,
growing digitalization ("Industry 4.0"), and the ever-increasing
delay of retirement. We create a framework to help maintain
the employability of our personnel at all stages of life and
ensure the availability of qualified employees. Our employees
and leaders are supported with health and exercise programs,
flexible working arrangements, age-appropriate workplaces
and demographic analyses. The topic "leadership in times of
demographic change" also forms a part of our leadership
programs. In addition, we actively engage in knowledge man-
agement and systematic succession planning.
For more on health protection, see page 101
15.6%
December 31, 2015
Total
South America, Africa,
Middle East
Asia Pacific
North America
Europe
BASF Group new hires in 2015
At the end of 2015, BASF had 112,435 employees (2014:
113,292); of these, 3,240 were apprentices (2014: 3,186). We
hired 7,489 new employees Group-wide in 2015. Reductions
in headcount came in part from the sale of portions of the
pharmaceutical ingredients and services business to Siegfried
Holding AG, based in Zofingen, Switzerland, as well as from
the asset swap with Gazprom.
Number of employees
Our Best Team Strategy is derived from our corporate strategy
and simultaneously contributes to the achievement of its
goals. We want to form the best team. To achieve this, we
focus on three strategic directions: excellent people, excellent
place to work and excellent leaders. Emphasis here is placed
on our attractiveness in worldwide labor markets, personal
and professional development, life-long learning, and support-
ing and developing our leaders. We are strongly committed to
internationally recognized labor and social standards and
strive to respect these worldwide.
- Best Team Strategy focuses on excellent people,
workplace and leaders
Strategy
Our employees are fundamental to achieving the goals of
the "We create chemistry" strategy. We want to attract
and retain talented people for our company and support
them in their development. To do so, we cultivate a work-
ing environment that inspires and connects people. It is
founded on inclusive leadership based on mutual trust,
respect and dedication to top performance.
3,240
Apprentices in around
60 occupations
BASF Report 2015
On center stage
Life-long learning
Employees
around the world
Working at BASF
Working at BASF
42 Management's Report
The close alignment of our business with our customers'
needs is an important component of our "We create chem-
istry" strategy. We will therefore continue the systematic and
structured enhancement of our industry orientation in the
future.
Yet not all business units can be arranged purely according
to industry. That is why BASF has created sector-specific
groups for key customer industries - like the automotive,
pharmaceutical and packaging industries - or for growth fields
such as wind energy. These "industry teams" pool expertise,
knowledge and contacts across different units, sharpen our
understanding of the value chains in customer industries and
work on sector-specific solutions that often could not be
developed within one operating division alone. For more than
fifty years, we have worked closely with the construction
industry, which has enabled numerous successful and sus-
tainable projects. This means combining the expertise of seven
divisions into one global industry team. The products and
systems developed through this setup improve the durability
of buildings, which themselves require fewer resources for
maintenance. Furthermore, these products make buildings
more energy efficient, thus protecting our environment. BASF
is developing new solutions for faster and more cost-efficient
construction, easy maintenance, improved insulation materi-
als, and heat transfer by means of infrared-reflective coatings.
We serve customers from many different sectors with our
broad portfolio of diverse competencies, processes, technolo-
gies and products. Around half of our business units are
geared toward specific industries. By combining expertise and
resources, we position ourselves as a solution-oriented system
provider for our customers.
Industry orientation systematically and
structurally enhanced
■Industry teams pool cross-unit expertise,
knowledge and contacts
Around half of business units geared toward
specific industries
Industry orientation
73.8%
Thereof women %
3,218
112,435
1,731
17,562
29.9
Asia Pacific
O!
26.2%
21.4% women and 78.6% men
Germany: 52,837 (47.0%)
23.6% women and 76.4% men
BASF SE: 35,972 (32.0%)
OL
70,079
62.4%
Europe
6.5%
7,323
Middle East
Africa,
South America,
76.4%
76.3%
1,861
25.0
26.3%
25.1
679
7,489
27.7
31.1
BASF Group employees by region
(Total: 112,435, thereof 24.2% women, as of December 31, 2015)
North America
17,471
15.5%
HOO!
23.7%
6
In 2015, the BASF Group spent a total of €56.2 million sup-
porting projects (2014: €45.4 million). Of this amount, we
donated 46% (2014: 32%). We support initiatives that reach
out to as many people as possible and have long-term impact.
We foster education, science, social projects, sports and
cultural events in the communities around our sites. On a
regional level, we work together with universities, schools and
nonprofit organizations. We support BASF Stiftung, a charita-
ble foundation, in its international projects with various U.N.
and nongovernmental organizations.
Starting in 2016, we want to focus our social commitment
even more on making an impact, and we have developed a
new, global strategy for achieving this. We want to put life-
long learning on center stage and define global and regional
focus topics to which our activities can make a targeted
contribution.
BASF Group donations, sponsorship and own projects in 2015
(in million €)
We take on social responsibility: We are involved in
diverse projects worldwide, especially in the communities
where our sites are located. Our main focus is on access
to education. In this way, we promote innovative capacity
and future viability.
-23456
Strategy
1 Education
2
22.1 39.3%
5.4 9.6%
6.4 11.4%
13.2 23.5% 4
2.9 5.2%
6.2 11.0%
5
1
€56.2 million
Science
Sports
Other
campaign
Focus on education
Social projects
Culture
Collected in 2015
year-end donation
- The annual survey of our Group companies
Participants in
Kids' Labs and Teens' Labs
worldwide
■ BASF organizes 50th Jugend forscht national youth
science competition
Alignment with U.N. Guiding Principles
on Business and Human Rights
Adjusted management process for monitoring
adherence to labor and social standards
Our voluntary commitment to respecting international labor
and social standards is embedded in our global Code of
Conduct. This encompasses internationally recognized labor
norms as stipulated in the United Nations' Universal Declara-
tion of Human Rights, the OECD Guidelines for Multinational
Enterprises, and the Tripartite Declaration of Principles
Concerning Multinational Enterprises and Social Policy of the
International Labour Organization (ILO). BASF strives to uphold
these standards worldwide. In countries where national laws,
rules and customs deviate from international standards, we
take on the challenge of finding appropriate solutions that
respect local customs by engaging in dialog with stakeholders.
We check regard for international labor and social stan-
dards using a global monitoring system comprising three
instruments:
- External compliance hotlines
- Close dialog with our stakeholders, such as employee
representatives and international organizations
In order to even better inspect compliance with international
labor and social standards around the world, we began
restructuring our management process in 2015. Step by step,
the annual survey of our Group companies will be replaced
with a process through which we can more efficiently monitor
worldwide adherence to international labor standards based
on a globally applicable BASF guideline. The management
process is geared toward internal regulations on compliance
and risk management, as well as requirements with respect to
the U.N.'s Guiding Principles on Business and Human Rights.
For more on labor and social standards,
see basf.com/labor_social_standards
For more on worldwide standards, see page 26
For more on our sustainability-related risk management, see page 31
For more on compliance, see page 136 onward
48 Management's Report
Social commitment
Social commitment
BASF Report 2015
€56.2 million
Spent on donations,
sponsorship and
BASF Group's own projects
87,032
€377,000
■ Experts convene for tenth anniversary of Offensive
Bildung early-childhood education initiative
2.4%
BASF hosted the 50th Jugend forscht national youth science
competition in our 2015 anniversary year; 195 young people
qualified for the competition with 113 projects. The winners
were honored in Ludwigshafen in the company of German
Federal President Joachim Gauck.
2015
2014
2015 2.4%
1.8%
1.4%
Emerging markets
of Asia
2014
2015
6.2%
2014 6.5%
2015 0.4%
2014
(0.1%)
South America
2015
(2.1%)
2014
0.4%
Japan
Trends in the global economy in 2015
Growth in the global economy was marked by diverging devel-
opments in the advanced economies and the emerging mar-
kets. In the European Union and the United States, consumers
benefited from low energy prices and rising real income. The
result was increased demand for consumer goods, stabilizing
the economy in these regions. The economic cooldown in
China, however, dampened growth in Asia and South America
in particular. Russia's recession intensified on account of the
low oil prices as well as the continuing trade sanctions. Fur-
thermore, many emerging-market currencies depreciated
sharply in anticipation of interest rate hikes in the United
States. Although this boosted these countries' competitive-
ness in terms of export prices, it also led to further capital
outflow and higher inflation rates.
Economic trends by region
United States
European Union
2015 2.4%
2014 2.6%
World
With the Offensive Bildung initiative, BASF and its partners
have been involved in education in day care centers and
primary schools for ten years. More than 500 education
specialists discussed the initiative's future and successes at
an expert convention in Ludwigshafen in 2015.
As a founding member of the Wissensfabrik, BASF is part
of a nationwide network of more than 120 companies and
foundations that have been making a contribution to educa-
tion and entrepreneurship in Germany since 2005.
Focus on refugees and migration
■ Supporting integration projects in the
Rhine-Neckar Metropolitan Region
■ BASF Stiftung's humanitarian engagement
BASF SE has already been supporting over 20 refugee
integration projects in the Rhine-Neckar Metropolitan Region
since 2014. These include language courses and integration
programs for children and families, as well as theater and
crafts projects. BASF's global "Connected to Care" competi-
tion to promote employees' charitable involvement also sup-
ported employee-organized integration projects. Connected
to Care won the Human Resources Manager magazine's
HR Excellence Award in 2015.
As part of its humanitarian development collaboration,
BASF Stiftung has supported various United Nations projects
since 2012 - along with other international nongovernmen-
tal organizations - in their efforts to deal with the effects of
refugeeism and migration. The company and its employees
gave €377,000 to BASF Stiftung in the 2015 year-end donation
campaign for the United Nations Children's Fund (UNICEF)
supporting an education and integration program in Jordan.
For more information, see basf.com/international_donations
BASF Report 2015
The BASF Group business year
Economic environment
In 2015, 87,032 children and young people visited our Kids'
Labs and Teens' Labs in 31 countries. We started a new
experiment program in 2015 entitled "Keep cool!" in which
10,406 children participated around the world.
Management's Report 49
2.4%
Growth in global gross
domestic product
2.0%
Growth in global
industrial production
3.6%
Growth in global
chemical industry
The global economy grew only moderately in 2015, slow-
ing down over the course of the year. Dampening effects
came primarily from the emerging markets. Growth in the
European Union was positive, yet remained at a low level.
After a weak start to 2015, the U.S. economy stabilized
over the course of the year. In China, however, industrial
production and demand for imports both slowed consid-
erably compared with 2014. This development also weak-
ened momentum for China's trading partners and weighed
down raw material prices. Important countries such as
Russia and Brazil found themselves in a recession. Over-
all, global gross domestic product grew by only 2.4%,
remaining behind 2014 (+2.6%¹) and our expectations for
2015 (+2.8%). The average price for a barrel of Brent blend
crude oil fell to $52 per barrel (2014: $99 per barrel).
For the outlook for the economic environment in 2016,
see page 121 onward
Gross domestic product
(Real change compared with previous year¹)
The BASF Group business year - Economic environment
3
For more on business reviews by segment, see page 61 onward
■
1,023
1,603
2,043
2,070
10,649
1,893
2,872
2,994
2,890
70,449
13,880
17,424
19,078
20,067
Full year
4th quarter
3rd quarter
2nd quarter
1st quarter
Adjusted earnings per share
Earnings per share
6,739
1,995
2,039
1,889
0.37
1.31
1.38
1.28
€
3,987
339
1,209
1,265
1,174
Net income
5,548
1,714
1,887
1,831
(700)
(209)
(175)
(152)
(164)
6,248
325
116
4.34
Income before taxes and minority interests
Income from operations (EBIT)
5,492
4,301
(23.0)
7,203
5,548
(65.5)
(423)
(700)
Adjusted earnings per share
Earnings per share
Net income
Income before minority interests
Income before taxes and minority interests
Financial result
(18.1)
7,626
6,248
Income from operations (EBIT)
(8.4)
7,357
6,739
(21.7)
3,987
5,155
(22.7)
Income from operations (EBIT) before special items
Income from operations before depreciation and amortization (EBITDA)
Sales
Sales and earnings by quarter in 20142,3 (in million €)
Adjusted earnings per share
Earnings per share
Net income
Income before taxes and minority interests
Financial result
Income from operations (EBIT)
Financial result
Income from operations (EBIT) before special items
Sales
Sales and earnings by quarter in 2015² (in million €)
(8.1)
5.44
5.00
€
(22.6)
5.61
4.34
€
Income from operations before depreciation and amortization (EBITDA)
Income from operations (EBIT) before special items
€
1.49
For more on the calculation of EBIT after cost of capital, see page 30
We once again earned a premium on our cost of capital in
2015. EBIT after cost of capital amounted to €194 million after
€1,368 million in the previous year. Cost of capital increased
particularly as a result of the higher amount of fixed assets.
Contrasting this was the reduction of inventories and other
receivables.
Compared with 2014, special charges from various
restructuring measures rose by €155 million to €223 million
and expenses for the integration of acquired businesses by
€9 million to €15 million.
Divestitures in 2015 resulted in an earnings contribution of
€476 million (2014: €712 million). This amount included the
asset swap with Gazprom as well as the disposal of the white
expandable polystyrene (EPS) business, the global textile
chemicals business, and parts of the pharmaceutical ingredi-
ents and services business.
Special items in 2015 resulted in an earnings contribution
to EBIT of minus €491 million (2014: €269 million). This was
largely the result of other special charges and income totaling
minus €729 million, mostly from impairments on assets in the
Oil & Gas segment. In 2014, other special charges and income
totaling minus €369 million had especially pertained to impair-
ment charges in the Oil & Gas, Chemicals, and Functional
Materials & Solutions segments.
Included in this figure is income from companies accounted
for using the equity method, which declined from €273 million
to €251 million.
At €6,248 million, income from operations for the BASF Group
in 2015 was considerably below the previous year's level
(€7,626 million).
Income from operations declines considerably
Premium once again earned on cost of capital
Income from operations and special items
Sales in Other shrank by 23%, mainly on account of a
reduced contribution from raw materials trading. The decline
was also influenced by the disposal of our share in the Ellba
Eastern Private Ltd. joint operation in Singapore at the end of
2014, as well as by lower plant availability from the outage at
the Ellba C.V. joint operation in Moerdijk, Netherlands. Income
from operations before special items dropped by 57% com-
pared with the previous year. Major factors were a lower cur-
rency result and higher expenses for provisions for our long-
term incentive program.
Sales declined by 14% in the Oil & Gas segment in 2015.
This was largely a result of the asset swap with Gazprom
completed at the end of September, through which contribu-
tions from the natural gas trading and storage business, as
well as from Wintershall Noordzee B.V., ceased as of the fourth
quarter of 2015. The significant drop in the price of oil led to
slightly lower sales in the Exploration & Production business
sector. Higher volumes in both the Exploration & Production
and Natural Gas Trading business sectors had a positive effect
on sales. Income from operations before special items declined
by 24% as a result of the reduced sales level.
Sales in the Agricultural Solutions segment exceeded
the level of 2014 by 7%, primarily driven by higher sales prices.
Over the course of the year, we experienced a slowdown in
demand for crop protection products, while prices for agricul-
tural products remained low. In emerging markets in particular,
our business development was hindered by the volatile envi-
ronment and depreciation of local currencies. Income from
operations before special items was down by 2%. This was
primarily attributable to higher fixed costs, mainly through
a decrease in plant capacity utilization rates from the startup of
new production capacities, along with reductions in inven-
tories.
We raised sales by 5% in the Functional Materials & Solu-
tions segment thanks to positive currency effects in all divi-
sions. Prices declined slightly overall, with volumes stable. We
improved income from operations before special items by
38%, mainly because of the considerable earnings increase in
the Performance Materials and Construction Chemicals divi-
sions.
BASF Report 2015
The BASF Group business year - Results of operations
54 Management's Report
3 The figures for the first three quarters of 2014 were adjusted to reflect the dissolution of the gas trading business disposal group at the end of 2014. For more information,
see the "Restated Figures 2013 and 2014" brochure at basf.com/publications.
2 Quarterly figures represent unaudited supplementary information.
1 With EBITDA of €10,649 million achieved in 2015, we confirmed the estimated range of €10 billion to €12 billion we announced in October 2014.
5.44
1.04
Special items (in million €)
Integration costs
Restructuring measures
Divestitures
Other charges and income
■
466
(468)
earnings before taxes
Total special items in
197
23
Special items reported in financial result
269
(491)
1.24
income from operations (EBIT)
(369)
(729)
712
476
(68)
(223)
(6)
(15)
2014
2015
Total special items in
1.43
1.53
€
7,357
1,459
1,774
2,012
2,112
11,043
2,873
2,514
2,705
2,951
74,326
18,047
18,312
18,455
19,512
Full year
2nd quarter 3rd quarter 4th quarter
1st quarter
5.00
1.01
1.07
2,221
1,933
1,742
1,730
5.61
1.54
1.11
1.37
1.59
€
5,155
1,418
1,014
1,259
1.63
1,464
1,795
1,573
1,797
2,038
(423)
65
(169)
(136)
(183)
7,626
7,203
- Growth somewhat stronger in European Union
U.S. economy initially below expectations,
picks up as year progresses
14.9
%
Growth below our expectations
Trends in the chemical industry
Management's Report 51
BASF Report 2015
Health and nutrition | Electronics
<5%
Agriculture | Construction
5-10%
Consumer goods | Transportation
10-15%
Chemicals and plastics | Energy and resources
>15%
BASF sales by industry
(Direct customers)
1 Figures that refer to previous years could deviate from last year's report due to statistical
revisions.
Agriculture
Electronics
2.8%
2014
2015 2.1%
3.6%
2014
In light of the dampened dynamic in its key customer indus-
tries, the chemical industry (excluding pharmaceuticals) grew
by 3.6%. Our original forecast of 4.2% had been much higher.
This development was largely a factor of slower momentum in
China, the world's largest chemical market. There, chemical
production gained 7.0%, around 2.3 percentage points under
the previous year's rate.
Growing at 0.3% (2014: +0.6%), the chemical industry in
the European Union continued to lag behind the total industry.
As in the previous year, momentum was provided by the
United Kingdom and the eastern E.U. countries. Chemical
production again declined slightly in Germany. In the United
States, the 3.5% growth rate was 2.1 percentage points
stronger than in the previous year, although momentum decel-
erated as the year progressed. At -1.7%, chemical production
in South America declined at the same rate as in the previous
year. Production volumes rose slightly in Japan, growing by
1.6% (2014: -0.8%).
Chemical production (excluding pharmaceuticals)
(Real change compared with previous year¹)
Important raw material price developments
2014 (1.7%)
2015 (1.7%)
South America
2014 (0.8%)
2015 1.6%
Japan
2014 7.5%
2015 6.4%
Emerging markets
of Asia
2014 1.4%
3.2%
2015 3.5%
2014 0.6%
2015 0.3%
European Union
3.6%
2015
2014 3.5%
World
The average price of gas in the United States was
$2.61 per mmBtu, below the level of the previous year
($4.37 per mmBtu). In Europe, the average price of gas on
spot markets remained substantially higher, at $6.49 per
mmBtu (2014: $8.21 per mmBtu). 2 Gas prices in China were
around $9.81 per mmBtu on national average, while the
average price in the coastal regions was $11.20 per mmBtu.
Average monthly prices for the chemical raw material
naphtha ranged over the course of 2015 between $551 per
metric ton in May and $387 per metric ton in December. At
$462 per metric ton, the annualized average price of naphtha
in 2015 was below the level of 2014 ($837 per metric ton).
At an average of around $52 per barrel in 2015, the price of
Brent blend crude oil dropped by 47% compared with the
previous year ($99 per barrel). The oil price fluctuated over the
course of the year between $64 per barrel in May and $38 per
barrel in December.
Prices continue to fall for crude oil and naphtha
Gas prices below previous year's level
United States
1 Figures that refer to previous years could deviate from last year's report due to statistical
revisions.
2015
4.2%
Industry total
Construction
resources
Growth in key customer industries
(Real change compared with previous year¹)
Against this backdrop, growth in key customer industries
and in the chemical industry also remained below prior-year
levels. Automotive manufacturing saw considerably slower
growth due to sales developments in China, South America
and Russia. In the construction industry, China's economic
cooldown and the sharp decline in construction activities in
Russia and Brazil led to lower growth rates worldwide. Agricul-
ture grew by 2.1%, somewhat behind the previous year's rate
but with regional developments varying widely.
In the European Union, industrial growth was able to expand
slightly from 1.3% to 1.5%, whereas North America saw a
substantial overall decline from 3.4% to 1.2%. At 5.4%, indus-
trial growth in the emerging markets of Asia remained around
1.7 percentage points behind the previous year's levels. Indus-
try in China grew at only 6.1%, a rate considerably slower than
in previous years. South America fell into a downright slump:
Industrial production in Brazil shrank by 8.4%.
Global industrial production grew by around 2% in 2015, con-
siderably more slowly than in the previous year (+3.5%) and far
below our expectation of 3.6%. It decelerated substantially in
both the advanced economies (2015: +0.9%, 2014: +2.4%)
and in the emerging markets (2015: +3.1%, 2014: +4.6%).
Development in key customer industries also
weaker than in previous year
■
■Substantially weaker growth in global industrial
production compared with 2014
Trends in key customer industries
Japan was also negatively affected by developments in
China, its most important trading partner apart from the United
States. Despite the depreciation of the yen against other
currencies, exports to China and to Europe and the United
States remained modest. Private consumption and the propen-
sity for investment were also dampened. Gross domestic
product was hardly able to grow in these conditions (+0.4%).
In South America, gross domestic product shrank by
2.1% overall in 2015. Many countries in the region suffered
from China's weaker demand for raw materials, as well as from
falling raw material prices. Brazil fell into a severe recession. As
a result of the 32% drop in value of the Brazilian real over the
course of the year, consumers and producers were left strug-
gling with rising prices for imported goods. Deteriorating
economic conditions and a crisis of confidence in the govern-
ment brought consumer sentiment and investor confidence to
record lows. The Argentinian peso also depreciated by around
30% compared with the average of the previous months after
exchange rates were allowed to float in December.
Growth continued to weaken in the emerging markets of
Asia, although it remained at a high level (+6.2%). In China,
growth especially decelerated in the manufacturing industry
and the construction sector. The Chinese government com-
bated this economic cooldown with monetary and fiscal
measures. The slowdown in China also dampened economic
activity in neighboring Asian countries; South Korea, Taiwan,
Singapore and Malaysia all saw substantially lower growth
rates than in the previous year.
In the first quarter of 2015, growth in the United States
remained considerably behind our expectations on account of
unfavorable weather conditions and long-running harbor
strikes that negatively impacted exports. Yet the U.S. economy
I was able to stabilize over the course of the year (+2.4%).
Private consumption, employment, and wages and salaries all
developed well while the inflation rate remained low. Low inter-
est rates spurred growth in the construction and automotive
sector.
BASF Report 2015
The BASF Group business year Economic environment
50 Management's Report
1 Figures that refer to previous years could deviate from last year's report due to statistical revisions.
The countries in central and eastern Europe developed
positively in light of low energy prices, rising export demand
from the eurozone, and comparatively low interest rates. In
Russia (-3.7%), however, the recession intensified in an
environment of low oil prices, a weak ruble and ongoing trade
sanctions.
At 1.8%, gross domestic product in the European Union
grew somewhat faster than in the previous year (2014: +1.4%).
Solid growth rates were seen in northwestern Europe, particu-
larly the United Kingdom, Sweden and Ireland. The economy
in southern Europe was able to continue stabilizing - especially
in Spain, which saw growth of 3.2%. France and Italy were
also able to slightly expand their gross domestic product.
Adjusted for number of working days, the German economy
only grew moderately, by 1.4%. Major drivers here were
above-average wage and salary increases, along with low
inflation rates, significantly increasing the purchasing power of
private households. Positive stimulus was also provided by the
eurozone's demand for exports. Demand was weaker from
outside the eurozone, especially China.
Economic cooldown in China weakens growth in
emerging markets of Asia and South America
2015
2.0%
2014
3.5%
2014
3.5%
2015
3.0%
2014
2.4%
2015
Consumer goods
3.4%
2014
Health and nutrition
2.5%
2.4%
2014
0.7%
2015
Energy and
3.6%
2014
1.4%
2015
Transportation
2015
15.1
Price trends for crude oil (Brent blend) and naphtha ($/barrel, $/metric ton)
1,200
Changes in scope of consolidation
Total change in sales
(6)
(3,948)
1
387
4,280
6
(6)
(6,339)
3
1,851
Change in %
Change in
million €
Currencies
Acquisitions
Divestitures
Prices
Volumes
Factors influencing sales of the BASF Group
Sales volumes in 2015 rose slightly overall, mainly as a result
of higher volumes in the Oil & Gas segment. Volumes were
slightly down overall in the chemicals business. Sales prices
fell in nearly all divisions, strongly affected by the sharp drop in
raw material prices. We were able to raise volumes and prices
in the Agricultural Solutions segment. Currency effects posi-
tively influenced sales in all segments. Sales were reduced by
the asset swap with Gazprom, through which contributions to
the Oil & Gas segment from the gas trading and storage busi-
ness in particular ceased as of the fourth quarter of 2015.
Factors influencing sales
6,647
2012
(108)
0
(3,877)
(5)
EBITDA margin
(3.6)
11,043
10,649
Income from operations before depreciation and amortization (EBITDA)1
(5.2)
74,326
70,449
Sales
Change in %
7,077
2014
The BASF Group business year - Results of operations
Management's Report 53
Sales and earnings (in million €)
BASF Report 2015
Our chemicals business comprises the Chemicals, Performance Products and Functional Materials & Solutions segments.
1
-
In the Performance Products segment, sales were up by
1%. Positive currency effects in all divisions were able to more
than compensate for lower sales prices and weaker volumes.
Income from operations before special items was 6% below
the prior year's level because of higher fixed costs. These
resulted from negative currency effects, the startup of new
plants such as those in Camaçari, Brazil, and Freeport,
Texas - and inventory reductions.
Sales in the Chemicals segment declined by 14%, largely due
to lower prices on account of decreased raw material costs,
especially in the Petrochemicals division. Income from opera-
tions before special items fell by 9% compared with the previ-
ous year. This was primarily attributable to the declining TDI
margins in the Monomers division as well as rising fixed costs
from the startup of new production plants, such as in Camaçari,
Brazil, and Chongqing, China.
Sales and income from operations before
special items in the segments
2015
$/t
2013
2014
110
120
130
140
$/bbl
2014
Crude oil
© 2015: $52/bbl
2014: $99/bbl
2013
© 2015: $462/t
2014: $837/t
2012
Naphtha
2011
2010
200
300
400
500
600
700
800
900
1,000
1,100
100
90
80
70
6,739
2015
Income from operations before special items (in million €)
73,973
72,129
2013
2012
2015 70,449
2014 74,326
Sales (in million €)
For more information on income from operations, see page 54
At €6,739 million, income from operations before special
items was 8% below the level of the previous year. Major influ-
ences here were the oil-price-related decline in sales from our
oil and gas production as well as decreased earnings in Other,
which was particularly the result of currency effects. Earnings
increased slightly in the chemicals business¹ but fell slightly in
the Agricultural Solutions segment.
Sales decreased by €3,877 million to €70,449 million in 2015,
largely on account of the significant drop in prices - especially
in the Chemicals segment - in relation to oil price develop-
ments. In addition, the asset swap with Gazprom completed
at the end of September particularly contributed to the decline.
This transaction meant the discontinuation of contributions to
the Oil & Gas segment mainly from the natural gas trading and
storage business as of the fourth quarter of 2015. We could
only partly compensate for this through sales increases in the
other three segments.
7,357
■ Sales decline by 5% to €70,449 million
At €6,739 million, income from operations before
special items 8% below prior-year level
The market environment continued to be volatile and
challenging in 2015. Growth rates for the global economy,
industrial production and the chemical industry all lagged
considerably behind our expectations. The economic
environment deteriorated in important emerging markets,
especially China. The sharp drop in the price of oil led to
falling prices for basic chemicals in particular. The dives-
titures completed in 2015 also put a strain on both sales
and income from operations (EBIT) before special items.
Impairments in the Oil & Gas segment resulting from the
reduced forecast for oil and gas prices led to considerably
lower EBIT. In light of these factors, our overall business
development remained behind our expectations.
BASF Report 2015
Results of operations
The BASF Group business year - Results of operations
52 Management's Report
2 As opposed to the prior year's reports, European gas prices on the spot market are reported here, as they are meanwhile more representative of the actual traded gas volumes than the
previously referenced European gas import prices. According to the definition used previously, the price of European gas imports was $7.3 per mmBtu in 2015 (2014: $10.1 mmBtu).
2015
40
50
60
Sales and income from operations before
special items
Global labor and social standards
The BASF Group business year - Economic environment
We signed a new site agreement in Ludwigshafen,
Germany the BASF Group's largest site - with employee
representatives in 2015. It applies for all employees of
BASF SE. Titled "Meeting the challenges of constant change
together," the agreement addresses job security, flexibility and
ensuring competitive ability.
Employees on parental leave
(including "partner months")
Men
Women
64.5%
Returnees from parental leave
(including "partner months")
Our regional initiatives specifically address the needs of our
employees at a local level. In South America, for example, we
introduced the Equilibre program comprising a range of possi-
bilities for flexible working hours. At our Work-Life Management
employee center in Ludwigshafen ("LuMit"), there are numer-
ous opportunities for exercise and health, employee assis-
tance, and balancing career, family and personal life - such as
the company childcare center, "LuKids." Around 600 employ-
ees take advantage of these options each day.
1 The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive
status by virtue of special expertise.
46 Management's Report
Working at BASF
BASF Report 2015
What we expect from our leaders
■ Leaders serve as role models
■ Diverse programs for leadership development
Our leaders serve as role models in implementing our strategy
in their day-to-day business. In this capacity, they contribute
to BASF's business success. Our leadership culture is founded
on BASF's strategic principles and values as well as on the
standards of behavior set out by our globally uniform Code of
Conduct. Our global Competence Model forms the basis of
our employee and leadership development.
All new leaders take part in the module-based New Leader
Program, which supports them in taking on a leadership role.
In addition, we offer global, regional and local programs for
leaders on all levels. These are geared toward strengthening
our leaders' competencies and offer opportunities for net-
working and learning from one another. Coaching is
furthermore an important measure for personal development
and the promotion of talent. Leaders play a central role here as
internal trainers or mentors.
Leadership responsibility in the BASF Group
Professionals¹
(Senior) executives²
December 31, 2015
35,797
9,273
89.1%
10.9%
In Germany, BASF is putting into practice the Law on Equal
Participation of Women and Men in Leadership Positions in
the Private and Public Sector. In accordance with these legal
requirements, the Board of Executive Directors determined
target figures for the proportion of women in the two leader-
ship levels below the Board of Executive Directors of BASF SE:
9.4% for the leadership level directly below the Board, and
11.8% for the level below that. This corresponds to the status
at the time these target figures were determined. Target figures
were likewise defined for German Group companies subject to
co-determination. The deadline for achieving these goals has
been set for December 31, 2016. After that, the company will
review the numbers and subsequently decide on new target
figures.
623
For more information, see basf.com/employeerepresentation
BASF Report 2015
Management's Report
Working at BASF
45
Inclusion of diversity
Promoting diversity as part of company culture
First global goals for increasing percentage of
women in leadership positions
We want to utilize diversity for the development of our business.
That is why promoting diversity is one of the mainstays of our
corporate culture. The strong global character of our markets
translates into different customer requirements. We want to
reflect this diversity in our workforce in order to even better
understand the needs of our customers. The aim is to increase
our teams' performance and power of innovation, and boost
creativity, motivation and identification with the company. We
are therefore further promoting the appreciation and inclusion
of diversity. Leaders play an important role here. We support
them in strengthening diversity and making the best possible
use of it in day-to-day business. For example, specific goals
and measures are being developed for such topics as recog-
nizing and developing different kinds of talent.
For the first time, BASF set itself global goals in 2015 for
increasing the percentage of women in leadership positions. In
the BASF Group, the global proportion of female leaders with
disciplinary responsibility was 19.5% at the end of 2015 (2014:
19.1%). We aim to increase this figure to 22-24% worldwide
by 2021, so that the proportion of women in leadership reflects
that of women in the global company workforce. Considering
the relatively low rate of turnover in the BASF Group's leader-
ship team, this is an ambitious goal.
2021 Goal
Thereof women %
29.0
Proportion of women in
leadership positions with
disciplinary responsibility
Furthermore, BASF wants to continue increasing the global
percentage of senior executives' that come from countries
other than Germany. This figure was at 35.6% by the end of
2015. Moreover, we intend to maintain the proportion of senior
executives with international experience at over 80%. We
exceeded this figure by the end of 2015, reaching 82.9%. With
these goals, we continue to drive our globally integrated
approach to promoting diversity and leadership development.
For more information, see basf.com/diversity
For more on diversity in the Board of Executive Directors
and the Supervisory Board, see page 132
Worldwide offers help combine career, family
and private life
Our identity as an employer includes our belief in enabling our
employees to better combine their work, family and private
lives. Through various offers and opportunities, we create
working conditions that give fair consideration to our employ-
ees' individual needs. We want to strengthen employee identi-
fication with the company and bolster our position as an
attractive employer in the competition for qualified personnel.
Our offer includes flexible working hours, part-time
employment and mobile working. In 2015, a total of 11.7% of
BASF SE employees held part-time positions, of which 68.5%
were women. Numerous BASF SE employees also made use
of parental leave, including more and more fathers.
Combining career, family and private life
(Total BASF SE employees: 35,972, thereof 21.4% women,
as of December 31, 2015)
1,264
35.5%
22-24%
1 Specialists without disciplinary leadership responsibilities
Work-life balance
Global Employee Survey
658
560
17.5
9,982
9,224
8.2
BASF Report 2015
Management's Report 47
Working at BASF
Employees participate in company's success
■ Return on assets determines variable compensation
BASF share program "plus" fosters employees'
long-term participation in company
■
With variable compensation components, employees partici-
pate in the company's success and are rewarded for their
individual performance. The same principles basically apply for
all employees. The amount of the variable component is deter-
mined by the success of the company measured by the
return on assets of the BASF Group - and the employee's
individual performance. Individual performance is assessed
using a globally consistent performance management
approach. The annual bonus for the 2015 business year is not
as high as in 2014 due to the lower return on assets.
In numerous Group companies, employees are offered the
chance to purchase shares. The BASF share program "plus"
sponsors the long-term participation of our employees in the
company through incentive shares: By investing a portion of
their compensation in BASF shares, they take part in the long-
term development of BASF.
BASF offers its executives the opportunity to participate in
a share-price-based compensation program. This long-term
incentive (LTI) program ties a portion of their compensation to
the long-term performance of BASF shares. In 2015, 93% of
the approximately 1,200 eligible executives worldwide partici-
pated in the LTI program, investing up to 30% of their variable
compensation in BASF shares.
For more information, see the Notes to the Consolidated Financial
Statements from page 218 onward
Dialog with employee representatives
Open dialog with employee representatives is an important
component of our corporate culture. If restructuring leads to
staff downsizing, we work with employee representatives to
develop socially responsible implementation measures. This is
done in accordance with the respective legal regulations and
the agreements reached. For cross-border matters, the BASF
Europa Betriebsrat (European Works Council) has been
responsible for employees in Europe since 2008.
2 Employees with disciplinary leadership responsibilities
-
10.6
1,844
-
Change
in %
7.6
19.5
■ Worldwide survey conducted for the third time
2,039
The Global Employee Survey, including its follow-up process,
has been an established tool throughout the BASF Group
since 2008. We conducted it for the third time in 2015. This
time, the survey's design was even more closely aligned with
the corporate strategy. Overall, 74% of employees in around
80 countries took part in the survey. Good results were
especially returned with regard to team collaboration, occupa-
tional safety, and satisfaction with BASF as an employer. In
some cases, employees saw room for improvement when it
came to supporting individual development, recognizing per-
formance, and communicating change. The results of the
survey were presented to the Board of Executive Directors and
the Supervisory Board. Employees and leaders subsequently
discussed the results together and are developing necessary
measures for improvement. The next Global Employee Survey
is planned for 2018.
Compensation and benefits
■
Compensation based on employee's position and
individual performance as well as company's success
Pay generally comprises fixed and variable
components plus benefits
In addition to market-oriented compensation, BASF's total
offer also comprises benefits, individual opportunities for
development and a good working environment. Our employ-
ees' pay is based on global compensation principles. These
take into account an employee's position and individual perfor-
mance as well as the company's success. Analyses of the
Ludwigshafen site have shown that, for contracts exempt from
collective agreements, there are no systematic differences in
pay between men and women, provided the positions and
qualifications are comparable.
As a rule, compensation is comprised of fixed and variable
components as well as benefits that often exceed legal
requirements. In many countries, these include company
pension benefits, supplementary health insurance, and share
programs.
On the occasion of the company's 150th anniversary,
BASF Group employees worldwide received an anniversary
bonus of around €100 million in total.
■
For more information, see the Notes to the Consolidated Financial
Statements on page 189
BASF Group personnel expenses (in million €)
Wages and salaries
7,380
Social security contributions
and expenses for pensions
and assistance
Thereof for pension benefits
Total personnel expenses
2015
7,943
In 2015, the BASF Group spent €9,982 million on wages
and salaries, social security contributions and expenses for
pensions and assistance (2014: €9,224 million). Personnel
expenses therefore rose by 8.2%, particularly owing to cur-
rency effects. Higher salaries and wages, in addition to expen-
ses for the anniversary bonus and the long-term incentive (LTI)
program, also contributed to the increase.
2014
BASF Report 2015
Statement of cash flows
■ Cash provided by operating activities and free cash
flow significantly exceed prior-year levels
At €9,446 million, cash provided by operating activities in
2015 was €2,488 million above the level of the previous year.
This was largely attributable to a decrease in the amount of
capital tied down in net working capital as a result of reduced
inventories and other operating receivables. The line item
"miscellaneous items" particularly contained the transfer of
gains from the asset swap with Gazprom into cash used in
investing activities. In the previous year, this item had primarily
included the reclassification of gains from the disposal of our
50% share in Styrolution Holding GmbH.
Cash used in investing activities amounted to minus
€5,235 million in 2015 compared with minus €4,496 million in
2014. Payments for property, plant and equipment and intan-
gible assets were at €5,812 million, surpassing both the prior
year's level (€5,296 million) and the level of depreciation and
amortization (€4,448 million).
For more on investments and acquisitions, see page 39 onward
Cash inflow of €141 million from financial investments and
other items in 2015 was primarily attributable to the decrease
in other financial receivables. In 2014, the disposal of financial
assets, other financial receivables, and miscellaneous items
had led to €427 million in payments received.
Cash used in financing activities amounted to minus
€3,673 million in 2015, compared with minus €2,478 million in
the previous year. The contribution from minority interests to a
capital increase in one Group company was primarily responsi-
ble for cash inflow of €66 million in 2015. Cash outflow from the
change in financial indebtedness amounted to €933 million. This
was largely from the scheduled repayment of two bonds; the
expansion of BASF SE's U.S. dollar commercial paper program
had a countering effect. In 2015, dividends of €2,572 million
were paid to shareholders of BASF SE and €234 million to
minority interests.
In total, cash and cash equivalents increased by €523 million
compared with the previous year, amounting to €2,241 million as
of December 31, 2015.
The BASF Group business year - Financial position
Cash flow (in billion €)
Free cash flow rose by €1,972 million to €3,634 million in
2015 on account of higher cash provided by operating activities.
Acquisitions and divestitures in 2015 resulted in net pay-
ments received of €436 million (2014: €373 million).
60 Management's Report
303
Our interest risk management generally pursues the goal
of reducing interest expenses for the Group and minimizing
interest risks. Interest rate hedging transactions are therefore
conducted with banks in order to turn selected capital market
liabilities from fixed interest to variable rate or vice versa.
To minimize risks and exploit internal optimization potential
within the Group, we bundle the financing, financial invest-
ments and foreign currency hedging of BASF SE's subsidiaries
within the BASF Group where possible. Foreign currency risks
are primarily hedged centrally by means of derivative financial
instruments in the market.
For more on the financing tools used, see the Notes to the Consolidated
Financial Statements from page 210 onward
Off-balance-sheet financing tools, such as leasing, are of
minor importance to us. BASF Group's most important finan-
cial contracts contain no side agreements with regard to
specific financial ratios (financial covenants) or compliance
with a specific rating (rating trigger).
We have solid financing. Corporate bonds form the basis
of our medium to long-term debt financing. These are issued
in euros and other currencies with different maturities as part
of our €20 billion debt issuance program. The goal is to create
a balanced maturity profile and diverse range of investors, and
to optimize our debt capital financing conditions.
BASF has good credit ratings, especially in comparison with
competitors in the chemical industry. Rating agency Moody's
last confirmed their rating of "A1/P-1/outlook stable" on
November 4, 2015. Standard & Poor's adjusted the outlook of
their "A+/A-1" rating to "negative" on April 10, 2015. This was
primarily because of an increase in pension provisions as a
result of lower capital market interest rates.
2021 and beyond 5,231
2020
2,099
2019
1,865
2018
10
1,625
59
8
Miscellaneous items¹
4
2017
4,448
5,155
3,987
2014
2015
Cash used in investing activities
Financial investments and other items
Acquisitions/divestitures
Payments for property, plant and equipment and intangible assets
Cash provided by operating activities
Depreciation and amortization of intangible assets, property, plant and equipment, and financial assets
Changes in net working capital'
Net income
Statement of cash flows (in million €)
3 Cash provided by operating activities less payments made for property, plant and
equipment and intangible assets
2 Including investments to the extent that they already had an effect on cash
1 The figures for the 2011 business year were not restated according to the new
accounting and reporting standards IFRS 10 and 11.
-
■Payments made for property, plant and equipment and intangible assets²
Free cash flow³
2015
■Cash provided by operating activities
2014
2013
#
2012
2011
0
2TTYH
封
6
4,074
Equity and liabilities
2
For more on the composition and development of individual equity and
liability items in the balance sheet, see the Notes to the Consolidated
Financial Statements from page 198 onward
Financial indebtedness decreased overall by €187 million
to €15,197 million. The average maturity of our financial
indebtedness was 5.2 years (2014: 5.7 years). Net debt fell by
€710 million to €12,956 million.
addition, short-term provisions fell by €304 million. Short-term
financial indebtedness rose by €529 million, largely on account
of the €1,590 million year-on-year increase in outstanding U.S.
dollar commercial paper as of December 31, 2015, as well as
the previously mentioned reclassification of bonds. Contrast-
ing this was the scheduled repayment of two bonds with a
nominal value of €2 billion and CHF 200 million in 2015. Tax
liabilities remained at the prior-year level.
Current liabilities fell by €1,657 million to €14,236 million,
predominantly due to the €841 million decline in trade accounts
payable and a €1,044 million decline in other liabilities, both of
which mainly resulted from the asset swap with Gazprom. In
Compared with the end of 2014, noncurrent liabilities
declined by €2,216 million to €25,055 million. All line items
contributed to this development. Provisions for pensions and
similar obligations were reduced by €1 billion, predominantly
as a result of the decline in the projected pension increase and
higher discount rates. Long-term financial indebtedness fell by
€716 million due to the reclassification into short-term financial
indebtedness of three bonds due in 2016 with a nominal value
totaling €900 million. Other liabilities declined by €328 million,
other provisions by €133 million and deferred taxes by
€39 million.
Equity grew by €3,350 million to €31,545 million compared
with the previous year. Retained earnings increased by
€1,343 million to €30,120 million. Other comprehensive
income rose by €1,961 million to minus €3,521 million, primar-
ily because of currency translation effects and the remeasure-
ment of defined benefit plans. The equity ratio was 44.5%
(2014: 39.5%).
Net debt shrinks slightly
■
■ Equity ratio rises from 39.5% to 44.5%
3,455
100.0
71,359
100.0
70,836
For more on the development of the balance sheet, see the
Ten-Year Summary on page 236
22.3
20.1
14,236
5.0
3,564
3.6
2,520
5.0
3,545
5.7
4,074
1.5
1,079
1.5
1,082
15,893
2016
Net debt (in million €)
Dec. 31, 2015
2,241
234
2,852
1,714
USD commercial paper
Other
€15,197 million
3
7,635
Eurobonds
2,996
Bank loans
1
1
4
Financing instruments (in million €)
Cash and cash equivalents
Financial indebtedness
Net debt
These credit lines were not used at any point in 2015. Our
external financing is therefore largely independent of short-
term fluctuations in the credit markets.
Maturities of financial indebtedness (in million €)
We strive to maintain at least a solid "A" rating, which allows
us unrestricted access to money and capital markets. Our
financing measures are aligned with our operative business
planning as well as the company's strategic direction and also
ensure the financial flexibility to take advantage of strategic
options.
Our financing policy is aimed at ensuring our solvency at all
times, limiting the risks associated with financing and optimiz-
ing our cost of capital. We preferably meet our financing needs
on international capital markets.
- "A" ratings confirmed
Financing principles remain unchanged
■
Financing policy and credit ratings
Management's Report
The BASF Group business year - Financial position
BASF Report 2015
13,666
12,956
1,718
15,384
15,197
Dec. 31, 2014
For short-term financing, we use BASF SE's U.S. dollar com-
mercial paper program, which has an issuing volume of up to
$12.5 billion. On December 31, 2015, $1,869 million worth of
commercial paper was outstanding under this program. Firmly
committed, syndicated credit lines of €6 billion serve to cover
the repayment of outstanding commercial paper, and can also
be used for general company purposes.
1,347
2015
(336)
Segment overview (in million €)
7,357
6,739
11,043
10,649
74,326
70,449
(566)
(888)
(2)
(866)
3,609
2,790
Other¹
Income from operations
1,795
2,626
2,587
15,145
12,998
Oil & Gas
1,109
1,090
1,297
1,321
5,446
5,820
Agricultural Solutions
1,197
1,649
1,366
1,678
(EBIT)
Investments²
1,108
1,083
Agricultural Solutions
650
854
12,987
13,341
1,150
1,607
Functional Materials & Solutions
849
964
14,502
14,232
Assets
1,417
Performance Products
2,085
1,859
12,498
12,823
2.396
2,131
Chemicals
2014
2015
2014
2015
2014
2015
1,340
(623)
2,228
18,523
2,241
Cash and cash equivalents at the end of the year
1,734
1,703
Cash and cash equivalents at the beginning of the year and other changes
(16)
538
Net changes in cash and cash equivalents
(2,478)
(3,673)
(2,766)
(2,806)
288
(933)
1,718
66
Dividends
Changes in financial liabilities
Capital increases/repayments, share repurchases
(4,496)
(5,235)
427
141
373
436
(5,296)
(5,812)
6,958
9,446
(1,029)
Cash used in financing activities
17,725
1 The figures for the 2014 business year were restated. For more information, see the Notes to the Consolidated Financial Statements on page 162.
Business review by segment
Functional Materials & Solutions
1,455
1,366
2,232
2,289
15,433
15,648
Performance Products
2,367
2,156
3,212
3,090
16,968
14,670
BASF Report 2015
Chemicals
2015
2014
2015
2014
4.0
before special items
Income from operations (EBIT)
(EBITDA)
depreciation and amortization
Sales
Income from operations before
The BASF Group business year - Business review by segment
Management's Report 61
Segment overview (in million €)
2014
2,844
44.5
2,540
For information on our expectations for 2016, see page 124 onward
We invested a total of €5.2 billion¹ in property, plant and
equipment in 2015, exceeding the forecasted amount of
around €4.0 billion. This higher level of investment is partly
attributable to currency effects and to expenditures on non-
BASF-operated field development projects in the Oil & Gas
segment.
Sales in Other decreased considerably, as predicted.
Contrary to our expectations, income from operations before
special items declined considerably, owing to a lower currency
result not allocated to the segments.
We had anticipated a slight sales decline in the Oil & Gas
segment. Our 2015 planning had not included the asset swap
with Gazprom. The completion of the asset swap at the end of
September 2015 resulted in the discontinuation of contribu-
tions mainly from the natural gas trading and storage business
as of the fourth quarter of 2015, which is usually a seasonally
strong quarter. Sales therefore fell considerably. The consider-
ably lower level of income from operations before special items
conforms to our expectations.
Sales in the Agricultural Solutions segment grew consid-
erably, in line with our expectations. With income from opera-
tions before special items slightly below 2014 levels, we did
not achieve our ambitious aim of considerable improvement.
Dampened demand and higher fixed costs from decreased
plant capacity utilization and simultaneous inventory reductions
had a more negative impact on our business than expected.
In the Functional Materials & Solutions segment, we raised
sales by 5%, which was just below the considerable growth
we had predicted. Higher demand, primarily from the automo-
tive industry, was unable to offset lower sales in precious
metal trading. Weighed down by the price of oil, prices in the
Performance Materials division also put a strain on sales. We
achieved a considerable increase in income from operations
before special items, as planned.
Sales grew slightly in the Performance Products seg-
ment, and thus somewhat below our expectations. With posi-
tive currency effects and lower sales prices, volumes declined
slightly, contrary to our assumptions. Contributing factors here
included intense competition in the pigments business; the
significant, oil-price-related decrease in demand for oilfield
chemicals; and the sale of parts of our pharmaceutical ingredi-
ents and services business as well as of our textile chemicals
business. The considerable rise expected in income from
operations before special items could not be achieved; we
posted a slight decline. Earnings were particularly below our
expectations in the Care Chemicals and Nutrition & Health
divisions.
Declining considerably rather than slightly, sales in the
Chemicals segment lagged behind our expectations. This
was largely the result of an even lower level of oil and gas
prices than we had assumed, which led to a sharp drop in
prices in some business areas. Income from operations before
special items was slightly below prior-year levels, as predicted.
For 2015, we had anticipated a slight increase in sales and
posted a slight decline. This was predominantly an effect of
the sharp drop in oil prices as well as the divestiture of the gas
trading and storage business at the end of September 2015.
We were able to raise our sales volumes excluding the effects
of acquisitions and divestitures, as predicted. Income from
operations before special items did not match the previous
year's level as expected, but rather decreased slightly. It was
especially down in the Performance Products segment,
although earnings in the Agricultural Solutions segment and in
Other were also weaker than anticipated. The impairments in
the Oil & Gas segment made necessary by our reduced oil and
gas price forecast particularly contributed to a significant - and
therefore unexpectedly sharp - decline in income from opera-
tions. The considerably lower EBIT after cost of capital corre-
sponds to our forecast.
Actual development compared with outlook
for 2015
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight"
means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%).
slight decline
slight decline
considerable decline
considerable decline
slight decline
considerable increase
slight decline
2015 actual
at prior-year level
slight decline
considerable increase
considerable increase
considerable increase
considerable decline
slight decline
2015 forecast
before special items
Income from operations (EBIT)
slight decline
considerable decline
slight increase
BASF Group
Other
Oil & Gas
slight increase
slight increase
considerable increase
considerable decline
considerable decline
slight decline
considerable increase
considerable increase
Agricultural Solutions
Functional Materials & Solutions
1 Excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments
BASF Report 2015
Net assets
Assets
1,791
Deferred taxes
0.8
540
0.7
526
Other financial assets
4.5
3,245
6.3
4,436
Investments accounted for using the equity method
32.9
23,496
considerable increase
35.7
Property, plant and equipment
18.2
12,967
17.7
12,537
Intangible assets
%
million €
%
million €
December 31, 2014
December 31, 2015
The BASF Group business year - Net assets
Management's Report 57
25,260
Performance Products
slight decline
2015 actual
considerable decline
647
801
Amortization of intangible assets
(466)
468
7,203
5,548
2014
2015
Special items
Income before taxes and
minority interests
Adjusted earnings per share (in million €)
By eliminating special items and the amortization of intangible
assets, adjusted earnings per share serves as a more suitable
ratio for long-term comparability and predicting the company's
future profitability. In 2015, adjusted earnings per share
amounted to €5.00 compared with €5.44 in the previous year.
■ At €5.00, adjusted earnings per share down by €0.44
Amortization of intangible assets
contained in special items
Adjusted earnings per share
Net income amounted to €3,987 million, below the previ-
ous year's level of €5,155 million. Earnings per share dipped
from €5.61 to €4.34.
Income before minority interests declined from €5,492 mil-
lion to €4,301 million. Minority interests amounted to €314 mil-
lion, compared with €337 million in 2014.
Income taxes were reduced from €1,711 million in 2014 to
€1,247 million in 2015. The tax rate fell from 23.8% to 22.5%,
predominantly due to lower earnings contributions in countries
with higher tax rates, especially Norway, as compared with the
prior year.
Earnings before taxes decreased by €1,655 million in 2015
to €5,548 million. Return on assets¹ amounted to 8.7%, com-
pared with 11.7% in the previous year.
Other financial result declined from minus €197 million in
the previous year to minus €284 million in 2015. The main
reason for this was a higher net interest expense from under-
funded pension plans and similar obligations, in addition to a
higher level of other financial expenses resulting primarily from
hedging expenses.
The interest result improved from minus €504 million in
2014 to minus €425 million, largely due to lower interest
expenses from financial indebtedness as a result of more
favorable refinancing conditions.
Income from shareholdings decreased from €278 million in
2014 to €9 million. The previous year had contained special
income of €220 million from the disposal of our shares in VNG
- Verbundnetz Gas AG.
The financial result fell to minus €700 million in 2015, com-
pared with minus €423 million in the previous year.
■ Earnings per share declines from €5.61 to €4.34
■ Financial result and net income considerably down
year-on-year
Financial result and net income
The BASF Group business year - Results of operations
Management's Report 55
BASF Report 2015
For information on the items in the statement of income, see the Notes
to the Consolidated Financial Statements from page 183 onward
For information on the tax rate, see the Notes to the Consolidated
Financial Statements from page 186 onward
2.5
(200)
Adjusted income before taxes
2015 forecast
Sales
Chemicals
BASF Report 2015
Forecast/actual comparison¹
The BASF Group business year - Results of operations
56 Management's Report
1 Return on assets is calculated as income before taxes and minority interests plus interest expenses as a percentage of average assets.
For more information on the earnings per share according to IFRS,
see the Notes to the Consolidated Financial Statements on page 182
Adjusted income before taxes and minority interests, adjusted
net income and adjusted earnings per share are key ratios that
are not defined under International Financial Reporting Stan-
dards (IFRS). They should therefore be viewed as supplemen-
tary information.
918,479
5.44
918,479
5.00
(€)
(in thousands)
(55)
of outstanding shares
Adjusted earnings per share
Adjusted minority interests
Adjusted net income
4,999
4,589
(357)
(312)
5,356
4,901
Adjusted income before
minority interests
(1,973)
(1,716)
Adjusted income taxes
7,329
6,617
and minority interests
Weighted average number
3.6
2,193
Other receivables and miscellaneous assets
3,369
Other provisions
10.2
7,313
8.9
6,313
Provisions for pensions and similar obligations
39.5
28,195
8,435
31,545
0.8
581
0.9
629
(7.7)
(5,482)
(5.0)
(3,521)
40.3
28,777
42.5
30,120
6.1
4,319
6.1
4,317
%
million €
4.8
3,502
4.9
Deferred taxes
6.8
4,861
5.7
4,020
Total equity and liabilities
Current liabilities
Other liabilities
Financial indebtedness
Tax liabilities
Provisions
Accounts payable, trade
38.2
27,271
35.4
%
25,055
1,197
1.2
869
16.6
11,839
15.7
11,123
Noncurrent liabilities
Other liabilities
Financial indebtedness
4.8
3,420
4.8
3,381
1.7
million €
December 31, 2014
December 31, 2015
1,718
3.2
2,241
Cash and cash equivalents
19
21
Marketable securities
5.6
4,032
3,095
Other receivables and miscellaneous assets
14.6
10,385
13.4
2.4
9,516
15.8
11,266
13.7
9,693
Inventories
61.6
43,939
65.3
46,270
Noncurrent assets
2.1
1,498
2.4
1,720
Accounts receivable, trade
3.1
Current assets
24,566
BASF Report 2015
Equity
Minority interests
Other comprehensive income
Retained earnings
Paid-in capital
Equity and liabilities
Financial position
The BASF Group business year - Financial position
58 Management's Report
For more on the composition and development of individual asset
items in the balance sheet, see the Notes to the Consolidated
Financial Statements from page 189 onward
At €2,241 million, cash and cash equivalents were
€523 million above the level of December 31, 2014.
The value of current assets declined by €2,854 million to
€24,566 million. In addition to the asset swap with Gazprom,
this was largely attributable to the reduction of inventories as
well as other receivables and miscellaneous assets.
Other noncurrent receivables and miscellaneous assets
were up by €222 million to €1,720 million year-on-year. This
was mainly due to the increase in the positive fair value of
derivatives.
Total assets
The value of other financial assets fell by €14 million to
€526 million in 2015, while deferred tax assets declined from
€2,193 million to €1,791 million.
The value of property, plant and equipment grew by
€1,764 million to €25,260 million. At €5,742 million, additions
considerably exceeded depreciation of €3,600 million. Invest-
ments amounted to €5,651 million in 2015 and primarily con-
cerned the construction of an integrated TDI complex in
Ludwigshafen, Germany; an aroma ingredients plant in Kuan-
tan, Malaysia; an acrylic acid and superabsorbent production
complex in Camaçari, Brazil; and field development projects in
Argentina, Norway and Russia. Currency effects additionally
increased the value of property, plant and equipment. Dispos-
als were mainly attributable to the asset swap with Gazprom.
Noncurrent assets grew by €2,331 million to €46,270 mil-
lion. The €430 million decline in intangible assets resulted
especially from amortization and impairments as well as from
the asset swap with Gazprom. Currency effects particularly
contrasted this development.
Amounting to €70,836 million, the level of total assets was
€523 million below that of the previous year.
■
■
■ Total assets slightly below prior-year level
Noncurrent assets rise, mostly through investments
Current assets decline, mainly due to asset swap
with Gazprom
Assets
100.0
71,359
100.0
70,836
38.4
27,420
34.7
Investments accounted for using the equity method increased
by €1,191 million to €4,436 million. This rise was primarily
attributable to the asset swap with Gazprom, where BASF
acquired shares in blocks IV and V of the Achimov formation of
the Urengoy natural gas and condensate field in western Sibe-
ria, and through which Wintershall Noordzee B.V. was reclas-
sified to an investment accounted for using the equity method.
7,857
4.4
391
(2%)
2015
Prices
(17%)
2014
2,156
2,367
Portfolio
(2%)
Currencies
7%
Sales
(14%)
Change:
minus €211 million
63
64 Management's Report
The BASF Group business year Chemicals
BASF Report 2015
How we create value - an example
Volumes
Sulfuric acid for the electronics industry
Ultrapure cleaning chemical for microchip production
Income from operations before special items
(in million €)
-27%
2%
Intermediates
€2,849 million
Percentage of sales:
19%
Change:
-4%
Factors influencing sales
Monomers
€6,093 million
Percentage of sales:
42%
2015:
€14,670 million
Change:
-14%
2014:
€16,968 million
Petrochemicals
€5,728 million
Change:
Percentage of sales:
39%
Value for BASF
Expected annual sales
growth for this application
through 2025
2015
4th quarter
3rd quarter
2nd quarter
1st quarter
Income from operations (EBIT) 1,2 (in million €)
1,459
1,023
1,774
1,603
(28)
(114)
(7)
(98)
347
127
436
371
123
2014
2015
2014
2015
8%
As a cleaning chemical, sulfuric acid plays a critical role in the
electronics industry when it comes to producing microchips.
The product's increased purity reduces deposits to the point
that very fine structures can be created. Our sulfuric acid
provides a level of purity 20 times higher than existing
standards. We expect annual sales growth in this application
of 8% through 2025.
Value for our customers
Greater speed in
computer chips
7-fold
Semiconductor manufacturing companies are constantly
competing to develop even higher-performance computer
chips for electronic devices. BASF's sulfuric acid is so ultra-
pure that, for the first time, our customers can produce surface
patterns on a 10-nanometer scale - that is, 10,000 times
thinner than a human hair. This allows for chips that are
7 times faster and 2.5 times more energy efficient than today's
usual 22-nanometer scale.
Strategy
■
Integrated production facilities form core of Verbund
■Technology and cost leadership provide most
important competitive edge
Change:
With our production facilities, we form the core of the Verbund
structure and supply BASF's segments with basic chemicals
for the production of downstream products. We add value
with innovations in processes and production, and invest in
future markets to ensure the growth of the entire BASF
Verbund. As a reliable supplier, we market our products to
customers in downstream industries. We continually improve
our value chains and are expanding our market position
particularly outside Europe - with new processes and techno-
logies, as well as through investments and collaborations in
future markets.
We invest in research and development in order to develop
new technologies and to make our existing technologies even
more efficient. Cost leadership and a clear orientation along
individual value chains are among our most important competi-
tive advantages. We concentrate on the critical success
factors of the classical chemicals business: making use of
economies of scale, the advantages of our Verbund, high
capacity utilization, continuous optimization of access to raw
materials, lean processes, and reliable, cost-effective logistics.
Furthermore, we are constantly improving our global
production structures and aligning these with regional market
requirements.
536
548
600
726
Chemicals
2014
2015
2014
-
144
Sales
Intermediates
(83)
(340)
(72)
(27)
(135)
445
1,995
2,221
2,039
1,933
1,889
1,742
325
1,730
EBIT before special items by segment
(in million €)
Chemicals
2,156
EBIT before special items BASF Group by quarter1,2
(in million €)
(211)
1st quarter 2015 2,070
(695)
158
402
177
Agricultural Solutions
573
510
365
433
6
43
139
122
Oil & Gas
436
597
430
499
643
434
(437)
Other³
Performance Products
1,366
Functional Materials & Solutions 1,649
1,090
Oil & Gas
1,366
Other³
(888)
4th quarter 2015
2014 2,112
2,043
2,012
1,603
2014 1,774
1,023
2014 1,459
1 Quarterly results not audited.
2 The figures for the first three quarters of 2014 were adjusted after the dissolution of the natural gas trading business disposal group at the end of 2014.
For more information, see the "Restated Figures 2013 and 2014" flyer available at basf.com/publications.
3 Information on the composition of Other can be found in the Notes to the Consolidated Financial Statements from page 179 onward.
BASF Report 2015
Chemicals
Management's Report
The BASF Group business year - Chemicals
-
The Chemicals segment consists of the Petrochemicals, Monomers and Intermediates
divisions. In our integrated production facilities – our Verbund – we produce a broad range
of basic chemicals and intermediates in Europe, Asia, North America and South America
for our external and internal customers.
Divisions
Petrochemicals
Broad range of basic
products and specialties
for sectors such as the
chemical and plastics
industries
Monomers
Isocyanates and polyamides
as well as inorganic basic
products and specialties for
various branches, such as the
plastics, automotive, construction
and electronics industries
631
615
226
645
2nd quarter 2015
2014
Agricultural Solutions
366
311
366
351
411
311
Most comprehensive inter-
mediates portfolio in the world,
including precursors for coatings,
plastics, textile fibers and crop
protection products
464
183
166
366
315
454
368
414
491
Performance Products
Functional Materials & Solutions
43
3rd quarter 2015
220
4,398
3,866
Chemicals
2014
2015
2014
2015
2014
2015
2014
2015
4th quarter
3rd quarter
2nd quarter
1st quarter
BASF Report 2015
Sales¹² (in million €)
The BASF Group business year - Business review by segment
62 Management's Report
3,975
Other
4,298
4,201
4,506
4,527
4,517
4,518
4,916
4,236
4,584
Functional Materials & Solutions
3,718
3,627
3,919
3,899
3,924
4,084
3,872
4,038
Performance Products
4,071
3,189
3,640
Oil & Gas
4%
19%
71,359
70,836
7,626
6,248
148
111
9,829
9,632
(133)
(985)
Other¹
3,162
1,823
13,686
12,373
1,688
1,072
7
Oil & Gas
6,013
7,285
1 Information on the composition of Other can be found in the Notes to the Consolidated Financial Statements from page 179 onward.
2 Additions to property, plant and equipment (thereof from acquisitions: €91 million in 2015 and €1,001 million in 2014) and intangible assets
(thereof from acquisitions: €136 million in 2015 and €732 million in 2014).
Contributions to total sales by segment
(8%)
24%
12%
Agricultural Solutions
21%
Functional Materials & Solutions
Performance Products
29%
Chemicals
4,444
Contributions to EBITDA by segment
Oil & Gas
8%
Agricultural Solutions
26%
Functional Materials & Solutions
22%
Performance Products
21%
Chemicals
Other
Agricultural Solutions
22%
1,653
(203)
(613)
546
431
466
437
433
365
510
574
Other³
Oil & Gas
Agricultural Solutions
356
458
311
431
Functional Materials & Solutions
435
(63)
(328)
2,070
2,043
389
310
1,898
371
580
217
228
376
319
249
304
616
2015
nnnn
2014
4th quarter
2014
2015
3rd quarter
2014
2,012
633
427
2,112
570
855
757
1,077
688
Other³
4,005
731
3,606
3,194
685
3,668
4,993
Oil & Gas
1,109
1,167
1,018
1,678
515
1,077
1,666
4,276
977
3,670
700
726
660
Performance Products
Chemicals
2nd quarter
2015
2014
1st quarter
Income from operations (EBIT) before special items 1,2 (in million €)
18,047
13,880
2015
548
20,067
19,512
19,078
18,455
601
17,424
18,312
2016
n/a
50,000
n/a
2016
750,000
100,000
2016
50,000
2015
2017
n/a
2016
300,000
2015
n/a
2015
12,000
2015
2015
2015
40,000
180,000
2015
30,000
400,000
Expansion: specialty amines plant
480,000
Construction: butanediol plant³
Construction: PolyTHFⓇ plant
n/a
Korla, China
Kuantan, Malaysia
Construction: 2-ethylhexanoic acid plant
Ludwigshafen, Germany
Construction: TDI complex
Replacement: nitric acid plants
Maoming, China
Nanjing, China
Construction: isononanol plant4
Construction: neopentyl glycol plant4
Shanghai, China
Construction: specialty amines plant
Expansion: tert-Butylamine plant
Construction: UltramidⓇ plant
BASF Report 2015
Additional annual capacity
through expansion
(metric tons)
Total annual
capacity
(metric tons)
Startup
160,000
2015
240,000
2017
2015
(4)
16,000
2,799
2
5,300
6,135
(14)
Sales including intersegmental transfers
19,970
23,103
(14)
Income from operations before depreciation and amortization (EBITDA)
3,090
3,212
EBITDA margin
%
21.1
18.9
Income from operations (EBIT) before special items
2,156
2,367
(9)
Income from operations (EBIT)
2,131
(11)
Expansion: butanediol plant
2,396
2,849
6,000
(4)
6,093
2015
100,000
2015
1 Operated by an associated company with BASF Huntsman Shanghai Isocyanate Investment B.V., Shanghai Hua Yi (Group) Company, Shanghai ChlorAlkali Chemical Co. Ltd. and
Sinopec Shanghai Gaoqiao Company
2 Operated by an associated company with Yara Freeport LLC
3 Operated by an associated company with Xinjiang Markor Chemical Industry Co. Ltd.
4 Each operated through joint venture with Sinopec
BASF Report 2015
Segment data (in million €)
Management's Report 67
The BASF Group business year - Chemicals
2015
2014
Change in %
Sales to third parties
Thereof Petrochemicals
Monomers
Intermediates
Intersegmental transfers
14,670
16,968
(14)
5,728
7,832
(27)
6,337
Construction: formic acid plant
Expansion: resins
Construction: MDI plant
Monomers
Intermediates
Products
Basic products: ethylene, propylene, butadiene, benzene,
alcohols, solvents, plasticizers, alkylene oxides, glycols
and acrylic monomers
Specialties: special plasticizers such as HexamollⓇ DINCH®,
special acrylates
Basic products: isocyanates (MDI, TDI), ammonia,
caprolactam, adipic acid, chlorine, urea, glues and
impregnating resins, caustic soda, polyamides 6 and 6.6,
standard alcoholates, sulfuric and nitric acid
Specialties: electronic chemicals, metal systems
Basic products: butanediol and derivatives, alkylamines and
alkanolamines, neopentyl glycol, formic and propionic acid
Specialties: specialty amines such as tert-Butylamine, gas
scrubbing chemicals, vinyl monomers, acid chlorides,
chloroformates, chiral intermediates
Customer industries and applications
Use in BASF Verbund
Chemical and plastics industry; detergent, automotive,
packaging and textile industries; production of paints,
coatings, and cosmetics as well as oilfield, construction
and paper chemicals
Use in BASF Verbund
Industries such as plastics, electronics, lumber, furniture,
packaging, textile, construction, and automotive
Use in BASF Verbund
Plastics, coatings and pharmaceutical industries,
production of detergents and cleaners as well as
crop protection products and textile fibers
Production capacities for important products¹
Product
Acrylic acid
Alkylamines
Ammonia
Benzene
Butadiene
Butanediol equivalents
Chlorine
Ethanolamines and derivatives
Petrochemicals
Ethylene
Division
Products, customers and applications
600,000
Income from operations (EBIT) after cost of capital
40,000
>120,000
30,000
630,000
n/a
215,000
590,000
72 Management's Report
The BASF Group business year - Performance Products
BASF Report 2015
Capital expenditures
Location
Antwerp, Belgium
Besigheim, Germany
Camaçari, Brazil
Cork, Ireland
Kuantan, Malaysia
Ludwigshafen, Germany
Pasir Gudang, Malaysia
Shanghai, China
Theodore, Alabama
Construction: polyisobutene
Expansion: lubricants
BASF Report 2015
Management's Report 65
The BASF Group business year - Chemicals
Construction: ammonia plant²
Ethylene oxide
Isocyanates
545,000
1,900,000
360,000
205,000
1,495,000
820,000
1,070,000
300,000
150,000
2,610,000
675,000
920,000
760,000
66 Management's Report
The BASF Group business year Chemicals
Capital expenditures
Location
Camaçari, Brazil
Caojing, China
Chongqing, China
Freeport, Texas
Geismar, Louisiana
Project
Construction: acrylic acid complex
Expansion: MDI plant¹
1,445,000
Urea
3,480,000
385,000
Caustic soda
Neopentyl glycol
Oxo-C4 alcohols (calculated as butyraldehyde)
Polyamide 6 and 6.6
Polyamide precursors
PolyTHF®
Propionic acid
Propylene
Propylene oxide
Sulfuric acid
Plasticizers
Europe
North America
1 All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Sites
Asia Pacific
South America,
Africa, Middle East
Annual capacity
(metric tons)
1,510,000
250,000
305,000
1,525,000
910,000
680,000
550,000
430,000
692
Formic acid
(37)
Income from operations before special items fell consider-
ably due to higher fixed costs. Contributing factors included
the startup of new plants as well as a lower level of capacity
utilization than in the previous year, due in part to a reduction
in inventories. Special charges were largely attributable to
restructuring measures.
A raw material bottleneck in the production of a range of
Care Chemicals products reduced sales volumes. In a market
environment that continues to be challenging, we were able to
compensate for this development through volumes increases
in other business areas, especially in Asia. Oleochemical sur-
factants and fatty alcohols made the strongest contributions.
In the Care Chemicals division, sales to third parties rose by
€65 million to reach €4,900 million in 2015. This was largely
the result of positive currency effects, especially in connection
with the U.S. dollar. Prices declined, predominantly as a
consequence of the decrease in raw material costs but also as
a result of competitive pressure, especially in the hygiene
business. Sales volumes matched the level of the previous
year (volumes 0%, prices -5%, portfolio 0%, currencies 6%).
■ Earnings considerably down due to rise in fixed costs
■Currency-driven sales increase of €65 million to
€4,900 million compared with 2014
Care Chemicals
4
Dispersions & Pigments - Sales by region
(Location of customer)
In the second quarter of 2015, we began operations at a
superabsorbent production plant in Camaçari, Brazil. More-
over, we invested in the modification of a new superabsorbent
technology platform in Antwerp, Belgium, and in new capaci-
ties for chelating agents in Theodore, Alabama.
In January 2016, we combined our pigments activities into
a new global business unit (GBU) based in Ludwigshafen,
Germany.
In the pigments business, an intense competitive environ-
ment led to a significant decline in volumes. Sales volumes in
the paper chemicals business integrated into our division since
2015 decreased in step with the development of the relevant
market. Volumes developed positively in the dispersions busi-
ness - especially in North America, due to new capacities in
Freeport, Texas - and grew slightly overall. The startup of new
plants since the fourth quarter of 2014 led to considerable
sales growth for resins in all regions. We were also able to raise
sales of additives in all regions.
Sales to third parties in the Dispersions & Pigments division in
2015 rose year-on-year by €128 million to €4,629 million,
mainly as a result of currency developments. Prices and
volumes fell slightly (volumes -1%, prices -4%, portfolio 1%,
currencies 7%).
■ Slight, margin-driven earnings improvement
■ Sales rise by €128 million to €4,629 million,
boosted mainly by positive currency effects
Dispersions & Pigments
BASF Report 2015
The BASF Group business year - Performance Products
74 Management's Report
We slightly improved income from operations before spe-
cial items compared with 2014 through higher margins. Fixed
costs rose, especially because of new plant startups in Free-
port, Texas, and Dahej, India. Special charges were above the
level of the previous year, and were mostly related to restruc-
turing measures.
Care Chemicals - Sales by region
(Location of customer)
4
1
South America, Africa, Middle East
1
€4,900 million
3
48%
25%
North America
2
24%
Asia Pacific
€4,629 million
Europe
1
28%
North America
1
3
41%
Europe
-234
In a market environment that continues to be challenging,
we expect sales in 2016 to match the prior-year levels, despite
lower prices. We want to increase sales volumes in all divi-
sions. Factors supporting this endeavor include new produc-
tion capacities in the Dispersions & Pigments and Care
Chemicals divisions. Income from operations before special
items should rise slightly above 2015 levels, bolstered by strict
cost discipline and measures to increase competitiveness in all
divisions.
7%
Texas - as well as inventory reductions. Income from opera-
tions fell by €77 million to €1,340 million. Special charges were
predominantly attributable to restructuring measures. By con-
trast, special income arose mainly from the sale of our textile
chemicals business, as well as parts of our pharmaceutical
ingredients and services business.
At €15,648 million, sales to third parties in the Performance
Products segment in 2015 were €215 million above the level
of the previous year. Positive currency effects in all divisions
were able to more than compensate for lower sales prices and
weaker volumes (volumes -1%, prices -4%, portfolio -1%,
currencies 7%). Decreased volumes were mainly brought
about by lower volumes of pigments and weak demand in the
oilfield chemicals business in connection with the price of oil,
as well as the unscheduled shutdown of a polyisobutene plant
in Antwerp, Belgium. The market environment for paper
chemicals remained difficult. Our prices were also negatively
impacted by factors such as intense competition in the hygiene
business and vitamin E, along with lower raw material costs.
1,366
Income from operations (EBIT) before special items
3
1
14.5
2,232
15,922
14.6
1,455
%
2,289
Income from operations before depreciation and amortization (EBITDA)
16,111
Sales including intersegmental transfers
(5)
489
463
1
EBITDA margin
(6)
Income from operations (EBIT)
1,340
Performance Products
1 Since the dissolution of the Paper Chemicals division on January 1, 2015, we have been continuing its business in the Dispersions & Pigments and Performance Chemicals divisions.
The 2014 figures for both divisions have been adjusted accordingly to ensure better comparability.
14
849
964
Additions to property, plant and equipment and intangible assets
4
369
383
Research expenses
(2)
14,502
14,232
Assets
(143)
(305)
Income from operations (EBIT) after cost of capital
(5)
1,417
Income from operations before special items declined by
€89 million to €1,366 million owing to higher fixed costs. These
resulted from negative currency effects and the startup of new
plants such as those in Camaçari, Brazil, and Freeport,
3 Asia Pacific
16%
4
Process chemicals for the extraction of oil, gas, metals and
minerals, chemicals for enhanced oil recovery, water
treatment chemicals, membrane technologies
Fuel and refinery additives, polyisobutene, brake fluids and
engine coolants, lubricant additives and basestocks,
components for metalworking fluids and compounded
lubricants
Antioxidants, light stabilizers, pigments and flame retardants
for plastic applications
Excipients for the pharmaceutical industry and selected,
high-volume active ingredients, such as ibuprofen and
omega-3 fatty acids
Flavors and fragrances, such as geraniol, citronellol,
L-menthol and linalool
Additives for the food and feed industries, such as vitamins,
carotenoids, sterols, enzymes, emulsifiers and omega-3 fatty
acids
Performance Chemicals
Superabsorbents for baby diapers, adult incontinence
products and feminine hygiene articles
Auxiliaries for the production and treatment of leather and
textiles
Printing and packaging industry, adhesives industry, plastics
processing industry, products for construction chemicals,
raw materials for paints and coatings, paper industry,
specialties for the electronics and other industries
Cosmetics industry, hygiene industry, detergents and
cleaners industry, agricultural industry and technical
applications
Solvents for crop protection product formulations and
products for metal surface treatments
Ingredients for detergents and cleaners in household,
institution or industry, such as surfactants, chelating agents,
polymers, biocides and products for optical effects
Ingredients for skin and hair cleansing and care products,
such as emollients, cosmetic active ingredients, polymers
and UV filters
Polymer dispersions, pigments, resins, high-performance
additives, formulation additives
Products
Care Chemicals
Dispersions & Pigments
Division
Customer industries and applications
Functional and process chemicals for the production
of paper and cardboard, kaolin minerals
Food and feed industries, flavor and fragrance industry and
pharmaceutical industry
Plastics processing industry, automotive industry, fuel and
lubricant industry, oil and gas industry, mining industry,
municipal and industrial water treatment, leather industry
as well as paper industry and packaging made of paper
1,095
Annual capacity
(metric tons)
South America,
Africa, Middle East
Asia Pacific
Sites
All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
1
North America
Europe
Superabsorbents
Polyisobutene
Organic pigments
Nonionic surfactants
Methane sulfonic acid
Chelating agents
Citral
Anionic surfactants
Product
Production capacities of significant products¹
The BASF Group business year - Performance Products
Management's Report 71
Products, customers and applications
BASF Report 2015
How we create value - - an example
The BASF Group business year - Performance Products
BASF Report 2015
70 Management's Report
1%
Sales
minus €89 million
7%
Currencies
Change:
(1%)
Portfolio
1,455
2014
(4%)
2
2
11%
South America, Africa, Middle East
Natuphos® E
4,068
New generation of phytase enzymes with environmental and economical impact in animal nutrition
Expected average annual
1 Assumption: annual feed production of 200,000 to 250,000 metric tons
In January 2016, we combined our pigments activities into
a new global business unit (GBU) based in Ludwigshafen,
Germany. The plan is to transfer this business into separate
legal entities. All employees in the pigments business are part
of the new GBU. This reorganization allows for better adapta-
tion to the challenges facing the pigment industry.
We support our customers by serving as a reliable supplier
with consistent product quality, a good value for money and
lean processes.
We pursue a different business model for standard
products, such as vitamins or dispersions for paper coatings.
Here, efficient production setups, backward integration in our
Production Verbund's value chains, capacity management,
and technology and cost leadership are all essential.
and strive for long-term partnerships, which create profitable
growth opportunities for both sides.
Industry-specific specialties make up a major part of our
product range. These products create additional value for our
customers, which allows them to stand out from the competi-
tion. We develop new solutions together with our customers
We take on the challenges arising from important future issues,
especially population growth: scarce resources, environmental
and climatic stressors, greater demand for food and the desire
for better quality of life. In doing so, we focus on research and
development and maintain close relationships to leading com-
panies in our key customer industries. We position ourselves
globally in order to reliably supply customers in all regions. We
invest in the development of innovations that enable our prod-
ucts and processes - as well as our customers' applications
and processes - to make a contribution to sustainability: for
example, enabling the more efficient use of resources.
New structure for pigments business
Global presence ensures reliable supply to
customers in all regions
■ Tailor-made products that improve our customers'
applications and processes
Strategy
Natuphos E allows our customers to use fewer inorganic
sources of phosphate in their feed production. Each production
site can therefore save an average of €1 million per year.
Phytase-enriched feed also reduces the amount of phosphate
excreted by pigs and poultry by 30%, which in turn benefits the
environment. Through its elevated efficiency, Natuphos® E
exceeds this figure by a third, significantly reducing phosphate
pollution in soil and water.
savings per
production site
In today's animal nutrition, the enzyme phytase helps non-
ruminants such as pigs and poultry to ingest and absorb
phosphorus, an essential mineral in feed plants. BASF's new
phytase, NatuphosⓇ E, can release far more phosphorus for
the animals from the plant than previous generations of the
enzyme. With an average annual sales growth of more than
5% expected through 2018, NatuphosⓇ E is a growth driver
for BASF's animal nutrition business.
>5%
€1 million
Average annual
Value for our customers and the environment
sales growth per year
through 2018
Value for BASF
4,121
Nutrition & Health
2,029
North America
2
3
1
42%
Europe
1
4
19%
Intermediates - Sales by region
(Location of customer)
Income from operations before special items rose slightly
compared with the previous year, predominantly from volumes
growth, an increased proportion of specialties in our product
mix, and improved margins, especially for amines. This
enabled us to more than compensate for overall higher fixed
costs resulting from the greater number of scheduled plant
turnarounds.
Volumes growth was particularly observed in both the
amines and polyalcohol businesses, as well as in specialties,
primarily in North America and Asia. Competitive pressure
from the startup of new capacities in the butanediol and deriv-
atives business had a negative effect on sales.
Sales to third parties in the Intermediates division rose by
€50 million to €2,849 million year-on-year due to positive
currency effects and higher sales volumes. Prices were lower
than in the previous year as a result of significantly reduced
raw material prices (volumes 3%, prices -9%, portfolio -1%,
currencies 9%).
■ Sales up by €50 million to €2,849 million,
driven by currency effects and higher volumes
■ Earnings slightly above prior-year level,
due in part to improved margins
Intermediates
1
4
(Location of customer)
We concluded numerous investment projects in 2015,
especially at BASF's Verbund sites: We started up a formic
acid plant in Geismar, Louisiana, while new facilities began
operations for special amines in Ludwigshafen, Germany, and
in Nanjing, China. With our joint venture partner Sinopec, we
completed the construction of a neopentyl glycol plant in
Nanjing, China.
€2,849 million
3
Asia Pacific
1
2
€6,093 million
6%
South America, Africa, Middle East
29%
Asia Pacific
23%
North America
234
3
42%
Europe
1
2
3%
South America, Africa, Middle East
4
36%
Monomers - Sales by region
BASF Report 2015
In China, we began operations at the MDI complex in
Chongqing and a polyamide-6 extrusion plant in Shanghai in
2015. The TDI production complex in Ludwigshafen, Germany,
gradually began operations starting November 2015.
Volumes growth for MDI and the polyamide-6 extrusion
polymers was not fully able to offset the decline in the TDI
business; sales volumes fell slightly as a result.
Sales to third parties decreased in the Petrochemicals division
by €2,104 million to €5,728 million in 2015, mostly because of
a sharp drop in sales prices (volumes -4%, prices -25%,
portfolio -4%, currencies 6%). This development was largely
the result of the sharp decrease in raw material prices since
the fourth quarter of 2014, especially for naphtha. Sales were
furthermore diminished by the consequences of a production
outage at the Ellba C.V. joint operation at the Moerdijk,
Netherlands, site since June 2014 as well as the divestiture of
our shares in the Singapore-based Ellba Eastern Private Ltd.
joint operation at the end of 2014. In North America, higher
prices for condensate led to reduced capacity utilization of the
condensate splitter and therefore to lower sales volumes.
Currency effects, however, were overall positive.
Earnings slightly below prior-year level due to
higher fixed costs, with improved margins
Petrochemicals
For 2016, we expect a slight decrease in sales. Higher
sales volumes in the Monomers and Intermediates divisions
from the startup of production plants will not be able to offset
lower prices resulting from reduced raw material costs. We
continue to anticipate intense competitive pressure, especially
in the markets for MDI, TDI, acrylic acid and caprolactam.
Income from operations before special items is likely to decline
considerably. We expect higher fixed costs in the Monomers
and Intermediates divisions due to plant startups and foresee
margin declines, especially in the Petrochemicals division.
Sales to third parties declined by €2,298 million to
€14,670 million in the Chemicals segment in 2015. This was
essentially due to lower prices on account of decreased raw
material costs, especially in the Petrochemicals division
(volumes -2%, prices -17%, portfolio -2%, currencies 7%).
Sales were also reduced by the disposal of our share in the
Singapore-based Ellba Eastern Private Ltd. joint operation.
Income from operations before special items fell by €211 mil-
lion to €2,156 million. This was primarily attributable to the
declining TDI margins in the Monomers division as well as
rising fixed costs from the startup of new production plants.
Income from operations decreased by €265 million to
€2,131 million. Special items had no material effect on earnings
in 2015.
Chemicals
(11)
2,085
For steam cracker products as well as ethylene oxide and
glycols, we saw good margin development in the first half of
2015 in both Europe and North America as a result of market
scarcity. As the second half of the year progressed, margins
weakened perceptibly as product availability on the market
increased. In the industrial petrochemicals business, margins
improved for solvents and plasticizers in Europe, and for sol-
vents and acrylic monomers in North America. The startup of
new plants led to higher fixed costs overall. As a result, income
from operations before special items remained slightly below
the high level of 2014, despite improved margins overall.
12
207
1,859
Additions to property, plant and equipment and intangible assets
Research expenses
3
12,498
12,823
(2)
Assets
185
68 Management's Report
The BASF Group business year Chemicals
BASF Report 2015
In 2015, sales to third parties in the Monomers division were
down by €244 million to €6,093 million (volumes -1%, prices
-10%, portfolio -1%, currencies 8%). This was predominantly
a result of lower sales prices for polyamides and isocyanates
due to lower raw material costs. The appreciation of curren-
cies, especially the U.S. dollar, relative to the euro had a posi-
tive effect on sales.
■ Significant earnings decline due to competitive
pressure in TDI business as well as startup costs
for new plants
■ Sales decrease by €244 million to €6,093 million
due mainly to lower prices
2
€5,728 million
3
ཚོ།」
39%
51%
Monomers
South America, Africa, Middle East
Asia Pacific
North America
-234
Europe
1
(Location of customer)
Petrochemicals - Sales by region
Our new acrylic acid complex in Camaçari, Brazil, began
operations in the second quarter of 2015 with an annual
capacity of 160,000 metric tons. In October, we started up an
isononanol plant in a joint venture with Sinopec in Maoming,
China, with a capacity of 180,000 metric tons a year.
Income from operations before special items declined
considerably, largely influenced by lower margins for TDI.
This came especially from slower growth in China and intense
competitive pressure through newly expanded capacities
on the market. Earnings were additionally weighed down by
startup costs for new production plants.
Management's Report 69
The BASF Group business year - Performance Products
■ Sales down by €2,104 million to €5,728 million
due to price declines
The Performance Products segment consists of the Dispersions & Pigments, Care
Chemicals, Nutrition & Health and Performance Chemicals divisions. Our solutions
enhance the performance of industrial and consumer products worldwide. With our
customized products, our customers can make their production processes more
efficient and give their products improved application properties.
2015
2016
2015
2017
2017
2016
2016
2016
BASF Report 2015
2017
Construction: aroma chemicals
2015
Expansion: process chemicals for mining industry (LIX®)
2015
Construction: superabsorbents
2017
Expansion: bismuth vanadate pigments
2016
2016
Segment data (in million €)
Management's Report 73
The BASF Group business year - Performance Products
1
Performance Products
1,998
4,835
4,900
3
4,501
4,629
1
15,433
Intersegmental transfers
Performance Chemicals¹
Nutrition & Health
Care Chemicals
Thereof Dispersions & Pigments¹
Sales to third parties
Change in %
2014
2015
Modification for new superabsorbent technology platform
Startup
15,648
Construction: chelating agents
Change:
€15,648 million
2015:
Percentage of sales:
13%
€1,998 million
-2%
Change:
Nutrition & Health
Percentage of sales:
26%
€4,121 million
1%
Change:
Sales
Performance Chemicals
Customized products
for many sectors, from
mining and the fuel
industry to plastics
processing
Nutrition & Health
Products for the food
and feed industries,
the flavor and
fragrance industry and
the pharmaceutical
industry
Divisions
Project
Care Chemicals
Ingredients for
hygiene, personal
care, home
care and industrial &
institutional cleaning
businesses as well as
for applications in the
chemical industry
Dispersions & Pigments
Raw materials for the
formulation of varnishes,
coatings, printing and
packaging inks,
adhesives and
construction materials
1%
2014:
Performance Chemicals
Dispersions & Pigments
€4,629 million
Modification: polyvinylpyrrolidone
Expansion: polyvinylpyrrolidone
Construction: dispersions
Expansion: vinyl formamide
€15,433 million
Prices
2015 1,366
(1%)
Volumes
(in million €)
Income from operations before special items
Expansion: PaliocromⓇ pigments
Percentage of sales:
31%
1%
Factors influencing sales
Change:
Care Chemicals
€4,900 million
Change:
Percentage of sales:
3%
30%
485.6
(880)
million €
Financial result
(6.4)
6,739
6,309
EBIT before special items
93.1
(491)
(34)
million €
Special items
0.4
million €
(700)
million €
Income before taxes and minority interests
€
6,248
194
Earnings per share
1,136
million €
EBIT after cost of capital
1.7
3,987
4,056
million €
Net income
(2.8)
5,548
5,395
(25.7)
6,275
(18.3)
Income from operations (EBIT)
Sales
Change in %
2015
2016
Economic data
BASF Group 2016 at a glance
(66)
1,050
362
Net income
(62)
1,366
4.42
517
EBIT before special items
million €
million €
57,550
Income from operations before depreciation and amortization (EBITDA)
(3.4)
4,401
4,251
million €
Amortization and depreciation'
(1.2)
10,649
10,526
million €
EBITDA
(1.7)
10,508
10,327
million €
and special items
70,449
4.34
Return on equity after tax
Adjusted earnings per share
(18.3)
9,446
7,717
million €
Cash provided by operating activities
11.3
12,935
14,401
million €
Net debt
14.4
13.3
%
8.7
8.2
Free cash flow
%
million €
3,634
3
(53)
(13,658) (14,787)
and other expenses
Services purchased, energy costs
2
2015
72,981
2016
59,852
(25,450) (37,323)
Cost of raw materials and merchandise
1
Business performance
Creation of value added (million €)
Value added 2016³
1 Amortization of intangible assets, depreciation of property, plant and equipment, impairments and write-ups
2 Additions to intangible assets and property, plant and equipment (including acquisitions)
(1.7)
3,572
1.8
44.5
%
million €
Personnel expenses
(4.6)
1,953
1,863
million €
Research and development expenses
3.4
2.90
3.00
€
Dividend per share
5.00
4.83
€
10,165
42.6
9,982
Number of employees
Return on assets
Equity ratio
20.7
6,013
7,258
million €
8.0
70,836
76,496
million €
Investments²
Assets
1.2
112,435
113,830
1.8
1,072
3,805
Income from operations (EBIT)
4,629
4,530
Thereof Dispersions & Pigments
(4)
15,648
15,002
(2)
Sales
2016
Key data Performance Products (million €)
(4)
2,156
2,064
EBIT before special items
2015 Change in %
Care Chemicals
4,735
4,900
1,340
1,648
Income from operations (EBIT)
10
2,289
2,522
EBITDA
(8)
4,121
Performance Chemicals
(3)
1,998
1,932
Nutrition & Health
(3)
(7)
2,131
1,983
Income from operations (EBIT)
Sales
2015 Change in %
2016
Key data Chemicals (million €)
Page 67
Our Performance Products lend stability, color and
better application properties to many everyday products.
Our product portfolio includes vitamins and other food
additives in addition to ingredients for pharmaceuticals,
personal care and cosmetics, as well as hygiene and
household products. Other products from this segment
improve processes in the paper industry, in oil, gas and
ore extraction, and in water treatment. They furthermore
enhance the efficiency of fuels and lubricants, the effec-
tiveness of adhesives and coatings, and the stability of
plastics.
Performance Products
The Chemicals segment comprises our business with
basic chemicals and intermediates. Its portfolio ranges
from solvents and plasticizers to high-volume monomers
and glues as well as raw materials for detergents, plas-
tics, textile fibers, paints and coatings, crop protection
and medicines. In addition to supplying customers in the
chemical industry and numerous other sectors, we also
ensure that other BASF segments are supplied with
chemicals for producing downstream products.
Page 61
Chemicals
We create chemistry
O-BASF
create chemistry
D-BASF
BASF
3
13,461
23
14,670
Thereof Petrochemicals
3
3,090
3,169
EBITDA
(6)
2,849
2,681
Intermediates
(6)
6,093
5,745
Monomers
(12)
5,728
5,035
(8)
EBIT before special items
1,745
1,366
1,321
1,305
EBITDA
(4)
5,820
5,569
Sales
2015 Change in %
2016
Key data Agricultural Solutions (million €)
Page 84
In the Oil & Gas segment, we focus on exploration and
production in oil and gas-rich regions in Europe, North
Africa, Russia, South America and the Middle East.
Together with our Russian partner Gazprom, we are also
active in the transport of natural gas in Europe.
Oil & Gas
The Agricultural Solutions segment provides innovative
solutions in the areas of chemical and biological crop
protection, seed treatment and water management as
well as for nutrient supply and plant stress.
Page 80
Agricultural Solutions
(1)
EBIT before special items
Income from operations (EBIT)
1,083
(38)
2,587
1,596
EBITDA
(79)
12,998
2015 Change in %
2016
2,768
Sales
Key data Oil & Gas (million €)
0
1,090
1,087
EBIT before special items
(4)
1,037
499
Income from operations (EBIT)
18
Construction Chemicals
(1)
6,306
6,263
Thereof Catalysts
1
18,523
18,732
Sales
2015 Change in %
2016
Key data Functional Materials & Solutions (million €)
In the Functional Materials & Solutions segment, we
bundle system solutions, services and innovative
products for specific sectors and customers, especially
the automotive, electrical, chemical and construction
industries, as well as applications for household, sports
and leisure. Our portfolio comprises catalysts, battery
materials, engineering plastics, polyurethane systems,
automotive coatings, surface treatment solutions and
concrete admixtures as well as construction systems like
tile adhesives and decorative paints.
Page 74
Functional Materials & Solutions
28
2,332
EBITDA
2,304
Coatings
1,649
1,946
37
1,607
2,199
30
2,228
2,906
2
6,747
6,888
Performance Materials
3
3,166
3,249
1
Amortization and depreciation
(43.4)
4
47
The business year at BASF
46
Social commitment
40
Working at BASF
Responsibility along the value chain
39
37
Investments, acquisitions and divestitures
32
Innovation
22
Our strategy
Business models and customer relations
92
Forecast
111
150
Declaration of Corporate Governance
150
Declaration of Conformity
146
Report of the Supervisory Board
138
Compensation report
136
Management and Supervisory Boards
134
Compliance
127
Corporate governance report
Corporate Governance
19
The BASF Group
Management's Report
702
Responsible Care Management System
(23.0)
135
104
Number of on-site sustainability audits of raw material suppliers
Suppliers
Change in %
2015
2016
Audits along the value chain
5 Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes
6 Excluding emissions from oil and gas production
4 For more information, see page 99.
(40.5)
346
206
Number of environmental and safety audits
Consolidated Financial Statements
121
(6.9)
12
BASF on the capital market
10
The Board of Executive Directors of BASF SE
Board of Executive Directors
Letter from the Chairman of the
To Our Shareholders
Contents
53
30
Number of occupational medicine and health protection audits
(45.6)
68
37
Number of short-notice audits
130
Statement by the Board of Executive Directors
153
Auditor's report
Milestone: To bolster its worldwide
polyacrylamide production network, BASF
started up the new world-scale production
plant for bio-acrylamide in Bradford, England.
BASF has been producing bio-acrylamide
in Suffolk, Virginia, since 2014.
Production in North America:
For more on bio-polyacrylamide, see
basf.com/bioacrylamide
Greater supply security combined with more
efficient and environmentally friendly production:
BASF switched over its production process for the
monomer acrylamide to a modern enzyme-based
process. Acrylamide is used for the production of
water-soluble flocculation aids in wastewater
treatment and papermaking, as well as mineral
processing and enhanced oil recovery. The bio-
catalytic production method results in less waste
than the copper catalysis previously used. The
process takes place at room temperature and under
normal atmospheric conditions, resulting in energy
savings and greater environmental compatibility.
It also generates fewer by-products. BASF has
been producing bio-acrylamide in Suffolk, Virginia,
since 2014 and started up a new bio-acrylamide
plant in Bradford, England, in 2016. A third plant is
being built in Asia and should start up in 2017. With
three state-of-the-art production facilities located
directly in key markets, BASF is able to quickly and
sustainably meet regional demand.
Sustainable, improved production
The BASF Verbund's strengths lie in highly efficient,
innovative value chains that extend from basic chemicals
right through to high-value-added products. We use
resource-saving processes to make products that create
value for our customers and the environment.
PRODUCTION
Our contribution to a
sustainable future
CHEMISTRY FOR A SUSTAINABLE FUTURE
We drive digital transformation under the banner
"BASF 4.0": In plants at the Ludwigshafen site,
employees can access information at any time using
special tablets and QR codes.
Cover photo and page 1:
On the following pages, we share how BASF
contributes to the SDGs: with responsible
production, solutions for clean water, products
for sustainable agriculture and to combat
hunger, and with contributions to infrastructure,
industry and innovation.
employee representatives,
scientists, policymakers
and industry. BASF was
actively involved in the
development of the SDGS.
as a member of working
groups.
organizations, international
trade associations,
D-BASF
Our innovations contribute
to a sustainable future. We
support the United Nations
in the implementation of
the U.N. Sustainable
Development Goals
(SDGs), which create the
framework for sustainable
business practices at the
economic, social and
environmental levels. In
drafting these development
goals, the United Nations.
worked together with
nongovernmental
We shortly
Naturally lighter
BASF
$1 million to help construct the BASF Sustainable
Living Laboratory. The laboratory, in operation
since fall 2016, focuses on researching
sustainable solutions for global challenges.
Dr. Kevin McPeak is the lab's first scientist in
residence. He and his team are working on
portable filtration and disinfection systems for
drinking water. "We are investigating light-driven
oxidation processes that safely and effectively
inactivate pathogens," McPeak explains. Instead
of the ultraviolet light used in traditional methods
for sun-supported water treatment, he harnesses
visible sunlight. Ultraviolet light makes up a mere
5% of the solar spectrum. By contrast, visible
light accounts for more than 40% of the
spectrum, which means that McPeak harnesses
several times as much energy than traditional
methods. This, in turn, allows for quicker and
more effective disinfection. With his research,
McPeak wants to create a simple and
inexpensive solution for developing countries to
transform polluted water into drinking water.
Clean water is essential for our health. We
need new and simple solutions to produce safe
drinking water - especially in developing
countries where traditional, energy-intensive
methods of water treatment are difficult to put
into practice. At the United States' Louisiana
State University, new ideas have room to
develop: As the major sponsor, BASF provided
the university's College of Engineering with
Purified by the sun
disinfection systems for drinking water
- harnessing visible sunlight.
BASF Sustainable Living Laboratory
at Louisiana State University. He
researches portable filtration and
is a scientist in residence at the
Clean water: Dr. Kevin McPeak
Water is a valuable resource. It needs to be
handled responsibly, and new methods of
wastewater treatment are in demand. Two
examples show how BASF helps.
WATER
CHEMISTRY FOR A SUSTAINABLE FUTURE
Lighter weight: The binding agent
Acrodur® 950 L provides the strength
and heat-resistance needed in the
world's first vehicle roof frame made
entirely of natural fibers.
basf.com/nonwovens
For more information, see
"Weight savings" is a key term in
modern automotive engineering, as
lighter vehicle components reduce fuel
consumption and carbon emissions for
the end customer. To produce
lightweight, innovative auto parts
made from environmentally friendly
substances, manufacturers need the
right materials from the supplier
industry. Such as BASF's binding
agent AcrodurⓇ: The acrylic resin can
be processed in a simple and
especially environmentally friendly
manner; the only by-product generated
is water. AcrodurⓇ is used, for
example, in collaboration with partners
to create a new vehicle roof frame
using renewable hemp. The natural
fiber construction is strengthened with
AcrodurⓇ, making the roof frame up to
40% lighter compared with regular
steel components.
CHEMISTRY FOR A SUSTAINABLE FUTURE
million €
Chemistry for a
sustainable future
10.32
Supplementary Information on the Oil & Gas Segment
160
Notes
159
Statement of equity
158
Statement of cash flows
157
Balance sheet
156
recognized in equity
Statement of income and expense
155
Statement of income
154
-
www
Supplementary information on the Oil & Gas segment – 223
Ten-year summary
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interested public about
the 2016 business year.
Our integrated corporate
report combines financial
and sustainability reporting
to inform shareholders,
employees and the
Welcome to BASF
Table of Contents
236
235
233
chapter divider.
Detailed tables of contents can be found on each colored
Glossary
Trademarks
Overviews
(4,251) (4,401)
5.1
1,011
9,966
(4.6)
1,953
1,863
million €
Change in %
10,010
2015
Environment, health, safety and security
Donations and sponsorship
Society
Personnel expenses
Apprentices at year-end
Employees at year-end
2016
(0.4)
2016
2015
(16.4)
56.2
47.0
million €
1.8
9,982
10,165
million €
(3.7)
3,240
3,120
1.2
112,435
113,830
Change in %
Employees
Employees and society
Number of employees in research and development at year-end
Research and development expenses
8.6%
60.6%
61.6%
2015
2016
Shareholders (dividend and retention)
4.5
4.4 Minority interests
4.3 Creditors
4.2 Government
4.1 Employees
Use of value added
16,470
16,493
Value added
9.4%
2016
4.0%
1.2%
Innovation
4.2
4.3
4.4
4.5
2
€72,981 million
2015:
€59,852 million
Business
performance
3 Value added results from the company's performance minus goods and services
purchased, depreciation and amortization. Business performance includes sales
revenues, other operating income, interest income and net income from shareholdings.
Value added shows the BASF Group's contribution to both private and public income
as well as its distribution among all stakeholders.
24.2%
24.6%
4.1
1.9%
3.9%
2015
Change in %
Safety, security and health
25.1
23.2
metric tons
(3.3)
3.0
2.9
thousand metric tons
(8.1)
17.3
15.9
thousand metric tons
(6.3)
22.1
20.7
million cubic meters
(7.6)
(2.2)
Emissions of greenhouse gases
Waste
million €
5.0
2.0
2.1
million metric tons
(6.6)
28.6
26.7
thousand metric tons
(1.4)
22.2
21.9
million metric tons of CO2 equivalents
Investments in environmental protection plants and facilities
Operating costs for environmental protection
Emissions to air (air pollutants)6
962
1,686
million cubic meters
0.96
0
1.4
1.4
per one million working hours
Lost-time injuries
(4.8)
2.1
2.0
per one million working hours
Process safety incidents
0
0
0
Transportation incidents with significant impact on the environment
0.97
1,649
(1.0)
Environment
Emissions of heavy metals to water
Emissions of nitrogen to water
Emissions of organic substances to water
Withdrawal of drinking water
Total water withdrawal
3.0
599
617
kilograms of sales product/MWh
Energy efficiency in production processes
0.2
57.3
57.4
million MWh
Primary energy use
Health Performance Index
BASF Report 2016
Economic, environmental and
social performance
(3.4)
9%
Change:
3%
Coatings
€3,249 million
Percentage of sales:
17%
Factors influencing sales
Construction Chemicals
Change:
1%
Percentage of sales:
13%
Income from operations before special items
(million €)
Volumes
7%
€2,332 million
33%
Percentage of sales:
-1%
Performance Materials
Polyurethanes, thermo-
plastics and foams
Sales
Performance Materials
Change:
2%
€6,888 million
Percentage of sales:
37%
€18,732 million
Change:
1%
2015:
€18,523 million
Catalysts
€6,263 million
Change:
2016
1,946
2015
Prices
Repairing paint damage requires a series of time-consuming
steps: For example, primer and filler need to be applied sepa-
rately, and each needs time for drying and cooling. Our prod-
uct eliminates one step for steel surfaces, as it serves as both
primer and filler. It can also be cured with UVA light, which,
unlike conventional methods, generates no heat and thus
requires no cooling time. After the successful launch in 2016,
we expect annual sales of this UV primer filler to grow by more
than 19% on average from 2017 to 2021.
Value for our customers
Time saved in painting
up to 65%
The new UV primer filler allows our customers to save up to
65% of their time in repairing paint damage, depending on the
surface material and paint shop equipment. Especially smaller
and medium-sized repairs can be conducted more economi-
cally. The use of UVA light is also considerably more energy-
efficient than other curing methods and prevents plastic parts,
like bumpers, from warping. We market the UV primer filler
under our brand names GlasuritⓇ and R-M®.
Strategy
Development of innovative products and
technologies in close collaboration with our
customers
Focus on specialties and system solutions that allow
our customers to stand out from the competition
We use BASF's expertise as the world's leading chemical
company to develop innovative products and technologies in
close cooperation with our customers. Our aim is to find the
best solution in terms of cost and functionality, helping our
customers contribute to sustainable development. Our spe-
Ocialties and system solutions enable customers to stand out
from the competition.
One focus of our strategy is the ongoing optimization of our
product portfolio and structures according to different regional
market requirements as well as trends in our customer indus-
tries. We are positioning ourselves to grow profitably and
faster than the market.
We aim to secure our leading market position in Europe, to
profitably expand our position in the North American market
and to selectively extend our activities in the growth regions of
Asia, South America, Eastern Europe and the Middle East.
At the end of 2016, we acquired surface technology pro-
vider Chemetall from Abermarle Corp., Charlotte, North Caro-
lina, thereby enhancing our coatings portfolio and supporting
our aim to grow profitably in innovative and solution-focused
businesses closer to end users.
76 Management's Report
The BASF Group business year - Functional Materials & Solutions
Products, customers and applications
>19%
Coatings solutions,
surface treatments,
decorative paints
Expected average sales
growth per year
through 2021
New automotive refinish product for shorter processing time in the workshop
(5%)
1,649
Portfolio
0%
Currencies
(1%)
Sales
1%
Change:
€297 million
BASF Report 2016
How we create value - an example
Management's Report 75
The BASF Group business year - Functional Materials & Solutions
Ultraviolet (UV) primer filler
Value for BASF
Coatings
Construction Chemicals
Solutions for building
structure and envelopes,
interior construction and
infrastructure
precious metal trading
Sales
(3%)
Nutrition & Health - Sales by region
(Location of customer)
Europe
1234
4
Performance Chemicals - Factors influencing sales
40%
1
North America
21%
3 €1,932 million
Asia Pacific
South America, Africa, Middle East
(1%)
29%
10%
Currencies
Portfolio
The BASF Group business year - Performance Products
Nutrition & Health
■
Sales down by 3% to €1,932 million after divestitures
in pharmaceuticals business
Considerable improvement in EBIT before special
items, especially through lower fixed costs and higher
margins and volumes
Sales to third parties in 2016 declined by €66 million to
€1,932 million in the Nutrition & Health division. This slight
reduction came from the sale of parts of our pharmaceutical
ingredients and services business at the end of September
2015. We were able to raise volumes in all business areas.
Demand grew, especially in the pharmaceuticals and animal
nutrition businesses. Sales prices overall were also higher than
in the previous year, primarily as a result of significant price
increases for vitamins in the animal nutrition business. This
allowed us to more than compensate for the decline in prices
in the flavor and fragrance business brought about by falling
raw material costs.
Performance Chemicals
Sales down 8% to €3,805 million, mainly due to lower
prices and divestitures
EBIT before special items rise slightly, mostly through
reduction in fixed costs
In the Performance Chemicals division, sales to third parties
fell by €316 million to €3,805 million compared with 2015. This
was largely the result of the lower sales prices brought about
by a sharp drop in raw material prices, as well as the sale of
the paper hydrous kaolin activities and the textile chemicals
business. Negative currency effects additionally weighed
down sales. We were able to raise our volumes overall, with
growth impetus coming particularly from the plastic additives
business and from the region Europe. Demand for oilfield and
mining chemicals declined, however, in an environment fraught
with lower oil and raw material prices.
Nutrition & Health - Factors influencing sales
Volumes
3%
Prices
3%
(8%)
BASF Report 2016
Volumes
Prices
(4%)
2
1
2
EBIT before special items improved considerably compared
with 2015 due to substantially reduced fixed costs as well as
to higher margins and volumes. The reduction in fixed costs
was largely thanks to restructuring measures and improved
capacity utilization of our production plants. Special charges
were primarily related to measures implemented to increase
our competitiveness. Special income arose in part from the
sale of the sterol site in Pasadena, Texas, in May 2016.
We concluded the modification of our production plant for
polyvinylpyrrolidone in Shanghai, China, in 2016. With our
partner, PETRONAS, we completed construction of the new
aroma ingredients complex at the integrated chemical site in
Kuantan, Malaysia. Production facilities for citral and L-menthol
will be gradually started up.
We achieved a slight rise in EBIT before special items com-
pared with the previous year. This was mainly due to lower
fixed costs resulting from restructuring measures and strict
cost discipline. Special charges arose partly on account of
these restructuring measures.
At the Bradford, England, site, in 2016 we started up a
world-scale bio-acrylamide production plant employing a new
enzymatic catalysis process. This will strengthen our polymer
production network and increase our competitiveness.
74 Management's Report
The BASF Group business year - Functional Materials & Solutions
BASF Report 2016
Functional Materials & Solutions
The Functional Materials & Solutions segment comprises the Catalysts, Construction
Chemicals, Coatings and Performance Materials divisions. They develop and market
system solutions, services and innovative products for specific sectors and customers,
particularly for the automotive, electronics, chemical and construction industries as well
as for household applications, sports and leisure.
Divisions
Catalysts
Automotive and
process catalysts,
battery materials,
10%
1%
South America, Africa, Middle East
Asia Pacific
Portfolio
(4%)
Currencies
(1%)
Sales
(8%)
Performance Chemicals - Sales by region
(Location of customer)
1234
Europe
North America
4
38%
26%
3
€3,805 million
26%
Management's Report 73
Operating division
Construction Chemicals
2,228
30
EBITDA margin
%
15.5
12.0
2,906
Depreciation and amortization¹
621
14
Income from operations (EBIT)
2,199
1,607
37
707
Income from operations before depreciation and amortization (EBITDA)
0
19,396
1
Coatings
3,249
3,166
3
Performance Materials
6,888
6,747
2
Intersegmental transfers
736
873
(16)
Sales including intersegmental transfers
19,468
Special items
253
(42)
EBIT before special items
Functional Materials & Solutions segment
■ Sales grow by 1% to €18,732 million
■
EBIT before special items increases by 18% to
€1,946 million as a result of higher contributions
from all divisions
In the Functional Materials & Solutions segment, sales to third
parties increased by €209 million to €18,732 million. By
increasing volumes in all divisions, we were able to more than
compensate for lower prices and mildly negative currency
effects (volumes 7%, prices -5%, portfolio 0%, currencies
-1%). The volumes growth was mainly attributable to higher
demand for our products for the automotive industry.
Business with the construction industry saw sales volumes at
a high level overall.
Income from operations (EBIT) before special items grew
by €297 million to €1,946 million compared with 2015. All divi-
sions contributed to this considerable earnings increase, with
particular support from higher margins in the Performance
Materials division. Special income in 2016 especially pertained
to the sale of the industrial coatings business as well as the
divestiture of the business with polyolefin catalysts. EBIT rose
by €592 million to €2,199 million.
For the Outlook for 2017, see page 122
Catalysts
■
Sales decline by 1% to €6,263 million, mainly
due to lower prices
■
EBIT before special items improves considerably,
mostly through contribution from mobile emissions
catalysts
In the Catalysts division, sales to third parties declined in 2016
by €43 million to €6,263 million. This was predominantly the
result of price decreases due to lower precious metal prices.
Currency effects and the sale of our business with polyolefin
catalysts had a negative impact on sales.
We achieved significant volumes growth, especially
through increased volumes of mobile emissions catalysts.
Greater demand for refinery catalysts and battery materials
also contributed to this development. Lower volumes of
chemical catalysts slowed this growth. In precious metal trad-
ing, sales declined by €52 million to €2,336 million due to
lower prices.
Catalysts - Factors influencing sales
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and write-ups)
2 Additions to intangible assets and property, plant and equipment (including acquisitions)
2,304
0
393
1,946
1,649
18
EBIT after cost of capital
813
96
Assets
17,359
13,341
30
Investments²
3,679
854
331
Research and development expenses
392
2,332
(1)
6,306
Chennai, India
Colombo, Sri Lanka
Gimcheon, South Korea
Hanoi, Vietnam
Klang, Malaysia
Kolkata, India
Rayong, Thailand
Shanghai, China
Schwarzheide, Germany
Totsuka, Japan
Yeosu, South Korea
Project
Startup
Construction: chemical catalysts plant
Construction: automotive coatings plant
2017
2017
Construction: concrete admixtures plant
2016
Carmona, Philippines
Construction: plant for mobile emissions catalysts
Caojing, China
Capital expenditures
Coatings
Performance Materials
Products
Automotive and process catalysts
Battery materials
Precious and base metal services
Concrete admixtures, cement additives, underground
construction solutions, flooring systems, sealants, solutions
for the protection and repair of concrete, high-performance
mortars and grouts, tile-laying systems, exterior insulation
and finishing systems, expansion joints, wood protection
Coatings solutions for automotive and industrial applications,
technology and system solutions for surface treatments,
decorative paints
Engineering plastics, biodegradable plastics, standard foams,
foam specialties, polyurethanes, epoxy systems for fiber-
reinforced composites
Customer industries and applications
Automotive and chemical industries, refineries, battery
manufacturers
Solutions for the protection of air quality as well as the
production of fuels, chemicals, plastics and battery materials
Cement and concrete producers, construction companies,
craftspeople, builders' merchants
Solutions for new building construction, maintenance, repair
and renovation of commercial and residential buildings as well
as infrastructure
Automotive industry, body shops, steel industry, aviation,
aluminum applications in the architecture and construction
industries, household appliances, painting businesses and
private consumers, wind power industry
Automotive manufacture, electrical engineering, packaging,
games, sports and leisure, household, mechanical engineering,
construction, medical technology, sanitation and water industry,
solar thermal energy and photovoltaics, wind power industry
Location
Catalysts
2016
2016
2017
BASF Report 2016
Management's Report 77
The BASF Group business year - Functional Materials & Solutions
Segment data (million €)
2016
2015
Change in %
Sales to third parties
Thereof Catalysts
Construction Chemicals
18,732
18,523
1
6,263
Capacity expansion: plant for UltrasonⓇ
Construction: concrete admixtures plant
2016
2017
Construction: plant for UltraformⓇ
2018
Construction: concrete admixtures plant
2016
Capacity expansion: plant for flooring solutions
2016
Construction: concrete admixtures plant
2016
Construction: plant for mobile emissions catalysts
2018
Capacity expansion: plant for CellastoⓇ
2016
Construction: technical competence center for automotive coatings
2018
Capacity expansion: compounding plant for UltramidⓇ and UltradurⓇ
Optimization: coating production
BASF Report 2016
2016:
234
Indications and sectors
Fungicides
Herbicides
Protecting crops against
harmful fungi
Reducing
Sales
competition from
weeds for water
and nutrients
Insecticides
Combating insect
pests in agriculture
The Agricultural Solutions segment consists of the Crop Protection division. We develop
and produce innovative solutions for the improvement of crop health and yields, and market
them worldwide.
and beyond
Biological crop
protection, seed
treatment, polymers
and colorants
Change:
-11%
Insecticides
€735 million
Percentage of sales:
13%
Functional Crop Care
€289 million
Change:
-16%
Functional Crop Care
Percentage of sales:
BASF Report 2016
The BASF Group business year - Agricultural Solutions
Portfolio
(1%)
Currencies
(1%)
Sales
2%
Performance Materials - Sales by region
(Location of customer)
Europe
1234
4
Agricultural Solutions
3
North America
23%
€6,888 million
1
Asia Pacific
27%
South America, Africa, Middle East
3%
2
80 Management's Report
47%
(4%)
5%
1%
(2%)
Sales
(4%)
Change:
minus €3 million
BASF Report 2016
How we create value -
- an example
InscalisⓇ
Management's Report 81
Currencies
The BASF Group business year - Agricultural Solutions
Value for BASF
Peak sales
potential
>€100 million
Value for our customers and the environment
Advantages compared with
conventional insecticides
InscalisⓇ is an innovative solution of a new chemical class for
combating piercing and sucking pests. InscalisⓇ will play an
important role in BASF's insecticide portfolio, and be used for
various plants in numerous countries starting at the end of
the decade. We expect peak sales potential of more than
€100 million.
3-fold
InscalisⓇ offers a three-fold advantage compared with conven-
tional insecticides. Effective in low doses, it is also character-
ized by low toxicity for beneficial insects such as bees and an
alternative mode of action for combating the most important
pests. For farmers, this means greater flexibility in application
and higher yields with better quality.
Strategy
◉
Innovative insecticide solution for use with numerous plants
Change:
0%
2015
Herbicides
€2,161 million
Percentage of sales:
39%
Factors influencing sales
2016:
€5,569 million
Change:
-4%
2015:
€5,820 million
Portfolio
Fungicides
€2,384 million
-5%
Percentage of sales:
43%
Income from operations before special items
(million €)
Volumes
(2%)
2016
1,087
Prices
0%
Change:
■
Prices
Volumes
22%
South America, Africa, Middle East
7%
2
We considerably raised EBIT before special items year-on-
year, mainly thanks to the higher contributions from the mobile
emissions catalysts business. In addition, we were able to
reduce fixed costs through strict cost discipline. Special
charges resulted primarily from asset impairments and special
income from the sale of the polyolefin catalysts business in
June 2016.
Construction Chemicals
■ Sales rise by 1% to €2,332 million as a result of
increased sales volumes
■Slight growth in EBIT before special items, thanks
primarily to higher sales volumes
In the Construction Chemicals division, sales to third parties
reached €2,332 million, an increase of €28 million over 2015.
Negative currency effects in all regions and lower prices overall
were more than offset by higher sales volumes.
In Europe and North America, sales grew as a result of this
volumes increase; prices remained stable. In the region South
America, Africa, Middle East, lower volumes and negative
currency effects were the main factors behind a drop in sales.
Demand declined in Saudi Arabia especially, as the number of
public construction projects fell due to low oil prices. Falling
prices were largely responsible for reduced sales in Asia. We
were able to increase volumes in the region.
Asia Pacific
■ Sales increase by 3% to €3,249 million
EBIT before special items considerably up,
especially in automotive OEM coatings
Sales of automotive OEM coatings grew slightly thanks to
higher volumes in North America and Asia. In the automotive
refinish coatings business, we observed a slight sales decline
as higher prices could only partly offset negative currency
effects and slightly lower volumes. The slight sales growth in
the industrial coatings business was attributable to higher
volumes. Sales fell slightly in the decorative paints business in
Brazil, despite significantly increased sales prices. This was
mostly the result of overall weak demand as well as negative
currency effects.
Coatings - Factors influencing sales
Volumes
Prices
Portfolio
4%
0%
1%
Currencies
Sales
(2%)
3%
In the Coatings division, sales to third parties in 2016 grew by
€83 million to €3,249 million. Higher sales volumes in North
America and Asia were able to more than compensate for a
volumes decline in South America. Prices remained stable
overall; negative currency effects in all businesses had a
dampening effect on sales.
Construction Chemicals - Factors influencing sales
Coatings
29%
(8%)
Portfolio
(1%)
Currencies
(1%)
Sales
(1%)
78 Management's Report
The BASF Group business year - Functional Materials & Solutions
Catalysts - Sales by region
€6,263 million
(Location of customer)
BASF Report 2016
Income from operations before special items was slightly
higher than the level of 2015, primarily as a result of volumes
growth.
1
Europe
42%
3
1
234
North America
4
8%
Volumes
Prices
20%
€3,249 million
South America, Africa, Middle East
24%
17%
2
€2,332 million
We were able to raise EBIT before special items considerably
in 2016, especially through the contribution from automotive
OEM coatings. Special income came from the sale of the
industrial coatings business in December 2016.
Since December 14, 2016, the Coatings division has
included the Chemetall business, which was acquired from
Albemarle. This has had no significant influence on the result
for the reporting year 2016.
2
BASF Report 2016
1
Management's Report 79
The BASF Group business year - Functional Materials & Solutions
■
■
Sales grow by 2% to €6,888 million through higher
volumes
EBIT before special items rises considerably due
to stronger margins and specialties business
The Performance Materials division raised its sales to third
parties by €141 million to €6,888 million in 2016. This was
largely thanks to sharp volumes growth, primarily in Asia and
Europe. Prices fell as a result of lower raw material prices.
Negative currency effects and portfolio measures additionally
dampened sales.
Our businesses with the automotive industry developed
positively thanks to significantly higher demand in Asia. We
were especially able to achieve substantial volumes growth for
polyurethane systems, engineering plastics and the special
elastomer CellastoⓇ.
In the consumer goods industry, sales were slightly down,
primarily on account of lower prices while volumes remained
stable. We particularly achieved higher volumes of engineering
plastics, thermoplastic polyurethanes and biopolymers, while
demand ebbed slightly for polyurethane systems.
Sales to the construction sector also declined as a result of
falling prices and the divestiture of our white expandable poly-
styrene (EPS) business in North and South America in March
2015. Volumes development was positive for polyurethane
systems and functional foams.
EBIT before special items considerably exceeded that of the
previous year. Contributing significantly to this were higher
margins due to lower raw material prices and the positive
development of our high-margin specialties business. Despite
higher production costs from new plant startups, including the
capacity expansion for CellastoⓇ in Shanghai, China, we were
able to reduce fixed costs compared with 2015.
Performance Materials - Factors influencing sales
Performance Materials
4%
39%
North America
(1%)
Portfolio
0%
Currencies
(2%)
Sales
1%
Construction Chemicals - Sales by region
(Location of customer)
1 Europe
Asia Pacific
35%
32%
3
Asia Pacific
18%
South America, Africa, Middle East
15%
Coatings - Sales by region
(Location of customer)
1234
4
Europe
North America
Helping to feed a growing world population
1,090
Our strategy is based on long-term market trends. A key chal-
lenge of the future will be to ensure sufficient food for a growing
world population. This means that farmers around the world
need to increase their yields - and yet the natural resources for
doing so, such as water and arable land, are limited. We see it
as our duty to provide farmers with professional support in
producing more - and more nutritious - food as efficiently as
possible.
Long-term innovation strategy ensures future growth
Development of solutions that go beyond
conventional crop protection
Volumes
Prices
BASF's activities in the field of plant biotechnology are part of
the Bioscience Research technology platform. Research and
development expenses, sales, earnings and all other data are
not included in the Agricultural Solutions segment; they are
reported in Other.
Plant biotechnology at BASF
In 2016, we invested €205 million in property, plant and equip-
ment. Most of this investment amount is attributable to the
expansion of dicamba production capacity in Beaumont,
Texas. We also increased capacities for the fungicide
Xemium® and enlarged a formulation plant for fungicides in
Tarragona, Spain. Furthermore, we are continuing to invest in
innovative solutions that go beyond classic crop protection.
One example from the area of Functional Crop Care is our new
research and development center for biological crop protec-
tion and seed solutions in Limburgerhof, Germany, which
combines expertise in chemical and biological solutions. In
order to continue meeting the ongoing high demand for our
innovative products in the future, we will invest around
€840 million in developing and expanding our infrastructure
and in our production and formulation capacities for active
ingredients between 2017 and 2021.
Investments
Boscalid, metiram, dimethomorph, Initium®, metrafenone,
F 500®, Xemium®, AgCelenceⓇ (umbrella brand)
Kixor, dicamba, pendimethalin, imazamox, topramezone,
ClearfieldⓇ herbicide tolerance system, dimethenamid-P
Fipronil, alpha-cypermethrin, chlorfenapyr, teflubenzuron,
NealtaⓇ, TermidorⓇ to guard against termite infestation,
InterceptorⓇ mosquito nets to protect against malaria
Vizura®, Limus, SystivaⓇ, VaultⓇ HP, Nodulator® PRO,
Flo Rite®, Integral®, Serifel®
Example products
Products for plant health and increased yield potential that
go beyond traditional crop protection, such as biological
crop protection, seed treatments, polymers and colorants
Combating insect pests in agriculture and beyond, such as
in the fields of public health, professional pest control and
landscape maintenance
Reducing competition from weeds for water and nutrients
Protecting crops from harmful fungal infections; improving
plant health
Applications
With our network of research sites, we help farmers meet
the growing demand for increased agricultural productivity as
well as better nutrition. As part of the regular review of our
portfolio, we focused our research activities in 2016 on proj-
ects with the highest business and technological potential.
These projects included the development of crops character-
ized by higher yields and stress resistance, herbicide tolerance,
or resistance against certain diseases. Part of this realignment
involved adapting our site structure in North America and
Europe; around 350 of approximately 750 positions were cut.
Our product marketing takes place in part together with lead-
ing seed providers.
Insecticides
Functional Crop Care
Our research and development activities range from solu-
tions for guarding plants against fungi, insects and weeds, to
seeds and soil management, to plant health. For example, the
Functional Crop Care business unit not only provides products
for improving seeds and innovations for better soil manage-
ment, but also biological and chemical technologies that make
plants better able to withstand stress factors like heat, cold
and nutrient deficiency.
We are intensifying our investment in growth markets and
continuing to expand our good position in our core markets.
In collaboration with seed companies, we benefit from the
technological competence of our crop protection research. In
addition, we work together with external partners to be able to
offer the best solutions for our customers. With our own proj-
ects, jointly with partners like John Deere and in collaboration
with farmers, we drive the development of integrated IT appli-
cations for modern, sustainable agriculture. One example is
the Maglis digital platform developed by BASF. Since its
launch at the beginning of 2016, the BASF team has used
MaglisⓇ to support farmers in collecting, interpreting and mon-
itoring a range of agricultural data. This enables them to opti-
mize management and make better decisions in cultivating
and marketing crops.
82 Management's Report
We are committed to the responsible treatment of our
products and the environment. We offer our customers a
broad portfolio of integrated solutions and constantly invest in
our development pipeline to create chemical and biological
innovations in crop protection.
Products, customers and applications
BASF Report 2016
Indications and sectors
Fungicides
Herbicides
The BASF Group business year - Agricultural Solutions
2
33%
Europe (excl. Germany)
17%
25%
4
4
345
Germany
1
2 Europe (excl. Germany)
North America
7%
€57,550 million
Asia Pacific
20%
South America, Africa, Middle East
345
North America
18%
€6,275 million
Asia Pacific
30%
17%
South America, Africa, Middle East
26%
Germany
■ Ongoing investments in production plants,
such as for ammonia and herbicides
1
0
1 For purposes of increased clarity in the presentation of regional results, income from operations (EBIT) before special items was replaced by EBIT, a figure directly derivable from the
Consolidated Financial Statements, as of the second quarter of 2016. Neither EBIT before special items by region nor EBIT by region is drawn upon for internal management decisions.
Europe
■
■
At €27,221 million, sales down by 30% compared
with previous year
Additional investments initiated at Ludwigshafen
Verbund site
In 2016, sales at companies headquartered in the region
Europe amounted to €27,221 million, 30% below the previous
year's level. This was mainly attributable to the considerable
decline in sales in the Oil & Gas segment following the disposal
of our gas trading and storage business to Gazprom in Sep-
tember 2015.
Despite strong volumes growth, the Chemicals segment
posted a considerable drop in sales due to lower sales prices
brought about by decreased raw material prices. Sales in the
Performance Products segment declined slightly, largely on
account of lower prices and the disposal of portions of our
pharmaceutical ingredients and services business. In the
Functional Materials & Solutions segment, significantly higher
volumes were able to more than compensate for price
declines, resulting in a sales increase. Despite increased sales
prices, a combination of lower volumes and negative currency
effects resulted in a considerable drop in sales in the Agricul-
tural Solutions segment. Sales declined considerably in Other.
Income from operations (EBIT) fell by 13% year-on-year to
€3,632 million, primarily owing to the decrease in the Oil & Gas
segment. Contributions were also smaller from the Chemicals
and Agricultural Solutions segments, as well as from Other.
The Performance Products and Functional Materials & Solu-
tions segments, however, raised their EBIT.
We are strengthening our market position through further
investments at the Ludwigshafen Verbund site, such as the
replacement of our acetylene plant with a state-of-the-art,
highly efficient production facility, and the expansion of capac-
ities for resins.
North America
■ Sales down 6% from the previous year to
€14,682 million
7%
Sales at companies headquartered in North America were
down by 6% compared with 2015 in both euro and local cur-
rency terms, amounting to €14,682 million. This was largely
due to decreased sales prices brought about by lower raw
material prices, especially in the Chemicals segment. Sales
volumes remained stable overall. Rising volumes in the Func-
tional Materials & Solutions segment were able to offset the
lower volumes in the Chemicals and Performance Products
segments.
EBIT fell 14% to €1,113 million compared with the previous
year. Significantly increased contributions from the Perfor-
mance Products and Functional Materials & Solutions seg-
ments were only partially able to compensate for the sales and
margin-related earnings decline in the Chemicals segment.
In this region, we continue to focus on innovation, attrac-
tive market segments and cross-business initiatives in order
to grow profitably. At the same time, we ares increasing our
operational excellence through continuous improvement.
Investments in new production facilities form the basis for
future growth. For example, we are building a new ammonia
plant in Freeport, Texas, with Yara; expanding production
capacities for our dicamba and dimethenamid-P herbicides in
Beaumont, Texas; and modifying the plant in Pasadena, Tex-
as, to produce our Palatinol® DOTP plasticizer so we can meet
growing demand in North America. Beyond that, we aim to
gradually expand the production capacity of MDI at our
Geismar, Louisiana, Verbund site.
BASF Report 2016
Management's Report 91
The BASF Group business year - Regional results
Sales by region
(Location of company)
Income from operations by region
(Location of company)
5
5
1
2
Management's Report
The BASF Group business year - Other
2
Sales decline by 79% and EBIT before special items
down by 62% due to discontinuation of contributions
from gas trading and storage business as well as to
lower oil and gas prices
Oil & Gas segment
4 More on this figure can be found in the reconciliation reporting for Oil & Gas in the Notes to the Consolidated Financial Statements on page 179.
3 Additions to intangible assets and property, plant and equipment (including acquisitions)
2 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and write-ups)
1 Supplementary information on the Oil & Gas segment can be found from page 221 onward.
(66)
1,050
362
(52)
195
94
(22)
50
39
(39)
1,823
1,115
4
12,373
12,829
(68)
(443)
(744)
Net income4
In the Oil & Gas segment, sales to third parties decreased by
€10,230 million to €2,768 million year-on-year (volumes 3%,
prices/currencies -3%, portfolio -79%). Owing to the asset
swap with Gazprom completed at the end of September
2015, contributions from the natural gas trading and storage
business and from Wintershall Noordzee B.V. ceased as of
the fourth quarter of 2015. These activities had contributed
€10.1 billion to sales in 2015. In the continuing oil and gas
business, we raised volumes by 15% compared with 2015,
while price and currency effects came out to minus 15%. The
price of a barrel of Brent blend crude oil averaged $44 in 2016
(2015: $52). Gas prices on European spot markets dropped
29%, also a sharp fall compared with the previous year. Both
oil and gas prices recovered significantly toward the end of
2016 as compared with the beginning of the year.
Oil & Gas - Sales by region
(Location of customer)
1 Europe
Asia Pacific
■ Sales 2% below 2015 level at €11,512 million
Local production expanded through new plants
in China and Malaysia
■
Sales
Change in %
2015
2016
Data for Other¹ (million €)
Other
89
6,248
BASF Report 2016
3
1
For the Outlook for 2017, see page 123
Income from operations (EBIT) before special items declined
by €849 million to €517 million in 2016. This was primarily the
result of falling oil and gas prices, in addition to the divestiture
of our gas trading and storage business to Gazprom. The
activities transferred to Gazprom had contributed around
€260 million to EBIT before special items in 2015. In addition,
as we had expected, the earnings contribution from our share
in the Yuzhno Russkoye natural gas field was lower: A
contractual agreement with our partner Gazprom stipulated
that the excess amounts received over previous years be
compensated in 2016. Positive effects came from compre-
hensive measures aimed at optimizing exploration and tech-
nology projects as well as the successful implementation of
operational cost-saving measures. EBIT declined by €573 mil-
lion to €499 million. Net income declined by €688 million to
€362 million.
20%
South America, Africa, Middle East
0%
Asia Pacific
€2,768 million
0%
80%
4
34
2 North America
We increased our crude oil and natural gas production by
12 million barrels of oil equivalent (BOE) to 165 million BOE.
In the search for new crude oil and natural gas deposits, we
finished drilling a total of 14 exploration and appraisal wells in
2016, of which 9 were successful. Our proven crude oil and
natural gas reserves fell by 7% compared with the end of
2015, to 1,622 million BOE. We replenished 26% of the
volumes produced in 2016. The reserve-to-production ratio
is around 10 years (2015: 11 years). This is based on Winters-
hall's production in 2016 and refers to the reserves at year-
end.
6,275
(6)
(18)
398
407
(2)
1 Information on the composition of Other can be found in the Notes to the Consolidated Financial Statements from page 178 onward.
2 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and write-ups)
3 Contains assets of businesses recognized under Other as well as reconciliation to assets of the BASF Group
4 Additions to intangible assets and property, plant and equipment (including acquisitions)
Sales in Other fell by €772 million to €2,018 million compared
with 2015. Lower prices and volumes in the raw materials
trading business were primarily responsible, along with the
expiration of supply contracts in connection with the disposal
of our share in the Ellba Eastern Private Ltd. joint operation in
Singapore at the end of 2014.
Income from operations before special items in Other declined
by €162 million to minus €1,050 million. This was largely
attributable to valuation effects for our long-term incentive
program. Positive currency effects helped slow the decline.
90 Management's Report
The BASF Group business year - Regional results
Regional results
Regions (million €)
BASF Report 2016
Sales
by location of company
Sales
by location of customer
Income from operations
by location of company¹
Change
Change
Change
2016
2015
in %
2016
Research and development expenses
9
111
121
2,790
Exploration expenses
(28)
Income from operations before depreciation and amortization (EBITDA)
(972)
(866)
(12)
Amortization and depreciation²
119
119
Income from operations (EBIT)
(1,091)
2015
(985)
Special items
(41)
(97)
58
EBIT before special items
(1,050)
(888)
(18)
Assets³
9,374
(3)
Investments4
(11)
2,018
in %
2015
(14)
Asia Pacific
11,512
11,712
(2)
12,165
12,334
(1)
1,098
445
147
South America, Africa, Middle East
4,135
4,397
5,304
5,828
(9)
432
334
29
57,550
70,449
(18)
57,550
70,449
1,295
1,113
(9)
15,390
in %
Europe
27,221
38,675
(30)
26,039
36,897
(29)
3,632
4,174
(13)
Thereof Germany
2016
17,540
(38)
7,412
13,483
(45)
1,582
2,303
(31)
North America
14,682
15,665
(6)
14,042
28,229
Research and development expenses
Change:
Assets
238
13
Income from operations (EBIT)
1,037
1,083
(4)
Special items
(50)
(7)
EBIT before special items
1,087
1,090
0
EBIT after cost of capital
172
154
12
Assets
8,899
8,435
6
Investments²
266
402
(34)
268
Research and development expenses
Depreciation and amortization¹
22.7
BASF Report 2016
Segment data (million €)
Management's Report 83
The BASF Group business year - Agricultural Solutions
2016
2015
Sales to third parties
Intersegmental transfers
5,569
5,820
Change in %
(4)
33
28
18
Sales including intersegmental transfers
5,602
5,848
(4)
Income from operations before depreciation and amortization (EBITDA)
1,305
1,321
(1)
EBITDA margin
%
23.4
-
489
514
(5)
BASF Report 2016
Oil & Gas
BASF's oil and gas activities are bundled in the Wintershall Group. We focus on exploration
and production in oil and gas-rich regions in Europe, North Africa, Russia, South America
and the Middle East – focus regions in which Wintershall has a high level of regional and
technological expertise. We are also active in the transport of natural gas in Europe with
our Russian partner Gazprom.
Sales
2015:
€12,998 million
Exploration & Production
€2,809 million
2016:
€2,768 million
Natural Gas Trading
€10,189 million
Factors influencing sales
Change:
-79%
Income from operations before special items
(million €)
Volumes
3%
2016
Prices/currencies
(3%)
2015
517
1,366
Portfolio
(79%)
Sales
(79%)
The BASF Group business year - Oil & Gas
84 Management's Report
1
23%
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and write-ups)
2 Additions to intangible assets and property, plant and equipment (including acquisitions)
Agricultural Solutions segment
■ Lower volumes and currency effects lead to
4% decline in sales to €5,569 million
■
At €1,087 million, EBIT before special items
matches prior-year level
In the Agricultural Solutions segment, sales to third parties in
2016 fell by €251 million to €5,569 million as a result of lower
sales volumes and negative currency effects. The challenging
market environment for crop protection products particularly
dampened demand for insecticides in South America and
for fungicides in Europe. Prices matched the level of 2015
(volumes -2%, prices 0%, currencies -2%).
In Europe, sales declined by €149 million to €1,958 mil-
lion. This was mainly attributable to weaker demand for fungi-
cides in the first half of the year. Especially in Germany and
Poland, volumes fell as a result of unfavorable weather condi-
tions and our customers' high inventory levels. Price increases,
primarily in central and eastern Europe, including Russia, were
unable to offset the lower volumes and negative currency
effects.
Sales in North America decreased by €69 million to
€1,801 million, predominantly because of lower prices, espe-
cially for fungicides in the United States. Higher demand for
fungicides and insecticides in the United States and for herbi-
cides in Canada helped support volumes development.
At €549 million, sales in Asia exceeded the previous year's
level by €24 million. We were able to raise sales volumes in all
indications, largely driven by substantially higher demand for
herbicides in India and the overall positive volumes develop-
ment in Indonesia and Australia. Currency effects slightly
dampened sales.
In South America, sales fell by €57 million to €1,261 mil-
lion, basically due to lower insecticide volumes in Brazil. This
was primarily attributable to our customers' high inventory
levels and critical economic situation, as well as the shrinking
market for insecticides in the region. Price increases were
unable to fully compensate for the drop in volumes.
Strict cost management enabled us to reduce fixed costs in
the Agricultural Solutions segment. Thanks to this develop-
ment, income from operations (EBIT) before special items
matched the previous year's level at €1,087 million despite the
sales decline. Due to special charges from the optimization of
our production structure, EBIT decreased by €46 million to
€1,037 million.
For the Outlook for 2017, see page 122
BASF Report 2016
Crop Protection - Sales by region
(Location of customer)
1
Europe
35%
2 North America
32%
€5,569 million
3
Asia Pacific
10%
3
4
South America, Africa, Middle East
4
How we create value - an example
Management's Report 85
The BASF Group business year — Oil & Gas
766
331
(79)
12,998
Change in %
2015
2,768
2016
Intersegmental transfers
Sales to third parties
BASF Report 2016
Segment data¹ (million €)
The BASF Group business year - Oil & Gas
88 Management's Report
The contracts signed in 2015 to join the companies
involved in the Nord Stream 2 AG were canceled in September
2016 after withdrawal of the antitrust clearance application in
Poland. BASF continues to firmly believe in the significance of
this project for Europe, and is evaluating possibilities to sup-
port the endeavor. The project is being developed by Nord
Stream 2 AG, a project company in which Gazprom holds
100% of the shares.
We hold a 15.5% share in the Nord Stream Pipeline through
Nord Stream AG, based in Zug, Switzerland, which is
accounted for in the BASF Group's financial statements using
the equity method. Other shareholders are Gazprom (51%)
and E.ON (15.5%), as well as N.V. Nederlandse Gasunie and
ENGIE (9% each). With a total capacity of 55 billion cubic
meters of natural gas per year, this pipeline, which stretches
from Russia to the German coast over the Baltic Sea, helps
shore up supply security in Europe.
The companies under the WIGA umbrella operate a
3,300-kilometer long-distance network that includes the pipe-
line links to the Nord Stream Pipeline, the Baltic Sea Pipeline
Link (OPAL) and the North European Gas Pipeline (NEL).
The highly regulated natural gas transport sector is character-
ized by stable conditions and yields based on approved costs
and tariffs. Our organizational structure allows us to meet the
unbundling requirements set down by the German Energy Act:
As a holding company for the German subsidiaries in natural
gas transport, WIGA Transport Beteiligungs-GmbH & Co. KG
(WIGA) mainly fulfills a reporting and financing capacity.
GASCADE Gastransport GmbH, OPAL Gastransport GmbH &
Co. KG, and NEL Gastransport GmbH all act as independent
companies under the umbrella of the holding company.
Mostly regulated business with stable conditions
■ Joint activities with Gazprom
Natural Gas Transport
2008/20202
43 million BOE
minus €849 million
At €11,512 million, sales at companies headquartered in the
Asia Pacific region fell by 2% in 2016; in local currency terms,
sales matched the level of the previous year.
Achimgaz, development of Achimov horizon in Urengoy natural
gas and condensate field
(57)
Sales including intersegmental transfers
3,099
13,764
EBIT after cost of capital
(62)
1,366
517
EBIT before special items
94
(294)
(18)
Special items
(53)
1,072
499
2018
Income from operations (EBIT)
1,515
1,097
Depreciation and amortization²
19.9
57.7
%
EBITDA margin
(38)
2,587
1,596
Income from operations before depreciation and amortization (EBITDA)
(77)
(28)
Investments³
12 million BOE
2015/2018²
Europe: The Mittelplate field off the North Sea coast is the
cornerstone of our crude oil production in Germany. We own
a 50% share in the next development phase of this largest
known oil deposit in the country. We are expanding production
in Emlichheim by drilling twelve new wells, two of which started
producing between September and December 2016. Winters-
hall is assessing a redevelopment of the Suderbruch oilfield
with two exploration wells. We continued the field test for
increasing recovery rates using the biopolymer Schizophyllan
at the Bockstedt oilfield.
Active portfolio management, including expansion of
our position in Norway
Exploration & Production
BASF Report 2016
The BASF Group business year - Oil & Gas
86 Management's Report
Wintershall's natural gas trading and storage activities
were transferred to Gazprom with the swap of assets of equal
value completed in September 2015, and are no longer part of
our portfolio. Our cooperation with Gazprom in the natural gas
transport business continues unaltered. With western Europe's
long-term demand for natural gas steadily on the rise, while its
local production simultaneously decreases, securing sufficient
imports is gaining in importance. ⑦
Handling hydrocarbons in a responsible manner demands
special measures for the protection of people and the environ-
ment. We therefore carefully assess the potential effects of
every project before we begin. Together with experts, contrac-
tors and relevant stakeholders, we develop methods and carry
out measures for using resources even more efficiently and
minimizing impact on the environment. This includes acting in
accordance with international agreements, legal requirements
and our own, self-imposed high standards.
Selected collaborations and strategic partnerships, inno-
vative technologies and the responsible development and
production of hydrocarbons all form the basis of our
growth-oriented strategy. Through the continuous optimiza-
tion of our cost structure and portfolio of oil and gas activities,
we ensure our future competitive viability, even in times when
oil and gas prices are low. Measured by production volumes,
gas activities comprised around 70% of our portfolio.
In the future, crude oil and natural gas will continue to contrib-
ute significantly toward covering the rising energy demand of a
growing world population. That is why we invest in the explo-
ration and production of oil and gas, primarily in our core
regions Europe, North Africa, Russia and South America. We
want to establish the Middle East as another core region in our
portfolio.
■ Growth through exploration, acquisitions, strategic
partnerships and technological expertise
Contribution to securing Europe's natural gas supply
Strategy
The new, optimized tanks are especially safe and do not
require large concrete containment systems underneath.
Instead, the oil tanks feature an accessible annular gap, while
the water tanks are constructed with vacuum-monitored
double walls. This increases their energy efficiency: Thanks to
the thermally insulating air layer in the annular gap and the
especially well insulated double floor, the amount of energy
needed to heat the oil tanks has been reduced by around 95%
over the course of a year.
An innovative construction concept enabled us to save around
25% in investment costs while reconstructing our tank farm in
Barnstorf, Germany. Typical construction methods would have
meant replacing the previous twelve crude oil and water tanks
with five new ones, and building individual facilities for separat-
ing the oil from associated substances and storing it. Because
our new tanks allow both at the same time, four new tanks
were sufficient. These can be employed more flexibly and
economically and ensure lower maintenance costs.
95%
around
Reduction of annual
energy demand
Value for the environment
25%
around
investment costs
Reduction of
Value for BASF
Reconstruction and process optimization of tank farm in Barnstorf
Optimized oil treatment and storage
In Norway, we were able to expand annual production to
80,000 barrels of oil equivalent (BOE) per day. The further
development of fields in which we hold a stake included the
installation of two subsea tiebacks in the Norwegian Sea for
the Wintershall-operated Maria field in the summer of 2016.
These were connected at a depth of 300 meters to the nearby
platforms Kristin, Heidrun and Åsgard B, enabling us to use
the existing infrastructure for production in the Maria field, in
which Wintershall holds a 50% share. Wintershall also has
shares in the Ivar Aasen offshore platform installed and started
up in 2016. In January 2016, Wintershall obtained shares in
seven new exploration licenses on the Norwegian continental
shelf from the Norwegian Ministry of Petroleum and Energy.
Wintershall will take over operatorship of four licenses.
As part of ongoing portfolio optimization, Wintershall
Norge AS agreed with Statoil Petroleum AS (both based in
Stavanger, Norway) on the sale of its 25% share in the Byrding
field on the Norwegian continental shelf. The field,
also known by its previous name, Astero, was discovered in
2005 and is located in the Troll/Fram region of the North Sea.
Wintershall Norge furthermore divested its 10% share in the
Yme license also on the Norwegian continental shelf - to
OKEA AS, an oil company based in Trondheim, Norway.
In Denmark, we are continuing the transition from the
development to the production phase of the Ravn field. The
crude oil is to be transported through a subsea pipeline
from an unmanned production platform to the A6-A platform
18 kilometers away in the German North Sea. Ravn will be the
first field in Denmark that Wintershall Noordzee B.V. (Rijswijk,
Norway) transfers to the production phase as operator. The
Danish energy ministry granted Wintershall three new licenses
in the Danish North Sea at the beginning of 2016. Wintershall
is the operator in all three licenses.
Russia: The Yuzhno Russkoye natural gas field in western
Siberia, in which we have a 35% economic interest, has been
operating at plateau production since 2009. We hold a 50%
stake in the development of Block IA of the Achimov formation
in the Urengoy field in western Siberia. The gradual develop-
ment of this field was continued and 78 wells were producing
at the end of 2016. We will develop blocks IV and V of the
Achimov formation together with Gazprom.
5 million BOE
Development of Edvard Grieg field
2018
7 million BOE
2016
9 million BOE
Development of Vega-Pléyade field
Development of Maria field
Startup
per year¹
Plateau/peak production
Project
The BASF Group business year - Oil & Gas
Development of Aasta Hansteen field
Management's Report 87
1 BASF's share in barrels of oil equivalent (BOE)
Siberia, Russia
North Sea, Norway
Argentina
Location
Capital expenditures
BASF Report 2016
For information on current reserves, see pages 88 and 223
South America: We hold shares in a total of fifteen onshore
and offshore fields in Argentina. In February 2016, the offshore
field Vega Pléyade, operated by Total Austral S.A., began
production off the coast of Tierra del Fuego. We drilled addi-
tional wells as an operator in the Vaca Muerta shale formation
in the Neuquén province, as stipulated in the joint operation
agreement between Wintershall Energía S.A. (Buenos Aires,
Argentina) and Gas y Petróleo del Neuquén S.A. (Neuquén,
Argentina).
Wintershall signed a memorandum of understanding in
April 2016 with the National Iranian Oil Company on a potential
collaboration.
In Abu Dhabi, we began drilling our second appraisal well
as operator in the development of the Shuwaihat sour gas field
in November 2016. It is Wintershall's first offshore exploration
well in the Shuwaihat field.
North Africa / Middle East: In Libya, we are the operator
of eight oilfields in the onshore concessions 96 and 97. Due to
difficult political conditions, we were only able to start produc-
ing in concession 96 again on September 16, 2016, at a low
level of 35,000 BOE a day. No production took place in con-
cession 97 in 2016. At the Al Jurf oilfield off the coast of Libya,
in which we have a stake, operations could be continued
without interruption.
2 Year completed
Low oil and raw material prices weighed on sales, espe-
cially at the beginning of the year. While sales prices did sub-
stantially recover over the year, they still showed an overall
decline for 2016. Sales were also dampened by negative cur-
rency effects and portfolio measures such as the sale of the
textile chemicals business in June 2015, parts of our pharma-
ceutical ingredients and services business in September 2015,
and the polyolefin catalysts business in July 2016. Sales in
Other decreased considerably. Volumes growth of around 5%
in this region was only partially able to offset these effects. We
raised sales volumes in all segments.
9,632
As part of our regional strategy, we want to further increase
the proportion of sales from local production in Asia Pacific in
the years ahead. We once again made progress toward this
goal: In Korla, China, we started up a polytetrahydrofuran
(PolyTHF) plant with our partner Markor, and in Shanghai,
China, we completed the modification of the polyvinyl-
pyrrolidone plant. In Kuantan, Malaysia, we and our partner
PETRONAS started up a production plant for 2-ethylhexanoic
acid and finished construction of the new aroma chemicals
complex. Further endeavors, such as catalyst production
plants in Caojing, China, and Rayong, Thailand, are currently
under construction and progressing on schedule.
Percentage of relevant suppliers
evaluated for their sustainability
performance
70%
What we expect from our suppliers
· Global Supplier Code of Conduct
Country-specific risk analysis forms basis of new
supplier selection
■
Both new and existing suppliers are selected and evaluated
not only on the basis of economic criteria, but also on environ-
mental, social and corporate governance standards. Our
Supplier Code of Conduct is founded on internationally recog-
nized guidelines, such as the principles of the United Nations'
Global Compact, the International Labor Organization (ILO)
conventions and the topic areas of the Responsible Care
Initiative. The Code of Conduct covers compliance with human
rights, labor and social standards, and antidiscrimination and
anticorruption policies in addition to protecting the environ-
ment. The Code is available in 26 languages.
2020 Goal
A country-based risk analysis forms the basis of our selec-
tion process for new suppliers. As a result of the country-
related risks identified in South America and Asia, we queried
around 2,100 suppliers in 2016 on their commitment to the
values of our Supplier Code of Conduct. We moreover pro-
vided training to a total of 267 suppliers with an elevated sus-
tainability risk, especially in Asia and South America, in 2016.
Worldwide procurement
From our suppliers, we obtain raw materials, technical goods,
and services from technical to logistics and building facility
services. BASF acquired raw materials, goods and services for
our own production totaling approximately €34 billion in value
from more than 70,000 suppliers around the world in 2016.
Around 90% of this was locally sourced. With regard to our
suppliers, there were no substantial changes in our value chain
in 2016.
■"Together for Sustainability" initiative aims to
harmonize and standardize supplier assessments
and audits
104 raw material supplier sites audited
BASF is a founding member of the Together for Sustainability
(TFS) initiative of leading chemical companies for the global
standardization of supplier evaluations and auditing. With the
help of TfS, we promote sustainability in the supply chain. The
initiative aims to develop and implement a global program for
the responsible supply of goods and services and improve
suppliers' environmental and social standards. The evaluation
process is simplified for both suppliers and TfS member com-
panies by a globally uniform questionnaire. The initiative's
members conducted a total of 1,773 sustainability assess-
ments and 241 audits in 2016. Membership has tripled since
the initiative was founded; there were 19 members in 2016.
1 We define relevant suppliers as those showing an elevated sustainability risk potential as identified by risk matrices and with respect to corresponding country risks. Our suppliers are
evaluated based on risk due to the size and scale of our supplier portfolio.
EBIT in the region grew by 147% to €1,098 million. This
was mainly due to higher volumes and margins in all segments.
Through strict cost management, fixed costs rose only slightly
compared with the previous year, despite the startup of sever-
al new plants.
In addition, we instructed 292 procurement employees on
sustainability-oriented supplier management. These are ways
in which potential supply chain risks can be identified and
minimized together with our suppliers.
With our sustainability-oriented supply chain management, we
contribute to risk management by clarifying our expectations
and standards for our suppliers, and by supporting them in
carrying out our specifications. We count on reliable supply
relationships and want to make our suppliers' contribution to
sustainable development transparent. In order to achieve this,
we set ourselves an ambitious goal: By 2020, we aim to eval-
uate the sustainability performance of 70% of the BASF
Group's relevant suppliers¹ pursuant to our risk-based
approach and develop action plans for any necessary
improvements. The proportion of evaluated relevant suppliers
was at 32% by the end of 2016. Furthermore, our Procurement
competence center supports BASF's business units in devel-
oping solutions to stand out from the competition in address-
ing customers' market-specific requirements.
Evaluating our suppliers
Our objective is to secure competitive advantages for
BASF through professional procurement structures. Our
suppliers are an important element of our value chain.
Together with them, we aim to create value and minimize
risks.
Strategy
South America, Africa, Middle East
■ Sales down 6% to €4,135 million
-
At €4,135 million, sales for companies headquartered in South
America, Africa, Middle East fell 6% below the level of 2015. In
local currency terms, sales were up by 2%.
Gross domestic product shrank in South America primarily
as a consequence of the continuing recession in Brazil as well
as the economic environment and structural reforms in Argen-
tina. Our sales declined slightly under these conditions. Price
increases enabled us to partly offset negative currency effects,
especially from the depreciation of the Argentinian peso, and
weaker sales volumes. Sales declined in the chemicals¹ and
crop protection businesses but rose in the Oil & Gas segment.
Companies in Africa and in the Middle East posted a con-
siderable sales decrease owing to currency effects and down-
ward pressure on prices. The drop in sales in South Africa was
primarily due to the depreciation of the rand; this particularly
affected the Functional Materials & Solutions segment. In the
Middle East, a slump in selling prices affected by falling raw
material prices negatively impacted our business in the Perfor-
mance Products and Functional Materials & Solutions seg-
ments.
EBIT grew by 29% to €432 million, supported especially by
the higher contribution from the chemicals business.
Production plant for 2-ethylhexyl acrylate
now in operation in Guaratinguetá, Brazil
Our chemicals business comprises the Chemicals, Performance Products and Functional Materials & Solutions segments.
92 Management's Report
Responsibility along the value chain - Suppliers
Responsibility along the value chain
Suppliers
Suppliers
Production
Customers
In South America in 2016, we continued implementing a
series of structural measures that increase our productivity
and sharpen the focus on our customers' needs. We have
expanded our production in Guaratinguetá, Brazil, with the
startup of a 2-ethylhexyl acrylate plant that will allow us to tap
into the region's growing demand.
BASF Report 2016
Our worldwide standards for occupational medicine and health
protection are specified in a directive that is implemented by a
global network of experts. Our global health management
serves to promote and maintain the health and productivity of
our employees. This was supported by numerous emergency
drills and health promotion measures in 2016.
■ Focus in 2016: heart attack and stroke prevention
■ Global standards for occupational medicine and
health protection
Health protection
3.3
1.9
1.5
1.4
1.4
1.4
We measure our performance in health protection using
the Health Performance Index (HPI). The HPI comprises five
components: confirmed occupational diseases, medical
emergency drills, first aid, preventive medicine and health
promotion. Each component contributes a maximum of 0.2 to
the total score. The highest possible score is 1.0. Our goal is
to reach a value of more than 0.9 every year.
0.5
1.7
Process safety
Responsibility along the value chain - Environment, health, safety and security - Production
Enhanced training methods
We use the number of process safety incidents as a key per-
formance indicator, following to a large extent the definition set
by the European Chemical Industry Council (CEFIC). In 2016,
we recorded 2.0 process safety incidents per one million
working hours worldwide (2015: 2.1). We pursue continual
improvement by investigating every incident in detail, analyzing
root causes and using the findings to derive suitable measures.
We set ourselves the goal of reducing process safety incidents
to a rate of no more than 0.5 per one million working hours by
2025.
2025 Goal
Reduction of worldwide process
safety incidents
per one million working hours
≤0.5
To this end, we continued our worldwide initiative focusing on
plant maintenance, repair and operation. This initiative pro-
duced a catalog of successful practices for preventing process
safety incidents that has been available in several languages to
all production plants worldwide since 2016.
100 Management's Report
BASF Report 2016
Our globally implemented management system for process
safety provides the framework for the safe construction and
operation of our plants as well as the protection of people and
the environment. Our experts have developed a protection
plan for every plant that considers the key aspects of safety,
health and environmental protection from conception to
startup and stipulates specific protection measures for each.
We continued to review this management system in all regions
in 2016.
-
In order to maintain the highest level of safety at our plants
across their entire life cycle, we review the implementation of
our protection plans in all facilities at regular intervals and
depending on hazard potential. We use globally standardized
software to track these safety assessments. One module of
this program already used in many of our plants - checks
the timely implementation of stipulated measures, supporting
our employees in production. We supplemented this in 2016
by updating a global recommendation for prioritizing safety
2025 Goal
Expanded initiative for reducing process safety
incidents
2012 2013 2014 2015 2016
per one million working hours
For more on occupational medicine, health promotion campaigns and
the HPI, see basf.com/health
For more on the global safety initiative, see
basf.com/global-safety-initiative
Occupational safety
■
Employees and contractors worldwide instructed
on safe behavior
■
Fire at North Harbor in Ludwigshafen
We have made it our goal to reduce the worldwide lost-time
injury rate per one million working hours to 0.5 at most by
2025. To this end, we promote risk-conscious behavior and
safe working practices for every individual, particularly through
regular communication, systematic risk assessments, specific
qualification measures and our worldwide safety initiatives.
We recorded around 118,000 enrollments in occupational
safety training courses worldwide in 2016. These seminars
comprise not only legally stipulated instructions, but also
courses on safe procedures to strengthen our employees'
risk-aware behavior and prevent work-related accidents.
2025 Goal
Reduction of worldwide lost-time
injury rate
measures.
<0.5
In 2016, 1.4 work-related accidents per one million working
hours occurred at BASF sites worldwide (2015: 1.4), raising the
rate of chemical-related accidents to 9% (2015: 8%). The rate
of work-related accidents per one million working hours for
contractors was at 1.5 in 2016 (2015: 1.4¹). Unfortunately,
there were four incidents in 2016 with a total of seven fatalities
(2015: two fatal work-related accidents). BASF is performing a
comprehensive analysis of the incidents and using the findings
to derive appropriate measures.
During maintenance work in Camaçari, Brazil, an employee
of a crane company suffered fatal injuries when the crane he
was operating tipped over. In May, an employee of an external
company hired by BASF to perform maintenance work in
Yeosu, South Korea, died from the effects of phosgene expo-
sure. The cause of the accident was investigated by BASF and
the relevant Korean authorities. In February 2017, the court
responsible for the case ruled that the accident was attribut-
able to carelessness on the part of individual employees.
The 2015 figure was adjusted to reflect a revised hour-counting method for contractors in Asia.
BASF Report 2016
Management's Report 99
Responsibility along the value chain - Environment, health, safety and security - Production
Although the court did not identify any technical or process
defects, a small monetary penalty was nevertheless imposed
on BASF. After the accident, BASF reviewed the safety mea-
sures and processes at all of its isocyanate production sites
worldwide and once again clarified these to employees. An
employee of a subcontractor succumbed to his injuries after
falling through a roof opening in Kuan Yin, Taiwan, in July.
In October, three employees of the BASF fire department
lost their lives in an accident at the North Harbor of the Lud-
wigshafen site, along with one barge crewman on a tanker
moored in the harbor. BASF had contracted a specialist com-
pany for pipeline construction to perform scheduled preventive
maintenance on an emptied and secured propylene line at the
North Harbor. Several pipeline sections were to be replaced. A
fire broke out during the work, leading to an explosion and
ensuing fires in other pipelines. Six of the severely injured were
discharged from the hospital in December; another was kept
in the hospital for inpatient treatment. Light injuries were sus-
tained by 22 people in the accident. The district attorney's
office of the city of Frankenthal is investigating the accident.
BASF is supporting assessors and authorities in their inspec-
tions and has also hired an independent expert to analyze the
causes of the accident.
For more on the fire in Ludwigshafen, see basf.de/fire-northharbor
For more on occupational safety, see basf.com/occupational_safety
Lost-time injury rate per one million working hours
With an HPI of 0.96, we were once again able to fulfill the
ambitious goal of exceeding 0.9 each year (2015: 0.97). Our
2016 global health campaign for employees centered on heart
attack and stroke prevention. To obtain a self-evaluation of
their heart's age and their risk of heart attack and stroke, our
employees filled out around 32,000 questionnaires worldwide.
The offer included personal recommendations for individual
risk factors and contact with a physician in the case of
increased risk.
Annual goal
Health protection
Health Performance Index
Maximum score 1.0
>0.9
Our 2017 global health campaign will focus on the lungs and
respiratory system. We raise employee awareness of these
topics through offers tailored toward specific target groups.
The BASF health checks form the foundation of our global
health promotion program and are offered to employees at
regular intervals.
2002 2011
To strengthen risk awareness, we enhanced our training
methods, introduced global recommendations for training
measures and instructed around 13,000 course participants.
For more on process safety, see basf.com/process_safety
Production
Regular review of emergency systems
2020 Goal
Risk assessment of products
that we sell in quantities of more
than one metric ton per year
>99%
REACH and other legal requirements
Third registration phase of REACH in progress
We are working continuously on registering substances pro-
duced in annual volumes between one and one hundred
metric tons for the third phase of the E.U. chemicals regulation,
REACH. We have already registered over 250 substances to
this end. Moreover, our REACH activities are increasingly
determined by E.U. authorities' decisions on additional studies
in connection with the evaluation of submitted dossiers. Inde-
pendently of this, BASF is also obligated to continuously
update the registration dossiers it has submitted. The number
of updates has meanwhile exceeded the number of registra-
tions, although over 90% of the updates are undertaken on
our own initiative and not as a response to official inquiry.
We apply the experience we have gathered with REACH
to fulfill new legal requirements around the world, such as in
Korea, Taiwan and Turkey. In 2016, we submitted more than
8,000 preregistrations in Taiwan in order to secure our business
activities there.
In an increasingly political agrochemical environment, we
are facing a rise in both regulatory requirements and the num-
ber of additional studies required to obtain or extend approval
for crop protection products.
102 Management's Report
Responsibility along the value chain - Environment, health, safety and security - Product stewardship
BASF Report 2016
Environmental and toxicological testing
Use of alternative and complementary methods for
animal studies
Before launching products on the market, we subject them to
a variety of environmental and toxicological testing. We apply
state-of-the-art knowledge already in the research and devel-
opment phase of our products. We only conduct animal
studies when they are required by law and approved by
respective authorities. Animal studies are at times stipulated
by REACH and other national legislation outside the European
Union in order to obtain more information on the properties
and effects of chemical products.
In 2016, our Experimental Toxicology and Ecotoxicology
department began work together with a total of 39 partners on
one of the largest European collaborative projects for alterna-
tive methods. The project, planned to run for six years, aims to
develop alternative methods to the point that chemical risk
assessments can be efficiently conducted largely without ani-
mal testing.
For more on alternative methods, see basf.com/alternative_methods
the safety of nanomaterials. We published the results in over
100 scientific articles. One important finding is that toxicity is
determined not by the size of the particles but by the intrinsic
properties of the substance.
The European Chemicals Agency (ECHA) as well as the
OECD and national authorities are currently developing regula-
tory concepts to test and assess nanomaterials. We contribute
our expertise through various working groups, such as the
Partner Expert Groups (PEGs) of the ECHA or the Business
and Industry Advisory Group (BIAC) of the OECD. These regu-
latory concepts are all based on a new approach for the tar-
geted investigation of nanomaterials. We developed them
together with the European Centre for Ecotoxicology and
Toxicology of Chemicals (ECETOC) and other experts and
expanded them further using concrete examples in 2016.
An important prerequisite for the consistent application of
regulatory specifications for nanomaterials is their clear identi-
fication. Together with partners, we have developed a tiered,
efficient measurement method in various E.U. projects that is
currently being validated for use in REACH.
Transparency is another issue. In our Nano dialog forum,
we meet with environmental and consumer agencies to dis-
cuss questions on nanomaterial safety and transparency and
develop joint recommendations for political representatives.
We wrapped up another series of talks in BASF's Nano dialog
forum with a report and an event in Brussels in 2016.
BASF makes successful use of biotechnology. We pro-
duce a range of established products with the help of biotech-
nological methods. This provides us with a great wealth of
experience in the safe use of biotechnological methods in
research and development as well as in production. When
employing biotechnology, we adhere to all standards and legal
regulations. We are guided by the code of conduct set out by
EuropaBio, the European biotechnology association that
actively supports a science-based, transparent and predict-
able regulatory framework. The association addresses soci-
ety's ethical concerns, and promotes better mutual under-
standing of such issues through dialog.
For more on nanotechnology and the Nanotechnology Code of Conduct,
see basf.com/nanotechnology
Management of new technologies
Continual safety research on nano- and
biotechnology
Technologies such as nanotechnology or biotechnology offer
solutions for key societal challenges – for example, in the areas
of climate protection or health and nutrition.
-
Safe handling of nanomaterials is stipulated in our Nano-
technology Code of Conduct. We are constantly expanding our
knowledge of nanomaterial safety. Over recent years, we have
conducted more than 240 toxicological and ecotoxicological
studies and participated in over 30 different projects related to
By 2020, we will conduct risk assessments for all substances
and mixtures BASF sells worldwide in quantities of more than
one metric ton per year. We already reached 75.4% of this
goal in 2016 (2015: 67.8%). The risk associated with using a
substance is determined by the combination of its hazardous
properties and its potential exposure to people and the envi-
ronment.
Global goal
For more on GPS, see basf.com/en/gps
In addition, we are also involved in workshops and training
seminars in developing countries and emerging markets.
In 2016, for example, we conducted training sessions for
chemical industry representatives on GPS in China, India and
Kenya on safe chemical management. In order to facilitate
public access to information, we are participating in the setup
of an ICCA online portal that provides more than 4,600 GPS
safety summaries.
Global qualification program for emergency
response teams
In order to ensure uniformly high standards around the world
for safety, security, health and environmental protection, we
continued to implement our requirements for emergency
response planning and fire prevention in the BASF Group in
2016. We work, for example, with site-specific emergency
response plans and actively involve situation-related partners
and suppliers as well as cities, communities and neighboring
companies.
We regularly check our emergency systems and drill pro-
cedures with employees, contractors and local authorities.
Through 173 drills and simulations in 2016, we instructed
participants in our emergency response measures. One topic,
for example, revolved around collaboration between produc-
tion facilities and the fire department.
Through our SPIDER Emergency Response and Informa-
tion Center Verbund, our specialists from the site fire depart-
ment, emergency medical team, site security, and environ-
mental protection can work together quickly and reliably
across different sites around Europe. Our central emergency
response supports local emergency response units around
the world and around the clock.
We have been using the KATWARN system at the Ludwigs-
hafen site since 2015, an app-based warning system that
serves as an additional information channel to quickly inform
site employees and neighbors of dangerous situations. We are
constantly improving its use.
We developed a global qualification program in 2016 to
train our emergency response teams. All over the world, men-
tors from the BASF SE fire department support local emer-
gency response instructors at the sites with their knowledge,
contributing to safety.
For more on emergency response, see basf.com/emergency_response
Corporate security
Worldwide network of information protection officers
We protect our employees, sites and company know-how
against third-party interference, and establish the necessary
framework worldwide with our uniform concepts. Audits
enable us to check the implementation of these measures.
New online training courses are available to our employees
to prepare them for travel. Business travelers, transferees, and
employees in countries with elevated security risks are
informed about appropriate protection measures and individu-
ally counseled where necessary. After any major incident, we
now have the possibility of more quickly and accurately locat-
ing employees in the affected regions through a travel research
system that was globally standardized in 2016.
Aspects of human rights related to site security, such as
the right to liberty and security of person, are a component of
the global qualification requirements of our security personnel.
Respect for human rights is a mandatory element of any con-
tract with service providers of the BASF Group who are active
in this area. Our investment projects include performing com-
prehensive analyses of potential risks. In 2016, we standard-
ized the use of security services at further European sites in
order to increase effectiveness and efficiency.
Due to the increasing risks associated with the use of infor-
mation technology, a global campaign for employees is draw-
ing attention to how we can even better protect our company
knowledge. For example, a global phishing simulation further
strengthened our employees' awareness of risks. Our world-
wide network of information protection officers comprises
more than 650 employees. They support the implementation
of our uniform requirements and conduct seminars on secure
behaviors. We provided information protection instruction to
more than 27,000 participants in 2016. In addition, we pub-
lished standardized Group-wide recommendations for the
protection of information and knowledge.
Emergency response
For more on corporate security, see basf.com/corporate-security
Product stewardship
Suppliers
diverse safety and security topics at our training center. The
training center was opened as part of our 2010 safety initia-
tive; more than 19,000 participants received training there in
2016.
Management's Report 101
Responsibility along the value chain - Environment, health, safety and security - Product stewardship
Customers
We review the safety of our products from research and
development through production and all the way to our
customers' application. We work continuously to ensure
that our products pose no risk to people or the environ-
ment when they are used responsibly and in the manner
intended.
Strategy
Global directives with uniformly high standards for
product stewardship
We ensure uniformly high standards for product stewardship
worldwide and our voluntary initiatives go beyond legal
requirements. We monitor the compliance of our guidelines
with regular audits.
We provide extensive information on our chemical sales
products to our customers with safety data sheets in more
than 40 languages. This is achieved with the help of a global
database in which we maintain and evaluate continuously
updated environmental, health and safety data for our sub-
stances and products. Our global emergency hotline network
provides information around the clock. We train and support
our customers in fulfilling their industry-specific or application-
specific product requirements.
The Care Chemicals division, for example, is involved in
the European Federation for Cosmetic Ingredients, EFfCI.
Together with other producers of cosmetic ingredients, we
discuss the best way to cover our customers' demand for
information. The aim is to enable them to ensure the safety of
the cosmetic products they manufacture in accordance with
current scientific knowledge. This includes knowledge that
extends back along the value chain to the production pro-
cesses of the chemical raw materials used.
The Intermediates division supports information exchange
with customers who manufacture ingredients for personal
end-user products. For example, BASF customers such as
industrial producers of raw materials for consumer goods are
specifically addressed and advised by BASF's experts as soon
as a change is observed in the risk assessment of materials
used in the production process.
With our global risk assessment goal, we are supporting
the implementation of initiatives such as the Global Product
Strategy (GPS) of the International Council of Chemical Asso-
ciations (ICCA). GPS is establishing worldwide standards and
best practices to improve the safe management of chemical
substances.
BASF Report 2016
With our global safety initiative begun in 2008, we have creat-
ed the conditions necessary for the continuous development
of a safety culture. Process safety and information protection
were the main theme of our 2016 Global Safety Days, carried
out in more than 860 activities at around 350 sites. Topics
included product spillage prevention; reducing environmental,
health and safety hazard potential; and proper conduct in
handling sensitive information. More than 75,000 employees
and contractors around the world took active part. This com-
mitment and vigorous exchange make a major contribution to
our safety culture. At the Ludwigshafen site, employees and
contractors can obtain continuous further education on
We adhere to the specifications laid down by the German
Animal Welfare Act as well as the requirements of the Associ-
ation for Assessment and Accreditation of Laboratory Animal
Care - the highest standard for laboratory animals in the world.
We are continually developing and optimizing alternative and
complementary methods, and we use them wherever it is
possible and approved by the authorities. We use alternative
and complementary methods in more than a third of our tests.
Currently, 30 replacement and supplementary methods are
being used in our labs and another 12 are in the development
stage. BASF spent €3.0 million toward this purpose in 2016.
One focus area of our research in 2016 and subsequent years
is the development of alternative methods for testing the
potential of substances that negatively affect organisms'
growth and development.
Process safety and information protection
dispersions, plastics such as polyamides and polyurethanes,
and for intermediates available on the market as "drop-in
products." These can be used in place of previously employed
products in the production process without having to change
the process itself.
Together with Avantium, BASF established the Amsterdam-
based Synvina C.V. joint venture in 2016 to produce and
market furandicarboxylic acid (FDCA) from renewable
resources. FDCA is a key chemical component of poly-
ethylenefuranoate (PEF), which will also be marketed by the
joint venture. PEF has a broad application profile and is espe-
Ocially suitable for producing certain food packaging materials,
such as films and plastic bottles. Compared with conventional
plastics, PEF demonstrates higher barrier properties for gases
like carbon dioxide and oxygen, leading to a longer shelf life for
packaged products. In addition, its higher degree of mechani-
cal strength allows for thinner - and therefore lighter - packag-
ing. We also offer our customers 1,4-butanediol (BDO) on a
commercial scale using sugars as a renewable feedstock,
based on a licensing agreement with the company Genomati-
ca Inc., headquartered in San Diego, California. We use BDO
to produce bio-based polytetrahydrofuran 1000 (PolyTHFⓇ
1000), which primarily serves as a chemical component in
thermoplastic polyurethane (TPU), an ingredient used to
manufacture skis and roller skates, shoe soles, dashboard
films in the automotive industry, and other products.
Palm oil, palm kernel oil, and their derivatives are some of
our most important renewable raw materials. We want to
ensure that the raw materials stem from sustainable, certified
sources and actively support the Roundtable on Sustainable
Palm Oil (RSPO). Based on the voluntary commitment to sus-
tainably source palm oil products that we expanded in 2015,
we increased our purchase of certified palm kernel oil by
around 32,000 metric tons to 158,000 metric tons in 2016. In
addition, our new BASF Palm Sourcing Policy addresses the
requirements for protecting and preserving forests and peat-
land, along with the involvement of local communities in deci-
sion-making processes, and we began its implementation
together with our suppliers in 2016.
We have intensified our dialog with partners along the
value chain. In order to involve smallholder farmers and
improve their living conditions, BASF and Henkel are working
together with the development organization Solidaridad to
provide training for around 5,500 farmers in Indonesia. BASF
also advanced the RSPO certification of its sites for cosmetic
ingredients. In 2016, 19 production sites worldwide were
already RSPO certified. Our goal is to only source palm oil and
palm kernel oil with RSPO certification, provided it is available
on the market. This voluntary commitment has been expanded
to include the most important intermediate products based
BASF Report 2016
on palm oil and palm kernel oil up to 2025; these include
fractions and primary oleochemical derivatives as well as edi-
ble oil esters.
We successfully completed our joint project with Cargill
and the German governmental agency for international coop-
eration (Gesellschaft für Internationale Zusammenarbeit, or
GIZ) on the sustainable production of coconut oil in the Philip-
pines in 2015. Since then, small-holder farmers have been
producing the world's first Rainforest Alliance-certified dried
coconut meat (copra), from which the oil is extracted. In a
follow-up project, BASF is working together with Cargill, Proc-
tor & Gamble and the GIZ to support the expansion of a certi-
fied and transparent supply chain for coconut oil in the Philip-
pines and Indonesia. The project is being financed in part by
the "develoPPP.de" program of the German Federal Ministry
for Economic Cooperation and Development (BMZ). The proj-
ect is also expected to result in improved income and living
standards for around 3,600 small farmers.
BASF signed a contract in 2016 together with Arkema and
Jayant Agro, along with the non-governmental organization
Solidaridad, to promote sustainability in the castor oil supply
chain. With the Sustainable Castor Initiative - Pragati, the
project members want to improve the livelihood of castor oil
farmers and their employees in India by helping them optimize
their yield and reduce the impact on the environment. Further-
more, a sustainability code is being developed that will enable
Indian farmers to offer the first certified sustainable castor oil
on the global market. The project is initially scheduled to run
for three years.
For more on the Biomass Balance Approach, see page 62
For more on palm (kernel) oil, see page 68
For more on our voluntary commitment to palm oil products, see
basf.com/en/palm-dialog
Mineral raw materials
We procure a number of mineral raw materials, like precious
metals, that we use to produce process and mobile emissions
catalysts. In suspected cases, we track the origins of minerals -
as defined in the Dodd-Frank Act - to see if they come from
mines in conflict regions. We reserve the right to conduct an
external audit and, if necessary, terminate our business relation-
ship. The suppliers addressed have confirmed to us that they do
not source minerals matching this definition of conflict minerals
from the Democratic Republic of the Congo or its neighboring
countries.
BASF is observing the current development of a European
regulation on conflict minerals that creates obligations for import-
ers and processors of mineral raw materials originating from
conflict regions.
Management's Report 95
Responsibility along the value chain - Raw materials
96 Management's Report
Responsibility along the value chain - Environment, health, safety and security - Responsible Care Management System
Environment, health, safety and security
Responsible Care Management System
Suppliers
Production
Customers
BASF Report 2016
We act responsibly as an integral part of society and have
set out the framework for our voluntary commitments in
our Responsible Care Management System. We never
compromise on the safety and security of our employees,
contractors and neighbors as well as our facilities, trans-
portation and products, and the environment.
Strategy
Worldwide safety initiatives foster awareness of
workplace safety
Ambitious goals for safety, security, health and
environmental protection
BASF's Responsible Care Management System comprises the
global rules, standards and procedures for safety, security,
health and environmental protection for the various stations
along our value chain. Our regulations cover the transportation of
raw materials, activities at our sites and warehouses, and distri-
bution of our products as well as our customers' application of
the products. Specifications for implementing these measures
are laid out in binding directives that are introduced in consulta-
tion with employee representatives. These describe the relevant
responsibilities, requirements and assessment methods. At our
sites, we cover energy and climate protection through, for exam-
ple, our energy management.
We also further established our "biomass balance"
approach on the market in 2016. The goal here is to replace
natural gas and naphtha at the beginning of the value chain
with biogas and bio-naphtha from certified sustainable pro-
duction. Should a customer select a biomass-balanced prod-
uct, the proportion of renewable feedstock to be used is cal-
culated based on the formulation. The calculation is certified
by an independent third party (TÜV Süd). Our Verbund pro-
duction ensures that the properties and quality of all end
products remain unchanged and that our customers can use
them as usual. This method has already been applied for more
than 40 BASF products - for example, for superabsorbents,
Numerous projects to improve sustainability along
the value chain
Joint venture with Avantium
■
BASF Report 2016
at Global Safety Days
Management's Report 93
Responsibility along the value chain - Suppliers
We conducted a Supplier Day in Mumbai, India, in 2016 as
part of the TfS initiative. TfS also provided training to suppliers
at the annual China Petroleum and Chemical Industry Federa-
tion (CPCIF) Conference in Shanghai, China, in order to
strengthen awareness for sustainability in the region.
Using TFS evaluations, we pursue a risk-oriented approach
with clearly defined, BASF-specific follow-up processes. We
drive these processes through a sustainability-oriented IT tool.
Suppliers with an elevated sustainability risk are identified
using risk matrices. Furthermore, our purchasers indicate the
suppliers for whom they see a potentially elevated sustainabil-
ity risk. We additionally check various information sources to
see if any suppliers have been observed in connection with
negative sustainability incidents. Based on these analyses, we
audited a total of 104 raw material supplier sites on sustain-
ability standards and had 551 sustainability assessments
conducted by an external service provider in 2016.
If we identify potential for improvement, we support suppli-
ers in developing measures to fulfill our standards. We conduct
another review according to a defined timeframe based on the
sustainability risk measured. If the weak points discovered
were particularly severe and we are unable to confirm any
improvement, we reserve the right to terminate the business
relationship. This occurred in two cases in 2016. We use this
approach to evaluate suppliers with an elevated sustainability
risk at least every five years. The approach itself is reviewed
every two years to identify possibilities for optimization.
For more on "Together for Sustainability," see
basf.com/en/together-for-sustainability
Supplier training
In 2016, we continued our collaborations in China and Brazil to
instruct suppliers on sustainability standards. We have devel-
oped a training program for China together with the East China
University of Science and Technology in Shanghai. In Brazil,
we are pursuing the same approach together with the Espaço
Eco® Foundation. Through these cooperations, 267 suppliers
received training in 2016.
Audit results
Our audits have revealed some deviations with respect to
working hours and payment of the minimum wage, especially
in China. Here, we have called for improvements on the part of
our suppliers. None of our 2016 audits identified instances of
child labor. For the suppliers we reviewed, persons under 18
were excluded from overtime and dangerous work; we found
one case of unauthorized night work. We did not find any inci-
dences of forced labor in 2016.
In August 2012, during an extended mining strike involving
workers of the London-based platinum supplier Lonmin Plc in
Marikana, South Africa, the conflict escalated and culminated
in a violent confrontation between mine workers and armed
South African police. Lonmin mine workers were among the
fatalities. In June 2015, the Farlam Report commissioned by
the South African government was released on the incidents.¹
BASF undertook a thorough examination of the issues
raised. We intensified our regular exchange with both Lonmin
and with local stakeholders, such as leading industry and
human rights representatives. Discussions included Lonmin's
measures for improving the living conditions of its workers.
We regularly conduct audits to monitor our performance and
progress. We use the findings from these audits for continual
improvement.
At the end of 2015, BASF had an Environment, Social,
Governance audit conducted at Lonmin by an internationally
recognized audit firm, in accordance with enhanced TfS
requirements. In the process, deficits were detected in areas
such as the grievance process for workers and residents, as
well as safety and security. Based on the results, BASF
enhanced the questionnaire and expanded it with a view to
industry-specific challenges in the mining sector. A follow-up
audit conducted in January 2017 is currently being evaluated.
We will use our sphere of influence within the platinum value
chain to create awareness for industry-specific challenges and
develop approaches for solutions together.
1
The Farlam Report found that the actions of the South African police forces and the striking miners were the primary cause of the violence. The Report also questioned whether
Lonmin had used its best endeavors to prevent the incident.
94 Management's Report
Responsibility along the value chain - Raw materials
Raw materials
Suppliers
Production
Customers
BASF Report 2016
Responsible resource management is an integral part of
our strategy. It is applied within the company through our
Verbund concept, our innovative products and the use of
renewable raw materials. In the search for alternative raw
materials, we employ solutions that contribute to sustain-
ability.
Strategy
The Verbund system is an important component of our
resource efficiency strategy: The by-products of one plant
often serve as feedstock elsewhere, thus helping us to use
raw materials more efficiently. In 2016, BASF purchased a
total of around 30,000 different raw materials from more than
6,000 suppliers. Some of our most important raw materials
are naphtha, natural gas,
methanol, ammonia and benzene. In
addition to fossil resources, we also employ renewable raw
materials. We use these to manufacture products that either
cannot be made with fossil resources, or only at significantly
greater expense. Renewable raw materials also give us the
opportunity to expand our raw material basis. Depending on
the application, the better solution can be fossil or renewable
raw materials; renewable raw materials are not per se sustain-
able, but can contribute to sustainability by, for example,
reducing greenhouse gas emissions.
Renewable resources
For more on suppliers, see basf.com/suppliers
We set ourselves ambitious goals for safety, security, health
and environmental protection. Our policies and requirements are
constantly updated.
In 2016, around 5.4% of the raw materials we purchased
worldwide were from renewable resources. To make the use of
these materials more competitive, we work on product inno-
vations based on renewable raw materials as well as on
enhancing production processes in reaction technology and
preparation.
We assess the potential risks and weak points of all our acti-
vities from research to production and logistics and the
effects of these on the safety and security of our employees, the
environment or our surroundings. In our databases, we docu-
ment accidents, near misses and safety-related incidents at our
sites as well as along our transportation routes; appropriate
measures are derived according to specific cause analyses. We
foster awareness of workplace safety in every individual with our
worldwide safety initiatives.
We recorded two incidents in 2016 with spillage of more than
200 kilograms of dangerous goods (2015: 2). None of these
transportation incidents had a significant impact on the envi-
ronment (2015: 0).
Accident prevention and emergency response
Dangerous goods inspections expanded in contract
management system
■ Inspection program introduced for container barges
In order to ensure that our processes are even safer and create
globally uniform standards, we introduced extended danger-
ous goods checks into our order management system in
2016.
We broadened the training opportunities for our employees
and added new e-learning modules, such as the introduction
of a multilingual training module in Europe on the road trans-
portation of hazardous goods.
We stipulate worldwide requirements for our logistics ser-
vice providers and assess them in terms of safety and quality.
In 2016, we evaluated around 370 companies in all regions.
Our experts use our own evaluation and monitoring tools as
well as internationally approved schemes.
We added container barges to our existing inspection
program in 2016. This includes not only evaluating the vessels
themselves, but also the management systems of the shipping
companies to review their safety standards.
We regularly evaluate the risks in transporting raw materials
with high hazard potential using our global guideline. It is based
on the guidelines of the European Chemical Industry Council,
CEFIC.
Activities in external networks
We are actively involved in external networks, which quickly
provide information and assistance in emergencies. These
include the International Chemical Environmental (ICE) initiative
and the German Transport Accident Information and Emer-
gency Response System (TUIS), in which BASF plays a coor-
dinating role. In 2016, we provided assistance to other com-
panies in 176 cases worldwide. We apply the experience
we have gathered to set up similar systems in other countries:
For example, we intensified our activities in South America
in 2016.
98 Management's Report
-
Responsibility along the value chain - Environment, health, safety and security - Production
Production
Suppliers
Production
Customers
BASF Report 2016
We never compromise on safety. For occupational and
process safety as well as health and environmental pro-
tection and corporate security, we rely on comprehensive
preventive measures as well as on the involvement of all
employees and contractors. Our global safety and secu-
rity concepts serve to protect our employees, contractors
and neighbors as well as to prevent property damage and
protect information and company assets. In this way, we
help prevent injury, production outages and environmen-
tal damage.
Strategy
■
Global safety standards
Strengthening risk awareness
We have set ourselves ambitious goals for occupational and
process safety as well as health protection. We stipulate
globally mandatory standards for safety, security and health
protection. A worldwide network of experts supports us in
their implementation. Tried-and-true processes and solutions
are documented and made globally available through net-
works and structured exchange. We regularly conduct audits
on safety, security, health and environmental protection in
order to monitor progress toward our goals. Risk-conscious
working behavior is promoted for every individual through
measures like systematic hazard assessments, specific quali-
fication measures and global safety initiatives. Based on our
corporate values, leaders serve as safety role models for our
employees. Together, they contribute to the constant develop-
ment of our safety culture.
_
Global safety initiative
Transportation incidents
In 2014, we had already nearly achieved the BASF Group goal
of reducing the number of worldwide transportation accidents
per 10,000 shipments by 70% from 2003 to 2020. Therefore,
in our reporting on transportation incidents, we have focused
since 2015 on dangerous goods spillages that significantly
impacted the environment. We report on dangerous goods
leaks of BASF products in excess of 200 kilograms on public
transportation routes, provided BASF arranged the transport.
For more, see basf.com/distribution_safety and
basf.com/emergency_response
2015
For more on Responsible Care, see basf.com/en/responsible-care
Audits
Strategy
121 safety, security, health and environmental
protection audits performed at 80 sites
Regular audits help ensure that standards are met for safety,
security, health and environmental protection. We conduct
audits at BASF sites and at companies in which BASF is a
majority shareholder. We have defined our regulations for
Responsible Care audits in a global Group requirement. During
our audits, we create a safety and environmental profile that
shows if we are properly addressing the existing hazard poten-
tial. If this is not the case, we agree on measures and conduct
follow-up audits on their implementation.
Our internal audit system complies with the standards for
external auditing procedures ISO 19011 and OHSAS 18001.
Worldwide, 155 BASF production sites are certified in accor-
dance with ISO 14001 (2015: 180)1. In the BASF Group in
2016, 121 environmental, safety and security audits were
carried out at 80 sites, along with 37 short-notice audits on
various topics at 33 sites. We audited 30 sites with respect to
occupational medicine and health protection.
For more on occupational safety and health protection, see page 98 onward
Costs and provisions for environmental protection in the
BASF Group (million €)
2016
Operating costs for environmental protection
Investments in new and improved
1,011
962
206
346
environmental protection plants and facilities²
Provisions for environmental protection
Management's Report 97
Responsibility along the value chain - Environment, health, safety and security - Transportation and storage
588
538
2 Investments comprise end-of-pipe measures as well as integrated environmental
protection measures.
Our regulations and measures for transportation and ware-
house safety cover the delivery of raw materials, the storage
and distribution of chemical products among BASF sites
and customers, and the transportation of waste from our
sites to the disposal facilities.
3 Values shown refer to December 31 of the respective year.
1 In addition to changes in the site portfolio, the decrease mainly resulted from the sites' aim to be certified in accordance with ISO 50001 due to our energy efficiency goal.
BASF Report 2016
measures and remediation³
Transportation and storage
Suppliers
Production
Customers
Carbon footprint and climate protection products
■ Customers' use of climate protection products sold
in 2016 avoids 540 million metric tons of CO2
equivalents
■ Reporting on greenhouse gas emissions along the
entire value chain
3 Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes
Greenhouse gas emissions along the BASF value chain in 20164
(million metric tons of CO, equivalents)
2 Scope 1 and Scope 2 (location-based) according to the GHG Protocol Standard, excluding emissions from the generation of steam and electricity for sale to third parties;
information on market-based Scope 2 emissions can be found in the GRI and Global Compact Index; see basf.com/en/gri_gc
Prevention of greenhouse gas emissions through the use of
BASF products (million metric tons of CO2 equivalents)
57.423
57.262
599
494
BASF has been publishing a comprehensive corporate carbon
footprint since as early as 2008. This reports on all emissions
along the value chain and shows the volume of emissions
prevented through the use of our climate protection products.
We plan our climate protection activities along the value chain
based on our corporate carbon footprint.
55.759
617
Through various measures to reduce our raw material and
energy requirements, the emission of greenhouse gases asso-
ciated with producing the raw materials was decreased by a
total of around 155,000 metric tons in 2016.
For more on our emissions reporting, see
basf.com/corporate_carbon_footprint
Our climate protection products help us offer solutions to
our customers to avoid greenhouse gas emissions over their
entire lifecycle as compared with reference products. Accord-
ing to the systematic sustainability analysis we conduct on our
portfolio using the Sustainable Solution SteeringⓇ method -
such products are referred to as "Accelerator" solutions as
using them contributes positively to climate protection and
energy. One example is our Green Sense® Concrete tech-
nology for sustainable construction: The optimization of the
concrete's composition allows for reduced greenhouse gas
emissions compared with conventional concrete production.
61 Suppliers
Purchased products,
services and capital
goods (C 1, 2, 3a)
22 BASF
Production (including genera-
tion of steam and electricity)
18 Disposal
Incineration with energy
recovery, landfilling (C 12)
4 Transport
Transport of products,
employees' commuting and
business travel (C 4, 6, 7, 9)
46 Customers
Emissions from
the use of end
products (C 11)
4 Other
(C 3b, 3c, 5,
8, 13, 15)
According to Greenhouse Gas Protocol, Scope 1, 2 and 3; categories within Scope 3
are shown in parentheses
An analysis of 24 climate protection product groups revealed
that customers' use of products sold in 2016 helped to avoid
540 million metric tons of CO2 equivalents. Every product
makes an individual contribution in the value chain of customer
solutions. Value chains are assessed in terms of BASF's eco-
nomic share of the respective customer solution. On average,
11% of the emissions avoided were attributable to BASF in
2016. The calculation of avoided greenhouse gas emissions
was based on the chemical industry standard of the Interna-
tional Council of Chemical Associations (ICCA) and the World
Business Council for Sustainable Development (WBCSD).
()
0.564
-
0.587
39.5
2016
19.976
Emissions along the entire value chain
38.6
42.3
27.3
90
2013
2014
2015
2016
2020 Goal
Energy supply and efficiency
Verbund system as important component of our
energy efficiency strategy
Gas and steam turbines in our combined heat and power
plants enable us to fulfill around 70% of the electricity demand
of the BASF Group. Compared with separate methods of
generating steam and electricity, we saved 14.0 million MWh
of fossil fuels and prevented 2.8 million metric tons of carbon
emissions in 2016. The Verbund system is an important com-
ponent of our energy efficiency strategy: Waste heat from one
plant's production process is used as energy in other plants. In
this way, the Verbund saved us around 19.0 million MWh in
2016, which translates to 3.8 million metric tons less of CO2
released to the environment. With combined power and steam
generation as well as our continuously enhanced Energy Ver-
bund, we were thus able to prevent a total of 6.6 million metric
tons of carbon emissions in 2016.
We were able to further optimize the resource and energy
consumption of our production in numerous projects around
the world in 2016. New highly efficient combined heat
and power plants started up at the German sites in Düsseldorf-
Holthausen and Illertissen as well as at Pontecchio Marconi in
Italy. Furthermore, process improvements at many additional
sites have led to savings in steam and electricity.
We also rely on locally available energy sources for energy
supply at our sites. Especially in the growing Asian market, we
and our energy suppliers also utilize coal as an energy source
since the more climate-friendly natural gas is not available in
sufficient quantities at competitive prices.
We are exploring the use of renewable energies. These
can only become a permanent part of our energy mix if they
are competitive in terms of supply security and cost. Our
research also contributes to increasing the efficiency of tech-
nologies for the use of renewable energy sources.
106 Management's Report
Responsibility along the value chain - Environment, health, safety and security - Energy and climate protection
Key indicators for energy and climate protection in BASF operations excluding Oil & Gas
Greenhouse gas emissions² (million metric tons of CO2 equivalents)
Specific greenhouse gas emissions (metric tons of CO, equivalents per ton of sales product)
Primary energy demand³ (million MWh)
Energy efficiency (kilograms of sales product per MWh)
1
The values for baseline 2002 were not adjusted to reflect the currently applied global warming potential factors.
BASF Report 2016
Baseline 2002¹
2015
24.713
20.133
0.897
Without the use of BASF's
climate protection products
from third parties
Emissions avoided.
Production
85%
Cooling
Discharge
1,644'
Surface water / freshwater
1,360
Brackish water / seawater
200
Groundwater
66
Cooling
6,214
Drinking water
Thereof recirculating
4,754
21
Reusable wastewater
once-through
1,460
Surface water / freshwater
Brackish water / seawater
Groundwater
1,428
187
11
Certified energy management systems (ISO 50001) introduced at
BASF Group sites worldwide, in terms of primary energy demand (%)
2
Production²
247
External treatment plant
15%
1,110
6,461
1,649'
With the use of BASF's
570
climate protection products
540 million metric tons
BASF Report 2016
Water
Suppliers
Production
Management's Report 107
Responsibility along the value chain - Environment, health, safety and security - Water
Customers
Water is of fundamental importance in chemical produc-
tion. It is used as a coolant, solvent and cleaning agent,
as well as to make our products. We are committed to
its responsible use along the entire value chain and espe-
cially in our production sites' water catchment areas. We
have set ourselves a global goal for sustainable water
management.
Strategy
Sustainable water management
We aim to use water as sparingly as possible and further
reduce emissions to water. To do so, we have set out a Group
directive with globally applicable standards.
We are introducing sustainable water management at all
relevant production sites. These include our major Verbund
sites as well as the sites in water stress areas, or regions in
which more than 60% of available water is used by industry,
household and agriculture. We consider the quantitative,
qualitative and social aspects of water use. We want to iden-
tify where we can improve at our sites, and use as little water
as possible, especially in water stress areas.
Together with the city of Guaratinguetá, Brazil, and the
Fundação Espaço ECO®, we are engaged in the restoration
of the local river basin at our site in Guaratinguetá, Brazil,
which provides 90% of the local population's water supply.
These efforts aim to improve water quality and increase its
availability.
We offer our customers solutions that help purify water and
use it more efficiently while minimizing pollution.
In order to ensure transparency in our reporting on water,
we once again took part in CDP reporting in 2016. According
to CDP, an international nonprofit organization, BASF is a
world leader in sustainable water management and was
included for the first time in CDP's Water A List. Of the
607 companies evaluated, only 24 of them received the top
score of "A" - among them, BASF. CDP's evaluation of sus-
tainable water management includes how transparently
companies report on their water management activities and
what they do to reduce risks, such as water scarcity. CDP
also assesses the extent to which product developments -
even at the customers of the companies under evaluation
can contribute to sustainable water management.
For more on the CDP water survey, see basf.com/en/cdp
Global goal
By 2025, we want to introduce sustainable water manage-
ment at all sites in water stress areas and at our Verbund sites,
covering 93% of BASF's entire water abstraction. We achieved
42.6% of this goal in 2016.
Water stress areas around the world
Source: Pfister et al., 2009
108 Management's Report
Responsibility along the value chain - Environment, health, safety and security - Water
BASF Report 2016
Water in the BASF Group 2016 (million cubic meters per year)
Abstraction/
withdrawal
Use
Conversion factor: 0.75 MWh per metric ton of steam
347
26,936
Total:
BASF Group's greenhouse gas emissions according to the Greenhouse Gas Protocol¹ (1,000 metric tons of CO2 equivalents)
BASF operations including Oil & Gas
2002
2015
Scope 12
CO2 (carbon dioxide)
N2O (nitrous oxide)
CH(methane)
HFC (hydrofluorocarbons)
SF (sulfur hexafluoride)
Scope 23
Total
CO₂
Sale of energy to third parties (Scope 1)4
CO
Total
2016
14,634
16,496
16,215
6,407
600
528
244
88
45
61
119
87
Responsibility along the value chain - Environment, health, safety and security - Energy and climate protection
0
BASF Report 2016
2 The figures for the 2011 and 2012 business years were not adjusted to the currently
applied factors for global warming potential. For more information on our data
collection methods, see page 104.
BASF Report 2016
18
Management's Report 103
Responsibility along the value chain - Environment, health, safety and security - Energy and climate protection
Energy and climate protection
Suppliers
Production
Customers
As an energy-intensive company, we are committed to
energy efficiency and global climate protection. We want
to reduce emissions along the value chain and utilize, for
example, efficient technologies for generating steam and
electricity, energy-efficient production processes, and
comprehensive energy management. Our climate protec-
tion products make an important contribution toward
helping our customers avoid emissions.
Strategy
We are committed to energy efficiency and global
climate protection along the value chain
We want to reduce greenhouse gas emissions in our produc-
tion and along the entire value chain. To this end, we have
thoroughly analyzed the greenhouse gas emissions from our
production in the past few years and implemented compre-
hensive reduction measures. This is how, for example, we
have been able to reduce nitrous oxide emissions by more
than 95% since 1997.
Comparisons with European emissions trading bench-
marks show that our greenhouse gas-intensive chemical
plants operate at above-average efficiency. To supply our
production sites with energy, we rely on highly efficient com-
bined heat and power plants with gas and steam turbines, and
on the use of heat released by production processes. Around
50% of BASF Group emissions in 2016 resulted from steam
and electricity generation in our power plants as well as in our
energy suppliers' power plants.
Our success also depends on the long-term security and
competitiveness of our energy supplies. Furthermore, we are
committed to energy management that helps us analyze and
further improve the energy efficiency of our plants.
We offer our customers solutions that help prevent green-
house gas emissions and improve energy and resource
efficiency. Around half of our total annual research and devel-
opment spending goes toward developing these products and
optimizing our processes.
Our climate protection activities are based on comprehensive
emissions controlling. We report on greenhouse gas emissions
in accordance with the Greenhouse Gas Protocol Standard,
as well as the sector-specific standard for the chemical indus-
try. Since 2004, we have participated in the international
non-profit organization CDP's program for reporting on data
relevant to climate protection. Reporting to CDP entails an
annual analysis performed by our experts of the opportunities
and risks that climate change poses for BASF. BASF achieved
a score of A- in CDP's rating for 2016, awarding it "Leader-
ship" status. Companies on the "Leadership" level are distin-
guished by factors such as the completeness and trans-
parency of their reporting. They also pursue comprehensive
approaches in managing the opportunities and risks associat-
ed with climate change as well as emissions reduction strate-
gies to achieve company-wide goals.
We advocate climate protection by supporting initiatives
to this end. The G20 Summit will take place in Hamburg in
July 2017, an annual meeting between leaders of state and
government of the most influential industrialized countries and
emerging markets. Companies from 20 countries - the
Business 20 (B20) are working on recommendations for
these political leaders. BASF is leading the working group on
energy, climate and resource efficiency. The group especially
aims for a political environment that enables companies like
BASF to make essential contributions to climate protection
using their power of innovation.
For more on climate protection, see basf.com/climate_protection
Reduction of greenhouse gas emissions per metric ton of sales
product in BASF operations excluding Oil & Gas¹, 2 (%)
2002
Baseline
2011 2012 2013 2014 2015 2016
2020 Goal
-34.6
-33.4
-34.1
-33.9
-34.6
-37.2
-40.0
1 The figure for 2011 was not adjusted to reflect the scope of consolidation pursuant
to International Financial Reporting Standards 10 and 11. For more information on
our data collection methods, see page 4.
104 Management's Report
37.6 million MWh
1
5,243
70%
2
Purchased
30%
Electricity
15.0 million
MWh
3
Fossil and residual fuels used for power generation in
power plants of the BASF Group
83.6%
0.4%
2.2%
Natural gas
31.4 million MWh
Heating oil
0.1 million MWh
Coal
Steam supply
0.9 million MWh
-23
1 Internally generated
52%
Waste heat
45%
2
Steam
40.7 million
MWh¹
13.8%
Residual fuels
5.2 million MWh
1
Purchased
3%
Internally generated
0
1
Electricity supply
3,795
26,589
21,099
3,884
20,759
1,071
22,170
1,161
21,920
1 BASF reports separately on direct and indirect emissions from the purchase of energy. Scope 1 emissions encompass both direct emissions from production and generation
of steam and electricity, as well as direct emissions from the generation of steam and electricity for sale. Scope 2 emissions comprise indirect emissions from the purchase of
energy for BASF's use.
² Emissions of N2O, CH, HFC und SF have been translated into CO2 emissions using the Global Warming Potential, or GWP, factor. GWP factors are based on the Intergovernmental
Panel on Climate Change (IPCC) 1995 (2002 emissions) and IPCC 2007, errata table 2012 (2015 and 2016 emissions). HFC (hydrofluorocarbons) are calculated using the GWP
factors of the individual components.
3 Location-based approach. Information on the calculation of market-based Scope 2 emissions can be found in the GRI and Global Compact Index; see basf.com/en/gri_gc
4 Includes sale to BASF Group companies; as a result, emissions reported under Scope 2 can be reported again in some cases.
Global goals
■
Reduction of greenhouse gas emissions per metric
ton of sales product
■Introduction of energy management systems in
accordance with ISO 50001
We aim to reduce our greenhouse gas emissions per metric
ton of sales product by 40% by 2020, compared with baseline
2002. In 2016, we achieved a reduction of 37.2% (2015:
reduction of 34.6%). Since 1990, we have been able to lower
our overall greenhouse gas emissions from BASF operations
(excluding Oil & Gas) by 50.2% and even reduce specific
emissions by 75.4%.
We set ourselves a new energy efficiency goal in 2015
covering both the chemicals and the oil and gas businesses.
By 2020, we want to have introduced certified energy
management systems (DIN EN ISO 50001) at all relevant pro-
duction sites5. Taken together, this represents 90% of BASF's
primary energy demand. This is one of the ways in which we
intend to identify and carry out improvements in energy
efficiency, reducing not only greenhouse gas emissions and
saving valuable energy resources, but also increasing the
BASF Group's competitive ability.
2020 Goal
Reduction of greenhouse
gas emissions per metric
ton of sales product
Baseline 2002
BASF operations excl. Oil & Gas
-40%
2020 Goal
Coverage of our primary
energy demand through
certified energy management
systems at all relevant sites
BASF operations incl. Oil & Gas
90%
In 2016, workshops were conducted in all regions to introduce
our energy management systems. This is how, for example, an
energy savings potential of over €1 million per year was identi-
fied during system implementation at three pilot plants at the
largest South American site in Guaratinguetá, Brazil. It is
already starting to be realized. All energy efficiency measures
are recorded and analyzed in a global database and made
available to Group sites as best practices. Currently, over
100 measures are being pursued to reduce energy consump-
tion and increase competitive ability. External audits in accor-
dance with ISO 50001 were already conducted at the first two
Chinese sites in the Shanghai metropolitan region in 2016.
At the moment, 31 sites are certified worldwide, representing
42.3% of our primary energy demand.
5 The selection of relevant sites is determined by the amount of primary energy used and local energy prices.
BASF Report 2016
Management's Report 105
Responsibility along the value chain - Environment, health, safety and security - Energy and climate protection
Energy supply of the BASF Group 2016
2
1 The difference between the volume of water drawn and the volume discharged is primarily attributable to evaporation losses during closed-circuit cooling.
2 Total from production processes, graywater, rinsing and cleaning in production
For more on the sustainability analysis of our product portfolio,
see page 30 onward
Waste management in the BASF Group (million metric tons)
0.44
Hazardous waste
0.87
0.90
Transported hazardous waste
0.23
0.27
Management of contaminated sites
■ Systematic management of contaminated sites
ensured
We develop remediation solutions that combine nature con-
servation, climate protection concerns, costs, and social
responsibility. This means making customized decisions on a
case-by-case basis, founded on the legal framework and
current technological possibilities. We set out global standards
for our approach to managing contaminated sites. A world-
wide network of experts ensures their proper implementation.
We have been documenting relevant sites in a contami-
nated site database since 2013. Ongoing remediation work
around the world continued on schedule and planning was
concluded on future landfill remediation projects.
1 Comprises all production waste and hazardous waste from construction activities
2 The classification of waste into hazardous and nonhazardous waste is performed
according to local regulations.
BASF Report 2016
Forecast
0.46
Opportunities and risks report
Nonhazardous waste
0.72
0.27
Thermally recovered
0.51
0.41
Waste disposed of
1.33
1.34
In underground landfills
0.14
0.14
In surface landfills
0.47
0.48
Through incineration
0.72
Classification of waste for disposal²
0.26
Management's Report 111
Forecast Opportunities and risks report
Potential successes that
exceed our defined goals
Law
Finance
Exchange rate volatility
Other financial opportunities and risks
<
€100 million
≥ €100 million < €500 million
≥
€500 million < €1,000 million
=
€1,000 million < €1,500 million
Outlook
2017 +
1 Using a 95% confidence interval per risk factor based on planned values;
summation is not permissible.
According to our assessment, there continue to be no signifi-
cant individual risks that pose a threat to the continued exis-
tence of the BASF Group. The same applies to the sum of
individual risks, even in the case of another global economic
crisis.
Information technology
Opportunities
Acquisitions/divestitures/cooperations
Investments/production
Risks
Events that can negatively
impact the achievement
of our goals
Risk management
Identifying opportunities
and risks as early as possible
and planning effective
courses of action
The goal of BASF's risk management is to identify and
evaluate opportunities and risks as early as possible and
to take appropriate measures in order to seize opportuni-
ties and limit business losses. The aim is to avoid risks
that pose a threat to BASF's continued existence and to
make improved managerial decisions to create value. We
understand risk to be any event that can negatively impact
the achievement of our short-term operational or long-
term strategic goals. We define opportunities as potential
successes that exceed our defined goals.
In order to effectively measure and manage identified opportu-
nities and risks, we quantify these in terms of probability and
economic impact in the event they occur. We use statistical
methods to aggregate opportunities and risks into risk factors.
This way, we achieve an overall view of opportunities and risks
at a portfolio level, allowing us to take effective measures for
risk management.
Overall assessment
■ Significant risks and opportunities arise from overall
economic developments and volatility in exchange
rates and margins
For 2017, we expect the global economy to continue to grow
at around the same pace as the previous year. Important
opportunities and risks for our earnings are associated with
uncertainty regarding market growth, the development of key
customer industries, and volatility in foreign currency exchange
rates and margins. A considerable slowdown of the Chinese
economy continues to pose significant risks. Such a develop-
ment would negatively impact demand for intermediate and
investment goods. This would impact the emerging markets
that export raw materials as well as the advanced economies.
This is especially true for Europe. Further risks to the global
economy arise from an escalation of geopolitical conflicts and
an increased tendency toward protectionism.
Potential short-term effects on EBIT of key opportunity
and risk factors subsequent to measures taken¹
Possible variations related to:
Business environment and sector
Market growth
Margins
Competition
Regulation/policy
Company-specific opportunities and risks
Purchasing/supply chain
Personnel
Recycled
0.68
0.77
Suppliers
Production
Management's Report 109
Responsibility along the value chain - Environment, health, safety and security - Air and soil
Customers
We want to further reduce emissions to air from our pro-
duction, prevent waste and protect the soil. We have set
ourselves standards for doing so in global directives. If no
recovery options are available for waste, we dispose of it
in a proper and environmentally responsible manner.
Strategy
■
■
Regular monitoring of emissions to air
Professional disposal of hazardous waste
■ Systematic management of contaminated sites
Regular monitoring of our emissions to air is a part of environ-
mental management at BASF. Aside from greenhouse gases,
we also measure emissions of other pollutants into the atmo-
sphere. Our reporting does not take into account air pollutant
emissions from oil and gas operations due to their substantial
fluctuation during exploration phases.
Our Raw Material Verbund helps us prevent and reduce
waste. We regularly carry out audits to inspect external waste
disposal companies, ensuring that our hazardous waste in
particular is properly disposed of. In this way, we also contrib-
ute to preventive soil protection and keep today's waste from
becoming tomorrow's contamination.
When treatment is required for soil and groundwater con-
tamination at active and former BASF sites, proper remediation
measures are reviewed based on prevailing legal and current
technical standards, and undertaken as necessary.
Emissions to air
Further reduction of emissions
Air and soil
Absolute emissions of air pollutants from our chemical plants
amounted to 26,735 metric tons in 2016. Emissions of
ozone-depleting substances as defined by the Montreal Pro-
tocol totaled 25 metric tons in 2016 (2015: 23 metric tons).
Emissions of heavy metals in 2016 amounted to 3 metric tons
(2015: 4 metric tons).
BASF Report 2016
For more, see basf.com/water
In 2016, around 23% of our production sites were located
in water stress areas. Around 1% of BASF's total water supply
was abstracted from these sites.
2025 Goal
Introduction of sustainable
water management at all
production sites in water stress
areas and at all Verbund sites
BASF operations excl. Oil & Gas
Water use
Using water responsibly
100%
Our water usage totaled 1,649 million cubic meters in 2016.
This demand was covered for the most part by surface water,
such as rivers and lakes. At some sites, we use alternative
sources such as treated municipal wastewater, brackish water
or seawater, reducing our need for freshwater.
We predominantly use water for cooling purposes (85%),
after which we recirculate it back to our supply sources. We
recirculate as much water as possible in order to withdraw
less. Our larger sites have recooling plants that allow water to
be reused several times and which reduce the temperature of
used cooling water before it is discharged back into a body of
water.
The supply, treatment, transportation and recooling of water is
associated with a considerable energy demand. We employ
various means in our efforts to minimize this as much as
possible. We are constantly working to optimize our energy
consumption and the amount of water we use, and to adapt
to the needs of our business and the environment.
Emissions to water
■
Further reduction of emissions
A total of 1,644 million cubic meters of water were discharged
from BASF production sites in 2016, including 184 million
cubic meters of wastewater from production. Emissions of
nitrogen to water amounted to 2,900 metric tons (2015:
3,000 metric tons). We were able to achieve this improvement
by optimizing processes and exchanging products, for exam-
ple. Around 15,900 metric tons of organic substances were
emitted in wastewater (2015: 17,300 metric tons). Our waste-
water contained 23 metric tons of heavy metals (2015:
25 metric tons). Phosphorus emissions amounted to
310 metric tons (2015: 460 metric tons). Our wastewater is
treated through different methods depending on the type and
degree of contamination - including biological processes, oxi-
dation, membrane technologies, precipitation or adsorption.
In order to avoid unanticipated emissions and the pollution
of surface or groundwater, we create water protection strate-
gies for our production sites. This is mandatory for all produc-
tion plants as part of the Responsible Care initiative. The
wastewater protection plans involve evaluating wastewater in
terms of risk and drawing up suitable monitoring approaches.
We use audits to check that these measures are being imple-
mented and complied with.
அ
Our product portfolio contains a variety of catalysts used in
the automotive sector and in industry to reduce the emission
of air pollutants.
Emissions to air (metric tons)
Air pollutants from BASF operations excluding Oil & Gas
28,585
110 Management's Report
Responsibility along the value chain - Environment, health, safety and security - Air and soil
BASF Report 2016
Waste management
- Total waste volume slightly above prior-year level
Waste prevention is our topmost goal. If waste is unavoidable,
we review the options for recycling or energy recovery, using
BASF's existing Verbund structures for efficient waste man-
agement. Total waste volume amounted to 2.10 million metric
tons in 2016 (+3.7%).
2016
2015
Total waste generation¹
2.10
Thereof from oil and gas exploration
0.06
2.02
0.05
Waste recovered
26,735
2,216
2,229
NH (ammonia) and other inorganic substances
Total
CO (carbon monoxide)
2016
2015
3,585
3,813
NOX (total nitrogen oxides)
11,143
Ultimately, however, residual risks remain in all entrepre-
neurial activities which even comprehensive risk management
cannot exclude.
11,058
4,824
5,140
1,872
3,028
Dust
3,082
3,330
NMVOC (nonmethane volatile organic compounds)
SO (total sulfur oxides)
Forecast Opportunities and risks report
112 Management's Report
Instruments
The BASF Group's risk management process is based on the
international risk management standard COSO II Enterprise
Risk Management Integrated Framework (2004), and has
the following key features:
Organization and responsibilities
- Risk management is the responsibility of the Board of Execu-
tive Directors, which also determines the processes for
approving investments, acquisitions and divestitures.
We pursue our goal by applying the European Water Steward-
ship standard, which rests on four principles: sustainable
water abstraction, maintaining good water quality, preserving
conservation areas, and ensuring continuous improvement
processes, including in cooperation with other users.
- A network of risk managers in the business, research, func-
tional and corporate units advances the implementation of
appropriate risk management practices in daily operations.
The management of specific opportunities and risks is largely
delegated to the business units and is steered at a regional
or local level. Risks relating to exchange rates and raw
-
1
Aggregation at a Group level
material prices are an exception. In this case, there is an
initial consolidation at a Group-wide level before derivative
hedging instruments, for example, are used.
- The internal auditing unit (Corporate Audit) is responsible for
regularly auditing the risk management system established
by the Board of Executive Directors in accordance with
Section 91(2) of the German Stock Corporation Act. Further-
more, as part of its monitoring of the Board of Executive
Directors, the Supervisory Board considers the effectiveness
of the risk management system. The suitability of the early
detection system we set up for risks is evaluated by our
external auditor.
- The Risk Management Process Manual, applicable through-
out the Group, forms the framework for risk management
and is implemented by the business units according to their
particular business conditions.
- A catalog of opportunity and risk categories helps to identify
all relevant opportunities and risks as comprehensively as
possible.
- We use standardized evaluation and reporting tools for the
identification and assessment of risks. The aggregation of
opportunities, risks and sensitivities at the business and
Group level using a Monte Carlo simulation helps us to iden-
tify effects and trends across the company.
- The BASF Group's management is informed about opera-
tional opportunities and risks (observation period of up to
The names of some individual units were changed as of January 1, 2017. For more information, see the section "Organization and responsibilities."
Organization of BASF Group's risk management¹
- BASF's Chief Compliance Officer (CCO) manages the imple-
mentation of our Compliance Management System, sup-
ported by additional compliance officers worldwide. The
CCO regularly reports to the Board of Executive Directors on
progress in the program's implementation as well as on any
significant results. Furthermore, the CCO provides a status
report to the Supervisory Board's Audit Committee at least
once each year, including any major developments. In the
event of significant incidents, the Audit Committee is imme-
diately informed by the Board of Executive Directors.
Decentralized management of specific opportunities
and risks
- The Board of Executive Directors is supported by the units
Finance; Corporate Controlling; Strategic Planning &
Controlling; Legal, Taxes, Insurance & Intellectual Property;
and the Chief Compliance Officer. Effective January 1, 2017,
the Finance corporate unit and the Legal, Taxes, Insurance
and Intellectual Property corporate unit were both renamed
functional units. Competence centers were relabeled either
functional units or research units. The Strategic Planning &
Controlling unit is now called Corporate Development. The
new nomenclature had no effect on the existing risk man-
agement processes. The aforementioned units continue to
coordinate the risk management process at a Group level
and provide the structure and appropriate methodology.
Opportunity and risk management is thus integrated into the
strategy, planning and budgeting processes.
■
Corporate Audit
Supervisory Board
Board of Executive Directors
and reporting
Finance
Corporate
Controlling
Corporate Units
Strategic Planning
& Controlling
Divisions
Chief Compliance Officer
Legal, Taxes, Insurance
& Intellectual Property
BASF Report 2016
External Auditors
Verbund Sites
Competence Centers
Risk management process
■ Integrated process for identification, assessment
Regions
■
Emerging markets of Asia
5.6%
0.7%
0.8%
Trends in gross domestic product 2017-2019
(Average annual real change)
The significant risks and opportunities that could affect our
forecast are described on pages 111 to 118.
South America
World
2.6%
European Union
Japan
2.0%
BASF Report 2016
European Union
United States
2.3%
World
Outlook for gross domestic product 2017
(Real change compared with previous year)
Following the administration change in the United States,
economic prospects for the United States are especially diffi-
cult to predict. We assume that this uncertainty will be reflect-
ed in a greater reluctance to invest in the manufacturing and
service sectors. Nevertheless, overall economic growth in
2017 will quicken somewhat, as investments in the oil and gas
industry are unlikely to continue declining. While the tax cuts
planned by the new U.S. administration could have positive
effects on growth, the expected protectionist measures and
the stronger U.S. dollar pose risks to the country's economy.
Economic growth in the European Union is expected to slow
down considerably in 2017. In the United Kingdom, uncer-
tainty as to the terms of exit from the European Union is likely
to curb investment and private consumption. This weaker
dynamic will have a dampening effect on the growth of Britain's
E.U. trading partners, including Germany, Italy, France and
Spain. Growth will presumably remain at a stable higher level
in the eastern E.U. countries. We expect the recession in
Russia to end, supported by our forecast of a slight recovery
in the oil price.
Weaker growth likely in the European Union
Further slowing of growth expected for China
■Slight upturn probable in the United States
■ End of recession anticipated for Russia and Brazil
Trends in the global economy in 2017
The global economy will presumably grow by 2.3% in
2017, about as fast as in 2016 (+2.3%). In light of signifi-
cant political uncertainty, volatility is likely to remain high.
We forecast a considerable slowdown in growth in the
European Union. For the United States, we currently
anticipate a slight upturn in growth. Growth in China is
likely to continue its downward trend. We expect the
recession in Brazil and Russia to end. We assume that
global chemical production will grow by 3.4% in 2017,
comparable with the rate of 2016. For 2017, we predict an
average price of $55 per barrel for Brent blend crude oil
and an exchange rate of $1.05 per euro.
Management's Report 119
Forecast Economic environment in 2017
Economic environment in 2017
1.5%
1.3%
United States
For the construction sector, we are assuming that the
solid growth rates will continue overall. Construction volumes
will grow only moderately in western Europe. A sharp increase
in Germany and weak growth in France and Italy will contrast
with a shrinking market in the United Kingdom. In the eastern
E.U. countries, construction activity will recover somewhat
after the strong declines of the previous year. However, we still
see no increase in activity in Russia. Construction in North
America is expected to grow at a moderate pace. We do not
anticipate growth impetus in the infrastructure sector in the
Emerging markets of Asia
■
Outlook for the chemical industry
Management's Report
Forecast Economic environment in 2017
BASF Report 2016
We expect stable to slightly accelerating growth in agricul-
tural production in 2017, given the low level of agricultural
production growth in 2016. Record yields in some regions - of
corn and soy in North America and wheat in eastern Europe,
for example - contrasted with declining yields in parts of
South America and Asia in particular, due to the negative
effects of El Niño as well as weaker monsoon rains. Global
demand for bioethanol in 2017 will remain dampened by lower
prices in the energy sector. Against this backdrop, we expect
prices for agricultural raw materials to remain under pressure
in 2017.
In the health and nutrition sector, growth should once
again match the levels of recent years. We expect the increase
to be slightly higher overall in the European Union and in North
America. The fast pace of growth in this sector in Asia will
probably let up slightly in 2017. In this industry, too, we expect
production to recover in South America.
The electronics industry is likely to expand its production
at a similarly strong rate as in 2016. We anticipate stable
growth in Asia, the center of the global electronics industry,
at a level comparable to that of the previous year. The increase
will probably be somewhat higher year-on-year in North
America.
Consumer goods production will presumably grow slightly
faster in 2017 than in the previous year. The increase will
remain weak in western Europe; eastern Europe will see higher
rates, albeit somewhat lower than in 2016. After a slight
decline in the previous year, we once again expect modest
growth in North America. In Asia, which accounts for over half
of the world's production of consumer goods, growth will
probably remain stable at a high level. For South America, we
predict consumer goods output will stagnate following last
year's considerable decline.
short term; financing conditions and the volume of a potential,
state-funded infrastructure program remain unclear. In China,
we continue to expect support measures for the construction
industry; growth there will nevertheless abate. We still expect
the other Asian emerging markets to show stable growth rates
in the construction industry. In Japan, government spending
programs should ensure additional investments in infrastruc-
ture. The construction market in South America is likely to
recover somewhat after the declines of recent years. Given a
background of continuing weak oil prices, only a slight recovery
in construction activity is expected in the Middle East.
BASF Report 2016
In the energy and raw materials sector, production will
presumably grow again in 2017 after stagnating in 2016. How-
ever, in Europe and South America, we only anticipate a slight
increase in production volumes. Higher raw material prices
and the return of stronger demand are likely to provide some-
what faster growth in North America. Production will expand
only moderately in the emerging markets of Asia; this will be
partly offset by rising imports from Australia.
We expect an economic slowdown in the transportation
sector overall compared with 2016. After three years of solid
growth, automotive production is likely to expand only slowly
in western Europe, while other branches of the transportation
industry could increase their growth rates. A turnaround can
be expected in the Russian automotive market. The eastern
European automotive market will begin growing again slightly
as a result, even if at a low level. In North America, we expect
production to stagnate overall. U.S. automotive production will
probably shrink slightly; in Mexico, on the other hand, new
production-line startups are expected to lead to growth. In
South America, we anticipate slight increases in production
once again for 2017. Growth in automotive production in
China will weaken after the significant gains seen in 2016.
2.0%
Global industrial production in 2017 is likely to grow marginally
faster than in 2016, at 2.3%. This will be largely attributable to
the end of the severe recession in South America, where
industrial production should once again show slight growth. In
the emerging markets of Asia, growth in industrial production
will abate slightly, from 5.5% to 5.2%. In the advanced econo-
mies, it will probably remain weak, at under one percent.
Outlook for key customer industries
BASF Report 2016
Forecast Economic environment in 2017
120 Management's Report
We anticipate an end to the economic downturn in South
America. Leading indicators suggest that Brazil has bottomed
out. Falling interest rates and declining inflation could increas-
ingly support readiness to invest in the country; export demand
is also likely to rise. We forecast economic recovery in Argen-
tina. Decreasing inflation, a stable exchange rate and a better
investment climate should provide impetus for growth.
Japan's gross domestic product is expected to maintain
its merely minimal upward trend in 2017. Monetary and fiscal
policy will continue to provide some growth impetus; however,
investment momentum and private consumption will remain
on the slow side in an environment of weak domestic demand.
Moreover, we do not expect any significant impulses that
would boost exports.
In the emerging markets of Asia, we expect growth to con-
tinue weakening in 2017. Against the backdrop of economic
restructuring in China, we anticipate a further cooldown in
economic momentum. We predict growth at levels compara-
ble to 2016 for the other countries in the region. While devel-
opments in China will probably exercise a dampening effect,
raw material prices and demand for imports from South
America and Russia should stabilize. The region's economy is
supported by a solidly growing IT and communications
industry.
1.8%
South America
0.8%
Japan
5.7%
Marginally higher growth expected in global industrial
production for 2017
For more on sustainability management, see page 29 onward
For more on energy and climate protection, see page 103 onward
For more on opportunities and risks from energy policies, see page 114
BASF Report 2016
In terms of upcoming opportunities and risks, material
aspects identified included: energy and climate, water,
resources and ecosystems, responsible production, and
employment and employability. In addition to specific require-
ments for these aspects, discussion is growing surrounding
the internalization of external effects.
Long-term demand development
Long-term opportunities and risks
Most employees are granted company pension benefits from
either defined contribution or defined benefit plans. We pre-
dominantly finance company pension obligations externally
through separate plan assets. This particularly includes BASF
Pensionskasse WaG and BASF Pensionstreuhand e.V. in
Germany, in addition to the large pension plans of our Group
companies in North America, the United Kingdom and Swit-
zerland. To address the risk of underfunding due to market-
related fluctuations in plan assets, we have investment strate-
gies that align return and risk optimization to the structure of
the pension obligations. Stress scenarios are also simulated
regularly by means of portfolio analyses. An adjustment to the
interest rates used in discounting pension obligations leads
immediately to changes in equity. To limit the risks of changing
financial market conditions as well as demographic develop-
ments, employees have been almost exclusively offered
defined contribution plans for future years of service in recent
years.
Risks from pension obligations
Our senior executives have the opportunity to participate in a
share-price-based compensation program. The need for pro-
visions for this program varies according to the development
of the BASF share price and the MSCI World Chemicals Index;
this leads to a corresponding increase or decrease in person-
nel costs.
Long-term incentive program for senior executives
Management's Report 117
Forecast Opportunities and risks report
BASF Report 2016
The risk of an asset impairment occurs if the assumed interest
rate in an impairment test increases, the predicted cash flows
decline, or investment projects are suspended. In the current
business environment, we consider the risk of impairment of
individual assets such as customer relationships, technologies
and trademarks, as well as goodwill, to be nonmaterial. Never-
theless, a continuing decline in the price of oil below our
assumed planning level would result in impairment risks for the
Oil & Gas segment's assets.
Impairment risks
We limit country-specific risks with measures based on inter-
nally determined country ratings, which are continuously
updated to reflect changing environment conditions. We
selectively use investment guarantees to limit specific
country-related risks. We lower credit risks for our financial
investments by engaging in transactions only with banks with
good credit ratings and by adhering to fixed limits. Creditwor-
thiness is continuously monitored and the limits are adjusted
accordingly. We reduce the risk of default on receivables by
continuously monitoring the creditworthiness and payment
behavior of our customers and by setting appropriate credit
limits. Due to the global activities and diversified customer
structure of the BASF Group, there are no major concentra-
tions of credit default risk. Risks are also limited through the
use of credit insurance and bank guarantees.
Risk of asset losses
For more on the maturity profile of our financial indebtedness, see the
Notes to the Consolidated Financial Statements from page 204 onward
For more on financial risks, see the Notes to the Consolidated Financial
Statements from page 208 onward
Risks from fluctuating cash flows are recognized in a timely
manner as part of our liquidity planning. We have access to
extensive liquidity at any time thanks to our good ratings, our
unrestricted access to the commercial paper market and
committed bank credit lines. In the short to medium term,
BASF is largely protected against potential refinancing risks by
the balanced maturity profile of its financial indebtedness as
well as through diversification in various financial markets.
Liquidity risks
In the catalysts business, BASF employs commodity deriva-
tives for precious metals and trades precious metals on behalf
of third parties and on its own account. In addition, we use our
knowledge of the markets for crude oil and oil products to
generate earnings from the trade of raw materials. To address
specific risks associated with these trades, which are not part
of our operating business, we set and continuously monitor
limits with regard to the type and size of the deals concluded.
Risks from metal and raw materials trading
In addition to market interest rates, BASF's financing costs
are determined by the credit risk premiums to be paid. These
are mainly influenced by our credit rating and the market con-
ditions at the time of issue. In the short to medium term, BASF
is largely protected from the possible effects on its interest
result thanks to the well-balanced maturity profile of its finan-
cial indebtedness.
Interest rate risks result from potential changes in prevailing
market interest rates. These can cause a change in the fair
value of fixed-rate instruments and fluctuations in the interest
payments for variable-rate instruments, which would positively
or negatively affect earnings. To hedge these risks, interest
rate swaps and combined interest rate and currency deriva-
tives are used in individual cases.
Interest rate risks
Financial currency risks result from the translation of
receivables, liabilities and other monetary items in accordance
with IAS 21 at the closing rate into the functional currency of
the respective Group company. In addition, we incorporate
planned purchase and sales transactions in foreign currencies
in our financial foreign currency risk management. These risks
are hedged using derivative instruments, if necessary.
Our competitiveness on global markets is influenced by fluc-
tuations in exchange rates. For BASF's purchasing, oppor-
tunities and risks arise in particular when the U.S. dollar
exchange rate fluctuates. A full-year rise in the value of the
U.S. dollar/euro exchange rate by $0.01 would result in an
increase of around €40 million in the BASF Group's EBIT,
assuming other conditions remain the same. On the produc-
tion side, we counter foreign currency risks by producing in the
respective currency zones.
Exchange rate volatility
The management of liquidity, currency and interest rate risks is
conducted in the Treasury unit. The management of commod-
ity price risks takes place in the Procurement functional unit or
in the appropriately authorized Group companies. Detailed
guidelines and procedures exist for dealing with financial risks.
Among other things, they provide for the segregation of trad-
ing and back office functions.
We assume that chemical production (excluding pharmaceuti-
cals) will grow considerably faster than global gross domestic
product over the next five years and at about the same level as
the previous five-year average. Through our market-oriented
and broad portfolio, which we will continue to strengthen in the
years ahead through investments in new production capaci-
ties, research and development activities and acquisitions, we
aim to achieve sales growth that slightly exceeds this market
growth. Should global economic growth see unexpected,
considerable deceleration, due for example to an ongoing
weak period in the emerging markets or to geopolitical crises,
the expected growth rates could prove too ambitious. As a
result of our high degree of diversification across various cus-
tomer industries and regions, we would still expect our growth
to be above the market average, even under these conditions.
In order to identify, assess and direct climate-related risks
and opportunities, our risk management process includes
analyzing the material aspect "energy and climate." For BASF
as an energy-intensive company, opportunities and risks arise
particularly from regulatory changes, such as in carbon prices
through emissions trading systems, taxes or energy legisla-
tion.
For more on the "We create chemistry" strategy, see page 22 onward
We expect competitors from emerging markets to gain
increasing significance in the years ahead. Furthermore, we
predict that many raw material suppliers will expand their value
chains.
BASF uses sustainability management tools to identify
upcoming opportunities and risks that arise in connection with
the topics of environment, society and governance. Their long-
term effect on our business activities and their associated
relevance are assessed through such instruments as our
materiality analysis, and take into account our experiences
from constant stakeholder dialog. We have established global
monitoring systems to check adherence to laws and our
voluntary commitments in the areas of environment, society
and governance. These also incorporate our suppliers.
Sustainability
For more on the individual initiatives and our goals, see page 40 onward
BASF, too, is adjusting in the medium and long term to the
rising challenge of gaining skilled employees due to demo-
graphic changes, especially in North America and Europe. As
a result, there is an increased risk that job vacancies may not
be filled with suitable applicants, or only after a delay. We
address these risks through our Best Team Strategy and the
global initiatives derived from it, covering demographic and
knowledge management, Diversity + Inclusion, employee and
leadership development, intensified employer branding, and
supplementary regional initiatives. With these measures, we
increase BASF's attractiveness as an employer and retain our
employees in the long term. ②
Recruitment and long-term retention of qualified
employees
For more on our acquisitions, see page 37 onward
The evaluation of opportunities and risks plays a signifi-
cant role during the assessment of acquisition targets. A
detailed analysis and quantification are conducted as part
of due diligence. Examples of risks include increased staff
turnover, delayed realization of synergies, and the assump-
tion of obligations that were not precisely quantifiable in
advance. If our expectations in this regard are not fulfilled,
risks could arise, such as the need to impair intangible
assets; however, there could also be opportunities, for
example, from additional synergies.
Financial opportunities and risks
In the future, we will continue to refine our portfolio through
acquisitions that promise above-average profitable growth,
are innovation-driven, offer added value for our customers
and reduce the cyclicality of our earnings.
Acquisitions
For more on our investment plans, see page 123 onward
Our decisions on the type, size and locations of our invest-
ment projects are based on assumptions related to the long-
term development of markets, margins and costs, as well as
raw material availability and country, currency and technology
risks. Opportunities and risks arise from potential deviations in
actual developments from our assumptions.
We expect the increase in chemical production in emerging
markets in the coming years to remain above the global aver-
age. This will create opportunities that we want to exploit by
expanding our local presence; therefore, more than a quarter
of our investment budget will be spent in emerging markets
over the next five years. In North America, investments in new
production facilities form the basis of future growth. For exam-
ple, we are constructing an ammonia production plant in
Freeport, Texas, with Yara International ASA (based in Oslo,
Norway). In addition, we are continuing to evaluate an invest-
ment in a world-scale methane-to-propylene complex on the
U.S. Gulf Coast and conduct regular assessments with a view
to developments in raw material prices and the relevant mar-
ket conditions.
Portfolio development through investments
For more on innovation, see page 32 onward
review includes all phases from idea generation to product
launch. The trust of customers and consumers is essential for
the successful introduction of new technologies. That is why
we enter into dialog with stakeholders at an early stage of
development.
Forecast Opportunities and risks report
118 Management's Report
We optimize the efficiency and effectiveness of our
research activities through our global Know-How Verbund as
well as through collaboration with partners and customers.
Furthermore, we continuously review the chances of success
and the underlying conditions of research projects; this
BASF's enhanced innovation approach helps the company
increase its power of innovation and ensure competitive ability
through targeted enhancement and innovative application of
specific key technologies. This is achieved by honing the focus
of research on topics with long-term strategic business rele-
vance, enhancing existing scientific processes and methods
and introducing new ones, and optimizing our organizational
structures. The central research areas Process Research &
Chemical Engineering, Advanced Materials & Systems
Research and Bioscience Research serve as global platforms
headquartered in one of the regions particularly significant for
us: Europe, Asia Pacific and North America. Together with the
development units in our operating divisions, they form the
core of the global Know-How Verbund. Stronger regional
presence opens up new opportunities to participate in local
innovation processes and gain access to local talent. We also
address the risk of the technical or economic failure of research
and development projects by maintaining a balanced and
comprehensive project portfolio, as well as through profes-
sional, milestone-based project management.
The trend toward more sustainability in our customer indus-
tries continues. We want to use innovations to take advantage
of the resulting opportunities. In the long term, we aim to
continue increasing sales and earnings with new and improved
products.
Innovation
In order to achieve lasting profitable growth, tap into new
market segments and customers, and make our customers
more successful, our research and business focus is on highly
innovative business areas, some of which we enter into
through strategic cooperative partnerships.
In order to remain competitive, we continuously improve
our operational excellence. Our strategic excellence program,
DrivE, also contributes to this aim. Starting at the end of 2018,
we expect this program to contribute around €1 billion in
earnings each year compared with baseline 2015.
We counter this risk through active portfolio management.
We exit markets where risks outweigh opportunities, and in
which we see limited possibilities to stand out from our com-
petitors in the long term.
Development of competitive and customer landscape
Forecast Opportunities and risks report
We are likely to once again earn a significant premium on
our cost of capital in 2017; compared with the previous year,
however, BASF Group EBIT after cost of capital will decrease
considerably. The slight rise in EBIT - despite a lower level of
special income from divestitures - will be contrasted by higher
cost of capital, due for the most part to the acquisition of
Chemetall at the end of 2016 as well as the startup of new
plants. In the Functional Materials & Solutions segment, we
are therefore assuming that EBIT after cost of capital will
decline considerably. We aim to boost it slightly in the Chemi-
cals segment and considerably in the other segments.
We use our internal control system to limit risks from
potential infringements of rights or laws. For example, we try
to avoid patent and licensing disputes whenever possible
through extensive clearance research. As part of our Group-
wide Compliance Program, our employees receive regular
training.
Emerging markets of Asia
1.8%
0.5%
3.4%
United States
World
European Union
Outlook for chemical production 2017 (excl. pharmaceuticals)
(Real change compared with previous year)
In South America, the anticipated end of the recession in
Argentina and Brazil will result in slight growth in chemical
production in the region.
In Japan, we presume a weak overall economic environ-
ment and minimal growth in chemical production.
Overall chemical growth is likely to decelerate somewhat in the
emerging markets of Asia, mainly due to the slowdown in
China, which will also affect the other developing countries in
the region.
In the United States, we expect somewhat faster growth
in chemical production, at just under 2%, as new production
capacity, which will also be used for export, comes onstream.
Chemical production in the European Union is expected
to barely grow faster than in 2016. In general, the increase in
production will remain modest against the backdrop of a slug-
gish domestic market. We expect competitive pressure on
export markets to remain intense, even though the naphtha-
based European chemical industry benefits more from low oil
prices than the gas-based production in the United States.
Global chemical production (excluding pharmaceuticals) will
probably grow by 3.4% in 2017, the same pace as 2016
(+3.4%). We anticipate a marginally higher expansion rate
in the advanced economies (2016: +0.9%, 2017: +1.1%).
Growth in the emerging markets will presumably weaken
somewhat (2016: +5.4%, 2017: +5.1%). The global growth
rate of the chemical market will be largely determined by
developments in China, which accounts for more than a third
of worldwide production. There, the upward trend may con-
tinue to slacken but producers in China are nevertheless likely
to contribute more than two percentage points to worldwide
chemical industry growth. Yet macroeconomic risks in China
remain high, therefore, our forecast for global chemical growth
is marked by particular uncertainty.
Global growth in chemical industry at level
of previous year
Sales and earnings forecast for the segments
Sales in the Chemicals segment are likely to grow consider-
ably in 2017. We anticipate higher sales prices as a conse-
quence of rising raw material prices, as well as volumes growth
from factors such as the startup of new plants. We assume
that strong competitive pressure will continue, especially on
the markets for butanediol, isocyanates and caprolactam.
EBIT before special items is likely to match the level of 2016.
We expect the earnings contribution from the increase in sales
volumes to offset both margin pressure and higher fixed costs.
Fixed costs will rise especially in the Intermediates division,
mainly as a result of scheduled plant turnarounds and initial
expenditures for the new acetylene plant in Ludwigshafen.
In the Performance Products segment, we expect the
market environment to remain challenging, but nevertheless
aim to slightly increase sales in 2017. This will be largely sup-
ported by volumes growth in all divisions, thanks in part to
higher plant capacity utilization rates as well as the startup of
new production capacities. We anticipate higher fixed costs in
2017, especially from new plant startups. This rise will be more
than offset by strict cost discipline and measures to increase
competitiveness in all divisions. As a result, we forecast slightly
higher EBIT before special items compared with 2016.
We want to achieve a considerable sales increase in the
Functional Materials & Solutions segment in 2017. The
Chemetall business acquired from Albemarle will contribute
to this, as will the sales volumes growth anticipated in all divi-
sions. Our forecast is supported by the expectation of continu-
ing good demand from the automotive and construction
industries. The divestitures completed in 2016 in the Catalysts
and Coatings divisions, along with a probable decline in pre-
cious metal prices, will slow sales growth. As a result of higher
sales, EBIT before special items is likely to slightly exceed the
level of 2016.
For the Agricultural Solutions segment, we anticipate
stable market development for crop protection products in
2017. Our goal is to utilize growth potential on the market pri-
marily through the launch of innovative products, growth in the
emerging markets – especially Asia - and a strong customer
focus. We are planning to increase volumes in 2017 and con-
siderably boost sales levels. Because of ongoing margin
pressure in a market environment that remains challenging, we
assume a slight increase in EBIT before special items.
1 With reference to sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%).
For earnings, "slight" means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0 %).
BASF Report 2016
Management's Report 113
Forecast Opportunities and risks report
one year) in the monthly management report produced by
the Corporate Controlling unit. In addition, Corporate Con-
trolling and Finance provide information twice a year on the
aggregated opportunity/risk exposure of the BASF Group.
Furthermore, if a new individual risk is identified which has a
more than €10 million impact on earnings or bears reputa-
tional risks, it must be immediately reported.
- As part of our strategy development, the Corporate Devel-
opment unit conducts strategic opportunity/risk analyses
with a ten-year assessment period. These analyses are
annually reviewed as part of strategic controlling and are
adapted if necessary.
- Our Group-wide Compliance Program aims to ensure
adherence to legal regulations and the company's internal
guidelines. Our global employee Code of Conduct firmly
embeds these mandatory standards into everyday business.
Members of the Board of Executive Directors are also
expressly obligated to follow these principles.
116 Management's Report
0.5%
South America
1.2%
BASF Group EBIT is also expected to grow slightly in
2017. A significantly higher contribution from the Oil & Gas
segment and slight increases in the Chemicals, Performance
Products and Agricultural Solutions segments are expected to
more than offset the slight declines in the Functional Mate-
rials & Solutions segment and in Other. In 2016, EBIT of the
Functional Materials & Solutions segment contained special
income from divestitures, and EBIT of Other included special
income from the sale of assets.
We want to slightly raise EBIT before special items com-
pared with 2016. We anticipate considerably higher contribu-
tions from the Oil & Gas segment and from Other. In the
Performance Products, Functional Materials & Solutions and
Agricultural Solutions segments, we assume EBIT before
special items will be slightly higher, while the contribution from
the Chemicals segment will match the prior-year level.
We expect BASF Group sales to grow considerably in the
2017 business year. This will be supported by slightly higher
sales in the Performance Products segment and by consider-
able increases in the other segments as well as in Other.
■Slightly higher EBIT before special items
Considerable sales growth through increases
in all segments
■
Sales and earnings forecast for the BASF Group
For more information on our expectations for the economic environment
in 2017, see page 119 onward
For 2017, we expect the global economy and chemical
production to grow at around the same pace as 2016. We
assume an average price of $55 for a barrel of Brent blend
crude oil and an exchange rate of $1.05 per euro. In an
environment that remains volatile, we aim to grow profit-
ably and considerably raise the BASF Group's sales. For
income from operations (EBIT) before special items as
well as for EBIT, we anticipate a slight increase compared
with the previous year.¹
BASF Report 2016
Outlook 2017
Forecast Outlook 2017
For more on our Group-wide Compliance Program,
see page 134 onward
122 Management's Report
South America
Japan
1.9%
0.5%
5.7%
Emerging markets of Asia
2.7%
1.0%
3.6%
World
European Union
United States
Trends in chemical production 2017-2019 (excl. pharmaceuticals)
(Average annual real change)
Japan
121
Significant features of the internal control and
risk management system with regard to the
Group financial reporting process
5.8%
■ Segregation of duties, four-eyes principle, and clearly
regulated access rights
Regulation and political risks
Risks for us can arise from intensified geopolitical tensions, the
destabilization of political systems or new trade sanctions. In
addition, risks to the BASF Group can be posed by further
regulations on the use or registration of agricultural and other
chemicals.
The German federal government's agreement with the
E.U. Commission on the treatment of existing self-generated
energy in the new Renewable Energy Act (Erneuerbare-
Energien-Gesetz, or EEG) has removed the previously reported
risk of sharply increased charges resulting from the EEG sur-
charge.
We view the worldwide expansion of renewable energy
and measures to increase energy efficiency as an opportunity
for increased demand for our products. For example, we offer
solutions for wind turbines in addition to insulation foams for
buildings. Our catalyst business benefits from the tightening of
automobile emissions regulations.
Purchasing and supply chain
We minimize procurement risks through our broad portfolio,
global purchasing activities and the purchase of raw materials
on spot markets, as well. If possible, we avoid procuring raw
materials from a single supplier. When this cannot be avoided,
we try to foster competition or we knowingly enter into this
relationship and assess the consequences of potential non-
delivery. We continuously monitor the credit risk of important
business partners.
Production and investments
We try to prevent unscheduled plant shutdowns by adhering
to high technical standards and by continuously improving our
plants. We reduce the effects of unscheduled shutdowns on
the supply of intermediate and end products through diversifi-
cation within our global production Verbund.
In the event of a production outage - caused by an acci-
dent, for example - our global, regional or local emergency
response plans and crisis management structures are
engaged, depending on the impact scope. Every region has
crisis management teams on a local and regional level. They
BASF Report 2016
Management's Report 115
Forecast Opportunities and risks report
Short-term risks from investments can result from, for
example, technical malfunctions or schedule and budget
breaches. We counter these risks with highly experienced
project management and controlling.
For more on emergency response, see page 100 or
basf.com/emergency_response
Acquisitions, divestitures and cooperations
We are constantly watching our environment in order to iden-
tify possible targets and develop our portfolio appropriately. In
addition, we work together in collaborations with customers
and partners to jointly develop new, competitive products and
applications.
Personnel
Due to BASF's worldwide compensation principles, the devel-
opment of personnel expenses is partly dependent on the
amount of variable compensation, which is linked to the com-
pany's success, among other factors. The correlation between
variable compensation and the success of the company has
the effect of minimizing risk. Another factor is the development
of interest rates for discounting pension obligations. Further-
more, changes to the legal environment of a particular country
I can have an impact on the development of personnel
expenses for the BASF Group. For countries in which BASF is
active, relevant developments are therefore constantly moni-
tored in order to recognize risks at an early stage and enable
BASF to carry out suitable measures.
For more on our compensation system, see page 44 onward
For more on risks from pension obligations, see page 117
Information technology risks
BASF relies on a number of IT systems. Their nonavailability,
violation of confidentiality or the manipulation of data in critical
IT systems and applications can all have a direct impact on
production and logistics processes. The threat environment
has changed in recent years, as attackers have become better
organized, use more sophisticated technology, and have far
more resources available. If data are lost or manipulated, this
can, for example, negatively affect process safety and the
accuracy of our financial reporting. Unauthorized access to
sensitive data, such as personnel records, competition-related
information or research results, can result in legal conse-
quences or jeopardize our competitive position. This would
also be accompanied by the associated loss of reputation.
To minimize such risks, BASF uses globally uniform processes
and systems to ensure IT security, such as stable and redun-
dantly designed IT systems, backup processes, virus and
access protection and encryption systems as well as
integrated, Group-wide standardized IT infrastructure and
applications. The systems used for information security are
constantly tested, continuously updated, and expanded if
necessary. In addition, our employees receive regular training
on information and data protection. IT-related risk manage-
ment is conducted using Group-wide regulations for organiza-
tion and application, as well as an internal control system
based on these regulations.
BASF also established a Cyber Defense Center in 2015; is
a member of the Cyber Security Sharing and Analytics e.V.
(CSSA); and is a founding member of the German Cyber
Security Organization (DCSO) together with Allianz SE,
Bayer AG and Volkswagen AG.
Legal dispute and proceedings
We constantly monitor current and potential legal disputes and
proceedings, and regularly report on these to the Board of
Executive Directors and Supervisory Board. In order to assess
the risks from current legal disputes and proceedings and any
potential need to recognize provisions, we prepare our own
analysis and assessment of the circumstances and claims
considered. In addition, in individual cases, we consider the
results of comparable proceedings and, needed, indepen-
dent legal opinions. Risk assessment is particularly based on
estimates as to the probability of occurrence and the range of
possible claims. These estimates are the result of close coop-
eration between the affected operating and functional units
together with the Legal and Finance units. If sufficient proba-
bility is identified, a provision is recognized accordingly for
each dispute. Should a provision be unnecessary, general risk
management continues to assess whether these litigations
nevertheless present a risk for the EBIT of the BASF Group.
Conducted in accordance with standardized Group
guidelines
We continuously enhance our products and solutions in order
to maintain competitive ability. We watch the market and the
competition, and try to take targeted advantage of opportuni-
ties and counter emerging risks with fitting measures. Aside
from innovation, a major component of competitiveness is a
suitable cost structure in order to achieve good business per-
formance on the market.
Competition
not only coordinate the necessary emergency response mea-
sures, they also initiate the immediate measures for damage
control and resumption of normal operations as quickly as
possible.
We anticipate generally stable margins for the BASF Group in
2017. For some products and value chains, it is possible that
margin pressure could be increased by, for example, new
capacities or increasing raw material costs. This would have a
negative effect on our EBIT.
-
The year's average oil price for Brent crude was around
$44 per barrel in 2016, compared with $52 in the previous
year. For 2017, we anticipate an average oil price of $55 per
barrel. We therefore expect a moderate increase in price levels
for the raw materials and petrochemical basic products that
are important to our business. Yet an oil price level below the
expected average would pose risks for our oil and gas busi-
ness, whose EBIT dips by approximately €20 million for every
$1 decrease in the average annual barrel price of Brent crude.
The Consolidated Financial Statements are prepared by a unit
in the Finance division. BASF Group's accounting process is
based on a standardized accounting guideline that sets out
accounting policies and the significant processes and dead-
lines on a Group-wide basis. There are binding directives for
the internal reconciliations and other accounting operations.
Standard software is used to carry out the accounting pro-
cesses for the preparation of the individual financial statements
as well as for the Consolidated Financial Statements. There
are clear rules for the access rights of each participant in these
processes.
Employees involved in the accounting and reporting pro-
cess meet the qualitative requirements and participate in
training on a regular basis. There is a clear assignment of
responsibilities between the specialist units, companies and
regional service units involved. We strictly adhere to the princi-
ples of segregation of duties and dual control, or the "four-eyes
principle." Complex actuarial reports and evaluations are pro-
duced by specialized service providers or specially qualified
employees.
An internal control system for financial reporting continuously
monitors these principles. To this end, methods are provided
to ensure that evaluation of the internal control system in finan-
cial reporting is structured and uniform across the BASF Group.
The significant risks for the BASF Group regarding a reli-
able control environment for proper financial reporting are
reviewed and updated on an annual basis. Risks are compiled
into a central risk catalog.
Moreover, a centralized selection process identifies com-
panies that are exposed to particular risks, that have a materi-
al impact on the Consolidated Financial Statements of the
BASF Group, or that provide service processes. The selection
process is conducted annually. In the relevant companies, one
person is given the responsibility of monitoring the execution
of the annual evaluation process.
In these companies, the process comprises the following
steps:
-
- Evaluation of the control environment
Adherence to internal and external guidelines that are rele-
vant for the maintenance of a reliable control environment is
checked by means of a standardized questionnaire and evi-
denced by sample taking.
- Identification and documentation of control activities
In order to mitigate the risks to the financial reporting pro-
cesses listed in our central risk catalog, critical processes
and control activities are documented.
- Assessment of control activities
After documentation, a review is performed to verify whether
the described controls are capable of adequately covering
the risks. In the subsequent test phase, samples are taken
to test whether, in practice, the controls were executed as
described and effective.
Annual evaluation of control environment and relevant
processes at significant companies
Margin volatility
- Monitoring of control weaknesses
Should the macroeconomic environment develop more
weakly than we predict, we expect a lower oil price. In this
case, we would also expect the euro to depreciate relative to
the U.S. dollar as compared with our planning assumptions,
as the eurozone's economy shows a high level of dependency
on exports and, in times of global economic weakness, the
U.S. dollar is preferred by portfolio investors as a safe haven.
Weather-related influences can result in positive or nega-
tive effects on our crop protection business.
We also consider risks from deviations in assumptions. We
continue to see a significant macroeconomic risk in an
increased slowdown of the Chinese economy, which would
have considerable impact on demand for intermediate goods
for industrial production as well as investment goods. This
would have an effect on emerging markets that export raw
materials as well as on advanced economies that specialize in
technological goods. Risks to the global economy would also
be posed by the possible escalation of geopolitical conflicts
and an increased tendency toward protectionism.
Development of demand
Short-term opportunities and risks
The development of our sales markets is one of the strongest
sources of opportunities and risks. More details on our
assumptions regarding short-term growth rates for the global
economy, regions and key customer industries, such as the
chemicals, automotive and construction sectors, can be found
from pages 119 to 121.
Forecast Opportunities and risks report
114 Management's Report
- Internal confirmation of the internal control system
All managing directors and chief financial officers of each
consolidated Group company must confirm to the Board of
Executive Directors of BASF SE every half-year and at the
end of the annual cycle, in writing, that the internal control
system is effective with regard to accounting and reporting.
The managers responsible receive reports on any control
weaknesses identified and their resolution, and an interdisci-
plinary committee investigates their relevance for the
BASF Group. The Board of Executive Directors and the Audit
Committee are informed once control weaknesses have
been identified that have a considerable impact on financial
reporting. Only after material control weaknesses have been
resolved does the company's managing director confirm the
effective internal control system.
BASF Report 2016
As a target figure for the Board of Executive Directors, the
Supervisory Board determined, in accordance with Section
111(5) AktG for the first target-attainment period after the law's
entry into force, that the Board of Executive Directors should
have at least one female member. With eight members of the
Board of Executive Directors, this represents 12.5%. Both at the
time the target was set, and by the target-attainment deadline
on December 31, 2016, the Board of Executive Directors con-
tained one woman. The stipulation was therefore met.
Minimum quota on Supervisory Board, target
figures for Board of Executive Directors and
top management
On April 24, 2015, the Law on Equal Participation of Women
and Men in Leadership Positions in the Private and Public Sec-
tor came into force in Germany.
The supervisory board of a publicly listed European society
(SE) that is composed of the same number of shareholder and
employee representatives must, according to Section 17(2) of
the SE Implementation Act, consist of at least 30% each of
women and men. The Supervisory Board of BASF SE currently
comprises three women and nine men. Two of the six share-
holder representatives elected at the Annual Shareholders'
Meeting are women. According to the legal stipulations of Sec-
tion 17(2) SE Implementation Act, the minimum quota is not to
be fulfilled immediately but rather upon any necessary reap-
pointments, that is, new elections. In 2016, the employee-
elected Supervisory Board member Wolfgang Daniel left the
Supervisory Board. He is succeeded by Waldemar Helber, who
joined the Supervisory Board without additional appointment,
that is, without election, as the member personally chosen to
replace Wolfgang Daniel as early as 2013 until the end of the
2019 Annual Shareholders' Meeting. In accordance with legal
regulations, the legal minimum quota will therefore be reached
after the next regular Supervisory Board election in 2019 at the
latest.
In addition, the Board of Executive Directors decided on
target figures for the percentage of women in the two manage-
ment levels below the Board of Executive Directors of BASF SE
as per the legal requirements in Section 76(4) AktG: These were
at 9.4% for the leadership level directly below the Board, and
11.8% for the level below that. This corresponded to the status
at the time these target figures were determined.
By the end of the first target-attainment period, new target
figures were set for BASF SE: The Supervisory Board deter-
mined as a target figure for the Board of Executive Directors that
the Board of Executive Directors of BASF SE should continue to
have at least one female member. With eight current members
of the Board of Executive Directors, this represents a proportion
of 12.5%. The Board of Executive Directors also decided on
target figures for the proportion of women in the two manage-
ment levels below the Board of Executive Directors of BASF SE:
Women are to make up 12.1% of the leadership level directly
below the Board, and the level below that is to comprise 7.3%
women. This corresponds to the status at the time these target
figures were determined. The deadline for achieving these new
goals was set for December 31, 2021.
Corporate Governance
Corporate governance report
On December 31, 2016, the deadline for attainment of these
goals, the percentage of women in the first level of management
under the Board of Executive Directors of BASF SE was at
12.1%. The percentage of women in management one level
below that was 7.3%.
We do not regard these deviations as meaningful, as BASF
views the further development and promotion of women as a
global duty independent of individual Group companies. We set
ourselves ambitious goals for this and made further progress in
2016. The focus goes beyond gender quotas, and includes, for
example, increasing international representation.
Commitments to promote the participation of
women in leadership positions at BASF SE
BASF will continue working on expanding the percentage of
women in its leadership team. The company is carrying out, and
constantly enhancing, worldwide measures to this effect.
BASF Report 2016
On this basis, the Supervisory Board has determined that all of
its current members can be considered independent. We
firmly believe that the current composition fulfills the objectives
with the aforementioned exception regarding the period of
membership.
On October 21, 2010, the Supervisory Board agreed upon
objectives for the composition of the Supervisory Board in
accordance with Section 5.4.1 of the German Corporate
Governance Code; these were supplemented in the Super-
visory Board meetings of December 20, 2012, and Octo-
ber 22, 2015. According to these objectives, the Supervisory
Board shall be composed in such a way that the members as
a group possess knowledge, ability and expert experience in
the following:
At least one independent member of the Supervisory Board
must have expertise in the fields of accounting or auditing as
per Section 100(5) of the German Stock Corporation Act
(AktG). With regard to diversity, the Supervisory Board shall
consider a variety of professional and international experience
as well as the participation of women. Individuals who may
have a conflict of interest shall not be nominated for election to
the Supervisory Board. The same applies to candidates who
will have reached the age of 70 by the day of the election.
Membership on the Supervisory Board should generally not
exceed 15 years; this corresponds to three regular statutory
periods in office. The members of the Supervisory Board elect-
ed at the Annual Shareholders' Meeting already fulfill this target
- in effect since October 2015 - with one exception.
The field of technical and scientific innovations in the chemi-
cal sector and associated industries as well as in the sectors
using chemical products.
-
The management of an internationally operating company
- Cross-industry value creation along different value chains
- The application of accounting principles and internal control
procedures
One important concern of good corporate governance is to
ensure that seats on the responsible corporate bodies, the
Board of Executive Directors and the Supervisory Board, are
appropriately filled. Seats on the Board of Executive Directors
and Supervisory Board of BASF SE should be filled with mem-
bers who ensure a well-balanced consideration of all the
knowledge, skills and personal qualifications necessary to
manage and supervise BASF as a large, globally operating,
capital market-oriented company in the chemical industry.
Composition criteria: professional and personal
qualifications, diversity, and independence
Objectives for Supervisory Board composition
BASF Report 2016
Corporate governance report
130 Corporate Governance
129
With regard to independence, the Supervisory Board aims
to ensure that all Supervisory Board members are independent
as defined by the terms of the Code. In assessing indepen-
dence, the Supervisory Board assumes that neither election
as an employee representative, nor membership on the Board
of Executive Directors more than two years in the past, nor the
duration of membership on the Supervisory Board, taken in
isolation, precludes the classification as independent.
The November 2015 Employee Participation Agreement relevant
to the composition of the Supervisory Board is available at
basf.com/en/governance
In the event of a change of control, members of the Board
of Executive Directors shall, under certain additional condi-
tions, receive compensation (details of which are listed in the
Compensation Report on page 144). A change of control is
assumed when a shareholder informs BASF of a shareholding
of at least 25% or the increase of such a holding. In addition,
employees of BASF SE and its subsidiaries who are classed
as senior executives will receive a severance payment if
their contract of employment is terminated by BASF within
18 months of the occurrence of a change of control, provided
the employee has not given cause for the termination. The
employee whose service contract has been terminated in
such a case will receive a maximum severance payment of
For more on the inclusion of diversity, including promotion of women,
see the chapter on Working at BASF in the Management's Report on
page 43
For an individual overview of meeting attendance, see
basf.com/governance/supervisoryboard/meetings
Bonds issued by BASF SE grant the bearer the right to
request early repayment of the bonds at nominal value if one
person or several persons acting in concert - hold or acquire
a BASF SE share volume after the time of issuance which
corresponds to more than 50% of the voting rights (change of
control), and one of the rating agencies named in the bond's
terms and conditions withdraws its rating of BASF SE or the
bond, or reduces it to a noninvestment grade rating within 120
days after the change-of-control event.
At the Annual Shareholders' Meeting on April 27, 2012,
the Board of Executive Directors was authorized to purchase
up to 10% of the shares existing at the time of the resolution
(10% of the company's share capital) until April 26, 2017. At
the discretion of the Board of Executive Directors, the pur-
chase can take place on the stock exchange or by way of a
public purchase offer directed to all shareholders. The Board
of Executive Directors is authorized to sell the repurchased
company shares (a) through a stock exchange, (b) through a
public offer directed to all shareholders and - with the approval
of the Supervisory Board - to third parties, (c) for a cash pay-
ment that is not significantly lower than the stock exchange
price at the time of sale and (d) for contributions in kind, par-
ticularly in connection with the acquisition of companies, parts
of companies or shares in companies or in connection with
mergers. In the cases specified under (c) and (d), the share-
holders' subscription right is excluded. The Board of Executive
Directors is furthermore authorized to redeem the shares
bought back and to reduce the share capital by the proportion
of the share capital accounted for by the redeemed shares.
shareholders. This can also be done by a credit institution
acquiring the new shares with the obligation to offer these to
shareholders (indirect subscription right). The Board of Execu-
tive Directors is authorized to exclude the statutory subscrip-
tion right of shareholders to a maximum amount of a total of
20% of share capital in certain exceptional cases that are
defined in Section 5(8) of the BASF SE Statutes. This applies
in particular if, for capital increases in return for cash contribu-
tions, the issue price of the new shares is not substantially
lower than the stock market price of BASF shares and the total
number of shares issued under this authorization is not more
than 10% of the stock of shares on the date of issue or, in
eligible individual cases, to acquire companies or shares in
companies in exchange for surrendering BASF shares.
Until May 1, 2019, the Board of Executive Directors of
BASF SE is empowered by a resolution passed at the Annual
Shareholders' Meeting of May 2, 2014, to increase the sub-
scribed capital - with the approval of the Supervisory Board -
by a total amount of €500 million through the issue of new
shares against cash or contributions in kind (authorized capi-
tal). A right to subscribe to the new shares shall be granted to
According to Article 59(1) SE Council Regulation, amend-
ments to the Statutes of BASF SE require a resolution of the
Annual Shareholders' Meeting adopted with at least a two-
thirds majority of the votes cast, provided that the legal provi-
sions applicable to German stock corporations under the
German Stock Corporation Act do not stipulate or allow for
larger majority requirements. In the case of amendments to
the Statutes, the Section 179(2) of the German Stock Corpo-
ration Act requires a majority of at least three-quarters of the
subscribed capital represented. Pursuant to Article 12(6) of
the Statutes of BASF SE, the Supervisory Board is authorized
to resolve upon amendments to the Statutes that merely
concern their wording. This applies in particular to the adjust-
ment of the share capital and the number of shares after the
redemption of repurchased BASF shares and after a new issue
of shares from the authorized capital.
The appointment and dismissal of members of the Board
of Executive Directors is legally governed by the regulations in
Article 39 of the SE Council Regulation, Section 16 of the SE
Implementation Act and Sections 84, 85 AktG as well as Arti-
cle 7 of the BASF SE Statutes. Accordingly, the Supervisory
Board determines the number of members of the Board of
Executive Directors (at least two), appoints the members of
the Board of Executive Directors, and can nominate a chair-
person, as well as one or more vice chairpersons. The mem-
bers of the Board of Executive Directors are appointed for a
maximum of five years, and reappointments are permissible.
The Supervisory Board can dismiss a member of the Board of
Executive Directors if there is serious cause to do so. Serious
cause includes, in particular, a gross breach of the duties
pertaining to the Board of Executive Directors and a vote of no
confidence at the Annual Shareholders' Meeting. The Supervi-
sory Board decides on appointments and dismissals accord-
ing to its own best judgment.
As of December 31, 2016, the subscribed capital of BASF SE
was €1,175,652,728.32 divided into 918,478,694 registered
shares with no par value. Each share entitles the holder to one
vote at the Annual Shareholders' Meeting. Restrictions on the
right to vote or transfer shares do not exist. The same rights
and duties apply to all shares. According to the Statutes,
shareholders are not entitled to receive share certificates.
There are neither different classes of shares nor shares with
preferential voting rights (golden shares).
Disclosure according to Section 315(4) of the
German Commercial Code (HGB) and the
explanatory report of the Board of Executive
Directors according to Section 176(1) Sentence
1 of the German Stock Corporation Act (AktG)
BASF Report 2016
Corporate governance report
132 Corporate Governance
For more on women in executive positions in the BASF Group
worldwide, see page 26
131
BASF SE follows all recommendations of the German
Corporate Governance Code in its most recently revised ver-
sion of May 2015. In the same manner, BASF has followed
nearly all of the nonobligatory suggestions of the German
Corporate Governance Code. We have not implemented the
suggestion to enable shareholders to follow the proceedings
of the entire Annual Shareholders' Meeting online. The Annual
Shareholders' Meeting is publicly accessible via online broad-
cast until the end of the speech by the Chairman of the Board
of Executive Directors. The subsequent discussion of items on
the agenda is not accessible online in order to preserve the
character of the Annual Shareholders' Meeting as a meeting.
attended by our shareholders on-site.
BASF advocates responsible corporate governance that
focuses on sustainably increasing the value of the company.
BASF SE follows all recommendations of German
Corporate Governance Code
Implementation of the German Corporate
Governance Code
Shareholders who hold at least €500,000 of the compa-
ny's share capital, a quota corresponding to 390,625 shares,
are furthermore entitled to request that additional items be
added to the agenda of the Annual Shareholders' Meeting.
All shareholders entered in the share register are entitled to
participate in the Annual Shareholders' Meetings, to have their
say concerning any item on the agenda and to request infor-
mation about company issues insofar as this is necessary to
make an informed judgment about the item on the agenda
under discussion. Registered shareholders are also entitled to
file motions pertaining to proposals for resolutions made by
the Board of Executive Directors and Supervisory Board at the
Annual Shareholders' Meeting and to contest resolutions of
the Meeting and have them evaluated for their lawfulness in
court.
no limit to the number of shares that can be registered to one
shareholder. Only the persons listed in the share register are
entitled to vote as shareholders. Listed shareholders may
exercise their voting rights at the Annual Shareholders' Meet-
ing either personally, through a representative of their choice
or through a company-appointed proxy authorized by the
shareholders to vote according to their instructions. There are
neither voting caps to limit the number of votes a shareholder
may cast nor special voting rights. BASF has fully implement-
ed the principle of "one share, one vote."
Each BASF SE share represents one vote. All of BASF SE's
shares are registered shares. Shareholders are obliged to have
themselves entered with their shares into the company share
register and to provide the information necessary for registra-
tion in the share register according to the German Stock Cor-
poration Act. There are no registration restrictions and there is
Shareholders exercise their rights of co-administration and
supervision at the Annual Shareholders' Meeting, which
usually takes place within the first five months of the business
year. The Annual Shareholders' Meeting elects half of the
members of the Supervisory Board and, in particular, decides
on the formal discharge of the Board of Executive Directors
and the Supervisory Board, the distribution of profits, capital
measures, the authorization of share buybacks, changes to
the Statutes and the selection of the auditor.
Shareholders' rights of co-administration and
supervision at the Annual Shareholders' Meeting
One share, one vote
-
Shareholders' rights
The joint Declaration of Conformity 2016 by the Board of Executive
Directors and Supervisory Board of BASF SE is rendered on page 150
For more on the Declaration of Conformity 2016, the implementation of
the Code's suggestions and the German Corporate Governance Code,
see basf.com/en/governance
For more on the Supervisory Board's activities and resolutions in
the 2016 business year, see the Report of the Supervisory Board
on page 146
5050
- The Strategy Committee did not meet.
4%
Agricultural Solutions
€19.0 billion
5
15%
Functional Materials & Solutions
21%
Performance Products
24%
Chemicals
6
Information on our financing policies can be found on page 57
From the scheduled repayment of bonds, we expect cash
outflows in the equivalent amount of around €1.4 billion in
2017. To refinance mature bonds and to optimize our maturity
profile, we continue to have medium to long-term corporate
bonds and our U.S. dollar commercial paper program at our
disposal.
Our financing policy is aimed at ensuring our solvency at all
times, limiting the risks associated with financing and optimiz-
ing our cost of capital. We strive to maintain at least a solid
"A" rating, which allows the BASF Group unrestricted access
to money and capital markets.
Financing
2
1
BASF Report 2016
by segment, 2017-2021
Investments in property, plant and equipment
Forecast Outlook 2017
124 Management's Report
3 Excluding additions to property, plant and equipment from acquisitions, capitalized exploration, restoration obligations and IT investments
In the Oil & Gas segment, our currently planned investments of
around €4.4 billion between 2017 and 2021 will focus mainly
on the development of proven gas and oil deposits in Argen-
tina, Norway and Russia. The actual amount of expenditure is
also dependent on oil and gas price developments and will be
adjusted as necessary.
Construction: vitamin A production plant
Oil & Gas
23%
With the exception of one Supervisory Board meeting at which
one member was absent due to illness, all respective mem-
bers attended all meetings of the Supervisory Board and its
committees.
13%
Since the end of the 2016 business year, we have acquired
the Henkel Group's western European building material busi-
ness for professional users and completed the purchase of
Rolic AG, an Allschwil, Switzerland-based company primarily
active in the display material sector.
Information on the proposed dividend can be found from page 12 onward
We stand by our ambitious dividend policy and offer our share-
holders an attractive dividend yield. We continue to aim to
increase our dividend each year, or at least maintain it at the
previous year's level.
3%
Dividend
being investigated
12345
Alternative sites currently
10%
South America, Africa, Middle East
Events after the reporting period
1
Replacement: acetylene plant
€19.0 billion
Asia Pacific
3
22%
North America
49%
Europe
4
by region, 2017-2021
Investments in property, plant and equipment
123456
3
4
16%
For more information, see the Notes to the Consolidated Financial
Statements on page 220
Capacity expansion: MDI
Ludwigshafen,
Germany
slight increase
1,946
considerable increase
18,732
Functional Materials & Solutions
slight increase
1,777
slight increase
15,558
Performance Products²
at prior-year level
2,032
considerable increase
12,905
Chemicals²
Forecast 2017
2016
Forecast 2017
2016
before special items
Sales
Income from operations (EBIT)
Management's Report 123
Forecast Outlook 2017
Forecast by segment¹ (million €)
BASF Report 2016
Agricultural Solutions
5,569
considerable increase
1,087
Geismar, Louisiana
Caojing, China
Project
Location
Capital expenditures: Selected projects
Our investments in 2016 focused on the Chemicals, Perfor-
mance Products and Oil & Gas segments. For example, we
started up further sections of the TDI production complex
in Ludwigshafen, Germany; completed construction of the
aroma ingredients complex in Kuantan, Malaysia; and invested
in field development projects in Argentina, Norway and Russia.
For 2017, we are planning total capital expenditures of
around €3.9 billion for the BASF Group. We have planned
capital expenditures totaling €19.0 billion for the period from
2017 to 2021 and will invest more than a quarter of this
amount in emerging markets. The average investment volume
in the years ahead will therefore remain at the same level as in
2016. Projects currently being planned or underway include:
Investments of around €3.9 billion planned for 2017
Investments³
Sales in Other are expected to considerably increase in
2017, primarily as a result of higher prices in raw material
trading. We also anticipate a considerable rise in EBIT before
special items as compared with 2016.
Our planning for the 2017 business year in the Oil & Gas
segment is based on an average price for Brent blend crude oil
of $55 per barrel. Gas prices in northwestern Europe are likely
to hover above the level of 2016. We anticipate a considerable
rise in sales and EBIT before special items. Higher prices for
oil and gas and a contribution from our share in the Yuzhno
Russkoye natural gas field exceeding that of the previous year
will substantially support this development. In 2016, the
excess amounts received over previous years were compen-
sated as contractually agreed with our partner, Gazprom.
6,309
considerable increase
Construction: automotive coatings plant
(1,050)
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%).
For earnings, "slight" means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0 %).
2 Effective January 1, 2017, the Chemicals and Performance Products segments' activities for the electronics industry were merged and allocated to the Performance Products
segment as the Electronic Materials global business unit. To facilitate comparability, the 2016 figures for both segments have been adjusted accordingly.
slight increase
considerable increase
2,018
57,550
BASF Group
considerable increase
517
considerable increase
2,768
Other
Oil & Gas
slight increase
considerable increase
3
Other (infrastructure, R&D)
Management's Report
Members:
Personnel Committee
Corporate Governance
Corporate governance report
BASF Report 2016
Compensation of the Supervisory Board is described in the
Compensation Report from page 144 onward
The members of the Supervisory Board of BASF SE, including their
membership on the supervisory bodies of other companies, are listed
on page 137
For more on the Statutes of BASF SE and the Employee Participation
Agreement, see basf.com/en/cg/investor
BASF SE's Supervisory Board has established a total of
four Supervisory Board Committees: the Personnel Commit-
tee, the Audit Committee, the Nomination Committee and the
Strategy Committee.
The meetings of the Supervisory Board and its committees
are called by their chairmen and, independently, at the request
of one of their members or the Board of Executive Directors.
Resolutions of the Supervisory Board are passed by a simple
majority vote of the participating members. In the event of a
tie, the vote of the Chairman of the Supervisory Board, who
must always be a shareholder representative, shall be the
casting vote. This resolution process is also applicable for the
appointment and dismissal of members of the Board of Execu-
tive Directors by the Supervisory Board. Resolutions can, as
needed, also be made in writing or through other means of
communication outside of the meetings, as long as no mem-
ber objects to this form of passing a resolution.
The Supervisory Board of BASF SE comprises twelve
members. Six members are elected to a five-year term each
by the shareholders at the Annual Shareholders' Meeting. The
remaining six members are elected by the BASF Europa
Betriebsrat (BASF Works Council Europe), the European
employee representation body of the BASF Group.
quota for the Supervisory Board mandated by law as of Janu-
ary 1, 2016. The German Codetermination Act does not apply
to BASF as a European stock corporation (Societas Europaea,
SE).
In addition to the SE Council Regulation, the relevant legal
basis for the size and composition of the Supervisory Board is
provided by the Statutes of BASF SE and the Agreement
Concerning the Involvement of Employees in BASF SE
(Employee Participation Agreement), which also includes the
regulations applicable to BASF for implementing the gender
Dr. Jürgen Hambrecht (chairman), Michael Diekmann, Robert
Oswald, Michael Vassiliadis
The Supervisory Board appoints the members of the Board of
Executive Directors and supervises and advises the Board on
management issues. As members of the Supervisory Board
cannot simultaneously be on the Board of Executive Directors,
a high level of autonomy is already structurally ensured with
regard to the supervision of the Board of Executive Directors.
■Supervisory Board appoints, monitors and advises
Board of Executive Directors
Supervision of company management by the
Supervisory Board
For more on risk management, see the Forecast from page 111 onward
The members of the Board of Executive Directors, including their areas
of responsibility and memberships on the supervisory bodies of other
companies, are listed on page 136. Compensation of the Board of
Executive Directors is described in detail in the Compensation Report
from page 138 onward
The Statutes of BASF SE define certain transactions that
require the Board of Executive Directors to obtain the Super-
visory Board's approval prior to their conclusion. Such cases
include the acquisition and disposal of enterprises and parts of
enterprises, as well as the issue of bonds or comparable finan-
cial instruments. However, this is only necessary if the acquisi-
tion or disposal price or the amount of the issue in an individual
case exceeds 3% of the equity reported in the last approved
Consolidated Financial Statements of the BASF Group.
elected by the Supervisory Board
Chairman
6 employee representatives
and
6 shareholder representatives elected
at the Annual Shareholders' Meeting
12 members
reports to Supervisory Board
appointed by the Supervisory Board
Four Supervisory Board committees
Chairman
To Our Shareholders
- When making recommendations for appointments to the
Board of Executive Directors, considers professional qualifi-
cations, international experience and leadership skills as well
as long-term succession planning, diversity, and especially
the appropriate consideration of women
- The Nomination Committee met once.
- The Personnel Committee met four times.
- The Audit Committee met five times.
In the 2016 business year, meetings were held as follows:
- The Supervisory Board met five times.
Meetings and meeting attendance
- Handles the further development of the company's strategy
- Prepares resolutions of the Supervisory Board on the
company's major acquisitions and divestitures
Duties:
Dr. Jürgen Hambrecht (chairman), Dame Alison Carnwath
DBE, Michael Diekmann, Robert Oswald, Michael Vassiliadis
Members:
Strategy Committee
- Is authorized to request any information that it deems neces-
sary from the auditor or Board of Executive Directors; can
also view all of BASF's business documents and examine
these and all other assets belonging to BASF. The Audit
Committee can also engage experts such as auditors or
lawyers to carry out these inspections
- Is responsible for business relations with the company's
external auditor: prepares the Supervisory Board's proposal
to the Annual Shareholders' Meeting regarding the selection
of an auditor, monitors the auditor's independence, defines
the focus areas of the audit together with the auditor, nego-
tiates auditing fees and establishes the conditions for the
provision of the auditor's nonaudit services
Deals with monitoring the financial reporting process, the
annual audit, the effectiveness of the internal control system,
the risk management system, and the internal auditing sys-
tem as well as compliance issues
- Prepares the appointment of members to the Board of
Executive Directors by the Supervisory Board as well as the
employment contracts to be entered into with members of
the Board of Executive Directors
- Prepares the negotiations and resolutions of the Supervisory
Board for the approval of the Financial Statements and Con-
solidated Financial Statements, and discusses the quarterly
statements and half-year financial reports with the Board of
Executive Directors prior to their publication
Dame Alison Carnwath DBE (chairman), Ralf-Gerd Bastian,
Franz Fehrenbach, Michael Vassiliadis
Members:
Audit Committee
- Prepares the recommendations made by the Supervisory
Board for the election of Supervisory Board members for the
Annual Shareholders' Meeting
- Identifies suitable candidates for the Supervisory Board
based on objectives for the composition decided on by the
Supervisory Board
Duties:
Dr. Jürgen Hambrecht (chairman), Dame Alison Carnwath
DBE, Prof. Dr. François Diederich, Michael Diekmann, Franz
Fehrenbach, Anke Schäferkordt
Members:
Nomination Committee
Dame Alison Carnwath DBE and Franz Fehrenbach are mem-
bers with special knowledge of, and experience in, applying
accounting and reporting standards and internal control meth-
ods pursuant to the German Corporate Governance Code.
Financial Experts:
- Prepares the resolutions made by the Supervisory Board
with regard to the system and amount of compensation paid
to members of the Board of Executive Directors
Duties:
8 members
appointed by the Supervisory Board
Duties:
monitors the Board of Executive Directors
Corporate Governance
Declaration of Corporate Governance
Section 161 AktG (Stock Corporation Act)
Declaration of Conformity as per
146
Report of the Supervisory Board
138
Compensation report
137
Supervisory Board
136
136
BASF Report 2016
Management and Supervisory Boards
Compliance
127
Corporate governance report
231
221
Supplementary Information on the Oil & Gas Segment
Overviews
151
Consolidated Financial Statements
17
57
Corporate Governance
advises the Board of Executive Directors
134
Corporate governance report
Board of Executive Directors
Board of Executive Supervisory Board
appoints the Board of Executive Directors
Corporate Governance
Corporate governance report
Supervisory Board
Board of Executive Directors
BASF Report 2016
Two-tier management system of BASF SE
Corporate governance report
128 Corporate Governance
The Board of Executive Directors informs the Supervisory
Board regularly, without delay and comprehensively, of all
issues important to the company with regard to planning,
business development, risk situation, risk management and
compliance. Furthermore, the Board of Executive Directors
coordinates the company's strategic orientation with the
Supervisory Board.
The Board can set up Board Committees to consult and
decide on individual issues; these must include at least three
members of the Board of Executive Directors. For the prepa-
ration of important decisions, such as those on acquisitions,
divestitures, investments and personnel, the Board has various
commissions at the level below the Board that carefully assess
the planned measure and evaluate the associated opportuni-
ties and risks, and based on this information, report and make
recommendations to the Board - independently of the affected
business area.
Decisions that are reserved for the Board as a whole by
law, through the Board of Executive Directors' Rules of Proce-
dure or through resolutions adopted by the Board, are made
at regularly held Board meetings called by the Chairman of the
Board of Executive Directors. Board decisions are generally
based on detailed information and analyses provided by the
business areas and specialist units, and, if deemed necessary,
by external consultants. Board decisions can generally be
made via a simple majority. In the case of a tied vote, the
casting vote is given by the Chairman of the Board. However,
the Chairman of the Board does not have the right to veto the
decisions of the Board of Executive Directors. Members of the
Board of Executive Directors are authorized to make decisions
individually in their assigned areas of responsibility.
The Board's actions and decisions are geared toward the
company's best interests. It is committed to the goal of sus-
tainably increasing the company's value. Among the Board's
responsibilities is the preparation of the consolidated and
separate financial statements of BASF SE. Furthermore, it
must ensure that the company's activities comply with the law
and with internal corporate directives. This includes the estab-
lishment of appropriate systems for control, compliance and
risk management.
The Board of Executive Directors is responsible for the
management of the company, and represents BASF SE in
business undertakings with third parties. BASF's Board of
Executive Directors is strictly separated from the Supervisory
Board, which monitors the activity of the Board of Executive
Directors and decides on its composition. A member of the
Board of Executive Directors cannot simultaneously be a
member of the Supervisory Board. As the central duty of com-
pany management, the Board of Executive Directors agrees
on the corporate goals and strategic direction of the BASF
Group as well as its individual business areas; determines the
company's internal organization; and decides on the composi-
tion of management on the levels below the Board. It also
manages and monitors BASF Group business by planning and
setting the corporate budget, allocating resources and
management capacities, monitoring and making decisions on
significant individual measures, and supervising operational
management.
127
Manages company and
represents BASF SE in
business with third parties
Directors
Sets corporate goals and strategic direction
Appoints, monitors and
advises Board of
Executive Directors
Shareholders
Corporate governance refers to the entire system for
managing and supervising a company. This includes its
organization, values, corporate principles and guidelines
as well as internal and external control and monitoring
mechanisms. Effective and transparent corporate gover-
nance guarantees that BASF is directed and monitored in
a responsible manner focused on value creation. It fosters
the confidence of our domestic and international inves-
tors, the financial markets, our customers and other
business partners, employees, and the public in BASF.
Exercise rights of co-adminis-
tration and supervision at
Annual Shareholders' Meeting
Direction and management by the Board of
Executive Directors
-
Board of Executive Directors strictly separated from
the Supervisory Board
Responsible for company management
The fundamental elements of BASF SE's corporate gover-
nance system are: its two-tier system, with a transparent and
effective separation of company management and supervision
between BASF's Board of Executive Directors and the Super-
visory Board; the equal representation of shareholders and
employees on the Supervisory Board; and the shareholders'
rights of co-administration and supervision at the Annual
Shareholders' Meeting.
(1,300)
(1,300)
(1,300)
(1,300)
plus allocated actual annual variable
less service cost
1,023
1,031
1,023
1,031
compensation
compensation
less granted annual variable target
445
Reconciliation reporting of total compensation
pursuant to Section 314(1)(6a) HGB in
4,913
1,379
3,196
3,221
4,626
1,092
2,814
2,946
Total compensation in accordance with GCGC
445
445
(399)
connection with GAS 17
(359)
(Max)
(445)
478
(Min)
(Min)
2016
2016
2016
2015
2016
2016
2016
2015
2016
2016
2016
2015
Michael Heinz
141
Corporate Governance
Compensation report
Sanjeev Gandhi
Dr. Hans-Ulrich Engel
BASF Report 2016
1 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
2 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
2,482
2,466
2,186
2,270
Total compensation
(478)
359
Supervisory Board
359
The total fee paid to KPMG and auditing firms of the KPMG
group by BASF SE and other BASF Group companies for
non-audit services, in addition to the auditing fee, was €1 mil-
lion in 2016. This represents around 5.7% of the fees for
auditing the financial statements.
The Annual Shareholders' Meeting of April 29, 2016, once
again elected KPMG AG Wirtschaftsprüfungsgesellschaft as
the auditor of the BASF Group Consolidated Financial State-
ments and Separate Financial Statements of BASF SE for the
2016 business year, as well as for those reports' correspond-
ing Management's Reports. KPMG member firms also audit
the majority of companies included in the Consolidated Finan-
cial Statements. KPMG has been the continuous auditor of
BASF SE since the 2006 Financial Statements; the 2015
Financial Statements marked the tenth annual report in a row
audited by KPMG. For this reason, a public call to tender was
made to all auditors for the audit of the 2016 Consolidated and
Separate Financial Statements, in line with the E.U. Regulation
537/2014 of April 16, 2014. Based on the results of the ten-
dering process, the Audit Committee recommended to the
Supervisory Board that it once again propose KPMG for elec-
tion. After completing the tendering process, KPMG can now
be proposed for election at the Annual Shareholders' Meeting
as BASF's auditor without further tendering processes up to
and including the 2024 business year. Hans-Dieter Krauẞ has
been the auditor responsible for the Consolidated Financial
Statements since auditing the 2010 Financial Statements.
Since the 2013 Financial Statements, the auditor responsible
for the separate financial statements has been Alexander
Bock.
Information on the auditor
For more on securities transactions reported in 2016, see
basf.com/en/governance/sharedealings
As legally stipulated by Article 19(1) MAR, all members of the
Board of Executive Directors and the Supervisory Board as
well as certain members of their families are required to dis-
close the purchase or sale of financial instruments of BASF SE
(e.g., shares, bonds, options, forward contracts, swaps) to the
Federal Financial Supervisory Authority (Bundesanstalt für
Finanzdienstleistungsaufsicht) and to the company if transac-
tions within the calendar year exceed the threshold of €5,000.
In 2016, a total of four purchases by members of the
Board of Executive Directors and the Supervisory Board and
members of their families subject to disclosure were reported
as Directors' Dealings, involving between 417 and 2,660
BASF shares. The price per share was between €62.43 and
€67.88. The volume of the individual trades was between
€26,033.31 und €180,567.16. The disclosed share transac-
tions are published on the website of BASF SE.
Share dealings of the Board of Executive
Directors and Supervisory Board (obligatory
reportable and publishable directors' dealings
under Article 19(1) of the E.U. Market Abuse
Regulation 596/2014 (MAR))
No member of the Board of Executive Directors or the Super-
visory Board owns shares in BASF SE and related options or
other derivatives that account for 1% or more of the share
capital. Furthermore, the total volume of BASF SE shares and
related financial instruments held by members of the Board of
Executive Directors and the Supervisory Board accounts for
less than 1% of the shares issued by the company.
Share ownership by Members of the Board of
Executive Directors and the Supervisory Board
BASF SE has taken out liability insurance that covers the
activities of members of the Board of Executive Directors and
the Supervisory Board (D&O insurance). This policy provides
for the level of deductibles for the Board of Executive Directors
as prescribed by Section 93(2)(3) AktG and for the level of
deductibles for the Supervisory Board as recommended in
Section 3.8(3) of the German Corporate Governance Code.
Directors' and Officers' liability insurance
For more on bonds issued by BASF SE, see basf.com/en/investor/bonds
The remaining specifications stipulated in Section 315(4)
HGB refer to situations that are not applicable to BASF SE.
1.5 times the annual salary (fixed component) depending on
the number of months that have passed since the change-of-
control event.
Corporate Governance
Corporate governance report
(Max)
(Min)
(Max)
6621
650
650
650
5141
4551
4551
4551
For more information, see Note 33 of the Consolidated Financial
Statements on page 219
650
133
Compliance
Antitrust Legislation
Protection of Environment,
Health and Safety
Gifts and Entertainment
Protection of Data Privacy
Protection of Company Property and
Property of Business Partners
BASF's Code of Conduct
For more on the BASF Code of Conduct, see
basf.com/code_of_conduct
Our efforts are principally aimed at preventing violations
from the outset. To this end, all employees are required within a
prescribed time frame to take part in basic compliance training,
refresher courses and special tutorials dealing with, for exam-
ple, antitrust legislation, taxes or trade control regulations.
Training takes place in different formats, including face-to-face
training, e-learning or workshops. The course materials and
formats are constantly being updated. In total, more than
25,000 participants worldwide received around 40,000 hours
of compliance training in 2016.
Abiding by compliance standards is the foundation of
responsible leadership. This has been expressly embedded in
our values, where we state: "We strictly adhere to our compli-
ance standards." We are convinced that compliance with these
standards will not only prevent the disadvantages associated
with violations, such as penalties and fines; we also view com-
pliance as the right path toward securing our company's long-
term success.
antitrust laws to human rights, labor and social standards,
conflicts of interest and trade control, and protection of data
privacy.
voluntary commitments to create a framework that regulates
how all BASF employees interact with business partners, offi-
cials, colleagues and society. At the core of our Compliance
Program is the global, standardized Code of Conduct received
by every employee. All employees and managers are obligated
to adhere to its guidelines, which describe our principles for
proper conduct and cover topics ranging from corruption and
-
-
Based on international standards, BASF's Compliance Pro-
gram combines important laws and company-internal policies
themselves exceeding legal requirements with external
Regular compliance training for employees
Compliance standards integrated into
corporate values
Compliance Program and Code of Conduct
Our Group-wide Compliance Program aims to ensure
adherence to legal regulations and the company's internal
guidelines. This topic has been integrated into our "We
create chemistry" strategy. Our employee Code of Conduct
firmly embeds these mandatory standards into day-to-day
business. Members of the Board of Executive Directors are
also expressly obligated to follow these principles.
63 audits
Conducted internally
on compliance
Participants in
compliance training
More than 25,000
Forms core of our
Compliance Program
Code of Conduct
BASF Report 2016
Compliance
134 Corporate Governance
Imports and Exports
650
650
422
0
1,534
2,816
2,464
742
4,276
2,583
།།
1,433
1,433
1,433
800
734
734
734
1,300
0
2,000
1,300
1,300
0
2,000
422
0
171
650
442
1,534
4122
92
92
92
5982
9782
9782
9782
150
84
84
84
1,074
742
742
742
1,112
1,300
1,300
0
2,000
1,300
442
422
0
171
1,534
BASF's Code of Conduct stipulates
how these topics are handled
Corruption
Michael Diekmann, Munich, Germany
Nyxoah S.A. (nonexecutive director)
Comparable German and non-German controlling bodies:
Daimler AG (member)
Trumpf GmbH & Co. KG (chairman)
Fuchs Petrolub SE (chairman)
Supervisory Board memberships:
Member of the Supervisory Board since: May 2, 2014
Former Chairman of the Board of Executive Directors of BASF SE
(until May 2011)
Dr. Jürgen Hambrecht, Neustadt an der Weinstraße, Germany
Chairman of the Supervisory Board of BASF SE
The term of office of the Supervisory Board commenced follow-
ing the Annual Shareholders' Meeting on May 2, 2014, in which
the shareholder representatives on the Supervisory Board were
elected. It terminates upon conclusion of the Annual Share-
holders' Meeting which resolves on the discharge of members of
the Supervisory Board for the fourth complete financial year after
the term of office commenced; this is the Annual Shareholders'
Meeting in 2019. The Supervisory Board comprises the following
members:
In accordance with the Statutes, the Supervisory Board of BASF SE comprises twelve members
137
Corporate Governance
Management and Supervisory Boards - Supervisory Board
BASF Report 2016
Michael Heinz will take over the responsibilities of Margret
Suckale. In addition to his previous responsibilities, Sanjeev
Gandhi will also be responsible for Dispersions & Pigments.
Responsibilities: Care Chemicals; Nutrition & Health; Performance
Chemicals; Advanced Materials & Systems Research; Region South America
First appointed: 2017, Term expires: 2020
Degree: Chemistry, 46 years old, 18 years at BASF
Dr. Markus Kamieth
First appointed: 2011, Term expires: 2019
Responsibilities: Dispersions & Pigments; Care Chemicals;
Nutrition & Health; Performance Chemicals; Advanced Materials & Systems
Research; Region South America
Degree: Business Administration, 52 years old, 33 years at BASF
Michael Heinz
First appointed: 2017, Term expires: 2020
Degree: Business Administration, 45 years old, 20 years at BASF
Responsibilities: Construction Chemicals; Crop Protection; Bioscience
Research; Region Europe
Vice Chairman of the Supervisory Board of BASF SE
Saori Dubourg
Former Chairman of the Board of Management of Allianz SE
Fresenius Management SE (member)
Gerresheimer AG (vice chairman)
Member of the Supervisory Board since: May 2, 2014
Supervisory Board memberships:
Regional manager of the Rhineland-Palatinate/Saarland branch of the
Mining, Chemical and Energy Industries Union
Francesco Grioli, Ronnenberg, Germany
Comparable German and non-German controlling bodies:
Stihl Holding AG & Co. KG (member of the Advisory Board)
Stihl AG (vice chairman)
Linde AG (member)
Chairman of the Supervisory Board of Robert Bosch GmbH
Member of the Supervisory Board since: January 14, 2008
Supervisory Board memberships:
Robert Bosch GmbH (chairman)
Franz Fehrenbach, Stuttgart, Germany
Prof. Dr. François Diederich, Dietikon, Switzerland
Professor at the Swiss Federal Institute of Technology, Zurich, Switzerland
Member of the Supervisory Board since: May 19, 1998
Coller Capital Ltd. (nonexecutive member of the Board of Directors)
Land Securities Group plc (nonexecutive Chairman of the Board of Directors)
PACCAR Inc. (independent member of the Board of Directors)
Zurich Insurance Group AG (independent member of the Administrative Council)
Zürich Versicherungs-Gesellschaft AG (independent member of the
Administrative Council)
Comparable German and non-German controlling bodies:
Member of the Supervisory Board since: May 2, 2014
Senior Advisor Evercore Partners
Dame Alison Carnwath DBE, Exeter, England
Member of the Works Council of the Ludwigshafen site of BASF SE
Member of the Supervisory Board since: May 6, 2003
Ralf-Gerd Bastian, Neuhofen, Germany
Member of the Supervisory Board since: October 1, 2000
Chairman of the Works Council of the Ludwigshafen site of BASF SE
and Chairman of BASF's Joint Work Council
Vice Chairman of the Supervisory Board of BASF SE
Robert Oswald, Altrip, Germany
Siemens AG (member)
Linde AG (vice chairman)
Fresenius SE & CO. KGaA (vice chairman)
Member of the Supervisory Board since: May 6, 2003
Supervisory Board memberships:
Human Rights, Labor
and Social Standards
Following the Annual Shareholders' Meeting on May 12, 2017,
Margret Suckale and Dr. Harald Schwager will leave the Board of
Executive Directors. The Supervisory Board will then appoint
Saori Dubourg and Dr. Markus Kamieth as new members of the
Board of Executive Directors:
Comparable German and non-German controlling bodies:
BASF Antwerpen N.V. (Chairwoman of the Administrative Council)
There were eight members on the Board of Executive Directors of BASF SE as of December 31, 2016
BASF Report 2016
Board of Executive Directors
Management and Supervisory Boards
Management and Supervisory Boards - Board of Executive Directors
136 Corporate Governance
For more on suppliers, see page 92 onward
For more on human rights and labor and social standards, see
basf.com/human_rights
We support the United Nations' Guiding Principles on
Business and Human Rights and are constantly working to
enhance our internal guidelines and processes in keeping with
these principles. For example, we introduced a new internal
guideline to respect international labor and social standards.
Outside of our company, as well, we support respect for hu-
man rights and the fight against corruption: We are, for
example, a founding member of the United Nations Global
Compact. As a member of Transparency International
Deutschland and the Partnering Against Corruption Initiative
(PACI) of the World Economic Forum, we assist in the imple-
mentation of these organizations' objectives.
Based on the Guideline on Business Partner Due Diligence
introduced in 2015, we monitor our business partners in sales
for potential compliance risks. This is done by means of a
checklist, a questionnaire distributed to business partners,
and an internet-based analysis. The results are then docu-
mented. Depending on the results, conclusions are drawn
regarding whether and how to maintain the business relation-
ship. We furthermore expect all suppliers to know of and act in
accordance with our global Code of Conduct.
BASF's Corporate Audit department monitors adherence
to compliance principles, covering all areas in which compli-
ance violations could occur. They check that employees
uphold regulations and make sure that the established pro-
cesses, procedures and monitoring tools are appropriate and
sufficient to minimize potential risk or preclude violations in the
first place. In 2016, 63 Group-wide audits of this kind were
performed (2015: 92). The audits confirmed the effectiveness
of the compliance management system. No irregularities were
shown in the audit's focus areas of antitrust and trade controls
and embargo, nor was there a major need for action identified
beyond these topics.
regulations, into all cases of suspected misconduct that we
became aware of. Confirmed violations were penalized, up to
and including dismissal. This involved making sure that the
necessary action was taken in accordance with standardized
company criteria.
In 2016, 278 calls and emails were received by our exter-
nal hotlines (2015: 357). Concerns involved questions ranging
from personnel management and handling of company prop-
erty to information on the behavior of business partners or
human rights issues - such as labor and social standards. We
continued to observe increasing awareness when it came to
potential conflicts of interest. We launched case-specific
investigations, in accordance with applicable law and internal
We particularly encourage our employees to actively and
promptly seek guidance if in doubt. For this, they can consult
not only their managers but also dedicated specialist depart-
ments and company compliance officers. We have also set up
56 external hotlines worldwide which our employees can turn
to anonymously. We make sure that all concerns are pro-
cessed and answered in a swift manner.
BASF's Chief Compliance Officer (CCO) reports directly to the
Board of Executive Directors and manages the implementation
of our Compliance Management System, supported by 104
compliance officers worldwide. The CCO regularly reports to
the Board of Executive Directors on progress in the program's
implementation as well as on any significant findings. Further-
more, the CCO reports to the Supervisory Board's Audit
Committee in at least one of its meetings each year on the
status of the Compliance Program as well as any major devel-
opments. In the event of significant incidents, the Audit Com-
mittee is immediately informed by the Board of Executive
Directors.
56 external hotlines worldwide
Numerous internal Compliance audits
Central role of Chief Compliance Officer and
compliance officers
Monitoring adherence to our Compliance
principles
We firmly believe that for corporate responsibility to be a
success, there must be an active culture of living these guide-
lines within the company. This culture takes years to develop,
and requires the consistent, reliable application of compliance
standards. Because we introduced our Code of Conduct early
on, these standards have already been firmly established and
are undisputed. In our last Global Employee Survey, conduct-
ed in 2015, the vast majority of our employees confirmed that
their work environment places high value on proper conduct in
alignment with internal company guidelines and standards.
Starting in 2015, we have now investigated all cases in which
the answer to the corresponding question showed unit-
specific anomalies, and held, for instance, additional semi-
nars or workshops as necessary.
Compliance culture at BASF
Corporate Governance 135
Compliance
BASF Report 2016
Money Laundering
Information Protection
and Insider Trading Laws
Conflicts of Interest
Dr. Kurt Bock
Changes as of May 13, 2017:
Chairman of the Board of Executive Directors
First appointed: 2003, Term expires: 2021
Degrees: Law, Business Administration, 60 years old, 8 years at BASF
Responsibilities: Engineering & Maintenance; Environmental Protection,
Health & Safety; European Site & Verbund Management; Human Resources
First appointed: 2011, Term expires: 2017
Margret Suckale
First appointed: 2014, Term expires: 2018
Responsibilities: Greater China & Functions Asia Pacific;
South & East Asia, ASEAN & Australia/New Zealand
Degrees: Chemical Engineering, Business Administration, 50 years old,
23 years at BASF
Sanjeev Gandhi
Wintershall Holding GmbH (Chairman of the Supervisory Board)
Wintershall AG (Chairman of the Supervisory Board)
Comparable German and non-German controlling bodies:
Nord Stream AG (member of the Shareholders' Committee)
Internal memberships as defined in Section 100(2) of the German
Stock Corporation Act:
Responsibilities: Finance; Oil & Gas; Procurement; Supply Chain
Operations & Information Services; Corporate Controlling; Corporate Audit
First appointed: 2008, Term expires: 2021
Degree: Law, 57 years old, 29 years at BASF
Dr. Hans-Ulrich Engel
First appointed: 2006, Term expires: 2021
Responsibilities: Petrochemicals; Monomers; Intermediates;
Process Research & Chemical Engineering; Innovation Management;
Digitalization in Research & Development; Corporate Technology &
Operational Excellence; BASF New Business
Degree: Chemistry, 55 years old, 29 years at BASF
Vice Chairman of the Board of Executive Directors
Dr. Martin Brudermüller
First appointed: 2012, Term expires: 2020
Responsibilities: Catalysts; Coatings; Performance Materials; Market &
Business Development, Site & Verbund Management North America;
Regional Functions & Country Platforms North America
Degrees: Chemical Engineering, Business Administration, 56 years old,
13 years at BASF
Wayne T. Smith
First appointed: 2008, Term expires: 2017
Responsibilities: Construction Chemicals; Crop Protection; Bioscience
Research; Region Europe
Degree: Chemistry, 56 years old, 29 years at BASF
Dr. Harald Schwager
Supervisory Board memberships (excluding internal memberships):
Fresenius Management SE (since May 13, 2016)
Degree: Business Administration, 58 years old, 26 years at BASF
Responsibilities: Legal, Taxes, Insurance & Intellectual Property;
Corporate Development; Corporate Communications & Government
Relations; Senior Executive Human Resources; Investor Relations;
Compliance
442
422
0
157,972
Compensation allocated in accordance with the German
Corporate Governance Code (GCGC)
The "Compensation allocated in accordance with the GCGC"
shown for 2015 and 2016 is comprised of the fixed and
variable compensation components actually allocated, plus
the service cost calculated for each member of the Board of
Executive Directors in the reporting years even though this
does not actually represent payment in the narrower sense.
Compensation allocated in accordance with the German Corporate Governance Code (GCGC) (thousand €)
BASF Report 2016
359
Dr. Martin Brudermüller
Vice Chairman of the Board
of Executive Directors
Dr. Hans-Ulrich Engel
2016
2015
2016
2015
2016
2015
Fixed salary
1,300
1,300
865
8662
650
6622
Fringe benefits
68
215
2393
163,764
3893
Total
17,552
Number of options granted
2016
2015
Dr. Kurt Bock
35,108
36,248
Dr. Martin Brudermüller
23,344
24,104
Dr. Hans-Ulrich Engel
17,552
18,124
Sanjeev Gandhi
17,552
7,000
Michael Heinz
17,552
18,124
Dr. Harald Schwager
17,552
18,124
Wayne T. Smith
17,552
18,124
Margret Suckale
18,124
The table below shows the options granted to the Board of
Executive Directors on July 1 of both reporting years.
92
Total
Service cost
Total compensation in accordance with GCGC
7,815
6,244
4,132
2,616
1,773
4,168
537
605
8,352
6,849
471
4,603
529
363
402
3,145
2,136
4,570
1 The basis for the allocated actual annual variable compensation is the return on assets adjusted for special items and the performance factor. This includes contributions made to the
deferred compensation program.
2 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
3 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
4 At the end of the regular term of the LTI program 2008, exercise gains which were realized in 2012 or 2010 were allocated to Dr. Kurt Bock and Wayne T. Smith in 2016 in accordance
with the special conditions of the U.S. LTI program.
5 At the end of the regular term of the LTI program 2007, exercise gains which were realized in 2009, 2012 or 2013 were allocated to Dr. Kurt Bock, Dr. Hans-Ulrich Engel and
Wayne T. Smith in 2015 in accordance with the special conditions of the U.S. LTI program.
BASF Report 2016
Total
4123
LTI program 2012 (2012-2020)
1,657
1,368
1,515
1,104
1,255
742
1,074
Actual annual variable compensation¹
2,061
2,046
1,371
1,361
1,031
1,023
Multiple-year variable compensation
4,3864
2,6835
1,657
2,0715
LTI program 2007 (2007-2015)
2,6835
2,0715
LTI program 2008 (2008-2016)
4,3864
LTI program 2009 (2009-2017)
LTI program 2010 (2010-2018)
LTI program 2011 (2011-2019)
Compensation report
142 Corporate Governance
2 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
1,105
4,639
3,072
3,600
1,878
5,412
2,963
2,829
1,107
4,641
(1,300)
(1,300)
(1,300)
(1,300)
(1,300)
(1,300)
1,023
1,031
1,023
1,031
1,023
1,031
(402)
(363)
(489)
2,827
(445)
3,218
373
1,534
442
422
0
1,534
422
0
1,534
3,155
1,433
4,967
2,542
2,456
734
4,268
402
363
363
363
489
445
445
445
421
373
373
(421)
(373)
2,539
0
1,534
442
422
0
1,534
2,472
2,430
708
4,242
326
309
309
309
2,798
2,739
1,017
4,551
(1,300)
(1,300)
1,023
1,031
(326)
2,195
(309)
2,161
1 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
422
442
2,000
0
2,195
2,306
2,886
2,265
2,187
Margret Suckale
2015
2016
2016
2016
(Min)
(Max)
Villeroy & Boch AG (member)
650
650
650
80
58
58
58
730
708
708
708
1,300
1,300
650
Steag New Energies GmbH (vice chairman)
Dr. Kurt Bock
Chairman of the Board of
Executive Directors
Waldemar Helber, Otterbach, Germany
0
844
884
Multiple-year variable compensation
2,660
0
1,729
1,729
0
2,600
2,600
Annual variable target compensation
1,104
1,104
1,104
1,255
1,368
1,368
1,368
1,515
Total
2392
2392
2392
3892
3,069
68
588
0
537
537
537
605
Service cost
5,804
1,104
3,394
3,572
8,437
1,368
4,812
4,999
Total
2,040
0
561
3,069
0
844
LTI program 2016 (2016-2024)
588
884
LTI program 2015 (2015-2023)
2,040
561
529
68
215
140 Corporate Governance
139
Furthermore, a reconciliation statement for total compen-
sation to be reported is provided below the table "Compensa-
tion granted in accordance with GCGC" due to the disclosures
required by Section 314(1)(6a) of the German Commercial
Code (HGB) in connection with the German Accounting Stan-
dard Number 17 (GAS 17).
The table "Compensation granted in accordance with GCGC"
shows: fixed salary, fringe benefits, annual variable target
compensation, LTI program measured at fair value at the grant
date, and service cost. The individual compensation compo-
nents are supplemented by individually attainable minimum
and maximum compensation.
Compensation granted in accordance with the German
Corporate Governance Code (GCGC)
The tables on pages 140 to 143 show the granted and allo-
cated compensation as well as service cost of each member
of the Board of Executive Directors in accordance with Section
4.2.5(3) of the German Corporate Governance Code (GCGC)
in its version of May 5, 2015.
Amount of total compensation
Board members are members of the BASF Pensionskasse
WAG, as are generally all employees of BASF SE. Contribu-
tions and benefits are determined by the Statutes of the BASF
Pensionskasse WaG and the General Conditions of Insurance.
The pension units also include survivor benefits. Upon the
death of an active or former member of the Board, the surviv-
ing spouse receives a survivor pension amounting to 60% of
the Board member's pension entitlement. The orphan pension
amounts to 10% for each half-orphan, 33% for an orphan,
25% each for two orphans and 20% each for three or more
orphans of the pension entitlement of the deceased (former)
Board member. Total survivor benefits may not exceed 75% of
the Board member's pension entitlement. If the survivor pen-
sions exceed the upper limit, they will be proportionately
reduced.
The sum of the pension units accumulated over the report-
ing years determines the respective Board member's pension
benefit in the event of a claim. This is the amount that is pay-
able upon retirement. Pension benefits take effect at the end of
service after completion of the member's 60th year of age, or
on account of disability or death. Pension payments are
reviewed on a regular basis and adjusted by at least 1% each
year.
The annual pension benefits accruing to Board members
in a given reporting year (pension unit) are composed of a fixed
and a variable component. The fixed component is calculated
by multiplying the annual fixed salary above the Social Security
Contribution Ceiling by 32% (contribution factor). The variable
component of the pension unit is the result of multiplying the
fixed component with a factor that is dependent on the return
on assets in the reporting year and the performance factor,
which is decisive for the variable bonus. The amount resulting
from the fixed and the variable component is converted into a
pension unit (lifelong pension) using actuarial factors based on
an actuarial interest rate (5%), the probability of death, invalid-
ity and bereavement according to Heubeck Richttafeln, 2005G
(modified), and an assumed pension increase (at least 1% per
annum).
5. As part of the pension benefits granted to the Board of
Executive Directors (Board Performance Pension), company
pension benefits are intended to accrue annual pension units.
The method used to determine the amount of the pension
benefits generally corresponds to that used for the other
senior executives of the BASF Group in Germany. The method
is designed such that both the performance of the company
and the progression of the individual Board member's career
significantly affect the pension entitlement.
For more on the D&O insurance of the Board of Executive Directors,
see page 133
The members of the Board are covered by a directors' and
officers' liability insurance (D&O insurance) concluded by the
company, which includes a deductible.
4. Included in nonmonetary compensation and other
additional compensation (fringe benefits) are the following:
delegation allowances, accident insurance premiums and
other similar benefits, and benefits from security measures
provided by the company. The members of the Board did not
receive loans or advances from the company in 2016.
Corporate Governance
Compensation report
BASF Report 2016
For more on the LTI program, see page 45 and from page 216 onward
For more on share ownership by members of the Board of Executive
Directors, see page 133
3. A share-price-based, long-term incentive (LTI) pro-
gram exists for members of the Board of Executive Directors.
It is also offered to all other senior executives of BASF Group.
Members of the Board of Executive Directors are subject to a
stricter set of rules than are contained in the general program
conditions: They are required to participate in the program
with at least 10% of their variable bonus. This mandatory
investment consisting of BASF shares is subject to a holding
period of four years. For any additional voluntary investment of
up to 20% of the variable bonus, the general holding period of
two years applies. Members of the Board of Executive Direc-
tors may only exercise their options at least four years after
they have been granted (vesting period). This compensation
component is limited, too, by the structure of the LTI program
as well as by the upper limit on the options' exercise value.
Due to the multiple-year exercise period, it can occur that
exercise gains from several LTI program years accumulate
inside of one year; there can also be years without any exer-
cise gains.
Board members, like other employee groups, may contrib-
ute a portion of their annual variable bonus into a deferred
compensation program. For members of the Board of Execu-
tive Directors, as well as for all other senior executives of the
BASF Group in Germany, the maximum amount that can be
contributed to this program is €30,000. Board members have
taken advantage of this offer to varying degrees.
The Supervisory Board assesses the goal achievement of
the current year and the previous two years. A performance
factor with a value between 0 and 1.5 is determined on the
basis of the goal achievement ascertained by the Supervisory
Board. The variable bonus for the prior fiscal year is payable
after the Annual Shareholders' Meeting.
In order to assess the sustainable performance of the
Board of Executive Directors, each year the Supervisory Board
sets a target agreement with the entire Board of Executive
Directors that primarily contains medium and long-term goals.
2. The actual annual variable compensation (variable
bonus) is based on the performance of the entire Board of
Executive Directors and the return on assets. The return on
assets is also used to determine the variable compensation of
all other employee groups.
1. The fixed salary is a set amount of yearly compensation
paid out in even installments. It is regularly reviewed by the
Supervisory Board and adjusted, if necessary.
Compensation report
68
BASF Report 2016
Dr. Kurt Bock
Fringe benefits
865
865
865
8661
1,300
1,300
1,300
1,300
Fixed salary
(Max)
(Min)
(Max)
(Min)
2016
2016
2016
2015
2016
2016
2016
2015
Vice Chairman of the Board of Executive Directors
Chairman of the Board of Executive Directors
Dr. Martin Brudermüller
Compensation granted in accordance with the German Corporate Governance Code (GCGC) (thousand €)
471
471
471
442
Multiple-year variable compensation
2,000
0
1,300
1,300
2,000
0
1,300
1,300
Annual variable target compensation
934
934
934
924
733
733
733
805
Total
1062
1062
1062
2562
83
422
83
0
519
V & B Fliesen GmbH (member)
399
Service cost
4,468
934
2,751
2,743
4,267
733
2,455
2,547
Total
1,534
0
517
1,534
0
422
LTI program 2016 (2016-2024)
519
442
LTI program 2015 (2015-2023)
1,534
0
517
1,534
83
155
Fringe benefits
(537)
(605)
less service cost
1,371
1,361
2,061
2,046
compensation
plus allocated actual annual variable
(1,729)
(1,729)
(2,600)
(2,600)
less granted annual variable target
compensation
connection with GAS 17
Reconciliation reporting of total compensation
pursuant to Section 314(1)(6a) HGB in
6,275
1,575
3,865
4,101
8,974
1,905
5,349
5,604
Total compensation in accordance with GCGC
(529)
(471)
Total compensation
4,445
8281
8281
8281
6681
650
650
650
650
Fixed salary
(Max)
(Min)
(Max)
The compensation components are shown in
detail below:
(Min)
2016
2016
2015
2016
2016
2016
2015
Wayne T. Smith
Dr. Harald Schwager
3,036
3,204
4,273
2016
5. Company pension benefits
4,000
3. Share-price-based, long-term incentive (LTI) program
Compensation report
138 Corporate Governance
Compensation report
Vice Chairman of the Works Council of the Ludwigshafen site of BASF SE
Member of the Supervisory Board since: September 9, 1996
Wolfgang Daniel, Heidelberg, Germany
The following member left the Supervisory
Board on April 29, 2016:
RAG DSK AG (vice chairman)
RAG AG (vice chairman)
Evonik Industries AG (vice chairman until May 18, 2016)
Steag GmbH (vice chairman)
K+S Aktiengesellschaft (vice chairman)
Michael Vassiliadis, Hannover, Germany
Member of the Supervisory Board since: January 14, 2008
Denise Schellemans, Brecht, Belgium
Full-time trade union delegate
Member of the Supervisory Board since: December 17, 2010
Comparable German and non-German controlling bodies:
Métropole Télévision S.A. (member of the Supervisory Board)
Chief Executive Officer of RTL Television GmbH
Member of the Executive Board of Bertelsmann SE & Co. KGaA
Co-CEO of RTL Group S.A.
Anke Schäferkordt, Cologne, Germany
BASF Report 2016
This report outlines the main principles of the compensa-
tion for the Board of Executive Directors and discloses the
amount and structure of the compensation of each Board
member. Furthermore, it provides information on end-of-
service undertakings with respect to Board members, as
well as information on the compensation of Supervisory
Board members.
Chairman of the Mining, Chemical and Energy Industries Union
Member of the Supervisory Board since: August 1, 2004
Supervisory Board memberships:
This report meets the disclosure requirements of the
German Commercial Code, supplemented by the additional
requirements based on the German Act on Disclosure of
Management Board Remuneration (Vorstandsvergütungs-
Offenlegungsgesetz) as well as the German Act on the Appro-
priateness of Management Board Remuneration (Gesetz zur
Angemessenheit der Vorstandsvergütung), and is aligned with
the recommendations of the German Corporate Governance
Code (GCGC) in its version of May 5, 2015.
Compensation of the Board of Executive
Directors
2. Annual variable compensation
1. Fixed salary
The compensation of the Board of Executive
Directors comprises:
The compensation of the Board of Executive Directors is
designed to promote sustainable corporate development. It
is marked by a pronounced variability in relation to the perfor-
mance of the Board of Executive Directors and BASF Group's
return on assets.
Vice Chairman of the Works Council of the Ludwigshafen site of BASF SE
Member of the Supervisory Board since: April 29, 2016
4. Nonmonetary compensation and other additional compen-
sation
For more on the Supervisory Board and its committees, see page 137
and from page 147 onward
Based on a proposal by the Personnel Committee, the
Supervisory Board determines the amount and structure of
compensation of members of the Board of Executive Directors.
The amount and structure of compensation is determined
by the company's size, complexity and financial position, as
well as the performance of the Board of Executive Directors.
Internal and external appropriateness of the Board's compen-
sation is reviewed by external auditors on a regular basis.
Globally operating companies based in Europe serve as an
external reference. For internal comparison, compensation is
considered in total as well as over time, especially for senior
executives.
Principles
214
28 Leases
208
instruments
27 Supplementary information on financial
25
24
Liabilities
Other explanatory notes
207
26 Risks from litigation and claims
206
Other financial obligations
204
29 Statement of cash flows and capital structure
management
Directors and Supervisory Board
30 Share-price-based compensation program
and BASF incentive share program
216
31 Compensation for the Board of Executive
218
32 Related-party transactions
period
203
35 Nonadjusting events after the reporting
220
34 Declaration of Conformity with the German
Corporate Governance Code
219
33 Services provided by the external auditor
218
215
Other provisions
17
198
180.0
180.0
120.0
120.0
60.0
60.0
Anke Schäferkordt
188
Notes on balance sheet
14 Intangible assets
189
15 Property, plant and equipment
192
16 Investments accounted for using the equity
method and other financial assets
194
220
obligations
22 Provisions for pensions and similar
197
21 Minority interests
197
20 Other comprehensive income
23
196
19
195
Receivables and miscellaneous assets
18
194
Inventories
Capital, reserves and retained earnings
Consolidated Financial Statements
Fixed salary
Compensation allocated in accordance with the German Corporate Governance Code (GCGC) (thousand €)
Margret Suckale
Wayne T. Smith
2,227
3,692
2,244
2,138
2,624
2,909
Total compensation in accordance with GCGC
2016
399
421
373
489
445
Service cost
1,828
3,333
1,823
1,765
359
2,135
2015
2015
1,023
1,031
1,023
1,031
Actual annual variable compensation¹
730
708
924
934
2016
Total
58
2563
1063
Fringe benefits
650
650
6682
8282
Fixed salary
80
BASF Report 2016
2,464
1,569
4552
2015
2016
2015
2016
2015
2016
Dr. Harald Schwager
Michael Heinz
5142
Sanjeev Gandhi
LTI program 2012 (2012-2020)
LTI program 2011 (2011-2019)
LTI program 2010 (2010-2018)
LTI program 2007 (2007-2015)
LTI program 2008 (2008-2016)
LTI program 2009 (2009-2017)
Multiple-year variable compensation
Actual annual variable compensation¹
Total
Fringe benefits
Denise Schellemans
Corporate Governance
Compensation report
Total
650
650
1,569
1,023
1,031
1,023
1,031
1,023
1,031
805
733
650
800
1,112
1,433
155
83
150
84
5983
9783
650
734
60.0
120.0
120.0
4
To Our Shareholders
Management's Report
Corporate Governance
Consolidated Financial
Statements
572
17
125
The Declaration of Corporate Governance, pursuant to Sec-
tion 315(5) HGB in connection with Section 289(a) HGB,
comprises the subchapters Corporate Governance Report
(except for the disclosures persuant to Section 315(4) HGB),
Compliance and Declaration of Conformity as per Section 161
of the German Stock Corporation Act (AktG) in the Corporate
Governance chapter. It is a component of the Management's
Report.
Supplementary Information on the Oil & Gas Segment
Overviews
231
Notes
Statement by the Board of Executive Directors
153
Policies and scope of consolidation
1
Summary of accounting policies
160
Auditor's report
221
154
Declaration of Corporate Governance as per
Section 315(5) of the German Commercial Code
(HGB) in connection with Section 289(a) HGB
The Board of Executive Directors
of BASF SE
For more information on changes within the Supervisory Board,
see the Corporate Governance Report on page 130
Thanks
The Supervisory Board thanks all employees of the BASF
Group worldwide and the management for their personal
contribution in the 2016 business year.
Ludwigshafen, February 22, 2017
The Supervisory Board
Juzen Hambrech
забрем
Jürgen Hambrecht
Chairman of the Supervisory Board
Declaration of Corporate Governance
150 Corporate Governance
BASF Report 2016
Declaration of Conformity pursuant to Section 161
of the German Stock Corporation Act (AktG)
Declaration of Conformity 2016 of the Board of
Executive Directors and the Supervisory Board
of BASF SE
The Board of Executive Directors and the Supervisory
Board of BASF SE hereby declare pursuant to Section
161 AktG (Stock Corporation Act)
The recommendations of the Government Commission on the
German Corporate Governance Code as amended on May 5,
2015, published by the Federal Ministry of Justice on June 12,
2015, in the official section of the electronic Federal Gazette,
have been complied with since the submission of the last
Declaration of Conformity in December 2015.
Ludwigshafen, December 2016
The Supervisory Board
of BASF SE
Multiple-year variable compensation
Declaration of Conformity pursuant to Section 161 of the German Stock Corporation Act (AktG) / Declaration of Corporate Governance
Employee representative Wolfgang Daniel left the Supervisory
Board at the conclusion of the Annual Shareholders' Meeting
on April 29, 2016. He was succeeded by Waldemar Helber,
who joined the Supervisory Board as the successor appointed
by the BASF Works Council Europe on December 4, 2013,
in accordance with the Employee Participation Agreement of
November 15, 2007. The Supervisory Board thanks Wolfgang
Daniel, who had been a member of the Supervisory Board since
1996, for his many years of service.
2
172
Statement of cash flows
158
8
Other operating expenses
183
9
Income from companies accounted for using
Statement of equity
159
182
the equity method
10
Financial result
185
11
Income taxes
185
12 Minority interests
188
13 Personnel expenses and employees
184
Scope of consolidation
Other operating income
182
3
BASF Group List of Shares Held in
Statement of income
155
accordance with Section 313(2) of the German
Commercial Code
178
Statement of income and expense recognized
4 Reporting by segment and region
7
178
156
Notes on statement of income
5
Earnings per share
181
Balance sheet
157
6
Functional costs
in equity
60.0
Composition of the Supervisory Board
the proposal by the Board of Executive Directors for the appro-
priation of profit as well as the Consolidated Financial State-
ments and Management's Report for the BASF Group for 2016.
The Supervisory Board has reviewed, acknowledged and
approved the auditor's reports. The results of the preliminary
review by the Audit Committee and the results of the Super-
visory Board's examination fully concur with those of the audit.
The Supervisory Board sees no grounds for objection to the
management and submitted reports.
Chairman of the Audit Committee
Compensation for Supervisory Board membership and mem-
bership of Supervisory Board committees is payable after the
Annual Shareholders' Meeting, which approves the Consoli-
dated Financial Statements upon which the variable compen-
sation is based. Accordingly, compensation relating to the
year 2016 will be paid following the Annual Shareholders'
Meeting on May 12, 2017.
In 2016, as in 2015, the company paid the Super-
visory Board member Prof. Dr. François Diederich a total of
CHF 38,400 (2016: approximately €35,200; 2015: approxi-
mately €36,000) for consulting work in the area of chemical
research based on a consulting contract approved by the
Supervisory Board.
Beyond this, no other Supervisory Board members
received any compensation in 2016 for services rendered
personally, in particular, the rendering of advisory and agency
services.
For more on share ownership by members of the Supervisory Board,
see page 133
145
146 Corporate Governance
Report of the Supervisory Board
4 Member of the Audit Committee
Report of the Supervisory Board
Dear Thareholds,
The Supervisory Board's work in 2016 was marked by several
events and topics that were, in various respects, both weighty
and significant - such as the explosion at the Ludwigshafen
site, changes in the chemical industry due to the announce-
ment of major mergers and acquisitions that impacted BASF's
strategic development, and long-term succession planning for
the composition of the Board of Executive Directors.
The Supervisory Board faced these challenges with a full
sense of responsibility and supported the Board of Executive
Directors' activities, especially in coping with the explosion,
and advised the Board of Executive Directors in its delibera-
tions on BASF's strategic further development in an evolving
industry environment.
Monitoring and consultation in an ongoing
dialog with the Board of Executive Directors
In 2016, the Supervisory Board of BASF SE exercised its duties
as required by law and the Statutes with the utmost care. It
regularly monitored the management of the Board of Executive
Directors and provided advice on the company's strategic
development and important individual measures, about which
the Supervisory Board was regularly and thoroughly informed
by the Board of Executive Directors. This occurred both during
and outside of the meetings of the Supervisory Board and its
committees in the form of written and oral reports on, for exam-
ple, all of the major financial KPIs of the BASF Group and its
segments, the economic situation in the main volumes and
procurement markets, and on deviations in business develop-
ments from original plans. Furthermore, the Supervisory Board
tackled fundamental questions of corporate planning, including
financial, investment, sales volumes and personnel planning, as
well as measures for designing the future of research and devel-
opment. The Supervisory Board discussed in detail the reports
from the Board of Executive Directors, and also deliberated on
prospects for the company and its individual business areas
with the Board of Executive Directors. It was convinced of the
lawfulness, expediency and propriety of the Board of Executive
Director's company leadership.
The Chairman of the Board of Executive Directors and the
Chairman of the Supervisory Board were in regular contact
outside of Supervisory Board meetings, as well. The former
promptly informed the latter of current developments and
significant issues. The Supervisory Board was always involved
at an early stage in decisions of major importance. The Super-
visory Board passed resolutions on the individual measures
that required the approval of the Supervisory Board. In the
2016 business year, this pertained to the authorization of the
Chemetall acquisition. With this transaction, BASF has added
the surface treatment business area to its Coatings division.
Supervisory Board meetings
The Supervisory Board held five meetings in the 2016 report-
ing year. With the exception of one meeting at which one
member of the Supervisory Board was absent due to illness,
all Supervisory Board members attended all Supervisory
Board meetings in 2016. The members of the Supervisory
Board elected by shareholders and those elected by the
employees prepared for the meetings in separate preliminary
discussions.
BASF Report 2016
An individual overview of meeting attendance has been made available
on the company website at:
basf.com/governance/supervisoryboard/meetings
7 Member of the Strategy Committee
(since October 1, 2015)
5 Chairman of the Strategy Committee
(since October 1, 2015)
180.0
180.0
Michael Vassiliadis 2,4,7
60.0
60.0
120.0
120.0
Total
875.0
6 Vice Chairman of the Strategy
Committee (since October 1, 2015)
870.0
1,740.0
62.5
312.5
65.6
332.8
242.5
2,937.5 2,942.8
245.6
1
Chairman of the Personnel Committee
2 Member of the Personnel Committee
3
1,750.0
At the Supervisory Board's accounts meeting on
February 22, 2017, it approved the Financial Statements of
BASF SE and the Consolidated Financial Statements of the
BASF Group prepared by the Board of Executive Directors,
making the 2016 Financial Statements of BASF SE final. The
Supervisory Board concurs with the proposal of the Board of
Executive Directors regarding the appropriation of profit and the
payment of a dividend of €3.00 per share.
A significant component of all Supervisory Board meetings was
the Board of Executive Directors' reports on the current busi-
ness situation with detailed information on sales and earnings
growth, as well as on opportunities and risks for business devel-
opment, the status of important current and planned investment
projects, developments on the capital markets, and significant
managerial measures taken by the Board of Executive Directors
in addition to innovation projects. In its meetings, the Super-
visory Board additionally discussed the further development of
the BASF Group's business activities through acquisitions,
divestitures and investment projects. Significant consultation
topics included the acquisition of Chemetall with the entrance
into the surface treatment business, the divestiture of the indus-
trial coatings business, the sale of the OLED patent portfolio,
the acquisition of Henkel's western European building material
business for professional users, and the establishment of a joint
venture with Avantium for the production of furandicarboxylic
acid (FDCA) from renewable resources.
BASF Report 2016
-
At the meeting on July 25, 2016, KPMG AG Wirtschafts-
prüfungsgesellschaft - the auditor elected at the Annual Share-
holders' Meeting was charged with the audit for the 2016
reporting year and auditing fees were agreed upon. The focus
areas for the annual audit were discussed and defined together
with the auditor. The Audit Committee categorically excluded
any service relationships between auditor and BASF Group
companies outside of the audit of the annual financial state-
ments, including beyond prevailing legal limitations. These
services may only be performed upon approval by the Audit
Committee. For certain nonaudit services beyond the scope of
the audit of the financial reports, the Audit Committee either
granted approval for individual cases or authorized the Board
of Executive Directors to engage KPMG AG Wirtschafts-
prüfungsgesellschaft for such services. The authorization of
each service applies for one reporting year and is limited in
amount.
Other important activities included advising the Board of
Executive Directors on accounting issues and the internal con-
trol system. The internal auditing system and compliance in the
BASF Group were each a focus at one meeting of the Audit
Committee. In these meetings, the head of the Corporate Audit
department and the Chief Compliance Officer reported to the
Audit Committee and answered its questions. In all meetings,
the Audit Committee also received information on the develop-
ment of risks from litigation.
The Nomination Committee is responsible for preparing
candidate proposals for the election of those Supervisory
Board members who are elected by the Annual Shareholders'
Meeting. The Nomination Committee is guided by the objectives
for the composition of the Supervisory Board adopted by the
Supervisory Board. The Nomination Committee met once in
2016. All committee members attended the meeting. Its focus
was the discussion of suitable candidates for the case of the
early departure from the Supervisory Board of one of the mem-
bers elected by the Annual Shareholder's Meeting.
The Strategy Committee, formed to consult on strategic
options for the further development of the BASF Group, did not
meet in 2016.
Corporate Governance and Declaration of
Conformity
The Supervisory Board places great value on ensuring good
corporate governance: In 2016, it was therefore once again
intensely occupied with the corporate governance standards
practiced in the company and the implementation of the Ger-
man Corporate Governance Code's recommendations and
suggestions. A further topic was the implementation of legal
stipulations in BASF SE. This included the E.U.'s regulation on
market abuse with the first-time introduction of legal "closed
periods" in which share transactions are not permissible, as
well as the Law on Equal Participation of Women and Men in
Leadership Positions in the Private and Public Sector. The
Corporate Governance Report of the BASF Group provides
extensive information on BASF's corporate governance. It also
includes the Compensation Report, containing full details on
the compensation for the Board of Executive Directors and the
Supervisory Board.
At the meeting of December 15, 2016, current recommen-
dations and proposals made for the German Corporate Gover-
nance Code and their implementation at BASF were discussed,
along with the joint Declaration of Conformity by the Super-
visory Board and Board of Executive Directors in accordance
with Section 161 of the Stock Corporation Act. BASF complies
with the recommendations of the German Corporate Gover-
nance Code in its version of May 5, 2015, without exception.
The full Declaration of Conformity is rendered on page 150
and is available to shareholders on the company website at:
basf.com/en/governance
At the meeting on February 21, 2017, the auditor reported
in detail on its audits of BASF SE's separate and consolidated
financial statements for the 2016 business year and discussed
the results of its audit with the Audit Committee.
Independence and efficiency review
BASF Report 2016
Corporate Governance
Report of the Supervisory Board
149
The Supervisory Board reviews the efficiency of its activities
every year in the form of a self-assessment. This took place in
2016 as well, as the Chairman of the Supervisory Board con-
ducted individual dialogs with each Supervisory Board member
using a structured questionnaire. Topics especially centered on
Supervisory Board meeting agendas; cooperation with the
Board of Executive Directors; information supply of the Super-
visory Board; the Committees' duties, composition and work;
and cooperation with shareholder and employee representa-
tives. The results of these individual meetings were presented
and thoroughly discussed at the Supervisory Board meeting on
December 15, 2016. Overall, its members rated the Supervisory
Board's activity as efficient.
The Audit Committee once again conducted a self-assess-
ment of its activities in 2016, apart from the efficiency review.
Material topic areas were the organization and content of the
meetings and the supply of information as the basis of the Com-
mittees' work. No notable need for action was identified.
Separate and consolidated financial statements
KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected
by the Annual Shareholders' Meeting for the 2016 reporting
year, has audited the Financial Statements of BASF SE and
the BASF Group Consolidated Financial Statements, including
the Management's Report and the accounting records from
which they were prepared, and have approved them free of
qualification. Furthermore, the auditor certified that the Board of
Executive Directors had taken the measures incumbent on it
under Section 91(2) of the German Stock Corporation Act in an
appropriate manner. In particular, it had instituted an appropriate
information and monitoring system that fulfilled the requirements
of the company and is applicable for the early identification of
developments that could pose a risk to the continued existence
of the BASF Group.
The documents to be examined and the auditor's reports
were sent in a timely manner to every member of the Supervisory
Board. The auditor attended the accounts review meeting of the
Audit Committee on February 21, 2017, as well as the accounts
meeting of the Supervisory Board on February 22, 2017, and
reported on the main findings of the audit. The auditor also
provided detailed explanations of the reports on the day before
the accounts meeting of the Supervisory Board.
The Audit Committee reviewed the Financial Statements
and Management's Report at its meeting on February 21, 2017,
and discussed them in detail with the auditor. The Chairwoman
of the Audit Committee gave a detailed account of the prelimi-
nary review at the Supervisory Board meeting on February 22,
2017. On the basis of this preliminary review by the Audit Com-
mittee, the Supervisory Board has examined the Financial
Statements and Management's Report of BASF SE for 2016,
An important aspect of good corporate governance is the
independence of Supervisory Board members and their
freedom from conflicts of interest. According to assessments of
the Supervisory Board, all of its members can be considered
independent as defined by the German Corporate Governance
Code. The criteria used for this evaluation can be found in the
Corporate Governance Report on page 130. In cases where
Supervisory Board members hold supervisory or management
positions at companies with which BASF has business relations,
we see no impairment of their independence. The scope of
these businesses is relatively marginal and furthermore takes
place under conditions similar to those of a third party.
Important focus points of the Supervisory Board's consulta-
tion topics over the entire business year centered on develop-
ments in the chemical industry as a result of announced mergers
and acquisitions, such as the DOW and DuPont merger;
the acquisition of Monsanto by Bayer and of Syngenta by
ChemChina; their potential impact on BASF's business and
strategic development possibilities, especially in the Agricultural
Solutions segment; and current and future courses of action.
The Audit Committee is responsible for all the tasks listed
in Section 107(3)(2) of the German Stock Corporation Act and
in Subsection 5.3.2 of the German Corporate Governance
Code in its version of May 5, 2015. The Audit Committee met
five times during the reporting period. All committee members
attended all meetings. Its core duties were to review BASF SE's
Financial Statements and Consolidated Financial Statements,
as well as to discuss the quarterly and first-half financial reports
with the Board of Executive Directors prior to their publication.
BASF Report 2016
Corporate Governance
Report of the Supervisory Board
147
With respect to regional opportunities and risks, the Supervisory
Board was often occupied with political and economic develop-
Iments in northern Africa and the Middle East as well as the
development of local markets there. Possibilities for tapping
these markets were discussed.
At its meeting on February 24, 2016, the Supervisory Board
reviewed and approved the Consolidated Financial Statements,
Management's Report and the proposal for the appropriation of
profit for the 2015 business year as presented by the Board of
Executive Directors. The meeting on April 29, 2016, served to
prepare for the Annual Shareholders' Meeting.
In addition to strategically significant individual measures,
the Supervisory Board also addressed BASF's strategy and
long-term business prospects in individual business areas and
regions. This was the focus of its meeting on July 25/26, 2016,
at which the Board of Executive Directors provided a status
update on the implementation of the "We create chemistry"
strategy. Main consultation topics comprised possibilities and
objectives for strategic portfolio development, innovation and
technology, the development of the Oil & Gas and Agricultural
Solutions segments, the automotive sector as a key customer
industry (especially with regard to the development of electro-
mobility), and opportunities and risks in the Asia Pacific region.
In addition, the Supervisory Board addressed future pros-
pects for the main site in Ludwigshafen and the further develop-
ment of the Engineering & Maintenance function at its meeting
on October 25, 2016.
At its meeting on December 15, 2016, the Supervisory
Board discussed and approved the Board of Executive Direc-
tors' operative and financial planning including the investment
budget for 2017, and as usual empowered the Board of Execu-
tive Directors to procure necessary financing in 2017.
Composition and compensation of the
Board of Executive Directors
In several meetings in the 2016 business year, the Supervisory
Board conferred on, and passed resolutions on, personnel
topics in the Board of Executive Directors as well as questions
concerning the compensation of the Board of Executive
Directors. Based on preparation conducted by the Personnel
Committee, it determined the targets for the Board of Executive
Directors for the 2016 business year at its meeting on Feb-
ruary 24, 2016.
compensation system, as well as the structure of the compen-
sation of the Supervisory Board. The basis for this was devel-
oped and intensively discussed with an independent compen-
sation consultant. The focus of the December 15, 2016,
meeting was the discussion of and resolution on the Super-
visory Board's proposal for new appointments to the Board of
Executive Directors, the adjustment of that Board's compensa-
tion, and a redesign of the Supervisory Board's compensation.
In addition, the Personnel Committee advised on the perfor-
mance evaluation of the Board of Executive Directors as well as
the target figures for the proportion of women in that Board.
At its meeting on December 15, 2016, the Supervisory
Board advised on long-term succession planning for the Board
of Executive Directors and approved the early conclusion of the
term for Dr. Harald Schwager, member of the Board of Execu-
tive Directors for many years, in order to allow for structured
succession. Dr. Harald Schwager agreed on early discontinu-
ance of his contract without severance pay by the company and
will receive the contractually agreed upon interim and pension
benefits in accordance with proper expiration of a term on the
Board of Executive Directors. Dr. Harald Schwager will therefore
depart the Board of Executive Directors together with Margret
Suckale at the conclusion of the Annual Shareholders' Meeting
Furthermore, the Supervisory Board agreed at its
December 15, 2016, meeting on the performance evaluation of
the Board of Executive Directors for the 2016 business year as
well as - based on an appropriateness test conducted by the
Personnel Committee - an adjustment of the Board of Executive
Directors' compensation including an increase in the fixed salary
and annual variable target compensation, effective January 1,
2017.
At several meetings, the Supervisory Board discussed the
topic of the compensation of the Supervisory Board. The cur-
rent configuration of the Supervisory Board's compensation,
with a fixed salary and a limited variable compensation compo-
nent based on earnings per share, has existed largely unchanged
since 2006. In normal business years, compensation in fact
purely comprises a fixed salary, as the maximum amount of the
variable compensation is for the most part reached by the high
level of earnings per share. This was also the case for compen-
sation for 2016. The Supervisory Board therefore decided to
propose to the 2017 Annual Shareholders' Meeting a formal
restructuring of the BASF Supervisory Board's compensation to
a purely fixed salary, combined with a long-term obligation for
the Supervisory Board members to acquire and keep shares -
in line with the development of the compensation structures of
the majority of large publicly traded companies in Germany.
Committees
The Supervisory Board of BASF SE has four committees: 1. the
committee for personnel matters of the Board of Executive
Directors and the granting of loans in accordance with Section
89(4) of the German Stock Corporation Act (Personnel Commit-
tee); 2. the Audit Committee; 3. the Nomination Committee; and
4. the Strategy Committee. Following each Committee meeting,
the chairpersons of the Committees reported in detail about the
meetings and the activities of the Committees at the subse-
quent meeting of the Supervisory Board.
For information on the composition of the committees and the tasks
assigned them by the Supervisory Board, see the Corporate Governance
Report on page 129
The Personnel Committee met four times during the reporting
period. All committee members attended the meetings. At its
meeting on February 24, 2016, the Personnel Committee
advised on the targets for the Board of Executive Directors for
the 2016 business year. The meetings on July 25, 2016, and
October 25, 2016, focused on development of leadership at
the top levels of management below the Board of Executive
Directors and succession planning for that Board.
Further consultation topics comprised a review of the
appropriateness of the compensation of the Board of Executive
Directors, both in terms of amount and configuration of the
148 Corporate Governance
Report of the Supervisory Board
on May 12, 2017. At the same Supervisory Board meeting,
Saori Dubourg and Dr. Markus Kamieth were appointed to the
Board of Executive Directors, effective at the end of the 2017
Annual Shareholders' Meeting, each with a first-time term to the
end of the 2020 Annual Shareholders' Meeting.
7984
LTI program 2007 (2007-2015)
527
285.6
Ralf-Gerd Bastian
60.0
60.0
120.0
120.0
50.0
50.0
230.0
230.0
Dame Alison Carnwath DBE3,7
60.0
60.0
120.0
120.0
282.5
15.6
12.5
180.0
31.3
475.0
481.3
Michael Diekmann, Vice Chairman2,6
90.0
90.0
180.0
100.0
180.0
17.2
282.5
287.2
Robert Oswald, Vice Chairman2.7
90.0
90.0
180.0
12.5
103.1
280.0
283.1
50.0
230.0
230.0
Francesco Grioli
60.0
60.0
120.0
50.0
120.0
180.0
Waldemar Helber, Supervisory Board member
since April 29, 2016
45.0
90.0
135.0
1515
180.0
25.0
120.0
60.0
Wolfgang Daniel, Supervisory Board member
until April 29, 2016
20.0
60.0
40.0
120.0
60.0
120.0
180.0
60.0
60.0
120.0
120.0
180.0
180.0
60.0
Prof. Dr. François Diederich
300.0
Franz Fehrenbach4
150.0
4 At the end of the regular term of the LTI program 2008, exercise gains which were realized in 2012 or 2010 were allocated to Dr. Kurt Bock and Wayne T. Smith in 2016 in accordance
with the special conditions of the U.S. LTI program.
5 At the end of the regular term of the LTI program 2007, exercise gains which were realized in 2009, 2012 or 2013 were allocated to Dr. Kurt Bock, Dr. Hans-Ulrich Engel and
Wayne T. Smith in 2015 in accordance with the special conditions of the U.S. LTI program.
Accounting valuation of multiple-year variable
compensation (LTI programs)
The options granted resulted in an expense in 2016. This
expense refers to the total of all options from the LTI programs
2008 to 2016 and is calculated as the difference in the value of
the options on December 31, 2016, compared with the value
on December 31, 2015, considering the options exercised and
granted in 2016. The value of the options is based primarily on
the development of the BASF share price and its relative per-
formance compared with the benchmark index specified for
the LTI programs 2008 to 2016.
The expenses reported below are purely accounting figures
which do not equate with the allocated actual gains should
options be exercised. Each member of the Board may decide
individually on the timing and scope of the exercise of options
of the LTI programs, while taking into account the terms and
conditions of the program.
The expenses for 2016 relating to all options issued were
as follows: Dr. Kurt Bock €5,000 thousand (2015: expense of
€1,058 thousand); Dr. Martin Brudermüller €4,052 thousand
(2015: expense of €788 thousand); Dr. Hans-Ulrich Engel
€4,011 thousand (2015: expense of €660 thousand); Sanjeev
Gandhi €156 thousand (2015: expense of €17 thousand);
Michael Heinz €2,423 thousand (2015: expense of €517 thou-
sand); Dr. Harald Schwager €4,182 thousand (2015: expense
of €642 thousand); Wayne T. Smith €1,872 thousand
(2015: expense of € 616 thousand); and Margret Suckale
€2,613 thousand (2015: expense of €419 thousand).
For more on the LTI program, see page 45 and from page 216 onward
143
144 Corporate Governance
Compensation report
BASF Report 2016
Pension benefits
The values for service cost incurred in 2016 contain service
cost for BASF Pensionskasse WaG and Board Performance
Pension. Service cost for the members of the Board of Execu-
tive Directors is shown individually in the tables "Compensation
granted in accordance with GCGC" and "Compensation allo-
cated in accordance with GCGC."
The present value of pension benefits (defined benefit
obligation) is an accounting figure for the entitlements that the
Board members have accumulated in their years of service at
BASF. The defined benefit obligations up to and including
2016 were as follows: Dr. Kurt Bock €18,931 thousand (2015:
€15,684 thousand); Dr. Martin Brudermüller €15,929 thou-
sand (2015: €13,148 thousand); Dr. Hans-Ulrich Engel
€10,968 thousand (2015: €9,068 thousand); Sanjeev Gandhi
€2,409 thousand (2015: €1,588 thousand); Michael Heinz
€10,229 thousand (2015: €8,226 thousand); Dr. Harald
Schwager €11,096 thousand (2015: €9,157 thousand);
Wayne T. Smith €3,210 thousand (2015: €2,355 thousand);
and Margret Suckale €4,315 thousand (2015: €3,518 thou-
sand).
3 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
2 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
1 The basis for the allocated actual annual variable compensation is the return on assets adjusted for special items and the performance factor. This includes contributions made to the
deferred compensation program.
2,079
1515
300.0
LTI program 2008 (2008-2016)
7984
LTI program 2009 (2009-2017)
LTI program 2010 (2010-2018)
527
End-of-service benefits
Total
LTI program 2012 (2012-2020)
Service cost
Total compensation in accordance with GCGC
2,098
478
2,576
2,266
309
2,575
1,753
326
LTI program 2011 (2011-2019)
In the event that a member of the Board of Executive Directors
retires from employment before the age of 60, either because
their appointment was not extended or was revoked for an
important reason, they are entitled to pension benefits if they
I have served on the Board for at least ten years or if the time
needed to reach legal retirement age is less than ten years.
The company is entitled to offset compensation received for
any other work done against pension benefits until the legal
retirement age is reached.
2,763
445
3,208
There is a general limit on severance pay (severance pay-
ment cap) for all Board members. Accordingly, payments
made to a Board member upon premature termination of their
contract, without serious cause, may not exceed the value of
two years' compensation, including fringe benefits, nor com-
pensate more than the remaining term of the contract. The
severance payment cap is to be calculated on the basis of the
total compensation for the past business year and, if appropri-
ate, also the expected total compensation for the current
related variable
Compensation for
committee
Fixed salary
compensation
memberships
Total compensation
2016
Performance-
2015
2016
2015
2016
2015
The following applies to end of service due to a change-
of-control event: A change-of-control event, in terms of this
provision, occurs when a shareholder informs BASF of a
shareholding of at least 25%, or the increase of such a holding.
If a Board member's appointment is revoked within one year
following a change-of-control event, the Board member will
receive the contractually agreed payments for the remaining
contractual term of office as a one-off payment (fixed salary
and annual variable target compensation). The Board member
may also receive the fair value of the option rights acquired in
connection with the LTI program within a period of three
months or may continue to hold the existing rights under the
terms of the program. For the determination of the accrued
pension benefits from the Board Performance Pension,
the time up to the regular expiry of office is taken into consid-
eration.
150.0
Dr. Jürgen Hambrecht, Chairman 1.5
2015
Compensation of the Supervisory Board of BASF SE (thousand €)
2016
For more on the D&O insurance of the Supervisory Board, see page 133
Total compensation for previous Board members and their
surviving dependents amounted to €15.9 million in 2016
(2015: €12.1 million¹). This figure also contains payments that
previous Board members have themselves financed through
the deferred compensation program and the expense or gain
for 2016 relating to options that previous members of the
Board still hold from the time of their active service period.
Former members of the Board of Executive
Directors
Total compensation of the Supervisory Board for activities in
2016, including attendance fees, was around €3 million (2015:
around €3 million). The compensation of the individual Super-
visory Board members was as follows.
business year. If the appointment to the Board of Executive
Directors is prematurely terminated as the result of a change-
of-control event, the payments may not exceed 150% of the
severance compensation cap.
The continuation of the options that have not yet been
exercised at the time of retirement, along with the continuation
of the associated holding period for individual investment in
BASF shares under the conditions of the program, is intended
in order to particularly emphasize how sustainability is incor-
porated into the compensation for the Board members.
Pension provisions for previous Board members and their
surviving dependents amounted to €150.4 million (2015:
€144.7 million²).
Compensation of Supervisory Board members
Each member of the Supervisory Board receives an annu-
al fixed compensation of €60,000 and a performance-related
variable compensation for each full €0.01 by which the earn-
ings per share of the BASF Group, as declared in the BASF
Group Consolidated Financial Statements for the year for
which the remuneration is paid, exceeds the minimum earn-
ings per share. For the 2016 business year, minimum earnings
per share amounted to €1.75 (2015: €1.70). The perfor-
mance-related variable remuneration is €800 for each €0.01 of
earnings per share up to an earnings per share of €2.50, €600
for each further €0.01 of earnings per share up to an earnings
per share of €3.00, and €400 for each €0.01 beyond this. The
minimum earnings per share and the corresponding thresh-
olds shall increase by €0.05 for each subsequent business
year. The performance-related variable compensation is limit-
ed to a maximum amount of €120,000.
Based on the earnings per share of €4.42 published in the
BASF Group Consolidated Financial Statements 2016, the
performance-related compensation reached the maximum
amount of €120,000 (2015: €120,000).
The chairman of the Supervisory Board receives two-and-
a-half times and a vice chairman one-and-a-half times the
compensation of an ordinary member. Members of the Super-
visory Board who are members of a committee, except for the
Nomination Committee, receive a further fixed compensation
for this purpose in the amount of €12,500. For the Audit
The disclosure of compensation of the Supervisory Board is
based on the German Commercial Code and is aligned with
the recommendations of the German Corporate Governance
Code (GCGC). The compensation of the Supervisory Board is
regulated by the Statutes of BASF SE passed by the Annual
Shareholders' Meeting.
2 Also includes the defined benefit obligations provided to Dr. Andreas Kreimeyer, up to and including December 31, 2015.
BASF Report 2016
of the duties of the members of the Supervisory Board in the
cover of a directors' and officers' liability insurance (D&O insur-
ance) concluded by it, which includes a deductible.
Corporate Governance
Compensation report
1 Also includes the pro rata temporis compensation of Dr. Andreas Kreimeyer up to his departure from the Board of Executive Directors on April 30, 2015.
Committee, the further fixed compensation is €50,000. The
chairman of a committee shall receive twice and a vice chair-
man one-and-a-half times the further fixed compensation.
The company reimburses members of the Supervisory
Board for out-of-pocket expenses and value-added tax to be
paid with regard to their activities as members of the Super-
visory Board or of a committee. The company further grants
the members of the Supervisory Board a fee of €500 for
attending a meeting of the Supervisory Board or one of its
committees to which they belong and includes the performance
629
6,313
8,209
[21]
Provisions for pensions and similar obligations
31,545
32,568
761
Other provisions
[22]
[23]
Financial indebtedness
3,369
Deferred tax liabilities
[11]
3,317
3,381
[24]
12,545
11,123
Other liabilities
30,916
[24]
873
3,667
31,807
Minority interests
(4,014)
24,566
869
Total assets
76,496
70,836
Equity and liabilities (million €)
Subscribed capital
Capital surplus
Retained earnings
Other comprehensive income
Equity of shareholders of BASF SE
Equity
Explanations in Note
Dec. 31, 2016
Dec. 31, 2015
[19]
1,176
1,176
[19]
3,130
3,141
[19]
31,515
30,120
[20]
(3,521)
Noncurrent liabilities
2015
25,055
Statement of cash flows
Statement of cash flows
BASF Group
Statement of cash flows¹ (million €)
BASF Report 2016
2016
Net income
4,056
3,987
Depreciation and amortization of intangible assets, property, plant and equipment and financial assets
4,291
4,448
Changes in inventories
(182)
1,094
Changes in receivables
(640)
1,463
Changes in operating liabilities and other provisions
926
(1,210)
Changes in pension provisions, defined benefit assets and other items
(547)
(317)
25,946
Consolidated Financial Statements
28,611
158
1 For a reconciliation of the amounts in the statement of cash flows with the balance sheet item "cash and cash equivalents," see page 158.
Accounts payable, trade
Provisions
Tax liabilities
Financial indebtedness
Other liabilities
4,610
4,020
[23]
2,802
2,540
[11]
1,288
1,082
[24]
3,767
4,074
[24]
2,850
2,520
Current liabilities
15,317
14,236
Total equity and liabilities
76,496
70,836
157
Current assets
(4,840)
1,375
As of December 31, 2016
(5,373)
1,476
32
(149)
561
(4,014)
As of January 1, 2015
Additions
Gains (-)/losses (+) from disposal of noncurrent assets and securities
(259)
20
(403)
(5,482)
961
924
0
385
2,270
Releases
681
68
Deferred taxes
As of December 31, 2015
(273)
(4,084)
21
(13)
(2)
553
Foreign
Remeasure-
ment of defined
currency
Measurement
translation
of securities
benefit plans
adjustment
at fair value
As of January 1, 2016
(4,084)
652
20
Additions
(1,842)
835
14
Cash flow
hedges
(109)
(61)
Total income
and expense
recognized
in equity
(3,521)
(1,054)
Releases
Deferred taxes
(11)
2,241
652
(91)
[11]
2,513
1,791
[18]
1,210
1,720
50,550
46,270
Inventories
[17]
10,005
9,693
Accounts receivable, trade
[18]
10,952
9,516
Other receivables and miscellaneous assets
[18]
3,078
3,095
Marketable securities
536
21
Cash and cash equivalents¹
[1]
526
0
605
4,436
(377)
20
(109)
(3,521)
1 Reclassification to retained earnings in accordance with IAS 19.122; for more information, see Note 20 on page 197
BASF Report 2016
Balance sheet
BASF Group
Assets (million €)
Intangible assets
Property, plant and equipment
Investments accounted for using the equity method
Other financial assets
Deferred tax assets
Other receivables and miscellaneous assets
Noncurrent assets
Consolidated Financial Statements
Balance sheet
Explanations in Note
[14]
Dec. 31, 2016
15,162
Dec. 31, 2015
12,537
[15]
26,413
25,260
[16]
4,647
[16]
(187)
(3,521)
Cash provided by operating activities
(2)4
3,141
(72)5
686
(6)
(234)
(240)
30,120
(3,521)
30,916
629
31,545
1,176
1 For more information on the items relating to equity, see Notes 19 und 20 from page 196 onward.
3 Including profit and loss transfers
4 Granting of BASF shares under the BASF share program "plus"
5 Including reclassification to retained earnings in accordance with IAS 19.122; for more information, see Note 19 on page 196
6 Reclassification to retained earnings in accordance with IAS 19.122; for more information, see Note 20 on page 197
160
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Policies and scope of consolidation
1 Summary of accounting policies
BASF Report 2016
1.1
2 Details are provided in the table "Income and expense recognized in equity" on page 156.
918,478,694
As of December 31, 2015
consolidation and other changes
28,777
(5,482)
27,614
581
28,195
As of January 1, 2015
Effects of acquisitions
achieved in stages
Dividend paid
(2,572)
(2,572)
(234)³
(2,806)
Net income
Changes to income and expense
recognized directly in equity
Changes in scope of
3,987
3,987
314
4,301
1,893
1,893
202
2,095
General information
BASF SE (registered at the district trade register, or Amts-
gericht, for Ludwigshafen am Rhein, number HRB 6000) is a
publicly listed corporation headquartered in Ludwigshafen am
Rhein, Germany. Its official address is Carl-Bosch-Str. 38,
67056 Ludwigshafen am Rhein, Germany.
The Consolidated Financial Statements of BASF SE as of
December 31, 2016, have been prepared in accordance with
the International Financial Reporting Standards (IFRS) of the
International Accounting Standards Board (IASB) and
Section 315a (1) of the German Commercial Code (HGB).
IFRSS are generally only applied after they have been
endorsed by the European Union. For the 2016 fiscal year,
all of the binding IFRSS and pronouncements of the Inter-
national Financial Reporting Interpretations Committee (IFRIC)
were applied.
The Consolidated Financial Statements are presented in
euros. All amounts, including the figures for previous years, are
given in million euros unless otherwise indicated.
Recognition of expected losses for trade accounts receiv-
able will largely take place on the basis of internal and external
customer ratings and the associated probability of default.
Furthermore, the new impairment model is also to be used
for other financial instruments measured at amortized cost,
such as bank balances, loan receivables and miscellaneous
receivables to the extent that they represent financial instru-
ments. As no group-wise individual valuation allowances are
currently calculated for such financial assets, the introduction
of IFRS 9 will probably mean an increase in the risk provision.
This effect cannot yet be reliably quantified.
With regard to new hedge accounting regulations, BASF
assumes that, in principle, all existing hedge accounting
relationships may be continued under IFRS 9. It has not yet
been fully determined how the accounting choices concerning
the designation of derivatives, as introduced by IFRS 9, will be
exercised.
BASF has not opted for early application of the new
standard. At the moment, BASF assumes that the new
regulations can be applied prospectively to a large extent. The
difference in the impairment amount that will arise upon
transition to IFRS 9 will be recognized in equity at the
beginning of the business year of the first-time adoption of the
standard. Exceptions to the prospective application are the
regulations on accounting for the time value of options if only
the intrinsic value is designated, and the analysis of the cash
flow condition that generally pertains to the point in time of the
first recognition of each financial instrument.
161
162
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2016
IFRS 15 - Revenues from Contracts with Customers
The IASB published the new standard on revenue recognition,
IFRS 15, on May 28, 2014. The revised standard particularly
aims to standardize existing regulations and thus improve
transparency and the comparability of financial information.
The rules and definitions of IFRS 15 supersede the content of
IAS 11, IAS 18, IFRIC 13. The new standard will be effective for
reporting periods beginning on or after January 1, 2018. BASF
does not plan to adopt the standard early. The European
Union endorsed the standard in 2016.
The new standard does not differentiate between different
types of contracts and services, but rather introduces uniform
criteria for the timing of revenue recognition. According to
IFRS 15, sales revenue is recognized when control of the
agreed-upon goods or services and the benefits obtainable
from them are transferred to the customer. Sales revenue is
measured as the amount the entity expects to receive in
exchange for goods and services.
The new model for the determination of revenue recog-
nition is based on five steps:
- Step 1: Identify the contract(s) with a customer
- Step 2: Identify the performance obligations in the contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance
obligations in the contract
- Step 5: Recognize revenue when (or as) the entity satisfies
a performance obligation
The new standard's potential impact on BASF's net assets,
financial position and results of operations is being assessed.
A Group-wide analysis was conducted to investigate the
extent to which BASF is affected by the new standard.
First, the major types of contracts were identified at an
operating division level and analyzed with regard to the
changes in accounting under IFRS 15. Based on the results,
the need for adjustment is currently being assessed.
Analysis of the contracts showed that contracts with
customers almost exclusively contain one service component
or a number of similar service components and that these
must be fulfilled by a certain point in time. Furthermore, con-
tracts with customers were identified that could lead, accord-
ing to IFRS 15, to a shift in time of revenue recognition. These
are mainly contracts with several contractual obligations and
revenues from issuing licenses. In such cases, revenue
recognition according to IFRS 15 will take place at both an
earlier and later point in time than it had been previously. BASF
assumes that fulfillment of the new standard's requirements
will necessitate the introduction of the balance sheet items
"contractual asset" and "contractual liability" as well as more
comprehensive quantitative and qualitative disclosures in the
Notes to the Consolidated Financial Statements. The analyses
showed no grounds to expect material impact on BASF's
results of operations or net assets.
BASF is currently planning to apply IFRS 15 for the first time on
January 1, 2018, by adjusting equity in the amount of the
cumulative effect (modified retroactive application).
IFRS 16 - Leases
The IASB published the new standard on leasing, IFRS 16, on
January 13, 2016. The rules and definitions of IFRS 16
supersede the content of IAS 17, IFRIC 4, SIC 15 and
SIC 27. The standard requires an accounting model for a
lessee that recognizes all assets and liabilities from leasing
agreements in the balance sheet, unless the term is twelve
months or less or the underlying asset is of low value. As for
the lessor, the new standard substantially carries forward the
lessor accounting requirements of IAS 17 – Leases. The new
standard will be effective for reporting periods beginning on or
after January 1, 2019. An endorsement by the European
Union is still pending. BASF does not plan on early adoption
and will likely recognize the cumulative adjustment effect in
equity on January 1, 2019.
Amendments to IFRS 10 and IAS 28 - Sale or Contribution
of Assets between an Investor and its Associate or Joint
Venture
The IASB issued amendments to IFRS 10 and IAS 28 on
September 11, 2014. The amendments address a known
inconsistency between the requirements of IFRS 10 and
IAS 28 (2011) in the case of the sale of an asset to an
associated company or a joint venture or the contribution of an
asset to an associated company or a joint venture. According
to IFRS 10, if the disposal of a subsidiary by a parent company
results in a loss of control, it recognizes the gain or loss on the
sale of the subsidiary in the full amount in the income state-
ment. In contrast, the currently applicable IAS 28.28 requires
that a gain on sales transactions between an investor and an
investment accounted for using the equity method - whether
it be an associated company or joint venture – is recognized
only to the extent of the investor's interests in the associated
company or joint venture. In the future, the entire gain or loss.
arising from a transaction shall only be recognized when the
assets sold or contributed constitute a business combination
according to IFRS 3. This applies regardless of whether the
transaction is a share or asset deal. Only a pro rata recognition
of gain is permissible if the assets do not constitute a business
combination. IASB has postponed the effective date of the
changes indefinitely.
As IFRS 9 introduces a cash flow condition that needs to
be considered in classifying financial assets, it is possible that
financial assets measured at amortized cost or at fair value
through other comprehensive income as per IAS 39 may, in
the future, need to be measured at fair value through profit or
loss. BASF will conduct this analysis in 2017. Impacts may
especially be observed for securities that are currently
classified as available-for-sale financial assets and thus
measured at fair value through other comprehensive income.
Depending on the cash flow characteristics of these financial
instruments, measurement at fair value through profit or loss
may be required in the future.
3,143
The new requirements for classification and measurement
could have an impact on the accounting treatment of other
shareholdings. BASF currently measures almost all of these
shareholdings at amortized cost, in line with IAS 39.46c.
Because IFRS 9 does not contain any comparable regulations,
BASF is currently reviewing what represents the best metric
for estimating fair value on a case-by-case basis. BASF will
determine on an instrument-by-instrument basis whether
measurement will take place at fair value through other
comprehensive income or at fair value through profit or loss.
In the future, the recognition of financial asset impairments
is based on expected losses according to IFRS 9. The general
approach adopts a three-stage model to assess the provisions
for risks. The model requires different degrees of impairment
based on the credit default risk of the counterparties. For cer-
tain financial instruments, such as trade accounts receivable,
operational simplifications for recognizing impairment losses
apply.
The individual financial statements of the consolidated
companies are prepared as of the balance sheet date of the
Consolidated Financial Statements. The accounting policies
applied are largely the same as those used in 2015, with the
exception of any changes arising from the application of new
or revised standards.
In its meeting on February 20, 2017, the Board of
Executive Directors prepared the Consolidated Financial
Statements, submitted them to the Supervisory Board for
review and approval, and released them for publication.
1.2 Changes in accounting principles
Accounting policies applied for the first time in 2016
Amendments to IAS 1 - Disclosure Initiative
On December 18, 2014, the IASB issued amendments made
to IAS 1. The amendments pertain to various disclosure
requirements. It is made clear that information needs to be
disclosed in the notes only if this is material for the company.
This explicitly applies if a standard calls for a list of minimum
disclosures. Explanations are moreover provided on the
aggregation and disaggregation of line items in the balance
sheet and statement of comprehensive income. Furthermore,
the revised standard clarifies how an entity's share of the other
comprehensive income of equity-accounted companies is to
be presented in the statement of comprehensive income. The
changes are effective for reporting periods beginning on or
after January 1, 2016. An endorsement by the European
Union was issued on December 19, 2015. Due to the recent
revision of IAS 1, the contributions of companies accounted
for using the equity method are now shown separately in the
Statement of Comprehensive Income. In addition, noncon-
trolling interests have been distributed among the subitems
under the separate "minority interests" column.
Amendments to IAS 16 and IAS 38
-
Clarification of
Acceptable Methods of Depreciation and Amortization
The IASB issued amendments to IAS 16 and IAS 38 on
May 12, 2014. These revisions provide further guidance on
determining an acceptable method of depreciation and
amortization. Revenue-based methods are not permissible for
property, plant and equipment and are only permissible for
intangible assets in specific exceptional cases (rebuttable
presumption of inappropriateness). The changes are effective
for reporting periods beginning on or after January 1, 2016.
The European Union's endorsement was issued on Decem-
ber 3, 2015. The amendments did not have a material effect
on BASF.
Amendments to IAS 19
Defined Benefit Plans
-
Employee Contributions to
The IASB issued amendments to IAS 19 on Novem-
ber 21, 2013. The amendments clarify requirements dealing
with the allocation to service periods of employee or third-
party contributions in cases where these are linked to the
service period. Furthermore, practical expedients were made
for cases where contributions are independent from the
number of service years. The European Union endorsed the
changes on January 9, 2015. In a deviation from the IASB's
effective date (reporting periods beginning on or after
July 1, 2014), IFRS-based financial statements in the
European Union must apply the amendments for reporting
periods beginning on or after February 1, 2015. The applica-
tion of the amendments did not materially affect BASF.
Amendments to IFRS 11 - Accounting for Acquisitions of
Interests in Joint Operations
The IASB issued amendments to IFRS 11 on May 6, 2014.
IFRS 11 includes regulations on the recognition of assets and
liabilities and gains or losses of joint ventures and joint
operations. Whereas joint ventures are accounted for using
the equity method, joint operations, according to IFRS 11, are
recognized in a similar fashion to proportional consolidation.
With the amendment to IFRS 11, IASB regulates the
accounting for the acquisition of shares in a joint operation,
which constitutes a business according to IFRS 3 - Business
Combinations. In such cases, the acquirer shall apply the
principles of accounting for business combinations according
to IFRS 3. Furthermore, the disclosure requirements in IFRS 3
also apply in such cases. The amendments are effective for
reporting periods beginning on or after January 1, 2016. An
endorsement by the European Union was issued on
November 25, 2015. BASF did not acquire shares in a joint
operation in 2016.
BASF Report 2016
Consolidated Financial Statements
Notes - Policies and scope of consolidation
IFRS Annual Improvements Cycle 2010-2012
Under its Annual Improvement Project, the IASB issued
amendments to several standards on December 12, 2013.
The affected standards are IFRS 2, IFRS 3, IFRS 8, IFRS 13,
IAS 16, IAS 24 and IAS 38. The amendments address details
of the recognition, measurement and disclosure of business
transactions or serve to standardize terminology. The
European Union endorsed the changes on January 9, 2015.
In a deviation from the IASB's effective date (reporting
periods beginning on or after July 1, 2014), IFRS-based
financial statements in the European Union must apply the
amendments for reporting periods beginning on or after Feb-
ruary 1, 2015. The application of the amendments did not
materially affect BASF.
IFRS Annual Improvements Cycle 2012-2014
Under its Annual Improvement Project, the IASB issued
amendments to several standards on September 25, 2014.
The affected standards are IAS 19, IAS 34, IFRS 5 and IFRS 7.
The amendments address details of the recognition, measure-
ment and disclosure of business transactions or serve to
standardize terminology. The changes are effective for report-
ing periods beginning on or after January 1, 2016. An
endorsement by the European Union was issued on Decem-
ber 16, 2015. The application of the amendments did not
materially affect BASF.
IFRSS and IFRICS not yet to be considered
The effects on the BASF Group financial statements of the
IFRSS and IFRICs not yet in force or not yet endorsed by the
European Union in 2016 were reviewed and are explained
below.
IFRS 9 - Financial Instruments
On July 24, 2014, the IASB issued the final version of IFRS 9,
concluding the multiyear project to replace IAS 39 - Financial
Instruments: Recognition and Measurement. IFRS 9 contains
new requirements for the classification and measurement of
financial instruments, fundamental changes regarding the
accounting treatment of financial asset impairments, and a
reformed approach to hedge accounting. The new standard
will be effective for reporting periods beginning on or after
January 1, 2018. The European Union endorsed the standard
in the fourth quarter of 2016.
IFRS 9 retains "amortized cost" and "fair value" as the
criteria for measuring financial instruments. Whether financial
assets are measured at amortized cost or fair value will
depend on two factors: the entity's business model for man-
aging the portfolio to which the financial asset belongs and the
contractual cash flow characteristics of the financial asset.
The IFRS 9 regulations on hedge accounting aim for a closer
alignment of hedge accounting with the entity's risk manage-
ment strategy.
1,176
918,478,694
32,568
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
1 More information on the statement of cash flows can be found in the Management's Report (Financial Position) on page 58.
Other information on cash flows can be found in Note 29 on page 215.
28
66
7,533
6,937
(6,954)
(7,870)
(2,664)
(2,572)
(103)
(234)
(2,160)
(3,673)
(933)
538
Other comprehensive income
66
(19)
1
4
2,241
1,375
1,718
changes in scope of consolidation
2,241
From foreign exchange rates
Net changes in cash and cash equivalents
7,717
9,446
Payments made for property, plant and equipment and intangible assets
Payments made for financial assets and securities
(4,145)
(5,812)
(1,389)
(920)
Payments made for acquisitions
(2,828)
(215)
Payments received for divestitures
664
651
Payments received from the disposal of noncurrent assets and securities
1,208
1,061
Cash used in investing activities
(6,490)
(5,235)
Capital increases/repayments and other equity transactions
Additions to financial and similar liabilities
Repayment of financial and similar liabilities
Dividends paid
To shareholders of BASF SE
minority shareholders
Cash used in financing activities
Change in cash and cash equivalents
(19)
BASF Report 2016
Statement of equity1 (million €)
(2,767)
4,056
4,056
199
4,255
recognized directly in equity
(493)
(493)
11
(482)
Changes in scope of
consolidation and other changes
(11)4
3
(8)
25
17
As of December 31, 2016
918,478,694
1,176
3,130
31,515
(4,014)
31,807
761
(103)³
Statement of equity
BASF Group
(2,664)
Changes to income and expense
Consolidated Financial Statements
Statement of equity
159
Number of
Other com-
shares
outstanding
Subscribed
capital
Capital
Retained
surplus
earnings
prehensive
income²
Equity of
share-
holders of
BASF SE
As of January 1, 2016
918,478,694
1,176
3,141
30,120
30,916
Minority
interests
629
Equity
31,545
Effects of acquisitions
achieved in stages
Dividend paid
Net income
(2,664)
Development of income and expense recognized in equity of shareholders of BASF SE (million €)
(284)
2 For more information, see Note 22, "Provisions for pensions and similar obligations," from page 198 onward.
Other financial result
Other financial expenses
Other financial income
Interest result
Interest expenses
Interest income
Net income from shareholdings
Expenses from other shareholdings
Income from other shareholdings
6,248
6,275
[4]
Income from operations
(3,640)
251
307
[9]
Income from companies accounted for using the equity method
(3,133)
[8]
Other operating expenses
2,004
1,780
[7]
Other operating income
(1,953)
(1,863)
[6]
Research and development expenses
(1,429)
Financial result
(1,337)
54
(71)
Minority interests
4,301
4,255
Income before minority interests
(1,247)
(1,140)
[11]
Income taxes
5,548
5,395
Income before taxes and minority interests
(700)
(880)
[10]
3 For more information, see Note 27, "Supplementary information on financial instruments," from page 208 onward.
(381)
(436)
(478)
152
97
(425)
(482)
(638)
(661)
213
179
9
(17)
(71)
80
[12]
[6]
(8,062)
BASF Report 2016
Auditor's report
Auditor's report
Consolidated Financial Statements
154
153
Margret Suckale
Suckale
Dr. Harald Schwager
کرمل
Wayne T. Smith
butti
Michael Heinz
Heinz
Sanjeev Gandhi
Dr. Hans-Ulrich Engel
Chief Financial Officer
Meegel
Dr. Martin Brudermüller
Vice Chairman
Rundeniable
Dr. Kurt Bock
Chairman
Ludwigshafen am Rhein, February 21, 2017
To the best of our knowledge, and in accordance with the
applicable reporting principles, the Consolidated Financial
Statements of the BASF Group give a true and fair view of the
net assets, financial position and results of operations of the
Group, and the Management's Report of the BASF Group
includes a fair review of the development and performance
of the business as well as position of the BASF Group,
together with a description of the principal opportunities
and risks associated with the expected development of the
BASF Group.
The risk management system we have set up is designed
such that the Board of Executive Directors can identify material
risks early on and take appropriate defensive measures as
necessary. The reliability and effectiveness of the internal con-
trol and risk management system are continually audited
throughout the Group by our internal audit department.
We have established effective internal control and steering
systems in order to ensure that the BASF Group's Consoli-
dated Financial Statements and Management's Report comply
with applicable accounting rules and to ensure proper
corporate reporting.
The BASF Group Consolidated Financial Statements for
2016 were prepared according to the International Financial
Reporting Standards (IFRS), which are published by the Inter-
national Accounting Standards Board (IASB), London, and
have been endorsed by the European Union.
The Board of Executive Directors of BASF SE is responsible
for preparing the Consolidated Financial Statements and
Management's Report of the BASF Group.
Statement by the Board of Executive Directors
and assurance pursuant to Sections 297(2) and 315(1)
of the German Commercial Code (HGB)
Consolidated Financial Statements
Statement by the Board of Executive Directors
BASF Report 2016
We have audited the consolidated financial statements
prepared by BASF SE, Ludwigshafen am Rhein, Germany,
comprising the statement of income, statement of income and
expense recognized in equity, balance sheet, statement of
cash flows, statement of equity and the Notes to the
Consolidated Financial Statements together with the Group
Management's Report for the business year from January 1 to
December 31, 2016. The preparation of the Consolidated
Financial Statements and the Group Management's Report in
accordance with IFRSS as adopted by the European Union,
and the additional requirements of German commercial law
pursuant to Section 315a(1) of the German Commercial Code
(HGB) are the responsibility of the parent company's manage-
ment. Our responsibility is to express an opinion on the
Consolidated Financial Statements and on the Group
Management's Report based on our audit. In addition, we
have been instructed to express an opinion as to whether the
consolidated financial statements comply with full IFRS.
General administrative expenses
We conducted our audit of the Consolidated Financial
Statements in accordance with Section 317 HGB and German
generally accepted standards for the audit of financial
statements promulgated by the Institute of Public Auditors
in Germany (Institut der Wirtschaftsprüfer, IDW). Those
standards require that we plan and perform the audit such that
misstatements materially affecting the presentation of the net
assets, financial position and results of operations in
the Consolidated Financial Statements in accordance with the
applicable financial reporting framework and in the Group
Management's Report are detected with reasonable
Our audit has not led to any reservations.
(7,764)
[6]
19,077
18,285
(51,372)
(39,265)
[6]
70,449
57,550
[4]
2015
2016
Explanations in Note
Consolidated Financial Statements
Statement of income
Selling expenses
Gross profit on sales
Cost of sales
Sales revenue
Statement of income (million €)
BASF Group
Statement of income
BASF Report 2016
Wirtschaftsprüfer
Krauẞ
Wirtschaftsprüfer
Wirtschaftsprüfungsgesellschaft
KPMG AG
Frankfurt am Main, February 21, 2017
In our opinion, based on the findings of our audit, the
consolidated financial statements comply with IFRSS as
adopted by the E.U., the additional requirements of German
commercial law pursuant to Section 315a(1) HGB and full
IFRS and give a true and fair view of the net assets, financial
position and results of operations of the Group in accordance
with these requirements. The Group Management's Report
is consistent with the Consolidated Financial Statements,
conforms to legal requirements, and as a whole provides a
suitable view of the Group's position and suitably presents the
opportunities and risks of future development.
assurance. Knowledge of the business activities and the
economic and legal environment of the Group and expecta-
tions as to possible misstatements are taken into account in
the determination of audit procedures. The effectiveness
of the accounting-related internal control system and the
evidence supporting the disclosures in the Consolidated
Financial Statements and the Group Management's Report
are examined primarily on a test basis within the framework of
the audit. The audit includes assessing the annual financial
statements of those entities included in consolidation, the
determination of entities to be included in consolidation, the
accounting and consolidation principles used and significant
estimates made by the Board of Executive Directors, as well
as evaluating the overall presentation of the consolidated
financial statements and the group management report. We
believe that our audit provides a reasonable basis for our
opinion.
(199)
Rega
Net income
reclassified
Deferred taxes for gains/losses that can be
64
858
922
11
747
758
Unrealized gains/losses from currency translation
213
369
582
(68)
(68)
Cash flow hedges, net³
329
347
676
(51)
(51)
in the income statement
Reclassifications of realized gains/losses recognized
(116)
22
(94)
(17)
(17)
Unrealized gains/losses from cash flow hedges
9
8
9
8
(104)
(314)
1 For more information on other comprehensive income, see Note 20 on page 197.
516
5,880
6,396
210
3,563
3,773
202
1,893
2,095
11
(493)
(482)
Comprehensive income
Other comprehensive income after taxes
202
1,205
1,407
796
807
Gains/losses that can be reclassified
82
82
100
100
after taxes from equity-accounted shareholdings
Gains/losses that can be reclassified
(75)
(179)
securities, net³
11
314
Unrealized gains/losses from fair value changes in
available-for-sale securities
Gains/losses that cannot be reclassified
after taxes from equity-accounted shareholdings
Gains/losses that cannot be reclassified
Deferred taxes for gains/losses that cannot be
reclassified
Remeasurement of defined benefit plans²
Income before minority interests
Statement of comprehensive income¹ (million €)
BASF Group
Statement of income and expense recognized in equity
BASF Report 2016
Statement of income and expense recognized in equity
Consolidated Financial Statements
156
155
4.33
4.41
[5]
(0.01)
(0.01)
[5]
Dilution effect (€)
4.34
4.42
[5]
Earnings per share (€)
3,987
Fair value changes in available-for-sale
4,056
Reclassifications of realized gains/losses recognized
in the income statement
Diluted earnings per share (€)
BASF Group
0
Minority
interests
2016
Shareholders
о
0
0
9
6
688
(12)
(12)
(3)
(1,289)
(1,289)
(3)
(273)
688
553
(273)
Minority
interests
of BASF SE
4,056
199
4,255
2015
Shareholders
of BASF SE
3,987
BASF Group
4,301
(1,839)
(1,839)
973
973
553
- 11 companies headquartered in all regions which had not
been consolidated at the time of the first inclusion in the
Consolidated Financial Statements. Thereof eight were
newly established in 2016.
- one newly acquired company headquartered in Japan
- four companies which had previously not been consolidated,
headquartered in Germany, China, India and Pakistan
While BASF does not hold majority shares in ZAO Gazprom
YRGM Trading, BASF is entitled to the earnings of the com-
pany due to profit distribution arrangements, so that the
company is fully consolidated in the Group Consolidated
Financial Statements.
- Two newly established companies with headquarters in the
regions Asia-Pacific and North America
33 companies in connection with the acquisition of Chemetall
registered in all regions
-
First-time consolidations in 2015 comprised:
First-time consolidations in 2016 comprised:
2 Scope of consolidation
Changes in scope of consolidation
2.1
BASF Report 2016
Notes - Policies and scope of consolidation
Consolidated Financial Statements
172
An impairment is recognized if the recoverable amount of
the asset is lower than the carrying amount. The impairment of
the asset (excluding goodwill) is made in the amount of the
difference between these amounts.
A list of companies included in the Consolidated Financial
Statements and a list of all companies in which BASF SE has
a shareholding as required by Section 313(2) of the German
Commercial Code is provided in the List of Shares Held.
171
The goodwill impairment test is based on cash-generating
units. At BASF, the cash-generating units are predominantly
the business units, or in certain cases, the divisions. If there is
a need for a valuation allowance, the existing goodwill is, if
necessary, completely written off as a first step. If there is
further need for a valuation allowance, this is allocated to the
remaining assets of the cash-generating unit. Goodwill
impairments are reported under other operating expenses.
Impairment reversals are not conducted for goodwill.
In 2016, the scope of consolidation for the Consolidated
Financial Statements encompassed 294 companies (2015:
258). Of this number, 46 companies were first-time consoli-
dations (2015: five). Since the beginning of 2016, a total of ten
companies (2015: 28) were deconsolidated due to divestiture,
merger, liquidation or immateriality.
For more information, see Note 3 on page 178
For more information, see basf.com/en/governance
57
South
America,
7
7
For more information, see Note 14 from page 189 onward
1
6
Thereof proportionally consolidated
281
258
23
Scope of consolidation
37
2015
2016
Middle East
Asia Pacific
Africa,
North
America
Thereof
Germany
Europe
141
As of January 1
55
Impairment tests are based on a comparison of the carrying
amount and the recoverable amount. The recoverable amount
is the higher of fair value less costs to sell and the value in use.
As a rule, value in use is determined using the discounted cash
flow method. The estimation of cash flows and the assump-
tions used consider all information available on the respective
balance sheet date on the future development of the operating
business. Actual future developments may vary. Impairment
testing relies upon the cash-generating unit's long-term
earnings forecasts, which are based on economic trends. The
weighted average cost of capital (WACC) based on the Capital
Asset Pricing Model plays an important role in impairment
testing. It comprises a risk-free rate, the market risk premium
and the spread for the credit risk. Additional important
assumptions are the forecasts for the detailed planning period
and the terminal growth rates used.
Provisions for German trade income tax, German corporate
income tax and similar income taxes are determined and
recognized in the amount necessary to meet the expected
payment obligations less any prepayments that have been
made. Other taxes to be assessed are considered accordingly.
The assumptions for oil and gas prices concern internal
company projections. The projections are based on an
empirical analysis of the global oil and gas supply and demand.
Short-term estimates up to three years consider the current
prices on active markets or forward transactions. In long-term
estimates, assumptions are made regarding factors such as
inflation, production quantities and costs as well as energy
efficiency and the substitution of energy sources. Using
external sources and reports, the oil and gas price estimates
are regularly checked for plausibility.
Notes - Policies and scope of consolidation
Consolidated Financial Statements
170
Provisions are established for certain environmental
protection measures and risks if there exist present legal or
constructive obligations arising from a past event, and the
expected cash outflow can be estimated with sufficient
reliability. Provisions for restoration obligations primarily
concern the filling of wells and the removal of production
facilities upon the termination of production in the Oil & Gas
segment. When the obligation arises, the provision is mea-
sured at the present value of the future restoration costs. An
asset is capitalized for the same amount as part of the carrying
amount of the plant concerned and is depreciated along with
the plant. The discount on the provision is unwound annually
until the time of the planned restoration.
Other provisions: Other provisions are recognized when there
is a present obligation as a result of a past event and when
there is a probable outflow of resources whose amount can be
reliably estimated. Provisions are recognized at the probable
settlement value.
For more information on provisions for pensions and similar obligations,
see Note 22 from page 198 onward
Actuarial gains and losses from changed estimations with
regard to the actuarial assumptions used for calculating
defined benefit obligations, the difference between
standardized and actual returns on plan assets as well as the
effects of the asset ceiling are recognized directly in equity as
other comprehensive income.
The calculation of pension provisions is based on actuarial
reports.
Similar obligations, especially those arising from commit-
ments by North American Group companies to pay the
healthcare costs and life insurance premiums of retired staff
and their dependents, are reported under provisions for similar
obligations.
BASF Report 2016
Provisions for pensions
Provisions for pensions are based on actuarial computations
made according to the projected unit credit method, which
applies for valuation parameters that include: future develop-
ments in compensation, pensions and inflation, employee
turnover and the life expectancy of beneficiaries. The resulting
obligations are discounted on the balance sheet date using
the market yields on high-quality corporate fixed-rate bonds
with a minimum of one AA rating.
Debt
The income and expenses shown in other comprehensive
income are divided into two categories. Items that will be
recognized in the income statement in the future (known as
"recycling") and items that will not be reclassified to the income
statement in the future. The first category includes translation
adjustments, the measurement of securities at fair value, and
changes in the fair value of derivatives held to hedge future
cash flows and net investments in a foreign operation. Items in
other comprehensive income that will not be reclassified to the
income statement at a future date include effects from the
remeasurement of defined benefit plans.
Other comprehensive income
When fair value hedges are used, the asset or liability is
hedged against the risk of a change in fair value. Here, changes
in the market value of the derivative financial instruments are
recognized in the income statement. Furthermore, the carrying
amount of the underlying transaction is adjusted by the profit
or loss resulting from the hedged risk, offsetting the effect in
the income statement.
Cash flow hedge accounting is applied for selected
deals to hedge future transactions. The effective portion of the
change in fair value of the derivative is thereby recognized
directly in equity under other comprehensive income, taking
deferred taxes into account. The ineffective portion is
recognized immediately in the income statement. In the case
of future transactions that will lead to a nonfinancial asset or a
nonfinancial debt, the cumulative fair value changes in equity
are either charged against the acquisition costs on initial
recognition or recognized in profit or loss in the reporting
period in which the hedged item is recorded in the income
statement. For hedges based on financial assets or debts, the
cumulative fair value changes of the hedges are transferred
from equity to the income statement in the reporting period in
which the hedged item is recognized in the income statement.
The maturity of the hedging instrument is determined based
on the effective date of the future transaction.
Financial guarantees of the BASF Group are contracts that
require compensation payments to be made to the guarantee
holder if a debtor fails to make payment when due under the
terms of the financial guarantee. Financial guarantees given by
BASF are measured at fair value upon initial recognition. In
subsequent periods, financial guarantees are carried at the
higher of amortized cost or the best estimate of the present
obligation on the financial reporting date.
169
First-time consolidations
Consolidated Financial Statements
Notes - Policies and scope of consolidation
and similar obligations:
Impairment tests on assets are carried out whenever certain
triggering events indicate that an impairment may be neces-
sary. External triggering events include, for example, changes
in customer industries, technologies used and economic
downturns. Internal triggering events for an impairment test
include lower product profitability, planned restructuring
measures or physical damage to assets.
In addition, other provisions also cover expected costs for
rehabilitating contaminated sites, recultivating landfills,
removal of environmental contamination from existing pro-
duction or storage sites and similar measures. If BASF is the
only responsible party that can be identified, the provision
covers the entire expected claim. At sites operated together
with one or more partners, the provision generally covers only
BASF's share of the expected claim. The determination of the
amount of the provision is based on the available technical
information on the site, the technology used, legal regulations,
and official obligations.
Provisions for long-service and anniversary bonuses are
predominantly calculated based on actuarial principles. For
contracts signed under the early retirement programs,
approved supplemental payments are accrued in install-
ments until the end of the exemption phase at the latest.
Accounting and measurement follow the German Accounting
Standards Committee e.V.'s Application Note 1 (IFRS) of
December 2012.
The carrying amount of assets, liabilities and provisions,
contingent liabilities and other financial obligations in the
Consolidated Financial Statements depends on the use of
estimates, assumptions and use of discretionary scope.
Specific estimates or assumptions used in individual
accounting or valuation methods are disclosed in their
respective sections. They are based on the circumstances and
estimates on the balance sheet date and affect the reported
amounts of income and expenses during the reporting periods.
These assumptions particularly concern discounted cash
flows in the context of impairment tests and purchase price
allocations; the determination of useful lives of property, plant
and equipment and intangible assets; the carrying amount of
investments; and the measurement of provisions for such
things as employee benefits, warranties, trade discounts,
environmental protection and taxes. Although uncertainty is
appropriately incorporated in the valuation factors, actual
results can differ from these estimates.
Use of estimates and assumptions in preparing the
Consolidated Financial Statements
Intangible assets in the Oil & Gas segment relate primarily
to exploration and production rights. During the exploration
phase, these are not subject to amortization but are tested for
impairment annually. When economic success is determined,
the rights are amortized in accordance with the unit of
production method.
The intangible asset from the marketing contract for natural
gas from the Yuzhno Russkoye natural gas field is amortized
based on BASF's share of the produced and distributed
volumes.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2016
An Exploration and Production Sharing Agreement is a
type of contract in crude oil and gas concessions whereby the
expenses and profits from the exploration, development and
production phases are divided between the state and one or
more exploration and production companies using defined
keys. The revenue BASF is entitled to under such contracts is
reported as sales.
Exploration expenses pertain exclusively to the Oil & Gas
segment and include all costs related to areas with unproven
oil or gas deposits. These include costs for the exploration of
areas with possible oil or gas deposits, among others. Costs
for geological and geophysical investigations are always
reported under exploration expenses. In addition, this item
includes valuation allowances for capitalized expenses for
exploration wells which did not encounter proven reserves.
Depreciation of successful exploratory drilling is reported
under cost of sales.
reserves.
Provisions are recognized for expected severance pay-
ments or similar personnel expenses as well as for demolition
expenses and other charges related to restructuring measures
that have been planned and publicly announced by manage-
ment.
The unit of production method is used to depreciate assets
from oil and gas production at the field or reservoir level.
Depreciation is generally calculated on the basis of the
production of the period in relation to the proven, developed
Exploratory drilling is generally reported under construction
in progress until its success can be determined. When the
presence of hydrocarbons is proven such that the economic
development of the field is probable, the costs remain
capitalized as suspended well costs. At least once a year, all
suspended wells are assessed from an economic, technical
and strategic viewpoint to see if development is still intended.
If this is not the case, the capitalized costs for the well in ques-
tion are impaired. When reserves are proven, the exploration
wells are reclassified as machinery and technical equipment
when production begins.
An exploration well is a well located outside of an area with
proven oil and gas reserves. A development well is a well
which is drilled to the depth of a reservoir of oil or gas within an
area with proven reserves.
Oil and gas production: Exploration and development
expenditures are accounted for using the successful efforts
method. Under this method, costs of successful exploratory
drilling as well as successful and dry development wells are
capitalized.
flows can differ significantly from the cash flows used to deter-
mine the fair values. Independent external appraisals are used
for the purchase price allocation of business combinations.
Valuations in the course of business combinations are based
on existing information as of the acquisition date.
Business combinations: In business combinations, the
acquired assets and liabilities are recognized at fair value on
the date the acquirer effectively obtains control. The fair value
of acquired assets and assumed liabilities at the date of
exchange, as well as the useful lives of the acquired assets,
are determined on the basis of assumptions. The measure-
ment is largely based on projected cash flows. The actual cash
Other accounting policies
The probable amount required to settle noncurrent
provisions is discounted if the effect of discounting is material.
In this case, the provision is recognized at present value.
Assumptions must be made in determining the discount rate
used for calculating noncurrent provisions. Financing costs
related to unwinding the discount on provisions in subsequent
periods are shown in other financial result.
For more information, see Note 26 on page 207
Other provisions also cover risks resulting from legal dis-
putes and proceedings, provided the criteria for recognizing a
provision are fulfilled. In order to determine the amount of the
provisions, the Company takes into consideration the facts
related to each case, the size of the claim, claims awarded in
similar cases and independent expert advice as well as
assumptions regarding the probability of a successful claim
and the range of possible claims. The actual costs can deviate
from these estimates.
Production costs include all costs incurred to operate,
repair and maintain the wells as well as the associated plant
and ancillary production equipment, including the associated
depreciation.
21
Equity
5
Total equity and liabilities
Thereof financial indebtedness
Current liabilities
Thereof financial indebtedness
Noncurrent liabilities
0.1
70
0.0
2
Assets
0.2
4
0.1
1
Thereof cash and cash equivalents
0.2
41
0.0
(3)
Other financial obligations
(2)
0.0
(7)
BASF Report 2016
1 The amounts from the deconsolidation of Wintershall Noordzee B.V. in connection with the asset swap with Gazprom are not shown in this table, but included in the table of
assets and liabilities transferred as a result of the asset swap with Gazprom in Note 2.4 on page 177.
0.1
41
0.1
70
0.0
2
0.2
Current assets
9
2
0.6
80
0.0
4
0.0
(3)
0.0
0.0
0.1
0.1
15
0.0
27
71
42
57
154
As of December 31
-
Thereof proportionally consolidated
28
294
10
5
46
4
612
2
8
Deconsolidations
Thereof proportionally consolidated
16
1
4
258
6
1
Thereof property, plant and equipment
0.1
29
0.0
5
Noncurrent assets
%
0.1
48
Thereof proportionally consolidated
0.0
%
2015
Million €
2016
Sales
Overview of impact of changes to the scope of consolidation (excluding acquisitions and divestitures)¹
7
8
2
Million €
Derivative financial instruments can be embedded within
other contracts. If IFRS requires separation, then the embed-
ded derivative is accounted for separately from its host
contract and measured at fair value.
Furthermore, valuation allowances are made on receivables
based on transfer risks for certain countries.
There were no reclassifications from one measurement
category to another in 2016 and 2015. The same applies for
transfers between levels in the fair value hierarchy.
4.33
4.58
4.70
4.73
Malaysia (MYR)
134.28
120.20
131.07
123.40
0.73
0.82
0.73
0.86
6.97
7.35
7.06
7.32
3.70
3.86
Mexico (MXN)
21.77
18.91
20.67
1,280.78
1.09
1.05
United States (USD)
1,269.36
South Korea (KRW)
1.09
1.08
1.07
Switzerland (CHF)
4.31
68.02
80.67
64.30
Russia (RUB)
8.95
9.29
9.60
9.09
Norway (NOK)
17.61
74.14
3.43
Brazil (BRL)
China (CNY)
Great Britain (GBP)
Japan (JPY)
2015
- The parent company holds decision-making power over the
relevant activities of the investee
According to IFRS 10, a group consists of a parent entity
and the subsidiaries controlled by the parent. “Control” of an
investee assumes the simultaneous fulfillment of the following
three criteria:
Scope of consolidation: The scope of consolidation is based
on the application of the standards IFRS 10 and 11.
1.3 Group accounting principles
Annual Improvements to IFRSS (2014-2016): Three
IFRSS were amended in the Annual Improvements to IFRSS
(2014-2016). In IFRS 12, it was clarified that disclosures pur-
suant to IFRS 12 generally also apply to an entity's interests in
subsidiaries, joint ventures and associated companies that are
classified as held for sale in accordance with IFRS 5, with the
exception of the disclosures outlined in IFRS 12.B10-B16
(Financial Information). In IAS 28, it was clarified that the
election to measure an investment in an associated company
or a joint venture held by an entity that is a venture capital
organization or other qualifying entity, can be exercised on an
investment-by-investment basis. The short-term exemptions
in IFRS 1, Appendix E (IFRS 1.E3-E7) for first-time IFRS users
were deleted. Pending E.U. endorsement, the amendments
to IFRS 12 are to be applied for the first time in the first
reporting period of a business year beginning on or after
January 1, 2017. Early adoption is permissible.
consideration is essential for determining the exchange rate
for the underlying asset, income or expense. The interpretation
is-pending E.U. endorsement - to be applied for the first time
in the first reporting period of a business year beginning on or
after January 1, 2018. Early adoption is permissible.
Supplementary information on IFRIC 22 Foreign
Currency Transactions and Advance Consideration:
IFRIC 22 addresses an application question for IAS 21 - The
Effects of Changes in Foreign Exchange Rates. It clarifies the
point in time for determining the exchange rate used to
translate foreign-currency transactions containing advance
payments that have been made or received. The date of the
initial recognition of an asset or liability resulting from advance
-
Supplementary information on IFRS 15 - Revenues
from Contracts with Customers: The amendments clarify
various regulations in IFRS 15 and provide transition relief for
the new standard. Beyond clarification, the changed standard
also contains two additional practical expedients for reducing
complexity and cost in the transfer to the new standard. These
concern options for the presentation of contracts that are
either concluded by the start of the earliest-presented period
or that have been changed before the start of the earliest-
presented period. The amendments are - pending E.U.
endorsement to be applied for the first time starting
January 1, 2018.
- The parent company has rights to variable returns from the
investee
Amendments to IFRS 4 Insurance Contracts: The
amendments aim to minimize the effects of various first-time
application dates of IFRS 9, especially for entities with
extensive insurance activities. The amendments are - pending
E.U. endorsement - to be applied for the first time starting
January 1, 2018.
Amendments to IFRS 2 - Classification and Measure-
ment of Share-Based Payment Transactions: The amend-
ments involve a number of individual issues pertaining to the
accounting of cash-settled share-based payment transac-
tions. IFRS 2 now contains requirements on determining the
fair value of obligations resulting from share-based payment
transactions. The amendments are - pending E.U. endorse-
ment - to be applied to compensation granted or changed in
business years beginning on or after January 1, 2018. Early
adoption is permissible.
-
-
Amendments to IAS 12 - Income Taxes: The amend-
ments to IAS 12 particularly aim to clarify how to account for
deferred tax assets for unrealized losses related to assets
measured at fair value, which are currently handled variously in
practice. The amendments are subject to E.U. endorse-
ment to be applied for the first time in the first reporting
period of a business year beginning on or after Janu-
ary 1, 2017, although early adoption is permissible.
Amendments to IAS 7 - Statement of Cash Flows: The
amendments pursue the objective that entities provide
disclosures that enable users of financial statements to
evaluate changes in liabilities arising from financing activities.
The amendments are - · subject to E.U. endorsement - to be
applied for the first time in the first reporting period of a
business year beginning on or after January 1, 2017, although
early adoption is permissible.
IASB issued further amendments to standards and interpreta-
tions whose application is not yet mandatory and whose
application also requires the endorsement of E.U. law. These
amendments are unlikely to have a material impact on the
reporting of BASF SE.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2016
Revenue from interest-bearing assets is recognized on the
outstanding receivables on the balance sheet date using
interest rates calculated by means of the effective interest
method. Dividends from shareholdings not accounted for
using the equity method are recognized when the share-
holders' right to receive payment is established.
-
1,284.18
1.11
- The parent company can use its decision-making power to
affect the variable returns
According to IFRS 11, which regulates the accounting of
joint arrangements, a distinction must be made between joint
ventures and joint operations. In the case of a joint venture, the
parties that have joint control of a legally independent company
have rights to the net assets of that arrangement. In joint
operations, the parties that have joint control have direct rights
to the assets and obligations for the liabilities relating to the
arrangement. This requirement is particularly fulfilled if the
production output of the joint arrangement is almost entirely
transferred to the partners, through which the partners
guarantee the joint arrangements' ongoing financing.
2016
2015
2016
Average rates
Closing rates
Dec. 31, Dec. 31,
Selected exchange rates (€1 equals)
For certain companies outside the eurozone or U.S. dollar
zone, the euro or U.S. dollar is the functional currency. In such
cases, the translation into the functional currency of financial
statements prepared in the local currency is done according to
the temporal method: All nonmonetary assets and related
depreciation and amortization as well as equity are translated
at the exchange rate applying to the respective transactions.
All other balance sheet items are translated using closing rates
on the balance sheet date; other expenses and income are
translated at monthly average rates. The resulting translation
differences are recognized in the income statement under
other operating income or expenses. If necessary, financial
statements in the functional currency are translated into the
presentation currency according to the closing rate method.
Translation of foreign currency financial statements:
The translation of foreign currency financial statements
depends on the functional currency of the consolidated
companies. For companies whose functional currency is not
the euro but a local currency, translation into the reporting
currency is based on the closing rate method: Balance sheet
items are translated into euros using closing rates on the
balance sheet date; expenses and income are translated into
euros at monthly average rates and accumulated for the year.
The difference between a company's translated equity at
historical rates at the time of acquisition or retention and its
equity at closing rates on the balance sheet date is reported
separately in equity under other comprehensive income (trans-
lation adjustments) and is recognized in income only upon the
company's disposal.
Foreign currency translations: The cost of assets acquired
in foreign currencies and revenue from sales in foreign curren-
cies are determined by the exchange rate on the date of the
transaction. Foreign currency receivables and liabilities are
valued at the exchange rates on the balance sheet date.
Changes in assets and liabilities arising from foreign currency
translation are recognized in the income statement and
reported under other operating expenses or income, other
financial result, and available-for-sale financial assets in other
comprehensive income.
Based on corporate governance and potential supplementary
agreements, companies are analyzed for their relevant
activities and variable returns, and the link between the variable
returns and the extent to which their relevant activities could
be influenced.
The incidental acquisition costs of a business combination
are recognized in the income statement under other operating
expenses.
Consolidation methods: Assets and liabilities of conso-
lidated companies are uniformly recognized and measured in
accordance with the principles described herein. For
equity-accounted companies, material deviations in measure-
ment resulting from the application of other accounting
principles than those used at BASF are adjusted for.
Joint ventures and associated companies are accounted
for using the equity method in the Consolidated Financial
Statements. Associated companies are entities in which
significant influence can be exercised over their operating and
financial policies and which are not subsidiaries, joint ventures
or joint operations. In general, this applies to companies in
which BASF has an investment of between 20% and 50%.
Equity-accounted income is reported as part of income from
operations (EBIT).
In addition to BASF SE, the Consolidated Financial
Statements include all material subsidiaries on a fully
consolidated and all material joint operations on a propor-
tionally consolidated basis. Companies whose business is
dormant or of low volume, and are of secondary importance
for the presentation of a true and fair view of the net assets,
financial position and results of operations, are not conso-
lidated, but rather are reported under other shareholdings.
These companies are carried at amortized cost and are written
down in the case of an impairment. The aggregate assets and
equity of these companies amount to less than 1% of the
corresponding value at the Group level.
Companies whose corporate governance structures classify
them as joint arrangements are analyzed to determine if they
meet the criteria for joint ventures or joint operations as per
IFRS 11. This requires an analysis of the joint arrangement's
structure. Should the arrangement be structured through a
separate vehicle, its legal form, contractual arrangements and
all other facts and circumstances are reviewed.
BASF Report 2016
Notes - Policies and scope of consolidation
Consolidated Financial Statements
164
163
Transactions between consolidated companies as well as
intercompany profits resulting from trade between consoli-
dated companies are eliminated in full; for joint operations,
they are proportionally eliminated. Material intercompany
profits related to companies accounted for using the equity
method are eliminated.
1.07
1,255.98
Capital consolidation is conducted at the acquisition date
according to the purchase method. Initially, all assets, liabilities
and additional intangible assets that are to be capitalized are
measured at fair value. Finally, the acquisition cost is com-
pared with the proportional share of the net assets acquired at
fair value. The resulting positive differences are capitalized as
goodwill. Negative differences are reviewed once more, then
recognized directly in the income statement.
BASF Report 2016
The exception made by IAS 2 for traders is applied to the
measurement of precious metal inventories. Accordingly,
inventories held exclusively for trading purposes are to be
measured at fair value less costs to sell. All changes in value
are recognized in the income statement.
Inventories may be written down if the prices for the sales
products decline, or in cases of a high rate of days sales of
inventory (DSI). Write-downs on inventories are reversed if the
reasons for them no longer apply.
In addition to direct costs, cost of conversion includes an
appropriate allocation of production overhead costs based on
normal utilization rates of the production plants, provided that
they are related to the production process. Pensions, social
services and voluntary social benefits are also included, as
well as allocations for administrative costs, provided they
relate to the production. Borrowing costs are not included in
cost of conversion.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2016
Inventories are measured at acquisition cost or cost of
conversion based on the weighted average method. If the
market price or fair value of the sales product which forms the
basis for the net realizable value is lower, then the sales
products are written down to this lower value. The net
realizable value is the estimated price in the ordinary course of
business less the estimated costs of completion and the
estimated selling costs.
Investments accounted for using the equity method:
The carrying amounts of these companies are adjusted
annually based on the pro rata share of net income, dividends
and other changes in equity. Should there be indications of a
permanent reduction in the value of an investment, an
impairment is recognized in the income statement.
Government grants: Government grants related to the
acquisition or construction of property, plant and equipment
reduce the acquisition or construction cost of the respective
assets. Other government grants or government assistance
are recognized immediately as other operating income or
treated as deferred income and reversed over the underlying
period.
Borrowing costs: Borrowing costs directly incurred as
part of the acquisition, construction or production of a
qualifying asset are capitalized as part of the acquisition or
production cost of that asset. A qualifying asset is an asset for
which the time period necessary to make it ready for its
intended use or sale is longer than one year. Borrowing costs
are capitalized up to the date the asset is ready for its intended
use. The borrowing costs were calculated based on a rate of
2.5% (2015: 3.0%) and adjusted on a country-specific basis, if
necessary. All other borrowing costs are recognized as an
expense in the period in which they are incurred.
Leases can be embedded within other contracts. If sepa-
ration is required under IFRS, then the embedded lease is
recorded separately from its host contract and each compo-
nent of the contract is carried and measured in accordance
with the applicable regulations.
A lease is classified as a finance lease if it substantially
transfers all the risks and rewards related to the leased asset.
Assets subject to a finance lease are capitalized at the lower of
the fair value of the leased assets or the present value of the
minimum lease payments. A leasing liability is recorded in the
same amount. The periodic lease payments must be divided
into principal and interest components. The principal
component reduces the outstanding liability, while the interest
component represents an interest expense. Depreciation
takes place over the shorter of the useful life of the asset or the
period of the lease.
Assets subject to operating leases are not capitalized. Lease
payments are recognized in the income statement in the
period they are incurred.
Leases: A lease is an agreement whereby the lessor
conveys to the lessee the right to use an asset for an agreed
period of time in return for a payment or series of payments.
Leasing contracts are classified as either finance or operating
leases.
Investment properties held to realize capital gains or rental
income are immaterial. They are valued at the lower of fair
value or acquisition cost less depreciation.
Impairments are recognized if the recoverable amount of the
asset is lower than the carrying amount. The measurement is
based on fair value less costs to sell or the value in use. The
value in use is determined on the basis of future cash inflows
and outflows, and the weighted average cost of capital after
taxes, depending on tax rates and country-related risks. An
impairment is recognized for the difference between the
carrying amount and the recoverable amount. If the reasons
for an impairment no longer exist, the write-downs are reversed
up to the value of the asset, had an impairment not been
recognized.
7
7
25
25
Deferred taxes: Deferred taxes are recorded for tempo-
rary differences between the carrying amount of assets and
liabilities in the financial statements and the carrying amounts
for tax purposes as well as for tax loss carryforwards and
unused tax credits. This also comprises temporary differences
arising from business combinations, with the exception of
goodwill. Deferred tax assets and liabilities are calculated
using the respective country-specific tax rates applicable for
the period in which the asset or liability is realized or settled.
Tax rate changes enacted or substantively enacted on or
before the balance sheet date are taken into consideration.
Deferred tax assets are offset against deferred tax liabilities
provided they are related to the same taxation authority and
have the same maturities. Surpluses of deferred tax assets are
only recognized provided that the tax benefits are likely to be
realized. The valuation of deferred tax assets is based on the
estimated probability of a reversal of the differences and the
ability to utilize tax loss carryforwards and unused tax credits.
This depends on whether future taxable profits will exist during
the period in which temporary differences are reversed and in
which tax loss carryforwards and unused tax credits can be
claimed. Based on experience and the expected development
of taxable income, it is assumed that the benefits of the
recognized deferred tax assets will be realized. The valuation
of deferred tax assets is based on internal projections of the
future earnings of the particular Group company.
Changes in deferred taxes in the balance sheet are
recorded as deferred tax expense or income if the underlying
transaction is not to be recognized directly in equity or in
income and expenses recognized in equity. For those effects
which have been recognized in equity, changes to deferred tax
assets and tax liabilities are also recognized directly in equity.
Deferred tax liabilities are recognized for differences between
the proportional IFRS equity and the tax base of the invest-
ment in a consolidated subsidiary if a reversal of these dif-
ferences is expected in the foreseeable future. Deferred tax
liabilities are recognized for dividend distributions which are
planned for the following year if these distributions lead to a
reversal of temporary differences.
- Cash and cash equivalents consist primarily of cash on
hand and bank balances with maturities of less than three
months.
1.11
- Financial liabilities which are not derivatives are initially
measured at fair value, which normally corresponds to the
amount received. Subsequent measurement is carried out at
amortized cost, using the effective interest method.
The measurement is carried out at fair value. Changes in
fair value are recognized directly in equity under the item
other comprehensive income and are only recognized in the
income statement when the assets are disposed of or have
been impaired. Subsequent reversals are recognized directly
in equity (other comprehensive income). Only in the case of
debt instruments are reversals recognized up to the amount
of the original impairment in the income statement; reversals
above this amount are recognized directly in equity. If the fair
value of available-for-sale financial assets drops below ac-
quisition costs, the assets are impaired if the decline in value
is significant and can be considered lasting. The fair values
are determined using market prices. Shareholdings whose
fair value cannot be reliably determined are carried at acqui-
sition cost and are written down in the case of an impair-
ment. When determining the value of these shareholdings,
the acquisition costs constitute the best estimate of their fair
value. This category of shareholdings includes investments
in other shareholdings, provided that these shares are not
publicly traded. There are no plans to sell significant stakes
in these shareholdings.
- Available-for-sale financial assets comprise financial
assets which are not derivatives and do not fall under any of
the previously stated valuation categories. This measure-
ment category comprises shareholdings reported under the
item other financial assets which are not accounted for using
the equity method as well as short and long-term
securities.
For BASF, there are no material financial assets that fall
under this category.
If, in a subsequent period, the amount of the valuation
allowance decreases and the decrease can be related
objectively to an event occurring after the valuation allow-
ance was made, then it must be reversed in the income
statement. Reversals of valuation allowances may not
exceed amortized cost. Loans and receivables are derecog-
nized when they are definitively found to be uncollectible.
- Held-to-maturity financial assets consist of nonderivative
financial assets with fixed or determinable payments and a
fixed term, for which there is the ability and intent to hold
until maturity, and which do not fall under other valuation
categories. Initial measurement is done at fair value, which
matches the nominal value in most cases. Subsequent
measurement is carried out at amortized cost, using the
effective interest method.
If there is objective evidence for an impairment of a
receivable or loan, an individual valuation allowance is made.
When assessing the need for a valuation allowance, regional
and sector-specific conditions are considered. In addition,
use is made of internal and external ratings as well as the
assessments of debt collection agencies and credit insurers,
when available. A portion of receivables is covered by credit
insurance. Bank guarantees and letters of credit are used to
an insignificant extent. Valuation allowances are only
recognized for those receivables which are not covered by
insurance or other collateral. The valuation allowances for
receivables whose insurance includes a deductible are not
recognized in excess of the amount of the deductible.
Write-downs are based on historical values relating to
customer solvency and the age, period overdue, insurance
policies and customer-specific risks. In addition, a valuation
allowance must be recognized when the contractual
conditions which form the basis for the receivable are
changed through renegotiation in such a way that the
present value of the future cash flows decreases.
- Loans and receivables comprise financial assets with fixed
or determinable payments, which are not quoted on an
active market and are not derivatives or classified as
available-for-sale. This measurement category includes
trade accounts receivable as well as other receivables and
loans reported under other receivables and miscellaneous
assets. Initial measurement is done at fair value, which
generally matches the nominal value of the receivable or
loan. Interest-free and low-interest long-term loans and
receivables are recorded at present value. Subsequent
measurement recognized in income is generally made at
amortized cost using the effective interest method.
10
BASF Report 2016
Consolidated Financial Statements
168
167
- Financial assets and liabilities at fair value recognized in
the income statement consist of derivatives and other
trading instruments. At BASF, this measurement category
only includes derivatives. Derivatives are reported in other
receivables and miscellaneous assets or other liabilities.
BASF does not make use of the fair value option under
IAS 39. The calculation of fair values is based on market
parameters or measurement models based on such
parameters. In some exceptional cases, the fair value is
calculated using parameters which are not observable on
the market.
Financial assets and liabilities are divided into the following
measurement categories:
If there is objective evidence of a permanent impairment of
a financial instrument that is not measured at fair value through
profit or loss, an impairment loss is recognized. If the reason
for the impairment of loans and receivables as well as
held-to-maturity financial instruments no longer exists, the
impairment is reversed up to the amortized cost and recog-
nized in the income statement. Impairments on financial
instruments are booked in separate accounts.
Financial assets and financial liabilities are recognized in the
balance sheet when the BASF Group becomes a party to a
financial instrument. Financial assets are derecognized when
the contractual rights to the cash flows from the financial asset
expire or when the financial asset, with all risks and rewards of
ownership, is transferred. Financial liabilities are derecognized
when the contractual obligation expires, is discharged or
cancelled. Regular-way purchases and sales of financial
instruments are accounted for using the settlement date; in
precious metals trading, the day of trading is used.
Financial instruments
For more information, see Note 11 from page 185 onward
Notes - Policies and scope of consolidation
10
The fair value of a financial instrument is the amount that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. When pricing on an active market is
available, for example on a stock exchange, this price is used
for the measurement. Otherwise, the measurement is based
on internal measurement models using current market
parameters or external measurements, for example, from
banks. These internal measurements predominantly use the
net present value method and option pricing models.
2015
18
19
14
14
2015
2016
Internally generated intangible assets
Other rights and values
Distribution, supply and similar rights
Product rights, licenses and trademarks
Know-how, patents and production
technologies
Average amortization in years
14
The estimated useful lives and amortization methods of
intangible assets are based on historical values, plans and
estimates. These estimates also consider the period and
distribution of future cash inflows and outflows. The
weighted average amortization periods of intangible assets
amounted to:
Impairments are recognized if the recoverable amount of
the asset is lower than the carrying amount. The recoverable
amount is the higher of either fair value less costs to sell or the
value in use. The value in use is determined on the basis of
future cash inflows and outflows, and the weighted average
cost of capital after taxes, depending on tax rates and
country-related risks. If the reasons for an impairment no
longer exist, the write-downs are reversed up to the value of
the asset, had an impairment not been recognized. Depending
on the type of intangible asset, amortization is reported under
cost of sales, selling expenses, research and development
expenses or other operating expenses.
Acquired intangible assets (excluding goodwill) with
defined useful lives are valued at cost less straight-line
amortization. The useful life is determined using the period of
the underlying contract or the period of time over which the
intangible asset can be expected to be used.
Assets
Income relating to the sale or licensing of technologies or
technological expertise are recognized in the income state-
ment according to the contractually agreed-upon transfer of
the rights and obligations associated with those technologies.
Revenues from the sale of precious metals to industrial
customers are recognized at the time of shipment and the
corresponding purchase prices are recorded at cost of sales.
In the trading of precious metals and their derivatives with
broker-traders, where there is usually no physical delivery,
revenues are netted against their corresponding costs.
Revenues from marketing the natural gas from the Yuzhno
Russkoye gas field are treated in the same manner.
Revenues from the sale of goods or the rendering of services
are recognized upon the transfer of ownership and risk to the
buyer. They are measured at the fair value of the consideration
received. Sales revenues are reported without sales tax.
Expected rebates and other trade discounts are accrued or
deducted. Provisions are recognized according to the principle
of individual measurement to cover probable risks related to
the return of products, future warranty obligations and other
claims.
Revenue recognition
22
1.4 Accounting policies
Internally generated intangible assets primarily comprise
internally developed software. Such software and other inter-
nally generated assets are measured at cost and amortized
over their estimated useful lives. Impairments are recognized if
the carrying amount of an asset exceeds the recoverable
amount. In addition to those costs directly attributable to the
asset, costs of internally generated intangible assets also
include an appropriate portion of overhead costs. Borrowing
costs are capitalized to the extent that they apply to the
purchase or the period of construction of qualifying assets.
12
Intangible assets with indefinite useful lives are trade
names and trademarks that have been acquired as part of
acquisitions. These are measured at cost and tested for
impairment annually, or if there is an indication that their value
has declined.
4
2016
23
4
Long-distance natural gas pipelines
Miscellaneous equipment and fixtures
Machinery and technical equipment
Buildings and structural installations
Weighted average depreciation in years
Both movable and immovable fixed assets are for the
most part depreciated using the straight-line method, with the
exception of production licenses and plants in the Oil & Gas
segment, which are primarily depreciated based on use in
accordance with the unit of production method. The estimated
useful lives and depreciation methods applied are based on
historical values, plans and estimates. These estimates also
consider the period and distribution of future cash inflows and
outflows. The depreciation methods, useful lives and residual
values are reviewed at each balance sheet date. The weighted
average depreciation periods were as follows:
Expenditures related to the scheduled maintenance of
large-scale plants are separately capitalized and depreciated
using the straight-line method over the period until the next
planned turnaround. Costs for the replacement of components
are recognized as assets when an additional future benefit is
expected. The carrying amount of the replaced components is
derecognized. Costs for maintenance and repair as part of
normal business operations are recognized as an expense.
The cost of self-constructed plants includes direct costs,
appropriate allocations of material and production overhead
costs, and a share of the general administrative costs of the
divisions involved in the construction of the plants. Borrowing
costs are capitalized to the extent that they apply to the pur-
chase or the period of construction of qualifying assets.
BASF Report 2016
Consolidated Financial Statements
Notes - Policies and scope of consolidation
5
Consolidated Financial Statements
Notes - Policies and scope of consolidation
166
165
Property, plant and equipment are measured at cost
less depreciation and impairment over their useful lives. The
revaluation method is not applied. Low-value assets are fully
written off in the year of acquisition.
Goodwill is only written down if there is an impairment.
Impairment testing takes place once a year and whenever
there is an indication of an impairment.
7
Emission rights: Emission right certificates, granted free of
charge by the German Emissions Trading Authority (Deutsche
Emissionshandelsstelle) or a similar authority in other coun-
tries, are recognized on the balance sheet with a value of zero.
Certificates purchased on the market are capitalized at cost as
intangible assets. Emissions generated create an obligation to
surrender the emission certificates. Emission certificates
purchased on the market are subsequently measured at fair
value, up to a maximum of the amount of the acquisition costs.
If the fair value is lower than the carrying amount on the
balance sheet date, the emission rights are impaired.
15.0
million MWh
of electricity
demand
40.7
million MWh
of steam demand
-
enrollments
million m3
of water
abstracted
occupational safety
and
13,000
on process safety
Training:
118,000
in courses on
5.4%
from renewable resources
purchased worldwide
of raw materials
different
raw materials
procured
30,000
protection
invested in environmental
€34 billion
€206 million
spent on further
education
in personnel expenses
€69 million
€10.17 billion
1,649
worth of raw materials,
goods and services
purchased for own
production
of our senior
executives have
international
experience
employees and
contractors at around
of raw materials,
goods and services
for own production
sourced locally
invested in fixed and
intangible assets (including
acquisitions)
around 90%
suppliers
include customers, employees,
suppliers and shareholders,
as well as experts in science,
industry, politics, society and
media
Our stakeholders
employees make use of these
opportunities daily
600
Numerous options for
balancing personal and
professional life worldwide;
in Ludwigshafen, Germany,
for example,
84.6%
training per
employee each year
days of further
2.0
Average of
Around
10,000
employees in research
and development
apprentices
3,120
employees
worldwide,
of which
113,830
health
protection
sites
audited on
occupational
medicine and
30
80 sites
environmental,
safety and
security audits
performed at
121
sites participate in
worldwide safety initiative
350
75,000
€7.3 billion
treatment. Farmers then profit from seeds
that provide plants with all-around
€1.86 billion
The steam cracker - the heart of production in
The BASF 4.0 project team is evaluating possibilities
for more intensive use of digital technologies and
business models, and drives the digital trans-
formation of BASF. Under the banner "Smart
Manufacturing," BASF implements digital
technologies and applications in its plants with the
goal of making production more efficient and even
safer. This includes the "predictive maintenance"
approach. A model-based analysis of the data can,
for example, better predict the optimal point in time
for maintenance measures, reducing unscheduled
repairs and shutdowns and optimizing coordination
between maintenance and production processes.
Driving digital transformation
回回
回
Infrastructure, industry and innovation are three important
pillars of sustainable development. While infrastructure provides
the basic foundation for all business processes, innovations -
such as in the field of digitalization – expand our technological
possibilities.
INFRASTRUCTURE, INDUSTRY, INNOVATION
CHEMISTRY FOR A SUSTAINABLE FUTURE
Protected seeds: Seed treatments
and refining support plants' undisturbed
development from the very beginning.
This later increases yields.
Networked research: The new research
and development center in Limburgerhof,
Germany, is part of our global network of
R+D sites and testing centers for biological
crop protection and seed treatment solutions.
For more on crop protection solutions, see
basf.com/agro
protection from the very beginning.
Sowing is simulated and optimized in
order to provide farmers with the best
possible application and handling.
network of expertise. Its goal is the global
exchange of research results that have
been tried and tested in different climate
zones and under various local parameters.
In this network, BASF researches naturally
occurring organisms and cultures and their
potential use in biological crop protection.
This is how we pursue our goal of supple-
menting our classic portfolio of chemical
crop protection and offering farmers an
even more comprehensive product
portfolio. We combine knowledge of
biological microorganism fermentation with
chemical formulation expertise and
develop new solutions for better seed
Limburgerhof, Germany. Together with
other research sites in Brazil, Argentina,
France, England, South Africa, China,
Australia, the United States and Canada,
Limburgerhof is part of an international
BASF opened a new research and
development center for biological crop
protection and seed solutions in
Knowledge on a global scale
Enzymes for sustainable agriculture: The animal
feed additive NatuphosⓇ helps farmers raise
healthy animals.
For more on feed additives, see:
animal-nutrition.basf.com
Sustainability is a core criterion in the
development of BASF's feed additives
portfolio. This means we not only
evaluate additives based on their
nutritional value, we also consider
additional positive effects on animal
feed and the environment. In pig and
poultry feeding, the enzyme NatuphosⓇ
improves digestion of important
nutrients such as phosphorus,
proteins, calcium and zinc. The feed
is more environmentally friendly, as
the animals excrete less phosphorus,
reducing the impact on water. Thanks
to NatuphosⓇ, the animals are also
better able to utilize the energy from
their food, reducing the overall feeding
costs. In pig farming, adding the
organic acid AmasilⓇ lowers the pH
value of the pigs' food, creating an
environment that is inhospitable to
harmful bacteria. The lower amount
of bacteria consumed reduces the
animals' microbial load, improving their
vitality. Furthermore, AmasilⓇ extends
the food's shelf life, enabling farmers
to provide their animals with the
needed nutrients in high quality.
Improved feed conversion
In 2050, nearly ten billion people will live on Earth. Our
innovative solutions for efficient and environmentally
friendly agriculture and animal feed make an important
contribution toward keeping people supplied with sufficient
and nourishing food.
FOOD
CHEMISTRY FOR A SUSTAINABLE FUTURE
For more on the water treatment plant, see
basf.com/wastewater-treatment-plant
is biological purification: Bacteria transform
polluted water into sewage sludge, carbon
dioxide (CO2) and water. Keeping the wastewater
moving and the bacteria supplied with oxygen
requires a lot of energy. Without changing water
volume or quality, BASF has increased the plant's
energy efficiency by 28% compared with 2012
and reduced costs by around €3 million over this
period. In addition, 18,000 fewer metric tons of
CO2 are emitted annually. "Efficient biological
purification is the key to our success. Solid
matter is already better separated in the
precleaning phase, reducing not only the amount
of pollution in the biological pools, but also the
energy requirement for aeration," explains plant
manager Dr. Peter Schmittel. BASF also reduced
the bacteria concentration by 50%. The
remaining bacteria are better supplied with
oxygen, which enables them to work even
more efficiently.
BASF's wastewater treatment plant is one of
the largest in Europe. It purifies nearly 100 million
cubic meters of wastewater from BASF's
production each year, in addition to another
20 million cubic meters of wastewater from
the German towns of Ludwigshafen, Frankenthal
and Bobenheim-Roxheim. The core of the plant
Tiny helpers, big impact
Q
Ludwigshafen – already uses predictive
spent on research
and development
maintenance through the application of
technology. Several thousand sensors track process
in equity
€32.6 billion
BASF Report 2016
Our foundation
How we create value
NECA CITY CENTRE
master-builders-solutions.basf.com
For more on our construction chemicals, see
pulsing metropolis of over 16 million people is one of the most
important centers of commerce and trade in India. After the
expansion of its metro, over 270 stations along approximately
330 kilometers of rail will run under the surface of the city.
To date, only the cities of London, Seoul, Tokyo and Beijing
boast larger subway networks. Construction projects on this
scale would hardly be possible without innovative and robust
construction materials. For the expansion of the Delhi Metro,
the BASF team in India won the project tender with their
customized concept proposal, including the use of BASF
waterproofing solutions for concrete. BASF's Master Builders
Solutions line of concrete solutions are currently used in
underground transport systems all over the world, such as
in China, Singapore, the United States and Poland. Railway
tunnel construction is another area that uses BASF's construc-
tion chemicals solutions. In Switzerland, for example, concrete
additives and cement-based injections for waterproofing were
employed in building the world's longest rail tunnel, the
Gotthard Base Tunnel, and its feeder, the Ceneri Base Tunnel.
Especially in megaprojects, the high performance of BASF
construction chemicals in sometimes extremely demanding
conditions is an important distinguishing feature.
Delhi is one of the largest cities in the world. The
Expertise for big visions
Delhi Metro: BASF developed
customized concrete waterproofing
solutions for the subway system of
the Delhi, India, metropolitan region.
CHEMISTRY FOR A SUSTAINABLE FUTURE
ant Inspektion (n...
900
Ludv
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02 Steckscheiben
01 Sicherheitsarmaturen
Daten
Objekte
Inspektion-(In Bearbeitung)
2016/05/08 
- PP2 DOWN
Digital and mobile:
Special tablet devices
give plant employees
access to information
at any time.
Ludwigshafen has state-of-the-art information
and automation technology at its disposal.
Smart Manufacturing: The steam cracker in
clock in order to monitor and optimally direct the
plant. Another Smart Manufacturing project is
"Augmented Reality." Plant employees are
supported in their work with industry-specific tablet
devices that provide access at any time to digital
information. Working processes are made more
transparent and efficient.
data, like pressure and temperature, around the
state-of-the-art information and automation
104
cases
56
universities, research
institutions and companies
within our global network
600
Around
UN Global Compact
since 2000
Involved in
spent on donations and
sponsorship
€47.0 million
36.4%
senior executives
non-German
Proportion of
executive positions
Proportion of
women in
19.8%
patents filed
worldwide
850
Around
୮
research pipeline
projects in
3,000
Around
product applications
assessed and rated
for aspects of
sustainability
60,000
Over
per one million
working hours
2.0
In
Process safety
incidents:
decline to
2 cas
a result of
A better energy
footprint: Dr. Peter
Schmittel is manager of
the wastewater treatment
plant. He and his team
work on improving the
facility's energy footprint
- with great success.
BASF Report 2016
PDF version available for download: basf.com/basf_report_2016.pdf
HTML version with additional features: basf.com/report
The BASF Report online
If the symbol is underlined, the entire chapter is relevant.
This section shows how the ten principles of the U.N. Global Compact and
the Blueprint for Corporate Sustainability Leadership are implemented.
You can find more information on our website.
You can find more information within the report.
The following symbols indicate important information for the reader:
Further information
This integrated report documents BASF's economic, environmental and social
performance in 2016. We use examples to illustrate how sustainability contributes
to BASF's long-term success and how we as a company create value for our
customers, employees, shareholders, business partners, neighbors and the public.
Integrated reporting
About This Report
About This Report
2
BASF Report 2016
The following overview provides examples of how we create value
for our company, the environment and society. It is modeled on the
framework of the International Integrated Reporting Council (IIRC).
Both financial and nonfinancial value drivers – such as environmental,
production-related, personnel and knowledge-based factors, along
with aspects of society and partnerships - form the foundation of
our actions. Through our business model these inputs are
transformed into various outputs - the results of our actions.
-
BASF's success is supported by both financial and nonfinancial
value drivers. We want to understand how these interact, and derive
targeted measures for increasing the positive impact of our actions
and further minimizing the negative effects. This intention forms the
basis of our integrated reporting.
How we create value
How we create value
phone calls and emails
received by external
compliance hotlines
278
,
performance
unsatisfactory
sustainability
we terminated
our collaboration
with suppliers as
raw material
supplier sites
audited
transportation incidents
with significant impact on
the environment
1.4
■ We add value as one company
on strategic principles
Market success based
countries
80
BASF Group
companies
in more than
With our broad portfolio, we serve customers
from many different sectors - from major global
customers to local workshops.
More than 130,000 customers
We create chemistry
for a sustainable future
Our corporate purpose:
additional production sites worldwide
352
Verbund sites and
6
Intelligent
Verbund system
strategic business units
86
operating divisions
13
■ Agricultural Solutions
■■■ Oil & Gas
■ Functional Materials &
Solutions
■ Performance Products
■ Chemicals
segments
5
Our business model
external
compliance
hotlines
■ We innovate to make our customers
more successful
0
■ We drive sustainable solutions
Values as guideline for
our conduct and actions
■Creative
Number of lost-time injuries
per one million working
hours
of CO2 equivalents
540 million
metric tons
fuel saved through Verbund system
Customers' use of BASF's climate
protection products avoids
14.0 million MWh
metric tons
of CO2 equivalents
21.9 million
Greenhouse gas emissions:
of water discharged
1,644
million m3
in income
taxes
€1.1 billion
dividend per share
€3.00
€4.1 billion
Net income of
in EBIT before
special items
€6.31 billion
in EBIT
€6.28 billion
from innovations
on the market since
2011
around €10 billion
€57.6 billion
in sales, of which
Our results
Corporate Governance
■ Entrepreneurial
■ Open
■Responsible
■ We form the best team
Largest water treatment plant
on the Rhine: The BASF wastewater
treatment plant in Ludwigshafen,
Germany, purifies almost 100 million
cubic meters of the company's
production water every year. Even
wastewater from the surrounding
towns and communities is purified.
Over
70,000
67
2016
2015
2016
2015
Balance sheet
Noncurrent assets
670
750
Carrying amount according to the equity method
as of the beginning of the year
1,434
1,343
Current assets
39
62
Proportional net income
109
204
Thereof marketable securities, cash and
Proportional change of other comprehensive
cash equivalents
income
100
15
4
(21)
Assets
709
812
Total comprehensive income
Non-material associated companies accounted for using the equity
method (BASF stake) (million €)
209
BASF Report 2016
Financial information on GASCADE Gastransport GmbH, Kassel,
22
332
64
Carrying amount according to the equity method
as of the beginning of the year
768
757
Proportional net income
166
32
Proportional change of other comprehensive
income
(26)
52
Total comprehensive income
140
84
Capital measures/dividends/changes in the scope of
consolidation/other adjustments
(27)
(73)
Other adjustments of income and expenses
Carrying amount according to the equity method
as of the end of the year
881
768
173
174
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Germany (million €)
183
Capital measures/dividends/changes in the scope of
consolidation/other adjustments
(90)
5
20
17
101
92
Carrying amount according to the equity
method as of the beginning of the year
641
639
Proportional net income
51
46
Proportional change of other comprehensive
income
Total comprehensive income
Capital measures/dividends/changes in the scope
of consolidation/other adjustments
(64)
(44)
Other adjustments of income and expense
(7)
Carrying amount according to the equity
method as of the end of the year
555
51
46
621
641
Non-material accounted for using the equity method asso-
ciated companies particularly comprise:
- OAO Severneftegazprom, Krasnoselkup, Russia (BASF
stake: 25%, economic share: 35%)
- Nord Stream AG, Zug, Switzerland, was classified as an
associated company even though BASF only has a
15.5% share, as it exercises significant influence over the
company due to the fact that its approval is required for
relevant board resolutions
2
-
Net income
Income taxes
(103)
Equity
370
398
Other adjustments of income and expense
1
11
Noncurrent liabilities
292
400
Thereof financial indebtedness
Carrying amount according to the equity method
as of the end of the year
1,554
1,434
110
Current liabilities
14
Thereof financial indebtedness
Total equity and liabilities
709
812
Statement of income
Sales
368
442
Depreciation, amortization and impairments
126
131
Interest income
Interest expenses
47
- NEL Gastransport GmbH, Kassel, Germany (BASF stake:
49.97%, voting rights: 50.02%)
34
4
Activities not assigned to a particular division are report-
ed under Other. These include the sale of raw materials,
engineering and other services, rental income and leases, the
production of precursors not assigned to a particular segment,
the steering of the BASF Group by corporate headquarters,
and cross-divisional corporate research. Cross-divisional
corporate research, which has been restructured in the context
of the newly developed innovation approach, works on long-
term topics of strategic importance to the BASF Group.
Furthermore, it focuses on the development of specific key
technologies, which are of central importance for the divisions.
Plant biotechnology research is also part of cross-divisional
corporate research.
The Oil & Gas segment comprises the division of the same
name. As part of an asset swap at the end of the third quarter
of 2015, BASF transferred to Gazprom the natural gas trading
and storage business previously operated together with
Gazprom. Since October 1, 2015, the segment has concen-
trated on the exploration and production of oil and gas-rich
regions in Europe, North Africa, Russia, South America and
the Middle East as well as on the transport of natural gas
together with partner Gazprom.
The Agricultural Solutions segment includes the Crop
Protection division. It provides innovative solutions in the areas
of chemical and biological crop protection, seed treatment
and water management as well as for nutrient supply and
plant stress. Plant biotechnology research is not assigned to
this segment; it is reported in Other.
The Functional Materials & Solutions segment bundles
system solutions, services and innovative products for specific
sectors and customers, especially the automotive, electrical,
chemical and construction industries, as well as applications
for household, sports and leisure. It is made up of the Catalysts,
Construction Chemicals, Coatings, and Performance Materi-
als divisions.
The Performance Products segment consists of the
Dispersions & Pigments, Care Chemicals, Nutrition & Health
and Performance Chemicals divisions. Customized products
and solutions allow customers to make their production
processes more efficient or to give their products improved
application properties. As of January 1, 2017, the activities of
the Monomers and Dispersions & Pigments divisions for the
Electronic Industry will be merged in the global business unit
Electronic Materials in the Dispersions & Pigments division
within the Performance Products segment. BASF thereby
strengthens its position as a strategic partner for the large
electronic producers.
The Chemicals segment entails the classical chemicals
business with basic chemicals and intermediates. It forms the
core of BASF's Production Verbund and is the starting point
for a majority of the value chains. In addition to supplying the
chemical industry and numerous other sectors, Chemicals
ensures that other BASF segments are supplied with chemi-
cals for producing downstream products. The Chemicals
segment comprises the Petrochemicals, Monomers and
Intermediates divisions.
BASF's business is conducted by thirteen operating divisions
aggregated into five segments for reporting purposes. The
divisions are allocated to the segments based on their business
models.
4 Reporting by segment and region
For more information, see basf.com/en/governance
audited Consolidated Financial Statements submitted to the
electronic Federal Gazette. The list of shares held is also
published online.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
2.2 Joint operations
Proportionally consolidated joint operations particularly
comprise:
- Ellba C.V., Rotterdam, Netherlands, which is operated
jointly with Shell and produces propylene oxide and styrene
monomer
- AO Achimgaz, Novy Urengoy, Russia, which is jointly
operated with Gazprom for the production of natural gas
and condensate
- BASF DOW HPPO Production B.V.B.A., Antwerp, Belgium,
which is operated jointly with The Dow Chemical Company
to produce propylene oxide
BASF holds a 50% share in each of these companies and
controls them jointly with the respective partner. The compa-
nies sell their products directly to the partners. The partners
ensure the ongoing financing of the companies by purchasing
the production. They were therefore classified as joint opera-
tions in accordance with IFRS 11.
2.3
Joint ventures and associated companies
The only material joint venture accounted for using the equity
method is BASF-YPC Company Ltd., Nanjing, China, which
operates the Verbund site in Nanjing together with Sinopec.
BASF's stake comprises 50%.
Financial information on BASF-YPC Company Ltd., Nanjing, China
(Million €)
2016
2015
Balance sheet
Noncurrent assets
1,515
Current assets
842
1,779
741
Earnings from currency conversion that are not allocated
to the segments are also reported under Other, as are earnings
from the hedging of raw material prices and foreign currency
exchange risks. Furthermore, income and expenses from the
long-term incentive (LTI) program are shown here.
Thereof marketable securities, cash and
cash equivalents
Transfers between the segments are generally executed at
adjusted market-based prices which take into account the
higher cost efficiency and lower risk of Group-internal
transactions. Assets, as well as their depreciation and
amortization, are allocated to the segments based on
economic control. Assets used by more than one segment are
allocated based on the percentage of usage.
Income from operations (EBIT) of Other (million €)
Cash and cash equivalents/marketable securities
Deferred tax assets
Financial assets
Assets of businesses included in Other
Assets of Other (million €)
cross-divisional corporate research as well as costs of
corporate headquarters decreased by €7 million and
€11 million, respectively. The line item miscellaneous income
and expenses amounted to minus €182 million compared
with minus €300 million in the previous year, which included
expenses for BASF's 150th anniversary celebrations among
other things.
Income from operations of Other decreased by €106 million
year-on-year to minus €1,091 million. Income from other
businesses fell by €131 million to €39 million. The line item
foreign currency results, hedging and other measurement
effects decreased by €111 million to minus €331 million.
Higher additions to provisions in comparison with the previous
year for the long-term incentive (LTI) program were partially
compensated by lower currency losses. The costs for
(985)
(1,091)
(300)
(182)
(220)
(331)
170
39
(233)
(222)
(402)
(395)
2015
2016
179
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Income from operations of Other
Miscellaneous income and expenses
Foreign currency results, hedging and other measurement effects
Other businesses
Costs of corporate headquarters
Costs for cross-divisional corporate research
BASF Report 2016
190
Assets
2,357
21
19
Total comprehensive income
10
Capital measures/dividends/changes in the scope of
consolidation/other adjustments
(8)
333
Other adjustments of income and expense
(4)
(35)
Carrying amount accounted for using the equity
method as of the end of the year
10
825
Material associated companies accounted for using the
equity method particularly comprise:
-
- Joint Stock Company Achim Trading, Moscow, Russia
(BASF stake: 18.01%, economic share: 25.01%), which to-
gether with Gazprom, will market the output from blocks IV
and V of the Achimov formation. The investment value in the
amount of €768 million remained unchanged in comparison
with the previous year and arose from the fair value mea-
surement as a result of the asset swap with Gazprom on
September 30, 2015. The company's economic activities
will commence in 2018 with the scheduled start of produc-
tion in blocks IV and V. Therefore, there is no relevant finan-
cial information to report according to IFRS 12 in 2016
-GASCADE Gastransport GmbH, Kassel, Germany (BASF
stake: 49.97%, voting rights: 50.02%)
Statement of income
Sales
2,358
2,212
Depreciation, amortization and
impairments
Interest income
Interest expenses
Income taxes
Net income
214
282
3
28
ཚ།
Proportional change of other comprehensive
income
(7)
69
2,520
Equity
1,760
1,533
Noncurrent liabilities
204
441
Thereof financial indebtedness
190
372
Current liabilities
393
546
Thereof financial indebtedness
23
107
Total equity and liabilities
2,357
2,520
Non-material joint ventures accounted for using the equity
method particularly comprise:
- Wintershall Noordzee B.V., Rijswijk, Netherlands, which is
operated jointly with Gazprom (BASF stake: 50%)
- N.E. Chemcat Corporation, Tokyo, Japan, which is operated
jointly with Sumitomo Metal Mining Co. Ltd. (BASF stake: 50%)
- Heesung Catalysts Corporation, Seoul, South Korea, which
is operated jointly with Heesung (BASF stake: 50 %)
Non-material joint ventures accounted for using the equity method
(BASF stake) (million €)
2016
2015
Carrying amount accounted for using the equity
method as of the beginning of the year
825
506
Proportional net income
(9)
270
Defined benefit assets
- Wintershall AG, Kassel, Germany, which operates Libyan
exploration and production activities together with Gazprom
Libyen Verwaltungs GmbH (BASF stake: 51%). Despite an
investment of 51%, BASF does not exercise control accord-
ing to IFRS 10, as contractual arrangements with the Libyan
government strictly limit influence on variable returns after
income taxes
Due to the corporate governance structure of NEL Gastrans-
port GmbH and GASCADE Gastransport GmbH – both based
in Kassel, Germany in connection with requirements of
Section 10 of the Energy Management Act (EnWG), BASF only
exercises significant influence over both companies, despite
voting rights of over 50%.
- On September 30, 2015, BASF concluded the agreed-upon
sale of portions of its pharmaceutical ingredients and services
business to Siegfried Holding AG, based in Zofingen,
Switzerland. This involved the custom synthesis business and
parts of the active pharmaceutical ingredients portfolio. The
transaction comprised the divestiture of the production sites
in Minden, Germany; Evionnaz, Switzerland; and Saint-
Vulbas, France. At BASF, the activities had been allocated to
the Nutrition & Health division
- On November 1, 2015, BASF divested its global paper
hydrous kaolin business to Imerys Kaolin, Inc., Roswell,
Georgia. The divestiture included the kaolin processing
production site in Wilkinson County, Georgia. The activities
at BASF had been allocated to the Performance Chemicals
division
Asset swap with Gazprom
In its Oil & Gas segment, BASF concluded the swap of assets
of equal value with Gazprom on September 30, 2015, with
retroactive economic effect to April 1, 2013. As a result of the
transaction, BASF received an economic share of 25.01% in
blocks IV and V of the Achimov formation of the Urengoy
natural gas and condensate field in western Siberia. According
to the development plan originally confirmed by Russian
authorities, blocks IV and V have total hydrocarbon resources
of 274 billion cubic meters of natural gas and 74 million metric
tons of condensate. Production is scheduled to start up in
2018.
In return, BASF transferred its shares in the previously
jointly run natural gas trading and storage business to
Gazprom. This included the 50.02% shares in the following:
the natural gas trading company WINGAS GmbH, Kassel,
Germany; the storage company astora GmbH & Co. KG,
Kassel, Germany, which operates natural gas storage facilities
in Rehden and Jemgum, Germany; and WINGAS Hold-
ing GmbH, Kassel, Germany, including its share in the natural
gas storage facility in Haidach, Austria. BASF also transferred
its 50% share in each of the natural gas trading companies
Wintershall Erdgas Handelshaus GmbH & Co. KG, Berlin,
Germany, and Wintershall Erdgas Handelshaus Zug AG, Zug,
Switzerland. Gazprom furthermore became a 50% share-
holder in Wintershall Noordzee B.V. in Rijswijk, Netherlands,
which is active in the exploration and production of natural gas
and crude oil deposits in the North Sea.
The following overview shows the individual components of
BASF's profit realization from the asset swap with Gazprom
and the transfer of Wintershall Noordzee B.V.: The final
purchase price allocation resulted in an adjustment of the fair
value of the shareholding in Wintershall Noordzee B.V. and the
compensation payment, and reduced disposal gains by
€17 million to €297 million.
Profit realization from asset swap with Gazprom and
transfer of Wintershall Noordzee B.V.
(Million €)
Fair value 25.01% Achimov IV/V
Dec. 31,
Dec. 31,
2016
2015
779
779
392
407
BASF Report 2016
(808)
(808)
Expected compensation payment and other
expenses
(66)
(64)
297
314
Fair value 50% Wintershall Noordzee B.V.
Disposed share of net assets
Income from swap and reclassification
The following overview shows the effects of the divestitures
conducted in 2016 and 2015 in the Consolidated Financial
Statements. The previous year includes the effects of the asset
swap with Gazprom. The line item sales reflects the year-on-
year decline resulting from divestitures. The impact on equity
relates mainly to gains and losses from divestitures.
Effects of divestitures and the change in the preliminary purchase price allocation for the asset swap with Gazprom
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Sales
BASF Report 2016
- On June 30, 2015, BASF concluded the divestiture of
its global textile chemicals business to Archroma Tex-
tiles S.à r.l., Luxembourg. The portfolio comprised products
for pretreatment, printing and coating. The transaction fur-
thermore involved the transfer of the subsidiary BASF Paki-
stan (Private) Ltd., based in Karachi, Pakistan, completed in
the third quarter of 2015. The textile chemicals business had
been part of the Performance Chemicals division
Equity
Noncurrent liabilities
356
1.2
(40)
(0.2)
Thereof financial indebtedness
Current liabilities
162
1.1
95
0.7
Thereof financial indebtedness
Total equity and liabilities
Payments made for acquisitions
518
2,849
0.7
97
0.1
146
Divestitures
In 2016, BASF sold the following activities:
- On June 30, 2016, BASF concluded the sale of its global
polyolefin catalysts business to W. R. Grace & Co., Columbia,
Maryland. The transaction involved technologies, patents,
brands and the transfer of production plants in Pasadena,
Texas, and Tarragona, Spain. Around 170 employees trans-
ferred to Grace. These activities had been assigned to the
Catalysts division
-
On August 26, 2016, BASF sold its worldwide photoinitiator
business to IGM Resins B.V., Waalwijk, Netherlands. The
transaction included technologies, patents, brands,
customer relations, business-related contracts, inventories,
and a production site in Mortara, Italy. The sale affected 120
employees worldwide
– On December 14, 2016, BASF sold the Coatings division's
industrial coatings business to the AkzoNobel Group. The
transaction included technologies, patents and trademarks,
customer relations, inventories as well as the transfer of two
production sites in England and in South Africa. BASF
generated around €300 million in sales in the industrial
coatings business in 2015
In 2015, BASF divested the following activities:
-
-
- On March 31, 2015, BASF sold its white expandable poly-
styrene (EPS) business in North and South America to Alpek
S.A.B. de C.V., based in Monterrey, Mexico. The sale com-
prised customer lists and current assets in addition to pro-
duction facilities in Canada, Brazil, Argentina and the United
States. The disposed activities had been part of BASF's
Performance Materials division. The shares in Aislapol S.A.,
based in Santiago de Chile, Chile, were also sold. Polioles, a
joint venture accounted for using the equity method, trans-
ferred its white EPS business to Alpek
- Effective July 1, 2015, BASF sold its 25% share in Solvin to
its partner, Solvay. Solvin was established in 1999 by Solvay
and BASF for the production of polyvinylchloride (PVC). At
BASF, the SolVin investment and the income associated
with it had been allocated to the Monomers division
2016
Million €
(10,718)
2015
Noncurrent liabilities
(63)
(0.2)
(942)
(3.8)
Thereof financial indebtedness
Current liabilities
(1)
(1,148)
(8.1)
Thereof financial indebtedness
(1)
0.0
Total equity and liabilities
403
0.5
(1,905)
(2.7)
Payments received from divestitures
701
702
177
178
Consolidated Financial Statements
Notes - Policies and scope of consolidation
3
BASF Group List of Shares Held in accordance with Section 313(2) of the German
Commercial Code
BASF Report 2016
The list of consolidated companies and the complete list of all
companies in which BASF SE has a share as required by
Section 313(2) of the German Commercial Code and infor-
mation for exemption of subsidiaries from accounting and
disclosure obligations are an integral component of the
0.6
185
1.4
467
%
Million €
%
(15.2)
(3,948)
(5.6)
Noncurrent assets
(234)
(0.5)
(408)
(0.9)
Thereof property, plant and equipment
(97)
(0.4)
0.1
(1,276)
Current assets
(64)
(0.3)
(2,199)
(9.0)
Thereof cash and cash equivalents
(285)
(12.7)
Total assets
(298)
(0.4)
(2,607)
(3.7)
Equity
(5.1)
-
42
243
Cash and cash equivalents
Current assets
Total assets
Provisions for pensions and similar obligations
Other provisions
Deferred taxes
Financial indebtedness
Other liabilities
Noncurrent liabilities
81
357
3,329
The purchase price allocations consider all the facts and cir-
cumstances prevailing as of the respective dates of acquisition
which were known prior to the preparation of the Consolidated
Financial Statements. In accordance with IFRS 3, should
further facts and circumstances become known within the
12-month measurement period, the purchase price allocation
will be adjusted accordingly.
In 2015, BASF acquired the following activities:
- On February 12, 2015, BASF concluded the acquisition,
announced on December 8, 2014, of the business from
Taiwan Sheen Soon Co., Ltd. (TWSS), Lukang Town, Taiwan.
TWSS is a leading manufacturer of precursors for adhesives
based on thermoplastic polyurethanes (TPU). Following
receipt of the official approval, BASF also took over TWSS's
activities on the Chinese mainland, effective Decem-
ber 1, 2015. The takeover consolidated BASF's market
position in the areas of TPU extrusion and injection molding
for various industries. BASF can now offer its customers
complete solutions for TPUs and TPU adhesives. At BASF,
the activities have been integrated in the Performance
Materials division
- On February 18, 2015, BASF took over technologies,
patents and know-how for silver nanowires from Seashell
Technology LLC, based in San Diego, California. Through
this acquisition, BASF has extended its product portfolio for
displays in the Electronic Materials business unit, which is
part of the Monomers division
88
26
229
-
13
356
Accounts payable, trade
73
Provisions
23
Tax liabilities
11
Financial indebtedness
Marketable securities
Other liabilities
41
156
2.4 Acquisitions and divestitures
Acquisitions
In 2016, BASF acquired the following activities:
- On September 26, 2016, BASF concluded the acquisition of
Guangdong Yinfan Chemistry ("Yinfan"), Jiangmen, China,
and integrated the activities in the Coatings division. This
acquisition enabled BASF to add the Yinfan product range
to its portfolio of automotive refinish coatings in Asia Pacific
and gain access to a state-of-the-art production plant for
automotive refinish coatings in China
-
– On December 14, 2016, BASF concluded the acquisition of
the global surface treatment provider Chemetall from
Albemarle Corporation, Charlotte, North Carolina. The
acquisition supplements the Coating division's portfolio in
the area of customized technology and system solutions for
the treatment of surfaces. The purchase price, subject to
usual adjustments to the net financial debt and net working
capital, amounted to $3.1 billion
BASF Report 2016
Consolidated Financial Statements
Notes - Policies and scope of consolidation
175
The preliminary fair values of the assets and liabilities of
Chemetall as of December 14, 2016, were as follows:
Preliminary purchase price allocation of the assets and liabilities
of Chemetall as of December, 14, 2016
(Million €)
Goodwill
Other intangible assets
Property, plant and equipment
Fair value
at time of
acquisition
1,545
1,223
139
Investments accounted for using the equity method
36
Other financial assets
9
Deferred taxes
5
Other receivables and miscellaneous assets
Noncurrent assets
15
2,972
79
Inventories
Accounts receivable, trade
Other receivables and miscellaneous assets
Current liabilities
Liabilities
Total purchase price¹
Property, plant and equipment
155
0.6
72
0.3
Financial assets
45
0.9
Other noncurrent assets
20
0.5
9
0.5
Noncurrent assets
3,009
6.0
169
0.4
Current assets
358
1.4
74
0.3
Thereof cash and cash equivalents
81
5.9
Total assets
3,367
4.4
1.5
62
24.3
1,237
30
137
493
2,836
1 To cover foreign currency risk, a part of the purchase price denominated in U.S. dollars
was hedged.
For more information, see Note 27 from page 208 onward
Goodwill in the amount of €1,545 million resulted primarily
from sales synergies, arising from the expansion of the port-
folio as well as cost synergies to a minor extent. Chemetall
contributed €32 million to sales in the fiscal year 2016 and
minus €5 million to net income. With the consolidation of
Chemetall in the Consolidated Financial Statements of BASF
as of January 1, 2016, sales would have amounted to
€768 million and net income €77 million. These proforma
results are for comparison purposes and do not necessarily
represent the results had the transaction taken place on
January 1, 2016, and are not indicative of future developments
and results.
The purchase prices for businesses acquired in 2016
totaled €2,872 million; as of December, 31, 2016, payments
made for these amounted to €2,849 million. The purchase
price allocations were based on valuations in accordance with
IFRS 3. The resulting goodwill amounted to €1,552 million.
-
· On February 24, 2015, BASF acquired a 66% share from
TODA KOGYO CORP., based in Hiroshima, Japan, in a
company to which TODA had contributed its business with
cathode materials for lithium-ion batteries, patents and
production capacities in Japan. The transaction had been
announced on October 30, 2014. The company focuses on
the research, development, production, marketing and sales
of a number of cathode materials. At BASF, the activities
were assigned to the Catalysts division
- On March 31, 2015, BASF concluded the acquisition of the
polyurethane (PU) business from Polioles, S.A. de C.V.,
based in Lerma, Mexico, that was announced on
July 10, 2014. Polioles is a joint venture with the Alpek
Group. BASF holds a 50% share, which is accounted for
using the equity method. The acquisition comprised
marketing and selling rights, current assets, and to a minor
extent, production facilities. The business has been assigned
to the Performance Materials division
- On April 23, 2015, BASF concluded an agreement with
Lanxess Aktiengesellschaft, based in Cologne, Germany,
on the acquisition and use of technologies and patents for
the production of high-molecular-weight polyisobutene (HM
PIB). The transaction furthermore included the acquisition of
selling rights and current assets as well as a manufacturing
agreement in which Lanxess will produce HM PIB exclusively
for BASF. The activities were allocated to the Performance
Chemicals division
The following overview shows the effects of the acquisitions
conducted in 2016 and 2015 on the Consolidated Financial
Statements. If acquisitions resulted in the transfer of assets or
the assumption of additional liabilities, these are shown as a
net impact.
176
0.3
Consolidated Financial Statements
Effects of acquisitions and changes in the preliminary purchase price allocations
BASF Report 2016
2016
2015
Million €
%
Million €
%
Goodwill
Other intangible assets
1,552
15.4
26
0.3
Notes - Policies and scope of consolidation
Other receivables/prepaid expenses
823
Reconciliation reporting Oil & Gas (million €)
7,258
2,526
1,224
1,018
463
244
4,251
Regions 2015 (million €)
South
America,
Europe
Thereof
Germany
North
America
Asia
Pacific
Africa,
BASF
Middle East
Group
Location of customers
Sales
Share
%
36,897
52.4
13,483
19.1
15,390
21.8
12,334
17.5
5,828
8.3
70,449
283
100.0
1,437
2,912
6,275
40,086
21,120
17,714
12,869
5,827
76,496
Thereof intangible assets
7,925
3,249
5,048
1,661
528
15,162
property, plant and equipment
13,990
6,915
Assets of Other
4,421
1,947
26,413
investments accounted for using the equity method
3,052
1,120
119
1,476
4,647
Additions to property, plant and equipment and intangible assets
Amortization of intangible assets and depreciation of property, plant
and equipment
4,114
1,424
432
Location of companies
38,675
property, plant and equipment
13,877
6,942
5,613
4,053
1,717
25,260
investments accounted for using the equity method
3,009
1,182
113
1,314
4,436
Additions to property, plant and equipment and intangible assets
3,162
1,446
1,263
986
602
6,013
Amortization of intangible assets and depreciation of property, plant
and equipment
2,889
1,081
911
422
179
4,401
1 The sum of sales including interregional transfers for all the regions can differ from the sum of sales including intersegmental transfers for all the segments, as the segments are viewed
globally, and therefore shipments and services between regions within the same segment are not classified as transfers.
In the United States, sales to third parties in 2016 amounted to
€12,831 million (2015: €13,831 million) according to location
of companies and €11,985 million (2015: €13,302 million)
according to location of customers. In the United States,
12,537
Sales
447
4,406
28,229
15,665
11,712
4,397
70,449
Sales including interregional transfers¹
46,056
34,297
18,311
12,384
4,623
81,374
Income from operations
4,174
2,303
1,295
445
334
6,248
Assets
38,993
20,307
15,968
11,002
4,873
70,836
Thereof intangible assets
6,845
2,467
839
1,098
1,113
1,582
1,628
3,511
4,639
3,550
Debt
2,589
387
195
840
the equity method
investments accounted for using
25,260
815
6,421
1,488
3,645
4,958
7,933
property, plant and equipment
4,174
38
1,030
342
1,181
1,428
155
other intangible assets
8,363
70
2,214
1,660
425
23,749
39,291
86
24
4,401
119
1,515
238
621
949
959
Thereof impairments
depreciation of property, plant and equipment
Amortization of intangible assets and
6,013
111
1,823
402
854
964
1,859
intangible assets
Additions to property, plant and equipment and
1,953
407
50
514
392
383
207
Research and development expenses
4,436
2,048
2,326
2,201
Location of companies
Sales
Sales including interregional transfers¹
26,039
%
45.3
7,412
12.9
14,042
24.4
12,165
21.1
5,304
57,550
9.2
100.0
27,221
17,540
14,682
11,512
4,135
57,550
34,234
23,241
17,060
12,269
4,361
67,924
Income from operations
Assets
3,632
Share
Sales
Location of customers
Group
58
Thereof goodwill
70,836
9,632
12,373
8,435
13,341
14,232
6,248
(985)
1,072
1,083
1,607
1,340
intangible assets, property, plant and equipment, and invest-
ments accounted for using the equity method amounted to
€10,342 million compared with €9,262 million in the previous
year.
2,131
12,823
3
690
BASF Report 2016
Regions 2016 (million €)
Consolidated Financial Statements
Notes Notes on statement of income
South
America,
Europe
Thereof
Germany
North
America
Asia
Pacific
Africa,
BASF
Middle East
500
Notes on statement of income
6,055
Earnings per share
17,359
14,549
13,486
Assets
6,275
(1,091)
499
1,037
2,199
1,648
1,983
Income from operations
63,952
2,019
3,099
5,602
19,468
15,467
18,297
Sales including intersegmental transfers
6,402
1
331
33
736
465
4,836
Intersegmental transfers
57,550
8,899
2,018
12,829
76,496
2,581
423
193
1,027
investments accounted for using
the equity method
26,413
833
6,678
1,543
4,065
5,183
8,111
property, plant and equipment
5,089
37
1,121
263
2,305
1,219
144
other intangible assets
10,073
70
1,712
2,093
3,909
2,227
62
Thereof goodwill
9,374
2,768
5,569
18,732
(74)
(6)
6
1,072
499
2015
2016
9,632
9,374
2,823
5 Earnings per share
133
66
2,262
1,911
1,791
2,513
526
605
December 31, 2015
2,097
December 31, 2016
1,959
Net income
Minority interests
Income before minority interests
Income taxes
Income before taxes and minority interests
Other income
Net income from shareholdings
Income from operations
267
431
1,333
7
15,002
13,461
Sales
Group
Other
Oil & Gas
BASF
Agri-
cultural
Solutions
Functional
Mate-
rials &
Solutions
mance
Products
Chemicals
Perfor-
Segments 2016 (million €)
Positive income taxes in 2016 were primarily a result of the
calculation of taxable income in Norway.
423
The Oil & Gas segment's other income relates to income and
expenses not included in the segment's income from opera-
tions, interest result and other financial result. As in the
previous year, other income largely consisted of currency
effects from Group loans.
Notes - Policies and scope of consolidation
Consolidated Financial Statements
180
Impairments for exploration and production licenses in the
Oil & Gas segment dampened income from operations by
€609 million in 2015.
income from operations, as the excess amounts received over
the last ten years were compensated in 2016, as contractually
agreed with our partner, Gazprom.
Income from operations in 2016 declined significantly in
comparison with the previous year. This was essentially a
result of lower oil and gas prices in the first three quarters of
2016 compared with the same period of the previous year as
well as the asset swap with Gazprom on September 30, 2015.
This resulted in a lack of earnings contributions from the
divested gas trading and storage business and the 50% share
in Wintershall Noordzee B.V., Rijswijk, Netherlands, beginning
in the fourth quarter of 2015. Furthermore, the transaction led
to earnings of €314 million in the previous year. The share in
the Yuzhno Russkoye natural gas field contributed lower
The reconciliation reporting Oil & Gas reconciles the income
from operations in the Oil & Gas segment with the contribution
of the segment to the net income of the BASF Group.
1,050
362
(115)
(76)
1,165
438
(168)
BASF Report 2016
4,647
2,320
4,720
Million €
2016
2015
Income from the adjustment and reversal of provisions recognized in other operating expenses
Revenue from miscellaneous revenue-generating activities
80
118
191
179
Income from foreign currency and hedging transactions
32
305
Income from the translation of financial statements in foreign currencies
57
101
Gains on divestitures and the disposal of fixed assets
667
525
Income on the reversal of valuation allowances for business-related receivables
Other
35
41
Other operating income
718
1,780
735
2,004
Income from the adjustment and reversal of provisions
that had been recognized in other operating expenses was
largely related to closures and restructuring measures,
employee obligations, risks from lawsuits and damage claims,
and various other items as part of the normal course of
business. Provisions were reversed or adjusted if the circum-
stances on the balance sheet date were such that utilization
was no longer expected, or expected to a lesser extent.
For more information, see Note 8 from page 183 onward
Revenue from miscellaneous revenue-generating
activities primarily included income from rentals, catering
operations, cultural events and logistics services.
Income from foreign currency and hedging trans-
actions pertained to the foreign currency translation of
receivables and payables as well as of currency derivatives
and other hedging transactions. The decline compared with
the previous year was attributable to the cessation of crude oil
swaps to hedge price risks from gas purchase and sales
contracts due to the completion of the asset swap with
Gazprom.
Income from the translation of financial statements in
foreign currencies contained gains from the translation of
companies whose local currency is different from the functional
currency.
Gains on divestitures and the disposal of fixed assets
in the amount of €349 million resulted from the sale of the
industrial coatings business to AkzoNobel, Amsterdam,
Netherlands. Income of €93 million arose from the sale of the
global polyolefin catalysts business to W.R. Grace & Co.,
Columbia, Maryland. Further income of €83 million resulted
from the disposal of BASF's OLED intellectual property assets
to UDC Ireland Limited, Dublin, Ireland. Income of €72 million
pertained to real estate divestitures in several countries. The
previous year had particularly contained income in the amount
of €314 million from the asset swap with Gazprom. In addition,
the sale of the global textile chemicals business to Archroma
Textiles S.à r.I., Luxembourg, resulted in income of €71 million.
Additional income of €39 million was attributable to the sale of
the white expandable polystyrene (EPS) business to Alpek
S.A.B. de C.V., Monterrey, Mexico. Furthermore, income in the
7 Other operating income
Assets
For more on research and development expenses by segment, see
Note 4 on page 180
Research and development expenses
Debt
2015
3,987
4.34
4.33
In accordance with IAS 33, a potential dilutive effect must be
considered in the diluted earnings per share for those BASF
shares which will be granted in the future as a part of the BASF
share program "plus." This applies regardless of the fact that
the necessary shares are acquired by third parties on the
market on behalf of BASF, and the fact that there are no plans
for the issuance of new shares. The dilutive effect of the issue
of "plus" shares amounted to €0.01 in 2016 (2015: €0.01).
Net income
million €
2016
4,056
Weighted-average number of
outstanding shares
1,000
€
Diluted earnings per share
€
918,479
4.42
4.41
918,479
181
182
Consolidated Financial Statements
Notes Notes on statement of income
6 Functional costs
BASF Report 2016
Under the cost-of-sales method, functional costs incurred by
the operating functions are determined on the basis of cost
center accounting. The functional costs particularly contain
the personnel costs, depreciation and amortization accumu-
lated on the underlying final cost centers as well as allocated
costs within the cost accounting cycle. Operating expenses
that cannot be allocated to the functional costs are reported
as other operating expenses.
For more on other operating expenses, see Note 8 from page 183
onward
Cost of sales
Cost of sales includes all production and purchase costs of
the company's own products as well as merchandise which
has been sold in the period, particularly plant, energy and
personnel costs.
Selling expenses
Selling expenses particularly include marketing and advertising
costs, freight costs, packaging costs, distribution manage-
ment costs, commissions, and licensing costs.
General and administrative expenses
General and administrative expenses primarily include the
costs of the central units, the costs of managing business
units and divisions, and costs of general management, the
Board of Executive Directors and the Supervisory Board.
Research and development expenses include the costs result-
ing from research projects as well as the necessary license
fees for research activities.
Income from operations
Earnings per share
2,787
268
707
874
1,186
Thereof impairments
depreciation of property, plant and equipment
Amortization of intangible assets and
7,258
121
1,115
266
3,679
864
1,213
1,097
intangible assets
1,863
398
39
489
393
362
182
43,928
25,185
2,190
1,853
4,328
77,876
5,652
Additions to property, plant and equipment and
119
Research and development expenses
86
4,251
13,764
5,848
7,427
70,449
2,790
BASF
Group
Other
Oil & Gas
12,998
766
Agri-
cultural
Solutions
5,820
28
18,523
873
19,396
16,111
19,970
Sales including intersegmental transfers
(3)
14,670
5,300
15,648
463
152
31
16
315
Segments 2015 (million €)
4
Chemicals
Intersegmental transfers
Perfor-
Functional
Mate-
rials &
Solutions
Sales
mance
Products
26
Balance as of
3,836
137
1,903
196
67
of December 31, 2015
865
411
2,160
December 31, 2015
Net carrying amount as
(7)
11
18
5
68
8
(1)
(389)
(123)
907
(6)
(125)
102
1,086
Notes Notes on balance sheet
254
buildings
(43)
Machinery and
Land, land
rights and
further infrastructure, which are depreciated according to the
unit of production method.
Development of property, plant and equipment 2016 (million €)
Machinery and technical equipment contain oil and gas
deposits, including related wells, production facilities and
15 Property, plant and equipment
In 2015, additions to accumulated amortization included
write-ups of €2 million.
more, under the category know-how, patents and production
technologies, a once-advantageous supply contract of
€36 million in the Functional Materials & Solutions segment
was fully impaired due to lower market prices.
In 2015, additions to accumulated amortization included
impairments of €205 million. These primarily concerned the
Oil & Gas segment. The revised assumptions for oil and gas
prices led to €137 million in goodwill impairments as well as
€27 million in impairments on a license in Norway. Further-
Related to this, goodwill of €173 million was derecognized,
€32 million of which was reported under transfers.
BASF Report 2016
Consolidated Financial Statements
192
191
Other rights and values under transfers also included
derecognitions of €153 million resulting from the change in
accounting to the net method for emission right certificates
granted free of charge in 2015. Disposals of €17 million were
attributable to the asset swap with Gazprom.
Concessions for oil and gas production under the category
product rights, licenses and trademarks with a net carrying
amount of €480 million in 2015 authorize the exploration and
production of oil and gas in certain areas. At the end of the
term of a concession, the rights are returned. Aside from
transfers to property, plant and equipment, transfers in 2015
included €54 million from the subsequent adjustments of the
purchase price allocation for the acquisition of assets from
Statoil.
of high-molecular-weight polyisobutene (HM PIB), which
added €23 million to intangible assets.
Additions from acquisitions amounted to €136 million in
2015. Significant acquisitions concerned the purchase of a
66% share in a company to which TODA KOGYO CORP.,
Hiroshima, Japan, contributed its business, and the purchase
of the polyurethane (PU) business from Polioles, S.A. de C.V.,
Lerma, Mexico. In connection with these transactions, addi-
tions to intangible assets amounted to €87 million. Moreover,
BASF concluded an agreement with Lanxess on the acqui-
sition and use of technologies and patents for the production
Besides goodwill, intangible assets also include acquired
intangible assets as well as internally generated intangible
assets. In addition, they include rights belonging to the Oil &
Gas segment, which are amortized in accordance with the unit
of production method. As of December 31, 2015, their
acquisition costs amounted to €835 million and accumulated
amortization to €246 million; amortization in 2015 amounted
to €41 million.
1 Including licenses to such rights and values
12,537
8,363
technical
equipment
24
(92)
1,951
137
1,318
4,063
December 31, 2015
731
513
17
(328)
(24)
(170)
1
(577)
(149)
(147)
(7)
136
19
32
135
45
11
(49)
(1)
(53)
Thereof depre-
ciation accord-
ing to the unit
of production
method
@&8*
91
801
450
16,373
84
14
193
71
302
(36)
(1)
(38)
3
Currency effects
Transfers
Disposals
Additions
consolidation
Changes in scope of
3,358
232
59
809
379
1,879
January 1, 2015
Balance as of
amortization
Accumulated
8,500
Miscellaneous
41,974
fixtures
1
(1)
Transfers
(1,013)
(73)
(182)
(28)
(658)
(100)
Disposals
3,691
1
78
939
2,930
376
Additions
(1)
(1)
Changes in scope of consolidation
220
3,152
2,827
32,965
307
1
Currency effects
58
Balance as of
In 2016, impairments of €254 million were included in
accumulated depreciation. These pertained largely to
impairments of €133 million on machinery and technical
equipment as well as buildings due to the new strategic
direction of individual businesses in the Chemicals and
Functional Materials & Solutions segments. The recoverable
amount of these assets equals their value in use amounting to
€72 million. The weighted average cost of capital rate before
taxes applied ranged between 9.4% and 12.8%.
Due to acquisitions, property, plant and equipment rose by
€155 million primarily from the acquisition of the global surface
treatment provider Chemetall from Albemarle Corp., Charlotte,
North Carolina.
additions.
In addition, investments for expansion purposes were
particularly made at the sites in Ludwigshafen, Germany;
Geismar, Louisiana; Port Arthur, Texas; and Antwerp, Belgium.
Government grants of €1 million were deducted from asset
Additions to property, plant and equipment arising from
investment projects amounted to €4,222 million in 2016.
Material investments were primarily related to the construction
of an integrated aroma ingredients complex in Kuantan,
Malaysia, the TDI complex in Ludwigshafen, Germany, and the
expansion of the dicamba plant in Beaumont, Texas, which
were partially started up in 2016. Further material asset addi-
tions included the construction of an ammonia plant in Free-
port, Texas, and oil and gas production facilities and wells in
Europe and South America.
26,413
5,758
1,129
3,469
14,238
5,288
Net carrying amount as of
December 31, 2016
45,163
231
3,308
3,711
35,655
5,969
Balance as of December 31, 2016
511
6
30
(27)
417
5,637
Balance as of January 1, 2016
Accumulated depreciation
71,576
18
54
77
Additions from acquisitions
4,222
2,536
203
309
1,300
183
Additions
1
2
(1)
Changes in scope of consolidation
67,234
6,502
4,216
5,972
45,805
10,711
Balance as of January 1, 2016
Cost
Total
progress
6
equipment and Construction in
155
(194)
5,989
4,437
7,180
49,893
11,257
Balance as of December 31, 2016
1,081
178
46
213
698
159
Currency effects
138
(3,145)
165
716
2,796
322
Transfers
(1,255)
(88)
(213)
(30)
(760)
Disposals
62
Number of employees as of December 31
Currency effects
4.4
236
German trade tax
0.2
11
0.2
13
15.0
234
832
810
Solidarity surcharge
Expected tax based on German corporate income tax (15%)
5,548
5,395
Income before taxes and minority interests
%
Million €
15.0
%
4.2
402
(0.7)
(38)
(0.9)
(46)
Income after taxes of companies accounted for using the equity method
4.3
239
1.4
Foreign tax-rate differential
76
(1.9)
(103)
(0.9)
(46)
Tax-exempt income
4.1
225
7.5
Nondeductible expenses
Million €
2015
2016
(514)
Deferred tax expense (+) / income (-)
(135)
(119)
Taxes for prior years
1,231
1,184
Foreign income tax
(363)
514
Corporate income tax, solidarity surcharge and trade taxes (Germany)
1,610
1,654
Current tax expense
2015
2016
Million €
BASF Report 2016
589
From changes in temporary differences
(473)
(314)
Reconciliation of the effective tax rate and the tax rate in Germany
Other taxes included real estate taxes and other comparable
taxes totaling €109 million in 2016 and €106 million in 2015.
Changes in valuation allowances on deferred tax assets for tax
loss carryforwards resulted in expenses of €7 million in 2016
and expenses of €4 million in 2015.
1,549
302
272
1,412
1,247
1,140
3
8
Other taxes as well as sales and consumption taxes
Tax expense
Income taxes
From valuation allowances on deferred tax assets
7
(6)
From changes in the tax rate
(59)
(43)
From changes in tax loss carryforwards / unused tax credits
Taxes for prior years
Tax expense
(119)
(135)
Tax loss carryforwards
177
170
1,346
1,446
Other provisions and liabilities
472
431
309
2,410
Provisions for pensions
517
498
251
348
Inventories and accounts receivable
106
84
3,028
12
271
157
439
595
1,791
2,513
(25)
(30)
(62)
(80)
Other
Thereof current
Valuation allowances for deferred tax assets
Thereof for tax loss carryforwards
107
(2,873)
(3,016)
(2,873)
(3,016)
Netting
95
164
Total
51
Financial assets
3,322
The foreign tax-rate differential increased due to improve-
ment in earnings in the Exploration & Production business
sector in countries with a high tax rate, particularly in Norway.
In the previous year, nondeductible expenses particularly
The BASF Group tax rate amounted to 21.1% in 2016 (2015:
22.5%). The lower tax rate was mainly due to deferred tax
income arising from the valuation of the differences to the tax
values as a result of foreign currency translation. Taxes for
prior years primarily contained reversals of long-term tax
provisions.
22.5
1,247
21.1
1,140
0.2
10
included an impairment of the goodwill of the Exploration &
Production business sector. In Other, currency driven
valuation of the differences to the tax values as well as
additional tax depreciation on oil and gas production facilities
in Norway led to tax income.
(3.4)
Income taxes / effective tax rate
Other
(0.5)
(28)
0.0
(2)
Deferred tax liabilities for the future reversal of temporary differences
associated with shares in participating interests
(2.4)
(184)
Future reversals of temporary differences for shares in
investments that are assumed to have a planning horizon of
one year led to deferred tax income of €2 million in 2016
(2015: €28 million).
BASF Report 2016
Deferred taxes
3,336
182
180
Property, plant and equipment
1,553
1,719
90
90
Intangible assets
2015
2016
2015
2016
Deferred tax liabilities
Deferred tax assets
Notes Notes on statement of income
187
Consolidated Financial Statements
Deferred tax assets and liabilities (million €)
(2.2)
Notes Notes on statement of income
Consolidated Financial Statements
186
Million €
9 Income from companies accounted for using the equity method
In both years, expenses under Other included expenses
from attorneys' fees for litigation cases as well as from REACH,
the provision of services, and conducting additional projects.
Moreover, 2016 contained expenses of €27 million from the
fire damage at the Ludwigshafen North Harbor. In addition to
expenses for onerous contracts at several companies, 2015
also contained expenses of €121 million for BASF's 150th
anniversary.
Expenses from the addition of valuation allowances for
business-related receivables rose by €25 million compared
with the previous year. This was predominantly due to higher
additions in the region South America, Africa, Middle East as
compared with the prior year.
Losses from the disposal of fixed assets and divesti-
tures amounted to €17 million in 2016 from the reduction in
disposal gains from the asset swap with Gazprom as part of
the final purchase price allocation. In 2015, losses mainly
stemmed from the sale of the global paper hydrous kaolin
business to Imerys Kaolin, Inc., Roswell, Georgia.
Expenses from foreign-currency and hedging transac-
tions as well as from the measurement of LTI options were
related to foreign currency translations of receivables and
payables as well as changes in the fair value of currency
derivatives and other hedging transactions. Compared with
the previous year, lower expenses were particularly the result
of the appreciation of the U.S. dollar against various curren-
cies. Countering this was an additional expense in 2016 for
the long-term incentive (LTI) program of €267 million (2015:
€53 million).
For more information, see Note 7 from page 182 onward
Costs from miscellaneous revenue-generating activities
concerned the respective item presented in other operating
income.
Proportional net income
BASF Report 2016
Consolidated Financial Statements
184
183
Amortization, depreciation and impairments of intan-
gible assets and property, plant and equipment arose from
impairments in the Functional Materials & Solutions seg-
ment in the amount of €124 million in 2016 compared
with €57 million in 2015. The Chemicals segment posted
impairments of €67 million in 2016 and €18 million in 2015.
Further impairments of €24 million concerned the Agricultural
Solutions segment in 2016. The previous year had recorded
€500 million in impairments in the Oil & Gas segment and
€53 million in the Performance Products segment.
Further expenses of €61 million in 2016 and €37 million in
2015 arose from the addition to environmental provisions. In
both years, these concerned several discontinued sites in
North America. In 2016, expenses were also incurred for
landfills in Germany. Moreover, the previous year had
contained expenses for several discontinued sites in
Switzerland.
Expenses arose from environmental protection and
safety measures, demolition and removal, and planning
expenses related to capital expenditures insofar as these
are not subject to mandatory capitalization according to IFRS.
Expenses for demolition, removal and project planning totaled
€375 million in 2016 and €376 million in 2015. These
especially pertained to the Ludwigshafen site in both years.
Expenses for restructuring measures were primarily related
to severance payments amounting to €190 million in 2016
and €69 million in 2015. Further expenses for restructuring
measures arose in the Petrochemicals division at several sites
in the United States; these amounted to €37 million in 2016
and €15 million in 2015. In the Dispersions & Pigments
division, expenses of €25 million in 2016 and €16 million
in 2015 concerned several sites worldwide. In addition,
expenses of €39 million in 2016 and €15 million in 2015 were
incurred for the outsourcing of the computer centers as well as
for a regional restructuring project in South America.
3,640
Notes Notes on statement of income
717
Thereof joint ventures
Other adjustments of income and expense
307
11
(6)
(35)
(4)
(24)
(10)
250
associated companies
160
157
275
317
2015
2016
Income from companies accounted for using the equity method
associated companies
Thereof joint ventures
25
604
3,133
Other operating expenses
Other
464
Environmental protection and safety measures, costs of demolition and removal, and planning
expenses related to capital expenditures that are not subject to mandatory capitalization
Amortization, depreciation and impairments of intangible assets and property, plant and equipment
Costs from miscellaneous revenue-generating activities
306
482
2015
2016
Restructuring measures
Million €
457
Other operating expenses
Moreover, income in both years was related to gains
from precious metal trading, the reversal of impairments on
property, plant and equipment, tax refunds, income from the
adjustment of pension plans, and a number of additional
items.
Further income resulted from refunds and compensation
payments in the amount of €291 million in 2016 and €254 mil-
lion in 2015. These were predominantly due in both years to
insurance refunds arising from a plant outage at the Ellba C.V.
joint operation in Moerdijk, Netherlands. The previous year had
also included income from a one-off payment for a price
revision relating to 2014 in the Oil & Gas segment as well as a
one-off payment from Tellus Petroleum AS, Oslo, Norway, in
connection with the intended sale of selected assets on the
Norwegian continental shelf, which was not completed.
Income under Other included government grants and
government assistance from several countries amounting to
€156 million in 2016 and €135 million in 2015. In both years,
these were primarily attributable to price compensation from
the Argentinian government for gas producers, which was
introduced in connection with the New Gas Price Scheme
(NGPS) in response to the lower, partly locally regulated gas
prices.
Income from the reversal of valuation allowances for
business-related receivables resulted mainly from the
settlement of customer-related receivables for which a valua-
tion allowance had been recorded.
amount of €37 million arose from the sale of buildings in China
and India as well as income in the amount of €29 million from
the sale of the custom synthesis business and parts of the
active pharmaceutical ingredients portfolio to Siegfried
Holding AG, Zofingen, Switzerland.
Consolidated Financial Statements
Notes Notes on statement of income
BASF Report 2016
93
8
337
675
179
259
277
Expenses from the consumption of inventories measured at market value and the derecognition
of obsolete inventory
81
106
Expenses from the addition of valuation allowances for business-related receivables
195
94
40
43
Oil and gas exploration expenses
Losses from the disposal of fixed assets and divestitures
92
17
Losses from the translation of financial statements in foreign currencies
639
530
Expenses from foreign-currency and hedging transactions as well as from the measurement of
LTI options
179
251
Income from companies accounted for using the equity
method increased in 2016 primarily due to higher earnings of
BASF-YPC Company Ltd., Nanjing, China. Countering this
were lower earnings at Lucura Versicherungs AG, Lud-
wigshafen, Germany, which was largely attributable to building
of provisions in connection with the fire at the North Harbor in
October 2016.
In 2016, earnings from companies in the Oil and Gas segment
which are accounted for using the equity method remained at
the prior year level. Nord Stream AG, Zug, Switzerland,
OAO Severneftegazprom, Krasnoselkup, Russia, as well as
GASCADE Gastransport GmbH, Kassel, Germany, con-
tributed most to these earnings.
BASF Report 2016
(7)
Other financial result
Other financial expenses
Net interest expense from other long-term personnel obligations
Unwinding the discount on other noncurrent liabilities
Miscellaneous financial expenses
(196)
(183)
Net interest expense from underfunded pension plans and similar obligations
(10)
(3)
Write-downs on/losses from the disposal of securities and loans
97
Other financial income
Miscellaneous financial income
149
3
52
92
Net interest income from overfunded pension plans and similar obligations
Income from the capitalization of borrowing costs
152
(47)
(68)
(231)
185
average trade tax rate was 14.1% (2015: 14.1%). The 30%
rate used to calculate deferred taxes for German Group com-
panies remained unchanged in 2016. The profits of foreign
Group companies are assessed using the tax rates applicable
in their respective countries. These are also generally used to
calculate deferred taxes to the extent that tax rate adjustments
for the future have not yet been enacted.
In Germany, a uniform corporate income tax rate of 15.0% as
well as a solidarity surcharge of 5.5% thereon is levied on all
paid out and retained earnings. In addition to corporate
income tax, income generated in Germany is subject to a
trade tax that varies depending on the municipality in which
the company is represented. Due to a constant rate of assess-
ment for Ludwigshafen, Germany, in 2016, the weighted
Income taxes
11
The rise in other financial expenses was largely
attributable to hedging of loans in U.S. dollars.
In comparison with 2015, income from the capitalization
of borrowing costs declined due to the start up of larger
investment projects.
underfunded pension plans and similar obligations
decreased compared with the previous year, as a result of the
reduced net defined benefit liability as of December 31, 2015.
Net interest expenses of the respective financial year is
based on the discount rate and the defined benefit obligation
at the beginning of the year. The net interest expense from
The interest result declined by €57 million compared with
the previous year from minus €425 million to minus €482 mil-
lion. This was due to lower interest income particularly from
liquid funds and higher interest expenses arising from bank
loans outside of the eurozone.
Net income from shareholdings was €26 million lower in
2016 than in the previous year. In 2015, higher income from
the disposal of shareholdings was reported, particularly
from the disposal of the share in Indaver N.V., Antwerp,
Belgium.
(700)
(880)
Financial result
(284)
(381)
(436)
(478)
(151)
(425)
3,317
179
(482)
(661)
9
47
39
2015
2016
Consolidated Financial Statements
Notes Notes on statement of income
Interest income from cash and cash equivalents
Net income from shareholdings
31
Expenses from other shareholdings
Losses from loss transfer agreements
Income from other shareholdings
Income from tax allocation to participating interests
Income from profit transfer agreements
Income from the disposal of shareholdings
Dividends and similar income
Million €
10 Financial result
Write-downs on/losses from the sale of shareholdings
6
2
54
213
179
Interest result
Interest expenses
Interest income
Interest and dividend income from securities and loans
29
20
184
159
9
(17)
(71)
(71)
(55)
(53)
(16)
(18)
80
(638)
3,381
256
(18)
Undistributed earnings of subsidiaries resulted in tempo-
rary differences of €8,905 million in 2016 (2015: €9,241 million)
for which deferred tax liabilities were not recognized, as they
are either not subject to taxation on payout or they are
expected to be reinvested for indefinite periods of time.
224
4
(17)
יוי
21
14
251
Currency effects
514
13
(16)
(2)
Transfers
(664)
(64)
(60)
(9)
(149)
(12)
(39)
Balance as of
5,051
Changes in scope of
3,836
137
196
67
865
411
2,160
December 31, 2016
January 1, 2016
amortization
Accumulated
19,089
10,214
435
92
1,958
1,339
Balance as of
(343)
Disposals
2,789
January 1, 2016
Balance as of
Total
Goodwill
Other rights
and values4
assets
technologies
trademarks
4,063
similar rights
production
licenses and
generated
patents and
Product rights,
Distribution,
supply and
Internally
Know-how,
intangible
1,318
1,951
91
1,552
3
108
44
1,082
Additions from acquisitions
92
25
10
39
18
Additions
2
2
consolidation
Changes in scope of
16,373
8,500
450
consolidation
Additions
260
47
Total
Goodwill
Other rights
and values¹
assets
intangible
production
technologies
trademarks
licenses and
January 1, 2015
generated
Product rights,
Distribution,
supply and
similar rights
Internally
Know-how,
Balance as of
Cost
Development of intangible assets 2015 (million €)
In 2016, additions to accumulated amortization included
impairments of €61 million. This primarily affected impairments
relating to production technologies and marketing and selling
rights in the Functional Materials & Solutions segment in the
amount of €51 million.
patents and
4,014
1,410
2,000
(167)
Deferred taxes result from temporary differences between tax
balances and the measurement of assets and liabilities
according to IFRS as well as from tax loss carryforwards and
unused tax credits. The remeasurement of all the assets and
liabilities associated with acquisitions according to IFRS 3 has
resulted in significant deviations between fair values and the
values in the tax accounts. This leads primarily to deferred tax
liabilities.
(2)
Transfers
(137)
(43)
(94)
Disposals
47
Additions from acquisitions
56
Additions
5
consolidation
Changes in scope of
16,325
8,141
674
86
production of oil and gas in certain areas. At the end of the
term of a concession, the rights are returned.
Cost
Concessions for oil and gas production under the category
product rights, licenses and trademarks with a net carrying
amount of €466 million in 2016 authorize the exploration and
Consolidated Financial Statements
Notes Notes on balance sheet
105
2
10
1
88
(1)
560
(573)
(55)
Balance as of
(9)
(24)
(339)
Currency effects
Transfers
Disposals
86
14
153
(146)
December 31, 2016
2,168
435
BASF Report 2016
Additions from acquisitions amounted to €2,789 million in
2016. Significant acquisitions comprising the purchase of the
global surface treatment provider Chemetall from Albemarle
Corp., Charlotte, North Carolina, and the automotive refinishing
business from Guangdong Yinfan Chemistry, Jiangmen, China,
led to an increase of goodwill in the amount of €1,552 million.
In connection with these transactions, additions to intangible
assets amounted to €1,237 million. These were primarily
related to customer relationships and production technologies.
Besides goodwill, intangible assets also include acquired
intangible assets as well as internally generated intangible
assets. In addition, they include rights belonging to the Oil &
Gas segment, which are amortized in accordance with the unit
of production method. As of December 31, 2016, their acqui-
sition costs amounted to €1,029 million and accumulated
amortization to €328 million; amortization in 2016 amounted to
€19 million.
4 Including licenses to such rights and values
15,162
10,073
206
20
20
1,076
904
2,883
of December 31, 2016
Net carrying amount as
3,927
141
229
72
882
Disposals of intangible assets in the amount of €21 million
were largely attributable to the sale of the 25% share in the
Byrding field to Statoil and the divestiture of the global
photoinitiator business as well as the global polyolefin catalysts
business. Related to this, goodwill of €64 million was derecog-
nized.
Development of intangible assets 2016 (million €)
(1)
8,363
113,830
7,323
7,307
South America, Africa, Middle East
BASF Group
17,562
18,156
17,471
17,583
112,435
52,837
70,079
70,784
2015
2016
Thereof Germany
North America
Europe
Personnel expenses (million €)
The BASF Group spent €10,165 million for wages and
salaries, social security contributions and expenses for
pensions and assistance in 2016 (2015: €9,982 million). This
represented an increase in personnel expenses of 1.8%. This
was particularly due to higher expenses for the long-term
incentive (LTI) program in addition to wage and salary
increases. Countering this was the lower average number of
employees (2016: 111,975 employees; 2015: 113,249 employ-
ees) as well as currency effects.
53,318
Thereof apprentices and trainees
temporary staff
3,120
3,240
10,165
Personnel expenses
658
627
Thereof for pension benefits
The average number of employees was distributed over
the regions as follows:
2,039
1,995
expenses for pensions and assistance
Social security contributions and
Employees from joint operations are included in the number of
employees at year end relative to BASF's share in the respec-
tive company. In total, this included 432 employees in 2016
(2015: 392 employees).
7,943
8,170
Wages and salaries
2015
2016
Asia Pacific
2,294
2,334
Personnel expenses
9,982
13 Personnel expenses and employees
For more information on minority interests in consolidated companies,
see Note 21 on page 197
2,490
2,383
Foreign
Total
1
1
Germany
2015
Deferred
tax assets
2016
279
2015
Tax loss
carryforwards
Tax obligations primarily include assessed income taxes and
other taxes as well as estimated income taxes not yet
assessed for the current year. Tax obligations amounted to
€1,288 million in 2016 (2015: €1,082 million).
Tax obligations
Tax loss carryforwards exist in all regions, especially in Europe
and Asia. German tax losses may be carried forward
indefinitely. In foreign countries, tax loss carryforwards are in
some cases only possible for a limited period of time. The bulk
of the tax loss carryforwards will expire in Europe by 2019 and
in Asia by 2021. No deferred tax assets were recognized for
tax loss carryforwards of €1,478 million in 2016 (2015:
€1,767 million).
Tax loss carryforwards (million €)
1 Growth rates used in impairment tests to determine terminal values in accordance with IAS 36
2 For impairment testing of the cash-generating unit Exploration & Production, a field-related valuation method considering the expected term and production profile of the included oil
and gas fields as well as the tax payments in the specific countries is used instead of a general growth rate, as of the 2016 financial year.
3 No impairment testing for the acquisition in December 2016
The regional distribution of tax loss carryforwards is as follows:
Tax loss carryforwards
2016
246
2,384
2,491
Higher minority interests in profits compared with the
previous year were predominantly attributable to W & G Trans-
port Holding GmbH, Kassel, Germany, and Shanghai BASF
Polyurethane Company Ltd., Shanghai, China.
(29)
343
BASF Report 2016
314
199
Total
(30)
Minority interests in losses
229
Minority interests in profits
2016
Million €
12 Minority interests
Notes Notes on statement of income
Consolidated Financial Statements
188
246
279
In 2016, lower minority interests in profits in comparison
with the previous year were mainly the result of the disposal of
shares in companies active in the gas storage business in
connection with the asset swap completed with Gazprom on
September 30, 2015. Also responsible were decreased
margins and lower sales volumes from the reduced capacity
utilization of BASF TOTAL Petrochemicals LLC's condensate
splitter in Port Arthur, Texas.
Number of employees
2015
Average number of employees
1,712
2.0%
2,048
2.0%
2,093
Growth rate¹
Goodwill
Growth rate¹
1,660
Goodwill
2016
BASF Report 2016
Goodwill as of December 31
Other cash-generating units
Surface Treatment in the Coatings division
Pigments in the Dispersions & Pigments division
Personal care ingredients in the Care Chemicals division
Construction Chemicals division
2015
(2.0%)
2.0%
1,411
1,523
0.0-2.0%
0.0-2.0%
As of December 31, 2016, the number of employees increased
to 113,830 employees due to the acquisition of Chemetall
compared with 112,435 employees as of December 31, 2015.
It was distributed over the regions as follows:
1,626
10,073
1,555
2.0%
484
2.0%
431
2.0%
537
2.0%
531
1.5%
700
1.5%
735
2.0%
Catalysts division (excluding battery materials)
Exploration & Production in the Oil & Gas segment
1,390
Cash-generating unit
111,975
7,557
7,321
South America, Africa, Middle East
BASF Group
17,428
17,473
Asia Pacific
17,342
Thereof apprentices and trainees
temporary staff
17,308
52,987
52,608
Thereof Germany
70,922
Europe
Crop Protection division
2015
2016
North America
2,838
2,365
113,249
Employees from joint operations are included in the average
number of employees relative to BASF's share in the com-
pany. This comprised a total of 404 employees (2015: 398
employees).
Goodwill of cash-generating units (million €)
Notes Notes on balance sheet
Consolidated Financial Statements
190
189
For impairment testing in the Exploration & Production
business sector in the Oil & Gas segment, BASF assumes an
average oil price of $55 per barrel of Brent crude oil in 2017. In
comparison with the previous year, the long-term outlook for
oil prices remained unchanged. The recoverable amount of
the cash-generating unit Exploration & Production improved
significantly compared against the impairment test of the pre-
vious year. This was mainly due to the expenditure and pro-
duction profiles that were adapted to the price development.
In 2016, the recoverable amount of Catalysts (excluding
battery materials) exceeded the carrying amount by €705 mil-
lion. The weighted average cost of capital rate after taxes used
for the impairment testing of this unit was 8.01% (2015:
7.66%). The recoverable amount would equal the unit's
carrying amount if the weighted average cost of capital rate
increased by 0.82 percentage points (2015: by 0.73 percent-
age points) or if income from operations of the last detailed
planning year as the basis for the terminal value - were lower
by 13.75% (2015: by 14.52%).
2,942
2,574
In the 2016 business year, the recoverable amount of the
Construction Chemicals unit exceeded the carrying amount by
around €282 million. The weighted average cost of capital rate
after taxes used for impairment testing was 8.01% (2015:
7.67%). The recoverable amount would equal the unit's
carrying amount if the weighted average cost of capital rate
increased by 0.69 percentage points (2015: by 0.96 percent-
age points) or if income from operations of the last detailed
planning year as the basis for the terminal value - were lower
by 12.0% (2015: by 16.65%).
In determining the recoverable amount for the great majority of
cash-generating units, BASF generally anticipates that a
reasonably possible deviation from the key assumptions will
not lead to the carrying amount of the units exceeding their
respective recoverable amounts. For the goodwill of the
Construction Chemicals division and the cash-generating
units Pigments (in the Dispersions & Pigments division), as well
as Catalysts (excluding battery materials), this is not the case.
In 2016, the recoverable amount of Pigments exceeded
the carrying amount by €242 million. The weighted average
cost of capital rate after taxes used for impairment testing was
5.09% (2015: 6.07%). The recoverable amount would equal
the unit's carrying amount if the weighted average cost of
capital rate increased by 0.51 percentage points (2015: by
0.04 percentage points) or if income from operations of the last
detailed planning year - as the basis for the terminal value -
were lower by 13.78% (2015: by 0.92%).
69,873
Annual impairment testing took place in the fourth quarter
of the year on the basis of the cash-generating units. Recover-
able amounts were determined in most cases using the value
in use. This was done using plans approved by company
management and their respective cash flows, generally for the
next five years. Thereafter, a terminal value was calculated
using a forward projection from the last detailed planning year
as a perpetual annuity. The planning is based on experience,
current performance and management's best possible
estimates on the future development of individual parameters,
such as raw material prices and profit margins. The oil price is
also among the main input parameters that provide the basis
for the forecast of cash flows in the current financial plans.
Market assumptions regarding, for example, economic devel-
opment and market growth are included based on external
macroeconomic sources as well as sources specific to the
industry.
The goodwill of BASF is allocated to 22 cash-generating units
(2015: 21), which are defined either on the basis of business
units or on a higher level.
Consolidated Financial Statements
Notes Notes on balance sheet
14 Intangible assets
Notes on balance sheet
The weighted average cost of capital rate after tax required
for impairment testing is determined using the Capital Asset
Pricing Model. It comprises a risk-free rate, a market risk
premium, and a spread for credit risk based on the respective
industry-specific peer group. The calculation also takes into
account capital structure and the beta factor of the respective
peer group as well as the average tax rate of each cash-
generating unit. Impairment tests of the units (excluding
Exploration & Production in the Oil & Gas segment) were
conducted assuming a weighted average cost of capital rate
after taxes between 5.07% and 8.01% (2015: between 6.04%
and 7.67%). This represents a weighted average cost of
capital rate before taxes between 6.43% and 10.77% (2015:
between 7.77% and 10.81%). In the financial year 2016, a
refined valuation model based on a field-related valuation
approach was introduced, which considers the expected cash
flows as well as the tax payments in the individual countries.
The period under consideration now includes the planned
license terms and the production profiles of the included
oil and gas fields. Furthermore, instead of using a single
weighted average cost of capital rate, the country risk and
the specific tax rate is considered in each case: this leads to
a more precise calculation of the recoverable amount. Con-
sidering these parameters, the capital rate after taxes varied
between 7.5% and 13.76% and before taxes between 10.96%
and 37.68%.
BASF Report 2016
1
133
27
373
7
64
36
24
118
Balance as of
December 31,
370
39
40
35
106
298
2016
46
Reversals not
recognized in
income
Additions not
recognized in
income
Reversals
recognized in
income
75
488
Reversals
196
income
Balance as of
December 31,
income
2015
Reversals not
recognized in
Additions not
recognized in
income
41
income
80
337
income
2015
recognized in
recognized in
Additions
Balance as
of January 1,
BASF Report 2016
Total
Other receivables
Accounts receivable, trade
Valuation allowances for receivables 2015 (million €)
Notes Notes on balance sheet
Consolidated Financial Statements
195
2016
176
Balance as
of January 1, recognized in
21
10
Employee receivables
875
102
747
114
Tax refund claims
133
66
Defined benefit assets
61
258
62
Prepaid expenses
1,049
1,358
1,017
905
Other receivables and assets which qualify as financial instruments
130
33
357
Precious metal trading items
Additions
690
Miscellaneous
Total
Other receivables
Accounts receivable, trade
Valuation allowances for receivables 2016 (million €)
The reduction in current tax refund claims can largely be
traced back to the settlement of open tax income receivables.
Precious metal trading items primarily comprise physical
items and precious metal accounts as well as long positions in
precious metals, which are largely hedged through sales or
derivatives.
Prepaid expenses in 2016 included prepayments of
€64 million related to operating activities compared with
€41 million in 2015, as well as €54 million in prepayments for
insurance in 2016 compared with €30 million in 2015. Prepay-
ments for license costs increased from €36 million to €48 mil-
lion in 2016.
able to the lower fair values of precious metal and foreign
currency derivatives.
The reduction of noncurrent derivatives positive fair
market values primarily affected the market valuation of com-
bined interest rate and currency swaps. The change in current
derivatives with positive fair market values was largely attribut-
The decline in noncurrent loans and interest receivables in
2016 was predominantly due to the reduction of loans granted
by WIGA Transport Beteiligungs-GmbH & Co. KG, Kassel,
Germany, to NEL Gastransport GmbH, Kassel, Germany, and
GASCADE Gastransport GmbH, Kassel, Germany, by
€139 million to €259 million to finance the pipeline network.
Furthermore, loans granted by BASF Belgium Coordination
Center Comm. V., Antwerp, Belgium, mainly to finance the
business expansion of Asian companies, were reduced by
€72 million to €144 million in 2016. As in the previous year, this
item also included receivables in favor of BASF SE from the
BASF Pensionskasse arising from an agreement regarding the
granting of profit participation capital in the amount of
€80 million.
3,095
1,720
3,078
1,210
Other receivables and miscellaneous assets
2,046
362
2,061
305
Other receivables and assets which do not qualify as financial
instruments
311
66
356
63
663
111
WIGA Transport Beteiligungs-GmbH & Co. KG,
108
Hedging future cash flows at Nord Stream AG, Zug, Switzer-
land, a company accounted for using the equity method,
resulted in a change of minus €7 million in 2016 and of
€16 million in 2015.
Cash flow hedges
The decline in the value of the euro, especially relative to the
ruble and the U.S. dollar, in 2016 led to an increase of
€824 million in the translation adjustment to €1,476 million.
Translation adjustments
20 Other comprehensive income
In accordance with the resolution of the Annual Shareholders'
Meeting on April 29, 2016, BASF SE paid a dividend of €2.90
per share from the retained profit of the 2015 fiscal year. With
918,478,694 shares entitled to dividends, this amounts to a
total dividend payout of €2,663,588,212.60.
Payment of dividends
lead to a change in the consolidation method. There were no
transactions of this type in 2016, as in the previous year.
The acquisition of shares in companies which BASF
already controls or which are included as a joint arrangement
in the Consolidated Financial Statements is treated as a
transaction between shareholders, as long as this does not
Due to the disposal of the 25% share in Solvin to our
partner, Solvay, of parts of the pharmaceutical ingredient
business to Siegfried Holding AG, Zofingen, Switzerland, and
the asset swap with Gazprom, an amount of €68 million
resulting from the remeasurement of defined benefit plans
was transferred from other comprehensive income into
retained earnings in 2015. There were no transfers in 2016.
The significant decline in the hedging of future cash flows
in 2015 was primarily a result of the disposal of the negative
fair values of commodity derivatives at WINGAS GmbH,
Transfers from other retained earnings increased legal
reserves by €31 million in 2016 (2015: €60 million).
BASF Report 2016
30,120
31,515
Retained earnings
Dec. 31,
2015
594
29,526
30,890
Other retained earnings
625
Dec. 31,
2016
Million €
Legal reserves
Consolidated Financial Statements
Notes Notes on balance sheet
Kassel, Germany, in connection with the asset swap with
Gazprom.
For more information on cash flow hedge accounting, see Note 27.4 from
page 213 onward
Remeasurement of defined benefit plans
(43)
406
49.981
Gazprom Germania GmbH,
Berlin, Germany
Million €
December 31, 2015
Equity stake
%
Million €
%
Partner
December 31, 2016
Equity stake
Total
Other
BASF TODA Battery Materials, LLC, Tokyo, Japan
BASF Shanghai Coatings Co. Ltd., Shanghai, China
BASF TOTAL Petrochemicals LLC, Port Arthur, Texas
Shanghai BASF Polyurethane Company Ltd.,
Shanghai, China
Shah Alam, Malaysia
BASF PETRONAS Chemicals Sdn. Bhd.,
BASF India Ltd., Mumbai, India
OPAL Gastransport GmbH & Co. KG¹
W & G Transport Holding GmbH¹,
Group company
21 Minority interests
For more information on the remeasurement of defined benefit plans,
see Note 22 from page 198 onward
Due to the disposal of the 25% share in Solvin to its partner,
Solvay, of parts of the pharmaceutical ingredient business to
Siegfried Holding AG, Zofingen, Switzerland, and the asset
swap with Gazprom, an amount of €68 million resulting from
the remeasurement of defined benefit plans was transferred
from other comprehensive income into retained earnings in
2015. There were no transfers in 2016.
Capital surplus includes effects from BASF's share program,
premiums from capital increases and consideration for
warrants and negative goodwill from the capital consolidation
resulting from acquisitions of subsidiaries in exchange for the
issue of BASF SE shares at par value.
298
Reserves and retained earnings
At the Annual Shareholders' Meeting on May 2, 2014, share-
holders authorized the Board of Executive Directors, with the
approval of the Supervisory Board, to increase the subscribed
capital by issuing new registered shares up to a total of
€500 million against cash or contributions in kind through
May 1, 2019. The Board of Executive Directors is empowered,
following the approval of the Supervisory Board, to decide on
the exclusion of shareholders' subscription rights for these
new shares in certain predefined cases covered by the
enabling resolution. Until now, this option has not been
exercised and no new shares have been issued.
December 31, 2016
Total
Past due more than 90 days
Past due between 30 and 89 days
Past due less than 30 days
Not yet due
Aging analysis of accounts receivable, trade (million €)
In 2016, individual valuation allowances of €27 million were
recognized for other receivables and €1 million reversed. In
2015, individual valuation allowances of €18 million were rec-
ognized for other receivables.
At BASF, a comprehensive, global credit insurance program
covers trade accounts receivable incurred since Janu-
ary 1, 2015. As part of a global excess of loss policy, an
essential part of future bad debts of the BASF Group are
insured. No compensation claims were incurred in either 2016
or 2015.
Even in the current economic environment, BASF has not
observed any material changes in the credit quality of its
receivables. In 2016, individual valuation allowances of
€71 million were recognized for accounts receivable, trade,
and valuation allowances of €22 million were reversed. In
2015, individual valuation allowances of €57 million were
recognized for trade accounts receivable and valuation
allowances of €17 million were reversed.
Gross value
Changes not recognized in income were primarily related
to changes in the scope of consolidation, translation adjust-
ments and derecognition of uncollectible receivables.
373
181
52
41
98
445
75
70
19
18
Changes recognized in income contained individual valuation
allowances, group-wise individual valuation allowances and
valuation allowances due to transfer risks.
Valuation allowances
December 31, 2015
Gross value
Valuation allowances
Authorized capital
19 Capital, reserves and retained earnings
As of December 31, 2016, there were no material other receivables classified as financial instruments that were overdue and for
which no valuation allowance was made.
298
9,814
370
11,322
265
422
334
487
8
135
8
159
3
435
2
381
22
8,822
26
10,295
BASF SE has only issued fully paid-up registered shares
with no par value. There are no preferences or other restric-
tions. BASF SE does not hold any treasury shares.
126
5,651
16
40,918
290
2,774
3,203
32,463
5,391
Balance as of January 1, 2015
Accumulated depreciation
67,234
6,502
Changes in scope of consolidation
4,216
45,805
10,711
Balance as of December 31, 2015
(864)
2,009
367
94
245
1,332
216
Currency effects
5,972
(36)
(19)
(55)
102
Currency effects
(733)
19
176
(595)
(935)
7
Transfers
(2,919)
(348)
(165)
(866)
(2,250)
(156)
Disposals
3,600
261
303
959
2,707
329
Additions
(4,518)
999
391
2,529
3,688
5,729
43,410
9,635
Balance as of January 1, 2015
Cost
Total
progress
fixtures
equipment and Construction in
7,681
Miscellaneous
technical
equipment
buildings
Machinery and
Land, land
rights and
Consolidated Financial Statements
Notes Notes on balance sheet
Currency effects arose particularly from the appreciation
of the U.S. dollar as well as the Brazilian real relative to the
euro.
in the Byrding field to Statoil; and the sale of industrial coatings
business to the AkzoNobel Group.
Disposals of property, plant and equipment were largely
attributable to the sale of assets of the global polyolefin
catalysts business to W. R. Grace & Co., Columbia, Maryland;
the sale of the worldwide photoinitiator business to IGM Res-
ins B.V., Waalwijk, the Netherlands; the sale of the 25% share
In 2016, additions to accumulated depreciation contained
write-ups of €2 million.
49.981
Thereof depre-
ciation accord-
ing to the unit
of production
method
64,414
Changes in scope of consolidation
(32)
734
Transfers
91
(4,027)
(606)
(184)
(977)
(2,974)
(263)
Disposals
19
1
46
25
Additions from acquisitions
3,555
226
492
1,474
396
Additions
(40)
4
(12)
483
126
64
(2)
BASF Report 2016
Cost of sales included inventories recognized as an expense
amounting to €26,048 million in 2016, and €38,199 million in
2015.
Work-in-process, finished goods and merchandise are
combined into one item due to the production conditions in
the chemical industry. Services-in-process primarily relate to
services not invoiced as of the balance sheet date.
2,944
6,680
69
9,693
10,005
6,808
90
December 31, 2015
December 31, 2016
3,107
Work-in-process, finished goods and merchandise
Advance payments and services-in-process
Inventories
Raw materials and factory supplies
Consolidated Financial Statements
Notes Notes on balance sheet
Million €
17
The change in other shareholdings resulted from additions of
€107 million, primarily attributable to Gullfaks AS, Stavanger,
Norway, and disposals of €12 million. Impairments amounted
to €41 million. Other shareholdings decreased by €12 million
as a result of reclassifications and transfers. Currency effects
resulted in an increase of €6 million in other shareholdings.
For a detailed overview of income from companies accounted for using
the equity method, see Note 9 on page 184
together by BASF and Gazprom since the sale of BASF's 50%
share to Gazprom in September 2015. Wintershall Noordzee
B.V. is accounted for as a joint venture using the equity method
in the Consolidated Financial Statements since then. In 2016,
the final purchase price allocation resulted in an adjustment of
the fair value of Wintershall Noordzee B.V. in the amount of
minus €15 million, which is included in transfers.
Transfers include dividend distributions and other com-
prehensive income of the companies as well as the net income
of investments accounted for using the equity method. The
previous year's figure was made up primarily of the first-time
use of the equity method to account for Wintershall Noord-
zee B.V., Rijswijk, the Netherlands. The company is operated
Disposals totaling €107 million in the previous year were
primarily attributable to the sale of the 25% share in Solvin to
our partner Solvay, effective July 1, 2015.
Additions of €152 million to investments accounted for using
the equity method were primarily attributable to the joint
venture Synvina C.V., Amsterdam, the Netherlands, estab-
lished with Avantium in 2016. Furthermore, additions included
Chongqing Chemetall Surface Treatment Co., Ltd, Chongqing,
China; and the Changchun Chemetall Chemicals Co. Ltd.,
Changchun, China. Both companies were acquired in con-
nection with the acquisition of Chemetall on Decem-
ber 14, 2016. The capital increase at Markor Meiou Chemical
(Xinjiang) Co., Ltd., Korla, China, had an effect of €8 million on
additions.
106
526
137
605
420
Inventories
A write-down of inventory was recognized in the amount of
€43 million in 2016 and a write-up in the amount of €22 million
in 2015. Changes in valuation allowances on inventory were
largely due to lower net realizable value.
Of total inventories, €836 million was measured at net
realizable value in 2016 and €770 million in 2015.
18 Receivables and miscellaneous assets
14
6
Insurance compensation receivables
8
33
5
29
Receivables from finance leases
474
384
342
176
194
811
Current
Noncurrent
Current
250
568
Derivatives with positive fair values
Loans and interest receivables
December 31, 2015
December 31, 2016
Noncurrent
Other receivables and miscellaneous assets (million €)
468
December 31, 2015
December 31, 2016
4,436
Notes Notes on balance sheet
Consolidated Financial Statements
194
193
Currency effects arose particularly from the appreciation
of the U.S. dollar relative to the euro.
Disposals of property, plant and equipment were primarily
attributable to the asset swap with Gazprom and related
primarily to the transferred natural gas trading and storage
business. Furthermore, BASF's share in Wintershall Noord-
zee B.V., Rijswijk, Netherlands, was reduced to 50%. With this
loss of control, the company was reclassified as an investment
accounted for using the equity method. 50% of the property,
plant and equipment was reported in disposals and the
remaining 50% in transfers.
before taxes used ranged between 9.13% and 88.83%. The
high cost of capital rates were due to the special income tax
for the oil and gas industry in Norway. The recoverable amount
for impaired property, plant and equipment equals their value
in use. In 2015, additions to accumulated depreciation
contained write-ups of €5 million.
In 2015, impairments of €485 million were included in
accumulated depreciation. Of this amount, €336 million
pertained to impairments on oil and gas fields in Norway, Libya
and Germany in the Oil & Gas segment. These impairments
arose particularly from the ongoing low oil and gas price levels
and the resulting revision of planning assumptions. These
fields were written down to their recoverable amount, totaling
€1,338 million. The weighted average cost of capital rate
Additions to property, plant and equipment arising from
investment projects amounted to €5,651 million in 2015.
Significant investments were primarily related to the construc-
tion of a TDI complex in Ludwigshafen, Germany; a production
complex for acrylic acid and superabsorbents in Camaçari,
Brazil; and an MDI plant in Chongqing, China. Each of these
started up either fully or partly in 2015. Further significant
investments included the construction of an integrated aroma
ingredients complex in Kuantan, Malaysia, and oil and gas
production facilities and wells in Europe and South America.
Investments for expansion purposes were particularly made
at the sites in Ludwigshafen, Germany; Freeport, Texas; Geis-
mar, Louisiana; and Antwerp, Belgium. Government grants of
€10 million related to tangible assets were deducted. Due to
acquisitions, property, plant and equipment rose by €91 mil-
lion primarily from the acquisition of BASF TODA Battery
Materials LLC, Tokyo, Japan.
25,260
6,282
1,064
3,145
12,840
5,074
41,974
220
3,152
2,827
32,965
5,637
Balance as of December 31, 2015
Net carrying amount as of
December 31, 2015
1,163
16 Investments accounted for using the equity method and other financial assets
Miscellaneous
Investments accounted for using the equity method (million €)
Changes in scope of consolidation
4,647
53
87
398
(27)
(107)
(1)
847
152
3,245
4,436
2015
2016
BASF Report 2016
Other financial assets
Long-term securities
Other shareholdings
Other financial assets (million €)
Net carrying amount as of December 31
Currency effects
Transfers
Disposals
Additions
Balance as of January 1
(128)
(156)
36
Benefits paid by unfunded plans
1,106
(2,617)
Actuarial gains/losses of the defined benefit obligation
(145)
775
Deviation between actual and standardized return on plan assets
487
492
Standardized return on plan assets
Employer contributions
(680)
Interest cost
(397)
(360)
Current service cost
(7,222)
(6,180)
Net defined benefit liability as of January 1
2015
2016
Development of the net defined benefit liability (million €)
(671)
Effects from acquisitions and divestitures
Past service cost
Other changes
2016
Pension obligations
Regional allocation of defined benefit plans as of December 31 (million €)
133
(6,313)
66
(8,209)
(6,180)
(8,143)
(175)
(98)
26
(18)
12
14
148
(84)
284
207
376
397
provisions for pensions and similar obligations
Thereof defined benefit assets
Net defined benefit liability as of December 31
Currency effects
The expected contribution payments for 2017 amount to
approximately €700 million.
2015
The standardized return on plan assets is calculated by
multiplying plan assets at the beginning of the year with the
discount rate used for existing defined benefit obligation at the
beginning of the year, taking into account benefit and
contribution payments expected to be made during the year.
19,460
Benefits paid
Participants' contributions
Deviation between actual and standardized return on plan assets
Employer contributions
Standardized return on plan assets
Plan assets as of January 1
Development of plan assets (million €)
led to an increase in the weighted average duration of the
defined benefit obligations.
As of December 31, 2016, the weighted average duration of
the defined benefit obligation amounted to 15.7 years (previous
year: 15.3 years). The significant decline in the discount rate
Consolidated Financial Statements
Notes Notes on balance sheet
BASF Report 2016
Effects from acquisitions and divestitures
24,861
Defined benefit obligation as of December 31
795
(63)
(65)
(2)
Currency effects
Other changes
Plan settlements
Past service cost
(48)
27,603
Past service cost
Plan settlements
Other changes
620
(161)
(39)
(20)
(36)
(165)
64
(630)
(627)
53
49
284
207
(145)
775
487
492
18,252
18,681
2015
2016
Plan assets as of December 31
Currency effects
18,681
Plan assets
2016
Net defined benefit liability
2015
100
100
1
Cash and cash equivalents
Total
15
15
Alternative investments
4
4
Real estate
The asset class debt instruments comprises promissory
notes and debentures (Pfandbriefe) in addition to corporate
and government bonds. Government bonds primarily concern
bonds from those countries enjoying the highest credit ratings,
such as the United States, United Kingdom, Germany and
Switzerland. Corporate bonds mainly comprise investment-
39
for other debtors
15
16
Thereof for government debtors
54
53
Debt instruments
28
Equities
2015
37
grade bonds, whereby particular high-yield bonds are also
held to a limited extent. In connection with the ongoing
monitoring of default risk based on a given risk budget and on
the continuous observation of the development of the
creditworthiness of issuers, an adjustment of plan asset
allocation to a revised market assessment may be made, if
necessary. Alternative investments largely comprise invest-
ments in private equity, absolute return funds and senior
secured loans.
Almost all of the equities are priced on active markets.
The category debt instruments includes promissory notes
and debentures (Pfandbriefe), which were acquired through
private placements with a market value in the amount of
€853 million as of December 31, 2016, and €1,072 million as
of December 31, 2015. For such securities, especially those
held by domestic pension plans, there is no active market. The
capital market compensates for this lack of fungibility with
yield premiums depending on the maturity. With only a few
exceptions, there is no active market for plan assets in real
estate and alternative investments.
Plan assets contained securities issued by BASF Group
companies with a market value of €16 million on Decem-
ber 31, 2016 and €11 million on December 31, 2015. The
market value of the properties of legally independent pension
funds rented to BASF Group companies amounted to
€117 million on December 31, 2016, and €151 million on
December 31, 2015.
in 2016 and €609 million in 2015.
Contributions to government pension plans were €590 million
The contributions to defined-contribution plans contained in
income from operations amounted to €281 million in 2016 and
€273 million in 2015.
Defined contribution plans and government pensions
18,681
18,681
22,250
24,861
19,460
27,603
19,460
24,734
2,611
Plan assets
Defined benefit
obligation
Plan assets
Defined benefit
obligation
2,869
2015
2016
Funded pension plans
Total
Unfunded pension plans
Current funding situation of the pension plans as of December 31 (million €)
The funding of the plans was as follows:
Since 2010 there has been an agreement between
BASF SE and BASF Pensionskasse about the granting of
profit participation capital with a nominal value of €80 million,
which is used to strengthen the financing of the BASF Pen-
sionskasse. No material transactions beyond this took place
between the legally independent pension funds and BASF
Group companies in 2016.
2016
26
Structure of plan assets (%)
Liability-driven investment (LDI) techniques, such as
hedging the risk of changes in interest rates and inflation, are
used in some pension plans, especially in the U.K. and U.S.
plans.
(169)
(298)
1,939
1,974
2,108
2,272
Switzerland
(1,639)
(1,718)
2,717
2,806
4,356
4,524
United States
(4,358)
(5,960)
11,671
12,282
16,029
18,242
Germany
2015
2016
United Kingdom
(14)
1,909
1,898
The target asset allocation has been defined by using asset
liability studies and is reviewed regularly. Accordingly, plan
assets are aligned with the long-term development of the
obligations, taking into consideration the risks associated with
the specific asset classes and the regulations relating to the
investment of plan assets. The existing portfolio structure is
oriented towards the target asset allocation. In addition,
current market assessments are taken into consideration. In
order to mitigate risks and maximize returns, a widely spread
global portfolio of individual asset classes is held.
Explanations regarding plan assets
BASF Report 2016
Notes Notes on balance sheet
Consolidated Financial Statements
202
201
(6,180)
(8,143)
18,681
19,460
24,861
27,603
Total
(124)
464
500
588
656
Other
110
(11)
1,890
1,780
26.67
(313)
Effects from acquisitions and divestitures
Switzerland
United States
Germany
Projected pension increase
Discount rate
Assumptions used to determine the defined benefit obligation as of December 31
The valuation of the defined benefit obligation is largely based on the following assumptions:
Actuarial assumptions
In the case of subsidiaries in other countries, defined benefits
are covered in some cases by pension provisions, but mainly
by external insurance companies or pension funds.
Other countries
United
Kingdom
The financing of the pension plans is determined by the
provisions of the regulatory authority for pensions and the
relevant social and labor law requirements. The defined benefit
plans are administered by a trust company, whose Board of
Trustees, according to the trustee agreement and law,
represents the interests of the beneficiaries and ensures that
the benefits can be paid in the future. The required funding is
determined using technical valuations according to local
regulations every three years.
United Kingdom Employees are granted benefits based on a
defined contribution plan.
United Kingdom
According to government regulations, the employer is
obligated to make contributions, so that the pension fund is
able to grant minimum benefits guaranteed by law. The
pension fund is managed by a board, where employer and
employees are equally represented, that steers and monitors
the benefit plan and assets.
Consolidated Financial Statements
Notes Notes on balance sheet
BASF Report 2016
The employees of the BASF Group in Switzerland receive a
company pension, which is financed through a pension fund
by employer and employee contributions as well as the return
on assets. The pension plan is accounted for as a defined
benefit plan, as the obligatory minimum pension guaranteed
by law according to the Swiss law "Berufliche Vorsorge (BVG)"
is included in the scheme. All benefits vest immediately.
Switzerland
Additional similar obligations arise from plans which
assume the healthcare costs and life insurance premiums of
retired employees and their dependents. Such plans are
closed to new entrants since 2007. In addition, the amount of
the benefits for such plans is frozen.
The legal and regulatory frameworks governing the plans
are based on the U.S. Employee Retirement Income Security
Act (ERISA), which requires the plan sponsor to ensure a
minimum funding level. Any employer contributions necessary
to meet the minimum funding level would be based on the
results of an actuarial valuation. Furthermore, there are
unfunded pension plans that are not subject to ERISA.
Since 2010, the existing defined benefit plans were closed
to further increases in benefits based on future years of
service, and benefits earned in the past have been frozen.
There is no entitlement to pension adjustments to compensate
for cost-of-living increases.
A part of the workforce received benefit increases
depending on service period in connection with a career
average plan until December 31, 2015. The BASF Group
maintains defined benefit plans in the United Kingdom, which
were closed for further increases in benefit from future years of
service. Adjustments to compensate for increases in the cost
of living until the beginning of retirement are legally required for
beneficiaries of defined benefit plans.
2016
2015
2016
Switzerland
United States
Germany
United
Projected pension increase
Discount rate
Assumptions used to determine expenses for pension benefits in the respective business year
2.90
3.10
1.50
1.50
4.00
2.80
0.80
0.60
2015
2016
2015
2016
2015
4.20
4.00
2.50
1.80
Employees are granted benefits based on defined contribution
plans.
Kingdom
United States
Germany
62
30.00
95
30.00
Corporation, Shanghai, China
Shanghai Gaoqiao Petrochemical
Shanghai, China, and Sinopec
Shanghai Huayi (Group) Company,
249
40.00
TODA KOGYO CORP., Hiroshima, Japan
Shanghai Huayi Fine Chemical Co., Ltd,
Shanghai, China
260
Total Petrochemicals Inc., Houston, Texas
221
40.00
235
40.00
Kuala Lumpur, Malaysia
Petroliam Nasional Bhd.,
Free float
35
26.67
40.00
34.00
34
34.00
Description of the defined benefit plans
The strategy of the BASF Group with regard to financing
pension commitments is aligned with country-specific supervi-
sory and tax regulations.
The obligations and the plan assets used to fund the
obligations are exposed to demographic, legal and economic
risks. Economic risks are primarily due to unforeseen
developments on commodity and capital markets. They affect,
for example, pension adjustments based on the level of
inflation in Germany and in the United Kingdom, as well as the
impact of the discount rate on the amount of the defined
benefit obligation. In previous years, measures taken to close
plans with defined benefits for future service, especially
benefits based on final pay promises and the assumption of
healthcare costs for former employees, however, led to a
reduction in risk with regard to future benefit levels.
In some countries especially in Germany, the United
Kingdom, Switzerland and Belgium there are pension
obligations subject to government supervision or similar legal
restrictions. For example, there are minimum funding
requirements to cover pension obligations, which are based
on actuarial assumptions that may differ from those in IAS 19.
Furthermore, there are restrictions in qualitative and
quantitative terms relating to parts of the plan assets for the
investment in certain asset categories. This could result in
fluctuating employer contributions, financing requirements and
the assumption of obligations in favor of the pension funds to
comply with the regulatory requirements.
Economic and legal environment of the plans
The Group Pension Committee monitors the risks of all
pension plans of the Group. In this connection, it issues
guidelines regarding the governance and risk management of
pension plans, particularly with regard to the funding of the
pension plans and the portfolio structure of the existing plan
assets. The organization, responsibilities, strategy, implemen-
tation and reporting requirements are documented for the
units involved.
In addition to state pension plans, most employees are
granted company pension benefits from either defined
contribution or defined benefit plans. Benefits generally
depend on years of service, contributions or compensation,
and take into consideration the legal framework of labor, tax
and social security laws of the countries where the companies
are located. To limit the risks of changing financial market
conditions as well as demographic developments, employees
have been almost exclusively offered defined contribution
plans for future years of service in recent years.
BASF Report 2016
22 Provisions for pensions and similar obligations
Notes Notes on balance sheet
Consolidated Financial Statements
198
197
1 Equity stake in W & G Transportation Holding GmbH and OPAL Gastransport GmbH & Co. KG: 50.03%; voting rights and portion of earnings: 49.98%
629
761
102
88
49
40.00
56
40.00
39
Description of the defined benefit plans Germany for BASF SE
and German Group companies, a basic level of benefits is
provided by BASF Pensionskasse WaG, a legally independent
funded plan, which is financed by contributions of employees
and the employer as well as the return on plan assets.
BASF SE ensures the necessary contributions to adequately
finance the benefits promised by BASF Pensionskasse WaG.
Some of the benefits financed via the BASF Pensions-
kasse WaG are subject to adjustments that must be borne by
its member companies to the extent that these cannot be
borne by BASF Pensionskasse WaG due to the regulations
imposed by the German supervisory authority. In 2004, the
basic benefits plan at BASF was closed for newly hired
employees at German BASF companies and replaced by a
defined contribution plan. At BASF SE, occupational pension
promises that exceed the basic level of benefits are financed
under a contractual trust arrangement by BASF Pensions-
treuhand e.V.; at German Group companies, these benefits
are almost exclusively financed via pension provisions. The
benefits are largely based on cash balance plans. Furthermore,
employees are given the option of participating in various
deferred compensation schemes.
2016
2015
2016
Development of defined benefit obligation (million €)
Net interest expense of the respective business year is based
on the discount rate and the defined benefit obligation at the
beginning of the year. The net interest expense from under-
funded pension plans and similar obligations decreased
compared with the previous year, as a result of the reduced
net defined benefit liability as of December 31, 2015.
The net interest on the defined benefit liability is recognized in
the financial result. This results from the difference between
the interest cost of the defined benefit obligation and the
standardized return on plan assets as well as the interest cost
for the asset ceiling. The expected contribution payments and
benefits paid over the course of the business year are
considered in the determination of net interest.
193
178
(3)
(5)
196
183
658
Defined benefit obligation as of January 1
627
╗་ ་
281
385
346
2015
2016
Expenses for pension benefits (recognized in the financial result)
Net interest expenses from underfunded pension plans and similar obligations
Net interest income from overfunded pension plans
Interest cost for the asset ceiling
Expenses for pension benefits (recognized in income from operations)
Expenses for defined contribution plans
273
Current service cost
Interest cost
Benefits paid
(103)
66
experience adjustments
(135)
(20)
adjustments relating to demographic assumptions
(868)
2,571
for adjustments relating to financial assumptions
53
49
(1,006)
(1,024)
680
671
397
360
25,474
24,861
2015
2016
Actuarial gains/losses
Participants' contributions
Expenses for defined benefit plans
Composition of expenses for pension benefits (million €)
Explanation of the amounts in the statement of income and balance sheet
based on alternative changes in the assumptions as well as an
addition of combined changes in the individual assumptions is
not possible.
Switzerland
Germany
United States
Actuarial mortality tables (significant countries) as of Dec. 31, 2016
The valuation of the defined benefit obligation is generally
made using the most recent actuarial mortality tables as of
December 31 of the respective business year, which in
Germany and the United States are derived from the BASF
Group population and were last updated for the pension
obligations in Germany in 2015 and for the pension obligations
in the United States in 2014.
A Group-wide, uniform procedure is used to determine
the discount rates used for the valuation of material pension
obligations of the BASF Group. Accordingly, the discount
rates were derived from the yields on corporate bonds in
the respective currency zones with an issuing volume of
more than 100 million units of the respective currency with
a minimum rating of AA- up to AA+ from one of the three
rating agencies: Fitch, Moody's, or Standard & Poor's.
The assumptions used to ascertain the defined benefit
obligation as of December 31 are used in the following year
to determine the expenses for pension plans.
2.90
2.90
1.75
1.50
3.70
4.00
1.00
0.80
3.90
4.20
2.40
2.50
2015
2016
2015
2016
2015
United Kingdom
148
Heubeck Richttafeln 2005G (modified)
RP-2014 (modified) with MP-2014 generational
projection
S1PxA (standard actuarial mortality tables for
self-administered plans (SAPS))
An alternative valuation of the defined benefit obligation was
conducted in order to determine how changes in the under-
lying assumptions would influence the amount of the defined
benefit obligation. A linear extrapolation of these amounts
(930)
(1,110)
1,120
1,175
2,000
2,270
2015
2016
2015
(1,750)
(1,990)
Decrease by 0.5 percentage points
Increase by 0.5 percentage points
2016
BASF Report 2016
Projected pension increase
Discount rate
Sensitivity of the defined benefit obligation as of December 31 (million €)
A change in the material actuarial assumptions would have the following effects on the defined benefit obligation:
Sensitivity analysis
Notes Notes on balance sheet
Consolidated Financial Statements
200
199
BVG 2015 generation
BASF Report 2016
Development of property, plant and equipment 2015 (million €)
Liabilities
to credit
institutions
2017
(excluding finance leases) (million €)
Obligations arising from purchase contracts (million €)
Obligations arising from purchase contracts resulted primarily
from long-term purchase obligations for raw materials. Firm
purchase obligations as of December 31, 2016, were as
follows:
Obligations arising from purchase contracts
Obligations arising from long-term leases
For more information on liabilities arising from leasing contracts, see
Note 28 from page 214 onward
Assets used under long-term leases primarily concerned
buildings and IT infrastructure.
Assets used under long-term leases
Consolidated Financial Statements
Notes Notes on balance sheet
2018
BASF Report 2016
BASF provides unlimited guarantees, particularly to the Danish
government as well as the state-owned company Nordsøfon-
den, as a precondition for the exploration for and production of
hydrocarbons in the Danish concession area by the joint
venture Wintershall Noordzee B.V., Rjswijk, the Netherlands.
80
25
10
7
1,429
1,391
4,672
5,394
1
Partially countering the possible 100% liability of BASF arising
from these guarantees are the 50% guarantees of the joint-
venture partner in favor of BASF. Drawing on these guarantees
was not forseeable as of December 31, 2016.
2019
2020
2021
29,830
8,590
2022 and maturities beyond this year
Total
396
1,513
125
2,540
2021
151
2,632
2020
202
3,764
2019
279
4,499
2018
360
7,805
2017
Risks from litigation and claims
26
Total
2022 and maturities beyond this year
87
In the arbitration proceedings initiated in May 2013, Metro-
gas S.A., Chile, claims damages valued in an amount of
€227 million as a result of insufficient gas deliveries against
Wintershall Energía S.A., Argentina (WIAR), Total Austral S.A.,
Argentina, and Pan American Energy LLC, Argentina. The
defendants, as sellers, concluded a natural gas supply
contract with Metrogas in 1997. WIAR's share of supply in the
contract is 37.5%. After the resignation of the chairman of the
Arbitral Tribunal in mid-2016, the International Chamber of
Commerce (ICC) nominated a new Arbitral Tribunal that will be
pursuing the arbitration proceedings during 2017. The defen-
dants are of the opinion that Metrogas does not have any
claim for damages
43
12
Secured liabilities (million €)
For more information on liabilities arising from leasing contracts, see
Note 28 from page 214 onward
The increase in other liabilities mainly related to higher,
current negative fair market values arising from the hedging of
combined interest and currency swaps on the U.S. dollar and
Brazilian real as well as foreign currency forward contracts for
U.S. dollar and Brazilian real as well as euro and U.S. dollar.
For more information on financial risks and derivative instruments, see
Note 27 from page 208 onward
Other liabilities
869
2,520
873
2,850
426
1,147
Liabilities to credit institutions
Other liabilities
334
21
265
23
254
163
71
171
66
Other liabilities
Other liabilities which do not qualify as financial instruments
1,267
Secured liabilities
Dec. 31,
2016
Dec. 31,
6
9
December 31, 2015
December 31, 2016
Payment and loan commitments and other financial obligations
for the purchase of intangible assets
Thereof purchase commitments
Initiated investment projects
Collateral granted on behalf of third-party liabilities
Warranties
Guarantees
Bills of exchange
Million €
The figures listed below are stated at nominal value:
25 Other financial obligations
Liabilities to credit institutions were secured primarily with
registered land charges. The increase in secured other liabili-
ties compared with December 31, 2015, is primarily attri-
butable to higher collateral for derivative instruments with
negative fair values. As in the previous year, there were no
secured contingent liabilities in 2016.
50
93
24
69
26
24
2015
49
BASF Corporation has potential liability under the
Comprehensive Response, Compensation and Liability Act of
1980, as amended, and related state laws for investigation
and cleanup at certain sites. The Lower Passaic River Study
Area (LPRSA) is one such site comprising the lower 17 miles of
the Passaic River in New Jersey. In 2016, the United States
Environmental Protection Agency selected a final remedy for
the lower 8 miles of the River. BASF Corporation and more
than 60 other companies (collectively, the Lower Passaic River
Study Area Cooperating Parties Group or CPG) are conduct-
ing a remedial investigation / feasibility study (RI/FS) of the
entire 17 miles of the River. A decision on the remedy for the
upper portion of the River will be made following completion of
the RI/FS.
In November 2014, a putative class action lawsuit was
filed in the United States District Court of the Southern District
of New York against BASF Metals Limited (BML) along with
other defendants, alleging violations of antitrust and
commodities laws stemming from the price discovery process
for platinum and palladium. BML, based in the United
Kingdom, and the other defendants are accused of improper
conduct concerning the calculation of the market prices of
platinum and palladium. Four additional lawsuits were filed
between November 2014 and March 2015. The lawsuits were
consolidated, and a Second Consolidated Amended Class
Action Complaint was eventually filed in July 2015. This
Complaint also names as a defendant, among others, BASF
Corporation. On September 21, 2015, defendants filed a Joint
Motion to Dismiss the Second Consolidated Amended Class
Action Complaint, and BML and BASF Corporation filed
individual motions to dismiss. In addition, a pro se complaint
with similar allegations was filed in the same court in Septem-
ber 2015. Motions to dismiss the pro se complaint have also
been filed. Pre-trial discovery is stayed pending resolution of
the motions to dismiss. In April 2015, BML received from the
European Commission written requests for information
regarding platinum and palladium trading BML provided
responsive information to the European Commission most
recently in the spring of 2016. Since then, BML has not
received any requests for further information or follow up.
2,476
315
2,047
45
2,745
(31)
1,900
(27)
1,700
(31)
121
1,900
1,700
Fair value
Nominal value
Fair value
Nominal value
December 31, 2015
December 31, 2016
Thereof fixed rate
Combined interest and cross-currency swaps
Thereof payer swaps
(27)
1,856
297
BASF Report 2016
1
6
Risk
Exposure
Value at
Value at
Risk
Exposure
December 31, 2015
December 31, 2016
Crude oil, oil products
and natural gas
Exposure to commodity derivatives (million €)
BASF uses value at risk as a supplement to other risk
management tools. Besides value at risk, BASF sets volume-
based limits as well as exposure and stop-loss limits.
BASF performs value-at-risk analyses for all commodity
derivatives and precious metals trading positions. Using the
value-at-risk analysis, we continually quantify market risk and
forecast the maximum possible loss within a given confidence
interval over a defined period. The value-at-risk calculation is
based on a confidence interval of 95% and a holding period of
one day. The value-at-risk calculation for precious metals is
based on a confidence interval of 99%. BASF uses the
variance-covariance approach.
By holding commodity derivatives and precious metal
trading positions, BASF is exposed to price risks. The valuation
of commodity derivatives and precious metal trading positions
at fair value means that adverse changes in market prices
could negatively affect the earnings and equity of BASF.
In connection with CO2 emissions trading, various types of
CO2 certificates are purchased and sold using forward con-
tracts. The goal of these transactions is to benefit from market
price differences. These deals are settled by physical delivery.
As of December 31, 2016 as well as of December 31, 2015,
there were no deals outstanding.
In addition, BASF holds limited unhedged precious metal and
oil product positions, which can also include derivatives, for
trading on its own account. The value of these positions is
exposed to market price volatility and is subject to constant
monitoring.
- In the Crop Protection division, the sales prices of products
are sometimes coupled to the price of certain agricultural
commodities. To hedge the resulting risks, derivatives on
agricultural commodities are concluded.
The Catalysts division enters into both short-term and long-
term purchase contracts with precious metal producers. It
also buys precious metals on spot markets from a variety of
business partners. The price risk from precious metals
purchased to be sold on to third parties, or for use in the
production of catalysts, is hedged using derivative instru-
ments. This is mainly done using forward contracts which
are settled by either entering into offsetting contracts or by
delivering the precious metals.
- In order to secure margins, the Oil & Gas segment used
commodity derivatives, primarily swaps on oil products, up
to the completion of the asset swap with Gazprom in 2015.
Risks to margins arise in volatile markets when purchase
and sales contracts are priced differently.
- BASF uses commodity derivatives to hedge the risks from
the volatility of raw material prices. These are primarily
options and swaps on crude oil, oil products and natural
gas.
Commodity price risks: Some of BASF's divisions are
exposed to strong fluctuations in raw material prices. These
result primarily from raw materials (for example, naphtha,
propylene, benzene, lauric oils, cyclohexane, methanol,
natural gas, butadiene, LPG condensate and ammonia) as
well as from precious metals. BASF takes the following
measures to reduce price risks associated with the purchase
of raw materials:
209
Consolidated Financial Statements
Notes Notes on balance sheet
Interest rate swaps
Nominal and fair values of interest rate swaps and combined interest and cross-currency swaps (million €)
4,083
58
264
Sensitivity
(260)
2,057
December 31, 2015
Exposure
Sensitivity
(241)
1,849
USD
Exposure
December 31, 2016
The sensitivity analysis is conducted by simulating a 10%
appreciation of the respective functional currency against
the other currencies. The effect on BASF's income before
taxes and minority interests would have been minus €300 mil-
lion as of December 31, 2016, and minus €340 million as
of December 31, 2015. The effect from the items designated
under hedge accounting would have increased the equity
of the shareholders of BASF SE before income taxes by
€24 million as of December 31, 2016 (2015: increase of
€52 million). This only refers to transactions in U.S. dollars. The
foreign currency risk exposure amounted to €2,113 million as
of December 31, 2016 and €2,201 million as of Decem-
ber 31, 2015.
The foreign currency risk exposure corresponds to the net
amount of the nominal volume of the primary and the derivative
financial instruments which are exposed to currency risks. In
addition, planned purchase and sales transactions of the
respective following year are included, if they fall under the
currency risk management system. Long and short positions
in the same currency are offset against each other.
Foreign currency risks: Changes in exchange rates could
lead to negative changes in the value of financial instruments
and adverse changes in future cash flows from planned
transactions. Foreign currency risks from financial instruments
result from the translation at the closing rate of financial
receivables, loans, securities, cash and financial liabilities into
the functional currency of the respective Group company.
Foreign currency contracts in a variety of currencies are used
to hedge foreign exchange risks from primary financial
instruments and planned transactions.
Market risks
BASF Report 2016
Exposure and sensitivity by currency (million €)
Financial risks
27.1
27 Supplementary information on financial instruments
Notes Notes on balance sheet
Consolidated Financial Statements
208
207
Furthermore, BASF SE and its affiliated companies are
defendants in or parties to a variety of judicial, arbitrational or
regulatory proceedings on a recurring basis. To our current
knowledge, none of these proceedings will have a material
effect on the economic situation of BASF.
(35)
Miscellaneous liabilities
144
2,113
69
11,114
568
3,748
744
interest rate
Variable
December 31, 2015
Fixed
interest rate
258
interest rate
610
Variable
208
105
12,564
interest rate
December 31, 2016
Fixed
Financial indebtedness
Securities
Loans
Carrying amount of nonderivative interest-bearing financial instruments (million €)
The variable interest exposure, which also includes fixed
rate bonds set to mature in the following year, amounted to
minus €2,447 million (2015: minus €2,786 million). An increase
in all relevant interest rates by one percentage point would
have raised income before taxes and minority interests by
€1 million as of December 31, 2016, and raised income before
taxes and minority interests by €7 million as of Decem-
ber 31, 2015. The effect from the items designated under
hedge accounting would have increased the equity of the
shareholders of BASF SE before income taxes by €16 million
as of December 31, 2016 (2015: increase of €20 million).
Interest rate risks: Interest rate risks result from changes
in prevailing market interest rates, which can cause a change
in the fair value of fixed-rate instruments, and changes in the
interest payments of variable-rate instruments. To hedge these
risks, interest rate swaps and combined interest rate and
currency derivatives are used. While these risks are relevant to
the financing activities of BASF, they are not of material
significance for BASF's operating activities.
Due to the use of options to hedge currency risks, the
sensitivity analysis is not a linear function of the assumed
changes in exchange rates.
Total
Other
(288)
2,201
(276)
(28)
58
Deferred income
13
Other bonds
449
461
4.88%
477
EUR
Ciba Specialty Chemicals Finance Luxembourg S.A.
4.875% Bond 2003/2018
494
0.88%
500
631
EUR
995
0.14%
1,000
EUR
Bond 2016/2020
0.0%
BASF Finance Europe N.V.
275
284
4.45%
0.75% Bond 2016/2026
672
Bonds and other liabilities to the capital market
13,457
Maturities of financial indebtedness (million €)
Total
Other currencies
Indian rupee
Ukrainian hryvnia
Turkish lira
Brazilian real
Chinese renminbi
Norwegian krone
Hong Kong dollar
Argentinian peso
British pound
U.S. dollar
Euro
Breakdown of financial indebtedness by currency (million €)
BASF Report 2016
On December 14, 2016, BASF SE issued a 2.67% NOK bond effective January 3, 2017, in the amount of NOK 1,600 million
with an annual effective interest rate of 2.69% and term of 12 years.
15,197
16,312
Financial indebtedness
2,996
2,855
Liabilities to credit institutions
12,201
300
Following year 1
USD
4.43%
490
491
3.15%
500
EUR
Bond 2013/2033
3%
159
2.37%
1,300
2.875%
HKD
2.37%
491
1.01%
500
EUR
Bond 2016/2031
0.875%
198
1.58%
200
Bond 2016/2031
Bond 2013/2033
EUR
200
641
663
4.11%
700
USD
U.S. Private Placement Series B 2013/2028
4.09%
229
237
3.92%
250
USD
U.S. Private Placement Series A 2013/2025
3.89%
199
199
3.27%
200
EUR
3.25% Bond 2013/2043
198
198
3.09%
U.S. Private Placement Series C 2013/2034
Following year 2
Following year 3
Following year 4
Loans and interest liabilities
60
22
84
22
Liabilities from finance leases
75
288
78
571
199
Derivative instruments with negative fair values
Current
Noncurrent
Current
December 31, 2015
BASF Report 2016
December 31, 2016
Other liabilities (million €)
Notes Notes on balance sheet
Consolidated Financial Statements
206
Noncurrent
280
331
265
Liabilities from precious metal trading positions
147
218
45
310
Employee liabilities
95
73
95
68
Liabilities related to social security
447
556
443
1,373
539
1,583
Other liabilities which qualify as financial instruments
43
732
97
791
Miscellaneous liabilities
205
BASF SE had committed and unused credit lines with variable
interest rates amounting to €6,000 million both as of Decem-
ber 31, 2016 and as of December 31, 2015.
Unused credit lines
The weighted average interest rate on loans amounted to
4.5% in 2016 compared with 4.9% in 2015.
55
74
59
268
113
261
118
159
151
159
167
194
884
1,048
3,659
3,346
9,499
December 31, 2015
December 31, 2016
10,897
Notes Notes on balance sheet
Consolidated Financial Statements
Following year 6 and maturities beyond this year
Total
Following year 5
65
73
34
130
In order to finance the natural gas transportation business, a
€1,650 million loan was incurred with a 5-year term at an
interest rate of 1.08% in 2014.
Liabilities to credit institutions
Other bonds consist primarily of industrial revenue and
pollution control bonds of the BASF Corporation group that
were used to finance investments in the United States. Both
the weighted-average interest rate of these bonds as well as
their weighted-average effective interest rate amounted to
2.1% in 2016 and 1.5% in 2015. The average residual term
amounted to 195 months as of December 31, 2016 (Decem-
ber 31, 2015: 210 months).
Other bonds
15,197
16,312
5,231
6,190
303
1,049
2,099
1,304
1,865
2,115
1,625
1,887
4,074
3,767
December 31, 2015
December 31, 2016
15,197
16,312
88
81
2
Precious metals
Emission certificates
Agricultural
commodities
5
17,119
Total assets
2,241
2,241
LaR
2,241
2,241
Cash and cash equivalents
Htm
Securities
14,711
127
Afs
127
127
Securities
1,508
LaR
1,508
3,916
Other receivables and other assets6
608
208
127
14,291
2,410
816
334
Derivatives no hedge accounting
4,020
4,020
Accounts payable, trade
82
82
Liabilities from finance leases
2,996
AmC
2,996
2,996
Liabilities to credit institutions
1,714
AmC
1,714
1,714
Commercial paper
11,109
AmC
10,487
10,487
Bonds
208
334
n.a.
208
420
Shareholdings¹
Carrying
amount
Total carrying
amount within
Carrying amounts and fair values of financial instruments as of December 31, 2015 (million €)
649
0
23,764
23,044
24,645
Receivables from finance leases
Total liabilities
AmC
1,367
2,968
Other liabilities
26
26
n.a.
26
26
Derivatives with hedge accounting
1,367
41
scope of
application of
IFRS 7
420
41
Valuation
category in
accordance
with IAS 392
Derivatives with hedge accounting
42
650
aFVtPL
650
650
Derivatives no hedge accounting
9,516
LaR
9,516
9,516
Accounts receivable, trade
41
n.a.
0
0
Afs
level 24
level 13
Fair value
Thereof
fair value
fair value
Thereof
208
n.a.
AmC
aFVtPL
82
4,020
Deviations from the derivatives with positive fair values and
derivatives with negative fair values reported in other
receivables and other liabilities at the end of 2016 and 2015
arose from derivatives not subject to any netting agreements
as well as embedded derivatives and are therefore not
included in the table above.
The table "Offsetting of financial assets and financial liabilities"
shows the extent to which financial assets and financial
liabilities are offset in the balance sheet, as well as potential
effects from the offsetting of instruments subject to a legally
enforceable global netting agreement or similar agreement.
For positive fair values of combined interest and cross-
currency swaps, the respective counterparties provided cash
collaterals in corresponding amounts to the outstanding fair
values.
185
(7)
258
(296)
(134)
(134)
Potential
net amount
collateral
agreements
Net gains and losses from financial instruments comprise the
results of valuations, the amortization of discounts, the recog-
nition and reversal of impairments, results from the translation
of foreign currencies as well as interest, dividends and all other
effects on the earnings resulting from financial instruments.
The line item financial instruments at fair value through profit or
loss contains only those gains and losses from instruments
which are not designated as hedging instruments as defined
by IAS 39. Net gains or net losses from available-for-sale
financial assets contain income and expenses from write-
downs/write-ups, interest, dividends and the reclassification of
valuation effects from equity on the sale of the securities and
shareholdings.
Relating to
financial
688
326
(22)
Net amount
Amount offset
(22)
710
348
Derivatives with negative fair values
Derivatives with positive fair values
Gross amount
Amounts which cannot be offset
Due to global
Amounts which can be offset
netting
Net gains and losses from financial instruments (million €)
Loans and receivables
Thereof interest result
The gains and losses from the valuation of securities and shareholdings
recognized in the equity of the shareholders of BASF SE are shown in
the Statement of income and expense recognized in equity on page 156
loss. This development is primarily due to realized and
unrealized results from derivatives to hedge the liabilities
previously stated.
The decrease in net losses from financial liabilities measured
at amortized cost primarily related to currency translation of
financing-related liabilities denominated in foreign currencies,
which resulted in a translation gain in 2016 and a translation
loss in 2015. Countering this was a net loss in 2016 from
financial instruments measured at fair value through profit or
(375)
595
(558)
(390)
(1,127)
(124)
0
2
10
22
105
74
(31)
(166)
2015
2016
Financial instruments at fair value through profit or loss
Thereof interest result
Financial liabilities measured at amortized cost
Thereof interest result
Available-for-sale financial assets
Offsetting of financial assets and financial liabilities as of December 31, 2015 (million €)
321
(47)
(101)
3 Determination of the fair value based on quoted, unadjusted prices on active markets
2 Afs: available-for-sale (category: available-for-sale financial assets); LaR: loans and receivables (category: loans and receivables); aFVtPL: at-fair-value-through-profit-or-loss (category:
financial assets and liabilities at fair value recognized in the income statement); AmC: amortized cost (category: financial liabilities which are not derivatives); Htm: Held-to-maturity
(category: financial assets held to maturity); a more detailed description of the categories can be found in Note 1 from page 160 onward.
1 The difference between carrying amount and fair value results from shareholdings measured at acquisition cost, for which the fair value could not be reliably determined (2016:
€468 million; 2015: €420 million).
level 35
Thereof
fair value
level 35
fair value
Thereof
341
22
1,371
21,655
312
29
29
n.a.
AmC
1,371
21,033
2,944
22,606
Total liabilities
Other liabilities 6
29
29
Derivatives with hedge accounting
22
334
4 Determination of the fair value based on parameters for which directly or indirectly quoted prices on active markets are available
623
5 Determination of the fair value based on parameters for which there is no observable market data
211
469
(46)
515
Derivatives with negative fair values
220
(124)
(101)
445
Potential
net amount
Relating to
financial
collateral
netting
agreements
Net amount
Amount offset
(46)
491
Derivatives with positive fair values
Gross amount
BASF Report 2016
Amounts which cannot be offset
Due to global
Amounts which can be offset
Offsetting of financial assets and financial liabilities as of December 31, 2016 (million €)
Notes Notes on balance sheet
Consolidated Financial Statements
212
6 Not including separately shown derivatives as well as receivables and liabilities from finance leases
0
623
aFVtPL
1,414
2,979
Total
liabilities
cial instruments
Miscellaneous
Bonds and other
liabilities to the
capital market
Total
2021 and thereafter
2020
339
2019
2017
2016
Liabilities
resulting from
derivative finan-
to credit
institutions
Liabilities
Maturities of contractual cash flows from financial liabilities as of December 31, 2015 (million €)
20,757
1,671
7,638
1,249
2018
1,258
5,990
1,738
315
43
8
6,497
480
14
14
3
449
2,287
18
8
1,351
910
2,161
28
13
119
2,001
1,938
47
8
145
1,551
2,362
2,256
5,701
Notes Notes on balance sheet
Consolidated Financial Statements
210
BASF promptly recognizes any risks from cash flow fluctua-
tions as part of the liquidity planning. BASF has ready access
to sufficient liquid funds from our ongoing commercial paper
program and confirmed lines of credit from banks.
Liquidity risks
For more information on credit risks, see Note 18 from page 195 onward
Default and credit risks arise when counterparties do not fulfill
their contractual obligations. BASF regularly analyzes the
creditworthiness of each significant debtor and grants credit
limits on the basis of this analysis. Due to the global activities
and diversified customer structure of the BASF Group, there
is no significant concentration of default risk. The carrying
amount of all receivables, loans and interest-bearing securities
plus the nominal value of other financial obligations subject to
default risk represents the maximum default risk for BASF.
Default and credit risk
For more information regarding financial risks and BASF's risk manage-
ment, see the chapter "Opportunities and risks report" in the Manage-
ment's Report from page 111 onward
The exposure corresponds to the net amount of all long and
short positions of the respective commodity category.
о
Total
4
91
2
0
0
(40)
(29)
1
10
1
23
1
BASF Report 2016
6,863
27.2 Maturity analysis
Derivatives are included using their net cash flows,
provided they have a negative fair value and therefore repre-
sent a liability. Derivatives with positive fair values are assets
and are therefore not considered.
Total
Miscellaneous
liabilities
1,097
2,871
15,555
7,269
1,368
1,163
1,475
1111
Liabilities
resulting from
derivative finan-
cial instruments
1,356
2,025
2,687
Bonds and other
liabilities to the
capital market
Total
2022 and thereafter
2021
2020
2019
2018
2017
Maturities of contractual cash flows from financial liabilities as of December 31, 2016 (million €)
Trade accounts payable are generally interest-free and due
within one year. Therefore, the carrying amount of trade
accounts payable equals the sum of future cash flows.
The interest and principal payments as well as other payments
for derivative financial instruments are relevant for the presen-
tation of the maturities of the contractual cash flows from
financial liabilities. Future cash flows are not discounted here.
EUR
14,574
425
14,921
15,390
17,756
Liabilities to credit institutions
Commercial paper
Bonds
Total assets
1,375
1,375
LaR
2,061
1,375
Cash and cash equivalents
Htm
1
1
Securities
672
672
Afs
672
672
1,375
504
12,424
12,424
623
623
Derivatives no hedge accounting
4,610
AmC
4,610
4,610
Accounts payable, trade
106
n.a.
106
106
Liabilities from finance leases
2,855
AmC
2,855
2,855
1,033
AmC
1,033
1,033
13,144
AmC
Securities
1,370
LaR
1,370
level 24
level 13
Fair value
fair value
fair value
Thereof
Thereof
Valuation
category in
accordance
with IAS 392
IFRS 7
amount
scope of
application of
Carrying
Notes Notes on balance sheet
Consolidated Financial Statements
Total carrying
amount within
Carrying amounts and fair values of financial instruments as of December 31, 2016 (million €)
BASF Report 2016
The fair value of financial indebtedness is determined on the
basis of interbank interest rates. The difference between carry-
ing amounts and fair values results primarily from changes in
market interest rates.
For trade accounts receivable, other receivables and miscella-
neous assets, loans, cash and cash equivalents, as well as
trade accounts payable and other liabilities, the carrying
amount approximates the fair value. Shareholdings which are
not traded on an active market and whose fair value could not
be reliably determined are recognized at amortized cost and
are reported under other financial assets.
Classes and categories of financial instru-
ments
27.3
19,719
1,680
Shareholdings¹
3,040
Receivables from finance leases
Accounts receivable, trade
Derivatives no hedge accounting
468
3,736
Other receivables and other assets
172
172
n.a.
172
172
Derivatives with hedge accounting
332
14
346
aFVtPL
346
346
10,952
LaR
10,952
10,952
34
n.a.
34
34
Afs
468
Bond 2016/2031
Advances received on orders
151
(10)
(65)
5
110
538
1,297
20
(62)
(72)
27
118
2016
Dec. 31,
588
Other
changes
Utilization
Unwinding
of the
discount
Additions
Jan. 1, 2016
1,266
Other
and similar commitments
Litigation, damage claims, warranties
117
196
Restructuring measures
743
775
contracts
Reversals
Obligations from sales and purchase
1,569
3
3,017
5,909
Total
1,406
(51)
(139)
(201)
1
317
1,479
109
15
(13)
1,561
(30)
86
208
6
(27)
(84)
928
44
(59)
(575)
1,933
(18)
(50)
(1,132)
51
36
Employee obligations
Environmental protection and remediation
919
928
Obligations from sales and purchase contracts
1,150
1,569
1,217
1,933
Employee obligations
59
538
116
588
Environmental protection and remediation costs
775
72
29
1,297
Thereof current
December 31, 2015
Thereof current
December 31, 2016
Restoration obligations
Million €
Notes Notes on balance sheet
Consolidated Financial Statements
23 Other provisions
BASF Report 2016
1.5%
1,266
costs
763
208
Restoration obligations
Development of other provisions in 2016 (million €)
The following table shows the development of other
provisions by category. Other changes include changes in the
scope of consolidation, acquisitions, divestitures, currency
effects and the reclassification of obligations to liabilities when
the amount and timing of these obligations become known.
Provisions for litigation, damage claims, warranties and
similar commitments contain anticipated expenses from
lawsuits in which BASF is the defendant party, as well as
obligations under damage claims against BASF and fines.
Other largely includes noncurrent tax provisions.
measures.
The restructuring measures provisions include severance
payments to departing employees as well as expected costs
for site closures, including the costs for demolition and similar
Obligations from sales and purchase contracts largely
include obligations arising from rebates granted and other
price discounts in the Agricultural Solutions segment,
warranties and product liability, sales commissions, expected
losses on contracts. The increase in provisions resulted from
higher accruals for rebate programs.
For more information on provisions for the long-term incentive program,
see Note 30 from page 216 onward
Provisions for employee obligations primarily include
obligations for the granting of long-service bonuses and
anniversary payments, variable compensation including
associated social security contributions, as well as provisions
for early retirement programs for employees nearing retirement.
The increase was primarily attributable to higher accruals for
the long-term Incentive (LTI) program.
Provisions for environmental protection and remedia-
tion costs cover expected costs for rehabilitating conta-
minated sites, recultivating landfills, removal of environmental
contamination at existing production or storage sites and
similar measures.
Restoration obligations primarily relate to the estimated
costs for the filling of wells and the removal of production
equipment after the end of production in the Oil & Gas
segment.
2,540
5,909
Restructuring measures
2,802
302
1,479
323
1,406
Other
Total
29
86
37
109
Litigation, damage claims, warranties and similar commitments
165
196
161
6,469
(2,159)
10
26
300
variable
300
EUR
Bond 2013/2020
Variable
749
749
1.44%
750
EUR
1.375% Bond 2014/2019
1,000
300
999
1,000
EUR
Bond 2012/2018
1.5%
300
300
variable
300
EUR
Bond 2013/2018
Variable
340
292
1.51%
1.46%
1.875%
EUR
159
3.70%
1,450
NOK
3.675% Bond 2013/2025
496
497
2.60%
500
EUR
Bond 2014/2024
2.5%
289
(360)
1.06%
GBP
0.875% Bond 2016/2023
1,256
1,255
1.93%
1,250
EUR
Bond 2012/2022
2%
698
1,016
1.47%
1,000
250
250
Bond 2013/2021
Bond 2014/2017
4.62%
500
EUR
Bond 2006/2016
4.5%
1,714
1,033
1,089
USD
Commercial paper
BASF SE
2015
2016
December 31,
Effective
interest rate
currency of issue)
Currency
Nominal value
(million,
effective interest method
Carrying amounts based on
BASF Report 2016
Financial indebtedness (million €)
24 Liabilities
Notes Notes on balance sheet
Consolidated Financial Statements
204
203
GBP
6,469
500
Variable Bond 2013/2016
December 31,
4.625%
300
EUR
300
4.69%
300
EUR
Bond 2009/2017
544
467
6.04%
400
1.375%
5.875% Bond 2009/2017
300
GBP
300
variable
300
EUR
Variable Bond 2014/2017
200
4.40%
200
200
EUR
4.25% Bond 2009/2016
200
variable
25.03
%
(0.26)
%
(0.11)
Volatility BASF share
24.69
The 2009 to 2015 programs were structured in a similar
way to the LTI program 2016.
Volatility MSCI Chemicals
%
15.73
15.07
Risk-free interest rate
As of January 1
2016
3.28
Fair value of options and parameters used as of December 31, 2016
%
Dividend yield
LTI program of the year
2016
2015
38.67
46.74
€
Fair value
Number of free shares to be granted (shares)
All employees are entitled to participate in the "plus" incentive
share program, with the exception of those entitled to
participate in the LTI program. The "plus" incentive share
program was introduced in 1999 and is currently offered in
Germany, other European countries and Mexico. Each
participant must make an individual investment in BASF shares
from his or her variable compensation. For every ten BASF
shares purchased in the program, a participant receives one
BASF share at no cost after one, three, five, seven and ten
years of holding the BASF shares. As a rule, the first and
second block of ten shares entitle the participant to receive
one BASF share at no extra cost in each of the next ten years.
The right to receive free BASF shares lapses if a participant
sells the individual investment in BASF shares, if the participant
stops working for the Company or one year after retirement.
The number of free shares to be granted has developed as
follows:
BASF incentive share program
€464 million as of December 31, 2016, due to higher fair val-
ues of the outstanding option rights as well as due to a higher
number of outstanding options. The utilization of provisions
amounted to €25 million in 2016 (2015: €34 million). Expenses
arising from additions to the provision amounted to €267 mil-
lion in 2016. The previous year had included an expense of
€49 million.
increased from €222 million as of December 31, 2015, to
The models used in the valuation of the option plans are
based on the arbitrage-free valuation model according to
Black-Scholes. The fair values of the options are determined
using the binomial model.
not surpassed and the option is exercised, the other option
right lapses. A participant's maximum gain from exercising an
option is limited to five times the original individual investment
starting with the 2013 LTI program. The maximum gain from
exercising an option is limited to ten times the original
individual investment for programs from previous years. Option
rights are nontransferable and are forfeited if the option holders
no longer work for BASF or have sold part of their individual
investment before the expiry of the two-year vesting period.
They remain valid in the case of retirement. For the members
of the Board of Executive Directors, the long-term orientation
of the program is significantly strengthened compared with the
conditions applying to the other participants. The members of
the Board of Executive Directors are required to participate in
the LTI program with at least 10% of their gross bonus. In view
of this binding personal investment (in the form of BASF
shares), an extended holding period of four years applies.
Members of the Board of Executive Directors may only exer-
cise their options at least four years after they have been
granted (vesting period).
Correlation BASF share price:
3.28
Newly acquired entitlements
2016
2015
2,905,048
The fair value of the free shares to be granted is recognized
as an expense with a corresponding increase in capital surplus
over the term of the program.
Personnel expenses of €28 million were recorded in 2016
for the BASF incentive share program "plus" and €27 million
in 2015.
217
218
Consolidated Financial Statements
Notes Other explanatory notes
The free shares to be provided by the Company are measured
at the fair value on the grant date. Fair value is determined on
the basis of the stock price of BASF shares, taking into
account the present value of dividends, which are not paid
during the term of the program. The weighted-average fair
value on the grant date amounted to €67.90 for the 2016
program, and €71.55 for the 2015 program.
31 Compensation for the Board of Executive Directors and Supervisory Board
BASF Report 2016
2015
Performance-related and not performance-related cash compensation for the
Board of Executive Directors
Consolidated Financial Statements
Notes Other explanatory notes
17.4
Million €
As a result of a resolution by the Board of Executive
Directors in 2002 to settle options in cash, options outstanding
from the LTI programs 2009 to 2016 were valued with the fair
value as of December 31, 2016. A proportionate provision is
recorded for programs in the vesting period. The LTI provision
The number of options granted amounted to 1,710,404 in
2016 (2015: 1,807,532).
Volatility was determined on the basis of the monthly
closing prices over a historical period corresponding to the
remaining term of the options.
533,825
MSCI Chemicals
%
73.90
73.66
Bonus shares issued
(519,984)
(509,168)
Lapsed entitlements
(97,424)
(100,184)
As of December 31
2,849,723
2,829,521
The stated fair values and the valuation parameters relate to
the LTI programs 2016 and 2015. The fair value calculation
was based on the assumption that options will be exercised in
a manner dependent on their potential gains. For the programs
from preceding years, corresponding fair values were com-
puted and valuation parameters were used.
2,829,521
637,610
BASF Report 2016
23
The participant receives four option rights per invested
share. Each option consists of two parts, right A and right B,
which may be exercised if defined thresholds have been met:
Cash used in investing activities included €2,828 million
in payments made for acquisitions (2015: €215 million),
especially for the acquisition of the global surface treatment
provider Chemetall from Albemarle Corporation, Charlotte,
North Carolina. In the previous year, payments had especially
been made for the acquisition of a 66% share in a company
into which TODA KOGYO CORP., Hiroshima, Japan,
contributed its business with cathode materials for lithium-ion
batteries, patents and production capacities.
Payments of €664 million were received for divestitures
(2015: €651 million) primarily from the sale of the industrial
coatings business to the AkzoNobel Group and from the sale
of the global polyolefin catalysts business to W. R. Grace &
Co., Columbia, Maryland. In the previous year, payments had
been received from the sale of portions of the pharmaceutical
ingredients and services business to Siegfried Holding AG,
Zofingen, Switzerland, as well as the sale of the 50% share in
Styrolution Holding GmbH, Frankfurt am Main, Germany, to
the INEOS Group completed in 2014.
The payments made for property, plant and equipment,
and intangible assets in the amount of €4,145 million included
investments for 2016, to the extent that they already had an
effect on cash.
Cash and cash equivalents were not subject to any
utilization restrictions, as in the previous year.
For more information on cash flow from acquisitions and divestitures,
see Note 2.4 from page 174 onward
Cash provided by operating activities also included
€262 million in benefits paid (2015: €248 million), which are
covered by a contractual trust arrangement.
215
Consolidated Financial Statements
Notes Other explanatory notes
BASF Report 2016
Capital structure management
The aim of capital structure management is to maintain the
financial flexibility needed to further develop BASF's business
portfolio and take advantage of strategic opportunities. The
objectives of the Company's financing policy are to secure
solvency, limit financial risks and optimize the cost of capital.
Capital structure management focuses on meeting the
requirements needed to ensure unrestricted access to capital
markets and a solid A rating. BASF's capital structure is
managed using selected financial ratios, such as dynamic
debt ratios, as part of the company's financial planning.
216
As a part of risk management, activities in countries with
transfer restrictions are continuously monitored. This includes,
for example, regular analysis of the macroeconomic and legal
environment, shareholders' equity and the business models of
the operating units. The chief aim is the reduction of counter-
party, transfer and currency risks for the BASF Group.
Interest payments comprised interest payments received of
€156 million (2015: €194 million) and interest paid of
€615 million (2015: €652 million).
1,550
18.4
89
83
Other explanatory notes
29 Statement of cash flows and capital structure management
Statement of cash flows
458
219
Cash provided by operating activities contained the following
payments:
Income tax payments
Interest payments
Dividends received
2016
2015
1,495
459
225
Million €
The equity of the BASF Group as reported in the balance
sheet amounted to €32,568 million as of December 31, 2016
(December 31, 2015: €31,545 million); the equity ratio was
42.6% on December 31, 2016 (December 31, 2015: 44.5%).
BASF prefers to access external financing on the capital
markets. A commercial paper program is used for short-term
financing, while corporate bonds are used for financing in
the medium and long term. These are issued in euros and
other currencies with different maturities. The goal is to
create a balanced maturity profile, achieve a diverse range of
investors and optimize our debt capital financing conditions.
Currently, BASF has the following ratings:
Current
financial
indebtedness
Outlook
A1
A+
P-1
stable
A-1
Noncurrent
financial
indebtedness
negative
BASF continues to strive for at least a solid A rating,
which ensures unrestricted access to financial and capital
markets.
For more information on financing policy and the Statement of Cash
Flows, see the Management's Report from page 57 onward
30 Share-price-based compensation program and BASF incentive share program
Share-price-based compensation program
In 2016, BASF continued its share-price-based compensation
program known as the long-term incentive (LTI) program for
senior executives of the BASF Group. This program has been
in place since 1999. Approximately 1,200 senior executives,
including the Board of Executive Directors, are currently
entitled to participate in this program. This program provides
for the granting of virtual options, which are settled in cash
when exercised.
Participation in the LTI program is voluntary. In order to
take part in the program, a participant must make a personal
investment: A participant must hold BASF shares amounting
to 10% to 30% of his or her individual variable compensation
for a two-year period from the granting of the option (holding
period). The number of shares to be held is determined by the
amount of variable compensation and the volume-weighted
average market price for BASF shares on the first business
day after the Annual Shareholders' Meeting, which was €69.93
on May 2, 2016.
Rating agency Moody's last confirmed their rating of "A1/P-1/
outlook stable" on November 28, 2016. Standard & Poor's
adjusted their BASF rating from "A+/A-1/outlook negative"
to "A/A-1/outlook stable" on March 14, 2016, and con-
firmed it most recently on August 10, 2016. This adjustment
was largely based on the weaker market environment,
especially for basic and agricultural chemicals, limited
overall volumes growth, and the considerable drop in the
price of crude oil. Uncertainty with regard to economic
development in China was taken into consideration, as well.
Rating agency Scope has also been evaluating BASF's
creditworthiness since September 2016. They rated BASF
at "A/S-1/outlook stable."
Dec. 31, 2015
Moody's
Standard & Poor's
Scope
stable
Noncurrent
financial
Current
financial
Dec. 31, 2016
Moody's
indebtedness
indebtedness
Outlook
A1
P-1
stable
Standard & Poor's
A
A-1
stable
A
S-1
The threshold of right A is met if the price of the BASF share
has increased by more than 30% in comparison with the base
price (absolute threshold). The value of right A will be the
difference between the market price of BASF shares on the
exercise date and the base price; it is limited to 100% of the
base price. Right B may be exercised if the cumulative per-
centage performance of BASF shares exceeds (relative
threshold) the percentage performance of the MSCI World
Chemicals IndexSM (MSCI Chemicals). The value of right B will
be the base price of the option multiplied by twice the
percentage outperformance of BASF shares compared with
the MSCI Chemicals Index on the exercise date. It is limited to
the closing price on the date of exercise minus the computed
nominal value of BASF shares. Beginning with the 2013
LTI program, right B is only valuable if the price of BASF shares
at least corresponds with the base price. The options of the
LTI program 2016 were granted on July 1, 2016, and may be
exercised following a two-year vesting period, between
July 1, 2018, and June 30, 2024. During the exercise period,
there are certain times (closed periods) during which the
options may not be exercised. Each option can only be
exercised in full. This means that one of the performance
targets must be surpassed. If the other performance target is
Fair value of options granted to the Board of Executive Directors in the fiscal year as of grant date
35 Nonadjusting events after the reporting period
4.3
Total
Thereof domestic
2016
2015
17.5
21.0
Other services
6.4
0.6
0.4
0.3
0.2
0.1
0.1
7.2
0.3
Thereof domestic
Thereof domestic
There were obligations from guarantees and other
financial obligations at BASF in favor of nonconsolidated
subsidiaries in the amount of €3 million on Decem-
ber 31, 2016 (December 31, 2015: €45 million) and in favor of
associated companies in the amount of €21 million in 2016
(December 31, 2015: €37 million).
Obligations arising from purchase contracts with associated
companies amounted to €26 million as of December 31, 2016
and €29 million as of December 31, 2015.
Effective December 31, 2016, the present value of the
outstanding minimum rental payments for an office building
including parking area payable by BASF SE to BASF Pen-
sionskasse WaG for the nonterminable basic rental period to
2029 amounted to €57 million.
There were no reportable related party transactions with
members of the Board of Executive Directors or the Super-
visory Board and their related parties in 2016.
For more information on subsidiaries, joint ventures and associated
companies, see the List of Shares Held of the BASF Group 2016 on
page 178
For more information on other financial obligations in favor of joint
ventures, see Note 25: Other financial obligations from page 206 onward
Tax consultation services
For more information on defined benefit plans that share risks between
the Group companies (including nonconsolidated subsidiaries), see
Note 22: Provisions for pensions and similar obligations from page 198
onward
33 Services provided by the external auditor
BASF Group companies have used the following services from KPMG:
Million €
Annual audit
Thereof domestic
Audit-related services
For more information on the Board of Executive Directors and the
Supervisory Board, see Management and Supervisory Boards and
Compensation Report from page 136 onward
0.7
0.3
0.7
Management's Report
Corporate Governance
Consolidated Financial Statements
Supplementary Information
on the Oil & Gas Segment
Overviews
To Our Shareholders
Supplementary information
on the Oil & Gas segment
Oil & Gas
231
៩៨ ហ
125
151
17
223
5
On February 7, 2017, BASF acquired the private company
Rolic AG headquartered in Allschwil, Switzerland. The com-
pany develops and sells ready-to-use formulations and
functional film products for the display and security industry
against forgery as well as barrier materials and films. With the
acquisition, BASF broadens its technology know-how and
product portfolio of display materials. The largest part of the
activities will be integrated in the Dispersions Pigments division
and a smaller part in the Coatings division.
Effective January 1, 2017, BASF took over the western Euro-
pean Construction Chemicals business from the Henkel Group
with the trade names ThomsitⓇ and CeresitⓇ for floor and
tile-laying systems as well as sealants for professional users.
This will strengthen BASF's portfolio in the construction chem-
icals business of the PCI Group, which belongs to the Con-
struction Chemicals division. The initial accounting for the
business combination will take place within a measurement
period of one year.
18.5
22.2
The line item annual audit related to expenses for the audit of
the Consolidated Financial Statements of the BASF Group as
well as the legally required financial statements of BASF SE
and its consolidated subsidiary companies and joint
operations.
219
220
Consolidated Financial Statements
Notes - Other explanatory notes
34 Declaration of Conformity with the German Corporate Governance Code
BASF Report 2016
Declaration pursuant to Section 161 AktG
(Stock Corporation Act)
The annual Declaration of Conformity with the German
Governance Code according to Section 161 of the German
Stock Corporation Act was signed by the Board of Executive
Directors and the Supervisory Board of BASF SE in December
2016, and is published online.
For more information, see basf.com/en/governance
23
The outstanding balances toward related parties were
generally not secured and settled in cash. As in the previous
year, there were no significant valuation allowances in 2016 for
trade accounts receivable from related parties. The balance of
valuation allowances for other receivables from nonconsoli-
dated subsidiaries rose from €39 million as of Decem-
ber 31, 2015, to €79 million as of December 31, 2016.
Thereof €26 million in 2016 was recognized as an expense
(2015: €17 million).
The decline of €127 million in other receivables from
associated companies in 2016 was largely due to the repay-
ment of long-term loans.
Other receivables and liabilities primarily arose from
financing activities, outstanding dividend payments, profit-
and-loss transfer agreements, and other finance-related and
operating activities and events.
Sales and trade accounts receivable from and trade accounts
payable to related parties mainly included business with own
products and merchandise, agency and licensing businesses,
and other operating business.
Performance-related compensation for the Board of Executive
Directors is based on the return on assets adjusted for special
items, as well as the performance of the entire Board. Return
on assets corresponds to income before taxes and minority
interests plus interest expenses as a percentage of average
assets.
The members of the Board of Executive Directors were
granted 163,764 options under the long-term incentive (LTI)
program in 2016.
The market valuation of the options of active and former
members of the Board resulted in expenses of €30.7 million in
2016. In 2015, the market valuation of the options resulted in
income of €6.6 million.
For more information on the compensation of members of the Board of
Executive Directors, see the Compensation Report from page 138
onward
For more information on the members of the Supervisory Board and
Board of Executive Directors, including their memberships on other
boards, see page 136 onward
32 Related-party transactions
144.7
A related party is a natural person or legal entity which can
exert influence on the BASF Group or over which the BASF
Group exercises control or joint control or a significant
influence. In particular, this comprises nonconsolidated
subsidiaries, joint ventures and associated companies.
Sales to related parties (million €)
Nonconsolidated
subsidiaries
2016
2015
395
389
The following tables show the volume of business with
related parties that are included at amortized cost or accounted
for using the equity method.
150.4
12.1
15.9
Total compensation for the Board of Executive Directors¹
21.4
22.7
Service costs for members of the Board of Executive Directors
3.3
3.8
Compensation for the Supervisory Board
Total compensation for former members of the Board of Executive Directors
and their surviving dependents
Pension provisions for former members of the Board of Executive Directors
and their surviving dependents
Guarantees assumed for members of the Board of Executive Directors and the Supervisory Board
1 The compensation for Dr. Andreas Kreimeyer, who left the Board of Executive Directors on April 30, 2015, is included in the 2015 figures.
3.0
3.0
317
4.0
378
245
Joint ventures
Associated companies
176
196
December 31, 2015
161
229
390
Nonconsolidated subsidiaries
517
December 31, 2015
180
120
203
BASF Report 2016
Consolidated Financial Statements
Notes - Other explanatory notes
Other liabilities
December 31, 2016
178
97
258
December 31, 2016
Other receivables
Other receivables and liabilities with related parties (million €)
370
Joint ventures
Trade accounts receivable from / trade accounts payable to related parties (million €)
Nonconsolidated subsidiaries
Joint ventures
Associated companies
135
76
55
Accounts receivable, trade
December 31, 2016 December 31, 2015
139
71
34
Accounts payable, trade
December 31, 2016
73
December 31, 2015
92
60
54
44
44
Associated companies
More than 5 years
Total
The total intrinsic value of the exercisable options
amounted to €167 million as of December 31, 2016 and
€34 million as of December 31, 2015.
49
Liabilities from finance leases (million €)
Total
Land, land rights and buildings
Machinery and technical equipment
Miscellaneous equipment and fixtures
Leased assets (million €)
Property, plant and equipment include those assets which are considered to be economically owned through a finance lease.
They primarily concern the following items:
Leased assets
28 Leases
Furthermore, BASF SE's fixed-rate U.S. private placement
of $1.25 billion, issued in 2013, was converted into euros
using currency swaps. This hedge was designated as a cash
flow hedge. The hedge was entirely effective. In 2016, this
resulted in changes in fair value of minus €33 million, which
were recognized in the equity of the shareholders of BASF SE
(2015: €157 million). In 2016, €38 million was derecognized
from other comprehensive income and recorded as income in
the financial result (2015: €119 million income in financial
result).
December 31, 2016
The interest rate risk of the floating rate notes issued by
BASF SE in 2014 (€300 million variable-rate bond 2014/2017)
as well as the floating rate notes issued in 2013 were hedged
using interest rate swaps. The bonds and the interest rate
swaps were designated in a hedging relationship. In 2016, the
effective changes in the fair value of the hedging instruments
amounting to €6 million (2015: €3 million) were recognized in
the equity of the shareholders of BASF SE. There were no
ineffective parts.
To hedge foreign currency risk which existed for a part of
the US dollar-denominated purchase price for the acquisition
of Chemetall, BASF used options and foreign currency forward
contracts in 2016. These were designated as hedging instru-
ments and led to effective changes in the amount of €97 mil-
lion, which was recognized in the equity of the shareholders of
BASF SE. Upon completion of the transaction in December
2016, this amount was derecognized from the equity of the
shareholders of BASF SE reducing the purchase price accord-
ingly and along with that the resulting goodwill arising from the
transaction. The ineffective part of the fair value changes of the
BASF also uses cash flow hedge accounting for some foreign
currency derivatives to hedge planned sales denominated in
U.S. dollars. The impact on earnings from the underlying
transactions will occur in 2017. In 2016, the effective change
in values of the hedges was €9 million (2015: minus €23 mil-
lion), which was recognized in the equity of the shareholders of
BASF SE. A total of €11 million (2015: expense of €29 million)
was derecognized from the equity of shareholders of BASF SE
and was recognized in income from foreign currency and
hedging transactions. The hedge was entirely effective.
BASF Report 2016
Consolidated Financial Statements
Notes Notes on balance sheet
214
213
BASF applied cash flow hedge accounting for derivatives
used to hedge foreign currency risks from gas purchase and
sales contracts to the completion of the asset swap with
Gazprom in 2015. In 2015 up to the completion date, the
effective change in values of the hedges was minus €150 mil-
lion, which was recognized in the equity of the shareholders of
BASF SE. There were no ineffective parts. The amounts
derecognized from the equity of shareholders of BASF SE
increased cost of sales by €161 million to the completion date
in 2015.
The planned transactions and their effect on earnings occur in
the year following the balance sheet date. In 2016, effective
changes in the fair value of hedging instruments of €1 million
(2015: €35 million) was recognized in the equity of the
shareholders of BASF SE. In 2016, effective changes in the fair
value of hedging instruments of €1 million were derecognized
from the equity of shareholders of BASF SE and recognized in
other operating income. In 2015, this resulted in an expense of
€174 million. The ineffective part in the change in value of the
hedge amounted to minus €1 million in 2016 and minus
€2 million in 2015. This amount was reported in the income
statement in other operating expenses and in the previous
year in cost of sales as well as in other operating income and
in other operating expenses.
hedging instruments amounted to minus €10 million and was
recognized in other operating expenses.
In the previous year up to the completion of the asset
swap with Gazprom, cash flow hedge accounting was applied
in the Natural Gas Trading business sector for crude oil swaps
concluded in order to hedge price risks from purchase and
sales contracts for natural gas. These contracts had variable
prices and the price formula was coupled with the oil price.
Cash flow hedge accounting continued to be applied to a
minor extent for natural gas purchases.
Acquisition cost
December 31, 2015
Acquisition cost
December 31, 2016
69
206
94
241
13
44
25
Net book value
59
117
43
136
25
45
26
46
Net book value
31
December 31, 2015
Some of the planned purchases of naphtha are hedged using
swaps and options on oil and oil products. Some of these
hedges were shown in the Consolidated Financial Statements
of the BASF Group by means of cash flow hedge accounting,
where gains and losses from hedges were initially recognized
directly in equity. Gains and losses from hedges are included
in cost of sales at the point in time at which the hedged item is
recognized in the consolidated statement of income. Unlike
the previous year, no hedging instruments were designated in
2016.
495
53
15
56
December 31, 2015
December 31, 2016
(163)
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Interest rate swaps
Foreign currency derivatives
Foreign currency options
(148)
Foreign currency forward contracts
The fair values of derivative financial instruments are
calculated using valuation models which use input parameters
observable on the market. Exceptions to this are some
commodity derivatives, whose valuation is based directly on
market prices.
the event of nonperformance of the other party. To minimize
the default risk on derivatives with positive market values,
transactions are exclusively conducted with creditworthy
banks and partners and are subject to predefined credit limits.
To ensure effective risk management, risk positions are
centralized at BASF SE and certain Group companies. The
contracting and execution of derivative financial instruments
for hedging purposes are conducted according to internal
guidelines, and subject to strict control mechanisms.
BASF is exposed to foreign-currency, interest-rate and com-
modity-price risks during the normal course of business.
These risks are hedged through a centrally determined
strategy employing derivative instruments. Hedging is only
employed for underlying items from the operating business,
cash investments, and financing as well as for planned sales,
raw material purchases and capital measures. The risks from
the underlying transactions and the derivatives are constantly
monitored. Where derivatives have a positive market value,
BASF is exposed to credit risks from derivative transactions in
The use of derivative instruments
27.4 Derivative instruments and hedge
accounting
Consolidated Financial Statements
Notes Notes on balance sheet
BASF Report 2016
43
Fair value of derivative instruments (million €)
Cash flow hedge accounting
109
8
(131)
1
1
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Derivative financial instruments
102
(1)
Commodity derivatives
284
3
18
163
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Interest derivatives
315
45
(27)
(21)
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Combined interest and cross-currency swaps
(31)
197
Minimum lease
payments
(27)
Leasing liability
Less than 1 year
Dec. 31, 2015
Dec. 31, 2016
Nominal value of the future
minimum lease payments
Commitments from operating lease contracts (million €)
In addition, BASF is a lessee under operating lease
contracts. The lease commitments totaling €1,513 million in
2016 (2015: €1,554 million) are due in the following years:
In the current business year and in the previous year, no
additional lease payments exceeding minimum lease payments
due to contractual conditions for finance leases were recog-
nized in the income statement. In 2016 and in the previous
year, leasing liabilities were not offset by any significant future
minimum lease payments from subleases.
Consolidated Financial Statements
Notes Other explanatory notes
360
BASF Report 2016
32
117
108
33
141
Total
18
13
85
31
413
784
17
Interest portion
17
Less than 1 year
1-5 years
Dec. 31, 2015
Nominal value of the future
minimum lease payments
Dec. 31, 2016
Future minimum lease payments from subleasing contracts
based on existing agreements amounted to €12 million in
2016 (2015: €11 million).
Future minimum lease payments to BASF from
operating lease contracts (million €)
757
In 2016, claims arising from operating leases amounted to
€89 million (2015: €83 million).
BASF as lessor
In 2016, minimum lease payments of €446 million (2015:
€474 million) were included in income from operations. In
2016, conditional lease payments of €1 million (2015: €1 mil-
lion) were also included in income from operations. Further-
more, sublease payments of €4 million were included in
income from operations in 2016 (2015: €4 million).
1,554
1,513
Total
357
396
More than 5 years
BASF acts as a lessor for finance leases to a minor extent only.
Receivables on finance leases were €33 million in 2016 (2015:
€41 million).
21
1-5 years
35
Following year 3
16
5
21
26
4
30
Following year 2
19
23
23
5
28
Following year 1
Leasing liability
14
Minimum lease
payments
Interest portion
5
4
28
12
15
More than 5 years
10
9
3
3
Following year 5
8
3
7
3
14
3
17
Following year 4
13
11
16
570
3,241
1,933
Future net cash flows, not discounted
(64)
10% discount rate
3,409
163
1,655
6,710
95
1,547
3,428
1,203
690
164
(120)
Future income taxes
1,582
11,027
1,378
1,633
5,264
1,549
Future production/development costs
(132)
3,610
20,978
1,937
527
82
59
Group
3,478
Thereof
at equity
Total
South
America
Middle East
Russia
Europe
Germany
companies
North Africa,
Rest of
Consolidated and equity-accounted
Standardized measure of discounted future net cash flows 2015 (million €)
1,278
82
25
(42)
82
4,470
1,147
104
2,131
1,020
68
Thereof equity-accounted companies
Standardized measure of discounted
future net cash flows
13
2,240
508
99
5,732
2015
1,365
103
Additions to exploration drilling of the year
479
423
As of January 1
2016
Fully consolidated companies
The following information was determined based on the regu-
lations on Extractive Activities - Oil and Gas (Topic 932) pub-
lished by FASB. Based on this, a standardized measure of
discounted future net cash flows with the relevant revenues,
costs and income tax rates is to be made. The proven reserves
are valued at the average price calculated from the prices on
the first day of the month for the past business year. The val-
ues thus determined are discounted at a 10% annual discount
rate.
reserves
Standardized measure of discounted future
net cash flows relating to proven oil and gas
22
29
27
45
36
45
36
423
411
251
303
152
71
20
37
2015
2016
Future revenues
Number of exploration wells in construction in
progress at equity-accounted companies
as of December 31
310
Capitalized exploration drilling charged to expense
(49)
(136)
Future revenues
Thereof
at equity
Group
America
Middle East
Russia
Total
South
North Africa,
Rest of
Europe
Germany
Consolidated and equity-accounted
companies
Supplementary Information on the Oil & Gas Segment 229
Standardized measure of discounted future net cash flows 2016 (million €)
6,975
BASF Report 2016
212
December 31
Equity-accounted companies as of
423
411
As of December 31
25
9
Translation effect
(150)
Changes in scope of consolidation
(105)
(75)
Reclassification of successful exploration drilling
181
1,861
(1,292)
7,992
78
(175)
68
283
30
Revisions of previous reserves estimates
improved recovery, less related costs
Net changes from extensions, discoveries and
(572)
(3,618)
(242)
(482)
Number of exploration wells in
construction in progress
(1,416)
(186)
balance sheet date
Net changes in prices and production costs at
(105)
(1,634)
(280)
(97)
(380)
(747)
(130)
costs in the current period
Sales of oil and gas produced, net of production
346
6,294
1,351
284
(172)
Investments in the period
67
182
926
171
183
348
207
17
Accretion of discount
351
1,359
116
347
212
625
304
59
Purchase/sale of reserves
(27)
(132)
(182)
24
63
(39)
2
Changes in estimated investments in future periods
79
1,000
144
87
702
Net change in income taxes
10,154
3,025
at equity
(49)
450
9,879
1,990
447
5,134
2,148
160
Future net cash flows, not discounted
10% discount rate
2,458
5,641
702
2,494
1,092
1,413
(60)
Future income taxes
1,618
12,783
1,359
1,304
1,766
6,593
1,761
Future production/development costs
4,526
28,303
4,051
4,245
743
2,109
143
639
Group
Thereof
Total
South
America
North Africa,
Middle East
Russia
Rest of
Europe
Germany
209
As of January 1
Consolidated companies and equity-accounted
companies
BASF Report 2016
Summary of changes in standardized measure of discounted future net cash flows 2016 (million €)
230 Supplementary Information on the Oil & Gas Segment
346
1,405
346
53
28
Thereof equity-accounted companies
346
6,294
1,351
304
3,025
1,405
209
future net cash flows
Standardized measure of discounted
104
3,585
265
Fully consolidated companies
Wells for which drilling is not complete
Wells capitalized less than one year
Wells capitalized more than one year
Total
905
The following table provides an overview of the capitalization
period, amounts capitalized for exploration drilling, and the
number of suspended exploration wells.
1,155
222
30
82
740
81
963
194
1
73
629
66
184
20
29
9
111
15
8
8
8
8
Group
Total
South
America
Middle East
Russia
North Africa,
Rest of
Europe
87
19
106
Germany
32
89
89
82
6
1
89
440
7
86
184
127
Other
79
Germany
54
190
12
Exploration and technology expenditures
For unproven reserves
41
41
41
41
Group
Total
South
America
North Africa,
Middle East
Russia
Rest of
Europe
1
60
For proven reserves
BASF Report 2016
Extensions and discoveries
Purchase/sale of reserves
Production
Proven reserves as of December 31
Thereof equity-accounted companies
Proven developed reserves as of December 31
Thereof equity-accounted companies
Gas 2016
42
144
193
96
9
484
96
5
6
(7)
4
(3)
36
1100
22
15
3
2
48
4
336
Revisions and other changes
in million barrels (MMbbl)
oil reserves as of January 1,
Proven developed and undeveloped
Supplementary Information on the Oil & Gas Segment 223
Supplementary Information on the Oil & Gas Segment
(Unaudited)
The following provides supplementary information on the
Exploration & Production business sector of the Oil & Gas
segment. In the absence of detailed disclosure rules in this
area under the International Financial Reporting Standards
(IFRS), the presentation is based on the FASB standard
Extractive Activities - Oil and Gas (Topic 932), which is a fur-
ther development of SFAS 69. In the following sections, the
determination of the amounts complies with the metrics set
out by IFRS that underlie the BASF Group Consolidated Finan-
cial Statements: Operating income from oil and gas-producing
activities; Period expenditures for acquisition, exploration and
development of oil and gas deposits; Capitalized costs relating
to oil and gas producing activities; and Capitalized exploration
drilling: suspended well costs. The definition of companies
accounted for using the equity method also follows the
approach of the Consolidated Financial Statements. These
changes were introduced in 2016 to improve comparability
between the Supplementary Information on the Oil & Gas
Segment and the BASF Group Consolidated Financial State-
ments. The amounts for 2015 have been restated accordingly.
The cash flow from the Yuzhno Russkoye project is shown in
the fully consolidated company responsible for marketing the
gas.
According to Topic 932, the current economic conditions
were considered in the determination of oil and gas reserves
as well as the standardized calculation of discounted net cash
flows. The prices used are valued at the average price calcu-
lated from the prices on the first day of the month for the past
12 months. Expected proven reserves and the resulting future
net cash flows can vary significantly from the current estimates.
Furthermore, the realized prices and costs and the actual cash
flows resulting therefrom may differ from the estimate in
amount and distribution over time. Therefore, the values pre-
sented should not be interpreted as a prediction of future cash
flows, nor in their sum as the current value of the company.
Furthermore, different prices, costs and volume estimates
are used for operative decisions as well as for the preparation
of the Consolidated Financial Statements. Therefore, the
reserves and net cash flows shown are not comparable with
statements and values in the Consolidated Financial State-
ments.
According to the requirements in Topic 932, regions with
more than a 15% share of total reserves must be shown sep-
arately. Therefore, the regions in the supplementary informa-
tion differ from those presented in the Group Consolidated
Financial Statements. Aside from the countries Germany and
Russia, this includes the regions: Rest of Europe; North Africa/
Middle East; as well as South America.
The regions include the following countries with operating
activities:
Region
Rest of Europe
North Africa / Middle East
South America
Oil and gas reserves
Exploration &
Production
United Kingdom,
the Netherlands,
Norway
Libya
Argentina
Exploration
Denmark
Acquisition expenditures
Abu Dhabi
224 Supplementary Information on the Oil & Gas Segment
Oil 2016
BASF Report 2016
Rest of
North Africa,
South
Consolidated and equity-accounted companies
Germany
Europe
Russia
Middle East
America
Total
Group
Thereof
at equity
Proven oil and gas reserves are the volumes of crude oil,
natural gas and condensate that, according to the geological,
engineering and economic conditions prevailing at the balance
sheet date, can be produced in future years. Accordingly,
reserve estimates based on this data could be materially dif-
ferent from the volumes that are ultimately recovered. To
reduce uncertainties, BASF works together with independent,
internationally recognized reserve auditors to perform recur-
ring reserves audits of its major crude oil and natural gas fields.
The tables on the following pages show the company's
estimated proven and proven developed reserves as of
December 31, 2015, and 2016, as well as changes attribut-
able to production or other factors.
Capitalized exploration drilling (million €)
2
144
74
800
Equipment and miscellaneous
868
267
114
435
52
Unproven oil and gas reserves
9,081
1,556
152
Group
Total
South
America
North Africa,
Middle East
Russia
1,149
5,285
939
Proven oil and gas reserves
Rest of
Europe
Germany
Fully consolidated companies
2015 (million €)
1,518
93
1,197
228
Investments in equity-accounted companies
874
Total gross assets
1,791
5,794
Capitalized exploration drilling (million €)
The last row shows the year-end value for equity-
accounted companies.
The following table indicates the changes to the capitalized
costs of exploration drilling. The determination of the amounts
as well as the activities included were adjusted to the BASF
Group Consolidated Financial Statements in 2016. The
amounts for 2015 were accordingly restated.
Exploratory drilling costs are capitalized until the drilling of the
well is complete. If hydrocarbon resources are found whose
commercial development is likely, the costs continue to be
capitalized as construction in progress, subject to further
appraisal activity that may include the drilling of further wells.
Management evaluates all such capitalized costs at least once
a year from both a technical and economic perspective to
confirm the continued intent to develop or otherwise extract
value from the discovery. If this is no longer the case, the rele-
vant costs are written off. If proven reserves of oil or natural
gas are determined and development is sanctioned, however,
the relevant expenses are transferred within property, plant
and equipment to machinery and technical equipment. Impair-
ments for unsuccessful exploration wells are recognized in
exploration expenses.
Capitalized exploration drilling:
Suspended well costs
BASF Report 2016
228 Supplementary Information on the Oil & Gas Segment
1,539
133
1,115
291
Investments in equity-accounted companies
6,532
913
6,984
76
4,148
511
Total net assets
(4,291)
(910)
(190)
(265)
(1,646)
(1,280)
Accumulated depreciation, amortization and impairments
10,823
1,823
266
1,149
884
60
986
1,213
978
Proven oil and gas reserves
Russia
Rest of
Europe
Germany
Fully consolidated companies
2016 (million €)
Capitalized costs represent total expenditures on proven and unproven oil and gas deposits including the related accumulated
depreciation and amortization.
Capitalized costs relating to oil and gas producing activities
1,047
8
822
217
Total expenditures at equity-accounted companies
1,616
409
54
116
966
71
Total expenditures
1,239
330
115
735
59
Development expenditures
7
77
6,023
1,577
North Africa,
Middle East
156
South
America
4,166
546
Total net assets
(5,381)
(1,044)
(209)
(364)
(2,429)
(1,335)
Accumulated depreciation, amortization and impairments
12,365
2,030
282
1,577
73
6,595
Total gross assets
47
858
Equipment and miscellaneous
993
297
126
525
45
Unproven oil and gas reserves
10,467
1,733
Group
Total
1,881
(9)
80
Standardized measure of discounted future net
945
413
166
291
75
Sales natural gas
1,106
94
56
74
680
202
Group
Total
South
America
Middle East
Russia
North Africa,
Rest of
Europe
Germany
Sales crude oil (including condensate and LPG)
Fully consolidated companies
2016 (million €)
figures shown for the Oil & Gas segment. Significant deviations
exist in sales revenues that do not include sales from mer-
chandise and services as well as the financing and corporate
overhead costs not included there. Income taxes were com-
puted using currently applicable local income tax rates.
Operating income represents only those revenues and
expenses directly associated with oil, condensate and gas
production. This partially results in significant differences to the
Operating income from oil and gas-producing
activities
BASF Report 2016
226 Supplementary Information on the Oil & Gas Segment
416
Local duties (royalties, export, etc.)
416
40
131
320
964
137
12
14
692
109
Depreciation, amortization and impairment
130
15
20
9
81
5
Exploration expenses and technology
563
145
13
33
264
108
Production costs
1,920
416
56
240
971
237
Net revenue (less duties)
91
9
398
9
6
6
Extensions and discoveries
12
93
31
43
18
1
Revisions and other changes
629
1,281
158
11
966
119
27
as of January 1, in million barrels of oil equivalent
(MMBOE)
Developed and undeveloped gas reserves
Thereof
at equity
Total
Group
South
America
North Africa,
Middle East
Russia
Rest of
Europe
Germany
Consolidated and equity-accounted companies
Gas 2015
Thereof equity-accounted companies
Purchase/sale of reserves
(8)
(8)
(8)
Thereof equity-accounted companies
416
872
127
9
669
49
18
Proven developed reserves as of December 31
572
572
11
552
9
Other
Thereof equity-accounted companies
1,260
167
11
940
118
24
Proven reserves as of December 31
61
112
22
69
17
4
Production
572
4
43
18
233
(79)
439
(56)
56
Operating income before taxes
(382)
(98)
3
16
(313)
10
Other
1,275
72
107
13
984
99
Depreciation, amortization and impairment
254
16
37
1
192
8
Exploration expenses and technology
628
127
593
Income taxes
16
17
2015 (million €)
Total expenditures at equity-accounted companies
Total expenditures
Development expenditures
Exploration and technology expenditures
For unproven reserves
For proven reserves
Acquisition expenditures
Fully consolidated companies
2016 (million €)
Period expenditures include all amounts incurred in connection with the acquisition, exploration or development of oil and gas
deposits, regardless of whether these were capitalized or expensed.
Period expenditures for acquisition, exploration and development of oil and gas deposits
Supplementary Information on the Oil & Gas Segment 227
BASF Report 2016
18
91
89
(3)
Net income of equity-accounted companies
371
150
(106)
360
(73)
40
Operating income after taxes
222
83
27
79
5
36
23
122
(26)
(40)
77
(63)
Net income of equity-accounted companies
173
154
(18)
141
(112)
8
Operating income after taxes
139
85
23
25
3
3
Income taxes
312
239
5
166
(109)
11
Operating income before taxes
(49)
(120)
6
2015 (million €)
Fully consolidated companies
Germany
Rest of
Europe
Production costs
2,368
350
86
492
1,145
295
Net revenue (less duties)
144
87
2
55
Local duties (royalties, export, etc.)
1,383
338
322
574
100
Sales natural gas
1,129
115
Group
Total
South
America
North Africa,
Middle East
86
105
573
250
Sales crude oil (including condensate and LPG)
Russia
387
Proven developed reserves as of December 31
Thereof equity-accounted companies
83
Other
304
1,306
86
329
495
312
84
Accretion of discount
1,435
2,991
(262)
1,288
295
1,464
206
Net change in income taxes
(28)
(32)
(32)
Purchase/sale of reserves
(87)
(522)
(226)
20
313
(603)
(26)
Changes in estimated investments in future periods
Standardized measure of discounted future net
cash flows as of December 31
Thereof equity-accounted companies
209
6
Overviews
Overviews
151
125
17
ន១៩៨០
221
Supplementary Information on the Oil & Gas Segment
Consolidated Financial Statements
Corporate Governance
Management's Report
To Our Shareholders
236
171
Glossary
Trademarks
233
Ten-year summary
6
346
346
265
53
346
6,294
1,351
304
3,025
1,405
28
235
74
1,400
8
Sales of oil and gas produced, net of production
794
Thereof
at equity
Total
Group
8,028
678
South
America
North Africa,
Middle East
923
4,355
1,338
734
As of January 1
Russia
Rest of
Europe
Germany
Consolidated companies and equity-accounted
companies
Summary of changes in standardized measure of discounted future net cash flows 2015 (million €)
82
82
99
25
82
4,470
1,147
104
2,131
1,020
(42)
Thereof equity-accounted companies
68
cash flows as of December 31
costs in the current period
(174)
(835)
(631)
133
898
72
Investments in the period
126
1,002
278
(55)
197
539
43
Revisions of previous reserves estimates
(17)
50
289
50
Net changes from extensions, discoveries and
(2,167)
(5,969)
730
(2,111)
(2,132)
(1,726)
(730)
balance sheet date
Net changes in prices and production costs at
(185)
(1,960)
(222)
(98)
improved recovery, less related costs
(9)
80
Consolidated and equity-accounted companies
33
1
(3)
23
17
(5)
102
427
10
103
183
78
53
Thereof
at equity
Total
Group
South
America
Middle East
Russia
Europe
Germany
North Africa,
Rest of
Supplementary Information on the Oil & Gas Segment 225
Proven reserves as of December 31
Production
Purchase/sale of reserves
Extensions and discoveries
Revisions and other changes
in million barrels (MMbbl)
(3)
65
65
1
83
79
4
Fully consolidated companies
83
330
8
83
141
62
62
96
96
91
oil reserves as of January 1,
4
96
484
9
96
193
144
42
4
41
2
4
13
16
6
1
80
Proven developed and undeveloped
Oil 2015
4
Production
Purchase/sale of reserves
Extensions and discoveries
6
39
11
(2)
19
8
3
Revisions and other changes
572
1,260
167
11
940
118
24
as of January 1, in million barrels of oil equivalent
(MMBOE)
Developed and undeveloped gas reserves
Thereof
at equity
Total
Group
South
America
Middle East
Russia
North Africa,
Rest of
Europe
Germany
15
74
24
117
BASF Report 2016
360
360
8
346
6
Thereof equity-accounted companies
360
856
147
8
628
50
23
Consolidated and equity-accounted companies
Proven developed reserves as of December 31
520
9
505
6
Thereof equity-accounted companies
520
1,182
154
9
885
111
23
Proven reserves as of December 31
58
520
as of December 313,6
4,401
Ten-year summary
Other liabilities
3,767
4,074
3,545
3,256
4,094
3,985
3,369
6,224 2,375
3,148
Financial indebtedness
1,288
1,082
1,079
968
870
1,038
1,140
1,003
860
881
Tax liabilities
2,802
1,976
2,540
3,434
2,802
62,726
61,175
51,268 59,393
50,860
46,802
Total equity and liabilities
15,317
14,339 15,893 14,236
1,993
16,710
11,680 15,568 16,477
16,295
12,482
Current liabilities
87
195
17
Liabilities of disposal groups
2,850
2,520
3,564
2,292
2,623
3,036
2,240
64,204
2,844
2,628
14,222
Noncurrent liabilities
917
901
Other liabilities
12,444
8,290
6,954
Financial indebtedness
3,317
3,381
3,420
2,894
2,234
2,628
2,467
2,093
2,167
2,060
Deferred taxes
3,667
3,369
3,502
15,843
2,670
898
20,979
11,123
3,210
3,324
3,276
3,043
2,697
Provisions
4,610
4,020
4,861
5,153
4,502
5,121
4,738
2,786
2,734
3,763
Accounts payable, trade
28,611
873
869
25,055
1,194 1,197
22,192 27,271
1,111
20,395
12,545
11,670 9,019 8,704 11,151 11,839
901
1,142
21,168 19,313
3,226
71,359
76,496
B
The Dodd-Frank Act issued in 2010 comprises accounting and
disclosure obligations for publicly listed U.S. companies regarding
the use of certain raw materials that come from the Democratic
Republic of the Congo or its bordering countries. The companies
must prove that the materials they use do not come from mines in
these conflict areas. The definition of conflict minerals as per the
Dodd-Frank Act includes the following materials and their deriva-
tives: Columbitetantalite (coltan), cassiterite, wolframite and gold.
Dodd-Frank Act
D
Compliance is an important element of corporate governance. It
refers to the company's behavior in accordance with laws, guide-
lines and voluntary codices.
Compliance
Audits are a strategic tool for monitoring and directing standards.
During a site or plant audit, clearly defined criteria are used to create
a profile on topics such as environment, safety or health.
Audits
Associated companies are entities in which significant influence can
be exercised over their operating and financial policies and which
are not subsidiaries, joint ventures or joint operations. In general, this
applies to companies in which BASF has an investment of between
20% and 50%.
Associated companies
A
BASF Report 2016
Glossary
Glossary
Overviews
236
.reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
XEMIUM®
.reg. trademark of BASF Group
TINUVIN®
TRILON®
ULTRADURⓇ
ULTRAFORM®
ULTRAMID®
ULTRASONⓇ
VIZURA®
VAULTⓇ
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
THOMSITⓇ
Backup line
TERMIDOR®
A backup line is a confirmed line of credit that can be drawn upon in
connection with the issue of commercial paper if market liquidity is
not sufficient, or for the purpose of general corporate financing. It
is one of the instruments BASF uses to ensure it is able to make
payments at all times.
A barrel of oil equivalent (BOE) is an international unit of measure-
ment for comparing the energy content of different fuels. It is equal
to one barrel of crude oil, or 6,000 cubic feet (169 cubic meters) of
natural gas.
Enhanced oil recovery (EOR)
The Eco-Efficiency Analysis is a method developed by BASF for
assessing the economic and environmental aspects of products and
processes. The aim is to compare products with regard to profit-
ability and environmental compatibility.
Eco-Efficiency Analysis
The EBITDA margin is the margin that we earn on sales from our
operating activities before depreciation and amortization. It is
calculated as income from operations before depreciation and
amortization as a percentage of sales.
EBITDA margin
Earnings before interest, taxes, depreciation and amortization
(EBITDA): At BASF, EBITDA corresponds to income from operations
before depreciation and amortization (impairments and write-ups).
EBITDA
EBIT after cost of capital is calculated by deducting the cost of
capital from the EBIT of the operating divisions. The cost of capital
thereby reflects the shareholders' expectations regarding return (in
the form of dividends or share price increases) and interest payable
to creditors. If the EBIT after cost of capital has a positive value, we
have earned a premium on our cost of capital.
EBIT after cost of capital
Earnings before interest and taxes (EBIT): At BASF, EBIT corre-
sponds to income from operations.
EBIT
E
The commercial paper program is a framework agreement between
BASF and banks regarding the issuing of debt obligations on the
financial market (commercial paper). The commercial paper is issued
under a rolling program for which the terms can be determined indi-
vidually. This requires a good rating.
Commercial paper program
CO2 equivalents are units for measuring the impact of greenhouse
gas emissions on the greenhouse effect. A factor known as the
global warming potential (GWP) shows the impact of the individual
gases compared with CO2 as the reference value.
CO₂ equivalents
The international nonprofit organization CDP (formerly the Carbon
Disclosure Project) analyzes environmental data of companies. The
CDP's indexes serve as assessment tools for investors.
CDP
C
BDO stands for 1,4-Butanediol and is a BASF intermediate. BDO
and its derivatives are used for producing plastics, solvents, elec-
tronic chemicals and elastic fibers.
BDO
Biotechnology includes all processes and products that make use of
living organisms, such as bacteria and yeasts, or their cellular con-
stituents.
Biotechnology
Barrel of oil equivalent (BOE)
70,836
SYSTIVAⓇ
.reg. trademark of BASF Group
GREEN SENSEⓇ
GlasuritⓇ
FLO RITE®
FSC®
ESPAÇO ECO®
F 500®
EPOTAL®
ENGENIAⓇ
BASF Report 2016
ECOVIO®
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
DINCH®
CREATOR SPACE®
CLEARFIELD®
.reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
CERESIT®
CELLASTOⓇ
BASONATⓇ
AMASIL®
ACRODURⓇ
AgCelenceⓇ
Overviews 235
Trademarks
Trademarks¹
BASF Report 2016
2 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
1 We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013.
Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
HEXAMOLL®
Sustainable Solution SteeringⓇ reg. trademark of BASF Group
HYDROBLUE®
INSCALISⓇ
INTEGRAL®
INTERCEPTOR®
.reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
_reg. trademark of BASF Group
reg trademark of Conseil
Européen de l'Industrie Chimique
reg. trademark of BASF Group
.reg. trademark of BASF Group
_reg. trademark of BASF Group
.reg. trademark of BASF Group
_reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
SOKALANⓇ
SERIFEL®
R-M®
REVYSOL®
Responsible Care®
NODULATOR®
PALATINOLⓇ
PALIOCROM®
POLYTHFⓇ
LUPRO-MIX®
MAGLISⓇ
natuphosⓇ
NEALTA®
LavergyⓇ
LIMUS®
1 Trademarks are not registered in all countries.
.reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of Forest
Stewardship Council
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
LAROMER®
KIXOR®
KEROPURⓇ
JONCRYLⓇ
INITIUM®
2,925
3,335
3,352
1,791
2,193
1,006
1,473
941
1,112
1,042
930
679
Deferred taxes
605
526
540
643
613
848
1,953
1,619
1,947
1,952
Other financial assets
4,647
4,436
2,513
3,245
Other receivables and miscellaneous
Noncurrent assets
7,752
8,561
Accounts receivable, trade
6,776
6,763
6,578
Inventories
50,550
46,270
1,210
1,720
1,498
43,939
877
38,253
911
35,259
561
34,087
34,532
31,681
29,586
27,894
653
946
642
655
noncurrent assets
7,738
4,174
1,852
2007
BASF Report 2016
Million €
Balance sheet (IFRS)
Ten-year summary
234 Overviews
6 After deduction of repurchased shares earmarked for cancellation
5 Calculated in accordance with German GAAP
4 Includes the change in reporting from 2009 onward of the effects of regular extensions of U.S. dollar hedging transactions
3 We conducted a two-for-one stock split in the second quarter of 2008. The previous year's figures for earnings per share, dividend per share and number of shares
have been adjusted accordingly for purposes of comparison.
2 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
1 We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013.
Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
918.5
918.5
918.5
918.5
918.5
918.5
918.5
918.5
918.5
956.4
million
2008
3,459
2009
Intangible assets
1,328
1,340
1,146
834
the equity method
Investments accounted for using
26,413
25,260
15,162
12,537
2016
2015
2014
2013²
12,193 12,324 12,967
16,610 19,229 23,496
20121
2011
11,919
17,966
17,241
15,032 16,285
14,215
Property, plant and equipment
12,245
9,889 10,449
9,559
2010
8,688 10,059
10,167 10,886
9,581
9,506
10,160 11,266
10,233 10,385
971
Minority interests
174
Other comprehensive income
23,708
19,446
15,817
13,250 12,916
14,556
Retained earnings
3,130
3,141
3,143
3,165
3,188
3,203
3,216
3,229
3,241
3,173
Capital surplus
1,176
1,176
Equity
1,176
20,098
26,102 28,777
314 (3,461) (3,400) (5,482)
1,246 1,010
630
581
25,385 25,621 27,673 28,195
3,289
2,757
3,015
Other provisions
8,209
6,313
7,313
3,727
5,421
3,189
2,778
2,255
1,712
1,292
obligations
Provisions for pensions and similar
32,568
761
629
31,545
(4,014)
(3,521)
31,515
30,120
(96)
156 1,195
1,151 1,132 1,253
18,722 18,609 22,657
1,176
1,176
1,176
3,714
3,455
3,781
19
2,048
295
27,088
24,861
18,908 21,274 19,587
Current assets
3,883
16
1,493
614
614
Assets of disposal groups
3,223
15
1,835
35
2,776
767
Cash and cash equivalents
51
Marketable securities
3,948
2,337
current assets
Other receivables and miscellaneous
10,952
9,516
10,005
9,693
4,032
3,095
3,078
14
1,647
3,264
27,467 25,951
1,176
1,176
1,176
1,224
Subscribed capital
76,496
70,836
64,204 71,359
62,726
61,175
59,393
Enhanced oil recovery (EOR) methods, also called tertiary recovery
or tertiary production methods, are used to increase the recovery
factor from oil reservoirs. Different technologies are employed
depending on reservoir conditions; a distinction is generally made
between thermal and chemical EOR and miscible gas flooding,
which makes use of gases such as carbon dioxide.
46,802 50,860 51,268
25,946
24,566
27,420
1,375
2,241
1,718
1,827
536
21
19
17
Total assets
BASF Report 2016
EMPRO®
Equity method
2,667
2,618
2,594
2,631
2,770 3,600
3,691
Number of employees
At year-end
Annual average
95,175 96,924 104,779 109,140 111,141
94,893 95,885 103,612 104,043
110,782 112,206 113,292 112,435 113,830
110,403 109,969 111,844 112,644 113,249 111,975
Personnel expenses
6,648
6,364
7,107
8,228
8,576
8,963
9,285
9,224
9,982
10,165
Research and development
2.614
expenses
2,481
equipment
Thereof property, plant and
equipment
2,564
2,809
4,126
3,294
3,199
4,084
6,428
6,369
5,742
4,377
Depreciation and amortization of property,
plant and equipment and intangible assets
2,909
3,099
3,711
Overviews 237
Glossary
3,407
3,267 3,272
3,417
4,251
Thereof property, plant and
2,294
7,258
1,380
1,398
6,602
8,100
6,958
9,446
7,717
EBITDA margin
%
17.6
15.3
14.6
17.4
16.3
13.9
14.1
14.9
15.1
18.3
Return on assets
%
16.4
13.5
7.5
14.7
7,105
1,355
6,460
5,023
1,492
1,605
1,732
1,849
1,884
1,953
1,863
Key data
Earnings per share³
€
4.16
3.13
1.54
4.96
6.74
5.25
5.22
5.61
4.34
4.42
Cash provided by operating
activities
5,807
5,693
16.1
6,013
3,646 5,263 7,726
7,160
7,626
6,248
6,275
Income before taxes
6,935
5,976
3,079
7,373
8,970
5,977
6,600
7,203
5,548
5,395
Income before minority interests
4,325
3,305
1,655
5,074
6,603
5,067
5,113
6,742
5,492
8,586
74,326 70,449
Million €
Overviews 233
Ten-year summary
2007
2008
2009
2010
2011
20121
2013²
2014
2015
2016
Sales and earnings
Sales
57,951
62,304
50,693
Income from operations (EBIT)
7,316
6,463 3,677
63,873
7,761
73,497 72,129 73,973
57,550
7,285
4,301
Net income
7,077
7,357
6,739
6,309
EBIT after cost of capital
2,895
1,621
(226)
3,500
2,551
1,164
1,768
1,368
194
1,136
Capital expenditures,
depreciation and amortization
Additions to property, plant and
equipment and intangible assets
4,425
3,634
5,972
5,304
6,647
4,255
8,447
4,852
4,065
2,912
1,410
4,557
6,188
4,819
4,792
5,155
3,987
4,056
Income from operations before
depreciation and amortization (EBITDA)
10,225
9,562
7,388
11,131
11,993
10,009 10,432
11,043 10,649
10,526
EBIT before special items
7,614
6,856
8,138
11.0
3,370
11.7
R
Propylene oxide (PO), a very reactive compound, is generated by
the oxidation of propylene and is used as basic chemical for further
processing in the chemical industry.
Propylene oxide (PO)
The peak sales potential of the crop protection pipeline describes the
total peak sales generated for individual products in the research and
development pipeline. The peak sales corresponds to the highest
sales value to be expected from one year. The pipeline comprises
innovative active ingredients and system solutions that have been on
the market since 2016 or will be launched on the market by 2026.
Peak sales potential
P
Overviews 239
Glossary
BASF Report 2016
The Occupational Health and Safety Assessment Series (OHSAS)
includes the standard OHSAS 18001, which contains a manage-
ment system for occupational safety. This system can be integrated
into an existing quality and environmental protection management
system and certified accordingly.
OHSAS 18001
MDI stands for diphenylmethane diisocyanate and is one of the
most important raw materials for the production of polyurethane.
This plastic is used for applications ranging from the soles of high-
tech running shoes and shock absorbers for vehicle engines to insu-
lation for refrigerators and buildings.
MDI
BASF uses the materiality analysis to gain information from internal
and external stakeholders about the significance of sustainability
topics.
Materiality analysis/material aspects
M
NMVOC (Nonmethane Volatile Organic Compounds)
VOCS (volatile organic compounds) are organic substances that are
present in the air as gas at low temperatures. These include some
hydrocarbons, alcohols, aldehydes and organic acids. NMVOCs are
VOCs from which methane is excluded.
Naphtha is petroleum that is produced during oil refining. Heavy
naphtha is the starting point for gasoline production. Light naphtha
is the most important feedstock for steam crackers.
Naphtha
The long-term incentive program is a share-price-based compensa-
tion program for senior executives of the BASF Group and members
of the Board of Executive Directors. The program aims to tie a por-
tion of the participants' compensation to the long-term, absolute
and relative performance of BASF shares.
Long-term incentive program (LTI)
L
The International Organization for Standardization defines nano-
materials as materials with one or more external dimensions on a
nanoscale or with internal structure or surface structure on a
nanoscale. For regulatory purposes, there are additional definitions
for nanomaterials worldwide.
Nanomaterials
REACH
N
REACH is a European Union regulatory framework for the registra-
tion, evaluation and authorization of chemicals, and will be imple-
mented gradually until 2018. Companies are obligated to collect
data on the properties and uses of produced and imported
substances and to assess any risks. The European Chemicals
Agency reviews the submitted dossiers and, if applicable, requests
additional information.
The term renewable resources refers to components from biomass
that originate from different sources (plants and microorganisms,
for example), and are used for industrial purposes. Renewable
resources are used for manufacturing numerous products.
Glossary
Overviews
240
TUIS is a German transport accident information and emergency
response system jointly operated by around 130 chemical compa-
nies. The member companies can be reached by the public author-
ities at any time and provide assistance over the telephone, expert
on-site advice or special technical equipment.
TUIS
TDI stands for toluene diisocyanate and is a raw material for the
production of polyurethane. It is used primarily in the automotive
industry (for example, in seat cushions and interiors) and the furni-
ture industry (for example, for flexible foams for mattresses or
cushioning, or in wood coating).
TDI
T
We use Sustainable Solution SteeringⓇ to review and guide our
portfolio in terms of sustainability. The four categories - Accelerators,
Performers, Transitioners and Challenged - indicate how our prod-
ucts and solutions already comply with sustainability requirements
and how we can increase their contribution.
Sustainable Solution SteeringⓇ
A steam cracker is a plant in which steam is used to "crack" naphtha
(petroleum) or natural gas. The resulting petrochemicals are the raw
materials used to produce most of BASF's products.
Steam cracker
A spot market is a market where an agreed-upon deal, including
delivery, acceptance and payment, occurs immediately, as opposed
to forward contracts, where the delivery, acceptance and payment
occurs at a point in time after the conclusion of the deal.
Spot market (cash market)
Special items arise from the integration of acquired businesses,
restructuring measures, impairments, gains or losses resulting from
divestitures and sales of shareholdings, and other expenses and
income that arise outside of ordinary business activities.
Special items
S
Return on assets describes the return we make on the average
assets employed during the year. It is calculated as income before
taxes and minority interests plus interest expenses as a percentage
of average assets.
Return on assets
Profits generated can be used in two ways: distribution to share-
holders or retention within the company.
Retention
Responsible Care® refers to a worldwide initiative by the chemical
industry to continuously improve its performance in the areas of
environmental protection, health and safety.
Responsible Care®
Renewable resources
The MSCI World Chemicals Index is a stock index that includes the
world's biggest chemical companies. It measures the performance of
the companies in the index in their respective national currencies,
thus considerably reducing currency effects.
MSCI World Chemicals Index
Monitoring systems and tools serve to measure and ensure the
adherence to standards. One area that is monitored is our voluntary
commitments, such as the adherence to human rights and interna-
tionally recognized labor standards.
In the United Nations Global Compact network, nongovernmental
organizations, companies, international business and employee
representatives, scientists and politicians work on aligning global
business with the principles of sustainable development.
Global Compact
G
Free cash flow is cash provided by operating activities less pay-
ments made for property, plant and equipment and intangible
assets.
11.5
Free cash flow
Formulation describes the combination of one or more active
substances with excipients like emulsifiers, stabilizers and other
inactive components in order to improve the applicability and effec-
tiveness of various products, such as cosmetics, pharmaceuticals,
agricultural chemicals, paints and coatings.
Formulation
Field development is the term for the installation of production
facilities and the drilling of production wells for the commercial
exploitation of oil and natural gas deposits.
Field development
F
The Health Performance Index is an indicator developed by BASF to
provide more detailed insight into our approach to health manage-
ment. It comprises five components: confirmed occupational
diseases, medical emergency drills, first aid, preventive medicine
and health promotion.
Health Performance Index (HPI)
H
The Greenhouse Gas Protocol, used by many companies in different
sectors as well as nongovernmental organizations and govern-
ments, is a globally recognized standard to quantify and manage
greenhouse gas emissions. The reporting standards and recom-
mendations for implementing projects to reduce emissions are
jointly developed by companies, nongovernmental organizations
and governments under the guidance of the World Resources Insti-
tute and the World Business Council for Sustainable Development.
Greenhouse Gas Protocol (GHG Protocol)
The Global Reporting Initiative is a multistakeholder organization. It
was established in 1997 with the aim of developing a guideline for
companies' and organizations' voluntary reporting on their eco-
nomic, environmental and social activities.
Global Reporting Initiative (GRI)
Exploration refers to the search for mineral resources, such as crude
oil or natural gas, in the Earth's crust. The exploration process
involves using suitable geophysical methods to find structures that
may contain oil and gas, then proving a possible discovery by means
of exploratory drilling.
Exploration
The European Water Stewardship (EWS) Standard enables busi-
nesses and agriculture to assess the sustainability of their water
management practices. The criteria are water abstraction volumes,
water quality, conservation of biodiversity and water governance.
The Europe-wide standard came into force at the end of 2011 and
was developed by nongovernmental organizations, governments
and businesses under the direction of the independent organization
European Water Partnership (EWP).
European Water Stewardship (EWS) Standard
The equity method is used to account for shareholdings in joint
ventures and associated companies. Based on the acquisition costs
of the shareholding as of the acquisition date, the carrying amount is
continuously adjusted to the changes in equity of the company in
which the share is held.
Global Product Strategy (GPS)
The Global Product Strategy aims to establish global product
stewardship standards and practices for companies. The program,
initiated by the International Council of Chemical Associations,
strives to ensure the safe handling of chemicals by reducing existing
differences in risk assessment.
|
IAS
Monitoring system
The British thermal unit (Btu) is a unit of energy observed in
the Anglo-American measuring system. It is used for indicating
values such as the energy content of gas. One mmBtu (million
British thermal units) is equal to approximately 1,003 cubic feet of
gas or 28 cubic meters of gas.
Million British thermal unit (mmBtu)
A joint venture is a joint arrangement in which the parties that have
joint control of a legally independent entity have rights to the net
assets of that arrangement. Joint ventures are accounted for using
the equity method in the BASF Group Consolidated Financial State-
ments.
Joint venture
A joint operation is a joint arrangement in which the parties that
share control have direct rights to the assets and liabilities relating to
the arrangement. For joint operations, the proportional share of
assets, liabilities, income and expenses are reported in the BASF
Group Consolidated Financial Statements.
Joint operation
A joint arrangement refers to joint ventures and joint operations, and
describes a jointly controlled arrangement of two or more parties.
This arrangement exists if decisions about relevant activities require
the unanimous consent of all parties sharing control.
Joint arrangement
J
ISO 50001 is an international standard developed by the International
Organization for Standardization (ISO) that determines the general
requirements for an energy management system for voluntary certi-
fication.
V
ISO 50001
Overviews
Glossary
238
ISO 19011 is an international standard developed by the International
Organization for Standardization (ISO) that determines requirements
for audits of quality management and environmental management
systems.
ISO 19011
ISO 14001 is an international standard developed by the International
Organization for Standardization (ISO) that determines the general
requirements for an environmental management system for volun-
tary certification.
ISO 14001
The ILO Core Labor Standards are set out in a declaration of the
International Labor Organization (ILO), comprising eight conventions
that set minimum requirements for decent working conditions.
ILO Core Labor Standards
The International Financial Reporting Standards (until 2001: Interna-
tional Accounting Standards, IAS) are developed and published
by the International Accounting Standards Board, headquartered
in London, England. The "IAS Regulation" made the application of
IFRSS mandatory for listed companies headquartered in the
European Union starting in 2005.
IFRS
IAS stands for International Accounting Standards (see also IFRS).
BASF Report 2016
Value chain
Number of shares
Verbund
2,808
1,831
1,791
1,561
2,021
2,296
2,388
2,480 2,572
2,664
2,755
€
1.95
1.95
1.70
2.20
2.50
2.60
2.70
2.80
2.90
3.00
Report 2016
We create chemistry
2,158
Q-BASF
5,853
2,880
A value chain describes the successive steps in a production pro-
cess: from raw materials through various intermediate steps, such
as transportation and production, to the finished product.
Dividend per share³
Dividend
Net income of BASF SE5
Appropriation of profits
13.3
14.4
19.7
19.2
19.9
27.5
24.6
8.9
17.0
%
Return on equity after tax
8.2
8.7
2,267
2,982
2,176
3,737
3,506
2,826
ISSN 1866-9387
22.4
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Board of Executive
Directors and
Supervisory Board:
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√
BASF Group 2016 at a glance ↑
BASF Report 2016
Water stress areas are areas in which water represents a scarce
resource, and where people abstract more than 60% of the water
available. The most important factors leading to water scarcity are:
low precipitation, high temperatures, low air humidity, unfavorable
soil properties and high water abstraction rates.
Water stress areas
W
COMC 1701 E
In the BASF Verbund (pronounced "fair-boond"), production facili-
ties, energy flow, logistics and infrastructure are intelligently net-
worked with each other in order to increase production yields, save
resources and energy, and reduce logistics costs. We also make
use of the Verbund principle for more than production, applying it
for technologies, knowledge, employees, customers, and partners,
as well.
Andreas Pohlmann
Quarterly Statement, 1st Quarter 2017 / Annual Shareholders' Meeting 2017
FSC
Half-Year Financial Report 2017
Thorsten Pinkepank, phone: +49 621 60-41976
Investor Relations
April 27, 2017 / May 12, 2017
Sustainability Relations
Juliana Ernst, phone: +49 621 60-99123
Media Relations
General inquiries
Contact
- Online: basf.com/publications
- By phone: +49 621 60-99001
You can also order the reports:
You can find this and other
BASF publications online at
basf.com
Published on February 24, 2017
Phone: +49 621 60-0
Dr. Stefanie Wettberg, phone: +49 621 60-48002
Internet
Further information
July 27, 2017
October 24, 2017
Quarterly Statement, 3rd Quarter 2017
February 27, 2018
Full-Year Results 2017
May 4, 2018
Responsible Care®
OUR COMMITMENT TO SUSTAINABILITY
BASF supports the chemical industry's
global Responsible Care initiative.
Quarterly Statement, 1st Quarter 2018/ Annual Shareholders' Meeting 2018
Management's Report
Corporate Governance
To Our Shareholders
1
Excluding the Chemetall business acquired from Albemarle Corp., Charlotte, North Carolina, in December 2016
This report contains forward-looking statements. These state-
ments are based on current estimates and projections of
BASF management and currently available information. Future
statements are not guarantees of the future developments and
results outlined therein. These are dependent on a number of
factors; they involve various risks and uncertainties; and they
are based on assumptions that may not prove to be accurate.
Such factors include those discussed in the Opportunities and
Risks Report from pages 111 to 118. We do not assume any
obligation to update the forward-looking statements contained
in this report.
Forward-looking statements
Our reporting is audited by a third party. KPMG AG Wirtschafts-
prüfungsgesellschaft has audited the BASF Group Consoli-
dated Financial Statements and the Management's Report
and has approved them free of qualification. The audit of the
Consolidated Financial Statements including the Notes is
based on the likewise audited financial statements of the
BASF Group companies.
The Auditor's Report can be found on page 154
Statements and figures pertaining to sustainability in the
Management's Report and Consolidated Financial Statements
are also audited. The audit was conducted using ISAE 3000
(Assurance Engagements other than Audits or Reviews of
Historical Financial Information) and ISAE 3410 (Assurance
Engagements on Greenhouse Gas Statements), the relevant
international auditing standards for sustainability reporting.
The additional content provided on the BASF internet sites
indicated in this report is not part of the information audited by
KPMG.
External audit and evaluation
The Consolidated Financial Statements begin on page 151
For more on emissions, see page 103 onward
17
For more on companies accounted for in the Consolidated Financial
Statements, see the Notes from page 172 onward
The Assurance Report on sustainability information in the
BASF Report 2016 can be found at basf.com/sustainability_information
125
12
151
2016 also painfully demonstrated to us that, despite all our caution and protective measures,
risks in the chemical industry cannot be ruled out. In October an accident occurred during main-
tenance work on a pipeline at the Ludwigshafen site. An explosion resulted in the deaths of four
people. Our sympathy is with their families and friends. We are doing everything we can to fully
investigate the accident and we will continue to be open and transparent in reporting the findings.
If there are ways of further improving our safety, we will pursue them.
In the chapter "Environment, Health, Safety and Security,"
we report all data on the emissions and waste of the world-
wide production sites of BASF SE, its subsidiaries, and joint
operations based on our stake.1 Work-related accidents' at
all sites of BASF SE and its subsidiaries as well as joint
operations and joint ventures in which we have sufficient
authority in terms of safety management, are compiled world-
wide regardless of our stake and reported in full. Further data
on transportation safety' and social responsibility refers to
BASF SE and its subsidiaries unless otherwise indicated.
In 2016, we achieved the goals we set for ourselves for growth and earnings. We successfully
grew in the chemicals business and further improved profitability. It was foreseeable that earnings
in Oil & Gas would not match the previous year's level. The oil price declined further - by around
15%, to an average of $44 per barrel for Brent crude in 2016. Furthermore, we had divested our
gas trading and storage business in the third quarter of 2015. As a result, BASF Group's EBIT
before special items of €6.3 billion was slightly lower overall, down by 6% versus the previous
year. As expected, sales declined considerably, by 18% to €57.6 billion.
Letter from the Chairman of the Board of Executive Directors
To Our Shareholders
Dear Shareholder,
BASF Report 2016
To Our Shareholders
BASF on the capital market
10
The Board of Executive Directors of BASF SE
7
the Board of Executive Directors
Letter from the Chairman of
231
221
Supplementary Information on the Oil & Gas Segment
Overviews
Consolidated Financial Statements
The chapter "Working at BASF" refers to employees active
in a company within the BASF Group scope of consolidation
as of December 31, 2016. Our data collection methods for
environmental protection and occupational safety are based
on the recommendations of the European Chemical Industry
Council (CEFIC).
the IIRC framework can be found in the introduction under "How we
create value"
All information and bases for calculation in this report are
founded on national and international standards for financial
and sustainability reporting. The data and information for the
reporting period were sourced from the expert units responsi-
ble using representative methods. The reporting period was
the 2016 business year. Relevant information is included up to
the editorial deadline of February 21, 2017. The report is pub-
lished each year in English and German.
Financial reporting according to International
Financial Reporting Standards, German Commercial
Code and German Accounting Standards
Requirements and topics
The GRI and Global Compact Index can be found at basf.com/en/gri-gc
An illustrated example of BASF's business model as geared toward
basf.com/en/global-compact
For more on the Global Compact, the implementation of the
Global Compact principles, Global Compact LEAD and Blueprint
for Corporate Sustainability Leadership, see globalcompact.org and
For more on sustainability, see basf.com/sustainability
The 2016 Online Report can be found at basf.com/report
■ Sustainability reporting focused on material topics
The GRI and Global Compact Index can be found in the
online report, providing information on GRI indicators and
topics relevant to the Global Compact principles.
Our sustainability reporting has been based on Global
Reporting Initiative (GRI) standards since 2003 already. For
the BASF Report 2016, we have chosen the GRI's "compre-
hensive" disclosure criteria.
The BASF Report combines the major financial and non-
financial information necessary to thoroughly evaluate our
performance. We select the report's topics based on the
following reporting principles: materiality, sustainability con-
text, completeness, balance, and stakeholder inclusion. In
addition to our integrated report, we publish further information
online. Links to this supplementary information are provided
in each chapter.
■ As an integrated report, the BASF Report also serves
as a progress report in terms of U.N. Global Compact
■ Sustainability reporting follows Global Reporting
Initiative's G4 "comprehensive" international
guidelines
Content and structure
About This Report 3
BASF Report 2016
The BASF team worked hard to quickly implement solutions to the initial major disturbances to
the logistics supplying the site. As a result, the economic consequences are considerably smaller
than had been expected in the immediate aftermath of the accident. This was an impressive
demonstration of the strength of the BASF team. And for this as well, I would like to extend a
heartfelt thanks to all employees on behalf of the Board of Executive Directors, especially since
2016 was also a challenging business year.
In addition, we served as a pilot enterprise in the develop-
ment of the framework for integrated reporting of the Interna-
tional Integrated Reporting Council (IIRC). Following this pilot
phase, we have been active in the IR Business Network since
2014 in order to discuss our experience with other stake-
holders and at the same time receive inspiration for enhancing
our reporting. This report addresses elements of the IIRC
framework by, for example, using graphics to illustrate how we
create value or demonstrate the relationships between finan-
cial and nonfinancial performance in the chapters for the seg-
ments. The information in the BASF Report 2016 also serves
as a progress report on BASF's implementation of the ten
principles of the United Nations Global Compact and takes
into consideration the Blueprint for Corporate Sustainability
Leadership of the Global Compact LEAD platform.
The information on the financial position and performance of
the BASF Group is based on the requirements of International
Financial Reporting Standards (IFRS), and, where applicable,
the German Commercial Code, the German Accounting
Standards (GAS), and the guidelines on alternative perfor-
mance measures from the European Securities and Markets
Authority (ESMA). Internal control mechanisms ensure the
reliability of the information presented in this report. BASF's
management confirmed the effectiveness of the internal con-
trol measures and compliance with the regulations for financial
reporting.
The focus and boundaries of this report are based on the
results of the materiality analysis together with a strategic
evaluation defining key aspects of the value chain.
For more on the Global Reporting Initiative, see globalreporting.org
For more on our selection of sustainability topics, see page 29 onward
and basf.com/materiality
■ Relevant information included up to the editorial
deadline of February 21, 2017
Data
BASF Report 2016
About This Report
4
BASF
GRI
GOLD Community
PARTICIPANT
LEAD
Global Compact
WE SUPPORT
COMPACT
THE GLOBAL
COMPACT
UN GLOBAL
For more on our control and risk management system,
see page 111 onward
BASF Group's scope of consolidation for its financial
reporting comprises BASF SE, with its headquarters in Lud-
wigshafen, Germany, and all of its fully consolidated material
subsidiaries and proportionally included joint operations.
Shares in joint ventures and associated companies are
accounted for, if material, using the equity method in the BASF
Group Consolidated Financial Statements.
2016 got off to a weak start with the oil price at times dipping below $30 per barrel for Brent
crude. Our customers were feeling uncertain and were hesitant to place orders. In the first
quarter we did not achieve any volume growth. Throughout the rest of the year the impact of
our strict spending and cost-discipline measures continually increased. Our excellence program
DrivE also delivered the anticipated contributions. Both of these factors played a role in the
positive earnings momentum.
To Our Shareholders
7
120
130
140
Change in value of an investment in BASF shares in 2016
(With dividends reinvested; indexed)
Viewed over a five and ten-year period, the long-term
performance of BASF shares still clearly surpasses these
indexes. The assets of an investor who invested €1,000 in
BASF shares at the end of 2006 and reinvested the dividends
in additional BASF shares would have increased to €3,538 by
the end of 2016. This represents an annual yield of 13.5%,
placing BASF shares above the returns for the DAX 30 (5.7%),
EURO STOXX 50 (0.9%) and MSCI World Chemicals (7.0%)
indexes.
subsequently recovered thanks to factors such as improved
Chinese economic data and the U.S. Federal Reserve's initially
unchanged interest rate policy. In the fourth quarter, the exten-
sion of the European Central Bank's bond-buying program as
well as hopes for a growth-promoting economic policy from
the newly elected U.S. president led to a year-end rally. On
December 30, 2016, Germany's benchmark index, the
DAX 30, reached a year's high of 11,481 points, as did the
BASF share price at €88.31. This equates to a 24.9% rise in
the value of BASF shares compared with the previous year's
closing price. Assuming that dividends were reinvested, BASF
shares gained 30.1% in value in 2016. The BASF share thus
outperformed the German and European stock markets,
whose benchmark indexes DAX 30 and DJ EURO STOXX 50
gained 6.9% and 3.7% over the same period, respectively. As
for the global industry indexes, DJ Chemicals increased 10.8%
in 2016 and MSCI World Chemicals 11.2%.
Weak economic data from the United States and China as well
as turbulence in the crude oil market led to a negative start to
the 2016 stock market year. Gains in oil prices, solid U.S. labor
market data and better economic indicators for China led to
stock market recovery during the second quarter. The uncer-
tainty leading up to the United Kingdom's referendum on E.U.
membership influenced the further course of the second
quarter. Stock markets suffered considerable losses following
the vote on June 23, 2016, to leave the E.U. Share prices
Long-term development continues to clearly
outperform benchmark indexes
BASF share gains 24.9% in 2016
110
■
Stock markets in 2016 were again marked by a high level
of volatility. Particularly contributing to this were fluctuat-
ing economic figures in China, crude oil prices and the
referendum in the United Kingdom on E.U. membership.
In this volatile environment, the BASF share rose by
24.9%, trading at €88.31 at the end of 2016. We stand by
our ambitious dividend policy and will propose a dividend
of €3.00 per share at the Annual Shareholders' Meeting -
an increase of 3.4% compared with the previous year.
BASF enjoys solid financing and good credit ratings.
BASF once again included
in sustainability indexes
DJSI World, CDP
Proposed dividend
per share
€3.00
BASF share closing price up by
24.9% year-on-year
€88.31
BASF Report 2016
BASF on the capital market
BASF share performance
100
90
140
DAX 30 6.9%
BASF share 30.1%
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
80
80
90
100
110
120
130
BASF on the capital market
To Our Shareholders
12
11
The process of structural change in the chemical industry continues, following what appear to
be the prevailing trends. BASF adheres to simple principles: Every business should achieve a
leading market position if possible and be successful on its own - especially in comparison with
its direct competitors. And each business benefits from BASF and from our Verbund - not only in
production and logistics but also in research and development and with customers. The Verbund
is and will remain the core of BASF. It demands and fosters excellence.
We also want to continue to grow profitably with acquisitions. In 2016 we purchased Chemetall,
a leading global supplier of surface treatments. Chemetall's products can, for example, protect
metals from corrosion or facilitate their machining. They are used in industries such as automotive
and aerospace. This business is very close to customers and perfectly complements our coatings
activities. At the same time, we have divested activities that were no longer an optimal fit for our
portfolio, such as the industrial coatings and polyolefin catalysts businesses, which we success-
fully sold.
9
To Our Shareholders
Letter from the Chairman of the Board of Executive Directors
BASF Report 2016
Digitalization will change BASF in other areas, too. We have bundled, focused and accelerated
our digitalization activities under the name BASF 4.0. The digital transformation will influence the
way we manage our factories in the future, how we work seamlessly with our suppliers and
customers, and how we tap and develop new business opportunities and markets. This report
contains examples of how we are doing this. We see digitalization as an opportunity for BASF
and for our employees - and we will actively shape it.
Innovation and sustainability - which are closely related – are key pillars of our strategy. In order
to offer customized solutions to our customers in the various regions and markets, we have
continuously expanded our global research and development activities. In 2016 we further
developed our approach to innovation. Our researchers are working on using digital technologies
even more. We are integrating digital technologies in our research processes and using data
to explore new questions. We also want to make greater use of scientific models to predict
the properties of chemical structures. These measures help us strengthen our long-term
competitiveness and take advantage of new growth opportunities.
In recent years, we have increased our investments in new plants worldwide. We have thus
created the conditions to enable organic growth. After a phase of high investments, especially in
emerging markets, we scaled these back in 2016 as previously announced. In the coming years
we plan to invest at a comparable level. We are now filling the existing capacity in our plants and
we want to build on the volume growth momentum seen last year.
Five years ago, we introduced our "We create chemistry" strategy. It focused on growth from
investments, innovation and the further development of our portfolio.
The BASF share price trend in 2016 reflected the earnings momentum as well as future
expectations. In a volatile market environment our share price developed positively. It closed out
the year at €88.31, around 25% higher than at the end of the previous year. The performance of
our shares was also impressive: With dividends reinvested, the value of our shares rose by 30%,
thus considerably outperforming the DAX 30 (7%), Dow Jones Euro Stoxx 50 (4%) and MSCI
World Chemicals (11%) Indexes.
As a shareholder, you deserve to appropriately share in this success. We are continuing our
dividend policy and propose to raise the dividend again, by 10 cents to €3.00 per share. BASF
shares thus once again offer a high dividend yield of 3.4% based on the closing share price at
the end of 2016.
We want to create value for our shareholders. The benchmark for this is positive EBIT after cost
of capital. The considerable improvement in 2016 is especially satisfying because the chemicals
business and our crop protection business successfully contributed to this. We were thus able to
more than offset the price-related negative contribution from our Oil & Gas business.
In the Oil & Gas business we made dramatic adjustments to our costs and expenditures in
response to the changing market conditions. As expected, sales and earnings in the segment
were significantly below the previous year's level. An important development was our increased
production of oil and gas in 2016. Following the sale of our gas trading business we are
concentrating on the exploration and production of oil and gas.
Our crop protection business performed moderately well in a difficult market environment.
Volumes were below the prior-year level, but we managed to keep EBIT before special items
stable thanks to strict cost management – we consider this a solid result compared with other
industry players.
"We have
bundled,
focused and
accelerated
our digitalization
activities under
the name
BASF 4.0."
successfully
contributed to
considerable
improvement in
EBIT after cost of
capital."
"The chemicals
business and our
crop protection
business
BASF Report 2016
Letter from the Chairman of the Board of Executive Directors
To Our Shareholders
8
In 2017, we want to grow further and all segments should contribute to this. More importantly,
our earnings should rise again, also in the Oil & Gas business, where we assume an average
oil price of $55 per barrel of Brent crude in 2017. Business so far this year is in line with our
expectations. These expectations are also based on the assumptions that economic conditions
will be similar to 2016 and chemical production worldwide will rise by around 3.4%.
As the year progressed, we were able to increase BASF's growth. Our sales volumes rose
from quarter to quarter. Particularly in Asia, we continuously increased our sales volumes in the
chemicals business and grew strongly. This shows that the high investments we made in re-
search and development and new production capacity in recent years are paying off. The Perfor-
mance Products and Functional Materials & Solutions segments, where we provide our custom-
ers with tailor-made solutions for their applications, contributed in particular to this. In both of
these segments we significantly improved our profitability, even more than we had expected one
year ago. In the Chemicals segment, our earnings nearly matched the previous year's level and
were thus slightly better than expected. Despite considerable price erosion for many products as
a result of lower raw material prices, we were able to keep margins stable in many cases.
However, political uncertainties in particular have rarely been this high. The impact of Brexit
remains unpredictable; it affects our competitiveness as well as that of our customers in our
home market of Europe, where, moreover, important elections are taking place. Protectionism
may seem sweet at first, but it is poison. Around the world, we are seeing a trend towards trying
to create prosperity through isolation rather than cooperation. This is another reason why our
strategy of producing as much as possible in the local markets is still the right approach.
We are cautiously optimistic for 2017. In light of the major uncertainties, we will continue
our strict discipline with respect to expenditures and costs. An ongoing task is the further
development of our portfolio. We will continue to drive forward the digital transformation in our
research and development, in production and in the development of new business models that
connect us even more closely with our customers. I can assure you that the BASF team is full of
energy and drive - and we will prove it once again in 2017.
Sanjeev Gandhi
Margret Suckale
Dr. Harald Schwager
Wayne T. Smith
The Board of Executive Directors of BASF SE
BASF Report 2016
Michael Heinz
Dr. Hans-Ulrich Engel
Chief Financial Officer
Vice Chairman of the Board of Executive Directors
Dr. Martin Brudermüller
Chairman of the Board of Executive Directors
Dr. Kurt Bock
The Board of Executive Directors
of BASF SE
The Board of Executive Directors of BASF SE
To Our Shareholders
10
"In the growth
markets in
particular we have
systematically
invested in
production,
research and
development and
sales and
marketing."
"In 2017, we want
to grow further
and all segments
should contribute
to this."
Kurt Bock
Mert back
Yours,
In the long term, Asia will continue to be the growth driver in the global chemicals market. And
China is by far the largest market. In the growth markets in particular we have systematically
invested in production, research and development and sales and marketing. We can therefore
offer our local customers tailor-made solutions and successfully participate in this growth.
MSCI World Chemicals 11.2%
BASF has participated in CDP's environmental data repor-
ting program since 2004. The CDP represents more than 820
institutional investors who manage over $100 trillion in assets.
The CDP's indexes serve as assessment tools for investors. In
2016, BASF achieved a rating of A- and gained leadership
status once again. In an analysis of the largest 350 enterprises
in Germany, Austria and Switzerland by market capitalization,
CDP named BASF among five companies whose efforts have
contributed significantly to a reduction in environmental emis-
sions. In addition, BASF was one of 24 companies in 2016,
out of a total of 607 assessed by CDP, to receive the top grade
of "A" for sustainable water management, putting it among the
world's leading enterprises in this area.
The BASF Group
DE000BASF111
International ticker symbol
Deutsche Börse
London Stock Exchange
Swiss Exchange
BAS
BFA
BAS
ISIN International Securities Identification Number
2
Management's Report
Corporate Governance
Consolidated Financial Statements
125
151
Supplementary Information on the Oil & Gas Segment
Overviews
221
231
To Our Shareholders
055262505
United States (CUSIP Number)
11450563
52
50
67
68
Price-earnings ratio (P/E ratio)²
13.6
14.8
12.5
16.3
20.0
1 Average, Xetra trading
2 Based on year-end share price
Further information on BASF share
Securities code numbers
Germany
Great Britain
Switzerland
BASF11
0083142
5
50
The BASF Group
Corporate strategy
Financial position
Business review by segment
Chemicals
Performance Products
Functional Materials & Solutions
Agricultural Solutions
Oil & Gas
Other
Net assets
CE6567%
47
50
55
59
61
74
80
84
47
Results of operations
Economic environment
The BASF Group business year
Goals
19
Value-based management
Sustainability management
22
22
26
28
29
Innovation
32
Investments, acquisitions and divestitures
37
Business models and customer relations
39
Working at BASF
40
Social commitment
46
Our strategy
%
Payout ratio
3.40
51.89
64.79
65.61
65.74
56.70
€
62.17
71.96
€
77.93
70.96
million €
205.6
200.8
224.5
264.5
201.9
million shares
79.28
88.31
96.72
87.36
Year high
Year low
Year average
Daily trade in shares¹
BASF Report 2016
2012
2013
2014
2015
2016
€
71.15
77.49
69.88
70.72
88.31
€
73.09
78.97
3.3
2.8
2.9
3.3
€
5.64
5.31
5.44
5.00
4.83
Dividend per share
€
2.60
2.70
2.80
2.90
3.00
Dividend yield²
%
3.65
3.48
4.01
4.10
Adjusted earnings per share
89
4.42
5.61
2.9
Number of shares December 31
million shares
918.5
918.5
918.5
918.5
918.5
Market capitalization December 31
billion €
65.4
71.2
64.2
65.0
81.1
Earnings per share
€
5.25
5.22
4.34
Year-end price
90
Responsibility along the value chain
Suppliers
2010
World population growth
We innovate to make our customers more successful. We
I want to align our business optimally with our customers'
needs and contribute to their success with innovative and
sustainable solutions. Through close partnerships with cus-
tomers and research institutes, we link expertise in chemistry,
We add value as one company. Our Verbund concept is
unique in the industry. Encompassing the Production Verbund,
Technology Verbund and Know-How Verbund as well as all
relevant customer industries worldwide, this sophisticated and
profitable system will continue to be expanded. This is how we
combine our strengths and add value as one company.
We form the best team
We innovate to make our customers more successful
We drive sustainable solutions
We add value as one company
Our strategic principles
Europe
We therefore act in accordance with four strategic principles.
- Food and nutrition
- Resources, environment and climate
Our leading position as an integrated global chemical com-
pany gives us the chance to make important contributions in
the following three areas:
For us, this is what successful business is all about.
- Connecting creative minds to find the best solution
for market needs
- Acting as a fair and reliable partner
We live our corporate purpose by:
- Sourcing and producing responsibly
We want to contribute to a world that provides a viable future
with enhanced quality of life for everyone. We do so by creat-
ing chemistry for our customers and society and by making
the best use of available resources.
- Quality of life
735 million
Americas
Asia
Kuantan
Regional centers
Selected sites
+58%
2,478 million
+137%
57 million
Oceania
Africa
9.7 billion
Asia
5,267 million
+26%
Americas
1,217 million
+29%
Europe
707 million
-3.8%
2050
Source: United Nations
36 million
Oceania
Africa
1,044 million
6.9 billion
4,170 million
944 million
We create chemistry for a sustainable future
São Paulo
Our corporate purpose
With the "We create chemistry" strategy, BASF has set
itself ambitious goals in order to strengthen its position as
the world's leading chemical company. We want to contrib-
ute to a sustainable future and have embedded this into our
corporate purpose: "We create chemistry for a sustainable
future."
The BASF Group
Management's Report 21
BASF Report 2016
For more on the Verbund concept, see basf.com/en/verbund
We also make use of the Verbund principle for more than
production, applying it for technologies, knowledge, employ-
ees, customers, and partners, as well. Expert knowledge is
pooled into our global research platforms.
The Verbund system is one of BASF's great strengths. Here,
we add value as one company by using our resources
efficiently. The Production Verbund intelligently links produc-
tion units and energy demand so that, for example, the waste
heat of one plant provides energy to others. Furthermore, one
facility's by-products can serve as feedstock elsewhere. This
not only saves us raw materials and energy, it also avoids
emissions, lowers logistics costs and makes use of synergies.
■ Technology and Know-How Verbund
Intelligent plant networking in the
Production Verbund
Competitive environment
Verbund
BASF has companies in more than 80 countries and supplies
products to numerous customers in nearly every part of the
world. In 2016, we generated 43% of our sales (excluding
Oil & Gas) with customers in Europe. In addition, 26% of sales
were generated in North America; 22% in Asia Pacific; and 9%
in South America, Africa, Middle East. Viewed over the entire
BASF Group, 45% of our sales were to customers in Europe,
25% in North America, 21% in Asia Pacific and 9% in South
America, Africa, Middle East.
Six Verbund sites and 352 additional production
sites worldwide
BASF companies in more than 80 countries
■
Markets and sites
- Hong Kong
BASF Report 2016
Nanjing
We operate six Verbund sites and 352 additional produc-
tion sites worldwide. Our Verbund site in Ludwigshafen is the
world's largest integrated chemical complex. This was where
the Verbund principle was originally developed and steadily
honed before being implemented at additional sites.
BASF holds one of the top three market positions in around
70% of the business areas in which it is active. Our most
important global competitors include AkzoNobel, Clariant,
Covestro, Dow Chemical, DSM, DuPont, Evonik, Formosa
Plastics, Reliance, SABIC, Sinopec, Solvay and many hun-
dreds of local and regional competitors. We expect competi-
tors from emerging markets to gain increasing significance in
the years ahead.
Corporate legal structure
As the publicly traded parent company, BASF SE takes a
central position: Directly or indirectly, it holds the shares in the
companies belonging to the BASF Group, and is also the
largest operating company. The majority of Group companies
cover a broad spectrum of our business. In some, we concen-
trate on specific business areas: The Wintershall Group, for
example, focuses on oil and gas activities. In the BASF Group
Consolidated Financial Statements, 286 companies including
BASF SE are fully consolidated. We consolidate eight joint
operations on a proportional basis, and account for 34 com-
panies using the equity method.
As guideline for our conduct
and actions
Values
As strategic basis for our
success on the market
Principles
We create chemistry
for a sustainable future
Purpose
BASF Report 2016
Our strategy
Corporate strategy
Our strategy Corporate strategy
22 Management's Report
Pursuant to Section 317(2)(4) HGB, information disclosed in
accordance with Section 315(5) HGB is not included in the
audit conducted by the report auditor.
- The Declaration of Conformity pursuant to Section 161 of
the German Stock Corporation Act
- Compliance reporting
- Corporate Governance Report (except disclosures pursuant
to Section 315(4) of HGB)
The Declaration of Corporate Governance can be found in the
Corporate Governance chapter from page 125 onward and is
a component of the Management's Report. It comprises:
Declaration of Corporate Governance in
accordance with Section 315(5) HGB in
connection with Section 289a HGB
The Compensation Report can be found in the Corporate
Governance chapter from page 138 onward, and the disclo-
sures required by takeover law in accordance with Section
315(4) HGB from page 132 onward. They form part of the
Management's Report audited by the external auditor.
Compensation Report and disclosures in
accordance with Section 315(4) of the German
Commercial Code (HGB)
For more information, see the Notes to the Consolidated Financial
Statements from page 172 onward
In 2050, nearly ten billion people will live on Earth. While the
world's population and its demands will keep growing, the
planet's resources are finite. On the one hand, population
growth is associated with huge global challenges; and yet
we also see many opportunities, especially for the chemical
industry.
Antwerp
Ludwigshafen
Geismar
Florham Park
103
107
109
119
122
Management's Report
BASF Report 2016
Management's Report 19
The BASF Group
101
Global leader
In 80+ countries
Employees contribute to our
success
Broad portfolio
5 segments
13 operating divisions
86 strategic business units
At BASF, we create chemistry for a sustainable future. As
the world's leading chemical company, we combine eco-
nomic success with environmental protection and social
responsibility. The approximately 114,000 employees in
the BASF Group work on contributing to the success of
our customers in nearly all sectors and almost every
country in the world. Our portfolio is arranged into five
segments: Chemicals, Performance Products, Functional
Materials & Solutions, Agricultural Solutions and Oil &
Gas.
Organization of the BASF Group
Thirteen divisions grouped into five segments
BASF is the world's leading
chemical company
98
97
88$$b$རྔུ⪜༅ #
Raw materials
Environment, health, safety and security
Responsible Care Management System
Transportation and storage
Production
Product stewardship
Energy and climate protection
Water
Air and soil
Forecast
Opportunities and risks report
Economic environment in 2017
Outlook 2017
92
92
94
96
96
111
111
■ Regional divisions, corporate units and research and
functional units support our business
Thirteen divisions divided into five segments bear operational
responsibility and manage our 57 global and regional business
units. The divisions develop strategies for our 86 strategic
business units and are organized according to sectors or
products.
Our regional units are responsible for optimizing local infra-
structure, and contribute to tapping our market potential. For
financial reporting purposes, we organize our regional divisions
into four regions: Europe; North America; Asia Pacific; and
South America, Africa, Middle East.
Until the end of 2016, three central divisions, six corporate
units and ten competence centers supported the BASF
Group's business activities in areas such as finance, engineer-
ing, investor relations, communications and research. At the
beginning of 2017, we reassembled these into five research
units, eight functional units and seven corporate units. We
realigned the organizational structures in selected functional
units. These include Procurement, Human Resources and
Supply Chain Operations & Information Services, along with
Environmental Protection, Health & Safety and European
Site & Verbund Management. With this organization, we are
aligning ourselves more closely to customer and market needs
and reducing internal interfaces.
33%
- Coatings
Performance Materials
4
Agricultural Solutions
5
Oil & Gas
6
Other
Crop Protection
10%
Oil & Gas
5%
2
3%
20 Management's Report
The BASF Group
BASF sites
Freeport
Functional Materials & Solutions
Regional results
3
Catalysts
BASF structure
Percentage of total sales in 2016
1
Chemicals
- Petrochemicals
-
- Monomers
4
23%
5
6
- Intermediates
Dispersions & Pigments
Care Chemicals
2
Performance Products
26%
- Nutrition & Health
Performance Chemicals
-
- Construction Chemicals
● Selected research and development sites
Key BASF share data
To Our Shareholders
MSCI World Index
6
8.7%
1 Germany
40%
5
6.5%
2
United States and Canada
18%
DJ Chemicals
0.3%
United Kingdom and Ireland
11% 4
4
Rest of Europe
17%
5
Rest of world
5%
3
6
3
Not identified
DAX 30
With over 500,000 shareholders, BASF is one of the largest
publicly owned companies with a high free float. An analysis of
the shareholder structure carried out at the end of 2016
showed that, at 18% of share capital, the United States and
Canada made up the largest regional group of institutional
investors. Institutional investors from Germany accounted for
11%. Shareholders from the United Kingdom and Ireland hold
11% of BASF shares, while institutional investors from the rest
of Europe hold a further 17% of capital. Approximately 29%
of the company's share capital is held by private investors,
most of whom reside in Germany. BASF is therefore one of the
DAX 30 companies with the largest percentage of private
shareholders.
BASF on the capital market
BASF Report 2016
To Our Shareholders
BASF on the capital market
13
Long-term performance of BASF shares compared with indexes
(Average annual increase with dividends reinvested)
2011-2016
14.4%
14.2%
10.5%
11.8%
Shareholder structure (by region)
2006-2016
5.7%
0.9%
7.0%
BASF share
DAX 30
EURO STOXX
MSCI World Chemicals
Weighting of BASF shares in important indexes
as of December 31, 2016
Broad base of international shareholders
13.5%
9%
Verbund sites
Proposed dividend of €3.00 per share
At the end of 2016, the financial indebtedness of the BASF
Group was €16.3 billion. Liquid funds including marketable
securities amounted to €1.9 billion. The average maturity of
our financial indebtedness was 5.6 years. The company's
medium to long-term debt financing is predominantly based
on corporate bonds with a balanced maturity profile. In 2016,
BASF issued several bonds to finance, among other things,
the acquisition of Chemetall. For short-term debt financing,
BASF SE has a commercial paper program with an issuing
volume of up to $12.5 billion. As backup for the commercial
paper program, there are committed, broadly syndicated
credit lines of €6 billion available; these are not being used at
this time.
For more on financial indebtedness and maturities, see page 56 onward
and the Notes from page 204 onward
Analysts' recommendations
Around 30 financial analysts regularly publish studies on BASF.
At the end of 2016, 43% recommended buying our shares
(end of 2015: 32%) and 39% recommended holding them
(end of 2015: 40%), while 18% had a sell rating (end of 2015:
28%). The average target share price ascribed to BASF by
analysts was €79.65 in December 2016.
Continuously updated analyst estimates on BASF are available at
basf.com/share
BASF Report 2016
To Our Shareholders
BASF on the capital market
15
Close dialog with the capital market
■
Rated "A1/P-1/outlook stable" by Moody's and "A/A-1/out-
look stable" by Standard & Poor's, BASF enjoys good credit
ratings, especially compared with competitors in the chemical
industry. Rating agency Scope has also been evaluating
our creditworthiness since September 2016. It rates BASF at
"A/S-1/outlook stable."
Roadshows for institutional investors and talks with
rating agencies
Our corporate strategy aims to create long-term value. We
support this strategy through regular and open communica-
tion with all capital market participants. To keep institutional
investors and rating agencies informed, we host numerous
one-on-one meetings and roadshows worldwide. We also
hold informational events to provide private investors with an
insight into BASF. In 2016, around 1,500 private investors took
the opportunity to attend such events in Germany and Austria.
At the end of September 2016, we informed analysts and
investors at our "Roundtable Asia Pacific" event in London
about our activities in the region as well as the growth potential
for the chemical industry. With the aid of concrete measures
and examples, it was explained how BASF intends to continue
growing profitably in the Asia Pacific region in the future.
In 2016, we once again held special events aimed toward
investors who base their investment decisions on sustainability
criteria. There, we outlined in particular our measures for
climate protection and energy efficiency. In addition, we
offered several special creditor relations roadshows, where
creditors and credit analysts could learn more about our busi-
ness and financing strategy.
Investors can find comprehensive information about BASF
and BASF shares on our website and on social media plat-
forms.
Analysts and investors have confirmed the quality of our
communication work: We took first place among European
chemical companies in the annual survey conducted by
Britain's IR Magazine. Institutional Investor Magazine recog-
nized BASF in such areas as best investor day and best inves-
tor relations program in the European chemical industry.
Moreover, the British IR Society honored the integration of
sustainability reporting into BASF's corporate communications
activities with first place in this international category. BASF
won the Building Public Trust Award from auditing firm Price-
waterhouseCoopers for best integrated corporate report in
2015. The award, which was presented in Germany for the
first time, is intended to recognize companies for their open,
honest and transparent reporting, not just of the classic repor-
ting elements but also nonfinancial aspects such as sustain-
ability, risk management and corporate governance.
For more about BASF stock, see basf.com/share
Register for the newsletter with current topics and dates at
basf.com/share/newsletter
Contact the Investor Relations team by phone at +49 621 60-48230
or email ir@basf.com
16
2
BASF Roundtable Asia Pacific
Good credit ratings and solid financing
Information events for private investors
For more on the key sustainability indexes, see
basf.com/sustainabilityindexes
At the Annual Shareholders' Meeting, the Board of Executive
Directors and the Supervisory Board will propose a dividend
payment of €3.00 per share. We stand by our ambitious divi-
dend policy and plan to pay out nearly €2.8 billion to our
shareholders. Based on the year-end share price for 2016,
BASF shares offer a high dividend yield of 3.4%. BASF is part
of the DivDAX share index, which contains the fifteen compa-
nies with the highest dividend yield in the DAX 30. We aim to
increase our dividend each year, or at least maintain it at the
previous year's level.
For more on energy and climate protection, see page 103 onward
Employees becoming shareholders
In many countries, we offer share purchase programs that
turn our employees into BASF shareholders. In 2016, for
example, around 24,000 employees (2015: 21,600) purchased
employee shares worth about €59 million (2015: €60 million).
For more on employee share purchase programs, see page 45
2.50
Dividend per share¹ (€ per share)
3.00
2.20
1.95 1.95
1.70
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2.90
2.80
2.70
2.60
■
14
To Our Shareholders
BASF on the capital market
BASF Report 2016
BASF a sustainable investment
■
BASF once again included in DJSI World
sustainability index in 2016
In September 2016, BASF shares were included in the Dow
Jones Sustainability World Index (DJSI World) for the sixteenth
year in succession. As one of the most well-known sustain-
ability indexes, the DJSI World represents the top 10% of the
2,500 largest companies in the S&P Global Broad Market
Index based on economic, environmental and social criteria.
CDP again awards BASF leadership status and
honors company's sustainable water management
1 Adjusted for two-for-one stock split conducted in 2008
per one million working hours
2025 Goals
Production
BASF Report 2016
Reduction of worldwide lost-time injury rate
Reduction of worldwide process safety incidents
per one million working hours
Energy and climate protection
Product stewardship
Risk assessment of products that we sell in quantities of more than
one metric ton per year worldwide
Management's Report 27
Our strategy Goals
Health Performance Index
3 The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive
status by virtue of special expertise.
Status at end of 2016
The project has been
implemented for around
78,150 employees
worldwide.
Page 43
84.6%
Page 43
36.4%
Page 43
19.8%
More on
Systematic, global employee development as shared responsibility
of employees and leaders based on relevant processes and tools
Proportion of senior executives with international experience over
80%
Increase in proportion of non-German senior executives
(baseline 2003: 30%)
Long-term goals
Status at end of 2016
Page 42
More on
(37.2%)
1.4
2025 Goal
Increase the proportion of sales generated by products that make a
particular contribution to sustainable development ("Accelerators")
Products and solutions
Introduction of sustainable water management at all production sites
in water stress areas and at all Verbund sites (excluding Oil & Gas)
Water
4 The selection of relevant sites is determined by the amount of primary energy used and local energy prices.
Page 104
Employee development
(40%)
Page 104
42.3%
90%
Coverage of our primary energy demand by introducing certified
energy management systems (ISO 50001) at all relevant sites4
Reduction of greenhouse gas emissions per metric ton of sales
product (excluding Oil & Gas, baseline 2002)
More on
Status at end of 2016
2020 Goals
Page 101
75.4%
>99%
More on
Status at end of 2016
2020 Goal
Page 99
0.96
Annual goal
>0.9
Page 99
2.0
≤0.5
Page 98
≤0.5
Senior executives with international
experience
More on
22-24%
BASF Report 2016
Goals
Our strategy Goals
26 Management's Report
Excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments
3 Comprises EU15, Norway, Switzerland, United States, Canada, Japan, South Korea,
Australia, New Zealand
2 Percentage of BASF Group sales (excluding Oil & Gas) by location of customer
66%
73%
Industrialized countries³
| Emerging markets
27%
2006
34%
2016
Sales² in emerging markets
For more on current developments, see the Regional Results on page 91
For more on our goals, see page 26 onward
Compared with 2015, sales (excluding Oil & Gas) at our
companies headquartered in the emerging markets declined
by 3% to €14,849 million. Increased sales volumes could only
partly compensate for negative currency and price effects.
Measured by customer location, sales (excluding Oil & Gas) in
the emerging markets fell by 4% to €18,742 million. This
brought sales to customers in emerging markets to around
34% of total sales (excluding Oil & Gas) in 2016. In the years
ahead, we want to continue expanding this percentage.
Growth in the emerging markets remained overall stable in
2016 as compared with the previous year. In China, govern-
ment support measures kept growth from slowing down as
much as we had expected. The other emerging markets of
Asia were able to largely retain their growth dynamic. Gross
domestic product continued to drop in South America. Brazil
found itself in a severe recession, while gross domestic prod-
uct decreased slightly in Argentina, as well. Economic perfor-
mance in Russia shrank only marginally after sharp declines in
the previous year; a contributing factor was the stabilization of
oil prices. Overall, the emerging markets of eastern Europe
were able to post slight growth once again.
In the years ahead, we want to grow even more vigorously in
the emerging markets and further expand our position there.
Today's emerging markets are expected to account for around
60% of global chemical production in 2020. We aim to benefit
from the above-average growth in these regions and therefore
plan to invest more than a quarter of our capital expenditures¹
there between 2017 and 2021.
Business expansion in emerging markets
For more on innovation, see page 32 onward
Our three global technology platforms are each based in
one of the regions particularly significant for us: Process
Research & Chemical Engineering (Ludwigshafen, Germany),
Advanced Materials & Systems Research (Shanghai, China)
and Bioscience Research (Research Triangle Park, North
Carolina). We want to continue expanding our research and
development activities on a global level, and are also adapting
this to the growth in regional markets. The stronger global
presence of our research and development opens up new
opportunities to actively participate in worldwide innovation
processes and gain access to talent.
We drive intensive research and development activities in
our established business areas. One focus of our research is
on the enhancement and innovative application of specific key
technologies. They pool the diverse competencies of our inter-
national Research and Development Verbund to strengthen
our competitive ability in the long-term. We also work on
specific growth fields in order to develop future business
fields for BASF. With our research, we aim to make a decisive
contribution to innovative solutions for global challenges and
contribute to sustainable development.
Innovations in chemistry are needed to meet the needs of the
growing world population on a long-term basis. The develop-
ment of innovative products and solutions is, therefore, of vital
significance for BASF. In the long term, we aim to continue
significantly increasing sales and earnings with new and
improved products. Effective and efficient research is therefore
indispensable.
Innovations for a sustainable future
Management's Report 25
Our strategy - Corporate strategy
BASF Report 2016
For more on Compliance, see page 134 onward
We carry out our corporate purpose, “We create chemistry for
a sustainable future," by pursuing ambitious goals along our
entire value chain. In this way, we aim to achieve profitable
growth and take on social and environmental responsibility. We
are focusing on issues through which we as a company can
make a significant contribution.
Goal areas along the value chain
Suppliers
2021 Goal
Proportion of women in leadership positions
with disciplinary responsibility
Employees
2 Baseline 2015: excluding business transferred to Gazprom
€1.1 billion
€3.6 billion
(4.6%)²
5.3%²
€0.10
€2.90
2015
2016
€57.6 billion
€10.5 billion
Change since
Premium on cost of capital
Free cash flow
Dividends per share paid out
EBITDA
Sales
International representation among senior
executives³
For more on our Results of Operations, see pages 50 to 54
Growth and profitability
Assessment of sustainability performance of relevant suppliers¹ according to our
risk-based approach; development of action plans where improvement is necessary
1 We define relevant suppliers as those showing an elevated sustainability risk potential as identified by risk matrices and with respect to corresponding country risks. Our suppliers are
evaluated based on risk due to the size and scale of our supplier portfolio.
Page 92
32%
70%
Status at end of 2016
Status at end of 2016
2020 Goal
Products and solutions
Customers
Growth and profitability; Employees;
Production; Product stewardship;
Energy and climate protection; Water
BASF
Procurement
Procurement
As determined in 2015, our aim for the years ahead is, on
average, to grow sales slightly faster and EBITDA considerably
faster than global chemical production (excluding pharma-
ceuticals; 2016: 3.4%), and to earn a significant premium on
our cost of capital. Moreover, we strive for a high level of free
cash flow each year, either raising or at least maintaining the
dividend at the prior-year level. The goals for sales and EBITDA
are based on the 2015 figures, excluding contributions from
the business disposed of in the asset swap with Gazprom in
September 2015.
More on
Value-based management throughout the
company
42.6%
to 28%
Increase proportion of sales gener-
ated by Accelerator products
2020 Goal
"Accelerator" products make a particular contribution to
sustainability in the value chain. That is why we want to
increase the proportion of sales from Accelerator products
to 28% by 2020. In 2016, this figure was at 27.2%.
A significant lever for the targeted steering of our product
portfolio, based on the sustainability performance of our prod-
ucts, is the Sustainable Solution SteeringⓇ method. By the end
of the 2016 business year, BASF had conducted sustainability
assessments and ratings for 95.9% of its entire relevant port-
folio of more than 60,000 specific product applications - which
account for €53.2 billion in sales. We consider the products'
application in various markets and industries. Because of
increasing sustainability requirements on the market, we
regularly conduct reassessments of existing product catego-
ries as well as of the relevant portfolio.
Significant sustainability concern identified
and action plan in development
Specific sustainability issues which are being
actively addressed
Meets basic sustainability standards
on the market
Our strategy - Sustainability management
Management's Report 31
4.2% 0.3%
Transitioner Challen
Sustainable
Solution
SteeringⓇ
One of our Accelerator products for the agricultural sector is
Limus, an additive for urea-based fertilizers. Using purely
urea-based fertilizers means the loss of a large portion of nitro-
gen one of the most important crop nutrients - through the
activity of the urease enzyme. Adding Limus inhibits this
enzyme and ensures a constant supply of nitrogen. At the
same time, less ammonia is released into the atmosphere.
Ammonia contributes to smog, as well as to overfertilization
and alternation of the ecosystem. LimusⓇ thus leads to more
consistent harvest yields while protecting the environment.
Performer
Substantial sustainability contribution
in the value chain
Accelerator
27.2%
Sustainable Solution SteeringⓇ: How BASF's products contribute to sustainability
BASF Report 2016
We contribute our approach and expertise to current
debates on the monetary value of the economic, environmen-
tal and social impact of business decisions. We share our
experience in networks and are involved in the corresponding
standardization processes within the International Organiza-
tion for Standardization (ISO).
This transparency supports the integrated character of our
actions, contributing to BASF's long-term success. The results
of these assessments are helpful in our discussions with
stakeholders, in internal progress measurements, and in
decision-making processes.
Building on this, BASF has been developing a new method
with external experts since 2014 to perform the first monetary
assessment of the economic, ecological, and social impacts
of its business activities along the value chain: the "Value to
Society" approach. It enables a direct comparison between
financial and nonfinancial effects on society, along with how
these interact.
In order to achieve this, we need to understand better than
ever how our actions impact society and the environment. We
already have many years of experience evaluating our prod-
ucts and processes using such methods as eco-efficiency
analyses, the Sustainable Solution SteeringⓇ portfolio analysis,
or BASF's corporate carbon footprint.
We want to measure the value proposition of our actions along
the entire value chain, aware that our business activities are
connected to both positive and negative impacts on the envi-
ronment and society. We strive to increase our positive contri-
bution to society and minimize the negative effects of our
business activities.
■ Evaluating sustainability performance to steer product
portfolio
Value to Society: method for assessing economic,
environmental and social impact of business activities
along the value chain
Creating value
68.3%
"Transitioners" are products with specific sustainability
challenges that are being actively tackled. Due to the adjust-
ment of the portfolio under evaluation, the number of these
products rose in 2016. A fuel additive from our KeropurⓇ line is
one example of how we enhance the sustainability perfor-
mance of our products. Such innovative fuel additives increase
the efficiency of combustion engines. The result is reduced
fuel consumption, and therefore fewer pollutant emissions.
KeropurⓇ 3638 is categorized as a Transitioner because it
contains a liquid hydrocarbon mixture. This hydrocarbon mix-
ture contains naphthalene, which categorizes it as a CMR
(carcinogenic, mutagenic or toxic for reproduction) substance.
In order to address some of our customers' occupational
safety concerns, a research project was begun and a solution
developed. Customers can now obtain the alternative
Keropur 3708, free of CMR substances.
For all products classified as "Challenged," we aim to
develop prompt plans of action, even in the case of portfolio
revisions and product reassessments. These action plans can
include research projects, reformulations or even replacing
one product with an alternative product. At the end of
2016, action plans had been created for 100% of Challenged
products.
Innovations based on chemistry require market-oriented
research and development focused on the needs of our
customers. That is why our cross-divisional corporate research
is closely aligned with the requirements of our operating
Our research pipeline comprised approximately 3,000 proj-
ects in 2016. Expenses for research and development
amounted to around €1,863 million, slightly below the prior
year's level (€1,953 million). This was particularly attributable to
the rearrangement of research activities in plant biotechnology
and the corresponding adjustment of site structure in North
America and Europe. Operating divisions were responsible for
79% of total research and development expenses in 2016.
The remaining 21% was allocated to cross-divisional corpo-
rate research focusing on long-term topics of strategic impor-
tance to the BASF Group. We strive to maintain the recent
years' high level of spending on research and development.
Globalizing research and strengthening regional
competencies
Increased use of digital technologies
Enhanced innovation approach with strong focus
on customers and markets
■
■
Strategic focus
In our excellence program "UNIQUE - The BASF Academic
Partnership Program," we are working intensively with fifteen
leading universities around the world. BASF also runs four
postdoc centers that pool collaborations with several research
groups on a regional level. The North American Center for
Research on Advanced Materials (NORA) and the California
Research Alliance (CARA) are located in North America. The
Joint Research Network on Advanced Materials and Systems
(JONAS) is active in Europe, while the Network for Advanced
Materials Open Research (NAO) covers the Asia Pacific region.
In order to continuously promote exchange with external
customers and partners, we have integrated the Creator
Space approach from our 2015 anniversary year into our
regular research activities. We use this program to develop
innovative ideas.
disciplines. The direct access to external scientific expertise,
new technologies and talented minds from various disciplines
strengthens our portfolio with creative new projects.
Our global network of about 600 universities, research insti-
tutes and companies forms an important part of our Know-
How Verbund. We collaborate with them in many different
Network with around 600 universities,
research institutes and companies
Global network
In 2016, we generated sales of over €10 billion with prod-
ucts launched on the market since 2011 that stemmed from
research and development activities. In the long term, we aim
to continue significantly increasing sales and earnings with
new and improved products.
For BASF, innovation is the key to successfully standing out
from the crowd in a challenging market environment. Our inno-
vative strength is based on our global team of highly qualified
employees with various specializations. We had around
10,000 employees involved in research and development in
2016. Our three global technology platforms are each run from
one of the regions particularly significant for us - Europe, Asia
Pacific and North America: Process Research & Chemical
Engineering (Ludwigshafen, Germany), Advanced Materials &
Systems Research (Shanghai, China) and Bioscience
Research (Research Triangle Park, North Carolina). Together
with the development units in our operating divisions, they
form the core of our global Know-How Verbund. BASF New
Business GmbH and BASF Venture Capital GmbH supplement
this network with the task of using new technologies to tap
into attractive markets and new business models for BASF.
A growing need for food, clean water and energy, limited
resources and a booming world population - reconciling
all these factors is the greatest challenge of our time.
Innovations based on chemistry play a key role here, as
they contribute decisively to new solutions. Effective and
efficient research and development are a prerequisite for
innovations as well as an important growth engine for
BASF. We work in interdisciplinary teams on innovative
processes and products for a sustainable future. This
is how we ensure our long-term business success
with chemistry-based solutions for almost all sectors of
industry.
Projects in research pipeline
Around 3,000
Spent on research
and development
€1,863 million
Employees in research and
development worldwide
Around 10,000
BASF Report 2016
Innovation
Innovation
32 Management's Report
For more on our sustainability instruments, see
basf.com/en/measurement-methods and page 94
For more on Sustainable Solution SteeringⓇ, see
basf.com/en/sustainable-solution-steering
We furthermore promoted sustainability topics in 2016
through various joint projects with partners along the value
chain. One such project involved supporting the agricultural
trading company AGRAVIS Raiffeisen AG, based in Münster/
Hannover, in conducting calculations for the manufacture of
sustainable feed mixes. BASF developed an online calculation
program that compares various feed mixes for pigs using
sustainability criteria along the entire value chain. The under-
lying eco-efficiency analysis measures various parameters like
emissions to water, land use, CO2 emissions and costs. Cus-
tomers can use this information to figure out how to reduce
their products' environmental impact while keeping an eye on
costs. For example, a comparison between conventional and
optimized feed mixes showed how impact on the environment
can be significantly reduced while production costs remain
nearly unchanged. Major factors here included minimizing
water and land use. With new combinable feed mixes contain-
ing grain by-products and other ingredients, reductions can be
attained in the use of arable land for producing feed for hogs.
For more on Value to Society (methodology and results), see
basf.com/en/value-to-society
For more on sustainability in procurement, see page 92 onward
For more on our human rights position, see
basf.com/humanrights and pages 45 and 134
For more on our guidelines for responsible lobbying, see
basf.com/guidelines_political_communication
For more on stakeholder dialog, see basf.com/en/dialog
For more on the Stakeholder Advisory Council, see
basf.com/en/stakeholder-advisory-council
For more on the development of the figures outlined in
Results of Operations, see page 50 onward
According to our value-based management concept, all
employees can make a contribution in their business area to
help ensure that we earn the targeted premium on our cost of
capital. We pass this value-based management concept on to
our team around the world through seminars and training
events, thereby promoting entrepreneurial thinking at all levels
within BASF. +
We primarily comment on EBIT before special items on a
segment and division level in our financial reporting. Special
items arise from the integration of acquired businesses,
restructuring measures, impairments, gains or losses resulting
from divestitures and sales of shareholdings, and other expen-
ses and income that arise outside of ordinary business activi-
ties. Adjusting for special items makes EBIT before special
items an especially suitable figure for illustrating development
over time. In addition to EBIT before special items, we also
report on sales as a further main driver for EBIT after cost of
capital. BASF's nonfinancial targets are focused more on the
long term, and are not used for short-term steering.
All this forms a consistent system of value drivers and key
indicators for the individual levels and functions at BASF. In
addition to EBIT after cost of capital, EBIT and EBIT before
special items are the most significant performance indicators
for measuring economic success as well as for steering the
BASF Group and its operating units.
An important factor in ensuring the successful implemen-
tation of value-based management is linking the goals of BASF
to the individual target agreements of employees. In the
operating units, the most important performance indicator is
EBIT after cost of capital. By contrast, the functional units'
contribution to value is assessed on the basis of effectiveness
and efficiency.
For us, value-based management means the daily focus
placed on value by all of our employees. To this end, we have
identified value drivers that show how each and every unit in
the company can create value. We develop performance indi-
cators for the individual value drivers that help us to plan and
pursue changes.
Exercising a value-oriented mindset in day-to-day
business by every employee
The cost of capital basis consists of a segment's oper-
ating assets plus the customer and supplier financing not
included there. Operating assets comprise the current and
noncurrent asset items¹ used by the operating divisions.
The cost of capital percentage (weighted average cost
of capital, WACC) is determined using the weighted cost of
capital from equity and borrowing costs. The cost of equity is
ascertained using the Capital Asset Pricing Model. Borrowing
costs are determined based on the financing costs of the
BASF Group. EBIT after cost of capital, which we use as a
steering parameter, is a pretax figure. Therefore, we use the
current average tax rate to derive the pretax cost of capital
percentage from the WACC. The projected net expense of
Other is already provided for by an adjustment in the cost of
capital percentage.
To calculate EBIT after cost of capital, we take the BASF
Group's EBIT and deduct the EBIT of activities recognized
under Other - not allocated to the segments - and subtract
the cost of capital of the BASF Group from the resulting figure.
Cost of capital is determined by applying cost of capital
before taxes to the value of the cost of capital basis at each
month end. Monthly cost of capital is then added up over the
course of the year.
Cost of capital determined using cost of capital
percentage and cost of capital basis
-
Responsible: We act responsibly as an integral part of soci-
ety. In doing so, we strictly adhere to our compliance stan-
dards. And in everything we do, we never compromise on
safety.
Calculating EBIT after cost of capital
Income from operations (EBIT) after cost of capital is a key
performance and management indicator for the BASF Group,
its operating divisions and business units. This figure combines
the company's economic situation as summarized in EBIT with
the costs for the capital made available to us by shareholders
and creditors. When EBIT exceeds cost of capital, we earn
a premium on our cost of capital and exceed the return
expected by our shareholders.
Performance and management indicator
EBIT after cost of capital
"We add value as one company" is one of the four princi-
ples of our "We create chemistry" strategy. To create
value in the long term, a company's earnings must exceed
the cost of stockholders' equity and borrowing costs. This
is why we strive to earn a significant premium on our
cost of capital. To ensure BASF's long-term success, we
encourage and support all employees in thinking and
acting entrepreneurially in line with our value-based
management concept. Our goal: to create awareness as
to how each and every employee can find value-oriented
solutions in the company's day-to-day operations and
implement these in an effective and efficient manner.
BASF Report 2016
Value-based management
Our strategy Value-based management
28 Management's Report
Page 30
27.2%
28%
More on
Status at end of 2016
2020 Goal
Page 107
1 These include fixed assets, intangible assets, investments accounted for using the equity method, inventories, trade accounts receivable, other receivables generated by core business
activities, and other assets as well as any assets of disposal groups.
100%
BASF Report 2016
Management's Report 29
Our strategy Sustainability management
Corporation have made use of their right to establish a Political
Action Committee (PAC). The BASF Corporation Employee
PAC is a voluntary, federally registered employee association
founded in 1998. It collects donations for political purposes
and independently decides how these are used, in accordance
with U.S. law.
Our lobbying and political communications are conducted
in accordance with transparent guidelines and in keeping with
our publicly stated positions. BASF does not financially sup-
port political parties. In the United States, employees at BASF
We are part of the Global Business Initiative on Human
Rights (GBI). This group of globally operating companies from
various branches aims to ensure implementation of the U.N.
Guiding Principles on Business and Human Rights. With inter-
national experts at the GBI conference in South Africa, we
discussed how we can support a mining company and BASF
supplier in fulfilling its responsibilities with respect to human
rights.
BASF is involved in worldwide initiatives with various
stakeholder groups, such as the U.N. Global Compact. BASF's
Chairman of the Board of Executive Directors is a member of
the United Nations Global Compact Board. As a member of
the U.N. Global Compact LEAD initiative, we support the
implementation of the "Agenda 2030" and its Sustainable
Development Goals. BASF is also active in local Global Com-
pact networks.
We have a particular responsibility toward our production
sites' neighbors. With the established community advisory
panels, we aim to promote open exchange between citizens
and our site management, and strengthen trust in our
activities. In 2016, we developed new, globally applicable
requirements for community advisory panels at our sites.
These minimum requirements are oriented toward the griev-
ance mechanisms outlined in the U.N. Guiding Principles
for Business and Human Rights. We keep track of their imple-
mentation through the existing global databank of the
Responsible Care Management System.
To involve our stakeholders even more closely, members
of the Board of Executive Directors once again met with the
Stakeholder Advisory Council in 2016 to discuss important
aspects of sustainability. Topics include further integrating
sustainability into our company, as well as our new "Value to
Society" approach. This involves evaluating the societal bene-
fits and costs generated by BASF's business activities.
Our stakeholders include customers, employees, suppliers
and shareholders, as well as representatives from science,
industry, politics, society and media. Parts of our business
activities, such as the use of new technologies, are frequently
viewed by our stakeholders with a critical eye. In order to
increase societal acceptance for our business activities, we
take on critical questions, assess our business activities in
terms of their sustainability, and communicate transparently.
Such dialogs help us to even better understand society's
expectations of us and which measures we need to pursue in
order to establish trust and build partnerships.
Constant dialog with our stakeholders
Engaging stakeholders
BASF Report 2016
Our strategy Sustainability management
30 Management's Report
For more on standards in our supply chain, see page 92 onward
For more on Compliance and our Code of Conduct,
see page 134 onward
For more on our materiality analysis, see basf.com/materiality
For more on our financial and sustainability goals, see page 26 onward
For more on our production standards, see page 98 onward
For more on the organization of our sustainability management, see
basf.com/sustainabilitymanagement
Our risk management supports our long-term business
success. We aim to reduce potential risks in the areas of envi-
ronment, safety and security, health protection, product
stewardship, compliance, and labor and social standards by
setting ourselves globally uniform requirements that frequently
go beyond legal requirements. Internal monitoring systems
and complaint mechanisms enable us to check compliance
with these standards: they include, for example, question-
naires, audits and compliance hotlines. All employees, manag-
ers, and Board members are required to abide by our global
Code of Conduct, which defines a mandatory framework for
our business activities.
We take advantage of business opportunities by offering
our customers innovative products and solutions that contrib-
ute to sustainable development. We ensure that sustainability
criteria are integrated into our business units' development
and implementation of strategies, research projects, and inno-
vation processes. For example, we analyze sustainability-
related market trends in customer industries, such as the
packaging industry, in order to zero in on taking advantage of
new business opportunities.
Relevant topics resulting from these commitments form the
focal points of our reporting, which we integrate into our long-
term steering processes.
- We drive sustainable solutions.
- We respect people and treat them fairly.
- We produce safely for people and the environment.
- We produce efficiently.
They provide strategic orientation for BASF's commitments in
meeting the growing challenges along the value chain:
- We source responsibly.
We were already using a materiality analysis back in 2013
to identify such topics as energy and climate, water, resources
and ecosystems, responsible production, and employment
and employability. A strategic evaluation process built upon
this in 2015 and 2016 to define new focus topics along the
value chain.
Through our materiality analysis, constant dialog with
stakeholders, and our many years of experience, we are con-
tinuously developing a better understanding of significant
topics and trends as well as potential opportunities and risks
along our value chain.
We have created structures to promote sustainable, entre-
preneurial actions all the way from strategy to implementation.
The Corporate Sustainability Board is BASF's central steering
committee for sustainable development. It is comprised of the
heads of our business, corporate and functional units as well
as of the regions. A member of the Board of Executive Direc-
tors serves as chair. We have also established an external,
independent Stakeholder Advisory Council. Here, international
experts from science and society contribute important external
perspectives to discussions with BASF's Board of Executive
Directors, thereby helping us expand our strengths and identify
our potential for improvement.
As the world's leading chemical company, we aim to add value
in the long term for our company, the environment, and soci-
ety. Sustainability is a driver for growth as well as an element
of our risk management. That is why we incorporate aspects
of sustainability into our decision-making processes and have
defined clear responsibilities in our organization.
Recognizing significant topics and trends
Taking advantage of business opportunities
■Minimizing risks
Strategy
Sustainability is an integral part of our corporate strategy.
Using the various tools of our sustainability management,
we carry out our company purpose: "We create chemistry
for a sustainable future." Sustainability is integrated into
our core business, in line with our strategic principle "We
drive sustainable solutions." This is how we seize business
opportunities and minimize risks along the value chain.
Sustainability management
Our investment decisions for property, plant and equip-
ment and financial assets also involve sustainability criteria.
Our decision-making is supported by expert appraisals that
assess economic implications as well as potential effects on
the environment, human rights or local communities.
Entrepreneurial: All employees contribute to BASF's success
- as individuals and as a team. We turn market needs into
customer solutions. We succeed in this because we take
ownership and embrace accountability for our work.
Management's Report 23
Our strategy Corporate strategy
Global standards
We are constantly developing our brand image. We regu-
larly measure awareness of and trust in our brand, and there-
fore in our company. A global market research study con-
ducted every two years showed in 2016 that, in terms of
awareness and trust, BASF is above the industry average in
numerous countries. The study collected data on respon-
dents' aided awareness of BASF and our most important
competitors. Our goal is to continue increasing awareness of
BASF in all of our relevant markets.
Wherever our stakeholders encounter our brand, we want
to convince them that BASF stands for connectivity, intelligent
solutions, value-adding partnerships, an attractive working
environment and sustainability. This contributes to our custom-
ers' confidence in their buying decisions and to our company
value.
"Connected" describes the essence of the BASF brand.
Connectivity is one of BASF's great strengths. Our Verbund
concept realized in production, technologies, knowledge,
employees, customers and partners enables innovative
solutions for a sustainable future. The claim that "We create
chemistry," as stated in the BASF logo, helps us embed this
solution-oriented strategy in the public consciousness. Our
brand creates value by helping communicate its benefits for
our stakeholders as well as our values.
We rely on a strong brand in order to further expand our posi-
tion as the world's leading chemical company. Our brand is
derived from our strategy and our corporate purpose "We
create chemistry for a sustainable future" as well as our
strategic principles and values.
-
BASF brand in chemical industry
Above-average awareness of, and trust in,
■
The BASF brand
BASF Report 2016
Our strategy Corporate strategy
24 Management's Report
For more on our materiality analysis, see basf.com/materiality
- We drive sustainable solutions.
- We respect people and treat them fairly.
-
- We produce efficiently.
-We produce safely for people and the environment.
-
- We source responsibly.
Our long-term economic success is dependent on societal
acceptance of our business activities. That is why we have
formulated clear expectations for our conduct along the value
chain:
We used a materiality analysis to identify and rank relevant
sustainability issues. These topics include, for example, energy
and climate, water, resources and ecosystems, responsible
production, and employment and employability.
■ We set ourselves goals along the value chain for our
focus areas
Our focus areas
Open: We value diversity - in people, opinions and experi-
ences. That is why we foster dialog based on honesty, respect
and mutual trust. We develop our talents and capabilities.
BASF Report 2016
■
We act according to clearly defined values and
standards of conduct that comply with or go beyond
laws and regulations
For more on our goals, see page 26 onward
Our standards fulfill or exceed existing laws and regulations
and take internationally recognized principles into account. We
respect and promote:
We review our performance with regular audits
biology, physics, materials science and engineering to jointly
develop customized products, functional materials, and sys-
tem solutions as well as processes and technologies.
We drive sustainable solutions. In the future, sustainability
will more than ever serve as a starting point for new business
opportunities. That is why sustainability and innovation are
becoming significant drivers for our profitable growth.
We form the best team. Committed and qualified employees
around the world are the key to making our contribution to a
sustainable future. Because we want to form the best team,
we offer excellent working conditions and inclusive leadership
based on mutual trust, respect and dedication to top perfor-
mance.
For more on innovation, see page 32 onward
For more on business opportunities with sustainability,
see page 29 onward
For more on the Best Team Strategy, see page 40 onward
■ Creative
■
Open
■
■
Responsible
Our values
Entrepreneurial
- The ten principles of the U.N. Global Compact
- The Universal Declaration of Human Rights and the two
U.N. Human Rights Covenants
- The core labor standards of the ILO and the Tripartite
Declaration of Principles Concerning Multinational
Enterprises and Social Policy (MNE Declaration)
- The OECD Guidelines for Multinational Enterprises
- The Responsible Care Global Charter
- The German Corporate Governance Code
norms.
Our business partners are expected to comply with pre-
vailing laws and regulations and to align their actions with
internationally recognized principles. We have established
monitoring systems to ensure this.
We stipulate rules for our employees with standards that apply
throughout the Group. We set ourselves ambitious goals with
voluntary commitments and monitor our performance in terms
of the environment, health and safety using our Responsible
Care Management System. In terms of labor and social
standards, this takes place using three elements: the Compli-
ance Program (including the external compliance hotlines),
close dialog with our stakeholders (such as with employee
representatives or international organizations), and the global
management process for the respect of international labor
For more on the Responsible Care Management System, see page 96
For more on Corporate Governance, see page 125 onward
Creative: In order to find innovative and sustainable solutions,
we have the courage to pursue bold ideas. We link our areas
of expertise from many different fields and build partnerships
to develop creative, value-adding solutions. We constantly
improve our products, services and solutions.
Our conduct is critical for the successful implementation of our
strategy: This is what our values represent. They guide how
we interact with society, our partners and with each other.
For more on labor and social standards, see page 45
Agricultural Solutions: We are working with farmers around
the globe to improve the quality and yield of their agricultural
production while taking into account societal expectations and
requirements. To achieve this, we constantly invest in our
development pipeline in order to expand our portfolio both in
and beyond conventional crop protection - such as in biologi-
cal solutions. In 2016, we invested €489 million in research
and development in the Crop Protection division, representing
around 9% of sales for the segment.
For more on InscalisⓇ, see page 81
Our well-stocked innovation pipeline comprises products
with a launch date between 2016 and 2026. With a peak sales
potential¹ of €3 billion, the pipeline comprises innovations from
all business areas. The herbicide EngeniaⓇ is being introduced
to the North American market for the 2017 growing season. It
serves as a key component of dicamba and glyphosate-
tolerant cropping systems for soy and cotton. We are also
planning the launch of the new insecticides InscalisⓇ and
broflanilide. InscalisⓇ combats piercing-sucking pests like
aphids and whiteflies. An application for approval was submit-
ted in 2016. Broflanilide is effective against chewing insects,
like potato beetles and caterpillars, in specialty and field crops;
use is also planned in professional pest control. With its novel
mode of action, it is highly effective in low doses and will play
an important role in resistance management.
We submitted the first approval applications for our new
fungicide, RevysolⓇ, in 2016. The active ingredient RevysolⓇ is
highly effective in combating a number of hard-to-control
fungal infections, like Septoria tritici, an agent that causes leaf
blotch in wheat. It will be offered in regionally and customer-
specific product formulations and used in all important field
and specialty crops worldwide. The first market launches are
scheduled for the 2019 growing season upon registration with
the relevant authorities.
Oil & Gas: The Wintershall Group concentrates its innova-
tion-related activities on improving the success rate of explo-
ration, developing technologies for reservoirs with challenging
development and production conditions, and increasing the
recovery factor of reservoirs.
€4,314 million
Peak sales describes the highest sales value to be expected in one year. For more, see the Glossary on page 239.
BASF Report 2016
Investments, acquisitions and divestitures
Management's Report 37
Investments, acquisitions and divestitures
In investments made in 2016
UltramidⓇ Advanced N, our new portfolio of heat-resis-
tant polyamides, gives customers in different industries greater
freedom for innovation, such as when it comes to developing
technically sophisticated end-user products. It allows for the
construction of lighter, smaller and more high-performance
plastic components for demanding operating conditions, such
as in automotive construction, household appliances or enter-
tainment electronics. With EcovioⓇ EA, BASF has developed
a high-performance foam that is bio-based and compostable.
Its excellent properties make it especially suitable for the trans-
port packaging of valuable, heavy or fragile goods that require
high shock resistance and durability.
In the Düste crude oilfield in Germany, we tested an inno-
vative and environmentally friendly method for increasing the
reservoir's recovery factor and have achieved positive initial
results. Wintershall developed a concept within the BASF
Verbund for microbial enhanced oil recovery (MEOR): We
aim to use tiny life forms found in the reservoir, like microbes
and microorganisms, to produce more crude oil. Fed nutrients,
these multiply and produce various natural substances as
metabolic products that can increase the oil recovery factor.
Unlike other enhanced oil recovery (EOR) technologies, the
use of microbes in MEOR can have several production-
increasing effects at the same time. We also successfully
managed, for the first time, to model these effects outside of
the reservoir, allowing for more efficient use. A larger field test
is scheduled to begin in 2017.
Our Cool Coatings automotive coating technology combines
innovative functional properties with a sophisticated design
that allows for a broad color palette. The coating formulation
reflects infrared light, reducing the vehicle's surface tempera-
ture by up to 20°C. This passive temperature management
reduces the inside temperature by up to 4°C. Cool Coatings
thus enables our customers to save on air conditioning, which
decreases fuel consumption or, in the case of electric vehicles,
increases range.
3
36 Management's Report
Innovation
MasterSuna SBS is a new concrete additive that allows
previously unsuitable types of sand to be processed into high-
grade concrete. Clay minerals in sand usually prevent concrete
superplasticizers from doing their job. With MasterSuna SBS,
even sand containing high levels of clay can be used in the
production of consistently high-quality concrete. Concrete
producers save considerable costs, as they no longer need to
pay for the transport of more suitable sands from distant sand
pits. Fewer sand pits need to be opened, as well, which helps
protect the environment and landscape.
Functional Materials & Solutions: To meet ever-tightening
exhaust regulations for diesel vehicles, manufacturers employ
special catalysts for nitrogen oxides (NOx) such as lean
NOX trap (LNT) technology, that is, NOX adsorbers. With
EMPRO® LNT, BASF has launched a new generation of these
catalysts that are especially robust and powerful, even under
widely various driving conditions, like city traffic, country roads,
or interstate highways.
Plastic components offer possibilities to make vehicles
lighter, more comfortable, and more aesthetically pleasing.
Additives like light stabilizers are used to maintain the original
properties and appearance of materials and surfaces for as
long as possible. TinuvinⓇ 880 is a novel light stabilizer that
significantly increases the durability of plastic parts exposed to
UV radiation and heat, making it suitable for automotive appli-
cations that require plastics to stand up to high levels of stress.
TinuvinⓇ 880 can also be used in the construction, agricultural
and packaging industries.
Farmers require high-quality feed for their animals. Yet
preserved feed, typically in the form of silage, and water are
both susceptible to pathogenic microorganisms. Adding our
Lupro-MixⓇ NA organic acid mixture inhibits the growth of
harmful bacteria and mold, allowing livestock to receive silage
and water of the highest quality. Farmers also benefit from the
fact that Lupro-MixⓇ NA is easier and safer to use than com-
parable products, while remaining nevertheless economical.
Lavergy® Pro 104 L is a newly developed protease
tein-splitting enzyme. Liquid detergents formulated with this
enzyme are already powerfully effective at low washing tem-
peratures, removing certain tough stains considerably better
than the established market standards. Lavergy® Pro 104 L is
even more powerful when combined with our high-perfor-
mance detergent polymer SokalanⓇ HP 20. Expertise in both
biology and chemistry allows us to offer customers even more
opportunities to precisely customize liquid detergent formula-
tions.
- or pro-
2
Performance Products: Flexible food packaging must fulfill
the highest functional requirements; at the same time, interest
is growing in environmentally friendly solutions. That is why we
are constantly enhancing the ink bonding agents of our
Joncryl® FLX product line and the laminating adhesives of the
EpotalⓇ range. These water-based products provide a more
environmentally friendly alternative to solvent-based systems
for flexible packaging. With EpotalⓇ, packaging manufacturers
can also shorten the processing time between order place-
ment and delivery.
With UltramidⓇ C37LC, BASF launched a new, high-
quality copolyamide on the market in 2016. It ensures a stabler
and more efficient production process for shrink films used in
food packaging. Films produced with UltramidⓇ C37LC are
considerably softer and more transparent than those made
from conventional materials. Manufacturers of fishing nets and
lines can also further increase the quality of their products
using the new plastic.
Our new HydroBlueⓇ90 demonstrates that innovation and
enhancement are even possible for products that were patent-
ed over 100 years ago. The product originally went to market
as an auxiliary agent in dyeing textiles with indigo. Today,
HydroBlueⓇ90 ensures consistent high quality in the dyeing
process. This stability is important for textile producers, as
signs of faulty coloring in denim do not usually appear until
after the garment is already finished. New HydroBlueⓇ90 is
especially highly concentrated, shelf-stable, odorless and
dust-free.
Chemicals: In 2016, we established the Amsterdam-based
Synvina C.V. joint venture with Avantium to produce and mar-
ket furandicarboxylic acid (FDCA) from renewable resour-
ces on an industrial scale. The most significant use of FDCS is
the production of polyethylenefuranoate (PEF), a new polymer
used for applications such as food and beverage packaging.
Compared with conventional plastics, PEF demonstrates
higher barrier properties for gases like carbon dioxide and oxy-
Igen, leading to a longer shelf life for packaged products. In
addition, its higher mechanical strength allows for thinner -
and therefore lighter - packaging.
21%
€2,944 million
BASF Report 2016
Used for acquisitions in 2016
In the Oil & Gas segment, we invested primarily in field
development projects in Argentina, Norway and Russia in
2016.
Of our portfolio through
acquisitions and divestitures
3 Including impairments and write-ups
1 Excluding additions to property, plant and equipment from acquisitions, capitalized exploration, restoration obligations and IT investments
For more on investments within the segments, see page 61 onward
Corporate research, Other
We are constructing an ammonia production plant in
Freeport, Texas, together with Yara International ASA, head-
quartered in Oslo, Norway. At our site in Geismar, Louisiana,
we completed the expansion of our butanediol capacities in
2016. The capacity expansion of our dicamba production in
Beaumont, Texas, is expected to start up in 2017.
With our partner, PETRONAS Chemicals Group Berhad,
headquartered in Kuala Lumpur, Malaysia, we completed con-
struction on the new aroma ingredients complex at the integrat-
ed chemical site in Kuantan, Malaysia. Production facilities for
citral and L-menthol will be gradually started up. In June 2016,
we began construction of a new automotive coatings plant in
Shanghai, China, together with our partner Shanghai Huayi Fine
Chemical Co. Ltd., based in Shanghai, China. With these invest-
ments, we are expanding our presence in the emerging markets
of Asia.
In Ludwigshafen, Germany, we started up further sections
of our integrated TDI complex in 2016. TDI production began
in August 2016. In November 2016, the TDI plant was tempo-
rarily shut down due to a technical defect in one part. Repair-
work was ongoing at the time of this report's release. We
continued work on revamping the new superabsorbent tech-
nology at the site in Antwerp, Belgium, and plan to complete
this in 2017.
We invested €4,222 million in property, plant and equipment
in 2016. Total investments were therefore €1,429 million
lower than in the previous year and €531 million above the
level of depreciation³ in 2016. Our investments in 2016
focused on the Chemicals, Performance Products and Oil &
Gas segments.
Investments
2 Including capitalized exploration, restoration obligations and IT investments
1,552
4,377
7,258
2,944
4,314
Total
155
4,222
Property, plant and equipment²
In addition to innovations, investments and acquisitions
make a decisive contribution toward achieving our ambi-
tious growth goals. We are intensifying our investment in
emerging markets and in North America. We use targeted
acquisitions to supplement our organic growth.
By investing in our plants, we create the conditions for our
desired growth while constantly improving the efficiency of our
production processes. For the period from 2017 to 2021, we
have planned capital expenditures¹ totaling €19.0 billion. We
want to invest more than a quarter of this amount in emerging
markets and expand our local presence in order to benefit
from the growth in these regions. In North America, invest-
ments in new production facilities form the basis of future
growth. We also continue to develop our portfolio through
acquisitions that promise above-average profitable growth,
are driven by innovation, offer added value for our customers,
and reduce the cyclicality of our earnings. Investments and
acquisitions alike are prepared by interdisciplinary teams and
assessed using diverse criteria. In this way, we ensure that
economic, environmental and social concerns are included in
strategic decision-making.
For more on our investments as of 2017, see pages 123 and 124
Investments and acquisitions 2016 (million €)
Intangible assets
Thereof goodwill
Optimization
Invest-
ments
tions
Total
92
2,789
2,881
1,552
Acquisi-
2%
We want to continue advancing our research and develop-
ment activities in Asia especially, as well as in North America,
and are adapting this to the growth in regional markets. This
increased presence outside Europe creates new opportunities
for fortifying and expanding customer relations and scientific
collaborations and for gaining access to talented employees.
The result will be to strengthen our Research and Develop-
ment Verbund and make BASF an even more attractive partner
and employer, both on a global level and in the regions.
26%
Beijing University of Chemical Technology
Beijing, China
Beijing, China
Beijing Institute of Technology
Tsinghua University
Tsinghua, China
Changchun Institute of Applied Chemistry
Changchun, China
Network for Advanced Materials
Open Research
NAO
Zurich, Switzerland
University of Freiburg
Freiburg, Germany
ETH Zurich
I.S.I.S - Université de Strasbourg
Strasbourg, France
Joint Research Network on
Advanced Materials and Systems
JONAS
University of Massachusetts
Amherst, Massachusetts
Massachusetts Institute of Technology
Cambridge, Massachusetts
Harvard University
Cambridge, Massachusetts
North American Center for Research
on Advanced Materials
NORA
BASF Report 2016
Management's Report 33
Innovation
divisions. In order to bring promising ideas to market as quickly
as possible, we regularly assess our research projects using a
multistep process and focus our topics accordingly. Creativity,
efficiency and collaboration with external partners are among
the most important success factors.
We enhanced our innovation approach in 2016 with the
aim of increasing our company's power of innovation and
securing long-term competitive ability. We aim to achieve this
by honing our research focus on topics that are strategically
relevant for our business, strengthening our existing scientific
processes and methods and introducing new ones, and opti-
mizing organizational structures.
In so doing, we restructured cross-divisional corporate
research in 2016 to create more space for the quick review of
creative research approaches. At the same time, we tailored
our previous technology fields even more toward the needs of
the BASF Group. They have been rearranged into multiple,
strategic key technologies that are constantly being further
developed. We also place our focus on the innovative applica-
tion of specific key technologies that are of central significance
for our operating divisions. Examples include polymer technol-
ogies, catalyst processes and strategies for the development
of biodegradable and bio-based materials.
In order to develop future business fields with high sales
potential for BASF, we develop specific growth fields. These
are regularly reviewed in terms of their attractiveness for BASF.
Fudan University
Fudan, China
When they mature, we transfer them to the operating divisions
and promote the development of new approaches with high
market potential. In addition, we have set a course for system-
atically using digital technologies in research and development.
In the years ahead, existing expertise in fields like modeling
and simulation will be consistently expanded and new digital
work areas will be developed.
Our global research and development presence is vital
to our success. In 2015, we had completed the expansion of
the Innovation Campus Asia Pacific in Shanghai, China. A
second Innovation Campus Asia Pacific is now being set up in
Mumbai, India, in order to continue strengthening our regional
research capacities. There, the focus areas in research will be
on crop protection and method development.
Global network: postdoc centers
CARA
California Research Alliance
University of California
Berkeley, California
University of California
San Francisco, California
Stanford University
Stanford, California
University of California
Los Angeles, California
After rearranging our research activities in plant biotech-
nology, we undertook further organizational adjustments to
our global R+D structures at the end of 2016. Research activi-
ties in Singapore were discontinued toward the end of the year
due to market developments. We are pursuing the research
topics located there at other sites. Research and development
activities at the European research sites in Basel and Düssel-
dorf were restructured in order to be able to support the oper-
ating divisions there more effectively.
Oil & Gas
Hanyang University
Kyoto University
Agricultural Solutions
€1,863 million
21% 5
Functional Materials & Solutions
20%
Performance Products
6
10%
Chemicals
123456
Research and development expenses by segment
Innovations in the segments - examples
Innovation
Management's Report 35
BASF Report 2016
PRODIAS stands for Processing Diluted Aqueous Systems.
For more on research and development, see basf.com/innovations
Kyoto, Japan
34 Management's Report
Innovation
BASF Report 2016
38 Management's Report
The number and quality of our patents also attest to our
power of innovation and long-term competitiveness. We filed
around 850 new patents worldwide in 2016. For the eighth
time in succession, we headed the rankings in the Patent
Asset Index in 2016 - a method which compares patent port-
folios industry-wide.
For a multiyear overview of research and development expenditures,
see the Ten-Year Summary on page 233
Hanyang, South Korea
Research focus areas - examples
Our focus areas in research are derived from the three major
areas in which chemistry-based innovations will play a key role
in the future: resources, environment and climate; food and
nutrition; and quality of life.
The field of efficient energy systems reveals high innovation
and market potential. In this context, BASF is working on such
topics as the development of high-temperature supercon-
ductors based on yttrium barium copper oxide, which trans-
mits electricity at low temperatures with negligible loss and
enables savings potential in generating and transporting
power. Its current-carrying capacity is twenty times greater
than that of copper, the most commonly used material in
electrical lines. Two milestones have been achieved on the
path toward a market launch: BASF and the global energy
company American Superconductor Corp. (AMSC) announced
a licensing agreement and research cooperation together
in March 2016. Furthermore, Deutsche Nanoschicht GmbH,
a 100% subsidiary of BASF New Business GmbH, started
up a pilot plant for manufacturing high-temperature super-
conductors in May 2016.
As the market leader in chemicals, BASF holds a special
responsibility toward people and the environment. Accor-
dingly, new products undergo comprehensive environmental
and toxicological testing before being brought to market.
These tasks are appointed to the Bioscience Research tech-
nology platform and include the search for new methods to
reduce, improve or replace the animal testing required by law.
We are the global forerunner in the chemical industry in devel-
oping such alternative methods. In May 2016, LuSens, an
alternative method developed by BASF, was validated by the
European Union. LuSens is one component of a three-part
testing strategy that enables reliable screening for allergic skin
reactions on contact with chemicals.
3-D printing involves the development of innovative mate-
rials. Compared with injection molding, 3-D printing offers
advantages such as lower costs in small-series production,
more time efficiency, and the realization of complex structural
elements in a single manufacturing process. In the chemical
industry, BASF has a broad material portfolio for 3-D printing
at its disposal. BASF New Business GmbH is constructing a
development center in Heidelberg, Germany, to develop
improved materials and optimize the interplay between mate-
rials and 3-D printers, together with partners like printer manu-
facturer Farsoon Technologies. Furthermore, our Advanced
Materials & Systems Research technology platform is active in
this field at the sites in Ludwigshafen, Germany; Basel, Swit-
zerland; Wyandotte, Michigan; and Shanghai, China. One
attest to BASF's competencies in material development is
Ultrasint PA6 X028, launched in April 2016. This powder,
based on polyamide 6, is geared toward use in the laser sin-
tering technique widely used in 3-D printing. Compared with
conventional polyamides, it provides superior mechanical sta-
bility and higher heat resistance. Furthermore, BASF
announced its intention in November 2016 to expand its co-
operation with American printer manufacturer HP in order to
move forward with the development of new 3-D print materials.
In the E.U.-supported PRODIAS¹ project, researchers and
developers of our Process Research & Chemical Engineering
technology platform are working together with partners from
industry and academia on methods and processes that allow
products based on renewable raw materials to be produced
efficiently and with fewer resources, while simultaneously
increasing the competitiveness of these products. The bio-
technological processes used, like fermentation, mostly take
place in diluted aqueous systems that demand energy-
intensive steps for separation and purification. Through the
use of freeze concentration - a technique typical in the food
industry we managed to concentrate biotechnologically
produced products in an especially gentle manner with negli-
gible losses for the first time in 2016.
-
Innovations based in chemistry to answer important
questions of the future
Investments, acquisitions and divestitures
Ludwigshafen remains the largest site in our Research
Verbund. In the nearby BASF agricultural center of Limburger-
hof-headquarters of the Crop Protection division - a new
research and development center for biological crop protec-
tion and seed solutions was opened in April 2016.
Additions to property, plant and equipment¹ by segment in 2016
South America,
Africa,
Middle East
7,307
6.4%
Europe
70,784
62.2%
76.1%
26.6%
23.9%
73.4%
Germany: 53,318 (46.8%)
23.6% women and 76.4% men
BASF SE: 35,001 (30.7%)
21.4% women and 78.6% men
18,156
16.0%
At BASF, the apprenticeship program trains students for technical, scientific and business vocations as well as for trade and craft professions.
BASF Report 2016
Management's Report 41
Working at BASF
- High scores in worldwide employer rankings
■
Asia Pacific
72.3%
27.7%
76.0%
December 31, 2016
Thereof women %
3,111
30.8
1,584
31.3
1,733
32.1
South America, Africa,
Middle East
Total
529
38.9
6,957
31.9
In regular development meetings, held as part of our
annual employee dialogs, employees and leaders outline pros-
pects for individual professional development together and
determine measures for further training and development. This
model was implemented for around 78,150 employees by the
end of 2016. We want to conduct development meetings for
all employees by the end of 2017.
BASF Group employees by region
(Total: 113,830, thereof 24.6% women, as of December 31, 2016)
North America
17,583
15.4%
24.0%
Focus on social media and online marketing
In the global competition for the best employees and leaders,
we want to recruit qualified talent in order to achieve our ambi-
tious growth targets. This is why we continuously review
measures to make our total offer package attractive for
employees. For example, we have now expanded our career
website to include a total of 61 countries in 2016. We continue
to make use of social networks to reach candidates and
ensure an innovative, target-group-appropriate approach
through digital media, such as 360-degree videos showcasing
selected workspaces. In North America, our online campaign
to make BASF an attractive employer for women and minori-
ties was highly successful. We were able to attract and hire
new employees for the Innovation Campus Asia Pacific in
Shanghai, China, at our "Live Day" virtual career fair in Asia
Pacific. In South America, we trained employees in the use of
social media as ambassadors of our employee brand.
We were once again able to achieve high scores in
employer rankings in 2016. For example, in a study conducted
by Universum, BASF was again selected by engineering and IT
students as one of the 50 most attractive employers in the
world. In North America, BASF was listed among Forbes' 100
Best Employers for the second time in a row. We are also far
ahead of our key competitors in North America on the employ-
er rating website glassdoor.com. In Brazil, BASF was once
again named one of the top 150 employers in a ranking by
Você SA magazine.
Vocational training
42 Management's Report
45.3
2,334
25.5
24.1
Thereof women %
December 31, 2016
108,376
3,120
Temporary staff
Apprentices
Permanent staff
BASF Group employees by contract type (total: 113,830)
For more information, see basf.com/apprenticeship
The "Start Integration" program, begun with 50 place-
ments in 2015, is geared toward refugees with a high proba-
bility of being granted the right to remain in Germany and aims
to integrate them into the labor market in the Rhine-Neckar
Metropolitan Region. BASF expanded the program to 300
placements and, for the 2016/2017 apprenticeship year,
added three modules - include a one-year career prep course
providing instruction in topics like language and intercultural
training.
At the Ludwigshafen site, we also offer a part-time training
program for newcomers from other fields, so that they can
qualify for a career in chemical production even while working
at their current job.
BASF launched its new apprenticeship campaign in May
2016, called "Show Us What You've Got!" (Zeig's Uns!).
It underscores the fact that, for BASF, an applicant's overall
impression is not made by technical know-how alone;
personal interests and strengths like initiative, creativity and
team spirit are also decisive factors.
In 2016, 837 apprentices started their vocational training
at BASF SE and at German Group companies, filling almost all
available program slots in Germany. The current shortage of
skilled labor nevertheless presents a challenge that we address
with various initiatives. In the Rhine-Neckar Metropolitan
region, such programs include Start in den Beruf and Anlauf
zur Ausbildung, in which 210 young people in the BASF Train-
ing Verbund participated in cooperation with partner compa-
nies in 2016. The goal here is to prepare participants for a
subsequent apprenticeship within one year, making a contri-
bution to the long-term supply of qualified employees in the
region. Because the number of open vocational training place-
ments meanwhile outweighs demand, some slots in these
programs remained unfilled in 2016.
BASF Report 2016
- 3,120 apprentices in around 60 occupations worldwide
Around €104 million spent on vocational training
As of December 31, 2016, BASF was training 3,120 people in
14 countries and around 60 occupations. We spent a total of
around €104 million on vocational training in 2016, as well as
about €6 million on the BASF Training Verbund as part of our
social commitment in the Rhine-Neckar Metropolitan Region.
Working at BASF
North America
Asia Pacific
BASF Report 2016
- Leaders as role models
We spent around €69 million on further training in 2016
(2015: €96 million). Each employee spent an average of 2.0
days on further training in 2016. As part of cost management,
we decided in 2016 to focus training on business and safety-
related courses.
We support employees in production and engineering
worldwide with job-specific qualifications and further training.
We have further strengthened our in-plant qualification
measures with in-plant trainers who promote the continuous
professional development of employees in production
and engineering through individual learning assignments.
Moreover, we expanded our programs on safety culture and
knowledge management as well as team and organizational
development.
Learning and development are essential success factors for a
strong company culture. The skills and competencies of our
employees are critical for profitable growth and lasting suc-
cess. With the Best Team Strategy and regional learning
strategies, we want to establish a new learning culture and
enable life-long, self-guided learning. The learning and devel-
opment options cover a range of learning goals: starting a
career, expanding knowledge, personal development, and
leadership training. For example, our Learning Campus in
Singapore offers development programs for leaders and
leadership candidates with a focus on strategy, leadership and
innovation. It serves as a platform for new styles of learning
and brings together employees from diverse areas - for our
goal is to create a common-ground, inspiring learning experi-
ence that enables employees to connect with the company
and with each other. In this regard, we have also been imple-
menting the "MentForMe" mentoring program step by step
since 2016. Our learning activities follow the "70-20-10"
philosophy: We apply the elements "learning from experience"
(70%), "learning from others" (20%) and "learning through
courses and media" (10%).
Development meetings form important element of
employee development
■ Specific further training for employees in production
and technical areas
■ Life-long learning concept focuses on on-the-job
experience
Learning and development
19.8
Thereof women %
29.4
2 Employees with disciplinary leadership responsibilities
1 Specialists without disciplinary leadership responsibilities
December 31, 2016
36,909
9,558
(Senior) executives²
Professionals¹
Leadership responsibility in the BASF Group
We offer our leaders learning and development measures
for all phases of their career, coordinating global, regional and
local opportunities. These are geared toward strengthening
our leaders' competencies and offer chances to network and
learn from one another. For example, we began the European
Emerging Leader program in 2016, which guides leadership
candidates into their roles over a period of 1.5 years. Similar
programs are available in other regions, too: In Asia Pacific, for
example, we run an internal training and further development
course for leaders to become coaches.
Our leaders should be role models for applying our strategy
in daily corporate life. We expect them to have a positive
influence on shaping day-to-day business, relaying company
values, and motivating employees. This includes how chal-
lenges are approached and how the leader's area of respon-
sibility is continuously developed. Our leadership culture is
founded on BASF's strategic principles and values as well as
on the standards of behavior set out by our global Code of
Conduct.
Multifaceted offers for leadership development
■
What we expect from our leaders
Europe
Competition for talent
The average percentage of employees who resigned
during their first three years of employment was 1.2% world-
wide in 2016. This turnover rate was 0.5% in Europe, 1.5% in
North America, 3.2% in Asia Pacific and 1.9% in South Amer-
ica, Africa, Middle East. Our turnover rates are therefore lower
than those of many other companies.
North America
49%
26%
3
Asia Pacific
19%
4
South America, Africa, Middle East
6%
2
1
Including capitalized exploration, restoration obligations
and IT investments
Acquisitions
2
1
We gained €155 million worth of property, plant and equip-
ment through acquisitions in 2016. Additions to intangible
assets including goodwill amounted to €2,789 million.
On September 26, 2016, we completed the acquisition of
Guangdong Yinfan Chemistry ("Yinfan”) in Jiangmen, China,
and integrated the business into the Coatings division. This
enabled us to add the Yinfan product line to our portfolio of
automotive refinish coatings in Asia Pacific and gain access to
a state-of-the-art production facility for automotive refinish
coatings in China.
The purchase of global surface technology provider
Chemetall from Albemarle Corp. in Charlotte, North Carolina,
was completed on December 14, 2016. With the acquisition
of this business, our Coatings division supplements its port-
folio of tailor-made technology and system solutions for sur-
face treatment. The purchase price amounted to $3.1 billion.
Effective January 1, 2017, we acquired the Henkel Group's
western European building material business for professional
users, broadening the portfolio of our Construction Chemicals
division.
2
For more information on acquisitions, see the Notes to the Consolidated
Financial Statements from page 174 onward
Europe
3
Chemicals
28%
BASF Group new hires in 2016
5
Performance Products
20%
Functional Materials & Solutions
17%
Agricultural Solutions
6%
Oil & Gas
26%
4
Other (infrastructure, R&D)
3%
6
€4,222 million
Additions to property, plant and equipment' by region in 2016
4
1
Divestitures
€4,222 million
On August 26, 2016, we divested our global photoinitiator
business to IGM Resins B.V., based in Wallwijk, Netherlands.
The transaction comprised technology, patents, trademarks,
customer relationships, contracts and inventories as well as
the photoinitiator production site in Mortara, Italy. These activi-
ties had been organized under the Dispersions & Pigments
1 division. High-performance photoinitiators for electronics cus-
tomers were not part of the transaction, as the electronics
industry is one of BASF's strategic focus areas.
The close alignment of our business with our customers'
needs is an important component of our "We create chemis-
try" strategy. We will therefore continue the systematic and
structured enhancement of our industry orientation in the
future.
40 Management's Report
Working at BASF
Working at BASF
113,830
Employees
around the world
Life-long learning
On center stage
BASF Report 2016
3,120
Apprentices¹
in around 60 occupations
Our employees carry out the goals of the "We create
chemistry" strategy. We want to attract and retain talented
people for our company and support them in their
development. To do so, we cultivate a working environ-
ment that inspires and connects people. It is founded on
inclusive leadership based on mutual trust, respect and
dedication to top performance.
123456
Strategy
- Best Team Strategy focuses on excellent people,
workplace and leaders
The Best Team Strategy is derived from our corporate strategy
and contributes greatly to the achievement of our goals. We
want to form the best team. To achieve this, we focus on three
strategic directions: excellent people, excellent place to work
and excellent leaders. Emphasis here is placed on our attrac-
tiveness in worldwide labor markets, personal and professional
development, life-long learning, and supporting and develop-
ing our leaders. We are strongly committed to internationally
recognized labor and social standards and strive to respect
these worldwide.
We completed the sale of the global polyolefin catalysts
business to W.R. Grace & Co., based in Columbia, Maryland,
on June 30, 2016. The transaction involved technologies,
patents, trademarks and the transfer of production plants in
Pasadena, Texas, and Tarragona, Spain. These activities had
been assigned to the Catalysts division.
At the end of 2016, BASF had 113,830 employees (2015:
112,435); of these, 3,120 were apprentices (2015: 3,240). We
hired 6,957 new employees Group-wide in 2016. Moreover,
the acquisition of Chemetall especially added to our workforce.
Reductions in headcount were related to events such as the
sale of the industrial coatings and polyolefin catalysts busi-
nesses.
Yet not all business units can be arranged purely according
to industry. That is why BASF has created sector-specific
groups for key customer industries - like the automotive,
construction and pharmaceutical sectors - or for growth fields
such as enzymes. These "industry teams" pool expertise,
knowledge and contacts across different units, sharpen our
understanding of the value chains in customer industries and
work on sector-specific solutions that often could not be
developed within one operating division alone. Our innovations
are geared specifically toward these needs and offer sustain-
able solutions for the packaging and print branches, for exam-
ple. This means combining the expertise of seven divisions
into one global industry team. Whether keeping food fresh,
manufacturing user-friendly packaging or optimizing costs -
we know the needs of the industry. The products and systems
developed by these teams comprise tailor-made solutions for
paper packaging, along with adhesives and plastics for pack-
aging or coatings. Our portfolio offers value to paper manufac-
turers in every phase of their production: Process chemicals
optimize costs and increase machine efficiency, functional
chemicals grant products special properties and finishing
chemicals improve the appearance and performance of ready-
to-use paper and cardboard.
We serve customers from many different sectors with our
broad portfolio of diverse competencies, processes, technol-
ogies and products. Around half of our business units are
oriented toward industries. By combining expertise and
resources, we position ourselves as a solution-oriented sys-
tem provider for our customers.
Number of employees
■ Industry teams pool cross-unit expertise,
knowledge and contacts
Industry orientation undergoing systematic,
structured enhancement
We sold the Coatings division's business with industrial
coatings to the AkzoNobel Group on December 14, 2016. The
transaction included technologies, patents, trademarks, cus-
tomer relationships and inventories as well as the transfer of
two production sites in England and in South Africa.
For more information on divestitures, see the Notes to the Consolidated
Financial Statements from page 174 onward
BASF Report 2016
Business models and customer relations
Management's Report 39
Business models and customer relations
Customized
And reliable supplier of classic With products and formulations
chemicals
for specific industries
Cost-effective
In close partnership with our
customers
BASF's customer portfolio ranges from major global
customers and medium-sized businesses to local work-
shops. We align our business models and sales chan-
nels with the respective customer groups and market
segments. In line with our strategic principle, "We add
value as one company," we tightly bundle our products
and services to target the specific needs of customers
from various sectors and bring innovations more quickly
to market.
Around half of business units geared toward
specific industries
In the classical chemicals business, we mostly sell the chem-
icals produced in our Verbund in bulk. These comprise basic
products from the Chemicals segment, such as steam cracker
products, sulfuric acid, plasticizers, caprolactam and isocya-
nates. For these basic chemicals, our priority is on supplying
customers reliably and cost effectively. Marketing is carried
out partly via e-commerce.
We create a broad range of customized products, partic-
ularly in the Performance Products segment - from vitamins,
personal care ingredients and color pigments to paper chemi-
cals and plastic additives. In joint projects, we start working
closely together with customers already at an early stage in
order to develop new products or formulations for a specific
industry. A worldwide network of development laboratories
allows us to quickly adapt our products to local needs.
We offer functionalized materials and solutions tailored
to customers' requirements, particularly in the Functional
Materials & Solutions and Agricultural Solutions segments.
These include, for example, engineering plastics, concrete
additives, coatings and crop protection products. We engage
in close partnerships with customers and develop innovations
together that help them optimize their processes and applica-
tions. Our understanding of the entire value chain as well as
our global structure and market knowledge are key success
factors here.
For information on customer relations in the Oil & Gas segment, see
page 84 onward
Innovative
Industry orientation
(4)
(3,166)
Change in %
2
Change in
million €
1,689
Currencies
Prices
(767)
Changes in scope of consolidation
Acquisitions
63
0
Divestitures
(10,718)
(15)
Volumes
Total change in sales
(1)
For the definition of special items, see page 28
2013
2012
■
(12,899)
EBIT before special items 6% below 2015 level,
at €6,309 million
At €6,275 million, EBIT matches prior-year level
EBIT after cost of capital rises considerably
At €6,309 million, income from operations (EBIT) before
special items was €430 million below the level of the previous
year. This was largely a consequence of the considerable
decline in the Oil & Gas segment resulting mainly from falling
prices and the divestiture of the natural gas trading and stor-
age business. The activities transferred to Gazprom had
contributed around €260 million to EBIT before special items
in 2015. In the Agricultural Solutions segment, EBIT before
special items matched the previous year's level. We achieved
a considerable increase in the chemicals business thanks to
sharply improved contributions from the Performance Prod-
ucts and Functional Materials & Solutions segments.
For an explanation of the figure EBIT before special items, see page 28
EBIT before special items (million €)
2016
6,309
Integration costs for acquired businesses amounted to
€27 million, compared with €15 million in 2015.
2015
2014
7,357
7,077
6,647
Special items in EBIT amounted to minus €34 million in 2016,
compared with minus €491 million in the previous year.
This development was mainly due to the special items
recognized in other charges and income, which amounted to
minus €44 million in 2016. In the previous year, other charges
and income totaled minus €729 million, mostly comprising
impairments on assets in the Oil & Gas segment.
Special charges from various restructuring measures came
out to minus €394 million compared with minus €223 million in
the previous year.
Divestitures in 2016 resulted in an earnings contribution of
€431 million, after €476 million in the previous year, especially
from the sale of the industrial coatings business and the poly-
olefin catalysts business in the Functional Materials & Solutions
segment.
6,739
(18)
(1.7)
BASF Report 2016
EBIT before special items
Financial result
Income before taxes and minority interests
Net income
Earnings per share
Adjusted earnings per share
Sales and earnings by quarter in 2015² (million €)
Management's Report 51
Special items
The BASF Group business year - Results of operations
2015
57,550
70,449
Change in %
(18.3)
10,327
10,508
Income from operations
Aside from EBIT, EBIT before special items, and EBIT after cost
of capital figures drawn upon to steer the BASF Group - we
also provide additional performance indicators in this report
that are not defined by IFRS. They should not be viewed in
isolation, but treated as supplementary information.
2016
Income from operations (EBIT)
Amortization and depreciation¹
EBITDA
Sales and earnings (million €)
Sales
Income from operations before depreciation and amortization (EBITDA)
and special items
EBITDA
EBITDA margin
Amortization and depreciation¹
Income from operations (EBIT)
Special items
EBIT before special items
Financial result
Income before taxes and minority interests
Income before minority interests
Net income
Earnings per share
Adjusted earnings per share
Sales and earnings by quarter in 2016² (million €)
Sales
Income from operations before depreciation and amortization (EBITDA)
and special items
Our chemicals business comprises the Chemicals, Performance Products und Functional Materials & Solutions segments.
Factors influencing sales of the BASF Group
2015 3.6%
2012
2016
1.4%
2015
2.1%
Electronics
Agriculture
1 Figures that refer to previous years may deviate from last year's report due to statistical
revisions.
BASF sales by industry²
(Direct customers)
>20%
10-20%
5-10%
Chemicals and plastics
Consumer goods | Transportation
<5%
2.8%
Agriculture | Construction | Energy and resources
Health and nutrition | Electronics
BASF Report 2016
Management's Report 49
The BASF Group business year - Economic environment
Trends in the chemical industry
■ Global growth corresponds to our expectations
The chemical industry (excluding pharmaceuticals) grew at the
rate we had anticipated, by 3.4%. The fastest growth was
seen in chemical production in the emerging markets of Asia
(2016: +6.3%, 2015: +6.6%). Chemical production increased
only marginally in the European Union (2016: +0.4%, 2015:
+0.9%). There were substantial regional differences. Produc-
tion fell considerably in Belgium and the United Kingdom,
while the Netherlands saw a sharp increase. Chemical pro-
duction declined slightly in Germany. Growth in the United
States was weaker than in the previous year (2016: +0.6%,
2015: +1.9%). Thanks to significant production expansion in
Mexico, overall growth for North America shrank at a slower
rate (2016: +0.9%, 2015: +1.8%). South America saw a mar-
ginal decline in chemical production (2016: -0.8%, 2015:
-3.8%). Production volumes grew slightly in Japan, at 1.5%
(2015: +1.6%).
Chemical production (excluding pharmaceuticals)
(Real change compared with previous year²)
Important raw material price developments
Prices continue to fall for crude oil and naphtha
Gas prices below previous year's level, but with
wide regional variance
Averaging around $44 per barrel in 2016, the price of Brent
blend crude oil dropped by about 15% compared with the
previous year ($52 per barrel). The oil price fluctuated over the
course of the year between $31 per barrel in January and $54
per barrel in December.
The average monthly price for the chemical raw material
naphtha ranged over the course of 2016 between $293 per
metric ton in February and $462 per metric ton in December.
At $385 per metric ton, the annualized average price of naph-
tha in 2016 was below the level of 2015 ($462 per metric ton).
The average price of gas in the United States was
$2.49 per mmBtu, under the previous year's level ($2.61 per
mmBtu). In Europe, the average price of gas on spot markets
remained substantially higher, at $4.58 per mmBtu (2015:
$6.49 per mmBtu). Gas prices in China averaged around
$6.54 per mmBtu nationally (2015: $9.81 per mmBtu), while
the average price in the coastal regions was $7.72 per mmBtu
(2015: $11.20 per mmBtu).
World
2016 3.4%
2 Changes in percentages from the previous year are mainly a result of the asset swap
with Gazprom.
European Union
2015
2016
Adjusted earnings per share dip from €5.00 to €4.83
1.9%
2015
2.0%
Transportation
2016
3.0%
2015
1.2%
Energy and
resources
2016
(0.3%)
2015
3.5%
1.4%
2.8%
2015
3.5%
Consumer goods
2016
2.6%
2015
2.0%
2016
4.7%
2015
3.8%
Health and nutrition
2016
United States
2016 0.4%
2015 0.9%
2016 0.6%
2015 1.9%
100
2011
2012
2016: $385/t
2015: $462/t
2013
© 2016: $44/bbl
2015: $52/bbl
2014
40
30
2015
2016
This figure deviates significantly from last year's report due to statistical revisions.
50 Management's Report
The BASF Group business year - Results of operations
Results of operations
200
BASF Report 2016
Business reviews by segment can be found from page 59 onward
Sales
■ Sales down 18% to €57,550 million
Sales for 2016 decreased by €12,899 million to €57,550 mil-
lion. This was mainly attributable to the divestiture of the gas
trading and storage business as part of the asset swap with
Gazprom at the end of September 2015. This business had
contributed €10.1 billion to sales in 2015. In addition, lower oil,
gas and other raw material prices led to a drop in sales prices,
reducing sales in the chemicals business especially the
Chemicals segment - as well as in the Oil & Gas segment. We
were able to continually raise sales volumes over the course of
the year, and achieved slight volumes growth overall. Volumes
grew slightly in the Chemicals, Performance Products and
Oil & Gas segments. The Functional Materials & Solutions
segment posted a significant increase, and Agricultural Solu-
tions a slight decrease. Currency effects slightly dampened
sales.
Sales (million €)
2016
57,550
2015
70,449
2014
74,326
2013
73,973
In 2016, our market environment continued to be volatile
and challenging; the global economy and the chemical
industry saw slower growth. Overall, BASF Group business
developments unfolded in line with our expectations. We
posted a considerable sales decline compared with the
previous year and a slightly lower income from operations
(EBIT) before special items. These developments were
largely the result of the divestitures completed in 2015 as
well as price declines due to further drops in raw material
prices. Increased sales volumes and reduced fixed costs
helped counter this effect, even allowing us to achieve
considerably higher EBIT before special items in the
chemicals business¹.
50
300
Crude oil
Emerging markets
2016 6.3%
of Asia
2015 6.6%
Japan
2016 1.5%
South America
2015 1.6%
2016 (0.8%)
2015 (3.8%)
2 Figures that refer to previous years may deviate from last year's report due to statistical
revisions.
Price trends for crude oil (Brent blend) and naphtha ($/barrel, $/metric ton)
$/t
$/bbl
1,100
130
1,000
120
900
110
800
100
700
90
600
80
500
70
400
60
Naphtha
72,129
EBITDA before special items and EBITDA slightly
down
888
1,164
1.51
€
4,056
689
1,092
1,387
5,395
995
1,181
1,541
1,678
(880)
(232)
1.19
(283)
(188)
6,309
1,180
1,516
1,707
1,906
(34)
47
(52)
11
(40)
6,275
1,227
(177)
1,464
0.97
4.42
10,649
2,872
2,994
2,890
10,508
2,105
2,502
2,952
2,949
70,449
13,880
17,424
19,078
0.75
20,067
Income from operations before depreciation and amortization (EBITDA)
and special items
Sales
EBITDA
Full year
3rd quarter 4th quarter
2nd quarter
1st quarter
4.83
0.79
1.10
1.30
1.64
€
Amortization and depreciation¹
1,718
1,866
4,251
(1.1)
4,301
4,255
(2.8)
5,548
5,395
(25.7)
(700)
(880)
(6.4)
6,739
6,309
93.1
4,056
(491)
0.4
6,248
6,275
(3.4)
4,401
4,251
15.1
18.3
%
(1.2)
10,649
10,526
2016
(34)
3,987
1.7
€
1,260
973
1,072
946
10,526
2,487
2,437
2,790
2,812
10,327
2,320
2,490
2,674
2,843
57,550
14,846
14,013
Full year
4th quarter
3rd quarter
2nd quarter
14,483
14,208
1st quarter
(3.4)
5.00
4.83
1.8
4.34
4.42
895
Additional figures for results of operations
955
1,568
Financial result and net income
For an explanation of the figure EBIT after cost of capital, see page 28
The calculation of EBIT as part of our income statement is shown in the
Consolidated Financial Statements on page 155
We once again earned a premium on our cost of capital in
2016. EBIT after cost of capital amounted to €1,136 million
compared with €194 million in the previous year. The cost of
capital fell by €809 million year-on-year. In addition to the
reduction of the cost of capital percentage by one percentage
point, this was primarily the result of the lower level of tied-up
capital in inventories and operating receivables.
6,742
2012
7,160
2013
7,626
2014
6,248
2015
6,275
2016
- Financial result considerably below, and net income
slightly above, prior year
EBIT (million €)
23
(468)
(34)
Total special items in income before
taxes and minority interests
Special items reported in financial result.
(491)
(34)
Total special items in EBIT
(729)
(44)
Other charges and income
476
431
At €6,275 million, EBIT for the BASF Group in 2016 matched
the level of the previous year (2015: €6,248 million). Included
in this figure is income from companies accounted for using
the equity method, which rose from €251 million to €307 mil-
lion.
Divestitures
■ Earnings per share rise from €4.34 to €4.42
Income from shareholdings decreased from €9 million in
2015 to minus €17 million, predominantly due to lower income
from the disposal of shareholdings.
2012
1,768
2013
1,368
2014
194
2015
1,136
2016
EBIT after cost of capital (million €)
1 In 2015, the cost of capital percentage was 11%, compared with 10% in 2016.
194
1,136
The financial result fell to minus €880 million in 2016, com-
pared with minus €700 million in the previous year.
EBIT after cost of capital
2015
6,275 6,248
(1,091)
6,230
- Cost of capital¹
- EBIT of Other
EBIT of BASF Group
2016
EBIT after cost of capital (million €)
For information on the items in the statement of income, see the Notes
to the Consolidated Financial Statements from page 181 onward
For information on the tax rate, see the Notes to the Consolidated
Financial Statements from page 185 onward
At €4,056 million, net income exceeded the previous
year's level of €3,987 million. Earnings per share increased
from €4.34 to €4.42.
Income before minority interests decreased from
€4,301 million to €4,255 million. Minority interests amounted
to €199 million, compared with €314 million in 2015.
Income taxes were reduced from €1,247 million in 2015 to
€1,140 million in 2016. At 21.1%, the tax rate was below the
prior year's level (22.5%) primarily as a result of currency-
related deferred tax income in Norway, whereas the previous
year had included currency-related deferred tax expenses.
Income before taxes and minority interests dipped
from €5,548 million in 2015 to €5,395 million in 2016.
Other financial result fell from minus €284 million in the
previous year to minus €381 million in 2016, due mostly to the
decline in interest payments capitalized as construction period
interest and higher currency hedging costs.
The interest result declined from minus €425 million in
2015 to minus €482 million. This was predominantly from
lower interest income, especially from investments in liquid
funds, and higher interest expenses in connection with new
bank loans outside of the eurozone.
(985)
7,039
(15)
(27)
(223)
1,887
1,831
Income before taxes and minority interests
(700)
(209)
(175)
(152)
(164)
Financial result
6,739
1,023
1,603
2,043
1,714
2,070
(491)
(698)
286
(4)
(75)
Special items
6,248
325
1,889
2,039
1,995
Income from operations (EBIT)
4,401
EBIT before special items
116
5,548
Net income
(394)
Integration costs
Restructuring measures
2015
2016
Special items (million €)
BASF Report 2016
The BASF Group business year - Results of operations
52 Management's Report
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and write-ups)
2 Quarterly results not audited
5.00
1.01
1.07
1.49
1.43
€
Adjusted earnings per share
4.34
0.37
1.31
1.38
1.28
€
Earnings per share
3,987
339
1,209
1,265
1,174
983
Construction
1,893
Growth in key customer industries
(Real change compared with previous year¹)
Thereof for pension benefits
Total personnel expenses
Social security contributions
and expenses for pensions
and assistance
2.9
7,943
8,170
Wages and salaries
Change
in %
2015
2016
BASF Group personnel expenses (million €)
For more information, see the Notes to the Consolidated Financial
Statements on page 188
In 2016, the BASF Group spent €10,165 million on wages
and salaries, social security contributions and expenses for
pensions and assistance (2015: €9,982 million). This rep-
resents growth of 1.8% in personnel expenses, primarily as
a result of expenses for the long-term incentive program as
well as wage and salary increases. Partly countering this rise
was the lower average number of employees, in addition to
currency effects.
In addition to market-oriented compensation, BASF's total
offer also comprises benefits, individual opportunities for
development and a good working environment. Our employ-
ees' pay is based on global compensation principles. These
take into account an employee's position and individual perfor-
mance as well as the company's success. Representative
analyses of the Ludwigshafen site have shown that there are
no systematic differences in pay between men and women,
provided the positions and qualifications are comparable. As a
rule, compensation is comprised of fixed and variable compo-
nents as well as benefits that often exceed legal requirements.
In many countries, these include company pension benefits,
supplementary health insurance, and share programs.
Compensation based on employee's position and
individual performance as well as company's success
Pay generally comprises fixed and variable
components plus benefits
■
Compensation and benefits
The Global Employee Survey and its follow-up process have
been established for the entire BASF Group ever since the first
survey in 2008. It was last conducted in 2015. Employees and
leaders discussed the results together in all regions, and are
now implementing improvement measures. This pertains to
topics such as supporting employees in their career develop-
ment, intensifying feedback, or supporting leaders and their
teams in driving change and innovation. We conduct the
Global Employee Survey at regular intervals; the next one is
scheduled for 2018.
Global Employee Survey
Our regional initiatives specifically address the needs of our
employees at a local level. Our Work-Life Management
employee center in Ludwigshafen ("LuMit"), provides opportu-
nities for fitness and health, employee assistance, and balanc-
ing career and personal life - like the company childcare center,
"LuKids," which offers daycare for 250 children. Around 600
employees take advantage of LuMit every day. We also pro-
vide social counseling at other sites in Germany, such as those
in Münster and Schwarzheide, as well as in Asia, South Africa
and North America, to help employees overcome difficult life
situations and maintain their employability.
Returnees from parental leave
(including "partner months")
38.6%
1,262
61.4%
1,995
Men
2,039
627
Our voluntary commitment to respecting international labor
and social standards is embedded in our global Code of Con-
duct. This encompasses internationally recognized labor
norms as stipulated in the United Nations' Universal Declara-
tion of Human Rights, the OECD Guidelines for Multinational
Enterprises, and the Tripartite Declaration of Principles Con-
cerning Multinational Enterprises and Social Policy of the Inter-
national Labour Organization (ILO). BASF strives to uphold
these standards worldwide. We mainly approach our adher-
ence to international labor and social standards using three
elements: the Compliance Program (including external compli-
ance hotlines), close dialog with our stakeholders (such as
with employee representatives or international organizations),
and the global management process for the respect of inter-
national labor norms.
Adjusted management process for monitoring
adherence to labor and social standards
on Business and Human Rights
Alignment with U.N. Guiding Principles
■
Global labor and social standards
For more information, see basf.com/employeerepresentation
Together with employee representatives, we continued to
elaborate on the future topics described by the company and
works council in the BASF SE 2020 site agreement in 2016.
For example, new principles for promoting apprentices were
described in BASF SE's "Apprenticeship of the Future." We are
engaged in close exchange with employee representatives on
the topic of changes through increasing digitalization in order to
identify and jointly address challenges.
Open dialog with employee representatives is an important
component of our corporate culture. If restructuring leads to
staff downsizing, for example, we work with employee repre-
sentatives to develop socially responsible implementation
measures. This is done in accordance with the respective legal
regulations and the agreements reached. The BASF Europa
Betriebsrat (European Works Council) addresses cross-border
matters in Europe.
Dialog with employee representatives
For more information, see the Notes to the Consolidated Financial
Statements from page 216 onward
BASF offers its executives the opportunity to participate in
a share-price-based compensation program. This long-term
incentive (LTI) program ties a portion of their compensation to
the long-term performance of BASF shares. In 2016, 92% of
the approximately 1,200 eligible executives worldwide partici-
pated in the LTI program, investing up to 30% of their variable
compensation in BASF shares.
In numerous Group companies, employees are offered the
chance to purchase shares. The BASF share program "plus"
sponsors employees' long-term participation in the company
through incentive shares: By investing a portion of their com-
pensation in BASF shares, they take part in the long-term
development of BASF.
With variable compensation components, we involve employ-
ees in the company's success and reward individual perfor-
mance. The same principles basically apply for all employees.
The amount of the variable component is determined by the
company's economic success (measured by the return on
assets of the BASF Group) as well as the employee's individ-
ual performance. Individual performance is assessed as part
of a globally consistent performance management process.
Return on assets determines variable compensation
■ "plus" share program fosters employees' long-term
participation in company
Employees participate in the company's success
Management's Report
Working at BASF
BASF Report 2016
1.8
9,982
10,165
(4.7)
658
(2.2)
In 2016, we continued the restructuring of our manage-
ment process begun in 2015. In the previous year, a global
team of experts had already drafted a Group-wide BASF
guideline on complying with international labor and social
standards². This provided the basis for developing a process
that determines potential gaps in complying with these stan-
dards. The management process will now be implemented
successively around the world. A monitoring system launched
in 2016 keeps track of the situation in countries in which BASF
is active, and regularly reviews the implementation of set goals
and measures. We performed a risk-based analysis of 43
countries by the end of 2016. The remaining countries are
scheduled to be reviewed in 2017.
Employees on parental leave
(including "partner months")
Women
90.7%
72.1%
27.9%
8,172
69.7%
Since 2015, BASF has set itself global quantitative goals
for increasing the percentage of women in leadership posi-
tions. In the BASF Group, the global proportion of female
leaders with disciplinary responsibility was 19.8% at the end of
2016 (2015: 19.5%). We aim to increase this figure to 22-24%
worldwide by 2021, so that the proportion of women in lead-
ership reflects that of women in the global company workforce.
We want to utilize diversity for the development of our busi-
ness. Promoting diversity is one of the mainstays of our corpo-
rate culture. The strong global character of our markets
translates into different customer requirements. We want to
reflect this diversity in our workforce, as well, in order to even
better understand the needs of our customers. The aim is to
increase our teams' performance and power of innovation,
and boost creativity, motivation and identification with the
company. We are further promoting the appreciation and
inclusion of diversity. Leaders play an important role here. We
support them in strengthening diversity and making the best
possible use of it in day-to-day business. For example, specific
goals and measures are being developed for such topics as
recognizing and developing different kinds of talent.
Promoting diversity as part of company culture
Global goals for increasing percentage of women in
leadership positions
-
■
Inclusion of diversity
22.8%
48,148
30.3%
37,437
(Total: 113,830, thereof 24.6% women, as of December 31, 2016)
BASF Group employee age structure
For more on health protection, see page 99
The demographic situation within the BASF Group varies
widely by region. The aging population in areas like Germany
and North America presents us with challenges. We are also
occupied with future issues like new technologies, growing
digitalization ("Industry 4.0"), and the ever-increasing delay of
retirement. We create a framework to help maintain the
employability of our personnel at all stages of life and ensure
the availability of qualified employees. Employees and leaders
are supported with health and exercise programs, flexible
working arrangements, age-appropriate workplaces and
demographic analyses. The topic "leadership in times of
demographic change" also forms a part of our leadership
programs. In addition, we engage in knowledge management
and systematic succession planning.
Leadership duties include "leadership in times of
demographic change"
Managing demographic changes
Management's Report 43
Working at BASF
BASF Report 2016
Industry total
77.2%
9.3%
83.4%
16.6%
680
(Total BASF SE employees: 35,001, thereof 21.4% women,
as of December 31, 2016)
Balancing personal and professional life
Our identity as an employer includes our belief in supporting
our employees worldwide in balancing their personal and
professional lives. Through various offers and opportunities,
we create working conditions that give fair consideration to
our employees' individual needs. We want to strengthen
their identification with the company and bolster our position
as an attractive employer in the competition for qualified per-
sonnel. Our offer includes flexible working hours, part-time
employment and mobile working. In 2016, a total of 12.0% of
BASF SE employees held part-time positions, of which 69.9%
were women. Numerous employees also made use of parental
leave.
Worldwide offers and opportunities
Balancing personal and professional life
BASF Report 2016
Working at BASF
44 Management's Report
The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive
status by virtue of special expertise.
1
For more on diversity in the Board of Executive Directors and the
Supervisory Board, see page 130
Moreover, we intend to maintain the proportion of senior
executives with international experience at over 80%. We
exceeded this figure by the end of 2016, reaching 84.6%. With
these goals, we continue to drive our globally integrated
approach to promoting diversity and leadership development.
For more information, see basf.com/diversity
Considering the relatively low rate of turnover in the BASF
Group's leadership team, this is an ambitious goal. Further-
more, BASF wants to continue increasing the global percent-
age of senior executives¹ that come from countries other than
Germany. This figure was at 36.4% by the end of 2016 (2015:
35.6%).
22-24%
Proportion of women in
leadership positions with
disciplinary responsibility
Women
Men
55 years and up
Between 40
and 54 years
Between 26
and 39 years
25 years
Up to and including
20,073
அ
2021 Goal
For more on global standards, see page 24
South America
2015 1.2%
2016 1.0%
2015 6.3%
2016 6.0%
Emerging markets
of Asia
2.6%
2015
1.6%
2016
United States
2.2%
2015
1.9%
2016
European Union
2016 2.3%
2015 2.7%
World
(Real change compared with previous year¹)
Gross domestic product
For the outlook for the economic environment in 2017,
see page 119 onward
The global economy grew only moderately in 2016 but
was subject to regional fluctuations. While growth in the
emerging markets remained almost unchanged in com-
parison with 2015, it decelerated in the industrialized
countries due to the U.S. economy's initially weak
dynamic. In the European Union, growth in gross domes-
tic product was just marginally below the previous year's
level despite the heightened uncertainty before and after
the British referendum on leaving the E.U. Gross domestic
product in China grew only slightly more slowly thanks to
governmental economic measures. Overall, global gross
domestic product grew by 2.3%, as we had anticipated,
remaining behind the level of 2015 (+2.7%). The average
price for a barrel of Brent blend crude oil fell to $44 per
barrel (2015: $52 per barrel).
Growth in global
chemical industry
2016
2015
3.4%
(2.5%)
(1.8%)
1 Figures that refer to previous years may deviate from last year's report due to statistical
revisions.
For more on labor and social standards, see
basf.com/labor_social_standards
The chemical industry's key customer sectors developed
better on average than industrial production. Global auto-
motive production grew by 4.5%, outpacing the previous
year. In western Europe and North America, the sector contin-
ued its economic upswing. Tax incentives in China boosted
demand; however, production fell drastically in South America
and Russia. The global rate of growth in the construction
industry was 2.8%, down from the previous year's +3.5%. In
western Europe, construction saw slightly higher growth than
in 2015; in the eastern countries of the European Union, the
expiration of E.U. funding programs led to decreased activity.
Growth in the United States slowed considerably. In China,
construction volumes rose at around the same rate as 2015 as
a result of governmental support measures. Globally, agricul-
ture grew by 1.4%, behind the level in previous years; produc-
tion weakened in South America especially.
matched the prior year's level. Industry in China cooled down
only slightly, thanks to governmental stimulus. The recession
continued in South America: Industrial production shrank in
Brazil by 6.0% (2015: -8.2%).
Industrial growth in the European Union increased margin-
ally to 1.4% from 1.3%. In the United States, industrial produc-
tion nearly stagnated (2016: +0.3%; 2015: +1.3%). At 5.5%,
industrial growth in the emerging markets of Asia roughly
Global industrial production grew by around 1.9% in 2016,
about the same as in the previous year (+2.0%). Growth in the
advanced economies slowed slightly (2016: +0.8%, 2015:
+1.0%) but remained constant in the emerging markets (2016:
+3.0%, 2015: +3.0%).
Development in key customer industries
improves on average
Global industrial production increases at rate
similar to 2015
Trends in key customer industries
Gross domestic product shrank once again in South
America, by 2.5% (2015: -1.8%). Economic performance in
Brazil remained 3.4% behind the previous year (2015: -3.8%).
Gross domestic product declined in Argentina, as well, shrink-
ing by 2.3% against the backdrop of high inflation and fiscal
consolidation measures (2015: +2.6%). Venezuela and Ecua-
dor suffered from the low price of crude oil; gross domestic
product declined in both countries. The other countries in the
region grew moderately on average.
At 1.0%, growth remained modest in Japan. The appreci-
ation of the yen against the U.S. dollar (around 10% compared
with the previous year) and lower demand from China reduced
both the year's average exports and private companies' pro-
pensity to invest. Lower imports, weakly growing private con-
sumption, expanding housing investment and public expen-
ditures compensated for these negative effects, so that the
Japanese economy's overall growth was about as strong as in
the previous year.
Economic output in the emerging markets of Asia saw a
somewhat slower increase as compared with the previous
year (2016: +6.0%, 2015: +6.3%). This was largely attributable
to the only slightly slower growth in China (2016: +6.7%; 2015:
+6.9%). The construction and automotive industries benefited
from government investments as well as impetus provided by
monetary and fiscal policy. In this environment, the neighbor-
ing Asian countries grew at a relatively stable rate; India once
again saw rapid expansion, at 6.8% (2015: +7.9%).
Growth in the United States during the first two quarters was
considerably below the average for the year. Reasons included
weak investment activity in the oil industry and cyclical inven-
tory effects. Private consumption bolstered the economy. In
the second half of the year, growth picked up thanks to
increased investment and positive development in agricultural
exports. Overall, the U.S. economy grew by only 1.6% in 2016
(2015: +2.6%), remaining behind its medium-term pace of
around 2%.
BASF Report 2016
Economic environment
The BASF Group business year
48 Management's Report
In 2016, growth in the European Union's gross domestic
product slowed slightly, from 2.2% in 2015 to 1.9%. Develop-
ment in the region continued to be marked by widely divergent
trends in 2016: In northwestern Europe, growth rates remained
at a solid level overall. In the United Kingdom, the increase in
gross domestic product slackened only marginally after the
referendum on a British exit from the E.U. Germany's eco-
nomic growth was at a comparatively robust 1.8% while that
of France was more moderate, at 1.1%. In southwestern
Europe, Spain continued its dynamic pace (+3.2%). By
contrast, Italy (+1.0%) and Portugal (+1.4%) were not able to
boost their economies to such a considerable extent. The
central and eastern E.U. countries also boasted above-
average growth (+2.8%), helped along by low inflation rates,
ongoing low unemployment levels and the stable development
of exports. In Russia, the economy shrank only slightly (-0.2%)
after the previous year's sharp decline (-2.8%), partly thanks
to the stabilization in oil prices over the course of the year.
Slowdown in China lighter than expected;
stable growth in emerging markets of Asia
Further decline of GDP in South America
■ Economic growth somewhat slower in the E.U.
Weaker growth in the U.S.
Economic trends by region
The currencies of many emerging economies that export
raw materials were weaker than in the previous year, but
appreciated considerably over the course of 2016. This was
due in part to a gradual rise in oil and precious metal prices in
addition to the U.S. Federal Reserve's cautious interest rate
policy. Economic uncertainty increased considerably as the
year progressed, largely as an effect of the British vote to exit
the E.U., but also because of continuing geopolitical conflicts
and unpredictability before and after the U.S. presidential
elections.
The global economic environment was marked in 2016 by
expansive monetary policy, low raw materials prices that
nevertheless stabilized over the course of the year, and a
modest growth dynamic. The especially low price of oil during
the first half of the year dampened growth in the oil-producing
countries and reduced the propensity to invest there, including
the United States. Small levels of inflation, historically low inter-
est rates and a weak euro supported growth in Europe.
Trends in the global economy in 2016
Japan
Growth in global
industrial production
■
The BASF Group business year - Economic environment
16.7 35.5%
Education
Social projects
6
123456
BASF Group donations, sponsorship and own projects in 2016
(million €)
The BASF Group spent a total of €47.0 million supporting
projects in 2016; we donated 49.6% of this amount (2015:
€56.2 million, 46% of which were donations). The decline in
comparison with 2015 is attributable to the previous year's
individual special projects in honor of BASF's anniversary.
We support initiatives that reach out to as many people as
possible and have long-term impact. We foster education,
science, social projects, arts and culture, and sports in the
communities around our sites. On a regional level, we work
together with universities, schools and nonprofit organizations.
We support BASF Stiftung, a charitable foundation, in its inter-
national projects with various U.N. and nongovernmental
organizations.
In 2016, we revamped our activities in terms of social commit-
ment and designed them to have an even greater impact. The
Social Engagement Strategy serves as our launchpad - we
use this to strengthen our global approach to the topic. The
strategy revolves around support projects having a lasting
impact on society and offering learning opportunities for par-
ticipating cooperation partners and BASF. The common thread
throughout all worldwide social commitment activities is pro-
vided by the Sustainable Development Goals of the United
Nations. Regional emphasis topics help us tailor our engage-
ment toward local needs.
Strategy
We take on social responsibility: We are involved in
diverse projects worldwide, especially in the communities
where our sites are located. Our main focus is on life-long
learning and access to education. In this way, we promote
innovative capacity and future viability.
Nonprofit activities
and business-oriented
projects
Two pillars
5
Spent on donations,
sponsorship and
BASF Group's own projects
New strategy
BASF Report 2016
Social commitment
Social commitment
46 Management's Report
45
2 The guideline provides concrete interpretations for the topics outlined in the global Code of Conduct under "Human Rights and International Labor Standards."
To calculate variable compensation, total return on assets is adjusted for special items.
1
1.9%
For more on our sustainability-related risk management, see page 29
For more on Compliance, see page 134 onward
€47.0 million
14.2 30.2%
BASF hones societal
activities to have even
greater impact
4
Management's Report 47
Growth in global gross
domestic product
1
2.3%
The BASF Group business year
Economic environment
BASF Report 2016
2
The BASF Stiftung, a nonprofit organization, supported a
school nutrition project of the United Nations World Food
Programme in Colombia in 2016 as part of its humanitarian
development work. There, healthy school meals are an import-
ant motivation for students especially from low-income
families to attend school. The project also collaborates with
small-holder farmers who supply the participating schools with
groceries. The small-holder farmers are given specific training
in advance.
BASF Stiftung
With our Starting Venture program, we develop entrepre-
neurial solutions to support low-income demographic groups
in emerging markets in their efforts to improve their quality of
life. We achieve this through projects in various customer
industries and regions that aim to increase employment
opportunities and improve access to products. For example,
BASF supports young people from low-infrastructure urban
areas in Chile with occupational training in the field of auto-
motive coatings. 75 young people have achieved certification
so far and are now in a position to take up employment at our
customers. The Starting Venture program thus also contrib-
utes to our long-term business success.
Corporate Citizenship activities aim to help create a livable
surrounding region for our sites' neighbors, employees and
families. This means supporting numerous projects like the
"Connected to Care" program begun in 2015. Employees
around the world form teams to carry out volunteer projects
together with nonprofit organizations.
In its Social Engagement Strategy, BASF combines two pillars
under one roof: donations and the company's own nonprofit
activities (Corporate Citizenship) along with business-oriented
projects (Starting Ventures).
In the 2016 year-end donation campaign, the company
and its employees gave around €337,000 to BASF Stiftung,
which is using the sum to support a World Food Programme
initiative to improve living conditions for people in Ethiopia.
For more information, see basf.com/international_donations
5.2 11.1%
Two pillars of social commitment
Science
5.3 11.3%
2.7
2.9
€47.0 million
Sports
5.7%
Culture
3
6.2%
Other
2017
3,767
1,391
2018
2
1,887
2020
2,115
1,304
2021
Off-balance-sheet financing tools, such as leasing, are of
minor importance to us. BASF Group's most important finan-
cial contracts contain no side agreements with regard to
specific financial ratios (financial covenants) or compliance
with a specific rating (rating trigger).
1,033
2022 and beyond 6,190
1,049
2019
USD commercial paper
5 Other
1
€16,312 million
For short-term financing, we use BASF SE's U.S. dollar
commercial paper program, which has an issuing volume of
up to $12.5 billion. On December 31, 2016, $1,089 million
worth of commercial paper was outstanding under this pro-
gram. Firmly committed, syndicated credit lines of €6 billion
serve to cover the repayment of outstanding commercial
paper, and can also be used for general company purposes.
We have solid financing. Corporate bonds form the basis of
our medium to long-term debt financing. These are issued in
euros and other currencies with different maturities as part of
our €20 billion debt issuance program. The goal is to create a
balanced maturity profile and diverse range of investors, and
to optimize our debt capital financing conditions.
For more on the financing tools used, see the Notes to the Consolidated
Financial Statements from page 208 onward
These credit lines were not used at any point in 2016. Our
external financing is therefore largely independent of short-
term fluctuations in the credit markets.
Financing instruments (million €)
1 Bank loans
5
4
2,855
2
EUR bonds
9,243 3
3
USD bonds
1,790
4
BASF has good credit ratings, especially in comparison with
competitors in the chemical industry. Rating agency Moody's
last confirmed their rating of "A1/P-1/outlook stable" on
November 28, 2016. Standard & Poor's adjusted their BASF
rating from "A+/A-1/outlook negative" to "A/A-1/outlook
stable" on March 14, 2016, and confirmed it most recently
on August 10, 2016. This adjustment was largely based on
the weaker market environment, especially for basic and
agricultural chemicals, limited overall volumes growth, and
the considerable drop in the price of crude oil. Uncertainty
with regard to economic development in China was taken
into consideration, as well. Rating agency Scope has also
been evaluating our creditworthiness since September
2016. They rated BASF at "A/S-1/outlook stable."
2013
Our interest risk management generally pursues the goal
of reducing interest expenses for the Group and limiting inter-
est risks. Interest rate hedging transactions are therefore con-
ducted with banks in order to turn selected liabilities to
the capital markets from fixed interest to variable rate or vice
4
0
2012
2014
2015
2016
6
■Cash provided by operating activities
■Payments made for property, plant and equipment and intangible assets¹
Free cash flow
1 Including investments to the extent that they already had an effect on cash
2016
2015
Net income
Maturities of financial indebtedness (million €)
4,056
Statement of cash flows (million €)
8
10
Cash flow (billion €)
versa.
57
40
58 Management's Report
The BASF Group business year - Financial position
BASF Report 2016
Statement of Cash Flows
Cash provided by operating activities significantly,
and free cash flow slightly, down year-on-year
At €7,717 million, cash provided by operating activities in
2016 was €1,729 million below the level of the previous year.
Contributing to this was the lower year-on-year level of cash
inflow from changes in net working capital, which contains
changes in inventories and receivables as well as in operating
liabilities and other provisions. This resulted primarily from the
targeted reduction of inventories in 2015. Miscellaneous items
especially included the transfer of disposal gains into cash
used in investing activities. In 2015, this item had primarily
included the reclassification of gains from the asset swap with
Gazprom.
Cash used in investing activities amounted to
€6,490 million in 2016 compared with €5,235 million in 2015.
Payments made for property, plant and equipment and intangi-
ble assets were at €4,145 million, below both the prior year's
level (€5,812 million) and the level of amortization and depreci-
ation of intangible assets and property, plant and equipment
and financial assets (€4,291 million).
Acquisitions and divestitures in 2016 resulted in net pay-
ments made of €2,164 million compared with €436 million in
net payments received in 2015. The acquisition of Chemetall
was primarily responsible.
Cash outflow of €181 million from financial assets and
other items in 2016 was mainly attributable to the acquisition of
marketable securities. In 2015, the decline in loan receivables
in particular had led to €141 million in payments received.
For more on investments and acquisitions, see page 37 onward
Cash used in financing activities amounted to €2,160 mil-
lion in 2016, compared with €3,673 million in the previous
year. Contributions from minority interests to capital increases
in Group companies led to a cash inflow of €28 million in 2016.
Changes in financial liabilities resulted in cash inflow of
€579 million. This was largely the result of issuing new bonds
as well as of tapping an existing bond; the scheduled repay-
ment of three bonds and scaling back BASF SE's U.S. dollar
commercial paper program both had a counterbalancing
effect. In 2016, dividends of €2,664 million were paid to share-
holders of BASF SE and €103 million to minority interests.
Cash and cash equivalents fell by €933 million, amounting
to €1,375 million as of December 31, 2016.
Free cash flow, which is what remains after subtracting
payments made for property, plant and equipment and intan-
gible assets from cash provided by operating activities, fell to
€3,572 million compared with €3,634 million in 2015. The
decline in cash provided by operating activities was nearly
offset by lower payments made for property, plant and equip-
ment and intangible assets.
To minimize risks and exploit internal optimization potential
within the Group, we bundle the financing, financial invest-
ments and foreign currency hedging of BASF SE's subsidiaries
within the BASF Group where possible. Foreign currency risks
are primarily hedged centrally by means of derivative financial
instruments in the market.
We strive to maintain at least a solid "A" rating, which
allows us unrestricted access to money and capital markets.
Our financing measures are aligned with our operative business
planning as well as the company's strategic direction and also
ensure the financial flexibility to take advantage of strategic
options.
1,082
12,935
1.7
1.5
3,767
4.9
4,074
5.7
1,288
2,850
2,520
3.6
15,317
20.0
14,236
20.1
3.7
3.6
2,540
3.7
3,987
25,055
35.4
Accounts payable, trade
Provisions
Tax liabilities
Financial indebtedness
Other liabilities
Current liabilities
Total equity and liabilities
4,610
6.0
4,020
5.7
2,802
76,496
100.0
70,836
100.0
1,375
14,401
Financial indebtedness
- Marketable securities
- Cash and cash equivalents
Net debt
Financing policy and credit ratings
■
-
Financing principles remain unchanged
"A" ratings confirmed
Dec. 31, 2015
11,123
4,074
15,197
21
2,241
536
Our financing policy is aimed at ensuring our solvency at all
times, limiting the risks associated with financing and opti-
mizing our cost of capital. We preferably meet our external
financing needs on international capital markets.
16,312
+ Current financial indebtedness
Equity and liabilities
■ Equity ratio at 42.6%, compared with 44.5% in
previous year
Net debt rises from €12,935 million to €14,401 million
Equity rose by €1,023 million to €32,568 million compared
with the previous year. Retained earnings increased by
€1,395 million to €31,515 million. Other comprehensive in-
come was reduced by €493 million to minus €4,014 million,
primarily because of the remeasurement of defined benefit
plans. The equity ratio was 42.6% (2015: 44.5%).
Compared with the end of 2015, noncurrent liabilities grew
by €3,556 million to €28,611 million. Provisions for pensions
and similar obligations increased by €1,896 million, mainly as
a result of the reduced discount rate in all relevant currency
zones. Noncurrent financial indebtedness rose by €1,422 mil-
lion. A bond issued in 2013 with a maturity until 2021 was
tapped, increasing its volume by €300 million to €1 billion; in
addition, new bonds in EUR, GBP and HKD were issued with
an equivalent value totaling €2.6 billion at the end of the year
and maturities between 4 and 15 years, in part to finance the
acquisition of Chemetall. Four bonds in EUR and GBP due in
2017 with an equivalent value totaling around €1.4 billion were
reclassified to current financial indebtedness. Other provisions
rose by €298 million while other liabilities matched the prior-
year level. Deferred taxes decreased by €64 million.
Current liabilities grew by €1,081 million to €15,317 million. All
items contributed to this development, with the exception
of financial indebtedness. Trade accounts payable increased
by €590 million, current provisions by €262 million, tax liabilities
by €206 million and current other liabilities by €330 million.
Current financial indebtedness fell by €307 million. This
was largely on account of the €681 million year-on-year
decrease in outstanding U.S. dollar commercial paper as of
December 31, 2016, as well as the scheduled repayment of
EUR bonds totaling €900 million. The previously mentioned
reclassification of bonds had a counterbalancing effect.
In total, financial indebtedness grew by €1,115 million to
€16,312 million. The average maturity of our financial indebted-
ness was 5.6 years (2015: 5.2 years). Net debt grew by
€1,466 million to €14,401 million. This is calculated by sub-
tracting marketable securities and cash and cash equivalents
from current and noncurrent financial indebtedness. This
balance-related indicator provides information on effective
indebtedness.
For more on the composition and development of individual liability
items, see the Notes to the Consolidated Financial Statements from
page 196 onward
For more on the development of the balance sheet, see the Ten-Year
Summary on page 234
BASF Report 2016
Management's Report
The BASF Group business year - Financial position
Net debt (million €)
Dec. 31, 2016
Noncurrent financial indebtedness
12,545
3,767
Depreciation and amortization of intangible assets, property, plant and equipment, and financial assets
Changes in net working capital
Segment overview (million €)
4,448
2,790
(972)
(866)
(1,050)
(888)
57,550
2,018
70,449
10,649
6,309
6,739
37.4
Income from operations
(EBIT)
2016
10,526
Other
1,366
517
2,228
1,946
1,649
Agricultural Solutions
5,569
5,820
1,305
1,321
1,087
1,090
Oil & Gas
2,768
12,998
1,596
2,587
Chemicals
Performance Products
Functional Materials & Solutions
Agricultural Solutions
2,131
1,648
1,340
14,549
2,199
1,607
17,359
1,037
1,083
8,899
499
1,072
12,829
12,373
(1,091)
2015
2,906
13,341
964
Oil & Gas
Other
1,983
Assets
2016
13,486
Investments¹
2015
2016
2015
1,213
12,823
14,232
864
1,859
110001
4,291
18,523
Functional Materials & Solutions
(5,235)
Capital increases/repayments and other equity transactions
Changes in financial liabilities
Dividends
Cash used in financing activities
28
(6,490)
579
(2,767)
(2,806)
(2,160)
(3,673)
Net changes in cash and cash equivalents
(933)
66
(933)
141
(181)
436
104
1,347
Miscellaneous items
(734)
(336)
Cash provided by operating activities
7,717
9,446
Payments made for property, plant and equipment and intangible assets
Acquisitions/divestitures
Financial assets and other items
Cash used in investing activities
(4,145)
(5,812)
(2,164)
538
Cash and cash equivalents at the beginning of the year and other changes
2,308
1,703
2015
Chemicals
13,461
14,670
3,169
3,090
2,064
2,156
Performance Products
15,002
15,648
2,522
2,289
1,745
1,366
2016
18,732
2015
2015
Cash and cash equivalents at the end of the year
1,375
2,241
BASF Report 2016
Business review by segment
Segment overview (million €)
Management's Report 59
The BASF Group business year - Business review by segment
Income from operations before
depreciation and amortization
Income from operations (EBIT)
Sales
(EBITDA)
before special items
2016
2016
28,611
13.1
869
70,836
Average assets used
73,666
71,098
Return on assets
%
76,496
8.2
We calculate return on assets as income before taxes and
minority interests, plus interest expenses, as a percentage of
average assets used. This figure reflects the return inde-
pendently of capital structure.
54 Management's Report
The BASF Group business year - Results of operations
Forecast/actual comparison¹
BASF Report 2016
Chemicals
8.7
Total assets as of December 31
71,359
70,836
918,479
5.00
Compared with earnings per share, this figure has been
adjusted for special items as well as amortization of, and valu-
ation allowances (impairments and write-ups) on, intangible
assets. Amortization of intangible assets primarily results from
the purchase price allocation following acquisitions. The amor-
tization of intangible assets is therefore of a temporary nature.
The effects of these adjustments on income taxes and on
minority interests are also eliminated. This makes adjusted
earnings per share a suitable measure for making compari-
sons over time and predicting future profitability.
In 2016, adjusted earnings per share amounted to €4.83
compared with €5.00 in the previous year.
2016
2015
Income before taxes and minority interests
+ Interest expenses
5,395
661
5,548
638
For more information on the earnings per share according to IFRS,
see the Notes to the Consolidated Financial Statements on page 181
Income before taxes and minority interests
and interest expenses
6,056
6,186
Total assets as of January 1
Performance Products
918,479
4.83
Sales
2016 actual
In 2016, BASF Group sales and EBIT before special items
developed in line with our forecast: Sales declined consider-
ably and EBIT before special items was slightly below the level
of 2015. We just barely missed the volumes growth expected
in all segments excluding the effects of acquisitions and dives-
titures: In the Agricultural Solutions segment, volumes were
slightly down, while they rose as anticipated in the chemicals
business and the Oil & Gas segment. EBIT did not decline
slightly as forecast, but rather matched the prior-year level.
This was largely the result of special income from the divesti-
tures completed in 2016 in the Functional Materials & Solutions
segment. The earnings contribution from the chemicals busi-
ness increased considerably in 2016, counter to our assump-
tion that it would slightly decline. Mainly because of this, BASF
Group EBIT after cost of capital rose considerably rather than
decreasing considerably as we had expected.
Sales in the Chemicals segment fell considerably in 2016,
whereas we had expected the decline to be slight. Increased
volumes were able to partly offset for the sharp drop in prices,
but less so than we had foreseen. For EBIT before special
items, we observed only a slight, rather than considerable,
year-on-year decline, essentially through the higher margins
for isocyanates in the Monomers division.
Contrary to our expectations, sales in the Performance
Products segment were slightly below the previous year's
level instead of matching it. Volumes growth was less able
than we had anticipated to offset price declines and negative
portfolio and currency effects. EBIT before special items rose
not only slightly, but rather considerably, in the Performance
Products segment. In addition to significantly reduced fixed
costs thanks to restructuring measures and strict cost
management, improved margins also contributed to this
development.
In the Functional Materials & Solutions segment, we were
able to raise sales volumes in all divisions in 2016, more than
compensating for price and currency effects. As a result, sales
were not at the same level of the previous year, as forecast,
but rose slightly instead. EBIT before special items likewise
exceeded our expectations, with a considerable rather than
slight increase.
For the Agricultural Solutions segment, we had anticipat-
ed slight growth in both sales and EBIT before special items.
Due especially to dampened demand for insecticides in South
America and fungicides in Europe, however, we posted a
slight decrease in sales volumes instead of the expected
increase. Negative currency effects also dampened sales.
Through strict cost management, EBIT before special items
reached the prior year's level despite the slight decline in sales.
In the Oil & Gas segment, sales and EBIT before special
items fell considerably as expected. We expanded our pro-
duction volumes in 2016 in line with our forecast.
Actual development compared with outlook
for 2016
Sales in Other declined considerably, corresponding to
our expectations. EBIT before special items, however, was
considerably below rather than considerably above the level of
the previous year. This was largely attributable to valuation
effects for our long-term incentive program.
For information on our expectations for 2017, see page 122 onward
2 Our chemicals business comprises the Chemicals, Performance Products und Functional Materials & Solutions segments.
3 Excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments
BASF Report 2016
Net assets
Assets
In 2016, we invested a total of €3.9 billion in capital expen-
ditures, less than the anticipated level of around €4.2 billion.
Investments in the Oil & Gas and Performance Products
segments in particular were below the values considered in
our planning.
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight"
means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%).
slight decline
slight decline
considerable increase
considerable increase
at prior-year level
considerable decline
considerable decline
Income from operations (EBIT)
before special items
2016 actual
2016 forecast
considerable decline
considerable decline
at prior-year level
Functional Materials & Solutions
at prior-year level
slight increase
considerable decline
considerable decline
considerable decline
slight decline
slight increase
slight decline
considerable decline
considerable decline
considerable decline
slight increase
slight increase
slight increase
considerable decline
considerable increase
slight decline
Agricultural Solutions
Oil & Gas
Other
BASF Group
2016 forecast
slight decline
€
in thousands
Weighted average number
of outstanding shares
Adjusted earnings per share
2015
plant and equipment before special items
4,018
3,769
Income before taxes and
EBITDA before special items
2016
10,327
minority interests
5,395
5,548
- Special items
(34)
(468)
10,508
allowances on intangible assets and property,
+ Amortization, depreciation and valuation
Adjusted earnings per share (million €)
BASF Report 2016
Management's Report 53
The BASF Group business year - Results of operations
EBITDA before special items (million €)
2016
2015
Return on assets was 8.2%, compared with 8.7% in the
previous year. The decline was partly attributable to the acqui-
sition of Chemetall in December 2016.
EBIT
6,275
6,248
- Special items
(34)
(491)
EBIT before special items
6,309
6,739
EBITDA (million €)
+ Amortization and valuation allowances on
intangible assets
560
801
4,401
EBITDA
10,526
10,649
4,637
4,901
197
312
4,440
4,589
Income from operations before depreciation, amortization and
special items (EBITDA before special items) and income from
operations before depreciation and amortization (EBITDA)
are figures that describe operational performance independent
of age-related amortization and depreciation of assets and
extraordinary valuation allowances (impairments or write-ups).
Both figures are therefore particularly useful in cross-company
comparisons. EBITDA before special items is also highly useful
in making comparisons over time.
At €10,327 million, EBITDA before special items in 2016
was down by €181 million compared with the previous year;
EBITDA amounted to €10,526 million, or €123 million below
the level of 2015.
Return on assets (million €)
Adjusted income before
minority interests
- Adjusted minority interests
Adjusted net income
4,251
Management's Report 55
plant and equipment
1,300
2016
2015
- Amortization and valuation allowances on
intangible assets contained in special items
42
52
200
EBIT
6,275
6,248
Adjusted income before taxes
and minority interests
5,937
6,617
+ Amortization, depreciation and valuation
allowances on intangible assets and property,
- Adjusted income taxes
1,716
The BASF Group business year - Net assets
December 31, 2016
December 31, 2015
Equity
BASF Report 2016
December 31, 2016
December 31, 2015
Million €
%
Minority interests
Million €
4,306
5.6
4,317
6.1
31,515
41.2
%
Other comprehensive income
Retained earnings
Paid-in capital
Rise in both current and noncurrent assets
Noncurrent assets especially boosted by Chemetall
acquisition
Amounting to €76,496 million, the level of total assets was
€5,660 million above that of the previous year.
Noncurrent assets rose by €4,280 million to €50,550 mil-
lion. The €2,625 million increase in intangible assets was
mainly due to the Chemetall acquisition. Additions amounted
to €2,881 million, €1,552 million of which was goodwill. Cur-
rency effects increased intangible assets by €409 million.
Amortization reduced them by €560 million and disposals by
€91 million.
The value of property, plant and equipment rose by
€1,153 million to €26,413 million. Additions amounted to
€4,377 million, €4,222 million of which was to investments,
putting them above the level of depreciation', which amounted
to €3,691 million. Additions from acquisitions amounted to
€155 million and arose especially from the Chemetall acquisi-
tion. Currency effects increased property, plant and equipment
by €570 million. Disposals reduced this item by €242 million,
€97 million of which was attributable to divestitures.
Investments accounted for using the equity method rose
by €211 million to €4,647 million, primarily as a result of addi-
tions and currency effects.
Other financial assets increased by €79 million to €605 million
and deferred tax assets rose by €722 million to €2,513 million,
especially from the increase in provisions for pensions and
similar obligations.
Other receivables and miscellaneous assets were down by
€510 million to €1,210 million year-on-year. This was largely
the result of a decline in the positive fair value of derivatives
and lower receivables from loans as well as a lower level of
defined benefit assets.
The value of current assets rose by €1,380 million to
€25,946 million. The €1,436 million increase in trade accounts
receivable resulted mainly from higher year-on-year sales in
the fourth quarter as well as from currency effects. Inventories
grew by €312 million; other receivables and miscellaneous
assets fell by €17 million. With the acquisition of Chemetall on
December 14, 2016, these three items increased by €276 mil-
lion. Marketable securities rose by €515 million due to the
optimization of short-term financial investments.
At €1,375 million, cash and cash equivalents were
€866 million below the level of December 31, 2015.
For more on the composition and development of individual asset items,
see the Notes to the Consolidated Financial Statements from page 189
onward
Including impairments and write-ups
56 Management's Report
The BASF Group business year - Financial position
Financial position
Equity and liabilities
30,120
42.5
(4,014)
(5.2)
4.8
Deferred taxes
3,317
4.3
3,381
4.8
Financial indebtedness
Other liabilities
Noncurrent liabilities
12,545
16.4
11,123
15.7
873
1.2
3,369
■
4.8
Other provisions
(3,521)
(5.0)
761
1.0
629
0.9
32,568
42.6
31,545
44.5
Provisions for pensions and similar obligations
8,209
10.7
6,313
8.9
3,667
1.2
Assets
70,836
Other financial assets
605
0.8
526
0.7
Deferred taxes
6.3
2,513
1,791
2.5
Other receivables and miscellaneous assets
1,210
1.6
1,720
3.3
4,436
6.1
4,647
Million €
%
Million €
%
Intangible assets
15,162
19.8
12,537
17.7
Property, plant and equipment
26,413
34.5
25,260
35.7
Investments accounted for using the equity method
2.4
Noncurrent assets
50,550
66.1
0.7
21
Cash and cash equivalents
1,375
1.8
2,241
3.2
Current assets
25,946
33.9
24,566
34.7
Total assets
76,496
100.0
536
100.0
Marketable securities
3,095
46,270
65.3
Inventories
10,005
(985)
9,693
13.7
Accounts receivable, trade
10,952
14.3
9,516
13.4
Other receivables and miscellaneous assets
3,078
4.0
4.4
9,374
■
6,248
437
94
431
(219)
(613)
(212)
(63)
66
1,906
1,707
2,043
2015
548
3rd quarter
2016
2015
2,070
4th quarter
365
574
465
726
467
547
515
503
304
320
Functional Materials & Solutions
431
535
458
Agricultural Solutions
Oil & Gas
Other
591
456
2015
nnnn
2016
(386)
(114)
1,516
1,603
1,180
1,023
Income from operations (EBIT)' (million €)
(98)
1st quarter
3rd quarter
4th quarter
2016
2015
2016
2015
2016
2nd quarter
(233)
127
163
497
633
635
249
464
319
231
497
371
458
228
389
97
7
79
144
194
371
Performance Products
2015
Chemicals
2015
3,189
Performance Products
3,783
4,038
3,846
4,084
3,771
3,562
3,899
3,627
Functional Materials & Solutions
4,408
4,584
4,703
4,916
4,660
3,602
4,517
3,640
3,975
1st quarter
2nd quarter
3rd quarter
4th quarter
2016
2015
2016
3,377
2015
2015
2016
2015
Chemicals
3,149
3,866
3,373
2016
4,961
4,506
Agricultural Solutions
757
538
685
518
660
14,208
20,067
485
14,483
14,013
17,424
14,846
13,880
Income from operations (EBIT) before special items' (million €)
1st quarter
2016
19,078
688
477
Other
1,780
1,898
1,459
1,678
1,049
1,077
1,281
1,167
Oil & Gas
611
4,993
617
3,668
618
3,606
922
731
2nd quarter
2016
Sales1 (million €)
2016
Chemicals
Factors influencing sales
Monomers
€5,745 million
Percentage of sales:
43%
2016:
€13,461 million
-6%
Change:
2015:
€14,670 million
Petrochemicals
€5,035 million
Change:
-12%
Percentage of sales:
37%
-8%
Income from operations before special items
(million €)
Change:
Percentage of sales:
BASF Report 2016
Chemicals
Management's Report 61
The BASF Group business year - Chemicals
The Chemicals segment consists of the Petrochemicals, Monomers and Intermediates
divisions. In our integrated production facilities - our Verbund – we produce a broad range
of basic chemicals and intermediates in Europe, Asia, North America and South America
for our customers.
Divisions
Petrochemicals
20%
Broad range of basic
products and specialties
for sectors such as the
chemical and plastics
industries
Isocyanates and polyamides
as well as inorganic basic
products and specialties for
various branches, such as the
plastics, automotive, construction
and electronics industries
Intermediates
Most comprehensive inter-
mediates portfolio in the world,
including precursors for coatings,
plastics, textile fibers and crop
protection products
Sales
Change:
-6%
Intermediates
€2,681 million
Monomers
Volumes
3%
2016
>40
Value for our customers and the environment
Increased use of renewable
in place of fossil raw
materials per product
up to
100%
Since 2013, we have been in a position to flexibly replace
fossil resources in our current Verbund system with sustain-
ably generated bio-based raw materials by feeding raw mate-
rials like biogas or bionaphtha right into the beginning of the
value chain. The method is independently certified¹ and can be
used in existing production facilities. Based on their formula-
tions, we can already allocate and certify the proportion of
biomass in more than 40 sales products. Extensions to this
portfolio can be accomplished within a short amount of time
and enable us to quickly react to growing interest in the use of
renewable resources.
Externally certified products
since introduction
For more on the biomass balance approach, see page 94
Strategy
■ Integrated production facilities form core of Verbund
■ Technology and cost leadership provide most
important competitive edge
With its production facilities, the Chemicals segment is at the
heart of the Verbund structure and supplies BASF's segments
with basic chemicals for the production of downstream
products. We add value with innovations in processes and
production, and invest in future markets to ensure the growth
of the entire BASF Verbund. As a reliable supplier, we market
our products to customers in downstream industries. We
continually improve our value chains and are expanding our
market position - particularly outside Europe - with new pro-
cesses and technologies, as well as through investments and
collaborations in future markets.
We invest in research and development in order to develop
new technologies and to make our existing technologies even
more efficient. Cost leadership and a clear orientation along
individual value chains are among our most important compet-
itive advantages. We concentrate on the critical success
factors of the classical chemicals business: making use of
economies of scale, the advantages of our Verbund, high
capacity utilization, continuous optimization of access to raw
materials, lean processes, and reliable, cost-effective logistics.
Furthermore, we are constantly improving our global produc-
tion structures and aligning these with regional market require-
ments.
In Ludwigshafen, we will strengthen the Verbund by
replacing our acetylene plant, which occupies a central role
for many products and value chains, with a modern, highly
efficient plant by 2019.
1 Certification standard "Renewable raw materials" of the independent inspection authority TÜV SÜD, Munich, Germany
6,275
The approach can be applied to many of our products and
adjusted to customer specifications. Up to 100% of a product's
fossil raw materials can be replaced by sustainably produced
biomass while retaining identical product quality. Some of the
products already certified include dispersions, superabsor-
bents and plastics. The certification makes it easier for our
customers to place products on the market that have been
produced with the help of renewable resources.
Value for BASF
A groundbreaking way of using renewable resources in the Verbund
Biomass Balance Approach
2,064
Prices
(11%)
2015
2,156
Portfolio
0%
Currencies
0%
Sales
(8%)
Change:
minus €92 million
62 Management's Report
The BASF Group business year Chemicals
How we create value - an example
BASF Report 2016
1 Quarterly results not audited
2015
1,180
2015 1,023
(1,050)
531
411
492
366
724
366
Agricultural Solutions
464
590
288
365
93
6
66
139
Oil & Gas
573
66
452
166
468
726
467
548
499
631
549
Functional Materials & Solutions
226
535
491
486
368
458
315
169
Performance Products
436
93
430
EBIT before special items by segment
EBIT before special items BASF Group by quarter¹
(million €)
(million €)
Chemicals
2,064
1st quarter 2016
Performance Products
325
Functional Materials & Solutions 1,946
Agricultural Solutions
1,087
Oil & Gas
517
3rd quarter 2016
2015
1,906
2015 2,070
1,707
2015 2,043
1,516
1,603
Other
2nd quarter 2016
1,227
1,889
1,464
178
643
162
(437)
Other
(245)
(695)
(147)
(83)
(256)
(72)
(443)
(135)
1,866
1,995
1,718
2,039
4th quarter 2016
BASF Report 2016
1,745
Oil & Gas
Agricultural Solutions
10%
Oil & Gas
5%
Other
Contributions to EBITDA by segment
Chemicals
30%
Performance Products
24%
Functional Materials & Solutions
28%
Agricultural Solutions
12%
Other
15%
(9%)
60 Management's Report
The BASF Group business year - Business review by segment
33%
Functional Materials & Solutions
3%
Performance Products
76,496
8,435
26%
3,679
266
1,115
121
70,836
7,258
9,632
854
402
1,823
111
6,013
Contributions to total sales by segment
Chemicals
23%
1 Additons to property, plant and equipment (thereof from acquisitions: €155 million in 2016 and €91 million in 2015) and intangible assets
(thereof from acquisitions: €2,789 million in 2016 and €136 million in 2015)
€2,681 million
Asia Pacific
36%
South America, Africa, Middle East
3%
1
2
BASF Report 2016
In August 2016, we began production at the TDI complex
in Ludwigshafen, Germany, and started supplying customers
for the first time. The plant's gradual startup had begun in
November 2015. Owing to a technical defect in November
2016, the TDI plant was still undergoing repair at the time of
this report's publication.
EBIT before special items in 2016 was considerably below
the previous year's level. This was mainly the result of substan-
tially shrunken margins in the butanediol and derivatives
business. Slowing the decline were improved margins in the
polyalcohols business. Fixed costs rose year-on-year, mainly
as a result of several production plants beginning operation in
the second half of 2015. Special charges resulted predomi-
nantly from impairments on assets.
We expanded our butanediol capacities in Geismar,
Louisiana, in 2016. With our partner PETRONAS, we started
up a plant for 2-ethylhexanoic acid in Kuantan, Malaysia; in
Korla, China, we have been producing polytetrahydrofuran
(PolyTHFⓇ) since July 2016 with our partner Markor.
Management's Report 67
The BASF Group business year - Performance Products
The Performance Products segment consists of the Dispersions & Pigments, Care
Chemicals, Nutrition & Health and Performance Chemicals divisions. Our solutions
enhance the performance of industrial and consumer products worldwide. With our
tailor-made products, our customers can make their production processes more
efficient and give their products improved application properties.
Performance Products
19%
Increased margins for isocyanates, particularly in the fourth
quarter of 2016, led to a considerable increase in EBIT before
special items. They were able to more than offset lower mar-
gins in the polyamide value chain as well as the higher fixed
costs arising from the startup of new production plants.
Special charges came mainly from the overhaul of capro-
lactam production in Europe.
3
0%
1
6%
(12%)
Divisions
Portfolio
0%
Currencies
0%
Sales
(6%)
Intermediates - Sales by region
(Location of customer)
4
-234
1
Europe
42%
North America
Dispersions &
Pigments
2015:
Sales
Prices
€15,648 million
Factors influencing sales
Dispersions & Pigments
€4,530 million
Change:
-4%
-2%
Care Chemicals
€4,735 million
Change:
-3%
Percentage of sales:
32%
Income from operations before special items
(million €)
Volumes
Percentage of sales:
30%
Change:
€15,002 million
13%
Care Chemicals
Ingredients for hygiene,
personal care, home
care and industrial &
institutional cleaning
businesses as well as
for applications in the
chemical industry
Nutrition & Health
Products for the food
and feed industries,
the flavor and
fragrance industry
and the pharma-
ceutical industry
Performance Chemicals
Customized products
for many sectors, from
mining and the fuel
industry to plastics
processing
Performance Chemicals
Change:
€3,805 million
Percentage of sales:
-8%
25%
2016:
Nutrition & Health
Change:
-3%
€1,932 million
Percentage of sales:
Raw materials for
the formulation of
varnishes, coatings,
printing and packaging
inks, adhesives and
construction materials
Volumes
Volumes
South America, Africa, Middle East
57%
32%
€5,035 million
8% 2
South America, Africa, Middle East
3%
3
Asia Pacific
■
At €5,035 million, sales down by 12%, mainly
due to price declines
EBIT before special items slightly below previous
year's value owing to lower margins
In the Petrochemicals division, sales to third parties fell by
€693 million to €5,035 million in 2016, largely owing to sharp
declines in sales prices. These were predominantly brought
EBIT before special items was slightly below the previous
year's high level due to lower margins overall. Steam cracker
margins fell sharply in North America, while in Europe, they
once again matched the high level of 2015. Margins declined
in the acrylic monomers and oxo alcohol businesses due to
high product availability on the market. Margins developed
Petrochemicals
4
North America
234
41%
1
North America
27%
€4,530 million
Asia Pacific
26%
South America, Africa, Middle East
6%
2
We considerably improved EBIT before special items in 2016,
predominantly thanks to higher margins. We held fix costs at
the previous year's level through strict cost discipline. Special
charges were below the level of the previous year, and were
mostly related to restructuring measures. They were partly
offset by gains from the disposal of the photoinitiator business.
We were able to reduce fixed costs through strict cost disci-
pline, thereby more than offsetting the continued pressure on
margins that came largely from the hygiene business. As a
consequence, EBIT before special items rose slightly com-
pared with the previous year. Special charges were predomi-
nantly attributable to restructuring measures.
In the fourth quarter of 2016, we started up the expanded
production facility for chelating agents, including TrilonⓇ M, at
the site in Ludwigshafen, Germany. We increased production
volumes of surfactants in Dahej, India, in 2016. We continued
modification work for the new superabsorbent technology at
the site in Antwerp, Belgium, and plan to complete this in 2017.
Petrochemicals - Sales by region
(Location of customer)
1 Europe
66 Management's Report
33%
6%
The BASF Group business year Chemicals
positively, however, for steam cracker products in Asia and for
ethylene oxide and glycols in Europe, largely driven by product
scarcity on the market in the first half of the year.
Currencies
(1%)
Sales
(6%)
Monomers - Sales by region
(Location of customer)
(1%)
1234
Europe
39%
North America
22%
€5,745 million
Asia Pacific
4
Portfolio
(8%)
Prices
Monomers
■
Sales decrease by 6% to €5,745 million, mainly
on account of lower prices
EBIT before special items considerably higher
as a result of increased isocyanate margins
In the Monomers division, sales to third parties declined by
€348 million to €5,745 million in 2016. This was basically the
result of lower sales prices brought about by a drop in raw
material costs, which particularly weighed down sales in the
polyamide value chain. By contrast, prices increased for iso-
cyanates.
Volumes growth for isocyanates was able to more than
compensate for the decline in the caprolactam business;
sales volumes grew slightly as a result.
Intermediates
■ Sales decrease by 6% to €2,681 million on account
of lower prices
Lower margins primarily responsible for considerable
year-on-year decline in EBIT before special items
Compared with 2015, sales to third parties decreased by
€168 million to €2,681 million in the Intermediates division.
Sales prices fell once again, due to a sharp drop in raw mate-
rial prices. In the butanediol and derivatives market, intense
competitive pressure from the startup of new capacities in
Asia additionally weighed down prices.
We were able to raise our volumes overall, predominantly
driven by higher sales volumes of amines in North America
and of polyalcohols, especially neopentylglycol, in Asia.
Intermediates - Factors influencing sales
Monomers - Factors influencing sales
1%
4%
BASF Report 2016
2016
certified palm kernel
Prices
BASF Report 2016
Nanjing, China
Shanghai, China
Ludwigshafen, Germany
Bradford, England
Kuantan, Malaysia
Besigheim, Germany
Antwerp, Belgium
Project
Location
The BASF Group business year - Performance Products
70 Management's Report
590,000
215,000
n/a
630,000
Capital expenditures
Modification for new superabsorbent technology
Startup
2017
Expansion: vinyl formamide plant
2016
Expansion: production plant for pigments (PaliocromⓇ)
2016
Expansion: production plant for resins (LaromerⓇ)
2016
Expansion: lubricants plant
2017
Construction: polyisobutene plant
2017
Construction: aroma ingredients complex
2016
2017
Construction: production plant for bio-acrylamide
Expansion: production plant for bismuth vanadate pigments
30,000
2016
170,000
600,000
Plastics processing industry, automotive industry, fuel and
lubricant industry, oil and gas industry, mining industry,
municipal and industrial water treatment, leather industry
as well as paper industry and packaging made of paper
Food and feed industries, flavor and fragrance industry and
pharmaceutical industry
Raw materials for paints and coatings, adhesives industry,
plastics processing industry, products for construction
chemicals, printing and packaging industry, paper industry,
specialties for the electronics and other industries
Cosmetics industry, hygiene industry, detergent and cleaner
industry, agricultural industry and technical applications
Customer industries and applications
Auxiliaries for the production and treatment of leather and
textiles
Process chemicals for the extraction of oil, gas, metals and
minerals, chemicals for enhanced oil recovery
Functional chemicals and process chemicals for the
production of paper and cardboard, water treatment
chemicals, membrane technologies, kaolin minerals
Fuel and refinery additives, polyisobutene, brake fluids and
engine coolants, lubricant additives and basestocks,
components for metalworking fluids and compounded
lubricants
Excipients for the pharmaceutical industry and selected,
high-volume active ingredients, such as ibuprofen and
omega-3 fatty acids
Flavors and fragrances, such as geraniol, citronellol,
L-menthol and linalool
Additives for the food and feed industries, such as vitamins,
carotenoids, sterols, enzymes, emulsifiers and omega-3
fatty acids
Superabsorbents for baby diapers, adult incontinence
products and feminine hygiene articles
Solvents for crop protection product formulations and
products for metal surface treatments
(12%)
Antioxidants, light stabilizers, pigments and flame retardants
for plastic applications
Since January 2017
Production capacities of significant products²
Product
Annual capacity
(metric tons)
South America,
Africa, Middle East
Asia Pacific
Sites
2 All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Superabsorbents
North America
Europe
Polyisobutene
Organic pigments
Nonionic surfactants
Methane sulfonic acid
Chelating agents
Citral
Anionic surfactants
40,000
1,745
Expansion: polyvinylpyrrolidone plant
Expansion: production plant for resins (BasonatⓇ)
Europe
oil increased
to
158,000
metric tons
Value for our customers and the environment
In 2016, purchase of
Number of RSPO-certified
19
The sustainable cultivation of renewable raw materials is gain-
ing in importance. Our customers in the cosmetic and deter-
gents and cleaners industries are therefore increasingly making
use of ingredients containing palm kernel oil that has been
certified according to the criteria of the Round Table on Sus-
tainable Palm Oil (RSPO). The availability of certified palm
kernel oil is limited. And yet we were able to expand our pur-
chasing volumes by around 32,000 to 158,000 metric tons in
2016, nearly doubling sales of certified products based on
palm kernel oil. This allows us to meet increasing demand and
participate in actively shaping the evolving market.
With a total of 19 RSPO-certified production sites on four
continents, we offer our customers a secure supply worldwide,
helping them fulfill the obligations they took on for sustainable
palm-based products. Our annual use of palm kernel oil and
its derivatives requires an average of 785,000 hectares of
cultivated acreage. As one of the largest global processors
of palm kernel oil, we will continue our commitment to continu-
ously improving sustainability along the entire value chain.
Strategy
■
■
production sites worldwide
Value for BASF
Attracting customers as a reliable supplier and supporting more sustainable cultivation
Ingredients from RSPO-certified palm kernel oil
(2%)
2015
1,366
Portfolio
(2%)
Currencies
(1%)
Sales
(4%)
Change:
€379 million
68 Management's Report
BASF Report 2016
The BASF Group business year - Performance Products
How we create value - an example
Tailor-made products and solutions improve our
customers' applications and processes
Global presence ensures reliable supply to customers
in all regions
2017
Pigments activities transferred to independent legal
entities; new Electronic Materials business unit
Industry-specific specialties make up a major part of our
product range. These products create additional value for our
customers, which allows them to stand out from the competi-
tion. We develop new solutions together with our customers
and strive for long-term partnerships which create profitable
growth opportunities for both sides.
Performance Chemicals
Nutrition & Health
Care Chemicals
Thereof Dispersions & Pigments
Sales to third parties
Segment data (million €)
Intersegmental transfers
BASF Report 2016
Modification: polyvinylpyrrolidone plant
2018
Expansion: polyacrylamide plant
2020
Construction: production plant for vitamin A
2017
2016
Sales including intersegmental transfers
Ingredients for detergents and cleaners in household,
institution or industry, such as surfactants, enzymes,
chelating agents, polymers, biocides and products for
optical effects
Polymer dispersions, pigments, resins, high-performance
additives, formulation additives, electronic chemicals¹
We pursue a different business model for standard products,
such as vitamins or dispersions for paper coatings. Here, effi-
cient production setups, backward integration in our Produc-
tion Verbund's value chains, capacity management, and
technology and cost leadership are all essential.
We support our customers by serving as a reliable supplier
with consistently high product quality, good value for money
and lean processes.
In July 2016, we transferred the global pigments activities
to independent legal entities. The largest is BASF Colors &
Effects GmbH, headquartered in Ludwigshafen, Germany.
This reorganization allows for better adaptation to the chal-
lenges facing the pigment industry.
As of January 1, 2017, all resources of the BASF Group for
the electronics industry, including the activities of the Mono-
mers division for the semiconductor and display sectors, were
combined into a new global business unit, Electronic Materials,
allocated to the Dispersions & Pigments division. This will
strengthen our position as a strategic partner to the major
electronics manufacturers.
We began planning construction of a new vitamin A com-
plex in Ludwigshafen, scheduled to start up in 2020.
BASF Report 2016
Products, customers and applications
Management's Report 69
The BASF Group business year - Performance Products
Division
Dispersions & Pigments
Care Chemicals
Nutrition & Health
Performance Chemicals
Products
We take on the challenges posed by important future issues,
especially population growth: scarce resources, environmental
and climatic stressors, greater demand for food and the desire
for better quality of life. In doing so, we focus on research and
development and maintain close relationships to leading com-
panies in our key customer industries. We position ourselves
globally in order to reliably supply customers in all regions. We
invest in the development of innovations that enable our prod-
ucts and processes - as well as our customers' applications
and processes to make a contribution to sustainability: for
example, by allowing resources to be used more efficiently.
1
Ingredients for skin and hair cleansing and care products,
such as emollients, cosmetic active ingredients, polymers
and UV filters
10%
Total annual
capacity
(metric tons)
through expansion
(metric tons)
240,000
Additional annual capacity
BASF Report 2016
dioctyl terephthalate (DOTP)
Changeover of plasticizers production to
Pasadena, Texas
Replacement: acetylene plant
Construction: TDI plant
Ludwigshafen, Germany
Construction: 2-ethylhexanoic acid plant
Kuantan, Malaysia
Construction: PolyTHFⓇ plant
Construction: butanediole plant³
Korla, China
Expansion: butanediol plant
Geismar, Louisiana
Startup
Construction: ammonia plant²
480,000
750,000
2017
n/a
n/a
2019
2015/2016
300,000
90,000
n/a
2016
30,000
2016
50,000
2016
100,000
2016
160,000
n/a
2017
2017
Expansion: MDI plant¹
Freeport, Texas
Project
Polyamide precursors
Polyamide 6 and 6.6
Oxo-C4 alcohols (calculated as butyraldehyde)
Neopentyl glycol
360,000
Caustic soda
2,610,000
Isocyanates
545,000
Urea
1,445,000
3,480,000
430,000
385,000
670,000
680,000
Ethylene oxide
PolyTHF®
Propionic acid
Propylene
Propylene oxide
Caojing, China
Location
Capital expenditures
The BASF Group business year Chemicals
64 Management's Report
2 All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
535,000
Plasticizers
1 Operated by an associated company with Huntsman, Shanghai Huayi (Group) Company, Shanghai Chlor-Alkali Chemical Co. Ltd. and Sinopec Group Assets
Management Corp.
920,000
675,000
2,610,000
150,000
350,000
1,010,000
820,000
1,495,000
205,000
Sulfuric acid
Ethylene
2 Operated by an associated company with Yara International ASA
BASF Report 2016
Investments²
5
12,823
13,486
Assets
(1)
692
686
EBIT after cost of capital
(4)
2,156
2,064
EBIT before special items
(25)
(81)
Special items
(7)
1,213
2,131
1,859
Research and development expenses
Currencies
Sales
0%
1%
(13%)
-234
Volumes
Prices
Portfolio
Petrochemicals - Factors influencing sales
about by raw material prices that were significantly below
prior-year levels, especially in the first half of the year. Produc-
tion was resumed at the Ellba C.V. joint operation plant in
Moerdijk, Netherlands, enabling us to slightly increase overall
sales volumes. In North America, volumes decreased mainly
as a result of lower plant capacity utilization of the condensate
splitter as well as of unscheduled shutdowns of the steam
cracker in Port Arthur, Texas.
For the Outlook for 2017, see page 122
Income from operations (EBIT) before special items fell by
€92 million to €2,064 million, mainly because of higher fixed
costs from new production plant startups. Lower margins in
the Petrochemicals and Intermediates divisions also damp-
ened EBIT before special items; higher margins for isocyanates
in the Monomers division helped slow the decline. EBIT
decreased by €148 million to €1,983 million. Special charges
came mainly from the overhaul of caprolactam production in
Europe.
In the Chemicals segment, sales to third parties decreased by
€1,209 million in 2016 to €13,461 million (volumes 3%, prices
-11%, portfolio 0%, currencies 0%). The reason for this were
lower prices as a result of slumped raw material prices, espe-
cially in the Petrochemicals division. We were able to raise our
volumes overall.
■ Decline in EBIT before special items by 4% to
€2,064 million mainly owing to higher fixed costs
Sales decrease by 8% to €13,461 million,
due to lower prices
Chemicals segment
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and write-ups)
2 Additions to intangible assets and property, plant and equipment (including acquisitions)
(12)
207
182
(35)
1,983
Income from operations (EBIT)
24
6,093
5,745
(12)
5,728
5,035
(8)
2015
14,670
13,461
Intersegmental transfers
Intermediates
Monomers
Thereof Petrochemicals
Sales to third parties
2016
The BASF Group business year - Chemicals
Management's Report 65
Segment data (million €)
(6)
2,681
2,849
(6)
959
1,186
Amortization and depreciation¹
21.1
23.5
%
EBITDA margin
3
3 Operated by an associated company with Xinjiang Markor Chemical Industry Co. Ltd.
3,090
Income from operations before depreciation and amortization (EBITDA)
(8)
19,970
18,297
Sales including intersegmental transfers
(9)
5,300
4,836
3,169
Ethanolamines and derivatives
Change in %
Butanediol equivalents
■ At €15,002 million, sales driven down 4% mainly
by prices and divestitures
■ EBIT before special items improves by 28% to
€1,745 million, primarily due to lower fixed costs
and higher margins
At €15,002 million, sales to third parties in 2016 in the Perfor-
mance Products segment were €646 million below the level of
the previous year. This was primarily attributable to falling sales
prices and the divestitures completed in 2015 (volumes 1%,
prices -2%, portfolio -2%, currencies -1%). The drop in sales
prices was largely the result of oil-price-related reductions in
raw material costs, in addition to ongoing pressure on prices
in the hygiene business. Sharp increases in vitamin prices in
the Nutrition & Health division helped counter this development.
_
In addition, the portfolio measures taken in 2015 — in particu-
lar, the divestiture of parts of our pharmaceutical ingredients
and services business and the paper hydrous kaolin activities,
as well as the sale of the textile chemicals business - led to
diminished sales in 2016. Currency effects slightly dampened
sales in all divisions. We achieved volumes growth overall in
the remaining business.
We raised income from operations (EBIT) before special
items by €379 million to €1,745 million. This was mostly due to
significantly reduced fixed costs thanks to restructuring
measures and strict fixed cost management, in addition to
improved margins. At €1,648 million, EBIT exceeded the
previous year's level by €308 million. Special charges were
predominantly attributable to restructuring measures. Special
income arose particularly from the sale of the photoinitiator
business.
For the Outlook for 2017, see page 122
72 Management's Report
The BASF Group business year - Performance Products
BASF Report 2016
Dispersions & Pigments
■
Sales at €4,530 million, 2% below 2015 level mostly
owing to lower prices
Considerable increase in EBIT before special items,
primarily through higher margins
At €4,530 million, sales to third parties were €99 million below
the level of the previous year in the Dispersions & Pigments
division. Lower sales prices weighed down by an oil-price-
related drop in raw material costs were the main reason behind
this slight decline. We were able to slightly raise overall sales
volumes.
Demand in the dispersions business developed positively,
especially in Asia and Europe, but sales as a whole fell on
account of price declines. Sales of resins decreased mainly as
a result of lower prices. The closure of the production plant in
Kankakee, Illinois, also weighed down sales; growth impetus,
on the other hand, came from Europe and Asia. In the addi-
tives business, rising volumes drove an increase in sales. In
July 2016, we transferred our global pigments activities to
independent legal entities. Sales in this sector increased
slightly thanks largely to the positive business development in
Asia; by contrast, sales fell in Europe.
Care Chemicals
Performance Products segment
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and write-ups)
2 Additions to intangible assets and property, plant and equipment (including acquisitions)
(10)
(5)
383
949
(8)
1,648
1,340
23
(97)
(26)
1,745
■
1,366
209
(305)
14,549
14,232
2
864
964
362
28
874
■
EBIT before special items improves considerably
thanks to reduced fixed costs
(2%)
Dispersions & Pigments - Sales by region
(Location of customer)
4
1
Europe
2 North America
34
Asia Pacific
South America, Africa, Middle East
4
49%
3
17%
Chlorine
24%
1
€4,735 million
Sales
Care Chemicals - Sales by region
(Location of customer)
(1%)
Currencies
In the Care Chemicals division, sales to third parties fell by
€165 million to €4,735 million in 2016. This was predominantly
the result of reduced prices due to lower raw material prices
and ongoing intense competition in the hygiene business.
Negative currency effects, especially from the Argentinian
peso and Brazilian real, additionally dampened sales.
Care Chemicals - Factors influencing sales
Volumes
Prices
0%
(2%)
Portfolio
0%
Currencies
Sales decrease by 3% to €4,735 million, mainly
on account of lower prices
(1%)
Sales
(3%)
Volumes
3%
Prices
(4%)
Portfolio
0%
Dispersions & Pigments - Factors influencing sales
14.6
Sales volumes matched the prior-year level in a market
environment that remained difficult. We increased sales
volumes, especially in our business with ingredients for the
detergents and cleaners industry, as well as in the Asia Pacific
region. This compensated for lower demand, especially in the
hygiene business and in South America.
%
Use in BASF-Verbund
Chemical and plastics industry, detergent, automotive,
packing and textile industries; production of paints,
coatings, and cosmetics as well as oilfield, construction
and paper chemicals
Use in BASF-Verbund
Customer industries and applications
Transferred to the Dispersions & Pigments division on January 1, 2017
Specialties: specialty amines such as tert-Butylamine, gas
scrubbing chemicals, vinyl monomers, acid chlorides,
chloroformates, chiral intermediates
Specialties: electronic chemicals¹, metal systems¹
Basic products: butanediol and derivatives, alkylamines and
alkanolamines, neopentyl glycol, formic and propionic acid
Basic products: isocyanates (MDI, TDI), ammonia,
caprolactam, adipic acid, chlorine, urea, glues and
impregnating resins, caustic soda, polyamides 6 and 6.6,
standard alcoholates, sulfuric and nitric acid
Specialties: special plasticizers such as Hexamoll®, Dinch®,
special acrylates
Basic products: ethylene, propylene, butadiene, benzene,
alcohols, solvents, plasticizers, alkylene oxides, glycols and
acrylic monomers
Products
Intermediates
Monomers
Petrochemicals
Division
Products, customers and applications
63
Use in BASF-Verbund
Plastics, coatings and pharmaceutical industries,
production of detergents and cleaners as well as crop
protection products and textile fibers
Production capacities of significant products²
Sites
Benzene
910,000
Butadiene
1,525,000
305,000
16.8
250,000
1,510,000
Management's Report
The BASF Group business year - Chemicals
Annual capacity
(metric tons)
Asia Pacific
North America
Europe
Ammonia
Formic acid
Alkylamines
Acrylic acid
Product
South America,
Africa, Middle East
BASF Report 2016
Industries such as plastics, electronics, lumber, furniture,
packaging, textile, construction and automotive
EBITDA margin
4,735
4,900
(3)
1,932
1,998
3,805
4,121
(8)
465
463
0
15,467
Income from operations before depreciation and amortization (EBITDA)
10
2,289
16,111
(4)
(2)
4,629
(3)
2,522
EBIT before special items
4,530
Special items
EBIT after cost of capital
Assets
Investments²
Management's Report 71
The BASF Group business year - Performance Products
Research and development expenses
Amortization and depreciation¹
2016
2015
Change in %
15,002
15,648
(4)
Income before operations (EBIT)
2016:
Innovation
2017
4.5
2
4.34.37.1
€59,852 million
€67,176 million
4.0%
4
8.9%
3 Value added results from the company's performance minus goods and services
purchased, depreciation and amortization. Business performance includes sales
revenues, other operating income, interest income and net income from shareholdings.
Value added shows the BASF Group's contribution to both private and public income
as well as its distribution among all stakeholders.
4.1
31.6%
1.2%
8.6%
1.4%
2016
2.9%
Business
performance
24.6%
Personnel expenses
Research and development expenses
115,490
Change in %
113,830
61.6%
1.5
2016
2017
Environment, health, safety and security
Donations and sponsorship
Society
Apprentices at year-end
Employees at year-end
Employees
3,103
Employees and society
1.4
9,966
10,110
Number of employees in research and development at year-end
1.3
1,863
1,888
million €
Change in %
55.2%
million €
2017
34.1
3,572
4,789
million €
Free cash flow
13.8
7,717
8,785
Cash provided by operating activities
(20.2)
1 Amortization of intangible assets, depreciation of property, plant and equipment, impairments and reversals of impairments
2 Additions to intangible assets and property, plant and equipment (including acquisitions)
14,401
million €
Net debt
13.3
18.9
%
%
3,120
10.8
Return on equity after tax
8.2
11,485
2016
Value added 2017³
Business performance
Shareholders (dividend and retention)
4.5
4.4 Minority interests
Creditors
4.2 Government
4.3
4.1 Employees
Use of value added
16,493
(4,202) (4,251)
19,230
Value added
Creation of value added (million €)
4
3
3
(14,520) (13,658)
and other expenses
Services purchased, energy costs
2
2016
59,852
2017
67,176
(29,224) (25,450)
Cost of raw materials and merchandise
1
Amortization and depreciation
(0.5)
2.12
10,610
thousand metric tons
2.7
22.0
22.6
million metric tons of CO, equivalents
4 The 2016 figure has been adjusted due to updated data.
Investments in environmental protection plants and facilities
Operating costs for environmental protection
Waste
Emissions to air (air pollutants)
25.7
Emissions of greenhouse gases
23.2
24.8
metric tons
(3.4)
2.9
2.8
thousand metric tons
(11.3)
15.9
14.1
6.9
thousand metric tons
26.0
million metric tons
104
15.4
120
42.6
Number of on-site sustainability audits of raw material suppliers
Suppliers
Change in %
2016
2017
Audits along the value chain
(1.2)
6 Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes
7 Excluding emissions from oil and gas production
3.6
206
234
million €
1.3
1,011
1,024
million €
1.0
2.10
5 For more information, see page 100
million €
(1.9)
20.3
1.5
1.4
per one million working hours
Lost-time injuries4
0
2.0
2.0
per one million working hours
Process safety incidents
0
(6.6)
0
Safety, security and health
Change in %
2016
2017
19.1
47.0
56.0
million €
4.4
10,165
Transportation incidents with significant impact on the environment
20.7
Health Performance Index5
0.96
million cubic meters
10.1
1,649
1,816
million cubic meters
Emissions of heavy metals to water?
Emissions of nitrogen to water?
Emissions of organic substances to water
Withdrawal of drinking water
Total water withdrawal
0.97
1.3
625
kilograms of sales product/MWh
Energy efficiency in production processes
(0.2)
57.4
57.3
million MWh
Primary energy use
Environment
1.0
617
44.1
3,249
Return on assets
1,015
Income from operations (EBIT)
(2)
1,305
1,282
EBITDA
2
5,569
5,696
Sales
2016 Change in %
2017
Key data Agricultural Solutions (million €)
In the Oil & Gas segment, we focus on exploration and
production in oil and gas-rich regions in Europe, North
Africa, Russia, South America and the Middle East.
Together with our Russian partner Gazprom, we are also
active in the transportation of natural gas in Europe.
Page 85
Oil & Gas
The Agricultural Solutions segment provides innovative
solutions in the areas of chemical and biological crop
protection, seed treatment and water management as
well as for nutrient supply and plant stress.
៣_ Page 81
Agricultural Solutions
(17)
1,946
1,617
EBIT before special items
1,037
(2)
EBIT before special items
1,033
719
53
517
793
EBIT before special items
Net income
109
499
1,043
Income from operations (EBIT)
30
(30)
1,596
EBITDA
17
2,768
3,244
Sales
2016 Change in %
2017
Key data Oil & Gas (million €)
(5)
1,087
2,069
2,199
1,545
Income from operations (EBIT)
Page 75
In the Functional Materials & Solutions segment, we
bundle system solutions, services and innovative
products for specific sectors and customers, especially
the automotive, electrical, chemical and construction
industries, as well as applications for household, sports
and leisure. Our portfolio comprises catalysts, battery
materials, engineering plastics, polyurethane systems,
automotive coatings, surface treatment solutions and
concrete admixtures as well as construction systems like
tile adhesives and decorative paints.
Functional Materials & Solutions
EBIT before special items
Income from operations (EBIT)
EBITDA
(20)
1,777
1,416
(10)
Key data Functional Materials & Solutions (million €)
1,678
(6)
2,577
2,427
2
3,805
3,896
Performance Chemicals
(5)
Responsible Care Management System
1,932
1,510
362
2017
Sales
(23)
2,906
2,251
EBITDA
12
6,888
7,706
Performance Materials
22
3,969
2016 Change in %
Coatings
2,332
2,412
Construction Chemicals
6
6,263
6,658
Thereof Catalysts
11
18,732
20,745
3
%
99
BASF Group 2017 at a glance
3.00
3.10
€
Dividend per share
33.3
4.83
6.44
€
Adjusted earnings per share
49.8
4.42
6.62
€
Earnings per share
140.1
1,136
2,727
million €
EBIT after cost of capital
49.9
4,056
3.3
Research and development expenses
million €
1,888
Equity ratio
(39.9)
7,258
4,364
million €
3.0
76,496
78,768
million €
Investments²
6,078
Assets
113,830
115,490
Number of employees
4.4
10,165
10,610
million €
Personnel expenses
1.3
1,863
1.5
million €
Net income
44.6
million €
Amortization and depreciation'
20.9
10,526
12,724
million €
EBITDA
21.3
10,327
12,527
4,202
million €
Income from operations before depreciation and amortization (EBITDA)
12.0
57,550
64,475
million €
Sales
Change in %
2016
2017
Economic data
and special items
1 On January 1, 2017, the Monomers and Dispersions & Pigments divisions' activities for the electronics industry were merged into the global Electronic Materials business unit and allocated to the
Dispersions & Pigments division. For better comparability, the affected figures for 2016 have been adjusted accordingly.
4,251
Income from operations (EBIT)
5,395
7,800
million €
Income before taxes and minority interests
18.0
(880)
(722)
million €
Financial result
32.0
(1.2)
6,309
million €
EBIT before special items
(34)
194
million €
Special items
35.8
6,275
8,522
million €
8,328
Number of environmental and safety audits
Nutrition & Health
121
120
raw material supplier
sites audited
>50
external
compliance
hotlines
Our business model1
5
segments
13
operating divisions
86
strategic business units
■ Chemicals
■ Performance Products
production
sourced locally
■ Functional Materials &
Solutions
■■■ Oil & Gas
Intelligent Verbund system²
6
Verbund sites and
347
additional production sites worldwide
BASF Group
companies
in more than
80
countries
Our corporate purpose:
We create chemistry
for a sustainable future
Around 130,000 customers
With our broad portfolio, we serve customers
from many different sectors – from major global
customers, small and medium-sized enterprises
to end consumers.
Market success based on
strategic principles
■ Agricultural Solutions
■ We add value as one company
goods and
services for own
around 90%
Training:
>72,000
enrollments in
information protection
courses
L
T↑
Employees and contractors
worldwide participated in the
global safety initiative with
over
930
activities at around
360
sites
115,490
of raw materials,
employees
worldwide,
3,103
apprentices
Around 10,000
employees in research and
development
84.6%
of our senior executives
have international
experience
Numerous offerings for
balancing personal and
professional life worldwide
Our stakeholders
include customers, employees, Over 70,000
suppliers and shareholders, as
well as representatives from
academia, industry, politics,
society and the media
suppliers
of which
■ We innovate to make our customers
more successful
109
■ We form the best team
3,114
5,374
EBITDA
11
2,681
2,979
Intermediates
34
5,189
6,963
Monomers
27
5,035
6,389
73
Thereof Petrochemicals
12,905
16,331
Sales
2016 Change in %
2017
Key data Chemicals' (million €)
The Chemicals segment comprises our business with
basic chemicals and intermediates. Its portfolio ranges
from solvents and plasticizers to high-volume monomers
and glues as well as raw materials for detergents, plas-
tics, textile fibers, paints and coatings, crop protection
and medicines. In addition to supplying customers in the
chemical industry and numerous other sectors, we also
ensure that other BASF segments are supplied with
chemicals for producing downstream products.
Page 62
Chemicals
We create chemistry
◉-BASF
Economic, environmental
and social performance
BASF Report 2017
口·BASF
1,844
27
Income from operations (EBIT)
4,208
1,953
Values guide our conduct
and actions
■ Creative
■ Open
■ Responsible
■ Entrepreneurial
1 For more information on our business model, see page 20 onward
2 For more information on the Verbund system, see page 21
Corporate Governance
7
4,735
5,079
Care Chemicals
6
5,086
5,398
Thereof Dispersions & Pigments
4
115
EBIT before special items
4,233
2,032
108
Performance Products
performance
control visits
Our Performance Products lend stability, color and bet-
ter application properties to many everyday products.
Our product portfolio includes vitamins and other food
additives in addition to ingredients for pharmaceuticals,
personal care and cosmetics, as well as hygiene and
household products. Other products from this segment
improve processes in the paper industry, in oil, gas and
ore extraction, and in water treatment. They furthermore
enhance the efficiency of fuels and lubricants, the effec-
tiveness of adhesives and coatings, and the stability of
plastics.
Key data Performance Products' (million €)
2017
2016 Change in %
Sales
16,217
15,558
Page 68
occupational
medicine and
health protection
audits and health
■ We drive sustainable solutions
0
Responsibility along the value chain
93
Forecast
111
Corporate Governance
Corporate governance report
127
Compliance
135
Management and Supervisory Boards
137
Board of Executive Directors
137
Supervisory Board
48
139
140
Report of the Supervisory Board
152
Declaration of Conformity pursuant to section 161
of the German Stock Corporation Act (AktG)
157
Declaration of Corporate Governance
158
Consolidated Financial Statements
Statement by the Board of Executive Directors
161
Independent Auditor's Report
162
Statement of income
Compensation report
42
Working at BASF
40
44
(9.9)
63
37
70.2
Number of short-notice audits
Number of occupational medicine and health protection audits and health performance
control visits
44
30
8 For more information, see page 97
Contents
To Our Shareholders
Letter from the Chairman of
the Board of Executive Directors
7
The Board of Executive Directors of BASF SE
10
Investments, acquisitions and divestitures
35
Innovation
34
Customers
23
168
Our strategy
The BASF Group
19
Overview
Management's Report
14
BASF on the capital market
20
Statement of income and expense
The BASF Group business year
169
BASF-Bericht 2017
How we create value
Our foundation
BASF Report 2017
€34.8 billion
in equity
€1.9 billion
spent on research
and development
€4.4 billion
invested in property, plant and
equipment and intangible assets
(including acquisitions)
€10.6 billion
in personnel expenses
€38 billion
€234 million
invested in environmental
protection
30,000
different raw materials
procured
sites
recognized in equity
83
environmental, safety
and security audits
performed at
109
of steam demand
The following overview provides examples of how we create value for
our company, the environment and society. It is modeled on the
framework of the International Integrated Reporting Council (IIRC).
Both financial and nonfinancial value drivers form the foundation of
our actions. Our business model transforms these principles and
actions into results.
million MWh
15.1
million MWh
of electricity
demand
of water abstracted
million m3
1,816
of raw materials
purchased worldwide
from renewable resources
5%
39.7
BASF's success is supported by both financial and nonfinancial
value drivers such as environmental, production-related, personnel
and knowledge-based factors, along with aspects of society and
partnerships. We want to understand the relationships between these
and derive measures to increase the positive impact of our actions
and further minimizing the negative effects. This intention forms the
basis of our integrated reporting.
worth of raw materials,
goods and services
purchased for own
production
170
Balance sheet
How we create value
Statement of cash flows
171
Statement of equity
172
Notes
173
Supplementary Information on the Oil & Gas Segment
Supplementary information on the Oil & Gas segment - 237
Overviews
Ten-year summary
Trademarks
Glossary
Detailed tables of contents can be found on each colored
-
247
How we create value
For more information on 3D printing, see page 37
chapter divider
Cover photo and page 1:
drafting these development
goals, the United Nations.
worked together with
nongovernmental organiza-
tions, international trade
associations, employee
representatives, scientists,
policymakers and industry.
BASF was actively involved
in the development of the
SDGs as a member of
working groups.
Our innovations contribute
to a sustainable future. We
support the United Nations
in the implementation of
the U.N. Sustainable
Development Goals
(SDGs), which create the
framework for sustainable
business practices at the
economic, social and
environmental levels. In
Chemistry for a
sustainable future
At the Application Technology Center in Heidelberg,
Germany, BASF tests new powders, resins, filaments and
granulates for 3D printing and develops solutions for
industrial additive manufacturing. This makes it possible
to create parts with new properties for our customers'
applications in industries such as automotive, aviation
and aerospace or consumer goods. One example is this
open printed functional model of a tool. The tool can be
heated or cooled using the integrated tempering
channels close to the surface conture.
Our integrated corporate
report combines financial
and sustainability reporting
to inform shareholders,
employees and the
Welcome to BASF
Table of Contents
250
249
interested public about the
2017 business year.
2017
5 million BOE
2015/2018²
12 million BOE
2018
Achimgaz, development of Achimov horizon in Urengoy natural
gas and condensate field
Development of Edvard Grieg field
2008/20202
Development of Aasta Hansteen field
1 BASF's share in barrels of oil equivalent (BOE)
Natural gas transportation
2 Year completed
8 million BOE
44 million BOE
Startup
2017/20242
In the Neuquén province, Wintershall reduced its interest in
the Aguada Pichana concession. Its share in the Aguada
Pichana Oeste (West) block was sold to Pan American Energy
LLC, Buenos Aires, Argentina, and YPF S.A., Buenos Aires,
Argentina. Wintershall reduced its interest in the Aguada
Pichana Este (East) block through the sale of shares to Total
Austral S.A., Buenos Aires, Argentina, at the beginning of
2018.
per year¹
■ Mostly regulated business with stable framework
Construction of European gas pipeline link (EUGAL)
planned
For information on current reserves, see pages 89 and 237
88 Management's Report
The BASF Group business year - Oil & Gas
Investments
BASF Report 2017
7 million BOE
Location
North Sea, Norway
Siberia, Russia
Project
Development of Aguada Pichana Este
Development of Maria field
Plateau/peak production
Argentina
■
1,596
Contribution to financing of the project company
Nord Stream 2 AG
South America: We hold shares in a total of 15 onshore
and offshore fields in Argentina. In the Neuquén province,
we drilled three pilot wells as an operator in the Bandurria
Norte block. The first exploration well in the CN-V block in
the Mendoza province found oil. In Tierra del Fuego, work
began on the expansion of the gas treatment facilities for the
Cuenca Marina Austral 1 concession.
30
2,069
Income from operations before depreciation and amortization (EBITDA)
18
3,099
3,653
Sales including intersegmental transfers
24
331
409
17
2,768
3,244
Intersegmental transfers
Sales to third parties
Change in %
The largey regulated natural gas transportation sector is char-
acterized by stable conditions and yields based on approved
costs and tariffs. Our organizational structure meets the
unbundling requirements set down by the German Energy Act.
As an indirect holding company for the German subsidiar-
ies in natural gas transportation, WIGA Transport Beteiligungs-
GmbH & Co. KG (WIGA) mainly fulfills a reporting and financing
function. GASCADE Gastransport GmbH, OPAL Gastransport
GmbH & Co. KG, and NEL Gastransport GmbH all act as
independent companies under the umbrella of the WIGA
group.
In August 2017, we established W & G Infrastruktur Finan-
zierungs-GmbH as an intermediate holding company and
contributed GASCADE Gastransport GmbH and NEL Gas-
transport GmbH to it. The intermediate holding company
performs WIGA's financing function for the two companies and
is accounted for in the BASF Group's financial statements us-
ing the equity method.
The companies under the WIGA umbrella operate a
3,300-kilometer long-distance pipeline network that includes
links to the Nord Stream pipeline, the Baltic Sea Pipeline Link
(OPAL) and the North European Gas Pipeline (NEL).
GASCADE Gastransport GmbH plans, as project devel-
oper, to construct the 485-kilometer European gas pipeline
link (EUGAL), which will extend from the Baltic sea in north-
ern Germany to the Czech border. Its maximum annual
transportation capacity of 51 billion cubic meters is to be
achieved in two phases by 2020. The project will be imple-
mented under a fractional ownership agreement with our
partners Fluxys Deutschland GmbH, Düsseldorf, Gasunie
Deutschland Transport Services GmbH, Hannover, and
ONTRAS Gastransport GmbH, Leipzig, each of which holds
a 16.5% share.
■
We hold a 15.5% share in the Nord Stream pipeline that
started up in 2011 through Nord Stream AG, based in Zug,
Switzerland, which is accounted for in the BASF Group's
financial statements using the equity method. Other share-
holders are the Gazprom (51%), E.ON (15.5%), N.V. Neder-
landse Gasunie (9%) and ENGIE (9%) groups. With a total
capacity of 55 billion cubic meters of natural gas per year, this
pipeline, which stretches from Russia to the German coast
over the Baltic Sea, helps strengthen the security of supply in
Europe.
BASF Report 2017
Segment data¹ (million €)
Management's Report
The BASF Group business year — Oil & Gas
2017
2016
Wintershall is contributing to the financing of the new Nord
Stream 2 project as a co-creditor. Its implementation will
strengthen infrastructure and security of supply in Europe,
which is particularly important given the decline in production
there. Together with the ENGIE, OMV, Royal Dutch Shell and
Uniper groups, Wintershall signed long-term financing agree-
ments with the project company Nord Stream 2 AG, Zug,
Switzerland, on April 24, 2017. The five European energy
companies committed to long-term financing of 50% of the
entire project costs, which are currently estimated at €9.5 bil-
lion. Wintershall will provide up to €950 million. As of Decem-
ber 31, 2017, €324 million of this amount had already been
called up. Gazprom is the sole shareholder of the project
company Nord Stream 2 AG.
In Abu Dhabi, Wintershall successfully completed the first
offshore exploration well in the Shuwaihat field.
10%
Russia: The Yuzhno Russkoye natural gas field in western
Siberia, in which Wintershall has a 35% economic interest, has
been producing at plateau since 2009. We hold a 50% share
in the development of Block IA of the Achimov formation in the
Urengoy field in western Siberia. The gradual development of
this field was continued and 88 wells were producing at the
end of 2017. We will develop blocks IV and V of the Achimov
formation with our partner Gazprom. We are also active in
exploration and production in the Volgograd region together
with the LUKOIL group.
Sales
0%
Portfolio
517
2016
13%
Prices/currencies
793
2017
4%
Volumes
Income from operations before special items
(million €)
17%
Factors influencing sales
Change
2017:
€3,244 million
2016:
€2,768 million
€5,696 million
3
Asia Pacific
4
South America, Africa, Middle East
20%
17%
2
Income from operations (EBIT) before special items was
€1,033 million, down €54 million on the prior-year figure. The
slight decline was mainly due to the lower average margins
from a different product mix and the difficult market situation
in Brazil. Earnings were also negatively impacted by the shut-
downs of our production facilities in Beaumont, Texas, and
Manatí, Puerto Rico, because of the hurricanes. Fixed costs
rose slightly. EBIT declined by €22 million to €1,015 million.
For the Outlook for 2018, see page 123
BASF Report 2017
Management's Report 85
The BASF Group business year — Oil & Gas
Oil & Gas
BASF's oil and gas activities are bundled in the Wintershall Group. We focus on exploration
and production in oil and gas-rich regions in Europe, North Africa, Russia, South America
and the Middle East – focus regions in which Wintershall has a high level of regional and
technological expertise. We are also active in the transportation of natural gas in Europe with
our Russian partner Gazprom.
Sales
1
Change:
€276 million
86 Management's Report
In the future, crude oil and natural gas will continue to contrib-
ute significantly toward covering the rising energy demand of a
growing world population. That is why we invest in the explo-
ration and production of oil and gas, primarily in our core
regions Europe, North Africa, Russia and South America. We
want to establish the Middle East as another core region in our
portfolio.
Selected collaborations and strategic partnerships, inno-
vative technologies and the responsible development and
production of hydrocarbons all form the basis of our
growth-oriented strategy. Through the continuous optimiza-
tion of our cost structure and portfolio of oil and gas activities,
we ensure our competitiveness, even in times when oil and
gas prices are low. Measured by production volumes, gas
activities comprised around 70% of our portfolio.
Handling hydrocarbons in a responsible manner demands
special measures for the protection of people and the environ-
ment. We therefore carefully assess the potential effects of
every project before we begin. Together with experts, contrac-
tors and relevant stakeholders, we develop methods and carry
out measures for using resources even more efficiently and
minimizing impact on the environment. This includes acting in
accordance with international agreements, legal requirements
and our own, self-imposed high standards. →
On December 7, 2017, BASF signed a letter of intent with the
LetterOne group on the merger of their respective oil and gas
businesses in a joint venture, which would operate under the
name Wintershall DEA. The oil and gas activities of BASF
bundled in the Wintershall Group comprise Wintershall Hold-
ing GmbH, based in Kassel, Germany, and its subsidiaries
including the gas transportation business. LetterOne's oil and
gas business comprises Hamburg-based DEA Deutsche
Erdoel AG and its subsidiaries. According to the plan, Winters-
hall DEA is to be created by LetterOne contributing all
its shares in DEA Deutsche Erdoel AG to Wintershall against
issuance of new shares to LetterOne. BASF shall initially hold
67% and LetterOne 33% of the shares in Wintershall DEA.1
Following the closing of the transaction, we expect to account
for our interest in the joint venture using the equity method in
the Consolidated Financial Statements.
Wintershall DEA would have significant growth potential
and be one of the largest independent European exploration
and production companies. Production volumes of Wintershall
and DEA in 2016 corresponded to around 590,000 barrels of
oil equivalent (BOE) per day; the proven reserves at the end of
2016 amounted to 2.1 billion BOE.
The merger is designed to optimize the portfolio footprint
of the combined business and exploit synergies. In the medi-
um term, we aim to take Wintershall DEA public together with
LetterOne.
Growth through exploration, acquisitions, strategic
partnerships and technological expertise
Contribution to securing Europe's natural gas supply
Intention to merge Wintershall Group with LetterOne's
oil and gas business
1 Wintershall's gas transportation business is not included in this shareholding ratio. As of closing, Wintershall DEA would issue a mandatory convertible bond to BASF reflecting the
value of Wintershall's gas transportation business.
Management's Report 87
The BASF Group business year - Oil & Gas
The definitive transaction agreements are to be negotiated
over the coming months; the transaction could be expected to
close in the second half of 2018, subject to the customary
regulatory approvals. There is no assurance that we will enter
into definitive transaction agreements with LetterOne or that
the intended transaction will be consummated.
Active portfolio management, including expansion of
our position in Norway
Europe: The Mittelplate field off the North Sea coast is the
cornerstone of our crude oil production in Germany. We own
a 50% share in the development of this largest known oil
deposit in the country. Some 30 million metric tons of oil have
already been extracted there. We have completed and started
up all 12 new wells at the Emlichheim site. A new drilling
campaign with a total of five new production wells started at
the Bockstedt oilfield. The first wells have already started
operation. We conducted a seismic survey at the Landau
concession in early 2017 and are currently evaluating the
results.
In Norway, oil production from the Maria field in the Norwe-
gian Sea started in 2017. It is the first project in Norway that
Wintershall has operated from the discovery of the field to the
start of production. Rather than building a new production
platform, we implemented an innovative development concept
for Maria: The production equipment was installed directly on
the seabed and connected underwater with three nearby
platforms operated by our cooperation partner Statoil.
Production started a year earlier than originally planned and
costs were more than a fifth lower than expected. Develop-
ment of the Ivar Aasen and Edvard Grieg fields continued with
additional wells drilled. As the operator of the Nova field
(previously: Skarfjell), we are in the process of finalizing the
development concept. This proposes to connect the oil and
gas reservoir with the nearby Gjøa platform via a subsea tie-
back. In January 2017, Wintershall was granted shares in five
new exploration licenses on the Norwegian continental shelf
from the Ministry of Petroleum and Energy. Wintershall will
take over operatorship of two licenses.
In early 2017, Wintershall Noordzee B.V., Rijswijk, Nether-
lands, started production from the Ravn oilfield as operator. It
is the first oilfield operated by the company in Denmark. Tech-
nical difficulties arose in production in mid-August; we are still
working on a solution.
BASF Report 2017
North Africa / Middle East: In Libya, we are the operator
of eight oilfields in the onshore concessions 96 and 97.
Crude oil production was temporarily suspended in both con-
cessions in March 2017. Based on an agreement with the
government-owned National Oil Corporation (NOC), we were
able to resume production from June to October: 55,000
barrels of oil per day (BOPD) for concession 96 and 10,000
BOPD for concession 97. Production in concession 96 then
halted due to a strike. We are currently negotiating with NOC
on the framework of our future cooperation. At the Al Jurf oil-
field off the coast of Libya, in which we hold a share, operations
could be continued without interruption in 2017.
■
The unit's innovative design enabled us to implement our
voluntary commitment - to using the associated gas from oil
production in efficient and environmentally friendly ways in
routine operations - in test production as well. The resulting
lower energy demand reduces CO2 emissions by over 50%.
The unit will also be used in future projects.
The BASF Group business year - Oil & Gas
How we create value - an example
BASF Report 2017
Resource-efficient oil production
Use of associated gas from test production reduces energy demand and emissions
Value for BASF
Strategy
Energy demand
around
40%
Wintershall developed a mobile test production unit equipped
with three micro gas turbines during the revaluation of the
German oil field Suderbruch. For the first time, this made it
possible to use the associated gas from test production in
plant operations, reducing energy demand by around 40%.
Value for the environment
CO₂ emissions
reduced by
>50%
reduced by
Exploration and production
Income from operations (EBIT)
35%
Our research and development activities range from solu-
tions for guarding plants against fungi, insects and weeds, to
seeds and improved soil management, and supporting plant
health. For example, the Functional Crop Care business unit
provides products for improving seeds and innovations for
better nitrogen and water management in soil. It also offers
biological and chemical technologies that make plants better
able to withstand stress factors like heat, cold and nutrient
deficiency.
The success of our customers depends on many factors
such as weather, plant health, soil conditions and prices for
agricultural products. As a result, modern farmers have to
analyze more and more data of increasing complexity to make
the right cultivation decisions. BASF's innovative digital appli-
cations help our customers to use these data to their advan-
tage as a basis for making better decisions, ensuring more
efficient and sustainable resource allocation.
One example of our strategic investments in digital solu-
tions is the acquisition of ZedX Inc., Bellefonte, Pennsylvania,
in May 2017. ZedX is a leader in the development of informa-
tion technology products and services for the agriculture sec-
tor. The company develops agronomic weather, crop and pest
models that can rapidly translate data into insights for more
efficient agricultural production.
Our aim is to offer farmers a wider range of solutions going
forward to even better meet the growing demand for high-
BASF Report 2017
Management's Report 83
The BASF Group business year - Agricultural Solutions
quality seeds as well as chemical and biological crop protec-
tion. We therefore signed an agreement to acquire significant
parts of the seed and non-selective herbicide businesses from
Bayer AG, Leverkusen, Germany, in October 2017. The trans-
action is expected to close in the first half of 2018, subject
to the closing of Bayer's acquisition of Monsanto and approval
by the relevant authorities. The planned acquisition includes
attractive businesses in important field crops and markets.
With the acquisition, we aim to expand our crop protection
business, strengthen our herbicide portfolio and enter the
seed business in key agricultural markets. It will also strengthen
our global innovation potential.
The agreement covers Bayer's global glufosinate-ammoni-
um non-selective herbicide business, commercialized under
the Liberty®, BastaⓇ and FinaleⓇ brands, as well as its seed
businesses for key row crops in selected markets. These
include canola hybrids in North America under the InVigorⓇ
brand using the LibertyLink® trait technology, as well as the
oilseed rape business mainly in the European markets, cotton
in the Americas and Europe, and soybean in the Americas.
The agreed transaction also includes Bayer's trait research
and breeding capabilities for these crops and the LibertyLink®
trait and trademark.
We are committed to the responsible treatment of our
products and the preservation of a healthy environment. We
also constantly invest in our development pipeline to offer our
customers an increasingly wide range of integrated solutions
for crop protection and beyond.
Investments
order to continue meeting the ongoing high demand for our
innovative solutions in the future, we will invest around
€780 million in developing and expanding our infrastructure
and in our production and formulation capacities for active
ingredients between 2018 and 2022.
Plant biotechnology at BASF
Our activities in the field of plant biotechnology are part of the
Bioscience Research technology platform. Research and
development expenses, sales, earnings and all other data
are not included in the Agricultural Solutions segment; they
are reported under Other.
With our network of research sites, we help farmers meet
the growing demand for increased agricultural productivity as
well as better nutrition. With a pioneering platform for gene
identification, we have specialized in the development of plant
characteristics such as higher yield, herbicide tolerance, dis-
ease resistance and quality traits. Our goal is to optimize crops
so that farmers can achieve greater and more secure yields. In
this way, we make an important contribution to securing a
better food supply for a growing world population. We also
contribute to sustainable agriculture, as the cultivation of these
plants significantly reduces the amount of land, water and
energy required to produce each metric ton of harvested
crops.
Together with Cargill, we are developing a rapeseed oil that
represents a new source of heart-healthy omega-3 fatty acids,
for example. The first regulatory dossier was submitted to the
U.S. Department of Agriculture in November 2017. Market
launch is planned from 2020, subject to regulatory approval. We
are also working on a soybean that is resistant to the devastating
Asian soybean rust disease. A number of lead genes have been
successfully tested in field trials in Brazil.
Products, customers and applications
Indications and sectors
Fungicides
Herbicides
In 2017, we invested €114 million in property, plant and equip-
ment. Major projects included the startup of our expanded
production capacities for dicamba in Beaumont, Texas, as well
as new production capacities for our fungicide RevysolⓇ and
our insecticide InscalisⓇ. In the area of Functional Crop Care,
we expanded our capacities for biological seed treatments
and soil management in Saskatoon, Canada. We also invested
in infrastructure, in particular at our plants in North America. In
Natural resources such as land and arable area are limited,
while the world's population and its demand for food continue
to grow. This means that farmers around the world face the
challenge of increasing their crop yields with limited resources.
We offer our customers innovative solutions combined with
practical, down-to-earth advice so that they can produce
more and more nutritious - food as efficiently as possible.
Agreement on acquisition of significant parts of
Bayer's seed and non-selective herbicide businesses
Long-term innovation strategy ensures future growth
Development of solutions that go beyond
conventional crop protection
Sales
2%
Change:
minus €54 million
82 Management's Report
The BASF Group business year - Agricultural Solutions
How we create value - an example
BASF Report 2017
RevysolⓇ
BASF's new blockbuster fungicide
Value for BASF
Peak sales
potential
>€1 billion
Value for our customers and the environment
Stronger activity
than existing
triazoles
RevysolⓇ will play a key role in our fungicide portfolio in many
crops for farmers around the world. We are driving forward the
approval process in all regions - in more than 60 countries and
for more than 240 crops. The first products based on RevysolⓇ
are to be launched on the market for the 2019 growing season
following registration with the relevant authorities. This will give
farmers a new active ingredient that offers exceptional biologi-
cal performance and provides additional resistance manage-
ment opportunities in agriculture. We are aiming for a peak
sales potential of over €1 billion with RevysolⓇ.
up to
100 times
Revysol® is an innovative fungicide active ingredient from the
triazole chemical class. It binds to the fungus enzyme up to 100
times more strongly than the products currently on the market,
making it significantly more effective. Farmers can thus also
safely manage those plant diseases that have become resistant
to the triazoles used in the past. At the same time, RevysolⓇ
has better toxicological properties than other standard triazoles
and is another important building block for sustainable agricul-
ture. Farmers around the world will benefit from RevysolⓇ-based
products, which safeguard and improve yield quality.
Strategy
■
Insecticides
Functional Crop Care
Applications
Protecting crops from harmful fungal infections; improving
plant health
(2)
EBITDA margin
%
22.5
23.4
Depreciation and amortization¹
267
268
0
EBITDA margin
1,015
1,037
(2)
Special items
(18)
(50)
64
EBIT before special items
1,033
1,087
(5)
1,305
(1%)
1,282
2
Reducing competition from weeds for water and nutrients
Combating insect pests in agriculture and beyond, such as
in the fields of public health, professional pest control and
landscape maintenance
Products for plant health and increased yield potential that
go beyond traditional crop protection, such as biological
crop protection, seed treatments, polymers and colorants
Example products
Boscalid, metiram, dimethomorph, Initium®, metrafenone,
F 500®, Xemium®, AgCelence® (umbrella brand)
Kixor®, EngeniaⓇ, pendimethalin, imazamox,
topramezone, ClearfieldⓇ herbicide tolerance system,
dimethenamid-P
Fipronil, alpha-cypermethrin, chlorfenapyr, teflubenzuron,
NealtaⓇ, TermidorⓇ to guard against termite infestation,
Interceptor® mosquito nets to protect against malaria
Vizura®, LimusⓇ, SystivaⓇ, VaultⓇ HP, Nodulator® PRO,
Flo Rite®, Integral®, Serifel®
84 Management's Report
The BASF Group business year - Agricultural Solutions
Segment data (million €)
BASF Report 2017
Sales to third parties
Intersegmental transfers
2017
5,696
2016
5,569
Change in %
2
36
33
9
Sales including intersegmental transfers
5,732
5,602
Income from operations before depreciation and amortization (EBITDA)
3
Currencies
Portfolio
■ Sales improve by 2% to €5,696 million as a result of
higher volumes
Agricultural Solutions segment
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
2 Additions to intangible assets and property, plant and equipment
4
489
507
(30)
266
185
■
Research and development expenses
(9)
8,899
8,096
(1)
172
171
BASF Report 2017
Management's Report 81
The BASF Group business year - Agricultural Solutions
Agricultural Solutions
Investments including acquisitions²
EBIT before special items down 5% year-on-year at
€1,033 million due to lower margins
Sales to third parties in the Agricultural Solutions segment rose
by €127 million to €5,696 million in 2017 as a result of higher
sales volumes. In an ongoing difficult market environment
for crop protection products, sales growth was negatively
impacted by price declines, especially in South America, and
negative currency effects.
In Europe, sales increased by €25 million to €1,983 million.
Volumes growth, especially in oilseed herbicides in eastern
and southern Europe, more than compensated for declines in
western and northern Europe, particularly in fungicides.
North America
2
35%
Europe
1
4
Agricultural Solutions - Sales by region
(Location of customer)
2%
Sales
(1%)
Currencies
0%
Portfolio
(3%)
Prices
6%
Volumes
Agricultural Solutions - Factors influencing sales
In the region South America, Africa, Middle East, sales
declined by €133 million to €1,128 million. This was largely
due to lower prices for fungicides and insecticides, negative
currency effects and the reduction of inventories at our
customers in Brazil. Here, we were able to increase sales
volumes despite the ongoing difficult business environment for
crop protection products. The positive trend in Argentina also
contributed to volumes growth in the region.
Sales in Asia rose by €33 million to €582 million. We
achieved particularly strong volumes growth for fungicides in
China and India, particularly with innovations such as our new
product portfolio for rice. In Southeast Asia, sales volumes
increased, especially for fungicides and herbicides.
At €2,003 million, sales in North America exceeded the
prior-year figure by €202 million. We were able to considerably
increase sales volumes, especially for herbicides in the United
States. The successful market launch of our new herbicide
EngeniaⓇ contributed substantially to sales growth. Strong
demand for fungicides in Canada also had a positive impact.
The Agricultural Solutions segment consists of the Crop Protection division. We develop
and produce innovative solutions for the improvement of crop health and yields, and market
them worldwide.
Indications and sectors
Fungicides
Herbicides
Percentage of sales:
42%
2017:
€5,696 million
Change:
2%
2016:
€5,569 million
Fungicides
€2,357 million
Change:
-1%
Percentage of sales:
41%
Income from operations before special items
(million €)
Volumes
6%
2017
1,033
Prices
(3%)
2016
1,087
Herbicides
€2,371 million
0%
5%
5%
Protecting crops against
harmful fungi
Reducing
Sales
Change:
10%
Factors influencing sales
competition from
weeds for water
and nutrients
Insecticides
Combating insect
pests in agriculture
and beyond
Functional Crop Care
Biological crop
protection, seed
treatment, polymers
and colorants
Change:
-10%
Insecticides
€663 million
Percentage of sales:
12%
Functional Crop Care
€305 million
Change:
Percentage of sales:
%
Assets
57.7
119
1
Income from operations (EBIT)
(799)
(1,091)
27
120
Special items
(41)
15
EBIT before special items
(764)
(1,050)
27
(35)
Thereof costs for cross-divisional corporate research
Amortization and depreciation²
(972)
89
90 Management's Report
The BASF Group business year - Other
Other
Data for Other¹ (million €)
BASF Report 2017
30
2017
Sales
2,242
2,018
Change in %
11
Income from operations before depreciation and amortization (EBITDA)
(679)
2016
(379)
(395)
4
186
121
54
Research and development expenses
381
398
Investments including acquisitions
(4)
2 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
3 Contains assets of businesses recognized under Other as well as reconciliation to assets of the BASF Group
4 Additions to intangible assets and property, plant and equipment
Sales in Other rose by €224 million compared with 2016 to
€2,242 million, mainly as a a result of higher sales prices in the
raw materials trading business. At minus €764 million, income
from operations before special items in Other was up €286 mil-
lion on the prior-year figure. This is largely attributable to valu-
ation effects for our long-term incentive program.
EBIT after cost of capital
63.8
1 Information on the composition of Other can be found in the Notes to the Consolidated Financial Statements from page 191 onward.
46
9,374
13,676
costs of corporate headquarters
(224)
(222)
(1)
other businesses
60
54
11
foreign currency results, hedging and other measurement effects
miscellaneous income and expenses
(331)
92
(193)
(156)
(24)
Assets³
1
17%
(28)
0%
Research and development expenses
Exploration expenses
Net income4
(175)
(744)
76
Investments including acquisitions³
11,967
(7)
988
1,115
(11)
46
39
12,829
18
Assets
53
Depreciation and amortization²
South America, Africa, Middle East
1,026
1,097
(6)
Income from operations (EBIT)
EBIT after cost of capital
1,043
109
Special items
250
(18)
EBIT before special items
517
499
104
793
11
17%
Oil & Gas - Sales by region
(Location of customer)
4
Income from operations (EBIT) before special items grew by
€276 million to €793 million in 2017. This is primarily
attributable to the increase in oil and gas prices as well as the
higher earnings contribution from our share in the Yuzhno
Russkoye natural gas field. Comprehensive measures aimed
at optimizing exploration and technology projects as well as
the successful implementation of operational cost-saving
measures also had a positive effect. EBIT rose by €544 million
to €1,043 million. This included special income from the reversal
of impairments in Norway and the Netherlands as well as from
the sale of shares in the Aguada Pichana concession in Argen-
tina. This was partially offset by an impairment on exploration
potential in Norway. Net income increased by €357 million to
€719 million.
For the Outlook for 2018, see page 123
At 164 million barrels of oil equivalent (BOE), our oil and
gas production was on a level with the previous year. In the
search for new oil and gas reservoirs, we completed a total of
seven exploration and appraisal wells in 2017, of which three
were successful. Our proven oil and gas reserves rose by 3%
compared with the end of 2016, to 1,677 million BOE. We
replenished 133% of the volumes produced in 2017. The
reserves-to-production ratio is around 10 years (2016: 10
years). This is based on Wintershall's production in 2017 and
the reserves at year-end.
Europe
83%
234
North America
0%
94
€3,244 million
Asia Pacific
0%
13%
1
Sales
99
362
4%
1 Supplementary information on the Oil & Gas segment can be found from page 235 onward
2 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
3 Additions to intangible assets and property, plant and equipment
Oil & Gas segment
Sales improve by 17% to €3,244 million due to
higher prices and volumes
4 More on this figure can be found in the reconciliation reporting for Oil & Gas in the Notes to the Consolidated Financial Statements from page 191 onward.
719
In the Oil & Gas segment, sales to third parties increased by
€476 million year-on-year to €3,244 million as a result of
higher prices and volumes. The price of a barrel of Brent crude
oil averaged $54 in 2017 (previous year: $44). Gas prices on
European spot markets rose by 24% compared with the pre-
vious year. Volumes growth was mainly driven by higher gas
sales volumes. Production volumes matched the prior-year
level.
Oil & Gas - Factors influencing sales
Volumes
Prices/currencies
Portfolio
■ 53% increase in EBIT before special items to
€793 million mainly from higher prices
North America
4%
15%
€8,522 million
Asia Pacific
345
26%
South America, Africa, Middle East
3
EBIT in the region grew by 101% to €2,209 million. This
was primarily due to a higher overall margin and volumes
growth in all segments. There was a particularly strong
increase in the contribution from the Chemicals segment.
Asia Pacific
■ Sales 19% above prior-year level at €13,658 million
■ Local production expanded through new plants in
Asia
Sales at companies located in the Asia Pacific region rose by
19% to €13,658 million in 2017. In local currency terms, sales
increased by 21%.
All segments contributed to this growth. The increase was
mainly attributable to higher sales prices, especially in the
Chemicals segment, as well as the 8% increase in volumes.
The Functional Materials & Solutions and Performance Products
segments in particular recorded volumes growth. By contrast,
sales were weighed down by currency effects. Overall, portfolio
measures had no material effect on sales development in
2017.
As part of our regional strategy, we want to further increase
the proportion of sales from local production in Asia Pacific.
We once again made progress toward this goal in 2017: One
example is the mobile emissions catalysts production site
opened in Chennai, India, in March 2017. In Shanghai, China,
we started up a large-scale plant for the production of chemi-
cal catalysts in November 2017. We will continue to work on
this goal in 2018.
We also inaugurated our new Innovation Campus Mumbai
in India, whose research focuses on crop protection and
process development. It represents BASF's largest research
and development investment in South Asia to date.
Our investments in production facilities and research serve
to bring products to market for our local and global customers
in the growing region of Asia.
33%
- Sales decline 1% to €4,102 million
Investment in digital sales channels
South America, Africa, Middle East
2
Europe (excl. Germany)
21%
4
2 Europe (excl. Germany)
■
17%
345
North America
25%
€64,475 million
Asia Pacific
South America, Africa, Middle East
6%
3
2
Income from operations by region
(Location of company)
BASF Report 2017
5
1
1
1
Germany
22%
2
Sales at companies located in the region South America,
Africa, Middle East declined by 1% as against 2016 to
€4,102 million. In local currency terms, sales were on a level
with the previous year.
Evaluating our suppliers
Companies in Africa and in the Middle East posted a con-
siderable sales decrease. In Africa, this was primarily due to
lower volumes. In the Middle East, sales were mainly weighed
down by negative currency effects.
2 The proportion of relevant suppliers evaluated by the end of 2016 in accordance with the new risk approach was 55% (in accordance with the previous risk approach: 32%). The
change in the percentage figure is due to the amended risk evaluation method and the greater integration of evaluations from other TFS companies.
94 Management's Report
Responsibility along the value chain - Suppliers
BASF Report 2017
Training
In 2017, we continued our collaborations in China and Brazil
to instruct suppliers on sustainability standards. 179 suppliers
received training in 2017 as part of local partnerships
with the East China University of Science and Technology
in Shanghai and the Espaço Eco® Foundation in Brazil, for
example. In addition, we instructed 704 BASF employees on
sustainability-oriented supplier management. These are ways
in which potential supply chain risks can be identified and
minimized together with our suppliers.
■ "Together for Sustainability" initiative aims to
harmonize and standardize supplier assessments and
audits
■ 120 raw material supplier sites audited
BASF is a founding member of the Together for Sustainability
(TFS) initiative of leading chemical companies for the global
standardization of supplier evaluations and auditing. With the
help of TfS, we promote sustainability in the supply chain. The
initiative aims to develop and implement a global program for
the responsible supply of goods and services and improve
suppliers' environmental and social standards. The evaluation
process is simplified for both suppliers and TfS member
companies by a globally uniform questionnaire. The 20 mem-
bers of the initiative conducted a total of 1,794 sustainability
assessments and 441 audits in 2017. The collaboration
between the TfS initiative and the China Petroleum and
Chemical Industry Federation (CPCIF) to educate suppliers
and raise awareness of sustainability topics continued in 2017.
More than 300 participants took part in a joint TfS/CPCIF
1 Our suppliers are evaluated based on risk due to the size and scale of our supplier portfolio. We define relevant suppliers as those showing an elevated sustainability risk potential as
identified by our risk matrices and our purchasers' assessments. We also use further sources of information to identify relevant suppliers such as evaluations from Together for
Sustainability (TFS), a joint initiative of chemical companies for sustainable supply chains.
course.
If we identify potential for improvement, we support suppli-
ers in developing measures to fulfill our standards. We conduct
another review according to a defined timeframe based on the
sustainability risk measured. If the weak points discovered
were particularly severe and we are unable to confirm any
improvement, we reserve the right to terminate the business
relationship. This occurred in one case in 2017. We use this
approach to evaluate suppliers with an elevated sustainability
risk at least every five years. The approach itself is reviewed
every two years to identify possibilities for optimization.
For more information on "Together for Sustainability," see
basf.com/en/together-for-sustainability
Audit results
Our audits have identified some deviations with respect to
environmental, social and corporate governance standards,
for example in waste and wastewater management and
relating to occupational safety, working hours and minimum
wage. In the follow-up audits conducted in 2017, we found
improvements in all areas. None of our 2017 audits identified
instances of child labor. For the suppliers we reviewed,
persons under 18 were excluded from overtime and danger-
ous work. We did not find any incidences of forced labor in
2017.
BASF undertook a thorough examination of the issues
raised at platinum supplier Lonmin Plc, London, in connection
with the events in Marikana, South Africa. We intensified our
regular dialog with both Lonmin and with local stakeholders,
such as leading industry and human rights representatives.
We had an internationally recognized audit firm conduct a
follow-up audit conducted at Lonmin in January 2017. This
reviewed to which extent Lonmin had resolved the weaknesses
we had identified in the first audit in 2015. The audit also
addressed working conditions below ground, social and work
schedules, communication between Lonmin and local stake-
holders and affected parties, as well as the progress of the
construction of employee housing. This follow-up audit
reported positive findings in several areas such as working
standards. However, it also identified gaps that Lonmin still
has to close, such as assessing the impact of Lonmin's
operations on local communities, improving dialog with various
stakeholders in the community and implementing a grievance
mechanism. We maintain an ongoing, close dialog with Lonmin
and will continue to support the company in its improvement
process.
For more information on suppliers, see basf.com/suppliers
1 In 2012, an extended strike at a Lonmin Plc mine in Marikana, South Africa, culminated in a violent confrontation between mine workers and armed South African police. Employees
of the platinum supplier Lonmin were among the fatalities. For more information on the supplier relationship with Lonmin, see basf.com/audits-lonmin.
4
Using TFS evaluations, we pursue a risk-oriented approach
with clearly defined, BASF-specific follow-up processes. A
total of 120 raw material supplier sites were audited on
sustainability standards in 2017. We also received sustainability
assessments for 513 suppliers from an external service pro-
vider.
A country-based risk analysis forms the basis of our
selection process for new suppliers. As a result of the country-
related risks identified in South America and Asia, we
specifically asked 6,467 suppliers in these regions to commit
to the values of our Supplier Code of Conduct in 2017. Only
those companies that have committed to our Code of
Conduct actually became new suppliers.
New suppliers are selected and existing suppliers are evalu-
ated not only on the basis of economic criteria, but also on
environmental, social and corporate governance standards.
Our Supplier Code of Conduct is founded on internationally
recognized guidelines, such as the principles of the United
Nations' Global Compact, the International Labor Organization
(ILO) conventions and the topic areas of the Responsible CareⓇ
initiative. The Code of Conduct covers compliance with human
rights, labor and social standards, and antidiscrimination and
anticorruption policies in addition to protecting the environ-
ment. The Code is available in 26 languages.
Country-specific risk analysis forms basis of new
supplier selection
At €335 million, EBIT was 22% below the prior-year figure,
mainly due to the decline in the Agricultural Solutions segment
in Brazil.
In South America in 2017, we completed the implementa-
tion of a series of structural measures that increase our pro-
ductivity and further sharpen the focus on our customers'
needs. We also aim to expand our sales channels. The objec-
tive is to better develop new customer segments, for instance
with digital sales channels, especially in the faster-growing
South American markets.
Our chemicals business comprises the Chemicals, Performance Products and Functional Materials & Solutions segments.
BASF Report 2017
Responsibility along the value chain
Suppliers
Suppliers
BASF
Management's Report 93
Responsibility along the value chain - Suppliers
Customers
Our objective is to secure competitive advantages for
BASF through professional procurement structures. Our
suppliers are an important part of our value chain.
Together with them, we aim to create value and minimize
risks.
Strategy
As well as a reliable supply of raw materials, technical goods
and services at competitive prices, our partnerships with
suppliers are based on mutual value creation. We work
together in an open and transparent way to realize long-term
benefits for both sides. In doing so, we create added value
that goes above and beyond procurement alone, for example
by developing solutions to target market-specific customer
requirements together with our suppliers.
Our sustainability-oriented supply chain management also
contributes to risk management by clarifying our expectations
and standards for our suppliers, and by supporting them in
carrying out our requirements. We count on reliable supply
relationships and want to make our suppliers' contribution to
sustainable development transparent. In order to achieve this,
we set ourselves an ambitious goal: By 2020, we aim to
evaluate the sustainability performance of 70% of the BASF
Group's relevant suppliers¹ and develop action plans for any
necessary improvements.
2020 Goal
Percentage of relevant suppliers
evaluated for their sustainability
performance
70%
In 2017, we reviewed our evaluation methods for high-risk
suppliers in order to focus even more closely on relevant
issues. For example, we increased the weighting of industry-
and country-specific risks in the evaluation to avoid the
ambiguities in the previous system. The proportion of relevant
suppliers evaluated by the end of 2017 in accordance with the
new risk approach was 56%.²
Worldwide procurement
Our 70,000+ suppliers play a significant role in value creation
at our company. We work in long-term partnership with
companies from different industries around the world. They
supply us with important raw materials, chemicals, investment
goods and consumables, and perform a range of services.
BASF acquired raw materials, goods and services for our own
production totaling approximately €38 billion in value in 2017.
There were no substantial changes with respect to our
suppliers in 2017.
What we expect from our suppliers
Global Supplier Code of Conduct
After two years of recession in Brazil, the South American
economy stabilized at a low level in 2017. Under these condi-
tions, our sales rose slightly as a result of volumes growth,
positive currency effects and higher prices in the chemicals
business. Price declines and currency effects impacted the
crop protection business in particular. In the Oil & Gas seg-
ment, sales were lifted slightly by higher prices despite nega-
tive currency effects and lower production volumes.
31%
12
1
29,214
26,039
4,742
3,632
31
Thereof Germany
19,873
17,540
13
8,359
7,412
13
1,913
1,582
21
North America
15,937
14,682
9
15,357
14,042
13
9
27,221
Europe
BASF Report 2017
Regional results
Regions (million €)
Management's Report 91
The BASF Group business year - Regional results
Sales
by location of company
Sales
by location of customer
Income from operations
by location of company
Change
Change
Change
2017
in %
2017
2016
in %
2017
2016
in %
30,778
Germany
1,236
11
12
8,522
6,275
36
Europe
■ Sales up 13% compared with 2016 at €30,778 million
Acquisitions strengthen businesses in key European
markets
■
Sales at companies located in Europe rose by 13% year-on-
year to €30,778 million. This was mainly due to significant
price increases, especially in the Chemicals segment, as well
as higher volumes.
Sales rose in all segments: In the Chemicals segment, this
was largely attributable to significantly higher prices in the
Petrochemicals and Monomers divisions. Slightly higher
volumes and prices led to growth in the Performance Products
segment. As well as price increases, the positive sales devel-
opment in the Functional Materials & Solutions segment was
mainly driven by the Chemetall business acquired in December
2016. Sales growth in the Agricultural Solutions segment was
primarily due to slightly higher volumes. The main factors in the
Oil & Gas segment were considerable price and volumes
growth.
Income from operations (EBIT) increased by 31% as
against the previous year to €4,742 million, largely on account
of the considerably higher contributions from the Chemicals
and Oil & Gas segments.
We want to strengthen our position in key European
markets with investments such as the expansion of our pro-
duction site for emissions catalysts in Środa Śląska, Poland, or
the inauguration of our production facility for construction
chemicals in St. Petersburg, Russia. In addition, we also aim
to complement and further expand our portfolio in Europe with
the agreed acquisition of significant parts of Bayer's seed and
non-selective herbicide businesses and the planned acquisi-
tion of the global polyamide business from Solvay.
North America
■ Year-on-year sales growth of 9% to €15,937 million
■ Ongoing investments in production plants
Sales at companies located in North America rose by 9%
compared with 2016 to €15,937 million. In local currency
terms, sales were up by 10%. This was driven by higher sales
prices and volumes growth, especially in the Chemicals and
Agricultural Solutions segments, as well as the acquisition of
the Chemetall business in December 2016. Sales were damp-
ened by currency effects.
EBIT was up 11% on the 2016 figure, at €1,236 million.
The significantly higher contributions from the Chemicals and
Agricultural Solutions segments more than compensated for
the decline in earnings in the Functional Materials & Solutions
and Performance Products segments. Earnings in the Func-
tional Materials & Solutions segment declined as a result of
lower margins and higher fixed costs. In the Performance
Products segment, the decline in margins was largely attribut-
able to higher raw materials prices.
In this region, we focus on innovation, attractive market
segments and strategic partnerships with customers in order
to grow profitably. At the same time, we are increasing our
operational excellence and optimizing our portfolio through
continuous improvement. We plan to further strengthen our
position in the region with the agreed acquisition of significant
parts of Bayer's seed and non-selective herbicide businesses.
We intend to continuously invest in our production facilities.
For example, we are constructing a new ammonia plant in
Freeport, Texas, together with Yara, expanding production for
mobile emissions catalysts in Huntsville, Alabama, and
increasing capacities for automotive coatings in Greenville,
Ohio, and Tultitlán, Mexico.
92 Management's Report
The BASF Group business year - Regional results
Sales by region
(Location of company)
5
57,550
1,113
64,475
57,550
Asia Pacific
13,658
11,512
19
14,343
12,165
18
2,209
1,098
101
South America, Africa, Middle East
4,102
4,135
(1)
5,561
5,304
5
335
432
(22)
64,475
12
2016
Raw materials
BASF
Management's Report 99
Responsibility along the value chain - Environment, health, safety and security - Production
local authorities. Refresher training on traffic safety was held
for employees of contractors at the site following the accident.
We will review additional measures based on the results of the
investigation into the cause of the accident.
In September 2017, one employee of the BASF fire
department succumbed to injuries sustained in the accident at
the North Harbor at BASF SE in Ludwigshafen, Germany, in
October 2016. An explosion and subsequent fires occurred
during work on a pipeline. Four employees of the BASF fire
department and one barge crewman lost their lives in or as a
result of the accident. Twenty-eight people were injured. Ac-
cording to a report on the cause of the fire commissioned by
the district attorney's office of the city of Frankenthal, Germa-
ny, the explosion and subsequent fires occurred during work
performed with an angle grinder. It states that one employee of
a contractor cut into the wrong pipeline, triggering the chain
reaction that caused the explosion. The report rules out other
causes or technical defects at the North Harbor plants. BASF
continues to support the relevant authorities in their investi-
gations.
For more information on occupational safety, see
basf.com/occupational_safety
Lost-time injury rate per one million working hours
2002 2012 2013 2014 2015 2016 2017
3.3
BASF Report 2017
1.4
1.4
1.5
1.4
1.7
Process safety
■
2025 Goal
1.5
2 The 2016 figure has been restated as against the previous year's report from 1.4 to 1.5 due to retrospective accident reports.
1 For 2018, we will adapt our reporting on accidents and process safety incidents to the recommendations of the International Council of Chemical Associations (ICCA), the European
Chemical Industry Council (CEFIC) and the German Chemicals Industry Association (VCI). To implement these recommendations, we also have to convert our targets. Consequently, our
goal from 2018 onward is to reduce occupational and process safety incidents to a rate of no more than 0.1 per 200,000 working hours by 2025 (previous goal: a rate of no more than
0.5 incidents per one million working hours).
One employee of a contractor died during demolition work
in McIntosh, Alabama, in November. The cause of the accident
is still being investigated by BASF and the relevant authorities
in Alabama. In November, one employee of a contractor died
as a result of a traffic accident at the Shanghai-Pudong site in
China. The cyclist was hit by a truck. The exact cause of the
accident is still being investigated by BASF and the relevant
We analyze accidents, incidents and their causes in detail
at a global level to learn from these. Hazard analyses and the
risk minimization measures derived from them are an important
prevention tool. We also promote regular dialog across
different sites to strengthen risk awareness among our
employees and contractors, to learn from examples of good
practice and in this way, continually develop the safety culture.
Based on our corporate values, leaders serve as safety
role models for our employees.
Global safety initiative
Global Safety Days focus on order, cleanliness and
discipline
Our global safety initiative was established in 2008 and plays a
key role in the continuous development of the safety culture.
With over 930 activities at around 360 sites, our 2017 Global
Safety Days focused on order, cleanliness and discipline to
help reduce the risk of accidents. At the Ludwigshafen site
alone, 13,000 employees and contractors registered to
participate. This involvement and lively discussion make a
major contribution to our safety culture.
For more information on the global safety initiative, see
basf.com/global-safety-initiative
Occupational safety
■
Employees and contractors worldwide instructed on
safe behavior
We have made it our goal to reduce the worldwide lost-time
injury rate per one million working hours to 0.5 at most by
2025.1 To prevent work-related accidents, we promote
risk-conscious behavior and safe working practices for every
individual. We are constantly refining and enhancing our
requirements.
In addition to the legally required briefings, we also held
training courses on safe procedures in 2017 to strengthen risk
awareness among our employees and contractors and
prevent work-related accidents. At the Ludwigshafen site in
Germany, our training center has offered continuous further
education on diverse safety and security topics for employees
and contractors since 2010. Some 22,000 participants
received training in 2017.
2025 Goal¹
Reduction of worldwide lost-time
injury rate
per one million working hours
≤0.5
In 2017, 1.4 work-related accidents per one million working
hours occurred at BASF sites worldwide (2016: 1.52), reducing
the proportion of chemical-related accidents to 5% (2016:
9%). The rate of work-related accidents for contractors was at
1.5 in 2017 (2016: 1.5).
Unfortunately, there were two fatal work-related accidents
in 2017. In 2016, four incidents occurred with a total of eight
fatalities (seven in the same year). BASF is performing a com-
prehensive analysis of the incidents and using the findings to
derive appropriate measures.
Plant protection plans to reduce process safety
incidents
Network of experts and global training methods
foster dialog
Process safety is a core part of safe and efficient production.
We meet high safety standards in the planning, construction
and operation of our plants around the world. Some of these
go beyond local legal requirements.
Our global process safety standards provide the frame-
work for the safe construction and operation of our plants as
well as the protection of people and the environment. Our
experts have developed a protection plan for every plant that
considers the key aspects of safety, health and environmental
protection from conception to startup - and stipulates
specific protection measures for each.
>0.9
We raise employee awareness of health topics through offers
tailored toward specific target groups. The BASF health
checks form the foundation of our global health promotion
program and are offered to employees at regular intervals.
For more information on occupational medicine, health promotion
campaigns and the HPI, see basf.com/health
Emergency response and corporate security
■ Regular review of emergency systems and crisis
management structures
Comprehensive protection measures against
third-party interference
We are well prepared for crisis situations thanks to our global
crisis management system. In the event of a crisis, our global,
regional or local emergency response plans and crisis manage-
ment structures are engaged, depending on the impact scope.
We involve situation-related partners and suppliers as well as
cities, communities and neighboring companies.
We regularly check our emergency systems, crisis manage-
ment structures and drill procedures with employees,
contractors, and local authorities and emergency rescue
workers. Through 202 drills and simulations in 2017, we
instructed participants in our emergency response measures.
We analyze the potential risks associated with investment
projects and define appropriate emergency response plans.
We also protect our employees, sites and company know-
how against third-party interference. This includes, for example,
addressing potential terrorist risks in the communities around
our sites.
We inform business travelers, transferees and employees
about appropriate protection measures prior to and during
travel in countries with elevated security risks. After any major
incident such as a terrorist attack or a natural catastrophe, we
have the possibility of more quickly and accurately locating
and contacting employees in the affected regions through a
standardized global travel research system. We discuss safe
conduct in crisis situations with leaders and employees and
train them on this.
Aspects of human rights related to site security, such as
the right to liberty and security of person, are a component of
the global qualification requirements of our security personnel.
Respect for human rights is a mandatory element of any
contract with service providers of the BASF Group who are
active in this area.
Our investment projects include performing comprehensive
analyses of potential risks and defining appropriate protection
measures. In 2017, we standardized the use of security
services in further countries in order to increase effectiveness
and efficiency.
Around the world, we work to sensitize all employees
about protecting information and know-how. For example, we
further strengthened our employees' awareness of risks in
2017 with training, case studies and interactive offerings. We
have defined mandatory information protection requirements
to ensure compliance with our processes for protecting
sensitive information and perform audits to monitor this.
Our worldwide network of information protection officers
comprises more than 600 employees. They support the
implementation of our uniform requirements and conduct
seminars on secure behaviors. We provided information
protection instruction to more than 72,000 participants in
2017. In addition, we published standardized Group-wide
recommendations for the protection of information and
knowledge.
For more information on emergency response, see
basf.com/emergency_response
For more information on corporate security, see
basf.com/corporate-security
Suppliers
BASF Report 2017
Health Performance Index
Maximum score 1.0
Risk-conscious working behavior is promoted for every
individual through measures like systematic hazard assess-
ments, specific and ongoing qualification measures and global
safety initiatives.
Health protection
Our 2017 global health campaign focused on lung and
respiratory health. Employees received an individual
recommendation based on a self-evaluation, including lung
function testing or consultation with a physician as necessary.
The health campaign was offered by over 450 sites worldwide.
-
We use the number of process safety incidents per one million
working hours as a key performance indicator, following to a
large extent the definition set by the European Chemical
Industry Council (CEFIC). In 2017, we recorded 2.0 process
safety incidents per one million working hours worldwide
(2016: 2.0). We pursue continual improvement by investigating
every incident in detail, analyzing root causes and using the
findings to derive suitable measures. We have set ourselves
the goal of reducing process safety incidents to a rate of no
more than 0.5 per one million working hours by 2025.1
2025 Goal¹
Reduction of worldwide process
safety incidents
per one million working hours
≤0.5
In order to maintain the highest level of safety at our plants
across their entire life cycle, we review the implementation of
our protection plans in all facilities at regular intervals and
depending on hazard potential. We periodically perform in-
depth audits of our plants and update their safety concepts
where necessary. Our training methods are constantly refined
and enhanced to increase risk awareness.
We are working on increasing the availability of our plants
and determining the optimum point in time for maintenance
measures. The aim is to further reduce unscheduled shut-
downs with a digitalization pilot project. Implementation began
in 2017, starting with the steam cracker in Ludwigshafen and
other plants at the following sites: Ludwigshafen, Germany;
Antwerp, Belgium; Schwarzheide, Germany; Port Arthur,
Texas; Geismar, Louisiana; and Freeport, Texas. We also plan
to implement this at further plants around the world.
We play an active role in improving process safety around
the world in a global network of experts, through our
involvement in organizations such as the International Council
of Chemical Associations (ICCA), the Center for Chemical
Process Safety (CCPS) and the European Process Safety
Centre (EPSC), and by fostering dialog with government
institutions.
1 For 2018, we will adapt our reporting on accidents and process safety incidents to the recommendations of the International Council of Chemical Associations (ICCA), the European
Chemical Industry Council (CEFIC) and the German Chemicals Industry Association (VCI). To implement these recommendations, we also have to convert our targets. Consequently, our
goal from 2018 onward is to reduce occupational and process safety incidents to a rate of no more than 0.1 per 200,000 working hours by 2025 (previous goal: a rate of no more than
0.5 incidents per one million working hours).
100 Management's Report
Responsibility along the value chain - Environment, health, safety and security - Production
BASF Report 2017
Health protection
■ Global corporate health management standards
■ Focus in 2017: Lung and respiratory health
Our global health management serves to promote and maintain
the health and productivity of our employees. Our worldwide
standards for occupational medicine and health protection are
specified in a directive that is implemented by a global network
of experts. This was once again supported by numerous
emergency drills and health promotion measures in 2017.
We measure our performance in health protection using
the Health Performance Index (HPI). The HPI comprises five
components: recognized occupational diseases, medical
emergency preparedness, first aid, medical surveillance
examinations and health promotion. Each component
contributes a maximum of 0.2 to the total score. The highest
possible score is 1.0. Our goal is to reach a value of more than
0.9 every year. With an HPI of 0.97, we once again fulfilled the
ambitious goal of exceeding 0.9 each year in 2017 (2016:
0.96).
Annual goal
We stipulate globally mandatory standards for safety,
security, and environmental and health protection. A world-
wide network of experts supports us in their implementation.
We regularly monitor progress toward our goals as part of our
continuous improvement process.
For more information on process safety, see basf.com/process_safety
Comprehensive incident analyses and global
experience and information exchange
BASF Report 2017
In order to involve smallholder farmers and improve their living
conditions, BASF and Henkel have cooperated with the devel-
opment organization Solidaridad since 2016 to provide training
for around 5,500 farmers in Indonesia. To date, more than
1,700 smallholders have completed a training program as part
of the Farmer Field School initiative.
BASF also advanced the RSPO supply chain certification
of its sites for cosmetic ingredients. In 2017, 20 production
sites worldwide were RSPO certified. Our goal is to only source
RSPO certified palm oil and palm kernel oil by 2020, provided
it is available on the market. By 2025, this voluntary commit-
ment will be expanded to include the most important interme-
diate products based on palm oil and palm kernel oil; these
include fractions and primary oleochemical derivatives as well
as edible oil esters.
BASF is working together with Cargill, Proctor & Gamble
and the German governmental agency for international
cooperation (Gesellschaft für Internationale Zusammenarbeit,
or GIZ) to help set up a certified and transparent supply chain
for coconut oil in the Philippines and Indonesia. The project is
being financed in part by the "develoPPP.de" program of the
German Federal Ministry for Economic Cooperation and
Development (BMZ). It is expected to improve income and
living standards for around 3,300 smallholders.
The joint initiative established by BASF together with
Arkema, Jayant Agro and the non-governmental organization
Solidaridad to promote sustainability in the castor oil supply
chain continued in 2017. With the Sustainable Castor Initiative
- Pragati, the project members aim to improve the economic
situation of castor oil farmers and their employees in India by
helping them to optimize their yield and reduce the impact on
the environment. The first smallholders were trained and
audited in 2017 based on a newly developed sustainability
code. This enables the Indian smallholders to offer certified
sustainable castor oil on the global market in the future. The
project is scheduled to run for three years until 2019.
For more information on renewable resources, see basf.com/renewables
For more information on our voluntary commitment to palm oil products,
see basf.com/en/palm-dialog
Mineral raw materials
We procure a number of mineral raw materials, like precious
metals, that we use to produce process and mobile emissions
catalysts. In suspected cases, we track the origins of minerals
- as defined in the Dodd-Frank Act - to see if they come from
mines in conflict regions. We reserve the right to conduct an
external audit and, if necessary, terminate our business
relationship. The suppliers addressed have confirmed to us
that they do not source minerals matching this definition of
conflict minerals from the Democratic Republic of the Congo
or its neighboring countries.
BASF is working on the implementation of the E.U. Conflict
Minerals Regulation published in May 2017. This lays down
supply chain due diligence obligations that must be met by
importers and processors of certain mineral raw materials
such as tin, tantalum, tungsten, their ores and gold originating
from conflict regions and high-risk areas.
BASF is committed to fostering a responsible and
sustainable global supply of cobalt. As such, in 2017 BASF
became a founding member of the Responsible Cobalt
Initiative and the World Economic Forum's Global Battery Alli-
ance. These initiatives were created by companies in collabo-
ration with international organizations such as the OECD and
UNICEF to address fundamental challenges in the supply
chain of battery materials.
BASF mainly uses the mineral raw material mica and
mica-based effect pigments in the production of coatings. Our
demand is largely met with mica from our own mine in
Hartwell, Georgia. We require our mica suppliers to comply
with internationally recognized standards, including the prohi-
bition of child labor. As a member of the Responsible Mica
Initiative (RMI), BASF is actively working to eradicate child
labor and unacceptable working conditions in the mica supply
chain in India.
BASF Report 2017
Management's Report 97
Responsibility along the value chain - Environment, health, safety and security - Responsible Care Management System
Environment, health, safety and security.
Responsible Care Management System
Suppliers
BASF
Customers
Responsibility along the value chain - Raw materials
The protection of people and the environment is our top
priority. Our core business - the development, production,
processing and transportation of chemicals - demands a
responsible approach. We systematically address risks
with a comprehensive Responsible Care Management
System, which is constantly being further developed. We
expect our employees and contractors to know the risks
of working with our products, substances and plants and
handle these responsibly.
96 Management's Report
Palm oil, palm kernel oil, and their derivatives are some of
our most important renewable raw materials. We aim to
ensure that these raw materials come from sustainable,
certified sources, and actively support the Roundtable on
Sustainable Palm Oil (RSPO). In 2017, we published our first
progress report the BASF Palm Progress Report - for
greater transparency in the value chain. Based on the volun-
tary commitment to sustainably source palm oil products that
we expanded in 2015, we were able to purchase large
volumes of certified palm kernel oil in 2017 despite a difficult
business environment. In addition, our BASF Palm Sourcing
Policy addresses the requirements for protecting and
preserving forests and peatland, along with the involvement of
local communities in decision-making processes.
The safety of our employees, contractors, neighbors and the
environment is our top priority. This is why we have set our-
selves ambitious goals for occupational and process safety as
well as health protection.
Management's Report 95
Responsibility along the value chain - Raw materials
Customers
Responsible resource management is an integral part
of our strategy. It is applied within the company through
our Verbund concept, our innovative products and the use
of renewable raw materials. In the search for alternative
raw materials, we employ solutions that contribute to
sustainability.
Strategy
The Verbund system is an important component of our
resource efficiency strategy: The by-products of one plant of-
ten serve as feedstock elsewhere, thus helping us to use raw
materials more efficiently. In 2017, BASF purchased a total of
around 30,000 different raw materials from more than 6,000
suppliers. Some of our most important raw materials are
naphtha, natural gas, methanol, ammonia and benzene. In
addition to fossil resources, we also employ renewable raw
materials. We use these to manufacture products that either
cannot be made with fossil resources, or only at significantly
greater expense, for example. Depending on the application,
the better solution can be fossil or renewable raw materials.
Renewable raw materials are not sustainable per se, but can
contribute to sustainability by, for example, reducing green-
house gas emissions.
Renewable resources
-
■
Joint venture with Avantium
Numerous projects to improve sustainability along
the value chain
In 2017, around 5% of the raw materials we purchased world-
wide were from renewable resources. To make the use of
these materials more competitive, we work on product
innovations based on renewable raw materials as well as on
enhancing production processes.
We also further established our biomass balance approach
on the market in 2017. The goal here is to replace natural gas
and naphtha at the beginning of the value chain with biogas
and bio-naphtha from certified sustainable production. Should
a customer select a biomass balanced product, the proportion
of renewable feedstock to be used is calculated based on the
formulation. The calculation model is certified by an indepen-
dent third party (TÜV Süd). Our Verbund production ensures
that the properties and quality of all end products remain
unchanged and that our customers can use them as usual.
This method has already been applied for more than 50 BASF
products for example, for superabsorbents, dispersions,
plastics such as polyamides and polyurethanes, and for inter-
mediates available on the market as "drop-in products." These
-
can be used in place of previously employed products in
the production process without having to change the process
itself.
-
We further expanded the support offered to our customers
to help them meet their voluntary commitments: BASF
stepped up its commitment to certified sustainable oil palm
products in the German, Austrian and Swiss markets by join-
ing the Forum for Sustainable Palm Oil in 2017 as a manufac-
turer of oleo derivatives. Demand for certified products again
increased significantly.
Responsible Care Management System
Synvina C.V., Netherlands, a joint venture of BASF and
Avantium based in Amsterdam, has been producing and
marketing furandicarboxylic acid (FDCA) from renewable
resources since being established in 2016. FDCA is the most
important chemical component of polyethylenefuranoate
(PEF), a new plastic that is marketed by Synvina. In 2017,
Synvina intensified its cooperation with partners along the
entire value chain with the aim of making PEF commercially
available in the medium term. One major step was the prelim-
inary approval granted in 2017 to recycle PEF bottles in the
European market and thus to integrate PEF into the circular
economy. PEF has a broad application profile and is especially
suitable for producing certain food packaging materials, such
as films and plastic bottles. Compared with conventional plas-
tics, PEF demonstrates higher barrier properties for gases like
carbon dioxide and oxygen, extending the shelf life of pack-
aged products. In addition, its higher degree of mechanical
strength allows for thinner - and therefore lighter - packaging.
Another product based on renewable feedstock that we offer
our customers on a commercial scale is 1,4-butanediol (BDO),
which is made from sugars. We use BDO to produce bio-
based polytetraydrofuran 1000 (PolyTHF® 1000), which pri-
marily serves as a chemical component in thermoplastic
polyurethane (TPU), an ingredient used to manufacture ski
boots and roller skates, shoe soles, dashboard films in the
automotive industry, and other products.
■ Regular audits to monitor performance and progress
588
1 Investments comprise end-of-pipe measures as well as integrated environmental
protection measures.
2 Values shown refer to December 31 of the respective year.
For more information, see the Notes to the Consolidated Financial
Statements on pages 196 and 217
98 Management's Report
Responsibility along the value chain - Environment, health, safety and security - Production
Production
Suppliers
Customers
BASF Report 2017
For occupational and process safety as well as health and
environmental protection and corporate security, we rely
on comprehensive preventive measures and expect the
cooperation of all employees and contractors. Our global
safety and security concepts serve to protect our
employees, contractors and neighbors as well as to
prevent property and environmental damage and protect
information and company assets.
Strategy
◉
■
Global safety standards
■ Global directives and standards for safety, security,
health and environmental protection
Strengthening risk awareness
600
measures and remediation²
BASF
234
We set ourselves ambitious goals for safety and security,
and health and environmental protection. We regularly
conduct audits to monitor our performance and progress. We
assess the potential risks and weak points of all our activities
― from research to production and logistics - and the effects of
these on the safety and security of our employees, the
environment or our surroundings. In our databases, we docu-
ment accidents, near misses and safety-related incidents at
our sites as well as along our transportation routes to learn
from these; appropriate measures are derived according to
specific cause analyses.
206
For more information on Responsible Care®,
see basf.com/en/responsible-care
Audits
109 safety, security, health and environmental
protection audits performed at 83 sites
Regular audits help ensure that standards are met for safety,
security, health and environmental protection. We conduct
audits at BASF sites and at companies in which BASF is a
majority shareholder. Sites and companies acquired as part of
acquisitions are audited in a timely manner to bring these into
line with our standards and directives. We have defined our
regulations for Responsible Care audits in a global Group
requirement. During our audits, we create a safety and
environmental profile that shows if we are properly addressing
the existing hazard potential. If this is not the case, we agree
measures and conduct follow-up audits on their
implementation.
Our internal audit system complies with the standards for
external auditing procedures ISO 19011 and OHSAS 18001.
Worldwide, 178 BASF production sites are certified in accor-
dance with ISO 14001 (2016: 155).
In the BASF Group in 2017, 109 environmental and safety
audits were conducted at 83 sites. The focus was on auditing
sites based on the level of risk. For production plants with a
medium and high hazard potential, we conducted an additional
63 short-notice audits at 47 sites. We audited 13 sites with
respect to occupational medicine and health protection in
2017. The number of these audits declined due to the risk-
based approach to site selection. In addition, 31 health perfor-
mance control visits were conducted at sites with low to medium
health risks.
on
BASF's Responsible Care Management System comprises
the global directives, standards and procedures for safety,
security, health and environmental protection for the various
stations along our value chain. Our regulations cover the
transportation of raw materials, activities at our sites and
warehouses, and distribution of our products as well as our
customers' application of the products. Specifications for
implementing these measures are laid out in binding directives
that are introduced in consultation with employee
representatives. These describe the relevant responsibilities,
requirements and assessment methods. Our policies and
requirements are constantly updated. We also maintain a
dialog with government institutions, associations and other
international organizations.
Costs and provisions for environmental protection in the
BASF Group (million €)
2017
2016
Operating costs for environmental protection
Investments in new and improved
1,024
For more information on occupational safety and health protection,
see page 98 onward
environmental protection plants and facilities¹
Provisions for environmental protection
1,011
The number of BASF sites in water stress areas rose
significantly in 2017 as a result of the acquisition of Chemetall
in December 2016. In 2017, BASF introduced sustainable
water management at three sites in China and two sites in
North America.
Water stress areas around the world
Source: Pfister et al., 2009
BASF Report 2017
Management's Report 109
Abstraction/
Responsibility along the value chain - Environment, health, safety and security - Water
In 2017, around 24% of our production sites were located
in water stress areas. Around 1% of BASF's total water supply
was abstracted from these sites.
1,816'
Water in the BASF Group 2017 (million cubic meters per year)
withdrawal
We offer our customers solutions that help purify water
and use it more efficiently while minimizing pollution.
We pursue our goal by applying the European Water
Stewardship standard, which rests on four principles:
sustainable water abstraction, maintaining good water quality,
preserving conservation areas, and ensuring continuous
improvement processes, including in cooperation with other
By 2025, we want to introduce sustainable water manage-
ment at all sites in water stress areas and at our Verbund sites,
covering 93% of BASF's entire water abstraction. We achieved
45.2% of this goal in 2017 (2016: 42.6%).
For more information on the CDP water survey, see basf.com/en/cdp
evaluated, only 73 of them received the top score of "A"
among them, BASF. CDP's evaluation of sustainable water
management includes how transparently companies report on
their water management activities and what they do to reduce
risks, such as water scarcity. CDP also assesses the extent to
which product developments - even at the customers of the
companies under evaluation - can contribute to sustainable
water management.
-
In order to ensure transparency in our reporting on water,
we once again took part in CDP reporting in 2017. According
to CDP, an international nonprofit organization, BASF is a
world leader in sustainable water management and was again
included in CDP's Water A List. Of the 742 companies
We are introducing sustainable water management at all
relevant production sites. These include our major Verbund
sites as well as the sites in water stress areas - regions in
which more than 60% of available water is used by industry,
household and agriculture. We consider the quantitative,
qualitative and social aspects of water use. We want to identify
where we can improve at our sites, and use as little water as
possible, especially in water stress areas.
We aim to use water as sparingly as possible and further
reduce emissions to water. To do so, we have set out a Group
directive with globally applicable standards.
Use
Strategy
Sustainable water management
users.
6,613
once-through
Production
Reusable wastewater
Water is of fundamental importance in chemical
production. It is used as a coolant, solvent and cleaning
agent, as well as to make our products. We are committed
to its responsible use along the entire value chain and
especially in our production sites' water catchment areas.
We have set ourselves a global goal for sustainable water
management.
10
250
1,487
Surface water / freshwater
Brackish water / seawater
Groundwater
1,589
4,783
Thereof recirculating
20
Drinking water
6,372
Cooling
65
Groundwater
258
Brackish water / seawater
1,472
Surface water / freshwater
1,766'
Discharge
Cooling
87%
13%
Customers
617
Suppliers
Greenhouse gas emissions along the BASF value chain in 20174
(million metric tons of CO2 equivalents)
Our climate protection products help us offer solutions to
our customers to avoid greenhouse gas emissions over their
entire lifecycle as compared with reference products. Accord-
ing to the systematic sustainability analysis we conduct on our
portfolio using the Sustainable Solution SteeringⓇ method -
such products are referred to as "Accelerator" solutions as
using them contributes positively to climate protection and
energy. One example is the ammonium stabilizer DMPP. As
the main component of BASF's VizuraⓇ fertilizer additive, it
helps to increase plant uptake efficiency. This reduces the use
of fertilizers or liquid manure and cuts nitrous oxide emissions
by 50% on average.
-
Through various measures to reduce our raw material and
energy requirements, the emission of greenhouse gases asso-
ciated with producing the raw materials was decreased by a
total of around 153,000 metric tons in 2017.
BASF has been publishing a comprehensive corporate carbon
footprint since as early as 2008. This reports on all emissions
along the value chain and shows the volume of emissions
prevented through the use of our climate protection products.
We plan our climate protection activities along the value chain
based on our corporate carbon footprint.
■ Customers' use of climate protection products sold
in 2017 avoids 570 million metric tons of CO₂
equivalents
Reporting on greenhouse gas emissions along the
entire value chain
Carbon footprint and climate protection products
3 Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes
2 Scope 1 and Scope 2 (location-based) according to the GHG Protocol Standard, excluding emissions from the generation of steam and electricity for sale to third parties;
information on market-based Scope 2 emissions can be found in the GRI and Global Compact Index; see basf.com/en/gri_gc
625
57.268
57.423
55.759
494
0.579
0.564
0.897
The values for baseline 2002 were not adjusted to reflect the currently applied global warming potential factors.
1
Energy efficiency (kilograms of sales product per MWh)
Specific greenhouse gas emissions (metric tons of CO, equivalents per ton of sales product)
Primary energy demand³ (million MWh)
20.716
from third parties
59 Suppliers
Purchased products,
services and capital
goods (C 1, 2, 3a)
BASF
23 BASF
20 Disposal
Water
BASF Report 2017
Responsibility along the value chain - Environment, health, safety and security - Water
108 Management's Report
570 million metric tons
climate protection products
420
With the use of BASF's
Emissions avoided
climate protection products
990
Without the use of BASF's
Emissions along the entire value chain
Prevention of greenhouse gas emissions through the use of
BASF products (million metric tons of CO2 equivalents)
For more information on the sustainability analysis of our product
portfolio, see page 32
For more information on our emissions reporting,
see basf.com/corporate_carbon_footprint
makes an individual contribution in the value chain of customer
solutions. Value chains are assessed in terms of BASF's
economic share of the respective customer solution. On aver-
age, 6% of the emissions avoided were attributable to BASF in
2017. The calculation of avoided greenhouse gas emissions
took into account the chemical industry standards of the
International Council of Chemical Associations (ICCA) and
the World Business Council for Sustainable Development
(WBCSD).
An analysis of 23 climate protection product groups revealed
that customers' use of products sold in 2017 helps to avoid
570 million metric tons of CO2 equivalents. Every product
4 According to Greenhouse Gas Protocol, Scope 1, 2 and 3; categories within Scope 3
are shown in parentheses
4 Other
(C 3b, 3c, 5,
8, 13, 15)
43 Customers
Emissions from
the use of end
products (C 11)
4 Transport
Transport of products,
employees' commuting and
business travel (C 4, 6, 7, 9)
Incineration with energy
recovery, landfilling (C 12)
Production (including genera-
tion of steam and electricity)
1
1.34
241
0.52
0.51
Thermally recovered
0.27
0.26
Recycled
0.79
0.77
Waste recovered
0.10
0.06
Thereof from oil and gas exploration
2.12
2.10
Total waste generation²
2017
2016
Waste management in the BASF Group (million metric tons)
Waste prevention is our topmost goal. If waste is unavoidable,
we review the options for recycling or energy recovery, using
BASF's existing Verbund structures for efficient waste manage-
ment. Total waste volume amounted to 2.12 million metric
tons in 2017 (+1.0%).
Total waste volume on a level with the previous year
Systematic management of contaminated sites
Management of waste and contaminated sites
Our product portfolio contains a variety of catalysts used in the
automotive sector and in industry to reduce the emission of air
pollutants.
25,706
Waste disposed of
25,991
1.33
In underground landfills
1 The 2016 figure has been adjusted due to updated data.
For more information, see the Notes to the Consolidated Financial
Statements on pages 196 and 217
al
We set out global standards for our approach to managing
contaminated sites. A worldwide network of experts ensures
their proper implementation. We develop remediation solutions
that combine nature conservation, climate protection
concerns, costs, and social responsibility. This means making
customized decisions on a case-by-case basis, founded on
the legal framework and current technological possibilities.
We have been documenting relevant sites in a contaminat-
ed site database since 2013. Ongoing remediation work
around the world continued on schedule and planning was
concluded on future landfill remediation projects.
2 Comprises all production waste and hazardous waste from construction activities
3 The classification of waste into hazardous and nonhazardous waste is performed
according to local regulations.
0.23
0.23
Transported hazardous waste
0.87
0.87
Hazardous waste
0.47
0.46
Nonhazardous waste
Classification of waste for disposal³
0.77
0.72
Through incineration
0.39
0.47
In surface landfills
0.17
0.14
19.976
Production²
2,170
NH (ammonia) and other inorganic substances
Total
BASF Report 2017
Customers
BASF
Suppliers
Air and soil
Responsibility along the value chain - Environment, health, safety and security - Air and soil
110 Management's Report
For more information, see basf.com/water
In order to avoid unanticipated emissions and the pollution
of surface or groundwater, we create water protection
strategies for our production sites. This is mandatory for all
production plants as part of the Responsible Care® initiative.
The wastewater protection plans involve evaluating wastewater
in terms of risk and drawing up suitable monitoring
approaches. We use audits to check that these measures are
being implemented and complied with.
A total of 1,766 million cubic meters of water were discharged
from BASF production sites in 2017, including 177 million
cubic meters of wastewater from production. Emissions of
nitrogen to water amounted to 2,800 metric tons (2016:
2,900 metric tons). Around 14,100 metric tons of organic
substances were emitted in wastewater (2016: 15,900 metric
tons). Our wastewater contained 25 metric tons of heavy
metals (2016: 23 metric tons). Phosphorus emissions amount-
ed to 420 metric tons (2016: 310 metric tons). Our wastewater
is treated through different methods depending on the type
and degree of contamination - including biological processes,
oxidation, membrane technologies, precipitation or adsorp-
tion.
Low level of emissions
Emissions to water
The supply, treatment, transportation and recooling of
water is associated with a considerable energy demand. We
employ various means in our efforts to minimize this as much
as possible. We are constantly working to optimize our energy
consumption and the amount of water we use, and to adapt
to the needs of our business and the environment.
We predominantly use water for cooling purposes (87%),
after which we recirculate it back to our supply sources. We
reduce our water use by recirculating as much water as possi-
ble. Our larger sites have recooling plants that allow water to
be reused several times and which reduce the temperature of
used cooling water before it is discharged back into a body
of water.
Our water usage totaled 1,816 million cubic meters in 2017.
This demand was covered for the most part by surface water,
such as rivers and lakes. At some sites, we use alternative
sources such as treated municipal wastewater, brackish water
or seawater, reducing our need for freshwater.
100%
■ Using water responsibly
Water use
Introduction of sustainable
water management at all
production sites in water stress
areas and at all Verbund sites
BASF operations excl. Oil & Gas
2025 Goal
1 The difference between the volume of water drawn and the volume discharged is primarily attributable to evaporation losses during closed-circuit cooling.
2 Total from production processes, graywater, rinsing and cleaning in production
19
External treatment plant
We want to further reduce emissions to air from our
production, prevent waste and protect the soil. We have
set ourselves standards for doing so in global directives.
If no recovery options are available for waste, we dispose
of it in a proper and environmentally responsible manner.
2,229
Strategy
Professional disposal of hazardous waste
2,207
2,338
Dust¹
1,753
1,872
SO (total sulfur oxides)
4,727
4,824
NMVOC (nonmethane volatile organic compounds)
2017
3,644
11,205
11,143
NOX (total nitrogen oxides)
3,585
CO (carbon monoxide)
2016
Air pollutants from BASF operations excluding Oil & Gas
Emissions to air (metric tons)
Absolute emissions of air pollutants from our chemical plants
amounted to 25,706 metric tons in 2017. Emissions of
ozone-depleting substances as defined by the Montreal
Protocol totaled 23 metric tons in 2017 (2016: 23 metric
tons¹). Emissions of heavy metals in 2017 amounted to 3
metric tons (2016: 3 metric tons).
Further reduction of emissions
Emissions to air
When treatment is required for soil and groundwater
contamination at active and former BASF sites, proper reme-
diation measures are reviewed based on prevailing legal and
current technical standards, and undertaken as necessary.
Our Raw Material Verbund helps us prevent or reduce
waste. We regularly carry out audits to inspect external waste
disposal companies to ensure that waste is properly disposed
of. In this way, we also contribute to preventive soil protection
and keep today's waste from becoming tomorrow's
contamination.
Regular monitoring of our emissions to air is a part of
environmental management at BASF. Aside from greenhouse
gases, we also measure emissions of other pollutants into the
atmosphere. Our reporting does not take into account air
pollutant emissions from oil and gas operations due to their
substantial fluctuation during exploration phases.
■ Regular monitoring of emissions to air
24.713
Global goal and measures
2017
For more information on climate protection,
see basf.com/climate_protection
Climate protection is a shared global task. We advocate
climate protection by supporting initiatives to this end. In 2017,
companies from G20 countries - the Business 20 (B20) -
developed recommendations on energy, climate and resource
efficiency for state and government leaders. BASF led this B20
task force. BASF supports a consistent implementation of the
Paris climate accord as the necessary basis for limiting global
warming. We therefore also joined the World Economic
Forum's CEO Climate Leaders initiative in 2017.
Our climate protection activities are based on a comprehensive
analysis of our emissions. We report on greenhouse gas
emissions in accordance with the Greenhouse Gas Protocol
Standard, as well as the sector-specific standard for the
chemical industry. Since 2004, we have participated in the
international non-profit organization CDP's program for
reporting on data relevant to climate protection. BASF again
achieved a score of A- in CDP's rating for 2017, awarding it
"Leadership" status. Companies on the "Leadership" level are
distinguished by factors such as the completeness and trans-
parency of their reporting. They also pursue comprehensive
approaches in managing the opportunities and risks
associated with climate change as well as emissions reduction
strategies to achieve company-wide goals.
We offer our customers solutions that help prevent green-
house gas emissions and improve energy and resource
efficiency. Around half of our total annual research and
development spending goes toward developing these
products and optimizing our processes.
Our success also depends on the long-term security and
competitiveness of our energy supplies. Furthermore, we are
committed to energy management that helps us analyze and
further improve the energy efficiency of our plants. We
continuously analyze potential risks to our business
operations arising in connection with the topics of energy and
climate protection and derive appropriate measures.
Comparisons with European emissions trading bench-
marks show that our greenhouse gas-intensive chemical
plants operate at above-average efficiency. To supply our
production sites with energy, we rely on highly efficient
combined heat and power plants with gas and steam turbines,
and on the use of heat released by production processes.
We want to reduce greenhouse gas emissions in our
production and along the entire value chain. To this end, we
have thoroughly analyzed the greenhouse gas emissions from
our production in the past few years and implemented
comprehensive reduction measures.
We are committed to energy efficiency and global
climate protection along the value chain
Strategy
As an energy-intensive company, we are committed to
energy efficiency and global climate protection. We want
to reduce emissions along the value chain and utilize, for
example, efficient technologies for generating steam and
electricity, energy-efficient production processes, and
comprehensive energy management. Our climate
protection products make an important contribution
toward helping our customers avoid emissions.
BASF Report 2017
Customers
BASF
Suppliers
Energy and climate protection
Responsibility along the value chain - Environment, health, safety and security - Energy and climate protection
104 Management's Report
For more information, see basf.com/distribution_safety and
basf.com/emergency_response
We are actively involved in external networks, which quickly
provide information and assistance in emergencies. These
include the International Chemical Environmental (ICE) initiative
and the German Transport Accident Information and
Emergency Response System (TUIS), in which BASF plays a
coordinating role. In 2017, we provided assistance to other
companies in 178 cases worldwide. We apply the experience
we have gathered to set up similar systems in other countries:
For example, we intensified our activities in Asia Pacific in
2017.
Activities in external networks
We have been able to reduce the number of transportation
accidents per 10,000 shipments worldwide by around 70%
since 2003. We recorded three incidents in 2017 with spillage of
more than 200 kilograms of dangerous goods (2016: 2). None
of these transportation incidents had a significant impact on the
environment (2016: 0).
We are systematically implementing our measures to improve
transportation safety and report in particular on dangerous
goods spillages that could lead to significant environmental
impacts. We report on dangerous goods leaks of BASF
products in excess of 200 kilograms on public transportation
routes, provided BASF arranged the transport.
Transportation incidents
Reduction of greenhouse gas emissions per metric ton of sales
product in BASF operations excluding Oil & Gas¹ (%)
2002
Baseline
2012 2013 2014 2015 2016
2017
Sale of energy to third parties (Scope 1)5
CO₂
Total
Scope 24
SF (sulfur hexafluoride)
HFC (hydrofluorocarbons)
CH₁ (methane)
N2O (nitrous oxide)³
CO2 (carbon dioxide)
Scope 12
2016
We regularly assess the safety and environmental risks of
transporting and storing raw materials and sales products with
high hazard potential using our global guideline. This is based
on the guidelines of the European Chemical Industry Council,
CEFIC. We also have binding global standards for load safety.
We stipulate worldwide requirements for our logistics
service providers and assess them in terms of safety and
quality. Our experts use our own evaluation and monitoring
tools as well as internationally approved schemes.
2002
BASF Group's greenhouse gas emissions according to the Greenhouse Gas Protocol¹ (million metric tons of CO2 equivalents)
Management's Report 105
Responsibility along the value chain - Environment, health, safety and security - Energy and climate protection
BASF Report 2017
For more information on our data collection methods, see page 105.
1 The value for the 2012 business year was not adjusted to reflect the currently applied
global warming potential factors.
-40.0
-37.2
-35.5
-34.1 -33.9 -34.6
-33.4
2020 Goal
BASF operations including Oil & Gas
CO₂
- Risk assessments for transportation and storage
We want our products to be safely loaded, transported,
handled and stored. This is why we depend on reliable
logistics partners, global standards and an effective
organization. Our goal is to minimize risks along the entire
transportation chain from loading and transportation to
unloading. Some of our guidelines for the transportation of
dangerous goods go above and beyond national and interna-
tional dangerous goods requirements. We have defined global
guidelines and requirements for the storage of our products
and regularly monitor compliance with these.
Third registration phase of REACH
REACH and other legal requirements
>99%
Risk assessment of products
that we sell in quantities of more
than one metric ton per year
2020 Goal
By 2020, we will conduct risk assessments for more than 99%
of the substances and mixtures sold by BASF worldwide in
quantities of more than one metric ton per year. We already
reached 76.2% of this goal in 2017 (2016: 75.4%). The risk
associated with using a substance is determined by the
combination of its hazardous properties and its potential
exposure to people and the environment.
Global goal
For more information on GPS, see basf.com/en/gps
Our risk assessment goals support the implementation of
initiatives such as the Global Product Strategy (GPS) of the
International Council of Chemical Associations (ICCA). GPS is
establishing worldwide standards and best practices to
improve the safe management of chemical substances. In
addition, we are also involved in workshops and training
seminars in developing countries and emerging markets. In
order to facilitate public access to information, we are
participating in the setup of an ICCA online portal that provides
more than 4,500 GPS safety summaries.
For example, in cooperation with the chemical association
ICCA, BASF is pushing for the establishment of a voluntary
global commitment to the controlled marketing of chemicals
that could be misused for purposes other than industrial
chemical applications. Producers in North America and
Europe are already implementing the voluntary commitment.
Manufacturers in China and Taiwan are currently in talks about
joining the scheme as well.
We provide extensive information on all our chemical sales
products to our customers with safety data sheets in around
40 languages. This is achieved with the help of a global data-
base in which we maintain and evaluate continuously updated
environmental, health and safety data for our substances and
products. Our global emergency hotline network provides
information around the clock. We train and support our
customers in fulfilling their industry-specific or application-
specific product requirements.
We are committed to continuously minimizing the negative
effects of our products on the environment, health, safety and
security along the value chain – from development to disposal.
This commitment to product stewardship is enshrined in our
Responsible Care® charter and the initiatives of the International
Council of Chemical Associations (ICCA). We also ensure
uniformly high standards for product stewardship worldwide.
Some of our voluntary initiatives go beyond local legal
requirements.
Global directives with uniformly high standards for
product stewardship
Strategy
We review the safety of our products from research and
development through production and all the way to our
customers' application. We work continuously to ensure
that our products pose no risk to people or the
environment when they are used responsibly and in the
manner intended.
Customers
Responsibility along the value chain - Environment, health, safety and security - Product stewardship
Management's Report 101
BASF
Suppliers
Greenhouse gas emissions² (million metric tons of CO2 equivalents)
Product stewardship
BASF Report 2017
We are working on registering substances produced in annual
volumes between one and one hundred metric tons for the
third and final phase of the E.U. chemicals regulation, REACH,
which will end on May 31, 2018. Our REACH activities are
increasingly determined by E.U. authorities' decisions on
additional studies in connection with the evaluation of
submitted dossiers. Independently of this, BASF is also
obligated to continuously update the registration dossiers it
has submitted. Over 80% of our dossiers have already been
updated, although the majority of these updates were under-
taken on our own initiative and not as a response to official
inquiry.
We apply the experience we have gathered with REACH to
fulfill new legal requirements around the world, such as in
South Korea and Turkey. In 2017, BASF took the industry lead
in South Korea with a large number of substance registrations
and was one of the first companies to receive such
registrations. We also advised government representatives on
chemicals legislation in 2017, for example in Brazil and
Columbia.
We are seeing a rise in both regulatory requirements for
agrochemicals and the number of additional studies required
to obtain or extend approval for crop protection products.
Potential risks for people and the environment are carefully
assessed and minimized throughout the research, develop-
ment and registration process for crop protection agents.
We perform a large number of scientific studies every year to
ensure that our products meet the highest safety require-
ments.
102 Management's Report
-
■ Risk minimization along the entire transportation
chain
Strategy
Our regulations and measures for transportation and
warehouse safety cover the delivery of raw materials, the
storage and distribution of chemical products among
BASF sites and customers, and the transportation of
waste from our sites to the disposal facilities.
Customers
BASF
Suppliers
Transportation and storage
BASF Report 2017
For more information on nanotechnology and the Nanotechnology Code
of Conduct, see basf.com/nanotechnology
BASF makes successful use of biotechnology. We
produce a range of established products with the help of bio-
technological methods. This provides us with extensive
experience in the safe use of biotechnological methods in
research and development as well as in production. When
employing biotechnology, we adhere to all standards and legal
regulations. We are guided by the code of conduct set out by
EuropaBio, the European biotechnology association.
Accident prevention and emergency response
Safe handling of nanomaterials is stipulated in our Nano-
technology Code of Conduct. Over recent years, we have
conducted over 250 scientific studies and participated in over
35 different projects related to the safety of nanomaterials. The
results were published in more than 100 scientific articles. One
important finding is that toxicity is determined not by the size
of the particles but by the intrinsic properties of the substance.
The European Chemicals Agency (ECHA) as well as the
OECD and national authorities are currently developing
regulatory concepts to systematically test and assess nano-
materials. We contribute our expertise through various ECHA
working groups or the OECD's Business and Industry Advisory
Group (BIAC). In May 2017, the ECHA published guidance on
the registration of nanomaterials, which we helped to develop.
The E.U.-funded NanoDefine project, in which we developed
measurement strategies for identifying nanomaterials together
with 27 partners, was also concluded in 2017.
■ Continual safety research on nano- and
biotechnology
Management of new technologies
For more information on alternative methods,
see basf.com/alternative_methods
Since 2016, our Experimental Toxicology and Ecotoxi-
cology department has been working together with a total of
39 partners on one of the largest European collaborative
projects for alternative methods. The project, planned to run
for six years, aims to develop alternative methods to the point
that chemical risk assessments can be efficiently conducted
largely without animal testing.
We adhere to the specifications laid down by the German
Animal Welfare Act as well as the requirements of the
Association for Assessment and Accreditation of Laboratory
Animal Care the highest standard for laboratory animals in
the world. We are continually developing and optimizing alter-
native and complementary methods, and we use them
wherever it is possible and approved by the authorities. We
use alternative and complementary methods in more than a
third of our tests. Currently, 30 replacement and supplementary
methods are being used in our labs and another 19 are in the
development stage. BASF spent €3.4 million toward this
purpose in 2017. One focus area of our research in 2017 and
subsequent years is the development of alternative methods
for testing the potential of substances that negatively affect
organisms' growth and development.
-
Before launching products on the market, we subject them to
a variety of environmental and toxicological testing. We apply
state-of-the-art knowledge in the research and development
phase of our products. For instance, we only conduct animal
studies when they are required by law and approved by
respective authorities. Animal studies are at times stipulated
by REACH and other national legislation outside the European
Union in order to obtain more information on the properties
and effects of chemical products.
Use of alternative and complementary methods for
animal studies
Environmental and toxicological testing
BASF Report 2017
Responsibility along the value chain - Environment, health, safety and security - Product stewardship
Nano- and biotechnology offer solutions for key societal
challenges - for example, in the areas of climate protection or
health and nutrition.
Total
Management's Report 103
Responsibility along the value chain - Environment, health, safety and security - Transportation and storage
14.634
Residual fuels
5.3 million MWh
14.1%
Steam
39.7 million
MWh¹
47%
Waste heat
50%
1 Internally generated
-23
2.3%
Steam supply
0.8 million MWh
Coal
0.1 million MWh
Heating oil
31.2 million MWh
Natural gas
0.2%
83.4%
Fossil and residual fuels used for own generation in power
plants of the BASF Group
BASF Report 2017
3
Electricity
15.1 million
MWh
30%
2
Purchased
3%
Conversion factor: 0.75 MWh per metric ton of steam
Key indicators for energy and climate protection in BASF operations excluding Oil & Gas
Baseline 2002¹
2017
2016
Management's Report 107
Responsibility along the value chain - Environment, health, safety and security - Energy and climate protection
BASF Report 2017
Our research also contributes to increasing the efficiency
of technologies for the use of renewable energy sources.
We also rely on locally available energy sources for energy
supply at our sites. Especially in the growing Asian market, we
and our energy suppliers also utilize coal as an energy source
in individual cases since the more climate-friendly natural gas
is not available in sufficient quantities at competitive prices.
We are continuously exploring the use of renewable
energies. The focus here is on the purchase of electricity. It
only makes economic sense to replace highly efficient internal
electricity and steam generation using natural gas once
renewable energies offer the necessary supply security and
are available at competitive prices.
We were able to further optimize the resource and energy
consumption of our production in numerous projects around
the world in 2017. In Ludwigshafen, for example, we were able
to reduce the energy required for cooling by systematically
analyzing the cold supply and using a new absorption chiller to
make the existing waste heat steam available for cooling.
Furthermore, process improvements at many additional sites
have led to savings in steam and electricity.
Gas and steam turbines in our combined heat and power
plants enable us to fulfill more than 70% of the electricity
demand of the BASF Group. Compared with separate
methods of generating steam and electricity, we saved
12.7 million MWh of fossil fuels and prevented 2.6 million
metric tons of carbon emissions in 2017. The Verbund system
is an important component of our energy efficiency strategy:
Waste heat from one plant's production process is used as
energy in other plants. In this way, the Verbund saved us
around 19.2 million MWh in 2017, which translates to 3.9 mil-
lion metric tons less of CO 2 released to the environment.
With combined power and steam generation as well as our
continuously enhanced Energy Verbund, we were thus able to
prevent a total of 6.5 million metric tons of carbon emissions
in 2017.
Verbund system as important component of our
energy efficiency strategy
Purchased
Energy supply and efficiency
2017
2016
2015
2014
90
39.5
38.6
42.3
54.3
Certified energy management systems (ISO 50001) introduced at
BASF Group sites worldwide, in terms of primary energy demand (%)
Total:
2020 Goal
2
37.4 million MWh
Internally generated
1 BASF reports separately on direct and indirect emissions from the purchase of energy. Scope 1 emissions encompass both direct emissions from production and generation of steam
and electricity, as well as direct emissions from the generation of steam and electricity for sale. Scope 2 emissions comprise indirect emissions from the purchase of energy for BASF's
22.571
1.086
1.161
21.978
0.347
26.936
3.796
21.485
20.817
26.589
3.884
5.243
0
0
0.081
0.087
0.061
0.048
0.045
0.244
0.747
0.586
70%
6.407
16.215
use.
² Emissions of N2O, CH, HFC and SF have been translated into CO2 emissions using the Global Warming Potential, or GWP, factor. GWP factors are based on the Intergovernmental
Panel on Climate Change (IPCC) 1995 (2002 emissions) and IPCC 2007, errata table 2012 (2016 and 2017 emissions). HFC (hydrofluorocarbons) are calculated using the GWP
factors of the individual components.
0
4 Location-based approach. Information on the calculation of market-based Scope 2 emissions can be found in the GRI and Global Compact Index; see basf.com/en/gri_gc
5 Includes sale to BASF Group companies; as a result, emissions reported under Scope 2 can be reported again in some cases.
1
2
Electricity supply
3 The 2016 figure has been adjusted due to updated data.
Energy supply of the BASF Group 2017
Responsibility along the value chain - Environment, health, safety and security - Energy and climate protection
106 Management's Report
6 The selection of relevant sites is determined by the amount of primary energy used and local energy prices.
The introduction and implementation of the energy manage-
ment systems is steered by a global working group. All energy
efficiency measures are recorded and analyzed in a global
database and made available to BASF sites as best practices.
Currently, over 100 measures are being pursued to reduce
energy consumption and increase competitive ability. Sites
and pilot plants across all regions were certified in accordance
with ISO 50001 in 2017. These include the Verbund site in
Antwerp, Belgium, production plants at the Guaratinguetá site
in Brazil and Freeport in Texas, as well as another 10 sites in
China, India, Singapore, Ireland, Norway and Switzerland. At
the moment, 43 sites are certified worldwide, representing
54.3% of our primary energy demand.
90%
Coverage of our primary
energy demand through
certified energy management
systems at all relevant sites
BASF operations incl. Oil & Gas
2020 Goal
16.813
-40%
Global goals and measures
Reduction of greenhouse gas emissions per metric
ton of sales product
■Introduction of energy management systems in
accordance with ISO 50001
We aim to reduce our greenhouse gas emissions per metric
ton of sales product by 40% by 2020, compared with baseline
2002. Our emissions rose year-on-year in 2017, mainly due to
higher production levels of precursors within the Group and an
increase in nitrous oxide emissions. In 2017, we reduced
greenhouse gas emissions per metric ton of sales product by
35.5% compared with baseline 2002 (2016: reduction of
37.2%). Since 1990, we have been able to lower our overall
greenhouse gas emissions from BASF operations (excluding
Oil & Gas) by 48.3% and even reduce specific emissions by
74.7%.
■
2020 Goal
We set ourselves a new energy efficiency goal in 2015
covering both the chemicals and the oil and gas businesses.
By 2020, we want to have introduced certified energy
management systems (DIN EN ISO 50001) at all relevant
production sites. 6 Taken together, this represents 90% of
BASF's primary energy demand. This is one of the ways in
which we intend to identify and carry out improvements in
energy efficiency, reducing not only greenhouse gas emissions
and saving valuable energy resources, but also increasing the
BASF Group's competitive ability.
Reduction of greenhouse
gas emissions per metric
ton of sales product
Baseline 2002
BASF operations excl. Oil & Gas
- The BASF Group's management is informed about
operational opportunities and risks (observation period of up
to one year) in the monthly management report produced by
the Corporate Controlling unit. In addition, Corporate
Controlling and Finance provide information twice a year on
the aggregated opportunity/risk exposure of the BASF
Group. Furthermore, if a new individual risk is identified
which has a more than €10 million impact on earnings or
bears reputational risks, it must be immediately reported.
- As part of our strategy development, the Corporate
Development unit conducts strategic opportunity/risk
analyses with a 10-year assessment period. These analyses
are annually reviewed as part of strategic controlling and are
adapted if necessary.
We strictly adhere to the principles of segregation of duties
and dual control, or the "four-eyes principle." Complex actuarial
reports and evaluations are produced by specialized service
providers or specially qualified employees.
The significant risks for the BASF Group regarding a reliable
control environment for proper financial reporting are reviewed
and updated on an annual basis. Risks are compiled into a
central risk catalog.
Annual evaluation of the control environment and
relevant processes at significant companies
An internal control system for financial reporting
continuously monitors these principles. To this end, methods
are provided to ensure that evaluation of the internal control
system in financial reporting is structured and uniform across
the BASF Group.
■Segregation of duties, principle of dual control and
clearly regulated access rights
■ Conducted in accordance with standardized Group
guidelines
Significant features of the internal control and
risk management system with regard to the
Group financial reporting process
For more information on our Group-wide Compliance Program,
see page 135 onward
- Our Group-wide Compliance Program aims to ensure
adherence to legal regulations and the company's internal
guidelines. Our global employee Code of Conduct firmly
embeds these mandatory standards into everyday business.
Members of the Board of Executive Directors are also
expressly obligated to follow these principles.
For more information on our sustainability management processes,
see page 29 onward
Employees involved in the accounting and reporting
process meet the qualitative requirements and participate in
training on a regular basis. There is a clear assignment of
responsibilities between the specialist units, companies and
regional service units involved.
The Consolidated Financial Statements are prepared by a unit
in the Finance division. BASF Group's accounting process is
based on a standardized accounting guideline that sets out
accounting policies and the significant processes and dead-
lines on a Group-wide basis. There are binding directives for
the internal reconciliations and other accounting operations
within the Group. Standard software is used to carry out the
accounting processes for the preparation of the individual
financial statements as well as for the Consolidated Financial
Statements. There are clear rules for the access rights of each
participant in these processes.
- The nonfinancial topics relevant for BASF are addressed by
the responsible functional units, which assess the risks
identified as being relevant according to impact and
probability of occurrence. We identify opportunities and risks
that arise in connection with the topics of environment,
society and governance with our sustainability management
Management's Report 113
Forecast Opportunities and risks report
BASF Report 2017
Moreover, a centralized selection process identifies
companies that are exposed to particular risks, that are material
to the Consolidated Financial Statements of the BASF Group,
or that provide service processes. The selection process is
conducted annually. In the relevant companies, one person is
given the responsibility of monitoring the execution of the
annual evaluation process.
- We use standardized evaluation and reporting tools for the
identification and assessment of risks. The aggregation of
opportunities, risks and sensitivities at division and Group
level using a Monte Carlo simulation helps us to identify
effects and trends across the Group.
- A catalog of opportunity and risk categories helps to identify
all relevant opportunities and risks as comprehensively as
possible.
- The Risk Management Policy, applicable throughout the
Group, forms the framework for risk management and is
implemented by the business units according to their
particular business conditions.
- Risk management is the responsibility of the Board of
Executive Directors, which also determines the processes
for approving investments, acquisitions and divestitures.
- The Board of Executive Directors is supported by the units
Finance, Corporate Controlling, Corporate Development
and Legal, Taxes, Insurance & Intellectual Property, and the
Chief Compliance Officer. These units coordinate the risk
management process at a Group level and provide the
structure and appropriate methodology. Opportunity and
risk management is thus integrated into the strategy, planning
and budgeting processes.
Instruments
– The internal auditing unit (Corporate Audit) is responsible for
regularly auditing the risk management system established
by the Board of Executive Directors in accordance with
section 91(2) of the German Stock Corporation Act. Further-
more, as part of its monitoring of the Board of Executive
Directors, the Supervisory Board considers the effectiveness
of the risk management system. The suitability of the early
detection system we set up for risks is evaluated by our
external auditor.
- BASF's Chief Compliance Officer (CCO) manages the
implementation of our Compliance Management System,
– The management of specific opportunities and risks is largely
delegated to the business units and is steered at a regional
or local level. Risks relating to exchange rates and raw
materials prices are an exception. In this case, there is
an initial consolidation at a Group level before derivative
hedging instruments, for example, are used.
- A network of risk managers in the business, functional and
corporate units as well as in the regions and at the Verbund
sites advances the implementation of appropriate risk
management practices in daily operations.
The BASF Group's risk management process is based on the
international risk management standard COSO II Enterprise
Risk Management Integrated Framework (2004), and has
the following key features:
Organization and responsibilities
tools. We have established global monitoring systems to
check adherence to laws and our voluntary commitments in
these areas. These also incorporate our suppliers.
supported by additional compliance officers worldwide. He
regularly reports to the Board of Executive Directors on the
status of implementation as well as on any significant results.
He also provides a status report to the Supervisory Board's
Audit Committee at least once a year, including any major
developments. In the event of significant incidents, the Audit
Committee is immediately informed by the Board of Execu-
tive Directors.
Regulation and political risks
- Evaluation of the control environment
We try to prevent unscheduled plant shutdowns by adhering
to high technical standards and by continuously improving our
plants. We reduce the effects of unscheduled shutdowns on
the supply of intermediate and end products through
diversification within our global production Verbund.
BASF Report 2017
Aggregation at a Group level
Production and investments
We minimize procurement risks through our broad portfolio,
global purchasing activities and the purchase of raw materials
on spot markets. If possible, we avoid procuring raw materials
from a single supplier. When this cannot be avoided, we try to
foster competition or we knowingly enter into this relationship
and assess the consequences of potential nondelivery. We
continuously monitor the credit risk of important business
partners.
Purchasing and supply chain
Political measures could also give rise to opportunities. For
example, we view the worldwide expansion of renewable
energy and measures to increase energy efficiency as an
opportunity for increased demand for our products, such as
our insulation foams for buildings or our solutions for wind
turbines. Our broad product portfolio enables us to offer
alternatives if chemicals have to be substituted as a result of
restrictions in connection with the REACH chemicals
regulation or new standards in our customers' industries.
Economic and political uncertainties may arise as a result
of Brexit. At this point in time, it is not yet clear what the future
relationship between the European Union and the United
Kingdom will look like post-Brexit and what specific
consequences this will have for our sites, our supply chains
and the regulatory environment. A cross-divisional Brexit team
has been established to prepare the BASF organization for
various exit scenarios and enable it to quickly react to political
decisions.
Risks for us can arise from intensified geopolitical tensions,
new trade sanctions, stricter emissions limits for plants or
energy and climate laws. In addition, risks to the BASF Group
can be posed by further regulations in key customer industries
or on the use or registration of agricultural and other
chemicals.
We continuously enhance our products and solutions in order
to maintain competitive ability. We watch the market and the
competition, and try to take targeted advantage of opportunities
and counter emerging risks with suitable measures. Aside
from innovation, a major component our competitiveness is
our cost structure.
Competition
The year's average oil price for Brent crude was around
$54 per barrel in 2017, compared with $44 per barrel in the
previous year. For 2018, we anticipate an average oil price of
$65 per barrel. We therefore expect a slight increase in price
levels for the raw materials and petrochemical basic products
that are important to our business. Yet an oil price level be-
low the expected average would pose risks for our oil and gas
business, whose EBIT declines by approximately €20 million
for every $1 decrease in the average annual barrel price of
Brent crude.
The BASF Group will be exposed to margin risk in 2018, driven
by the isocyanates business in particular. It is also possible
that margin pressure on a number of other products and value
chains could be increased by, for example, new capacities or
increasing raw material costs. This would have a negative effect
on our income from operations (EBIT).
Margin volatility
In these companies, the process comprises the following
steps:
Weather-related influences can result in positive or negative
effects on our crop protection business.
We also consider risks from deviations in assumptions. We
continue to see a significant macroeconomic risk in an
increased slowdown of the Chinese economy, which would
have considerable impact on demand for intermediate goods
for industrial production as well as investment goods. This
would have an effect on emerging markets that export raw
materials as well as on advanced economies that specialize in
technological goods. Risks to the global economy would also
be posed by the possible escalation of geopolitical conflicts
and an increased tendency toward protectionism.
The development of our sales markets is one of the strongest
sources of opportunities and risks. More details on our
assumptions regarding short-term growth rates for the global
economy, regions and key customer industries, such as the
chemicals, automotive and construction sectors, can be found
from pages 119 to 121.
Development of demand
Short-term opportunities and risks
BASF Report 2017
Forecast Opportunities and risks report
114 Management's Report
- Internal confirmation of the internal control system
All managing directors and chief financial officers of each
consolidated Group company must confirm to the Board of
Executive Directors of BASF SE every half-year and at the
end of the annual cycle, in writing, that the internal control
system is effective with regard to accounting and reporting.
The managers responsible receive reports on any control
weaknesses identified and their resolution, and an
interdisciplinary committee investigates their relevance for
the BASF Group. The Board of Executive Directors and the
Audit Committee are informed once control weaknesses
have been identified that have a considerable impact on
financial reporting. Only after material control weaknesses
have been resolved does the company's managing director
confirm the effectiveness of the internal control system.
- Monitoring of control weaknesses
After documentation, a review is performed to verify whether
the described controls are capable of adequately covering
the risks. In the subsequent test phase, samples are taken
to test whether, in practice, the controls were executed as
described and effective.
- Assessment of control activities
- Identification and documentation of control activities
In order to mitigate the risks to the financial reporting
processes listed in our central risk catalog, critical processes
and control activities are documented.
Adherence to internal and external guidelines that are
relevant for the maintenance of a reliable control environment
is checked by means of a standardized questionnaire.
Should the macroeconomic environment develop more
slowly than we predict, we expect a lower oil price. In this
case, we also expect the euro to weaken relative to the U.S.
dollar in the medium term as compared with our planning
assumptions, as the eurozone's economy shows a high level
of dependency on exports and, in times of global economic
weakness, the U.S. dollar is preferred by portfolio investors as
a safe haven.
Decentralized management of specific opportunities
and risks
Potential short-term effects on EBIT of key opportunity
and risk factors subsequent to measures taken¹
■
Exchange rate volatility
Finance
Law
Information technology
Acquisitions/divestitures/cooperations
Personnel
Investments/production
Purchasing/supply chain
Company-specific opportunities and risks
Regulation/policy
Competition
Margins
Business environment and sector
Market growth
Possible variations related to:
Other financial opportunities and risks
For 2018, we expect the global economy to continue to grow
at around the same pace as the previous year. Important
opportunities and risks for our earnings are associated with
uncertainty regarding market growth, the development of key
customer industries, acquisitions and divestitures, as well
as volatility in exchange rates and margins. In particular, a
considerable slowdown of the Chinese economy continues to
pose significant risks. Such a development would negatively
affect demand for intermediate and investment goods. This
would impact the emerging markets that export raw materials
as well as the advanced economies. This is especially true for
Europe. Further risks to the global economy arise from an
escalation of geopolitical conflicts and an increased tendency
toward protectionism.
Overall assessment
In order to effectively measure and manage identified
opportunities and risks, we quantify these where appropriate
in terms of probability and economic impact in the event they
occur. Where possible, we use statistical methods to aggregate
opportunities and risks into risk factors. This way, we achieve
an overall view of opportunities and risks at a portfolio level,
allowing us to take effective measures for risk management.
The goal of BASF's risk management is to identify and
evaluate opportunities and risks as early as possible and
to take appropriate measures in order to seize opportuni-
ties and limit business losses. The aim is to avoid risks
that pose a threat to BASF's continued existence and to
make improved managerial decisions to create value. We
understand risk to be any event that can negatively
impact the achievement of our short-term operational or
long-term strategic goals. We define opportunities as
potential successes that exceed our defined goals.
Identifying opportunities and
risks as early as possible
and planning effective
courses of action
Risk management
Events that can negatively
impact the achievement
of our goals
Risks
Potential successes that
exceed our defined goals
Opportunities
Management's Report 111
Forecast Opportunities and risks report
Opportunities and risks report
Forecast
Management's Report 115
Forecast Opportunities and risks report
BASF Report 2017
■ Significant risks and opportunities arise from overall
economic developments and volatility in exchange
rates and margins
and reporting
<
Z
■
■ Integrated process for identification, assessment
Risk management process
Functional units
External Auditors
BASF Report 2017
Verbund sites
Regions
Divisions
Legal, Taxes, Insurance
& Intellectual Property
Corporate
Development
Corporate
Controlling
Finance
Chief Compliance Officer
€100 million
Functional and corporate units
Supervisory Board
Corporate Audit
Organization of BASF Group's risk management
Forecast Opportunities and risks report
112 Management's Report
Ultimately, however, residual risks remain in all entrepre-
neurial activities which even comprehensive risk management
cannot exclude.
According to our assessment, there continue to be no sig-
nificant individual risks that pose a threat to the continued
existence of the BASF Group. The same applies to the sum of
individual risks, even in the case of another global economic
crisis.
Using a 95% confidence interval per risk factor based on planned values;
summation is not permissible.
2018 +
Outlook
≥ €1,000 million < €1,500 million
€500 million < €1,000 million
>
€100 million < €500 million
Board of Executive Directors
In the event of a production outage - caused by an accident,
for example - our global, regional or local emergency response
plans and crisis management structures are engaged,
depending on the impact scope. Every region has crisis
management teams on a local and regional level. They not
only coordinate the necessary emergency response measures,
they also initiate the immediate measures for damage control
and resumption of normal operations as quickly as possible.
United States
For more information on emergency response, see page 100 or
basf.com/emergency_response
Japan
5.9%
Emerging markets of Asia
2.5%
2.0%
3.0%
World
European Union
Outlook for gross domestic product 2018
(Real change compared with previous year)
The United States should maintain its economic momen-
tum, with slightly stronger growth compared with 2017. Early
economic indicators point to a stable, positive consumer
climate, which also reflects the strong labor market trend.
Moderating effects will come from the financial market. Slowly
rising interest rates should put more of a damper on consumer
spending than in the previous year. By contrast, the corporate
tax cut and the income tax reform passed in December 2017
will provide additional growth stimulus.
Growth in the E.U. is expected to slow slightly in 2018.
Although the economy is in a cyclical upturn that is likely to
continue in 2018, supported by low interest rates and moder-
ate inflation, exports will be curbed by the comparatively
strong euro and the weaker growth expected in Asia. We also
anticipate a weakening of growth in the United Kingdom as
uncertainty about the situation following the announced Brexit
dampens investment and private consumers increasingly
suffer from unclear labor market prospects and high inflation.
Growth rates in the eastern E.U. countries are forecast to
decline slightly after the strong upswing in the previous year.
We expect the recovery in Russia to continue at roughly the
same moderate pace as in 2017.
-
◉ Slightly stronger growth in the United States
Growth moderation expected in China
Continuation of recovery in Brazil and Russia
Slightly slower growth forecast for the E.U.
Trends in the global economy in 2018
The global economy is expected to grow by 3.0% in 2018,
about as fast as in 2017 (+3.1%). We expect economic
momentum in the European Union (E.U.) to ease slightly.
The United States will presumably grow at a slightly
stronger rate. We anticipate a weakening of the high
growth in China. This will probably negatively impact the
Japanese economy as well. We forecast a continuation of
the recovery already underway in Brazil and Russia. Global
chemical production is forecast to grow by 3.4% in 2018,
roughly at the same rate as in 2017 (+3.5%). For 2018, we
predict an average price of $65 per barrel for Brent crude
oil and an exchange rate of $1.20 per euro.
Management's Report 119
Forecast Economic environment in 2018
Short-term risks from investments can result from, for
example, technical malfunctions or schedule and budget
breaches. We counter these risks with highly experienced
project management and controlling.
BASF Report 2017
For more information on opportunities and risks from energy policies,
see page 114
For more information on energy and climate protection, see page 104
onward
For more information on sustainability management and material topics
for BASF, see page 29 onward
For example, the material topic "energy and climate" is
analyzed to enable us to identify, assess and manage climate-
related risks and opportunities. For BASF as an energy-
intensive company, these arise particularly from regulatory
changes, such as in carbon prices through emissions trading
systems, taxes or energy legislation.
As part of our sustainability management, we also assess
the opportunities and risks associated with the topics we
have identified as material. These also include the increasing
internalization of external effects, through which positive and
negative earnings contributions from companies' activities that
were previously borne by the community are attributed to
these companies.
Sustainability
BASF is adjusting in the medium and long term to the rising
challenge of gaining skilled employees due to demographic
changes, especially in North America and Europe. As a result,
there is an increased risk that job vacancies may not be filled
with suitable applicants, or only after a delay. We address
these risks with measures to integrate diversity, employee and
leadership development, and intensified employer branding.
At local level, demographic management includes succession
planning, knowledge management and offerings to improve
the balance between personal and professional life and pro-
mote healthy living. This increases BASF's appeal as an
employer and retains our employees in the long term.
For more information on the individual initiatives and our goals,
see page 42 onward
Recruitment and long-term retention of qualified
employees
For more information on our acquisitions, see page 40 onward
The evaluation of opportunities and risks plays a significant
role during the assessment of acquisition targets. A detailed
analysis and quantification is conducted as part of due diligence.
Examples of risks include increased staff turnover, delayed
realization of synergies, or the assumption of obligations that
were not precisely quantifiable in advance. If our expectations in
this regard are not fulfilled, risks could arise, such as the need to
impair intangible assets; however, there could also be oppor-
tunities, for example, from additional synergies.
In the future, we will continue to refine our portfolio through
acquisitions that promise above-average profitable growth,
are innovation-driven, offer added value for our customers and
reduce the cyclicality of our earnings.
1.2%
Acquisitions
2.0%
Trends in gross domestic product 2018-2020
(Average annual real change)
Agricultural production should see stable growth in 2018
on a level with the long-term average. That being said, we
expect very different regional trends. We anticipate slightly
stronger growth at a low level in Europe, while production in
North America should expand at a higher rate after the
weather-related losses in the previous year. Continued growth
is forecast for South America; however, this is expected to be
weaker than the rates seen in 2017. The agricultural industry
in Asia should expand at roughly the same robust level of the
previous year.
We expect slightly lower growth in the health and nutrition
sector for 2018 after a comparatively strong performance in
2017. The weaker global growth rate is primarily attributable to
Asia, where momentum will be strong but slightly slower. In
Europe, too, we anticipate a slight decline in growth, while
slightly stronger increases are forecast for North and South
America.
The electronics industry benefits from increasing digitali-
zation and automation. Following strong growth in the previous
year, particularly in Asia, growth rates should remain high but
ease slightly in 2018. The industry will see different trends in
the main production countries: We still anticipate double-digit
growth rates in the emerging economies of Asia despite a
slight slowdown. The downturn is expected to be more
pronounced in Japan. Growth in the United States should in-
crease slightly.
We expect consumer goods production to pick up slightly
in 2018 in line with the positive trajectory of the world economy
and rising purchasing power of consumers. Growth in western
and eastern Europe should weaken somewhat after an excep-
tionally strong previous year. We expect moderate growth in
production in North and South America in 2018. In Asia, the
world's largest market for consumer goods, we forecast stable
growth roughly at the high prior-year level.
Asian emerging markets, we predict largely stable growth
rates in the construction industry. As in previous years, the
highest growth rates will likely be in infrastructure investment.
For South America, we predict a weak increase in 2018 for the
first time after four years of declining construction activity.
Given a background of continuing weak oil and gas prices, the
construction industry in the Middle East should see moderate
growth.
Global growth in the construction industry should
increase slightly in 2018. However, we expect slightly weaker
growth overall in western Europe: The construction industry in
Germany is stretched to its capacity limits, government subsidy
programs in France are coming to an end and the announced
Brexit is negatively impacting construction demand in the
United Kingdom. We anticipate robust growth in demand in
the eastern European construction sector, which is also sup-
ported by a gradual recovery in Russia. For the United States,
we forecast low growth in the construction industry, but higher
than the weak prior-year level; in the infrastructure segment,
we once again expect a slight increase following a signifi-
cant decline in the previous year. In China and the other
In the energy and raw materials sector, we anticipate
stronger production growth for 2018. The increase in prices
for energy raw materials will drive forward the production of
unconventional oil and gas deposits in the United States. In
the Middle East, on the other hand, we only anticipate a slight
rise in growth rates due to the ongoing production cuts
imposed by the OPEC countries. We predict slight growth in
South America for 2018 following the decline in the previous
year. In Europe, too, we expect energy and raw material
production to expand at a slightly higher rate.
The transportation industry should post stable growth
overall, roughly on the same level as in 2017. We continue to
anticipate modest growth rates for the automotive industry in
western Europe, but stronger and stable growth of around 3%
for production in the transportation industry as a whole. Con-
tinued robust growth is forecast for the eastern European
automotive market, supported by a dynamic recovery of pro-
duction in Russia. Automotive production in North America
should also once again see slight growth in 2018 after the
decline in the previous year. One reason is the anticipated
replacement of the vehicles that were destroyed in the hurri-
canes in fall 2017. We expect growth in Asia to slow, mainly as
a result of the phasing out of sales tax incentives in China at
the end of 2017. By contrast, the automotive industry in South
America is expected to continue its recovery.
We expect global industrial production in 2018 to grow at
more or less the same rate as in the previous year (2017:
+3.3%; 2018: +3.2%). The trends in the regions are mixed:
Growth in the E.U. and Japan will probably weaken compared
with the high level of 2017. By contrast, we anticipate a slight
upturn in the United States. In the emerging markets of Asia,
we assume that China will experience a cooldown but India
will return to stronger industrial growth. In South America, the
recovery in industrial production that emerged over the course
of 2017 is expected to continue.
- Stable growth expected in global industrial
production for 2018
Outlook for key customer industries
BASF Report 2017
Forecast Economic environment in 2018
120 Management's Report
We anticipate a continuation of the slow economic recov-
ery in South America. In Brazil, demand for investment
goods and durable consumer goods will presumably pick up
slowly and export demand will develop solidly. We expect the
Argentinian government to continue its path of reforms.
Declining inflation rates should strengthen private consump-
tion, and rising demand should also improve the investment
climate.
For Japan, we anticipate a slowdown in 2018 after a year
of unexpectedly high growth. In particular, China's stimulating
effect on Japanese exports is expected to weaken. However,
the weak yen and the expansive fiscal policy will shore up the
Japanese economy, meaning that the moderate upward trend
is expected to continue.
In the emerging markets of Asia, we expect economic
growth to remain robust but slightly below the prior-year level
in 2018. China should report slower but still strong growth:
Government stimuli for the economy will probably be weaker
and the financial markets will generally be more strictly regulat-
ed to prevent a further rise in corporate and consumer debt.
Conversely, we are seeing slightly stronger growth rates in
India. Here, the dampening effects of the introduction of a new
sales tax system will presumably taper off.
2.4%
South America
0.8%
Japan
5.7%
Emerging markets of Asia
2.3%
1.7%
European Union
2.9%
World
United States
South America
For more information on our investment plans, see page 124
Economic environment in 2018
We expect the increase in chemical production in emerging
markets in the coming years to remain above the global
average. This will create opportunities that we want to exploit
by expanding our local presence.
Liquidity risks
In the catalysts business, BASF employs commodity derivatives
for precious metals and trades precious metals on behalf of
third parties and on its own account. Appropriate commodity
derivatives are also traded to optimize BASF's supply of refinery
products, gas and other petrochemical raw materials. To
address specific risks associated with these trades, which are
not part of our operating business, we set and continuously
monitor limits with regard to the type and size of the deals
concluded.
Risks from metal and raw materials trading
In addition to market interest rates, BASF's financing costs are
determined by the credit risk premiums to be paid. These are
mainly influenced by our credit rating and the market
conditions at the time of issue. In the short to medium term,
BASF is largely protected from the possible effects on its
interest result thanks to the balanced maturity profile of its
financial indebtedness.
Interest rate risks result from potential changes in prevailing
market interest rates. These can cause a change in the fair
value of fixed-rate instruments and fluctuations in the interest
payments for variable-rate financial instruments, which would
positively or negatively affect earnings. To hedge these risks,
interest rate swaps and combined interest rate and currency
derivatives are used in individual cases.
Interest rate risks
Financial currency risks result from the translation of
receivables, liabilities and other monetary items in accordance
Iwith IAS 21 at the closing rate into the functional currency of
the respective Group company. In addition, we incorporate
planned purchase and sales transactions in foreign currencies
in our financial foreign currency risk management. These risks
are hedged using derivative instruments, if necessary.
Our competitiveness on global markets is influenced by
fluctuations in exchange rates. For BASF's sales, opportunities
and risks arise in particular when the U.S. dollar exchange rate
fluctuates. A full-year rise in the value of the U.S. dollar/euro
exchange rate by $0.01 would result in an increase of around
€50 million in the BASF Group's EBIT, assuming other condi-
tions remain the same. On the production side, we counter
exchange rate risks by producing in the respective currency
zones.
Exchange rate volatility
As a part of risk management, activities in countries with
transfer restrictions are continuously monitored. This includes,
for example, regular analysis of the macroeconomic and legal
environment, shareholders' equity and the business models of
the operating units. The chief aim is the reduction of
counterparty, transfer and currency risks for the BASF Group.
The management of liquidity, currency and interest rate risks is
conducted in the Treasury unit. The management of commodity
price risks takes place in the Procurement functional unit or in
appropriately authorized Group companies. Detailed guide-
lines and procedures exist for dealing with financial risks.
Among other things, they provide for the segregation of trading
and back office functions.
Financial opportunities and risks
We are continuing to evaluate an investment in a world-
scale methane-to-propylene complex on the U.S. Gulf Coast
and conduct regular assessments, taking into account raw
materials prices and the relevant market conditions.
BASF Report 2017
Forecast Opportunities and risks report
116 Management's Report
We constantly monitor current and potential legal disputes and
proceedings, and regularly report on these to the Board of
Executive Directors and Supervisory Board. In order to assess
the risks from current legal disputes and proceedings and any
potential need to recognize provisions, we prepare our own
analyses and assessments of the circumstances and claims
considered. In addition, in individual cases, we consider the
results of comparable proceedings and, if needed, indepen-
dent legal opinions. Risk assessment is particularly based on
estimates as to the probability of occurrence and the range of
possible claims. These estimates are the result of close coop-
eration between the affected operating and functional units
together with the Legal and Finance units. If sufficient proba-
bility is identified, a provision is recognized accordingly for
each proceeding. Should a provision be unnecessary, general
risk management continues to assess whether these litigations
nevertheless present a risk for the EBIT of the BASF Group.
Legal dispute and proceedings
BASF also established the Cyber Defense Center in 2015;
is a member of the Cyber Security Sharing and Analytics e. V.
(CSSA); and is a founding member of the German Cyber
Security Organization (DCSO) together with Allianz SE,
Bayer AG and Volkswagen AG.
To minimize such risks, BASF uses globally uniform
processes and systems to ensure IT security, such as stable
and redundantly designed IT systems, backup processes,
virus and access protection, encryption systems as well as
integrated, Group-wide standardized IT infrastructure and
applications. The systems used for information security are
constantly tested, continuously updated, and expanded if
necessary. In addition, our employees receive regular training
on information and data protection. IT-related risk manage-
ment is conducted using Group-wide regulations for organiza-
tion and application, as well as an internal control system
based on these regulations.
BASF relies on a large number of IT systems. Their
nonavailability, violation of confidentiality or the manipulation of
data in critical IT systems and applications can all have a direct
impact on production and logistics processes. The threat
environment has changed in recent years, as attackers have
become better organized, use more sophisticated technology,
and have far more resources available. If data are lost or
manipulated, this can, for example, negatively affect process
safety and the accuracy of our financial reporting. Unauthorized
access to sensitive data, such as personnel records,
competition-related information or research results, can result
in legal consequences or jeopardize our competitive position.
This would also be accompanied by the associated loss of
reputation.
Information technology risks
For more information on our compensation system, see page 46
For more information on risks from pension obligations, see page 117
Due to BASF's worldwide compensation principles, the
development of personnel expenses is partly dependent on
the amount of variable compensation, which is linked to the
company's success, among other factors. The correlation
between variable compensation and the success of the
company has the effect of minimizing risk. Another factor is the
development of interest rates for discounting pension
obligations. Furthermore, changes to the legal environment of
a particular country can have an impact on the development of
personnel expenses for the BASF Group. For countries in
which BASF is active, relevant developments are therefore
constantly monitored in order to recognize risks at an early
stage and enable BASF to carry out suitable measures.
Personnel
For more information on opportunities and risks from acquisitions and
divestitures in 2018, see the Outlook from page 122 onward
Opportunities and risks arise in connection with acquisitions
and divestitures from the conclusion of a transaction, or it being
completed earlier or later than expected. They relate to the
regular earnings contributions gained or lost as well as the
realization of gains or losses from divestitures if these deviate
from our planning assumptions.
We are constantly watching our environment in order to identify
possible targets and develop our portfolio appropriately. In
addition, we work together in collaborations with customers
and partners to jointly develop new, competitive products and
applications.
Acquisitions, divestitures and cooperations
Risks from fluctuating cash flows are recognized in a timely
manner as part of our liquidity planning. We have access to
extensive liquidity at any time thanks to our good ratings, our
unrestricted access to the commercial paper market and
committed bank credit lines. In the short to medium term,
BASF is largely protected against potential refinancing risks by
the balanced maturity profile of its financial indebtedness as
well as through diversification in various financial markets.
For more information on the maturity profile of our financial indebted-
ness, see the explanations in the Financial Position on page 58 and the
Notes to the Consolidated Financial Statements from page 218 onward
We use our internal control system to limit risks from potential
infringements of rights or laws. For example, we try to avoid
patent and licensing disputes whenever possible through
extensive clearance research. As part of our Group-wide
Compliance Program, our employees receive regular training.
We limit country-specific risks with measures based on
internally determined country ratings, which are continuously
updated to reflect changing environment conditions. We
selectively use investment guarantees to limit specific
country-related risks. We lower credit risks for our financial
investments by engaging in transactions only with banks with
good credit ratings and by adhering to fixed limits.
Creditworthiness is continuously monitored and the limits are
adjusted accordingly. We reduce the risk of default on
receivables by continuously monitoring the creditworthiness
and payment behavior of our customers and by setting
appropriate credit limits. Due to the global activities and
diversified customer structure of the BASF Group, there are no
major concentrations of credit default risk. Risks are also limited
through the use of credit insurance and bank guarantees.
Risk of asset losses
Our decisions on the type, size and locations of our investment
projects are based on assumptions related to the longterm
development of markets, margins and costs, as well as raw
material availability and country, currency and technology
risks. Opportunities and risks arise from potential deviations in
actual developments from our assumptions.
Portfolio development through investments
For more information on innovation and digitalization,
see pages 35 to 39
The trust of customers and consumers is essential for the
successful introduction of new technologies. That is why we
enter into dialog with our stakeholders at an early stage of
development.
The opportunities of digitalization - especially in produc-
tion, for new business models and in research and develop-
ment - are being assessed in specific project organizations. To
take advantage of these, measures are being implemented
together with the divisions and the functional and research
units. The risks of digitalization are managed in the divisions
and functional units.
We also address the risk of the technical or economic
failure of research and development projects by maintaining
a balanced and comprehensive project portfolio, as well as
through professional, milestone-based project management.
Research activities funded by the BASF Group promote
the targeted development and enhancement of key technolo-
gies as well as the establishment of new business areas. Focus
areas in research are determined based on their strategic rele-
vance for BASF, above and beyond existing business areas.
The central research areas Process Research & Chemical
Engineering, Advanced Materials & Systems Research and
Bioscience Research serve as global platforms headquartered
in our key regions: Europe, Asia Pacific and North America.
Together with the development units in our operating divisions,
they form the core of the global Know-How Verbund. Stronger
regional presence opens up new opportunities to participate
in local innovation processes and gain access to local talent.
We optimize the effectiveness and efficiency of our research
activities through our global Know-How Verbund.
Forecast Opportunities and risks report
118 Management's Report
The trend toward more sustainability in our customer
industries continues. We want to use innovations to take
advantage of the resulting opportunities. In the long term, we
aim to continue increasing sales and earnings with new and
improved products.
Innovation
In order to achieve lasting profitable growth, tap into new
market segments and customers, and make our customers
more successful, our research and business focus is on highly
innovative business areas, some of which we enter into
through strategic cooperative partnerships.
We continuously improve our processes in order to remain
competitive through our operational excellence. Our strategic
excellence program, DrivE, also contributes to this aim. Start-
ing at the end of 2018, we expect this program to contribute
around €1 billion in earnings each year compared with baseline
2015.
BASF Report 2017
-
We expect competitors especially in Asia and the Middle
East to gain increasing significance in the years ahead.
Furthermore, we predict that many producers in countries rich
in raw materials will expand their value chains. We counter this
risk through active portfolio management. We exit markets in
which we see only limited possibilities to stand out from com-
petitors in the long term.
Management's Report 117
Forecast Opportunities and risks report
Impairment risks
The risk of an asset impairment occurs if the assumed interest
rate in an impairment test increases, the predicted cash flows
decline, or investment projects are suspended. In the current
business environment, we consider the risk of impairment of
individual assets such as customer relationships, technologies
and trademarks, as well as goodwill, to be nonmaterial. Never-
theless, a continuing decline in the prices of oil or gas below
our assumed planning level would result in impairment risks for
the Oil & Gas segment's assets.
Long-term incentive program for senior executives
Our senior executives have the opportunity to participate in
a share price-based compensation program. The need for
provisions for this program varies according to the develop-
ment of the BASF share price and the MSCI World Chemicals
Index; this leads to a corresponding increase or decrease in
personnel costs.
Risks from pension obligations
BASF Report 2017
Long-term opportunities and risks
Long-term demand development
We assume that chemical production (excluding pharmaceuti-
cals) will grow slightly faster than global gross domestic product
over the next five years and be slightly below the previous five-
year average. Through our market-oriented and broad portfolio,
which we will continue to strengthen in the years ahead through
investments in new production capacities, research and
development activities and acquisitions, we aim to achieve
sales growth that slightly exceeds this market growth. Should
global economic growth see unexpected, considerable deceler-
ation, due for example to an ongoing weak period in the emerg-
ing markets or to geopolitical crises, the expected growth rates
could prove too ambitious. As a result of our high degree of
diversification across various customer industries and regions,
we would still expect our growth to be above the market aver-
age, even under these conditions.
For more information on the "We create chemistry" strategy,
see page 23 onward
Development of competitive and customer landscape
Most employees are granted company pension benefits from
either defined contribution or defined benefit plans. We
predominantly finance company pension obligations externally
through separate plan assets. This particularly includes BASF
Pensionskasse WaG and BASF Pensionstreuhand e.V. in
Germany, in addition to the large pension plans of our Group
companies in North America, the United Kingdom and Switzer-
land. To address the risk of underfunding due to market-related
fluctuations in plan assets, we have investment strategies that
align return and risk optimization to the structure of the pension
obligations. Stress scenarios are also simulated regularly by
means of portfolio analyses. An adjustment to the interest rates
used in discounting pension obligations leads immediately to
changes in equity. To limit the risks of changing financial market
conditions as well as demographic developments, employees
have been almost exclusively offered defined contribution plans
for future years of service in recent years. Some of these
contribution plans include minimum interest guarantees. If the
pension fund cannot generate this, it must be provided by the
employer. A permanent continuation of the low interest rate
environment could make it necessary to recognize pension
obligations and plan assets for these plans.
-
- The Personnel Committee met four times.
- The Supervisory Board met six times.
In the 2017 business year, meetings were held as follows:
Meetings and meeting attendance
- Handles the further development of the company's strategy
- Prepares resolutions of the Supervisory Board on the com-
pany's major acquisitions and divestitures
Members:
Dr. Jürgen Hambrecht (chairman), Ralf-Gerd Bastian (since
May 12, 2017), Dame Alison Carnwath DBE, Michael Diek-
mann, Sinischa Horvat (since May 12, 2017), Robert Oswald
(until May 12, 2017), Michael Vassiliadis
Strategy Committee
- Prepares the recommendations made by the Supervisory
Board for the election of Supervisory Board members for the
Annual Shareholders' Meeting
- Identifies suitable candidates for the Supervisory Board
based on objectives for the composition decided on by the
Supervisory Board
- The Audit Committee met five times.
Duties:
- The Nomination Committee met once.
- Specialist knowledge and experience in sectors outside of
the chemical industry
With the exception of one Supervisory Board meeting, two
Audit Committee meetings, one Strategy Committee meeting
and one Personnel Committee meeting, at each of which one
member was absent, all respective members attended all
meetings of the Supervisory Board and its committees.
For more information on the Supervisory Board's activities and resolu-
tions in the 2017 business year, see the Report of the Supervisory Board
on page 152 onward
For an individual overview of meeting attendance, see basf.com/gover-
nance/supervisoryboard/meetings
Competence profile, diversity concept and
objectives for the composition of the
Supervisory Board
Composition criteria: professional and personal quali-
fications, diversity, and independence
One important concern of good corporate governance is to
ensure that seats on the responsible corporate bodies, the
Board of Executive Directors and the Supervisory Board, are
appropriately filled. On December 21, 2017, the Supervisory
Board therefore agreed on new objectives for the composition,
the competence profile and the diversity concept of the Super-
visory Board in accordance with section 5.4.1 of the German
Corporate Governance Code (GCGC) and section 289f(2) no.
6 of the German Commercial Code (HGB). The guiding princi-
ple for the composition of the Supervisory Board is to ensure
qualified supervision and guidance for the Board of Executive
Directors of BASF SE. Candidates shall be proposed to the
Annual Shareholders' Meeting for election to the Supervisory
Board who can, based on their professional expertise and
experience, integrity, commitment, independence and charac-
ter, successfully perform the work of a supervisory board
member in an international chemical company.
Competence profile
The following requirements and objectives are considered
essential to the composition of the Supervisory Board as a
collective body:
- Leadership experience in managing companies, associa-
tions and networks
- Members' collective knowledge of the chemical sector and
the related value chains
- Appropriate knowledge within the body as a whole of
finance, accounting, financial reporting, law and compliance
as well as one independent member with accounting and
auditing expertise ("financial expert") within the meaning of
section 100(5) of the German Stock Corporation Act (AktG)
- At least one member with in-depth experience in digitaliza-
tion, information technology, business models and start-ups
- At least one member with in-depth experience in human
resources, corporate governance, communications and the
media
Duties:
The Strategy Committee met four times.
Dr. Jürgen Hambrecht (chairman), Dame Alison Carnwath
DBE, Prof. Dr. François Diederich, Michael Diekmann, Franz
Fehrenbach, Anke Schäferkordt
3
Nomination Committee
€19.0 billion
Agricultural Solutions
4%
5
Oil & Gas
18%
Other (infrastructure, R&D)
18%
3
19%
Investments in property, plant and equipment
by region, 2018-2022
4
1
Europe
54%
2
North America
19%
3
Asia Pacific
2
14%
Functional Materials & Solutions
Performance Products
-
-
In the Agricultural Solutions segment, our aim is to exploit
positive market momentum, especially in the emerging
markets, significantly increase sales volumes with innovative
solutions and raise our prices. This should more than offset the
expected negative currency effects. In this way, we plan to
considerably increase sales. Excluding the agreed transaction
with Bayer, we would expect a slight improvement in earnings,
mainly from the planned volumes growth and innovative new
products amid continued strict cost management. However,
negative earnings effects from the timing of the acquisition, the
seasonality of the businesses to be taken over and the
anticipated integration costs will probably lead to a slight
decline in EBIT before special items.
Our forecast for the Oil & Gas segment does not take into
account the intended merger of our oil and gas activities with
the business of DEA Deutsche Erdoel AG and its subsidiaries.
Planning for the 2018 business year is based on an average
price for Brent blend crude oil of $65 per barrel. Gas prices are
likely to be on a level with 2017. We are forecasting consider-
able growth in sales and EBIT before special items in the Oil &
Gas segment, driven by positive price effects and the start of
production at fields in Norway in particular.
Sales in Other are expected to increase slightly in 2018,
primarily as a result of higher sales from raw materials trading.
We anticipate a slight improvement in EBIT before special
items as against 2017.
124 Management's Report
Forecast Outlook 2018
BASF Report 2017
Investments¹
16%
Investments of around €4.0 billion planned for 2018
We are planning total capital expenditures of around
€4.0 billion for the BASF Group in 2018. For the period from
2018 to 2022, we have planned capital expenditures totaling
€19.0 billion. The investment volume in the coming years is
thus in line with the planning period 2017 to 2021. Projects
currently being planned or underway include:
Capital expenditures: Selected projects
Investments in property, plant and equipment
by segment, 2018-2022
123456
6
Chemicals
25%
1
Our investments in 2017 focused on the Chemicals,
Functional Materials & Solutions and Oil & Gas segments. For
example, we started up the expanded compounding plant for
UltramidⓇ and UltradurⓇ in Schwarzheide, Germany, completed
construction of the chemical catalysts plant in Shanghai,
China, and invested in field development projects in Argentina,
Norway and Russia.
Sales in the Functional Materials & Solutions segment
will presumably rise slightly in 2018. Higher overall prices and
volumes growth in all divisions due to factors such as the
should contribute to
€19.0 billion
South America, Africa, Middle East
3
To Our Shareholders
Management's Report
Corporate Governance
57
17
Consolidated Financial Statements
159
Supplementary Information on the Oil & Gas Segment
Overviews
Excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments
235
Corporate governance report
127
Compliance
135
Management and Supervisory Boards
137
Board of Executive Directors
137
Supervisory Board
245
4
There have been no significant changes in the company's
situation or market environment since the beginning of the
2018 business year.
Information on our financing policies can be found on page 58
1
8%
5
Alternative sites currently
being investigated
5%
2
Location
Project
Events after the reporting period
Geismar, Louisiana
Germany
Shanghai, China
Środa Śląska,
Poland
Capacity expansion: MDI plant
Replacement: acetylene plant
Construction: production plant for vitamin A
Construction: production plant for ibuprofen
Construction: production plant for plastic additives
Capacity expansion: plant for emissions catalysts
In the Oil & Gas segment, our currently planned investments of
around €3.5 billion between 2018 and 2022 will focus mainly on
the development of proven gas and oil deposits in Argentina,
Norway and Russia. The actual expenses are also dependent
on oil and gas price developments and will be adjusted as
necessary. If the merger of our oil and gas activities with the
business of DEA Deutsche Erdoel AG and its subsidiaries is
consummated as intended, these expenditures will no longer
be reported as investments by the BASF Group.
Dividends
We stand by our ambitious dividend policy and offer our share-
holders an attractive dividend yield. We continue to aim to
increase our dividend each year, or at least maintain it at the
previous year's level.
Information on the proposed dividend can be found on page 15
Financing
In 2018, we expect cash outflows in the equivalent amount of
around €1.8 billion from the scheduled repayment of bonds.
To refinance maturing bonds and to optimize our maturity
profile, we continue to have medium to long-term corporate
bonds and our U.S. dollar commercial paper program at our
disposal.
Ludwigshafen,
In the Performance Products segment, we expect sales
to be up slightly on the prior-year level in 2018. We plan to
increase sales through volumes growth in the Dispersions &
Pigments, Care Chemicals and Performance Chemicals
divisions and are forecasting higher average prices overall.
Sales will be dampened by the absence of the leather
chemicals business, which was transferred to the Stahl group
at the end of the third quarter of 2017, as well as the antici-
pated negative currency effects and the limited product avail-
ability of citral-based flavors and fragrances as well as vitamins.
We are aiming for a considerable year-on-year increase in
EBIT before special items with higher volumes and margins as
well as strict cost discipline.
Despite the planned volumes growth, sales in the Chemicals
segment are expected to decline slightly in 2018 due to price
factors. Overall, we anticipate lower sales prices in the
isocyanates business as a result of additional capacities,
especially in the Middle East and Asia, which will increase
competitive pressure. EBIT before special items will presum-
ably be considerably below the high 2017 level. The earnings
contribution from higher sales volumes is not expected to
compensate for the lower margins in the isocyanates business
in particular.
Members:
3.4%
European Union
United States
1.5%
3.2%
Emerging markets of Asia
4.9%
1.0%
2.4%
Japan
World
South America
122 Management's Report
Forecast Outlook 2018
Outlook 2018
BASF Report 2017
For 2018, we expect the global economy and chemical
production to grow at roughly the same pace as in 2017.
We assume an average price of $65 for a barrel of Brent
blend crude oil and an exchange rate of $1.20 per euro.
In this environment, we aim to continue to grow profitably
and slightly increase the BASF Group's sales and
income from operations (EBIT) before special items in
2018.1 This forecast takes into account the agreed trans-
actions with Bayer and Solvay. In contrast, it does not
include the intended merger of our oil and gas activities
with the business of DEA Deutsche Erdoel AG and its
subsidiaries.
For more information on our expectations for the economic environment
in 2018, see page 119 onward
Sales and earnings forecast for the BASF Group
■
Slight sales growth, mainly from higher volumes
EBIT before special items expected to be up slightly
on 2017 level
121
Our forecast for 2018 includes the agreed acquisition of sig-
nificant parts of Bayer's seed and non-selective herbicide
businesses, which is expected to close in the first half of
2018. Based on the timing of the acquisition, the seasonality
of the businesses to be taken over and the anticipated integra-
tion costs, this is likely to have a positive impact on sales and
a negative impact on earnings for the Agricultural Solutions
segment and the BASF Group in 2018. This outlook also
includes the intended acquisition of Solvay's integrated
polyamide business in the third quarter of 2018. However,
we currently do not expect this transaction to have any mate-
rial effect on sales and earnings for 2018.
Trends in chemical production 2018-2020 (excl. pharmaceuticals)
(Average annual real change)
Japan
BASF Report 2017
Management's Report
Forecast Economic environment in 2018
Outlook for the chemical industry
■ Global growth in chemical industry roughly at level of
previous year
Global chemical production (excluding pharmaceuticals) is
expected to grow by 3.4% in 2018, roughly on a level with
2017 (+3.5%). We anticipate a slightly weaker expansion rate
in the advanced economies (2017: +3.7%; 2018: +2.4%).
Growth in the emerging markets should pick up slightly (2017:
+3.4%; 2018: +4.2%).
The development of the world's largest chemical market -
China - has a significant impact on the global growth rate. We
again expect slightly stronger growth here after a compara-
tively weak figure in 2017. As a result, China will presumably
once again account for almost two percentage points of
global chemical growth. Growth rates in the remaining emerg-
ing markets of Asia should remain stable.
We expect growth in the E.U. to remain above average in
2018, but slower than in 2017. Domestic demand in key cus-
tomer industries will probably be slightly weaker following
strong industrial growth in the previous year. We also anticipate
weaker export demand from Asia.
By contrast, chemical growth in the United States should
pick up. One reason for the higher growth forecast for 2018
is the production outages in the U.S. caused by Hurricane
Harvey in fall 2017. In addition, new production capacities will
reach the market in 2018, which will presumably increase
exports as well.
We expect chemical growth in Japan to level off after unusu-
ally strong, largely export-driven growth in the previous year.
South America
In South America, we assume that the upturn in the
chemical industry will continue in line with the overall economic
recovery.
World
European Union
United States
3.4%
2.2%
3.2%
Emerging markets of Asia
4.6%
2.5%
2.0%
Outlook for chemical production 2018 (excl. pharmaceuticals)
(Real change compared with previous year)
We anticipate slightly higher BASF Group sales in 2018,
largely as a result of volumes growth. We expect considerable
sales growth in the Agricultural Solutions and Oil & Gas seg-
ments, and slightly higher sales in the Functional Materials &
Solutions and Performance Products segments and in Other.
Our planning for the Chemicals segment assumes slightly
lower sales due to price factors.
EBIT before special items is expected to be up slightly
on the 2017 level. This will mainly be driven by significantly
higher contributions from the Performance Products, Functional
Materials & Solutions and Oil & Gas segments. We are fore-
casting a slight improvement in the earnings generated by
Other. After a strong result in 2017, we expect considerably
lower EBIT before special items in the Chemicals segment,
primarily as a result of lower margins. We anticipate a slight
decrease in the Agricultural Solutions segment: The agreed
transaction with Bayer is likely to have a negative effect on
earnings in 2018. Excluding this acquisition, we would expect
the segment to record slight growth in EBIT before special
items.
1,617
Agricultural Solutions
5,696
considerable increase
1,033
Forecast 2018
considerable decline
considerable increase
considerable increase
slight decline²
Oil & Gas
3,244
considerable increase
slight increase
793
BASF Group
2,242
64,475
slight increase
slight increase
(764)
considerable increase
slight increase
8,328
slight increase
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0 %). For earnings, "slight"
means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0 %).
2 Excluding the agreed transaction with Bayer, we expect a slight increase in EBIT before special items in the Agricultural Solutions segment.
Other
20,745
Functional Materials & Solutions
1,416
EBIT for the BASF Group is forecast to decline slightly in
2018. We anticipate special charges in the form of integration
costs in connection with the agreed acquisitions. In contrast,
the Performance Products and Oil & Gas segments in particular
recorded special income in 2017. EBIT in the Chemicals and
Agricultural Solutions segments is expected to be consider-
ably below the 2017 figure. We are forecasting slightly higher
EBIT for the Performance Products and Oil & Gas segments
and Other, and considerable growth in the Functional Mate-
rials & Solutions segment.
We aim to once again earn a significant premium on our
cost of capital in 2018. However, compared with the previous
year, the BASF Group's EBIT after cost of capital will
decrease considerably. This will mainly be due to lower EBIT
as well as the additional cost of capital from the planned
acquisitions. In the Chemicals and Agricultural Solutions seg-
ments, we anticipate a considerable decrease in EBIT after
cost of capital, and a considerable increase in the Performance
Products, Functional Materials & Solutions and Oil & Gas
segments.
The intended merger of our oil and gas activities with the
business of DEA Deutsche Erdoel AG and its subsidiaries is
not taken into account in this outlook. On signature of the final
transaction agreements, the Oil & Gas segment's earnings
would no longer be included in sales and EBIT for the BASF
Group retroactively as of January 1, 2018 and with the
prior-year figures restated. Rather, this would be presented in
the income before minority interests of the BASF Group as
a separate item, income from discontinued operations. From
the transaction closing date, we would presumably account
for BASF's share of income generated by the joint venture -
Wintershall DEA - using the equity method and include this in
EBIT for the BASF Group. The gain from the change from full
consolidation to the equity method would be shown in income
from discontinued operations.
The significant risks and opportunities that could affect our
forecast are described on pages 111 to 118.
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0 %). For earnings, "slight"
means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0 %).
BASF Report 2017
Forecast by segment¹ (million €)
Management's Report 123
Forecast Outlook 2018
Income from operations (EBIT)
Sales
before special items
2017
Forecast 2018
2017
Chemicals
16,331
slight decline
4,233
Performance Products
16,217
slight increase
139
Compensation report
Sales and earnings forecast for the segments
Report of the Supervisory Board
The Board of Executive Directors regularly informs the
Supervisory Board about matters such as the course of busi-
ness and expected developments, the financial position and
results of operations, corporate planning, the implementation
of the corporate strategy, business opportunities and risks,
and risk and compliance management. The Supervisory Board
has embedded the main reporting requirements in an informa-
tion policy. The Chairman of the Supervisory Board is in regular
contact with the Board of Executive Directors outside of meet-
ings as well.
The meetings of the Supervisory Board and its committees
are called by their chairmen and, independently, at the request
of one of their members or the Board of Executive Directors.
Resolutions of the Supervisory Board are passed by a simple
majority vote of the participating members. In the event of a
tie, the vote of the Chairman of the Supervisory Board, who
must always be a shareholder representative, shall be the
casting vote. This resolution process is also applicable for the
appointment and dismissal of members of the Board of Exec-
utive Directors by the Supervisory Board. Resolutions can, as
needed, also be made in writing or through other means of
communication outside of the meetings, as long as no mem-
ber objects to this form of passing a resolution.
The Supervisory Board of BASF SE comprises 12 mem-
bers. Six members are elected to a five-year term each by the
shareholders at the Annual Shareholders' Meeting. The remain-
ing six members are elected by the BASF Europa Betriebsrat
(BASF Works Council Europe), the European employee repre-
sentation body of the BASF Group.
In addition to the SE Council Regulation, the relevant legal
basis for the size and composition of the Supervisory Board is
provided by the Statutes of BASF SE and the Agreement
Concerning the Involvement of Employees in BASF SE
(Employee Participation Agreement), which also includes the
regulations applicable to BASF for implementing the gender
quota for the Supervisory Board mandated by law as of Janu-
ary 1, 2016. The German Codetermination Act does not apply
to BASF as a European stock corporation (Societas Europaea,
SE).
The Supervisory Board appoints the members of the Board of
Executive Directors and supervises and advises the Board of
Executive Directors on management issues. As members of
the Supervisory Board cannot simultaneously be on the Board
of Executive Directors, a high level of autonomy is already
structurally ensured with regard to the supervision of the Board
of Executive Directors.
- Four Supervisory Board committees
Supervisory Board appoints, monitors and advises
Board of Executive Directors
Supervision of company management by the
Supervisory Board
129
Corporate Governance
Corporate governance report
BASF SE's Supervisory Board has established a total of
four Supervisory Board Committees: the Personnel Commit-
BASF Report 2017
The current composition of the Board of Executive Direc-
tors meets the competence profile and the requirements of the
diversity concept in full.
The number of Board members is based on the insights
gained by BASF as a company with an integrated leadership
culture and is determined by the needs arising from coopera-
tion within the Board of Executive Directors. The Board of
Executive Directors currently comprises eight members.1 The
standard age limit for members of the Board of Executive
Directors is 63.
- A balanced age distribution to ensure the continuity of the
Board's work and enable seamless succession planning
- At least one female Board member
- International experience based on background and/or pro-
fessional experience
- Many years of management experience in scientific, techni-
cal and commercial fields
The aim is to enable the Supervisory Board to ensure a rea-
sonable level of diversity with respect to education and profes-
sional experience, cultural background, international represen-
tation, gender and age when appointing members of the
Board of Executive Directors. Independent of these individual
criteria, the Supervisory Board is convinced that ultimately,
only a holistic approach can determine an individual's suitability
for appointment to the Board of Executive Directors of BASF SE.
The overall aim is to ensure that the Board of Executive Directors
as a whole has the following profile, which serves as a diversity
concept:
- Role model function in putting our corporate values into
practice
· Desire to shape strategic and operational decisions, and
proven success in doing so, as well as leadership skills,
especially under challenging business conditions
elected by the Supervisory Board
1 In May 2018, this will be reduced from eight to seven members in the course of the changes to the composition of the Board of Executive Directors.
Chairman
tee, the Audit Committee, the Nomination Committee and the
Strategy Committee.
A list of the members of the Supervisory Board of BASF SE indicating
which members are shareholder or employee representatives and their
appointments to the supervisory bodies of other companies can be
found on page 139
Dame Alison Carnwath DBE and Franz Fehrenbach are mem-
bers with special knowledge of, and experience in, applying
accounting and reporting standards and internal control meth-
ods pursuant to the German Corporate Governance Code
(GCGC).
140
Financial Experts:
- Is authorized to request any information that it deems neces-
sary from the auditor or Board of Executive Directors; can
also view all of BASF's business documents and examine
these and all other assets belonging to BASF. The Audit
Committee can also engage experts such as auditors or
lawyers to carry out these inspections
BASF Report 2017
Corporate governance report
130 Corporate Governance
- Is responsible for business relations with the company's
external auditor: prepares the Supervisory Board's proposal
to the Annual Shareholders' Meeting regarding the selection
of an auditor, monitors the auditor's independence, defines
the focus areas of the audit together with the auditor, nego-
tiates auditing fees and establishes the conditions for the
provision of the auditor's nonaudit services
- Deals with monitoring the financial reporting process, the
annual audit, the effectiveness of the internal control system,
the risk management system, and the internal auditing sys-
tem as well as compliance issues
- Prepares the negotiations and resolutions of the Supervisory
Board for the approval of the Financial Statements, the Con-
solidated Financial Statements and the Management's
Reports including the nonfinancial statements and discusses
the quarterly statements and the half-year financial report
with the Board of Executive Directors prior to their publica-
tion
For more information on the Statutes of BASF SE and the Employee
Participation Agreement, see basf.com/en/cg/investor
Duties:
Members:
Audit Committee
- Prepares the resolutions made by the Supervisory Board
with regard to the system and amount of compensation paid
to members of the Board of Executive Directors
- When making recommendations for appointments to the
Board of Executive Directors, considers professional qualifi-
cations, international experience and leadership skills as well
as longterm succession planning, diversity, and especially
the appropriate consideration of women
- Prepares the appointment of members to the Board of Exec-
utive Directors by the Supervisory Board as well as the
employment contracts to be entered into with members of
the Board of Executive Directors
Duties:
Dr. Jürgen Hambrecht (chairman), Michael Diekmann,
Sinischa Horvat (since May 12, 2017), Robert Oswald (until
May 12, 2017), Michael Vassiliadis
Members:
Personnel Committee
The compensation of the Supervisory Board is described in the
Compensation report from page 150 onward
Dame Alison Carnwath DBE (chairman), Ralf-Gerd Bastian,
Franz Fehrenbach, Michael Vassiliadis
6 employee representatives
startup of new production capacities
this. Our forecast is supported by the expectation of continu-
ing good demand from the automotive and construction
industries. Despite the continued challenging market environ-
ment and higher fixed costs from new plants, we anticipate a
considerable increase in EBIT before special items, mainly as
a result of volumes growth and higher margins.
6 shareholder representatives elected
at the Annual Shareholders' Meeting
The Board's actions and decisions are geared toward the
company's best interests. It is committed to the goal of sus-
tainably increasing the company's value. Among the Board's
responsibilities is the preparation of the Consolidated and
Separate Financial Statements of BASF SE and reporting
on the company's financial and nonfinancial performance.
Furthermore, it must ensure that the company's activities
comply with the applicable legislation and regulatory require-
ments, as well as internal corporate directives. This includes
the establishment of appropriate systems for control, compli-
ance and risk management as well as establishing a company-
wide compliance culture with undisputed standards.
The Board of Executive Directors is responsible for the man-
agement of the company, and represents BASF SE in business
undertakings with third parties. BASF's Board of Executive
Directors is strictly separated from the Supervisory Board,
which monitors the activity of the Board of Executive Directors
and decides on its composition. A member of the Board of
Executive Directors cannot simultaneously be a member of the
Supervisory Board. As the central duty of company manage-
ment, the Board of Executive Directors agrees on the corpo-
rate goals and strategic direction of the BASF Group as well as
its individual business areas; determines the company's inter-
nal organization; and decides on the composition of manage-
ment on the levels below the Board. It also manages and
monitors BASF Group business by planning and setting the
corporate budget, allocating resources and management
capacities, monitoring and making decisions on significant in-
dividual measures, and supervising operational management.
Board of Executive Directors strictly separate from
the Supervisory Board
-
Direction and management by the Board of
Executive Directors
The fundamental elements of BASF SE's corporate gover-
nance system are: its two-tier system, with a transparent and
effective separation of company management and supervision
between BASF's Board of Executive Directors and the Super-
visory Board; the equal representation of shareholders and
employees on the Supervisory Board; and the shareholders'
rights of co-administration and supervision at the Annual
Shareholders' Meeting.
Corporate governance refers to the entire system for
managing and supervising a company. This includes its
organization, values, corporate principles and guidelines
as well as internal and external control and monitoring
mechanisms. Effective and transparent corporate gover-
nance guarantees that BASF is directed and monitored in
a responsible manner focused on value creation. It fosters
the confidence of our domestic and international inves-
tors, the financial markets, our customers and other
business partners, employees, and the public in BASF.
Exercise rights of co-adminis-
tration and supervision at
Annual Shareholders' Meeting
Shareholders
Appoints, monitors and
advises Board of
Executive Directors
Manages company and
represents BASF SE in
business with third parties
Directors
Board of Executive Supervisory Board
and
Corporate Governance
Corporate governance report
Corporate governance report
BASF Report 2017
Corporate Governance
158
Declaration of Corporate Governance
157
of the German Stock Corporation Act (AktG)
Declaration of Conformity pursuant to section 161
Decisions that are reserved for the Board as a whole by
law, through the Board of Executive Directors' Rules of Proce-
dure or through resolutions adopted by the Board, are made
at regularly held Board meetings called by the Chairman of the
Board of Executive Directors. Board decisions are based on
detailed information and analyses provided by the business
areas and specialist units, and, if deemed necessary, by exter-
nal consultants. Board decisions can generally be made via a
simple majority. In the case of a tied vote, the casting vote is
given by the Chairman of the Board. However, the Chairman of
the Board does not have the right to veto the decisions of the
Board of Executive Directors. Members of the Board of Exec-
utive Directors are authorized to make decisions individually in
their assigned areas of responsibility.
The Board can set up Board Committees to consult and
decide on individual issues such as proposed material acqui-
sitions or divestitures; these must include at least three mem-
bers of the Board of Executive Directors. For the preparation
of important decisions, such as those on acquisitions, divesti-
tures, investments and personnel, the Board has various
commissions at the level below the Board that carefully assess
the planned measure and evaluate the associated opportuni-
ties and risks, and based on this information, report and make
recommendations to the Board - independently of the affected
business area.
Responsible for company management
Sets corporate goals and strategic direction
127
12 members
- Systematic development of leaders through the successful
assumption of tasks with increasing responsibility, where
possible in different business areas, regions and functions
BASF's long-term succession planning is guided by the
"We create chemistry" strategy. It is based on systematic
management development characterized by the following:
- Early identification of suitable candidates of different profes-
sional backgrounds, nationalities and genders
The Supervisory Board works hand-in-hand with the Board of
Executive Directors to ensure long-term succession planning
for the composition of the Board of Executive Directors. BASF
aims to fill most Board positions with candidates from within
the company. It is the task of the Board of Executive Directors
to propose a sufficient number of suitable candidates to the
Supervisory Board.
Competence profile, diversity concept and
succession planning for the Board of Executive
Directors
The members of the Board of Executive Directors, including their areas
of responsibility and memberships on the supervisory bodies of other
companies, are listed on page 137. Compensation of the Board of
Executive Directors is described in detail in the Compensation report
from page 140 onward.
For more information on risk management, see the Forecast from
page 111 onward
The Statutes of BASF SE define certain transactions that
require the Board of Executive Directors to obtain the Super-
visory Board's approval prior to their conclusion. Such cases
include the acquisition and disposal of enterprises and parts of
enterprises, as well as the issue of bonds or comparable finan-
cial instruments. However, this is only necessary if the acquisi-
tion or disposal price or the amount of the issue in an individ-
ual case exceeds 3% of the equity reported in the last approved
Consolidated Financial Statements of the BASF Group.
The Board of Executive Directors informs the Supervisory
Board regularly, without delay and comprehensively, of all
issues important to the company with regard to planning,
business development, risk situation, risk management and
compliance. Furthermore, the Board of Executive Directors
coordinates the company's strategic orientation with the
Supervisory Board.
Chairman
8 members
appointed by the Supervisory Board
reports to Supervisory Board
appointed by the Supervisory Board
monitors the Board of Executive Directors
appoints the Board of Executive Directors
Supervisory Board
Board of Executive Directors
BASF Report 2017
Two-tier management system of BASF SE
Corporate governance report
152
advises the Board of Executive Directors
128 Corporate Governance
Antitrust Legislation
Protection of Environment,
Health and Safety
Protection of Data Privacy
Gifts and Entertainment
Abiding by compliance standards is the foundation of
responsible leadership. This has been expressly embedded in
our values, where we state: "We strictly adhere to our
compliance standards." We are convinced that compliance
with these standards will not only prevent the disadvantages
associated with violations, such as penalties and fines; we
also view compliance as the right path toward securing our
company's long-term success.
BASF's Code of Conduct
For more information on the BASF Code of Conduct, see basf.com/
code_of_conduct
Our efforts are principally aimed at preventing violations
from the outset. We perform systematic risk assessments to
identify the risk of compliance violations, including corruption
risks. These are conducted at division, regional and country
level. The regular compliance audits performed by the
Corporate Audit department are another source for the
systematic identification of risks. These risks are documented
in each risk or audit report. The same applies to specific risk
minimization measures as well as the time frame for their
implementation. One key element in the prevention of
compliance violations is compulsory training and workshops
held as classroom or online courses. All employees are
required within a prescribed time frame to take part in basic
compliance training, refresher courses and special tutorials
dealing with, for example, antitrust legislation, taxes or trade
control regulations. Course materials and formats are
constantly updated, taking into account the specific risks of
individual target groups and business areas. In total, more
than 33,500 participants worldwide received around 54,000
hours of compliance training in 2017.
Based on international standards, BASF's Compliance
Program combines important laws and company-internal
policies often exceeding legal requirements - with external
voluntary commitments to create a framework that regulates
how all BASF employees interact with business partners,
officials, colleagues and society. At the core of our Compliance
Program is the global, standardized Code of Conduct received
by every employee. All employees and managers are obligated
to adhere to its guidelines, which describe our principles for
proper conduct and cover topics ranging from corruption and
antitrust laws to human rights, labor and social standards,
conflicts of interest and trade control, and protection of data
privacy.
Human Rights, Labor
and Social Standards
Protection of Company Property and
Property of Business Partners
Conflicts of Interest
Money Laundering
Monitoring adherence to our Compliance
principles
Imports and Exports
Corporate Governance
Management and Supervisory Boards - Board of Executive Directors
137
There were eight members on the Board of Executive Directors of BASF SE as of December 31, 2017
Dr. Kurt Bock
Chairman of the Board of Executive Directors
Degree: Business Administration, 59 years old, 27 years at BASF
Responsibilities: Legal, Taxes, Insurance & Intellectual Property; Corporate
Development; Corporate Communications & Government Relations; Senior
Executive Human Resources; Investor Relations; Compliance
First appointed: 2003, Term expires: 2018
Supervisory Board memberships (excluding internal memberships):
Fresenius Management SE (member)
Dr. Martin Brudermüller
Vice Chairman of the Board of Executive Directors
Degree: Chemistry, 56 years old, 30 years at BASF
Responsibilities: Petrochemicals; Monomers; Intermediates; Process
Research & Chemical Engineering; Innovation Management; Digitalization in
Research & Development; Corporate Technology & Operational Excellence;
BASF New Business
First appointed: 2006, Term expires: 2023
Sanjeev Gandhi
Degrees: Chemical Engineering, Business Administration, 51 years old,
24 years at BASF
Responsibilities: Dispersions & Pigments; Greater China & Functions Asia
Pacific; South & East Asia, ASEAN & Australia/New Zealand
First appointed: 2014, Term expires: 2023
Board of Executive Directors
BASF's Code of
Conduct stipulates
how these topics are
handled
Management and Supervisory Boards
For more information on human rights and labor and social standards,
see basf.com/human_rights
Corruption
Information Protection
and Insider Trading Laws
136 Corporate Governance
Compliance
BASF Report 2017
Compliance culture at BASF
We firmly believe that for corporate responsibility to be a
success, there must be an active culture of living these guide-
lines within the company. Thanks to the early introduction of
our Code of Conduct, these standards have already been
firmly established and are undisputed. We expect all employ-
ees to act in line with these compliance principles. Managers
place a key role here - they serve as an example of and com-
municate our values and culture both internally and externally.
-
BASF's Chief Compliance Officer (CCO) reports directly to the
Chairman of the Board of Executive Directors and manages
the further development of our global compliance organization
and our Compliance Management System. He is supported in
this task by more than 100 compliance officers worldwide in
the regions and countries as well as in the divisions. Material
compliance topics are regularly discussed in the compliance
committees established at global and regional level. The CCO
reports to the Supervisory Board's Audit Committee in at least
one of its meetings each year on the status of the Compliance
Program as well as any major developments. In the event of
significant incidents, the Audit Committee is immediately
informed by the Board of Executive Directors.
We particularly encourage our employees to actively and
promptly seek guidance if in doubt. For this, they can consult
their managers, dedicated specialist departments, such as the
Legal department, and company compliance officers. We
have also set up more than 50 external hotlines worldwide that
our employees can use - including anonymously - to report
suspected or actual violations of laws or company guidelines.
All hotlines are also open to the public. Each concern is
documented according to specific criteria, properly investigated
in line with standard internal procedures and answered as
quickly as possible. The outcome of the investigation as well
as any measures taken are documented accordingly and
included in internal reports.
In 2017, 290 calls and emails were received by our external
hotlines (2016: 278). These concerns involved questions
ranging from personnel management and handling of company
property to information on the behavior of business partners or
human rights issues, such as on labor and social standards.
We continued to observe increasing awareness when it came
to potential conflicts of interest. We launched case-specific
investigations, in accordance with applicable law and internal
regulations, into all cases of suspected misconduct that we
became aware of. These include, for example, improved
control mechanisms, additional informational and training
measures, clarification and expansion of the relevant internal
regulations, as well as disciplinary measures as appropriate.
Most of the justified cases related to personal misconduct
in connection with the protection of company property,
inappropriate handling of conflicts of interests or gifts and
invitations. There was one case of passive corruption. In such
isolated cases, we took disciplinary measures up to and
including dismissal in accordance with uniform internal
standards and also pursued claims for damages where there
were sufficient prospects of success.
BASF's Corporate Audit department monitors adherence
to compliance principles, covering all areas in which compliance
violations could occur. They check that employees uphold
regulations and make sure that the established processes,
procedures and monitoring tools are appropriate and sufficient
to minimize potential risk or preclude violations in the first
place. In 2017, 75 Group-wide audits of this kind were
performed (2016: 63). One audit gave rise to the suspicion of
unlawful billing of labor by external service providers, with the
involvement of BASF employees, at the Ludwigshafen site in
the past few years. The district attorney's office is now investi-
gating the matter. Overall, the audits confirmed the effective-
ness of the compliance management system. No irregularities
were shown in the audit's focus areas of antitrust law, trade
controls and embargo.
Our business partners in sales are monitored for potential
compliance risks based on the Guideline on Business Partner
Due Diligence, which has been in effect since 2015, using a
checklist, a questionnaire and an internet-based analysis. The
results are then documented. Depending on the results, con-
clusions must be drawn regarding whether and how to main-
tain the business relationship. To date, we have ended one
existing business relationship based on the results of the audit.
In a number of cases, business relationships were not entered
into because the business partners were not prepared to
answer the questionnaire put to them. A dedicated global
Supplier Code of Conduct applies to our suppliers.
We support the United Nations' Guiding Principles on
Business and Human Rights and are constantly working to
enhance our internal guidelines and processes in keeping with
these principles. For example, there is an internal guideline to
respect international labor and social standards that is
applicable throughout the Group. Outside of our company, as
well, we support respect for human rights and the fight against
corruption: We are a founding member of the United Nations
Global Compact. As a member of Transparency International
Deutschland and the Partnering Against Corruption Initiative
(PACI) of the World Economic Forum, we assist in the
implementation of these organizations' objectives.
For more information on the Supplier Code of Conduct and supplier
assessments, see page 93 onward
BASF Report 2017
Integrated into corporate values
■Regular compliance training for employees
For more information, see Note 33 of the Consolidated Financial
Statements on page 234
Our Group-wide Compliance Program aims to ensure
adherence to legal regulations and the company's internal
guidelines. This topic has been integrated into our "We
create chemistry" strategy. Our employee Code of
Conduct firmly embeds these mandatory standards into
day-to-day business. Members of the Board of Executive
Directors are also expressly obligated to follow these
principles.
132 Corporate Governance
Corporate governance report
BASF Report 2017
least one female member. With eight members of the Board of
Executive Directors, this represented 12.5% on the date the
target was set. The Board of Executive Directors also decided
on target figures for the proportion of women in the two man-
agement levels below the Board of Executive Directors of
BASF SE: Women are to make up 12.1% of the leadership
level directly below the Board, and the level below that is to
comprise 7.3% women. This corresponds to the status at the
time these target figures were determined. The deadline for
achieving the goals for the second target-attainment period
I was set for December 31, 2021.
BASF views the further development and promotion of
women as a global duty independent of individual Group com-
panies. We set ourselves ambitious global goals for this and
made further progress in 2017. BASF will continue working on
expanding the percentage of women in its leadership team.
The company is carrying out, and constantly enhancing, world-
wide measures to this effect.
The November 2015 Employee Participation Agreement relevant to
the composition of the Supervisory Board is available at
basf.com/en/governance
For more information on women in executive positions in the BASF
Group worldwide, see page 26
For more information on the inclusion of diversity, including promotion
of women, see the chapter on Working at BASF in the Management's
Report on page 45
Shareholders' rights
-
Shareholders' rights of co-administration and super-
vision at the Annual Shareholders' Meeting
- One share, one vote
Shareholders exercise their rights of co-administration and
supervision at the Annual Shareholders' Meeting, which usually
takes place within the first five months of the business year.
The Annual Shareholders' Meeting elects half of the members
of the Supervisory Board and, in particular, decides on the
formal discharge of the Board of Executive Directors and the
Supervisory Board, the distribution of profits, capital mea-
sures, the authorization of share buybacks, changes to the
Statutes and the selection of the auditor.
Each BASF SE share represents one vote. All of BASF SE's
shares are registered shares. Shareholders are obliged to have
themselves entered with their shares into the company share
register and to provide the information necessary for registra-
tion in the share register according to the German Stock Cor-
poration Act. There are no registration restrictions and there is
no limit to the number of shares that can be registered to one
shareholder. Only the persons listed in the share register are
entitled to vote as shareholders. Listed shareholders may
exercise their voting rights at the Annual Shareholders' Meet-
ing either personally, through a representative of their choice
or through a company-appointed proxy authorized by the
shareholders to vote according to their instructions. There are
neither voting caps to limit the number of votes a shareholder
may cast nor special voting rights. BASF has fully implement-
ed the principle of "one share, one vote."
All shareholders entered in the share register are entitled to
participate in the Annual Shareholders' Meetings, to have their
say concerning any item on the agenda and to request infor-
mation about company issues insofar as this is necessary to
make an informed judgment about the item on the agenda
under discussion. Registered shareholders are also entitled to
file motions pertaining to proposals for resolutions made by
the Board of Executive Directors and Supervisory Board at the
Annual Shareholders' Meeting and to contest resolutions of
the Meeting and have them evaluated for their lawfulness in
court.
Shareholders who hold at least €500,000 of the compa-
ny's share capital, a quota corresponding to 390,625 shares,
are furthermore entitled to request that additional items be
added to the agenda of the Annual Shareholders' Meeting.
Implementation of the German Corporate
Governance Code (GCGC)
131
As a target figure for the Board of Executive Directors, the
Supervisory Board determined that, in accordance with sec-
tion 111(5) AktG for the second target-attainment period after
the law's entry into force, which began on January 1, 2017,
the Board of Executive Directors should continue to have at
On April 24, 2015, the Law on Equal Participation of Women
and Men in Leadership Positions in the Private and Public
Sector came into force in Germany. The supervisory board of
a publicly listed European society (SE) that is composed of the
same number of shareholder and employee representatives
must, according to section 17(2) of the SE Implementation
Act, consist of at least 30% each of women and men. The
Supervisory Board of BASF SE currently comprises three
women and nine men. Two of the six shareholder representa-
tives elected at the Annual Shareholders' Meeting are women.
According to the legal stipulations of section 17(2) SE Imple-
mentation Act, the minimum quota is not to be fulfilled imme-
diately but rather upon any necessary reappointments, that is,
new elections. In 2017, the employee-elected Supervisory
Board member Robert Oswald left the Supervisory Board. He
is succeeded by Sinischa Horvat, who joined the Supervisory
Board without additional appointment, that is, without elec-
tion, as the member personally chosen to replace Robert
Oswald as early as 2013 until the end of the 2019 Annual
Shareholders' Meeting. In accordance with legal regulations,
the minimum quota will therefore be reached after the next
regular Supervisory Board election in 2019 at the latest.
Minimum quota on Supervisory Board, target figures
for Board of Executive Directors and top
management
BASF Report 2017
Corporate Governance
Corporate governance report
Diversity concept
The Supervisory Board strives to achieve a reasonable level of
diversity with respect to character, gender, international repre-
sentation, professional background, specialist knowledge and
experience as well as age distribution, and takes the following
composition criteria into account:
- At least 30% women and 30% men
- At least 30% of members have international experience
based on their background or professional experience
- At least 50% of members have different educational back-
grounds and professional experience
- At least 30% under the age of 60
BASF SE follows all recommendations of German
Corporate Governance Code (GCGC)
Further composition objectives
- Age limit and period of membership: Persons who have
reached the age of 72 on the day of election by the Annual
Shareholders' Meeting should generally not be nominated
for election. Membership on the Supervisory Board should
generally not exceed 15 years; this corresponds to three
regular statutory periods in office.
- Independence: All Supervisory Board members should be
independent within the meaning of the criteria specified in the
German Corporate Governance Code (GCGC). This means
that they may not have a personal or business relationship
with BASF, its governing bodies, a controlling shareholder or
a company affiliated with this controlling shareholder that
may cause a substantial and not merely temporary conflict of
interest. The Supervisory Board has additionally defined the
following principles to clarify the meaning of independence:
The independence of employee representatives is not com-
promised by their role as an employee representative
or employment by BASF SE or a Group company. Prior
membership of the Board of Executive Directors does not
preclude independence following the expiry of the statutory
cooling-off period of two years. Members who have sat on
the Supervisory Board for more than 15 years are not consid-
ered independent. Based on these criteria, the Supervisory
Board should comprise at least 10 independent members;
this also means that of the total of six shareholder represen-
tatives, at least four must be independent.
Status of implementation
According to the Supervisory Board's own assessment, its
current composition already meets nearly all of the require-
ments of the competence profile. Only the competence area of
digitalization is not yet completely covered. The Supervisory
Board intends to meet the competence profile in full with its
nominations for election to the Supervisory Board in 2019.
The same applies to the diversity concept. The Super-
visory Board currently comprises 25% women. The target of
30%, which also corresponds to the statutory quota, is to be
met following the Supervisory Board elections in 2019.
According to the Supervisory Board's assessment, 11 of
the 12 current members are considered independent based
on the above criteria. One member of the Supervisory Board
no longer meets the independence criteria as he has been a
member of the Supervisory Board since May 1998.
For more information on the statutory minimum quotas for the number
of women and men on the Supervisory Board, see the section below
The independent Supervisory Board members are named under
Management and Supervisory Boards on page 139
Commitments to promote the participation of
women in leadership positions at BASF SE
- Character and integrity: All members of the Supervisory
Board must be personally reliable and have the knowledge
and experience required to diligently and independently
perform the work of a supervisory board member.
- Availability: Each member of the Supervisory Board ensures
that they invest the time needed to properly perform their
role as a member of the Supervisory Board of BASF SE. The
statutory limits on appointments to governing bodies and
the recommendations of the German Corporate Governance
Code (GCGC) must be complied with and the demands of
the capital market given appropriate consideration when
accepting further appointments.
Compliance Program and Code of Conduct
BASF advocates responsible corporate governance that
focuses on sustainably increasing the value of the company.
The joint Declaration of Conformity 2017 by the Board of Executive
Directors and Supervisory Board of BASF SE is rendered on page 157
For more information on the Declaration of Conformity 2017, the
implementation of the Code's suggestions and the German Corporate
Governance Code, see basf.com/en/governance
No member of the Board of Executive Directors or the Super-
visory Board owns shares in BASF SE and related options or
other derivatives that account for 1% or more of the share
capital. Furthermore, the total volume of BASF SE shares and
related financial instruments held by members of the Board of
Executive Directors and the Supervisory Board accounts for
less than 1% of the shares issued by the company.
Share dealings of the Board of Executive
Directors and Supervisory Board (obligatory
reportable and publishable directors' dealings
under Article 19(1) of the E.U. Market Abuse
Regulation 596/2014 (MAR))
As legally stipulated by Article 19(1) MAR, all members of the
Board of Executive Directors and the Supervisory Board as
well as certain members of their families are required to
disclose the purchase or sale of financial instruments of BASF
SE (e.g., shares, bonds, options, forward contracts, swaps) to
the Federal Financial Supervisory Authority (Bundesanstalt für
Finanzdienstleistungsaufsicht) and to the company if transac-
tions within the calendar year exceed the threshold of €5,000.
In 2017, a total of five purchases by members of the Board
of Executive Directors and the Supervisory Board and mem-
bers of their families subject to disclosure were reported as
Directors' Dealings, involving between 510 and 10,000 BASF
shares. The price per share was between €79.12 and €80.36.
The volume of the individual trades was between €40,494 and
€800,161.70. The disclosed share transactions are published
on the website of BASF SE.
For more information on securities transactions reported in 2017,
see basf.com/en/governance/sharedealings
Information on the auditor
The Annual Shareholders' Meeting of May 12, 2017, once
again elected KPMG AG Wirtschaftsprüfungsgesellschaft as
the auditor of the BASF Group Consolidated Financial State-
ments and Separate Financial Statements of BASF SE for the
2017 business year, as well as for those reports' correspond-
ing Management's Reports. KPMG member firms also audit
the majority of companies included in the Consolidated Finan-
cial Statements. KPMG has been the continuous auditor of
BASF SE since the 2006 Financial Statements. For this reason,
a public call to tender was made in 2015 to all auditors for the
audit of the 2016 Consolidated and Separate Financial State-
ments, in line with the E.U. Regulation 537/2014 of April 16,
2014. Based on the results of the tendering process, the Audit
Committee recommended to the Supervisory Board that it
once again propose KPMG for election. After completing the
tendering process, KPMG can now be proposed for election
at the Annual Shareholders' Meeting as BASF's auditor with-
out further tendering processes up to and including the 2025
business year. Alexander Bock has been the auditor responsi-
ble for the Consolidated Financial Statements since auditing
the 2017 Financial Statements. Since the 2017 Financial
Statements, the auditor responsible for the Separate Financial
Statements has been Dr. Stephanie Dietz.
The total fee paid to KPMG and auditing firms of the KPMG
group by BASF SE and other BASF Group companies for
non-audit services, in addition to the auditing fee, was
€0.7 million in 2017. This represents around 3.8% of the fees
for auditing the financial statements.
Michael Heinz
BASF Report 2017
Compliance
Corporate Governance 135
Compliance
Code of Conduct
Forms core of our
Compliance Program
More than 33,500
Participants in
compliance training
75 audits
Conducted internally
on compliance
Share ownership by Members of the Board of
Executive Directors and the Supervisory Board
BASF SE has taken out liability insurance that covers the
activities of members of the Board of Executive Directors and
the Supervisory Board (directors' and officers' liability insur-
ance). This policy provides for the level of deductibles for the
Board of Executive Directors as prescribed by section 93(2)
sentence 3 AktG and for the level of deductibles for the Super-
visory Board as recommended in section 3.8(3) of the German
Corporate Governance Code (GCGC) (10% of damages up to
one-and-a-half times the fixed annual compensation).
Directors' and Officers' liability insurance
The remaining specifications stipulated in section 315a(1)
HGB refer to situations that are not applicable to BASF SE.
For more information on bonds issued by BASF SE,
see basf.com/en/investor/bonds
Disclosures according to section 315a(1) of the
German Commercial Code (HGB) and
explanatory report of the Board of Executive
Directors according to section 176(1) sentence 1
of the German Stock Corporation Act (AktG)
As of December 31, 2017, the subscribed capital of BASF SE
was €1,175,652,728.32 divided into 918,478,694 registered
shares with no par value. Each share entitles the holder to one
vote at the Annual Shareholders' Meeting. Restrictions on the
right to vote or transfer shares do not exist. The same rights
and duties apply to all shares. According to the Statutes,
shareholders are not entitled to receive share certificates.
BASF Report 2017
Corporate Governance
Corporate governance report
There are neither different classes of shares nor shares with
preferential voting rights (golden shares).
The appointment and dismissal of members of the Board
of Executive Directors is legally governed by the regulations in
Article 39 of the SE Council Regulation, section 16 of the SE
Implementation Act and sections 84, 85 AktG as well as Article
7 of the BASF SE Statutes. Accordingly, the Supervisory
Board determines the number of members of the Board of
Executive Directors (at least two), appoints the members of
the Board of Executive Directors, and can nominate a chair-
person, as well as one or more vice chairpersons. The mem-
bers of the Board of Executive Directors are appointed for a
maximum of five years, and reappointments are permissible.
The Supervisory Board can dismiss a member of the Board of
Executive Directors if there is serious cause to do so. Serious
cause includes, in particular, a gross breach of the duties
pertaining to the Board of Executive Directors and a vote of no
confidence at the Annual Shareholders' Meeting. The Supervi-
sory Board decides on appointments and dismissals accord-
ing to its own best judgment.
According to Article 59(1) SE Council Regulation, amend-
ments to the Statutes of BASF SE require a resolution of the
Annual Shareholders' Meeting adopted with at least a two-
thirds majority of the votes cast, provided that the legal provi-
sions applicable to German stock corporations under the
German Stock Corporation Act do not stipulate or allow for
larger majority requirements. In the case of amendments to
the Statutes, the section 179(2) of the German Stock Corpo-
ration Act requires a majority of at least three-quarters of the
subscribed capital represented.
Pursuant to Article 12(6) of the Statutes of BASF SE, the
Supervisory Board is authorized to resolve upon amendments
to the Statutes that merely concern their wording. This applies
in particular to the adjustment of the share capital and the
number of shares after the redemption of repurchased BASF
shares and after a new issue of shares from the authorized
capital.
BASF SE follows all recommendations of the German
Corporate Governance Code (GCGC) in its most recently
revised version of February 2017. In the same manner, BASF
has followed nearly all of the nonobligatory suggestions of the
German Corporate Governance Code (GCGC). We have not
implemented the suggestion to enable shareholders to follow
the proceedings of the entire Annual Shareholders' Meeting
online. The Annual Shareholders' Meeting is publicly accessi-
ble via online broadcast until the end of the speech by the
Chairman of the Board of Executive Directors. The subsequent
discussion of items on the agenda is not accessible online in
order to preserve the character of the Annual Shareholders'
Meeting as a meeting attended by our shareholders on-site.
Until May 1, 2019, the Board of Executive Directors of
BASF SE is empowered by a resolution passed at the Annual
Shareholders' Meeting of May 2, 2014, to increase the sub-
scribed capital - with the approval of the Supervisory Board -
by a total amount of €500 million through the issue of new
shares against cash or contributions in kind (authorized capi-
tal). A right to subscribe to the new shares shall be granted to
shareholders. This can also be done by a credit institution
acquiring the new shares with the obligation to offer these to
shareholders (indirect subscription right). The Board of Execu-
tive Directors is authorized to exclude the statutory subscrip-
tion right of shareholders to a maximum amount of a total of
20% of share capital in certain exceptional cases that are
defined in Article 5(8) of the BASF SE Statutes. This applies in
particular if, for capital increases in return for cash contribu-
tions, the issue price of the new shares is not substantially
lower than the stock market price of BASF shares and the total
number of shares issued under this authorization is not more
than 10% of the stock of shares on the date of issue or, in eli-
By way of a resolution of the Annual Shareholders' Meeting
on May 12, 2017, the share capital was increased conditionally
by up to €117,565,184 by issuing up to 91,847,800 new
shares. The contingent capital increase serves to grant shares
to the holders of convertible bonds or warrants attached to
bonds with warrants of BASF SE or a subsidiary, which the
Board of Executive Directors is authorized to issue up to May
11, 2022 by way of a resolution of the Annual Shareholders'
Meeting on May 12, 2017. A right to subscribe to the bonds
shall be granted to shareholders. The Board of Executive
Directors is authorized to exclude the subscription right in
certain exceptional cases that are defined in Article 5(9) of the
BASF SE Statutes.
At the Annual Shareholders' Meeting on May 12, 2017, the
Board of Executive Directors was authorized to purchase up
to 10% of the shares existing at the time of the resolution (10%
of the company's share capital) until May 11, 2022. At the
discretion of the Board of Executive Directors, the purchase
can take place on the stock exchange or by way of a public
purchase offer directed to all shareholders. The Board of
Executive Directors is authorized to sell the repurchased com-
pany shares (a) through a stock exchange, (b) through a public
offer directed to all shareholders and - with the approval of the
Supervisory Board - to third parties, (c) for a cash payment
that is not significantly lower than the stock exchange price at
the time of sale and (d) for contributions in kind, particularly in
connection with the acquisition of companies, parts of compa-
nies or shares in companies or in connection with mergers. In
the cases specified under (c) and (d), the shareholders' sub-
scription right is excluded. The Board of Executive Directors is
furthermore authorized to redeem the shares bought back and
to reduce the share capital by the proportion of the share
capital accounted for by the redeemed shares.
Bonds issued by BASF SE grant the bearer the right to
request early repayment of the bonds at nominal value if one
person - or several persons acting in concert - hold or acquire
a BASF SE share volume after the time of issuance which
corresponds to more than 50% of the voting rights (change of
control), and one of the rating agencies named in the bond's
terms and conditions withdraws its rating of BASF SE or the
bond, or reduces it to a noninvestment grade rating within 120
days after the change-of-control event.
In the event of a change of control, members of the Board
of Executive Directors shall, under certain additional condi-
tions, receive compensation (details of which are listed in the
Compensation Report on page 148). A change of control is
assumed when a shareholder informs BASF of a shareholding
of at least 25% or the increase of such a holding. In addition,
employees of BASF SE and its subsidiaries who are classed
as senior executives will receive a severance payment if their
contract of employment is terminated by BASF within 18
months of the occurrence of a change of control, provided the
employee has not given cause for the termination. The
employee whose service contract has been terminated in such
133
134 Corporate Governance
Corporate governance report
BASF Report 2017
a case will receive a maximum severance payment of 1.5
times the annual salary (fixed component) depending on the
number of months that have passed since the change-of-
control event.
gible individual cases, to acquire companies or shares in
companies in exchange for surrendering BASF shares.
Degree: Business Administration, 53 years old, 34 years at BASF
Responsibilities: Engineering & Maintenance; Environmental Protection,
Health & Safety; European Site & Verbund Management; Human Resources
First appointed: 2011, Term expires: 2019
Degree: Chemistry, 57 years old, 29 years at BASF
Saori Dubourg (since May 12, 2017)
The following member left the Supervisory
Board on May 12, 2017
RAG DSK AG (vice chairman)
RAG AG (vice chairman)
K+S Aktiengesellschaft (vice chairman)
Steag GmbH (member)
Michael Vassiliadis, Hannover, Germany*2
Chairman of the Mining, Chemical and Energy Industries Union
Member of the Supervisory Board since: August 1, 2004
Supervisory board memberships:
Member of the Supervisory Board since: January 14, 2008
Robert Oswald, Altrip, Germany*2
Denise Schellemans, Brecht, Belgium*2
Full-time trade union delegate
Anke Schäferkordt, Cologne, Germany*1
Deputy Chairman of the Works Council of BASF SE, Ludwigshafen Site
Member of the Supervisory Board since: April 29, 2016
Waldemar Helber, Otterbach, Germany*2
V & B Fliesen GmbH (member)
Steag New Energies GmbH (vice chairman)
Villeroy & Boch AG (member)
Member of the Executive Board of Bertelsmann SE & Co. KGaA
Co-Chief Executive Officer of RTL Group S.A. (until April 19, 2017)
Chief Executive Officer of Mediengruppe RTL Deutschland GmbH
Member of the Supervisory Board since: December 17, 2010
Comparable German and non-German supervisory bodies:
Métropole Télévision S.A. (member of the Supervisory Board)
Gerresheimer AG (vice chairman)
Vice Chairman of the Supervisory Board of BASF SE; Chairman of the Works
Council of BASF SE, Ludwigshafen Site; Chairman of BASF's Joint Work
Council
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 131 for the criteria used to determine independence)
1 Shareholder representative
Fixed salary
Overview of compensation
For more information on the Supervisory Board and its committees,
see page 139 and from page 154 onward
In 2016, the Supervisory Board engaged an independent
external compensation consultant with an appropriateness
review. The results of the appropriateness review revealed
that the compensation granted to BASF's Board of Executive
Directors is below that of the peer group. On this basis, the
Supervisory Board resolved to increase the compensation of
the Board of Executive Directors for the first time since January 1,
2014, effective January 1, 2017. The amount of the increase
was determined to position the compensation granted to
BASF's Board of Executive Directors competitively within the
peer group.
The amount and structure of compensation is determined by
the company's size, complexity and financial position, as well
as the performance of the Board of Executive Directors and
promotes the company's sustainable development. Internal
and external appropriateness of the Board's compensation is
reviewed by an independent external auditor on a regular ba-
sis. Globally operating companies based in Europe serve as
an external reference. For internal comparison, compensation
is considered in total as well as over time, especially for senior
executives.
Based on a proposal by the Personnel Committee, the Super-
visory Board determines the amount and structure of compen-
sation of members of the Board of Executive Directors.
Member of the Supervisory Board since: October 1, 2000
Compensation of the Board of Executive
Directors
This report outlines the main principles of the compensa-
tion for the Board of Executive Directors and discloses the
amount and structure of the compensation of each Board
member. Furthermore, it provides information on end-of-
service undertakings with respect to members of the
Board of Executive Directors, as well as information on
the compensation of Supervisory Board members.
BASF Report 2017
Compensation report
Compensation report
140 Corporate Governance
2 Employee representative
This report meets the disclosure requirements of the
German Commercial Code, supplemented by the addi-
tional requirements based on the German Act on
Disclosure of Management Board Remuneration
(Vorstandsvergütungs-Offenlegungsgesetz) as well as the
German Act on the Appropriateness of Management
Board Remuneration (Gesetz zur Angemessenheit der
Vorstandsvergütung), and is aligned with the recommen-
dations of the German Corporate Governance Code
(GCGC) in the version dated February 7, 2017.
Annual amount: €800,000¹
Payment:
Supervisory board memberships:
Member of the Executive Committee of the Mining, Chemical and Energy
Industries Union
Sinischa Horvat, Limburgerhof, Germany*2
Linde AG (vice chairman until May 10, 2017)
Siemens AG (member)
Fresenius SE & CO. KGaA (vice chairman)
Fresenius Management SE (member)
Allianz SE (chairman since May 7, 2017)
Supervisory board memberships:
Vice Chairman of the Supervisory Board of BASF SE
Member of the Supervisory Board since: May 6, 2003
Michael Diekmann, Munich, Germany*1
Comparable German and non-German supervisory bodies:
Nyxoah S.A. (nonexecutive director until December 31, 2017)
Daimler AG (member)
Trumpf GmbH & Co. KG (chairman)
Fuchs Petrolub SE (chairman)
Former Chairman of the Board of Executive Directors of BASF SE (until May 2011)
Member of the Supervisory Board since: May 2, 2014
Supervisory board memberships:
Vice Chairman of the Supervisory Board of BASF SE
Chairman of the Supervisory Board of Allianz SE
Member of the Supervisory Board since: May 2, 2014
Chairman of the Works Council of BASF SE, Ludwigshafen Site; Chairman of
BASF's Joint Works Council and of the BASF Works Council Europe
Member of the Supervisory Board since: May 12, 2017
Member of the Works Council of BASF SE, Ludwigshafen Site
Member of the Supervisory Board since: May 6, 2003
Francesco Grioli, Ronnenberg, Germany*2
Comparable German and non-German supervisory bodies:
Stihl Holding AG & Co. KG (member of the Advisory Board)
Linde AG (second deputy chairman)
Stihl AG (vice chairman)
Chairman of the Supervisory Board of Robert Bosch GmbH
Member of the Supervisory Board since: January 14, 2008
Supervisory board memberships:
Robert Bosch GmbH (chairman)
Franz Fehrenbach, Stuttgart, Germany*1
Ralf-Gerd Bastian, Neuhofen, Germany*2
*
Professor at the Swiss Federal Institute of Technology, Zurich, Switzerland
Prof. Dr. François Diederich, Dietikon, Switzerland¹
Land Securities Group plc (nonexecutive Chairman of the Board of Directors)
PACCAR Inc. (independent member of the Board of Directors)
Coller Capital Ltd. (nonexecutive member of the Board of Directors)
Zürich Versicherungs-Gesellschaft AG (independent, nonexecutive member
of the Administrative Council)
Member of the Supervisory Board since: May 2, 2014
Comparable German and non-German supervisory bodies:
Zurich Insurance Group AG (independent, nonexecutive member of the
Administrative Council)
Dame Alison Carnwath DBE, Exeter, England*1
Senior Advisor Evercore Partners
Member of the Supervisory Board since: May 19, 1998
Comparable German and non-German supervisory bodies:
BASF Antwerpen N.V. (Chairman of the Administrative Council since
April 20, 2017)
in equal installments
Annual target:
Cap:
Comparable German and non-German supervisory bodies:
Nord Stream AG (member of the Shareholders' Committee)
The following members left the Board of Executive Directors on May 12, 2017
Dr. Harald Schwager
First appointed: 2008, Term expired: May 12, 2017
Margret Suckale
Wintershall AG (Chairman of the Supervisory Board)
Degrees: Law, Business Administration, 61 years old, 8 years at BASF
First appointed: 2011, Term expired: May 12, 2017
Comparable German and non-German supervisory bodies:
BASF Antwerpen N.V. (Chairwoman of the Administrative Council until
April 20, 2017)
Management and Supervisory Boards - Board of Executive Directors
BASF Report 2017
Changes as of May 4, 2018
The Chairman of the Board of Executive Directors Dr. Kurt Bock
will step down from the Board of Executive Directors following
the Annual Shareholders' Meeting on May 4, 2018. The Supervi-
sory Board has appointed Dr. Martin Brudermüller, currently Vice
Chairman, as Chairman of the Board of Executive Directors
and Dr. Hans-Ulrich Engel as Vice Chairman of the Board of
Executive Directors from this date. In the course of these
changes, the number of Board members will be reduced from
eight to seven. The areas of responsibility within the Board of
Executive Directors will be as follows:
Dr. Hans-Ulrich Engel
Finance; Oil & Gas; Procurement; Supply Chain Operations & Information
Services; Corporate Controlling; Corporate Audit
138 Corporate Governance
Sanjeev Gandhi
First appointed: 2012, Term expires: 2020
Degrees: Chemical Engineering, Business Administration, 57 years old,
14 years at BASF
Degree: Business Administration, 46 years old, 21 years at BASF
Responsibilities: Construction Chemicals; Crop Protection; Bioscience
Research; Region Europe
First appointed: 2017, Term expires: 2020
Dr. Markus Kamieth (since May 12, 2017)
Degree: Chemistry, 47 years old, 19 years at BASF
Responsibilities: Care Chemicals; Nutrition & Health; Performance
Responsibilities: Catalysts; Coatings; Performance Materials; Market &
Business Development, Site & Verbund Management North America;
Regional Functions & Country Platforms North America
Chemicals; Advanced Materials & Systems Research; Region South America
First appointed: 2017, Term expires: 2020
Degree: Law, 58 years old, 30 years at BASF
Responsibilities: Finance; Oil & Gas; Procurement; Supply Chain
Operations & Information Services; Corporate Controlling; Corporate Audit
First appointed: 2008, Term expires: 2023
Internal memberships within the meaning of section 100(2) of the
German Stock Corporation Act:
Wintershall Holding GmbH (Chairman of the Supervisory Board)
Wayne T. Smith
Dr. Hans-Ulrich Engel
Annual variable compensation
Intermediates; Monomers; Petrochemicals; Greater China & Functions Asia
Pacific; South & East Asia, ASEAN & Australia/New Zealand
Engineering & Maintenance; Environmental Protection, Health & Safety;
European Site & Verbund Management; Human Resources
Company pension benefits
Annual amount corresponds to value of nonmonetary compensation
in a period of 4-8 years after the grant date, depending on
individual exercise date
€3,750,0001,2
Fringe benefits
Payment:
Annual service cost is the accounting figure for the pension entitlements accrued in
the relevant business year
incentive program (LTI program)
Long-term, share price-based
Annual amount granted is dependent on the fair value of the options as of the grant
date and the scope of the individual investment
after the Annual Shareholders' Meeting for the prior business year
Payment:
€2,500,000¹
€1,600,0001
Cap:
Michael Heinz
1 Amounts apply to an ordinary member of the Board of Executive Directors. The amount for the chairman of the Board of Executive Directors is 2 times this value, and 1.33 times this
value for the vice chairman.
Chairman of the Supervisory Board of BASF SE
Dr. Martin Brudermüller
Legal, Taxes, Insurance & Intellectual Property; Corporate Development;
Corporate Communications & Government Relations; Senior Executive
Human Resources; Investor Relations; Compliance; BASF 4.0; Corporate
Technology & Operational Excellence; Digitalization in Research &
Development; Innovation Management
Dr. Markus Kamieth
Care Chemicals; Dispersions & Pigments; Nutrition & Health; Performance
Chemicals; Advanced Materials & Systems Research; BASF New Business;
Region South America
Saori Dubourg
Construction Chemicals; Crop Protection; Bioscience Research;
Region Europe
2 To reach the cap, a Board member must make the maximum individual investment based on the maximum annual variable compensation and the set limit on the gain from exercising
the options granted must be reached.
Wayne T. Smith
BASF Report 2017
Supervisory Board
Corporate Governance
Management and Supervisory Boards - Supervisory Board
In accordance with the Statutes, the Supervisory Board of BASF SE comprises 12 members
The term of office of the Supervisory Board commenced follow-
ing the Annual Shareholders' Meeting on May 2, 2014, in which
the shareholder representatives on the Supervisory Board were
elected. It terminates upon conclusion of the Annual Share-
holders' Meeting that resolves on the discharge of members of
the Supervisory Board for the fourth complete business year
after the term of office commenced; this is the Annual Share-
holders' Meeting in 2019. The Supervisory Board comprises the
following members:
Dr. Jürgen Hambrecht, Neustadt an der Weinstraße,
Germany*1
Catalysts; Coatings; Performance Materials; Market & Business
Development, Site & Verbund Management North America; Regional Func-
tions & Country Platforms North America; Process Research & Chemical
Engineering
139
4 Fringe benefits include the assumption of additional taxes for 2017 and tax back payments for previous years arising in connection with transfers.
The company reimburses members of the Supervisory
Board for out-of-pocket expenses and value-added tax to be
paid with regard to their activities as members of the Super-
visory Board or of a committee. The directors' and officers'
liability insurance (D&O insurance) concluded by the company
covers the duties performed by the members of the Super-
visory Board. This policy provides for the level of deductibles
for the Supervisory Board as recommended in section 3.8(3) of
the German Corporate Governance Code (GCGC).
2017
2017
Sanjeev Gandhi
145
Corporate Governance
Compensation report
Dr. Hans-Ulrich Engel
(since May 12, 2017)
Saori Dubourg
2016
BASF Report 2017
1 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
2017
1,872
1,156
3,011
2,187
Total compensation
(816)
(373)
less service cost
1,815
1,031
compensation
plus allocated actual annual variable
(791)
2016
2017
2017
37
37
37
5381
5381
5381
4551
800
800
800
650
507
507
507
(max)
(min)
(max)
(min)
(max)
(min)
2017
2017
2017
2016
2017
(1,019)
(1,600)
(1,300)
compensation
182
1,546
0
363
LTI program 2017 (2017-2025)
422
LTI program 2016 (2016-2024)
775
0
182
1,546
0
363
422
Multiple-year variable compensation
1,593
0
1,019
2,500
0
1,600
1,300
Annual variable target compensation
534
534
0
92
775
2,456
less granted annual variable target
connection with GAS 17
Reconciliation reporting of total compensation
pursuant to section 314(1) no. 6a HGB in
3,693
1,325
2,526
5,695
1,649
Total compensation of the Supervisory Board in 2017 was
around €3.3 million (2016: around €3 million). The compen-
sation of the individual Supervisory Board members was as
follows.
2,829
Total compensation in accordance with GCGC
791
791
791
816
816
816
373
Service cost
2,902
534
1,735
4,879
833
2,796
Total
59
59
59
(1,300)
(1,019)
6,589
3,574
5,295
3,600
5,602
1,556
3,519
2,827
3,157
1,340
2,412
957
957
957
445
697
697
697
363
796
796
796
5,632
(1,600)
2,617
(1,300)
1,156
2017
2016
2017
2017
2017
2016
(until May 12, 2017)
(until May 12, 2017)
Margret Suckale
Wayne T. Smith
Dr. Harald Schwager
4,553
2,886
3,037
2,195
1,753
(957)
(445)
(697)
(363)
(796)
1,815
1,031
1,815
1,031
(1,600)
534
4,338
4,905
0
1,600
1,300
2,500
0
1,600
1,300
1,593
0
1,019
2,617
2,617
2,617
1,433
859
859
859
742
544
544
544
2,0792,3
2,0792,3
2,0792,3
9782
2,500
3,155
53
224
859
2,822
2,464
2,361
544
1,616
515
0
121
1,546
0
363
224
0
53
422
422
515
0
121
422
1,546
0
363
422
0
2017
833
833
2016
2017
2017
2017
2016
Vice Chairman of the Board of Executive Directors
Chairman of the Board of Executive Directors
Dr. Martin Brudermüller
Dr. Kurt Bock
Compensation granted in accordance with the German Corporate Governance Code (GCGC) (thousand €)
BASF Report 2017
2017
Compensation report
143
Furthermore, a reconciliation statement for total compen-
sation to be reported is provided below the table "Compen-
sation granted in accordance with the German Corporate
Governance Code (GCGC)" due to the disclosures required
by section 314(1) no. 6a of the German Commercial Code
(HGB) in connection with the German Accounting Standard
17 (GAS 17).
The table "Compensation granted in accordance with the
German Corporate Governance Code (GCGC)" shows: fixed
salary, fringe benefits, annual variable target compensation,
LTI program measured at fair value as of the grant date and
service cost. The individual compensation components
are supplemented by individually attainable minimum and
maximum compensation.
Compensation granted in accordance with the German
Corporate Governance Code (GCGC)
The tables on pages 144 to 147 show the granted and allo-
cated compensation as well as service cost of each member
of the Board of Executive Directors in accordance with sec-
tion 4.2.5(3) of the German Corporate Governance Code
(GCGC) in the version dated February 7, 2017.
Amount of total compensation
Board members are members of the BASF Pensions-
kasse WaG, as are generally all employees of BASF SE.
Contributions and benefits are determined by the Statutes of
the BASF Pensionskasse WaG and the General Conditions
of Insurance.
The pension units also include survivor benefits. Upon
the death of an active or former member of the Board of
Executive Directors, the surviving spouse receives a survivor
pension amounting to 60% of the Board member's pension
entitlement. The orphan pension amounts to 10% for each
half-orphan, 33% for an orphan, 25% each for two orphans
and 20% each for three or more orphans of the pension
entitlement of the deceased (former) Board member. Total
survivor benefits may not exceed 75% of the Board member's
pension entitlement. If the survivor pensions exceed the
upper limit, they will be proportionately reduced.
The sum of the pension units accumulated over the
reporting years determines the respective Board member's
pension benefit in the event of a claim. This is the amount that
is payable on retirement, disability or death. Pension benefits
fall due at the end of service on reaching the age of 60 (for
members first appointed to the Board of Executive Directors
after January 1, 2017: on reaching the age of 63), or on
account of disability or death. Pension payments are reviewed
on a regular basis and adjusted by at least 1% each year.
The variable component of the pension unit is the result of
multiplying the fixed component with a factor based on the
relevant return on assets in the reporting year concerned, as
well as the performance factor used to determine the actual
annual variable compensation (variable pension component).
The amount resulting from the fixed and the variable pension
component is converted into a pension unit (lifelong pension)
using actuarial factors (annuity conversion factor) based
on an actuarial interest rate (5%), the probability of death,
invalidity and bereavement according to Heubeck Richttafeln,
2005G (modified) and an assumed pension increase (at least
1% each year).
The annual pension benefits accruing to Board members in a
given reporting year (pension unit) are composed of a fixed
and a variable component. The fixed component is calculat-
ed by multiplying the annual fixed salary above the Social
Security Contribution Ceiling by 32% (fixed pension compo-
nent).
144 Corporate Governance
2017
2017
(min)
1,684
1,684
1,684
1,368
Total
46
46
46
2391
84
84
84
1,064
1,064
1,064
865
1,600
1,600
1,600
1,300
68
Fringe benefits
Fixed salary
(max)
(min)
(max)
Corporate Governance
Compensation report
BASF Report 2017
unit
Annual pension
Key performance indicator for the success of the BASF
Group: return on assets
- Evaluation of target achievement in the current and previous
two business years and definition of a performance factor of
between 0 and 1.5
- Agreement of short-term operational targets and medium-
and long-term strategic goals
Actual annual variable compensation is based on the
achievement of set targets and the company's success
Annual variable compensation
Board members, like other employee groups, may contrib-
ute a portion of their actual annual variable compensation into
a deferred compensation program. For members of the Board
of Executive Directors, as well as for all other senior executives
of the BASF Group in Germany, the maximum amount that
can be contributed to this program per year is €30,000. Board
members have taken advantage of this offer to varying
degrees.
A cap of €2,500,000 was defined for the actual annual
variable compensation. The amount for the chairman of the
Board of Executive Directors is 2 times this value, and 1.33
times this value for the vice chairman.
The actual amount is calculated by multiplying the amount
of annual variable compensation for the relevant return on
assets by the average of the performance factor for the current
and the previous two years. The actual annual variable
compensation for the business year under review is payable
after the Annual Shareholders' Meeting.
Annual variable compensation is defined for each relevant
return on assets value. It declines at a faster rate if the return
on assets is lower than 8% and increases at a slower rate if the
return on assets is higher than 12%. The relevant return on
assets for 2017 is 10.6% (2016: 7.7%).
The Supervisory Board assesses target achievement in the
current and the previous two years. A performance factor with a
value between 0 and 1.5 is determined on the basis of the target
achievement ascertained by the Supervisory Board. The return
on assets is also used to determine the variable compensation
for all other employee groups. The annual variable target
compensation for a target return on assets for the Board of
Executive Directors of 10% and a target achievement of 100%
is double the fixed salary.
2. Annual variable compensation
The fixed salary is a set amount of yearly compensation paid
out in equal installments. The fixed salary was increased effec-
tive January 1, 2017 for the first time since January 1, 2014.
The annual fixed salary for an ordinary member of the Board of
Executive Directors is €800,000, compared with €650,000 in
the three years prior. The amount for the chairman of the
Board of Executive Directors is 2 times this value, and 1.33
times this value for the vice chairman.
1. Fixed salary
Individual compensation components
5. Company pension benefits
4. Nonmonetary compensation and other additional
compensation (fringe benefits)
3. Long-term, share price-based incentive program
(LTI program)
2. Annual variable compensation
1. Fixed salary
Compensation components
The compensation of the Board of Executive Directors is
designed to promote sustainable corporate development. It is
marked by a pronounced variability in relation to the perfor-
Imance of the Board of Executive Directors and the BASF
Group's success.
Principles and structure
141
Corporate Governance
Compensation report
BASF Report 2017
The amount of the actual annual variable compensation is based
on the performance of the Board of Executive Directors as
a whole and the BASF Group's return on assets adjusted for
special effects. In order to assess the sustainable performance
of the Board of Executive Directors, each year the Supervisory
Board sets a target agreement with the entire Board of Executive
Directors that primarily contains medium- and long-term goals.
1,104
142 Corporate Governance
BASF Report 2017
11
factor
Annuity
conversion
Variable pension
component
Fixed pension
component
As part of the pension benefits granted to the Board of Execu-
tive Directors (Board Performance Pension), company pension
benefits are intended to accrue annual pension units, the
amount of which depend on the company's success and the
performance of the Board of Executive Directors as a whole in
the business year concerned. The method used to determine
the amount of the pension benefits generally corresponds to
that used for all other senior executives of the BASF Group in
Germany.
- Pension benefits due: on reaching the retirement age of 60
(63 for members first appointed to the Board of Executive
Directors since 2017) or on account of disability or death
- Pension entitlement: retirement, disability and surviving
dependents' pensions
· Accrual of annual pension units, the amount of which
depend on the company's success and the performance
of the Board of Executive Directors as a whole
Board Performance Pension
For more information on the LTI program, see page 46 and from
page 231 onward
For more information on share ownership by members of the Board of
Executive Directors, see page 134
An LTI program exists for members of the Board of Executive
Directors. It is also offered to all other senior executives of
BASF Group. Members of the Board of Executive Directors
are subject to a stricter set of rules than are contained in the
general program conditions: for instance, they are required to
participate in the program with at least 10% of their actual
annual variable compensation. This mandatory investment
consisting of BASF shares is subject to a holding period of four
years (share ownership obligation). For any additional voluntary
investment of up to 20% of the actual annual variable compen-
sation, the general holding period of two years applies. Mem-
bers of the Board of Executive Directors may exercise their
options four years after they have been granted at the earliest
(vesting period). Each member of the Board of Executive
Directors may decide individually on the timing and scope of
the exercise of options within the four-year exercise period
following the vesting period. From the 2013 LTI program
onward, the maximum exercise gain is capped at five times the
original individual investment. For programs from previous
years, the maximum exercise gain is capped at 10 times the
original individual investment. Due to the multiple-year exercise
period, it can occur that exercise gains from several LTI
program years accumulate inside of one year; there can also
be years without any exercise gains.
5. Company pension benefits
The members of the Board of Executive Directors are
covered by a directors' and officers' liability insurance (D&O
insurance) concluded by the company. This policy provides for
the level of deductibles for the Board of Executive Directors as
prescribed by section 93(2) sentence 3 of the German Stock
Corporation Act.
Fringe benefits include delegation allowances, accident insur-
ance premiums, transportation and benefits from the provision
of security measures by the company. The members of the
Board of Executive Directors did not receive loans or advances
from the company in 2017.
4. Nonmonetary compensation and other additional
compensation (fringe benefits)
- Maximum exercise gain (cap): five times the individual
investment
Exercise first possible: four years after the grant date
(vesting period)
- Term: eight years
Holding obligation: mandatory individual investment in
BASF shares with a holding obligation of 10% of the actual
annual variable compensation, plus up to an additional 20%
of the actual annual variable compensation on a voluntary
basis
Relative performance threshold: BASF shares outperform
the MSCI World Chemicals Index and no share price loss
compared with the base price on the option
grant date
- Absolute performance threshold: BASF share price gains
at least 30% compared with the base price for the LTI
program concerned
LTI program
3. Long-term, share price-based incentive program
(LTI program)
Compensation report
1,110
1,110
1,110
2016
(since May 12, 2017)
Dr. Markus Kamieth
Michael Heinz
4,007
3,036
6,039
4,273
Total compensation
(1,001)
(471)
(1,142)
(537)
less service cost
2,414
1,371
3,629
2,061
compensation
plus allocated actual annual variable
(2,128)
(1,729)
(3,200)
(2,600)
compensation
2017
less granted annual variable target
2017
2016
734
Total
27
27
27
33
33
33
84
Fringe benefits
507
507
507
800
800
800
650
Fixed salary
(max)
(min)
(max)
(min)
2017
2017
2017
2017
833
connection with GAS 17
7,492
3,092
0
726
LTI program 2017 (2017-2025)
561
844
LTI program 2016 (2016-2024)
2,056
0
483
561
3,092
0
726
844
Multiple-year variable compensation
3,325
0
2,128
1,729
5,000
0
3,200
2,600
Annual variable target compensation
483
Reconciliation reporting of total compensation
pursuant to section 314(1) no. 6a HGB in
0
Total
2,111
4,722
3,865
10,918
2,826
6,752
5,349
Total compensation in accordance with GCGC
1,001
1,001
1,001
471
1,142
1,142
1,142
537
Service cost
6,491
1,110
3,721
3,394
9,776
1,684
5,610
4,812
2,056
2017
3,612
2017
296
2016
2017
Multiple-year variable compensation
1,156
1,031
1,815
1,031
1,815
Actual annual variable compensation¹
534
650
734
1,433
2,617
Total
27
84
33
9783
2,0793,4
Fringe benefits
507
650
833
25
83
321
277
791
373
816
445
957
Service cost
3,333
984
1,690
1,765
2,648
2,464
4,432
Total
LTI program 2013 (2013-2021)
LTI program 2012 (2012-2020)
LTI program 2011 (2011-2019)
1,569
LTI program 2009 (2009–2017)
LTI program 2010 (2010-2018)
LTI program 2008 (2008-2016)
1,569
1,031
663
733
800
4552
5382
Fixed salary
1,773
6,711
796
471
1,001
537
1,142
Service cost
1,700
4,132
3,524
7,815
9,817
Total
LTI program 2013 (2013-2021)
LTI program 2012 (2012-2020)
LTI program 2011 (2011-2019)
1,657
4,0373
4,5043
4,3864
LTI program 2008 (2008-2016)
LTI program 2009 (2009-2017)
LTI program 2010 (2010-2018)
4,0373
1,657
4,3864
697
359
363
with GCGC
2016
2017
2016
2017
2016
2017
(until May 12, 2017)
Dr. Harald Schwager
Dr. Markus Kamieth
(since May 12, 2017)
Corporate Governance
Compensation report
Michael Heinz
Sanjeev Gandhi
Compensation allocated in accordance with the German Corporate Governance Code (GCGC) (thousand €)
BASF Report 2017
4 At the end of the regular term of the LTI program 2008, exercise gains that were realized in 2012 or 2010 were allocated to Dr. Kurt Bock and Wayne T. Smith in 2016 in accordance with
the special conditions of the U.S. LTI program.
3 At the end of the regular term of the LTI program 2009, exercise gains that were realized in 2013 were allocated to Dr. Kurt Bock and Dr. Hans-Ulrich Engel in 2017 in accordance with
the special conditions of the U.S. LTI program.
2 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
1 The basis for the allocated actual annual variable compensation is the return on assets adjusted for special effects and the performance factor. This includes contributions made to the
deferred compensation program.
2,136
7,408
2,496
4,603
4,525
8,352
10,959
Total compensation in accordance
Total compensation in accordance
with GCGC
5,389
There is a general limit on severance pay (severance payment
cap) for all Board members. Accordingly, payments made to a
Board member upon premature termination of their contract,
without serious cause, may not exceed the value of two years'
compensation, including fringe benefits, nor compensate
more than the remaining term of the contract. The severance
payment cap is to be calculated on the basis of the total
compensation for the past business year and, if appropriate,
also the expected total compensation for the current business
year. If the appointment to the Board of Executive Directors is
prematurely terminated as the result of a change-of-control
event, the payments may not exceed 150% of the severance
compensation cap.
Corporate Governance
Compensation report
BASF Report 2017
The following applies to end of service due to a change-of-
control event: A change-of-control event, in terms of this
provision, occurs when a shareholder informs BASF of a
shareholding of at least 25%, or the increase of such a holding.
If a Board member's appointment is revoked within one year
following a change-of-control event, the Board member will
receive the contractually agreed payments for the remaining
contractual term of office as a one-off payment (fixed salary
and annual variable target compensation). The Board member
may also receive the fair value of the option rights acquired in
connection with the LTI program within a period of three
months or may continue to hold the existing rights under the
terms of the program. For the determination of the accrued
pension benefits from the Board Performance Pension, the time
up to the regular expiry of office is taken into consideration.
In the event that a member of the Board of Executive Directors
appointed before 2017 retires from employment before the
age of 60, either because their appointment was not extended
or was revoked for an important reason, they are entitled to
pension benefits if they have served on the Board for at least
10 years or if the time needed to reach legal retirement age is
less than 10 years. The company is entitled to offset compen-
sation received for any other work done against pension
benefits until the legal retirement age is reached.
End-of-service benefits
The present value of pension benefits (defined benefit
obligation) is an accounting figure for the entitlements that the
Board members have accumulated in their years of service at
BASF. The defined benefit obligations up to and including
2017 amounted to €20,313 thousand for Dr. Kurt Bock (2016:
€18,931 thousand), €17,248 thousand for Dr. Martin Bruder-
müller (2016: €15,929 thousand), €3,665 thousand for Saori
Dubourg, €11,811 thousand for Dr. Hans-Ulrich Engel (2016:
€10,968 thousand), €3,598 thousand for Sanjeev Gandhi
(2016: €2,409 thousand), €11,411 thousand for Michael Heinz
(2016: €10,229 thousand), €2,739 thousand for Dr. Markus
Kamieth, €11,462 thousand for Dr. Harald Schwager (2016:
€11,096 thousand), €4,165 thousand for Wayne T. Smith
(2016: €3,210 thousand) and €4,479 thousand for Margret
Suckale (2016: €4,315 thousand).
The values for service cost incurred in 2017 contain service
cost for BASF Pensionskasse WaG and Board Performance
Pension. Service cost for the members of the Board of
Executive Directors is shown individually in the tables
"Compensation granted in accordance with the German Cor-
porate Governance Code (GCGC)" and "Compensation allo-
cated in accordance with the German Corporate Governance
Code (GCGC)."
Pension benefits
For more information on the LTI program, see page 46 and from
page 231 onward
The income resulting from the accounting valuation of the
options granted to Dr. Harald Schwager and Margret Suckale,
former members of the Board of Executive Directors who
stepped down in 2017, are included in the total compensation
for former members of the Board of Executive Directors and
their surviving dependents.
The outstanding option rights held by the members of the
Board of Executive Directors resulted in the following income
and expenses in 2017: Dr. Kurt Bock: expense of €542 thou-
sand (2016: expense of €5,000 thousand); Dr. Martin
Brudermüller: income of €604 thousand (2016: expense of
€4,052 thousand); Saori Dubourg: expense of €8 thousand;
Dr. Hans-Ulrich Engel: income of €1,300 thousand (2016:
expense of €4,011 thousand); Sanjeev Gandhi: expense of
€178 thousand (2016: expense of €156 thousand);
Michael Heinz: income of €226 thousand (2016: expense of
€2,423 thousand); Dr. Markus Kamieth: expense of €26 thou-
sand; Wayne T. Smith: income of €35 thousand (2016:
expense of €1,872 thousand).
The expenses and income reported below are purely
accounting figures that do not equate with the actual gains
should options be exercised. Each member of the Board of
Executive Directors may decide individually on the timing and
scope of the exercise of options of the LTI programs, while
taking into account the terms and conditions of the program.
In 2017, some of the option rights granted resulted in an
expense and some resulted in income. This expense or
income refers to the total of all option rights from the LTI
programs 2009 to 2017 and is calculated as the difference in
the fair value of the option rights on December 31, 2017,
compared with the fair value on December 31, 2016, consid-
ering the option rights exercised and granted in 2017. The fair
value of the option rights is based primarily on the develop-
ment of the BASF share price and its relative performance
compared with the benchmark index, the MSCI World Chem-
icals Index.
Accounting valuation of multiple-year variable
compensation (LTI programs)
BASF Report 2017
2016
148 Corporate Governance
147
5 At the end of the regular term of the LTI program 2008, exercise gains that were realized in 2012 or 2010 were allocated to Dr. Kurt Bock and Wayne T. Smith in 2016 in accordance with
the special conditions of the U.S. LTI program.
3 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
2 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
1 The basis for the allocated actual annual variable compensation is the return on assets adjusted for special effects and the performance factor. This includes contributions made to the
deferred compensation program.
2,575
1,111
Further development of the compensation
system for the Board of Executive Directors
3,208
Changes to variable compensation and pension benefits
From the 2018 business year onward, the return on assets
will be replaced by the return on capital employed (ROCE) as
the key performance indicator on which the variable compen-
sation of all employee groups is based.
Each member of the Supervisory Board is required to use
25% of their fixed compensation to acquire shares in BASF SE,
and to hold these shares for the duration of membership on
the Supervisory Board. This does not apply to the amount of
compensation that the member of the Supervisory Board
transfers to a third party on a pro rata basis as a result of an
obligation entered into before their appointment to the Super-
visory Board. In this case, the utilization and holding obligation
applies to 25% of the remaining compensation after deducting
the amount transfered.
Members of the Supervisory Board who are members of a
committee, except for the Nomination Committee, receive an
additional fixed compensation of €12,500. The additional fixed
compensation for members of the Audit Committee is €50,000.
The amount of additional fixed compensation for the chairman
of a committee is 2 times this value, and 1.5 times this value for
the vice chairman.
Each member of the Supervisory Board receives an annual
fixed compensation of €200,000. The amount for the chairman
of the Supervisory Board is 2.5 times this value, and 1.5 times
this value for the vice chairman compared with the compensa-
tion of an ordinary member.
By way of a resolution of the Annual Shareholders' Meeting
on May 12, 2017, the compensation system for the Super-
visory Board in accordance with Article 14 of the Statutes was
changed to a fixed salary only plus share purchase and share
holding components from the 2017 business year onward. An
attendance fee is no longer granted.
A clause on the compensation of the Supervisory Board
was added to Article 14 of the company's Statutes by way of a
resolution of the Annual Shareholders' Meeting on May 4,
2006. This provided for an annual fixed salary of €60,000 for
each ordinary member of the Supervisory Board and perfor-
mance-based variable compensation based on earnings per
share (EPS) in the business year concerned in the period up to
and including 2016. The performance-based variable com-
pensation was capped at €120,000.
The disclosure of compensation of the Supervisory Board is
based on the German Commercial Code and is aligned with
the recommendations of the German Corporate Governance
Code (GCGC). The compensation of the Supervisory Board is
regulated by the Statutes of BASF SE passed by the Annual
Shareholders' Meeting.
2 The amount for the chairman of a committee is 2 times this value, and 1.5 times this
value for the vice chairman.
1 The amount for the chairman of the Supervisory Board is 2.5 times this value, and 1.5
times this value for the vice chairman compared with the compensation of an ordinary
member.
Compensation for committee memberships: €12,500²;
Audit Committee: €50,000²; Nomination Committee: no
additional compensation
- Share purchase and share holding component: 25% of the
fixed compensation must be used to purchase shares in
BASF; these shares must be held for the duration of
membership on the Supervisory Board
Fixed salary: €200,000¹
Compensation of Supervisory Board members
Compensation of Supervisory Board members
BASF Report 2017
Compensation report
Corporate Governance
150
149
Pension provisions for previous Board members and their
surviving dependents amounted to €144.3 million (2016:
€150.4 million).
Option rights that have not yet been exercised on retire-
ment are to be continued under the conditions of the program
including the associated holding period to emphasize that the
compensation for the Board of Executive Directors is geared
to sustainability.
Total compensation for previous Board members and their
surviving dependents amounted to €5.7 million in 2017 (2016:
€15.9 million). This figure also contains payments that previous
Board members have themselves financed through the
deferred compensation program and the expense or income
for 2017 relating to option rights that previous members of the
Board still hold from the time of their active service period. The
decline in total compensation was due to the fair value
measurement of these option rights, which generated total
income of €4.4 million in 2017 (2016: expense of €6.4 million).
Former members of the Board of Executive
Directors
The revised compensation system for the Board of Execu-
tive Directors will be submitted to the Annual Shareholders'
Meeting on May 4, 2018 for approval. A detailed description
will be published when the Annual Shareholders' Meeting is
convened.
For members first appointed to the Board of Executive
Directors after January 1, 2018, the pensionable age will be
increased from 60 to 63 years, as for the members first
appointed to the Board of Executive Directors in 2017.
In the future, under the Board Performance Pension,
members of the Board of Executive Directors will be able to
choose between payment of their pension entitlements in the
form of a lifelong pension or a lump sum.
In its meeting in December 2017, the Supervisory Board
resolved to further develop the compensation system for the
Board of Executive Directors and, from 2018 onward, replace
the annual variable compensation granted to date with a
performance bonus with a multiple-year, forward-looking
assessment basis in accordance with the amended recom-
mendations on variable compensation in the German Corpo-
rate Governance Code (GCGC) in the version dated February 7,
2017. In addition, a clawback clause will be introduced for the
variable compensation components.
4,5043
3,685
Total compensation in accordance
1,026
Total
58
17
1063
713
Fringe benefits
650
296
8282
9552
Fixed salary
2016
2017
2016
2017
(until May 12, 2017)
Margret Suckale
Wayne T. Smith
3,692
1,261
2,481
2,138
3,464
2,909
934
with GCGC
313
Actual annual variable compensation¹
309
135
445
844
Service cost
2,266
976
2,763
2,841
Total
LTI program 2013 (2013-2021)
LTI program 2012 (2012-2020)
LTI program 2011 (2011-2019)
527
LTI program 2010 (2010-2018)
LTI program 2009 (2009-2017)
7985
LTI program 2008 (2008-2016)
527
7985
Multiple-year variable compensation
1,031
663
1,031
1,815
708
1,031
Compensation report
1,156
1,220
2,455
1,338
0
314
1,546
0
431
1,338
0
314
321
422
422
1,338
0
314
422
1,546
0
431
517
1,338
0
517
2,573
2,751
3,057
1,870
3,901
3,196
2,850
598
1,497
2,814
135
135
135
309
844
844
844
445
277
277
277
359
2,565
313
1,212
2,430
5,072
1,026
314
422
914
0
321
321
25
83
296
296
296
650
9551
9551
9551
8281
296
296
296
650
(max)
(min)
(max)
(min)
(max)
(min)
2017
2017
1,815
225
5,916
25
712
585
1,300
2,500
0
1,600
1,300
914
0
585
1,300
313
313
313
708
1,026
1,026
1,026
934
321
17
17
17
58
712
71²
1062
2,739
733
448
2017
2016
2017
2016
1,300
1,600
Fixed salary
2017
Directors
Dr. Hans-Ulrich Engel
Saori Dubourg
(since May 12, 2017)
Vice Chairman of the
Board of Executive
Dr. Martin Brudermüller
Dr. Kurt Bock
Chairman of the Board of
Executive Directors
BASF Report 2017
Compensation allocated in accordance with the German Corporate Governance Code (GCGC) (thousand €)
The "Compensation allocated in accordance with the German
Corporate Governance Code (GCGC)" shown for 2016 and
2017 comprises the fixed and variable compensation compo-
nents actually allocated, plus the service cost calculated for
each member of the Board of Executive Directors in the
reporting years even though this does not actually represent
payment in the narrower sense.
Compensation allocated in accordance with the German
Corporate Governance Code (GCGC)
1 Saori Dubourg and Dr. Markus Kamieth were not yet members of the Board of
Executive Directors as of the reporting date for the LTI program 2016 (July 1, 2016).
163,764
127,276
Total
17,552
12,188
Margret Suckale (until May 12, 2017)
17,552
2016
14,076
2017
1,064
1,371
1,347
2,414
2,061
3,629
Actual annual variable compensation¹
Multiple-year variable compensation
742
859
544
1,104
1,110
1,368
1,684
92
59
37
2392
46
68
84
Fringe benefits
650
800
507
865
2016
Wayne T. Smith
Total
12,188
1,290
2,161
3,272
2,482
1,298
2,186
(135)
(309)
(844)
(445)
(277)
(359)
663
1,031
1,815
1,031
663
(585)
(1,300)
(1,600)
(1,300)
(585)
17,552
2,700
(1,300)
1 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
1,031
146 Corporate Governance
7,060
Dr. Markus Kamieth (since May 12, 2017)1
3 Fringe benefits include the payment of additional taxes for 2017 and tax back payments for previous years arising in connection with transfers.
Dr. Harald Schwager (until May 12, 2017)
17,552
14,076
17,552
4,692
Sanjeev Gandhi
17,552
14,076
Dr. Hans-Ulrich Engel
2,040
Michael Heinz
Saori Dubourg (since May 12, 2017)1
Compensation report
The table below shows the options granted to the Board of
Executive Directors on July 1 of both reporting years.
2017
2016
Dr. Kurt Bock
Number of options granted
23,344
35,108
Dr. Martin Brudermüller
18,724
28,156
The Board of Executive Directors
of BASF SE
572
Statements
Consolidated Financial
Corporate Governance
Management's Report
To Our Shareholders
4
The Supervisory Board
Pursuant to section 317(2) sentence 6 HGB, the auditor
checked that the disclosures according to section 315d HGB
were made.
The Declaration of Corporate Governance, pursuant to section
315d HGB in connection with section 289f HGB, comprises
the subchapters Corporate Governance Report including the
description of the diversity concept for the composition of the
Board of Executive Directors and the Supervisory Board
(except for the disclosures pursuant to section 315a(1) HGB),
Compliance and Declaration of Conformity as per section 161
of the German Stock Corporation Act (AktG) in the Corporate
Governance chapter. It is a component of the Management's
Report.
Declaration of Corporate Governance as per
section 315d of the German Commercial Code
(HGB) in connection with section 289f HGB
of BASF SE
Declaration of Corporate Governance
Declaration of Corporate Governance
158 Corporate Governance
157
17
BASF Report 2017
125
162
235
190
Commercial Code
Ludwigshafen, December 2017
with Section 313(2) of the German
168
Statement of income
BASF Group List of Shares Held in accordance
3
184
Scope of consolidation
2
Independent Auditor's Report
173
Summary of accounting policies
1
Policies and scope of consolidation
Statement by the Board of Executive Directors - 161
Notes
245
Supplementary Information on the Oil & Gas Segment
Overviews
2. The recommendations of the Government Commission
on the German Corporate Governance Code as amended
on February 7, 2017, published by the Federal Ministry
of Justice on April 24, 2017, in the official section of the
electronic Federal Gazette are complied with and will be
complied with.
Report of the Supervisory Board
The Board of Executive Directors and the Supervisory
Board of BASF SE hereby declare pursuant to section
161 AktG (Stock Corporation Act)
Corporate Governance
156
An important aspect of good corporate governance is the
independence of Supervisory Board members and their
freedom from conflicts of interest. According to assessments
of the Supervisory Board, eleven of its twelve members can be
considered independent within the meaning of the German
Corporate Governance Code and the additional criteria defined
by the Supervisory Board for evaluating their independence.
The criteria used for this evaluation can be found in the
Corporate Governance Report on page 131. In cases where
Supervisory Board members hold supervisory or management
positions at companies with which BASF has business
relations, we see no impairment of their independence. The
scope of these businesses is relatively marginal and further-
more takes place under conditions similar to those of a third
party. The Supervisory Board reviews the efficiency of its
activities every year in the form of a self-assessment. This took
place in 2017 as well, as the Chairman of the Supervisory
Board conducted individual dialogs with each Supervisory
Board member using a structured questionnaire. Topics
especially centered on Supervisory Board meeting agendas,
cooperation with the Board of Executive Directors, information
supply of the Supervisory Board, the Committees' duties,
composition and work, and cooperation with shareholder and
employee representatives. The results of these individual
meetings were presented and thoroughly discussed at the
Supervisory Board meeting on December 21, 2017. Overall,
its members rated the Supervisory Board's activity as efficient.
Independent of the efficiency review, the Audit Committee
also conducted a self-assessment of its activities in 2017
based on individual discussions with all of its members. Mate-
rial topic areas were the organization and content of the
Independence and efficiency review
The full Declaration of Conformity is rendered on page 157 and is
available to shareholders on the company website at
basf.com/en/governance
At its meeting of December 21, 2017, the Supervisory Board
approved the joint Declaration of Conformity by the Supervisory
Board and the Board of Executive Directors in accordance with
section 161 of the German Stock Corporation Act. BASF
complies with the recommendations of the German Corporate
Governance Code in the version dated February 7, 2017, with-
out exception. The Corporate Governance Report of the BASF
Group provides extensive information on BASF's corporate
governance.
For more information on the profiles of skills and expertise, diversity
concepts and composition goals, see page 128 and from page 130
onward
Code on structuring the variable components of the
compensation awarded to the Board of Executive Directors,
as well as the requirements on the composition of the
Supervisory Board and the Board of Executive Directors,
which are summarized in the profiles of skills and expertise
and diversity concepts for the Supervisory Board and the
Board of Executive Directors.
The Supervisory Board places great value on ensuring good
corporate governance: In 2017, it was therefore once again
intensely occupied with the corporate governance standards
practiced in the company and the implementation of the
recommendations and suggestions of the German Corporate
Governance Code in the version dated February 7, 2017. In
addition to the review of BASF's corporate governance culture,
topics of discussion were the implementation of the new
recommendations and suggestions of the German Corporate
Governance Code as well as the statutory requirements for the
Supervisory Board arising from the CSR Directive
Implementation Act. Discussions and decisions focused
especially on the implementation of the expanded
recommendations of the German Corporate Governance
Corporate Governance and Declaration of
Conformity
The Strategy Committee met four times in 2017. The
Committee was established to consult on strategic options for
the further development of the BASF Group and has com-
prised six members of the Supervisory Board since May 2017.
With the exception of one meeting, which one committee
member was unable to attend, all committee members
attended the meetings. At its meetings, the Committee
addressed in detail options for the strategic further develop-
ment of BASF's portfolio and proposed material acquisitions
and divestitures, particularly in the Agricultural Solutions and
Oil & Gas segments. The Committee's discussions and resolu-
tions repeatedly dealt with the intended acquisition of the seed
business offered by Bayer and the potential combination of the
BASF Group's and LetterOne's oil and gas businesses in a
joint venture, with the intention of later listing it on the stock
exchange.
objectives for the composition of the Supervisory Board
adopted by the Supervisory Board as well as the profile of skills
and expertise and diversity concept for the Supervisory Board
resolved at the meeting on December 21, 2017. The
Nomination Committee met once in 2017. All committee
members attended the meeting. The focus of the meeting was
consultation on the preparation of a profile of skills and expertise
and diversity concept for the Supervisory Board as a whole,
which aim to ensure that - based on a systematic review
individuals are nominated to the Annual Shareholders' Meeting
for election to the Supervisory Board that collectively posess all
of the professional and personal competencies and experience
that, according to the Supervisory Board's assessment, are
necessary to perform its tasks in full. Another focus of the
meeting was discussing the alternate candidates as well as
long-term planning and preparations for the succession of the
current Chairman of the Supervisory Board with the suggestion
to elect the current Chairman of the Board of Executive
Directors, Dr. Kurt Bock, as a member of the Supervisory Board
and its Chairman after expiry of the statutory cooling-off
period of two years following his departure from the Board of
Executive Directors.
-
155
Corporate Governance
Report of the Supervisory Board
BASF Report 2017
The Nomination Committee is responsible for preparing
candidate proposals for the election of those Supervisory
Board members who are elected by the Annual Shareholders'
Meeting. The Nomination Committee is guided by the
Statement of income and expense
Other important activities included advising the Board of
Executive Directors on accounting issues and the internal control
system. The Audit Committee focused on the internal auditing
system at the meeting on July 24, 2017, and compliance in the
BASF Group on December 20, 2017. In these meetings, the
head of the Corporate Audit department and the Chief
Compliance Officer reported to the Audit Committee and
answered its questions. In all meetings, the Audit Committee
also received information on the development of risks from
litigation.
BASF Report 2017
meetings and the supply of information as the basis of the
Committees' work. No notable need for action was identified.
Separate and Consolidated Financial
Statements
KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected
by the Annual Shareholders' Meeting for the 2017 reporting
year, has audited the Financial Statements of BASF SE and
the BASF Group Consolidated Financial Statements, which
were prepared in accordance with the International Financial
Reporting Standards (IFRS) as adopted by the European
Union, and the additional requirements that must be applied in
accordance with section 315e(1) of the German Commercial
Code (HGB), including the Management's Report and the
accounting records from which they were prepared, and have
approved them free of qualification. Furthermore, the auditor
certified that the Board of Executive Directors had taken the
measures incumbent on it under section 91(2) of the German
Stock Corporation Act (AktG) in an appropriate manner. In
particular, it had instituted an appropriate information and
monitoring system that fulfilled the requirements of the
company and is applicable for the early identification of
developments that could pose a risk to the continued existence
of the BASF Group. The results of the audit as well as the
procedure and material findings of the audit of the financial
statements are presented in the Auditor's Report, the content
of which has been significantly expanded since the 2017
Financial Statements.
Declaration of Conformity 2017 of the Board of
Executive Directors and the Supervisory Board
of BASF SE
Declaration of Conformity pursuant to section 161
of the German Stock Corporation Act (AktG)
Corporate Governance
Declaration of Conformity pursuant to section 161 of the German Stock Corporation Act (AktG)
BASF Report 2017
Jürgen Hambrecht
Chairman of the Supervisory Board
Jurgen Hambres
The Supervisory Board
Ludwigshafen, February 22, 2018
The Supervisory Board wishes to thank all employees of the
BASF Group worldwide and the management for their personal
contribution in the 2017 business year.
1. The recommendations of the Government Commission on
the German Corporate Governance Code as amended on
May 5, 2015, published by the Federal Ministry of Justice
on June 12, 2015, in the official section of the electronic
Federal Gazette, have been complied with since the sub-
mission of the last Declaration of Conformity in December
2016.
Thanks
Composition of the Supervisory Board
At its accounts meeting on February 22, 2018, the
Supervisory Board approved the Financial Statements of
BASF SE and the Consolidated Financial Statements of the
BASF Group prepared by the Board of Executive Directors,
making the 2017 Financial Statements final. The Supervisory
Board concurs with the proposal of the Board of Executive
Directors regarding the appropriation of profit and the payment
of a dividend of €3.10 per share.
key audit matters specified in the Auditor's Report, and
discussed them in detail with the auditor. The Chairman of the
Audit Committee gave a detailed account of the preliminary
review at the Supervisory Board meeting on February 22,
2018. On this basis, the Supervisory Board has examined the
Financial Statements and Management's Report of BASF SE
for 2017, the proposal by the Board of Executive Directors for
the appropriation of profit, and the Consolidated Financial
Statements and Management's Report for 2017. The results of
the preliminary review by the Audit Committee and the results
of the Supervisory Board's own examination fully concur with
those of the audit. The Supervisory Board sees no grounds for
objection to the management and submitted reports.
The Audit Committee reviewed the Financial Statements
and Management's Report at its meeting on February 21,
2018, including the reports prepared by the auditor and the
The auditor's reports were sent in a timely manner to every
member of the Supervisory Board. The auditor attended the
accounts review meeting of the Audit Committee on Febru-
ary 21, 2018, as well as the accounts meeting of the Supervisory
Board on February 22, 2018, and reported on the procedure
and material findings of its audit, including the key audit matters
described in the Auditor's Report. The auditor also provided
detailed explanations of the reports on the day before the
accounts meeting of the Supervisory Board.
The assurance report issued by KPMG on the substantive audit of the
NFS can be found at basf.com/nfs-audit
Beyond the statutory audit of the Financial Statements, KPMG
also conducted, on behalf of the Supervisory Board, a
substantive audit with limited assurance of the nonfinancial
statements (NFSs) for BASF SE and the BASF Group, which
are integral parts of the respective management's reports. On
the basis of its audit, KPMG did not raise any objections to the
nonfinancial reporting and the satisfaction of the relevant
statutory requirements.
For more information on the auditor, see the Corporate Governance
Report on page 134
The Auditor's Report is rendered from page 162 onward
The long-serving Vice Chairman of the Supervisory Board,
Robert Oswald, stepped down from the Supervisory Board at
the conclusion of the Annual Shareholders' Meeting on May
12, 2017. He had been a member of the Supervisory Board as
an employee representative since October 1, 2000. As the
chairman of the Works Council at BASF SE's Ludwigshafen
Site, BASF's Joint Works Council and the BASF Works Council
Europe, Robert Oswald played a significant role in BASF's
development. The Supervisory Board expresses its very sincere
thanks to Robert Oswald for his contribution. He was
succeeded by Sinischa Horvat, who joined the Supervisory
Board as the alternate member appointed by the BASF Works
Council Europe on December 4, 2013, in accordance with the
Employee Participation Agreement dated November 15, 2007.
For more information on changes within the Supervisory Board, see the
Corporate Governance Report on page 131
4 Reporting by segment and region
23
recognized in equity
instruments
27 Supplementary information on financial
221
26 Risks from litigation and claims
220
Other financial obligations
25
218
Liabilities
24
217
Other provisions
211
obligations
22 Provisions for pensions and similar
211
21 Minority interests
210
20 Other comprehensive income
222
209
28 Leases
Other explanatory notes
At the meeting on July 24, 2017, the Audit Committee
engaged KPMG AG Wirtschaftsprüfungsgesellschaft - the
auditor elected by the Annual Shareholders' Meeting - with
the audit for the 2017 reporting year and auditing fees were
agreed upon. The focus areas for the annual audit were
discussed and defined together with the auditor. The Audit
Committee categorically excluded any service relationships
between auditor and BASF Group companies outside of the
audit of the annual financial statements, including beyond
prevailing legal limitations. These services may only be
performed upon approval by the Audit Committee. For certain
nonaudit services beyond the scope of the audit of the financial
reports, the Audit Committee either granted approval for
individual cases or authorized the Board of Executive Directors
to engage KPMG AG Wirtschaftsprüfungsgesellschaft for
such services. The authorization of each service applies for
one reporting year and is limited in amount.
234
Corporate Governance Code
Declaration of Conformity with the German
34
234
Services provided by the external auditor
33
233
Related-party transactions
32
232
Executive Directors and Supervisory Board
31 Compensation for the Board of
231
and BASF incentive share program
30 Share price-based compensation program
229
29 Statement of cash flows and capital
structure management
228
190
Capital, reserves and retained earnings
208
Income from companies accounted
9
196
Other operating expenses
8
171
Statement of cash flows
195
Other operating income
7
194
Functional costs
6
170
Balance sheet
194
5 Earnings per share
Notes on statement of income
169
Statement of equity
19
172
197
Receivables and miscellaneous assets
18
207
Inventories
17
207
equity method and other financial assets
16 Investments accounted for using the
205
15 Property, plant and equipment
201
14 Intangible assets
Notes on balance sheet
200
198
Income taxes
11
197
10 Financial result
for using the equity method
At the meeting on February 21, 2018, the auditor reported
in detail on its audits of BASF SE's Separate and Consolidated
Financial Statements for the 2017 business year, including the
corresponding management's reports, and discussed the
results of its audit with the Audit Committee. The committee's
audit also included the nonfinancial statements of BASF SE
and the BASF Group, which were part of the management's
reports for the first time in 2017. In preparation for the audit,
the Audit Committee had, following a corresponding resolution
by the Supervisory Board, additionally engaged KPMG AG
Wirtschaftsprüfungsgesellschaft to perform a substantive audit
with limited assurance of the nonfinancial statements and to
issue an assurance report on this. KPMG also reported in detail
on the focus, the procedure and the key findings of this audit.
40.0
The Audit Committee is responsible for all the tasks listed in
section 107(3) sentence 2 of the German Stock Corporation Act
312.5
100.0
112.5
120.0
60.0
200.0
Dame Alison Carnwath DBE3,7
230.0
258.3
50.0
58.3
120.0
60.0
200.0
Ralf-Gerd Bastian4,7
216.7
16.7
200.0
Sinischa Horvat, Vice Chairman since May 12, 20172,7
280.0
282.5
Wolfgang Daniel, Supervisory Board member until
20.0
120.0
60.0
200.0
Francesco Grioli
230.0
250.0
50.0
50.0
120.0
60.0
200.0
Franz Fehrenbach4
180.0
200.0
120.0
60.0
200.0
Prof. Dr. François Diederich
60.0
April 29, 2016
200.0
135.4
10.4
2017
2016
2017
2016
2017
Total compensation
memberships
compensation
Fixed salary
committee
related variable
Compensation for
Performance-
151
Corporate Governance
Compensation report
Compensation of the Supervisory Board of BASF SE (thousand €)
BASF Report 2017
Consolidated Financial Statements
13 Personnel expenses and employees
2016
12.5
2017
Dr. Jürgen Hambrecht, Chairman 1.5
180.0
90.0
125.0
Robert Oswald, Vice Chairman until May 12, 20172,7
282.5
331.3
12.5
31.3
180.0
90.0
300.0
475.0
550.0
25.0
50.0
300.0
150.0
500.0
Michael Diekmann, Vice Chairman², 6
2016
180.0
Waldemar Helber, Supervisory Board member since
April 29, 2016
· The expansion of the battery materials business in Europe,
North America and Japan, for example by establishing addi-
tional production capacities in cooperation with Toda and a
raw materials supply cooperation with Norilsk Nickel
- The progress of the Nord Stream 2 pipeline project and the
BASF Group's involvement in financing the project
- The acquisition of the polyamide value chain from Solvay
- The long-term development of and strategic opportunities
for the oil and gas business bundled in the Wintershall group,
including the gas transportation business and its combina-
tion with DEA's business in a joint venture with LetterOne, as
well as the option of later public listing
the Supervisory Board discussed the further development of
the BASF Group's business activities through acquisitions,
divestitures and investment projects. Discussions focused on:
- Global consolidation in the crop protection industry and the
acquisition of the seed business offered by Bayer
Corporate Governance
Report of the Supervisory Board
BASF Report 2017
A significant component of all Supervisory Board meetings
was the Board of Executive Directors' reports on the current
business situation with detailed information on sales and
earnings development, as well as on opportunities and risks
for business development, the status of important current and
planned investment projects, developments on the capital
markets, and significant managerial measures taken by the
Board of Executive Directors in addition to innovation projects.
In all meetings, with the exception of the meeting following
the Annual Shareholders' Meeting on May 12, 2017, which
exclusively addressed organizational Supervisory Board topics,
An individual overview of attendance at meetings of the Supervisory
Board and its committees will be made available on the company
website at basf.com/governance/supervisoryboard/meetings
The Supervisory Board held six meetings in the 2017 business
year. With the exception of one meeting at which one member
of the Supervisory Board was unable to attend, all members
attended all Supervisory Board meetings in 2017. No member
of the Supervisory Board attended only half or fewer of the
meetings of the Supervisory Board and the committees of
which they are members. The members of the Supervisory
Board elected by shareholders and those elected by the
employees prepared for the meetings in separate preliminary
discussions in each case, which were also attended by
members of the Board of Executive Directors. All members of
the Board of Executive Directors attended the Supervisory
Board meetings unless it was deemed appropriate that the
Supervisory Board discuss individual topics such as
personnel matters relating to the Board of Executive Directors
- without them being present.
Supervisory Board meetings
- The acquisition of the polyamide business from Solvay
- Co-financing the Nord Stream 2 pipeline project
- The transfer of the oil and gas business bundled in the
Wintershall Group to a joint venture with LetterOne, including
possible public listing
- The acquisition of the seed business offered by Bayer
The Chairman of the Supervisory Board and the Chairman
of the Board of Executive Directors were also in regular
contact outside of Supervisory Board meetings so that the
Chairman of the Supervisory Board was promptly informed of
current developments and significant issues. The Supervisory
Board was always involved at an early stage in decisions of
major importance. The Supervisory Board passed resolutions
on all of those individual measures taken by the Board of
Executive Directors which by law or the Statutes required the
approval of the Supervisory Board. In the 2017 business year,
these included authorizing:
The Supervisory Board discussed in detail the reports from the
Board of Executive Directors, and also deliberated on pros-
pects for the company and its individual business areas with
the Board of Executive Directors. It was convinced of
the lawfulness, expediency and propriety of the Board of
Executive Director's company leadership.
In 2017, the Supervisory Board of BASF SE exercised its duties
as required by law and the Statutes with the utmost care. It
regularly monitored the management of the Board of Executive
Directors and provided advice on the company's strategic
development and important individual measures, about which
the Supervisory Board was regularly and thoroughly informed
by the Board of Executive Directors. This occurred both during
and outside of the meetings of the Supervisory Board and its
committees in the form of written and oral reports on, for
example, all of the major financial key performance indicators
(KPIs) of the BASF Group and its segments, the economic
situation in the main sales and procurement markets, and
on deviations in business developments from original plans.
Furthermore, the Supervisory Board tackled fundamental
questions of corporate planning, including financial, invest-
ment, sales volumes and personnel planning, as well as mea-
sures for designing the future of research and development.
Monitoring and consultation in an ongoing
dialog with the Board of Executive Directors
The Supervisory Board addressed these tasks with a great
sense of responsibility. Its aim is to lay the best possible
foundation for BASF's continued successful and sustainable
growth.
- Changes to the Board of Executive Directors with the naming
of a new Chairman, also for the purpose of succession
planning for the Supervisory Board
At its meeting on February 22, 2017, the Supervisory Board
reviewed and approved the Consolidated Financial Statements,
Management's Report and the proposal for the appropriation of
profit for the 2016 business year as presented by the Board of
Executive Directors. In addition, it discussed details of the new
structure of the Supervisory Board's compensation and prepared
the corresponding resolution for the Annual Shareholders'
Meeting. The Supervisory Board met prior to the Annual Share-
holders' Meeting on May 12, 2017, primarily to prepare for the
Annual Shareholders' Meeting.
- The further development of the compensation system for the
Board of Executive Directors
In addition to strategically significant individual measures,
the Supervisory Board also addressed BASF's strategy and
long-term business prospects in individual business areas and
regions. This was the focus of its meeting on July 24/25, 2017,
at which the Board of Executive Directors provided a status
update on the implementation of the "We create chemistry"
strategy. The main consultation topics were:
- Strategic opportunities for the oil and gas business
The main agenda item at the meeting on October 20, 2017
was the further development of the compensation system for
the Board of Executive Directors. Agenda items at the meeting
on December 21, 2017 were the performance evaluation of
the Board of Executive Directors for 2017, consultation on the
profile of skills and expertise and the diversity concept for the
Board of Executive Directors and the Supervisory Board, as
well as preparations for resolutions by the Supervisory Board
on the composition of the Board of Executive Directors. One of
the committee's core tasks at all meetings was continuing the
discussion started in 2016 on the further development of the
compensation awarded to the Board of Executive Directors
and the resulting amendment to Board members' contracts.
The results of the committee's discussions formed the basis
for the amended compensation system for the Board of
Executive Directors that was resolved by the Supervisory
Board on December 21, 2017.
The Personnel Committee met four times during the
reporting period. With the exception of one meeting, which
one committee member was unable to attend, all committee
members attended the meetings. At its meeting on February
22, 2017, the Personnel Committee advised on the targets for
the Board of Executive Directors for the 2017 business year.
The main focus at the meeting on July 24, 2017 was the
development of leadership at the top levels of management
below the Board of Executive Directors, as well as long-term
succession planning and potential alternate candidates for
that Board.
For information on the composition of the committees and the tasks
assigned to them by the Supervisory Board, see the Corporate
Governance Report on page 129
The Supervisory Board of BASF SE has four committees:
1. the committee for personnel matters of the Board of Exec-
utive Directors and the granting of loans in accordance with
section 89(4) of the German Stock Corporation Act (Personnel
Committee); 2. the Audit Committee; 3. the Nomination
Committee; and 4. the Strategy Committee. Following each
Committee meeting, the chairpersons of the Committees
reported in detail about the meetings and the activities of the
Committees at the subsequent meeting of the Supervisory
Board.
Committees
term and forward-looking in line with the new recommendations
of the German Corporate Governance Code, which replaces
the annual variable compensation granted to date, as well as
the agreement of a contractual clawback clause in the case of
a gross breach of the duties pertaining to the Board of
Executive Directors. The amended compensation system for
the Board of Executive Directors is to be submitted to the
Annual Shareholders' Meeting on May 4, 2018 for approval. All
members of the Board of Executive Directors have agreed to
the contractual amendment with effect from January 1, 2018.
BASF Report 2017
Report of the Supervisory Board
154 Corporate Governance
153
In addition, on December 21, 2017, after a number of
preparatory briefings by the Personnel Committee in the
meetings prior, the Supervisory Board resolved to amend the
compensation system for the Board of Executive Directors
and its members' contracts. The main changes are the
introduction of a new performance bonus to make it more long
At its meeting on December 21, 2017, the Supervisory
Board discussed at length, based on the counsel of the
Personnel Committee, questions relating to the composition of
the Board of Executive Directors, succession planning for the
Board of Executive Directors, the further development of the
compensation system for the Board of Executive Directors as
well as the related adjustments to the Board members'
contracts as of January 1, 2018, and evaluated the Board of
Executive Directors' performance in 2017. As part of long-term
succession planning, the Supervisory Board named Dr. Martin
Brudermüller, currently Vice Chairman of the Board of Executive
Directors, as Chairman of the Board of Executive Directors
effective at the end of the Annual Shareholders' Meeting on
May 4, 2018. The current Chairman of the Board of Executive
Directors, Dr. Kurt Bock, will step down from the Board of
Executive Directors by mutual agreement on this date so that
he can be elected to the Supervisory Board and appointed as
its chairman in 2020. Dr. Kurt Bock agreed on early
discontinuance of his contract without severance pay and will
receive the contractually agreed interim and pension benefits in
accordance with regular expiration of a term on the Board of
Executive Directors on this date. Furthermore, the Supervisory
Board named the Board of Executive Directors member
Dr. Hans-Ulrich Engel as Vice Chairman of the Board of Executive
Directors, likewise effective May 4, 2018, and extended the
appointments of Dr. Martin Brudermüller, Dr. Hans-Ulrich Engel
and Sanjeev Gandhi until the end of the Annual Shareholders'
Meeting in 2023. The number of members of the Board of
Executive Directors will be reduced from eight to seven following
the 2018 Annual Shareholders' Meeting.
In several meetings in the 2017 business year, the Supervisory
Board conferred on, and passed resolutions on, personnel
topics in the Board of Executive Directors as well as questions
concerning the compensation of the Board of Executive
Directors. Based on preparation conducted by the Personnel
Committee, it determined the targets for the Board of Executive
Directors for the 2017 business year at its meeting on Febru-
ary 22, 2017.
Composition and compensation of the Board of
Executive Directors
At its meeting on December 21, 2017, the Supervisory
Board discussed and approved the Board of Executive
Directors' operational and financial planning including the
investment budget for 2018, and as usual authorized the
Board of Executive Directors to procure the necessary financ-
ing in 2018.
for the nonfinancial statements, above and beyond the
statutory auditing requirements.
At its meeting on October 20, 2017, the Supervisory Board
addressed the crop protection and seeds business in detail,
including its growth prospects and business risks as well as
technology, market and development trends. It was also
informed of the new statutory nonfinancial reporting require-
ments and how the Board of Executive Directors planned to
structure BASF's nonfinancial statements going forward. In
this connection, the Supervisory Board resolved to also have
the auditor conduct a substantive audit with limited assurance
- The long-term development of the automotive industry as
one of BASF's key customer industries and the related
strategic business opportunities, especially from the
development of electromobility and autonomous driving
- Innovations, especially the status, opportunities and risks
arising from the digitalization of industrial processes
- The development of the Verbund and measures to promote
operational excellence
- The possibilities and objectives for strategic portfolio
development
The dynamic development of BASF and its competitive
environment meant that 2017 was a very busy year for the
Supervisory Board. Its work focused primarily on the following:
- Strategically important portfolio measures such as the
agreed acquisition of significant parts of the seed business
from Bayer and the planned transfer of the oil and gas
business to a joint venture
Dear Shareholders,
BASF Report 2017
200.0
180.0
200.0
120.0
60.0
200.0
Michael Vassiliadis2,4,7
Total
Denise Schellemans
180.0
200.0
120.0
60.0
200.0
Anke Schäferkordt
135.0
200.0
90.0
45.0
200.0
60.0
120.0
75.0
2,925.0
Report of the Supervisory Board
Report of the Supervisory Board
152 Corporate Governance
For more information on share ownership by members of the
Supervisory Board, see page 134
€35,200) for consulting work in the area of chemical research
based on a consulting contract approved by the Supervisory
Board. Beyond this, no other Supervisory Board members
received any compensation in 2017 for services rendered
personally, in particular, the rendering of advisory and agency
services.
In 2017, as in 2016, the company paid the Supervisory
Board member Prof. Dr. François Diederich a total of CHF
38,400 (2017: approximately €34,500; 2016: approximately
Compensation for Supervisory Board membership and mem-
bership of Supervisory Board committees is payable after the
Annual Shareholders' Meeting, which approves the Consoli-
dated Financial Statements for the business year. Accordingly,
compensation relating to the year 2017 will be paid following
the Annual Shareholders' Meeting on May 4, 2018.
7 Member of the Strategy Committee
6 Vice Chairman of the Strategy
Committee
and in section 5.3.2 of the German Corporate Governance Code
in the version dated February 7, 2017. Since the 2017 business
year, these tasks also include auditing the nonfinancial state-
ments of BASF SE and the BASF Group. The Audit Committee
met five times during the reporting period. Its core duties were to
review BASF SE's Financial Statements and Consolidated
Financial Statements, as well as to discuss the quarterly state-
ments and the half-year financial report with the Board of
Executive Directors prior to their publication. With the exception
of two meetings, which one member did not attend, all
committee members participated in the meetings.
5 Chairman of the Strategy Committee
3 Chairman of the Audit Committee
2 Member of the Personnel Committee
1 Chairman of the Personnel Committee
242.5
275.0
3,329.2 2,937.5
62.5
312.5
404.2
1,750.0
875.0
4 Member of the Audit Committee
12 Minority interests
200
2,731
(149)
hedges
Cash flow
8
32
1,476
(2,109)
(5,373)
1,073
Additions
As of January 1, 2017
at fair value
adjustment
benefit plans
of securities
translation
Measurement
currency
Remeasure-
ment of defined
(493)
11
4,997
4,810
187
3,773
68
3,563
1 For more information on other comprehensive income, see Note 20 on page 210
2 For more information, see Note 22, "Provisions for pensions and similar obligations," from page 211 onward
3 For more information, see Note 27, "Supplementary information on financial instruments," from page 222 onward
Development of income and expense recognized in equity of shareholders of BASF SE (million €)
Other comprehensive income
Foreign
210
Total income
and expense
recognized
in equity
(4,014)
20
(109)
(3,521)
(1,842)
835
14
652
(61)
Releases
Deferred taxes
553
(11)
(2)
21
(1,054)
(482)
(4,084)
As of January 1, 2016
(960)
Releases
Deferred taxes
(320)
28
(1)
Additions
(15)
As of December 31, 2017
(4,620)
(605)
39
(96)
(5,282)
(308)
(87)
(1,268)
(1,355)
9
9
Reclassifications of realized gains/losses recognized
in the income statement
Fair value changes in available-for-sale
securities, net³
6
Unrealized gains/losses from cash flow hedges
9
9
(48)
(17)
(17)
Reclassifications of realized gains/losses recognized
in the income statement
6
99
6
(48)
Gains/losses that cannot be reclassified
after taxes from equity-accounted shareholdings
Gains/losses that cannot be reclassified
9
9
753
Unrealized gains/losses from fair value changes in
available-for-sale securities
753
(1,839)
553
553
(3)
(1,289)
(3)
(1,289)
(1,839)
As of December 31, 2016
99
(51)
after taxes from equity-accounted shareholdings
(126)
(126)
100
100
Gains/losses that can be reclassified
Gains/losses that can be reclassified
(2,108)
(87)
807
796
11
Other comprehensive income after taxes
Comprehensive income
(2,021)
(51)
8
12
Cash flow hedges, net³
51
51
(68)
(68)
Unrealized gains/losses from currency translation
8
(2,051)
(87)
758
747
11
Deferred taxes for gains/losses that can be
reclassified
12
(1,964)
(320)
(5,373)
32
[11]
Deferred tax liabilities
3,667
3,478
[23]
Other provisions
8,209
6,293
[22]
Provisions for pensions and similar obligations
32,568
34,756
761
919
[21]
31,807
33,837
Dec. 31, 2017
Dec. 31, 2016
[19]
1,176
1,176
[19]
3,317
3,117
[19]
34,826
31,515
[20]
(5,282)
(4,014)
3,130
Financial indebtedness
[24]
15,535
[11]
1,119
1,288
[24]
2,497
3,767
2,802
[24]
2,850
Current liabilities
14,880
15,317
Total equity and liabilities
78,768
3,064
Explanations in Note
3,229
4,610
12,545
Other liabilities
[24]
1,095
873
Noncurrent liabilities
[23]
29,132
Accounts payable, trade
Provisions
Tax liabilities
Financial indebtedness
Other liabilities
4,971
28,611
Equity
Minority interests
Equity of shareholders of BASF SE
Dec. 31, 2017
13,594
Dec. 31, 2016
15,162
[15]
25,258
26,413
[14]
[16]
4,647
[16]
606
605
[11]
2,118
4,715
2,513
Explanations in Note
Noncurrent assets
(149)
561
(4,014)
169
170
Consolidated Financial Statements
Balance sheet
BASF Report 2017
Balance sheet
BASF Group
Intangible assets
Property, plant and equipment
Investments accounted for using the equity method
Other financial assets
Deferred tax assets
Other receivables and miscellaneous assets
Assets (million €)
1,476
[18]
1,210
[1]
6,495
1,375
Current assets
31,145
25,946
Cash and cash equivalents¹
Total assets
76,496
Equity and liabilities (million €)
Subscribed capital
Capital surplus
Retained earnings
Other comprehensive income
78,768
1,332
536
Marketable securities
47,623
50,550
Inventories
[17]
10,303
10,005
52
Accounts receivable, trade
11,190
10,952
Other receivables and miscellaneous assets
[18]
3,105
3,078
[18]
(320)
Deferred taxes for gains/losses that cannot be
reclassified
1,064
The classification of the Oil & Gas segment as a continuing
operation is appropriate and consistent with IFRS 5. The
related explanations in the Notes to the Consolidated Financial
Statements are sufficiently detailed and appropriate.
Our observations
Finally, we evaluated whether the explanations in the Notes to
the Consolidated Financial Statements on the classification of
the Oil & Gas segment are sufficiently detailed and appro-
priate.
We assessed whether the classification of the Oil & Gas seg-
ment as a continuing operation was performed properly. In
addition, we analyzed the agreements entered into in the letter
of intent, spoke with members of the Board of Executive
Directors and other BASF employees, and evaluated internal
and external reports.
Our audit approach
There is a risk for the Consolidated Financial Statements that
the classification of the Oil & Gas segment as a continuing
operation is not appropriate, and thus that its presentation in
the Consolidated Financial Statements is not correct. With
respect to the disclosures in the Notes to the Consolidated
Financial Statements on the classification of the Oil & Gas
segment as well as on the exercise of judgement, there is a
risk that the explanations are not sufficiently detailed or
appropriate.
in accordance with IFRS 5 depends on a range of criteria, the
assessment of which as of the reporting date is a source of
judgement for the specific matter.
Assets and liabilities classified as held for sale are presented
as separate items in the balance sheet. In addition, the results
from discontinued operations are presented as a separate
item in the statement of income. The classification of the
Oil & Gas segment as a continuing or discontinued operation
On December 7, 2017, BASF and LetterOne signed a letter of
intent on the merger of their oil and gas activities in a joint
venture. BASF's oil and gas activities represent a separate,
material business area of the BASF Group and are accounted
for as a reportable segment.
Financial statement risk
For information on the accounting principles applied, please
refer to Note 1.4 to the Consolidated Financial Statements on
page 183.
Accounting treatment of the oil and gas
business
The valuation methods applied by BASF and the assumptions
underlying the valuation of the pension obligations and the
plan assets are appropriate. Furthermore, the accounting
treatment of insurance-based pension plans where the
employer has a subsidiary liability is justified. The disclosures
in the Notes to the Consolidated Financial Statements on the
pension obligations, in particular the characteristics of defined
benefit plans and the risks associated with them, are com-
plete, sufficiently detailed and appropriate.
Our observations
Furthermore, we evaluated whether the explanations regard-
ing the characteristics of defined benefit plans and risks asso-
ciated with them in the Notes to the Consolidated Financial
Statements are complete, sufficiently detailed and appropriate.
For pension benefits based on insurance models, where the
employer has a subsidiary liability, we satisfied ourselves that
the estimates of recourse made by the Board of Executive
Directors are sufficiently documented and reasonable to justify
recognition as defined contribution plans by comparing cur-
rent return projections and minimum interest guarantees.
For the assessment of the fair values of plan assets, we had
access to, in particular, bank confirmations and financial
statements of the banks managing the funds. We also took
samples to compare the closing rates of the shares and bonds
with external market data. For non-listed investments, we
evaluated the design, implementation and effectiveness of the
internal controls established by the company to assess the
valuation process for these investments. For real estate and
alternative investments, we alse verified the processes under-
lying the valuation in each case as well as the valuation
assumptions and parameters used with the support of our
internal specialists.
For information on the accounting principles applied, please
refer to Note 1.4 to the Consolidated Financial Statements on
page 182. The underlying assumptions used in the measure-
ment of pension obligations are presented in the Notes to the
Consolidated Financial Statements from page 211 onward.
Financial statement risk
As of December 31, 2017, the Consolidated Financial State-
ments of BASF SE contained provisions for pensions and
similar obligations of €6,293 million. The net defined benefit
liability of €6,223 million (after taking into account defined
benefit assets of overfunded plans in the amount of €70 mil-
lion) is derived by subtracting the fair value of the plan assets
(€20,648 million) from the defined benefit obligation of the
pension obligations for the BASF Group (€26,871 million).
Obligations arising from defined benefit plans are measured on
the basis of actuarial assumptions made according to the
projected unit credit method. BASF uses external actuaries
here. The assumptions applied in the process are determined
by BASF. BASF uses a Group-wide, uniform process to deter-
mine the discount rates from the market yields on high-quality
corporate fixed-rate bonds. As key assumptions, the calcula-
tions as of December 31, 2017 are also based on current
projections for pension increases and mortality tables, which
are updated regularly. The amount of the defined benefit obli-
gations is largely based on the estimates and assumptions of
the Board of Executive Directors of BASF SE.
Plan assets are measured at fair value. The fair values of plan
assets are regularly derived from prices on active markets. If no
active market exists, this gives rise to uncertainty or discretion-
ary scope in the measurement of the pension assets.
Other information
Pension benefits based on insurance models, where the
employer generally has a subsidiary liability, are accounted for
as defined contribution plans, provided recourse to BASF is
very unlikely as of the reporting date. Recognition as defined
contribution plans is highly dependent on the assessment of
There is a risk for the Consolidated Financial Statements that
pension obligations and plan assets have not been measured
correctly. Furthermore, there is a risk that pension plans have
not been classified correctly and must be recognized as
defined benefit plans. There is also a risk that the Notes to the
Consolidated Financial Statements do not contain the required
disclosures on the characteristics of the defined benefit plans
and the related risks.
Our audit approach
In a first step, we assessed the structure, implementation and
effectiveness of the internal controls to communicate audit-
relevant financial information, particularly the underlying frame-
work, to the actuary.
In the assessment of the actuarial assumptions and the calcu-
lation methods used, the audit team was supported by our
actuarial specialists. Our audit procedures included, among
others, an assessment of the appropriateness of the process
used to determine the discount rate as well as the remeinaing
actuarial assumptions. In addition, we verified the accuracy of
the resulting obligations based on a selection of specific
pension commitments.
BASF Report 2017
Consolidated Financial Statements
Independent Auditor's Report^1
recourse.
The Board of Executive Directors is responsible for the other
information. The other information comprises:
- The unaudited part of the Group Management's Report
described in section "Opinions," and
- The remaining parts of the BASF Report 2017, with the
exception of the audited Consolidated Financial Statements
and Group Management's Report and our auditor's report.
-
- Obtain an understanding of internal control relevant to the
audit of the Consolidated Financial Statements and of
arrangements and measures (systems) relevant to the audit
of the Group Management's Report in order to design audit
procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the
effectiveness of these systems.
- Evaluate the appropriateness of accounting policies used by
the Board of Executive Directors and the reasonableness of
estimates made by the Board of Executive Directors and
related disclosures.
- Conclude on the appropriateness of the Board of Executive
Directors' use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may
cast significant doubt on the Group's ability to continue as a
BASF Report 2017
Consolidated Financial Statements
Independent Auditor's Report^1
- Identify and assess the risks of material misstatement of the
Consolidated Financial Statements and of the Group
Management's Report, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinions. The risk of not detecting a
material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal control.
going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in the auditor's
report to the related disclosures in the Consolidated
Financial Statements and in the Group Management's
Report or, if such disclosures are inadequate, to modify our
respective opinions. Our conclusions are based on the audit
evidence obtained up to the date of our auditor's report.
However, future events or conditions may cause the Group
to cease to be able to continue as a going concern.
- Evaluate the overall presentation, structure and content of
the Consolidated Financial Statements, including the disclo-
sures, and whether the Consolidated Financial Statements
present the underlying transactions and events in a manner
that the Consolidated Financial Statements give a true and
fair view of the assets, liabilities, financial position and finan-
cial performance of the Group in compliance with IFRSS as
adopted by the EU, the additional requirements of German
commercial law pursuant to Section 315e (1) HGB and full
IFRS.
- Evaluate the consistency of the Group Management's Report
with the Consolidated Financial Statements, its conformity
with law, and the view of the Group's position it provides.
- Perform audit procedures on the prospective information
presented by the Board of Executive Directors in the Group
Management's Report. On the basis of sufficient appropriate
audit evidence we evaluate, in particular, the significant
assumptions used by the Board of Executive Directors as a
basis for the prospective information, and evaluate the prop-
er derivation of the prospective information from these
assumptions. We do not express a separate opinion on the
prospective information and on the assumptions used as a
basis. There is a substantial unavoidable risk that future
events will differ materially from the prospective information.
We communicate with the audit committee regarding, among
other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the audit committee with a statement that we
have complied with the relevant independence requirements,
and communicate with them all relationships and other mat-
ters that may reasonably be thought to bear on our indepen-
dence, and where applicable, the related safeguards.
From the matters communicated with the audit committee, we
determine those matters that were of most significance in the
audit of the Consolidated Financial Statements of the current
period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter.
Other legal and regulatory requirements
Further information pursuant to Article 10 of the EU Audit
Regulation
- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities
within the Group to express opinions on the Consolidated
Financial Statements and on the Group Management's
Report. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsi-
ble for our opinions.
Accounting treatment of pension provisions
We exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
Our objectives are to obtain reasonable assurance about
whether the Consolidated Financial Statements as a whole are
free from material misstatement, whether due to fraud or error,
and whether the Group Management's Report as a whole
provides an appropriate view of the Group's position and, in all
material respects, is consistent with the Consolidated Finan-
cial Statements and the knowledge obtained in the audit,
complies with the German legal requirements and appropri-
ately presents the opportunities and risks of future develop-
ment, as well as to issue an auditor's report that includes our
opinions on the Consolidated Financial Statements and on the
Group Management's Report.
Our opinions on the Consolidated Financial Statements and
on the Group Management's Report do not cover the other
information, and consequently we do not express an opinion
or any other form of assurance conclusion thereon.
In connection with our audit, our responsibility is to read the
other information and, in so doing, to consider whether the
other information
- Is materially inconsistent with the Consolidated Financial
Statements, with the Group Management's Report or our
knowledge obtained in the audit, or
- Otherwise appears to be materially misstated.
165
166
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
Section 317 HGB and the EU Audit Regulation and in compli-
ance with German Generally Accepted Standards for Financial
Statement Audits promulgated by the Institut der Wirtschafts-
prüfer (IDW) will always detect a material misstatement.
Misstatements can arise from fraud or error and are consid-
ered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions
of users taken on the basis of these Consolidated Financial
Statements and this Group Management's Report.
Consolidated Financial Statements
Independent Auditor's Report^1
In accordance with our engagement, we performed a separate
audit of the nonfinancial statement. For the type, scope and
results of this audit, please refer to our audit report dated
February 21, 2018.
Responsibilities of the Board of Executive Directors and
the Supervisory Board for the Consolidated Financial
Statements and the Group Management's Report
Board of Executive Directors is responsible for the preparation
of the Consolidated Financial Statements that comply, in all
material respects, with IFRSS as adopted by the EU, the
additional requirements of German commercial law pursuant
to Section 315e (1) HGB and full IFRS and that the Con-
solidated Financial Statements, in compliance with these
requirements, give a true and fair view of the assets, liabilities,
financial position, and financial performance of the Group. In
addition, the Board of Executive Directors is responsible for
such internal control as they have determined necessary to
enable the preparation of Consolidated Financial Statements
that are free from material misstatement, whether due to fraud
or error.
In preparing the Consolidated Financial Statements, the Board
of Executive Directors is responsible for assessing the Group's
ability to continue as a going concern. They also have the
responsibility for disclosing, as applicable, matters related to
going concern. In addition, they are responsible for financial
reporting based on the going concern basis of accounting
unless there is an intention to liquidate the Group or to cease
operations, or there is no realistic alternative but to do so.
Furthermore, the Board of Executive Directors is responsible
for the preparation of the Group Management's Report that, as
a whole, provides an appropriate view of the Group's position
and is, in all material respects, consistent with the Con-
solidated Financial Statements, complies with German legal
requirements, and appropriately presents the opportunities
and risks of future development. In addition, the Board of
Executive Directors is responsible for such arrangements and
measures (systems) as they have considered necessary to
enable the preparation of a Group Management's Report that
is in accordance with the applicable German legal require-
ments, and to be able to provide sufficient appropriate evi-
dence for the assertions in the Group Management's Report.
The supervisory board is responsible for overseeing the
Group's financial reporting process for the preparation of the
Consolidated Financial Statements and of the Group
Management's Report.
Auditor's Responsibilities for the Audit of the Con-
solidated Financial Statements and of the Group
Management's Report
BASF Report 2017
The assumptions underlying the calculations of the Board of
Executive Directors are balanced overall. The disclosures in the
notes on the key assumptions and the sensitivities are complete.
Our observations
Finally, we assessed the completeness of the disclosures on
the key assumptions and the sensitivities.
Heinz
Michael Heinz
Dr. Markus Kamieth
Cutl
Wayne T. Smith
161
Saori Dubourg
162
Note: This is a translation of the German original. Solely the original text in German language is authoritative.
Independent Auditor's Report¹
BASF Report 2017
TO BASF SE, Ludwigshafen am Rhein
Report on the Audit of the Consolidated Finan-
cial Statements and of the Group Management's
Report
Opinions
Consolidated Financial Statements
Independent Auditor's Report^1
We have audited the Consolidated Financial Statements of
BASF SE and its subsidiaries (the Group), which comprise the
balance sheet as at December 31, 2017, statement of income,
statement of income and expense recognized in equity, state-
ment of cash flows, statement of equity for the financial year
from January 1, 2017 to December 31, 2017 and Notes to the
Consolidated Financial Statements, including a summary of
significant accounting policies. In addition, we have audited
the Group Management's Report of BASF SE for the financial
year from January 1, 2017 to December 31, 2017. In addition,
we have been instructed to express an opinion as to whether
the Consolidated Financial Statements comply with full IFRS.
In accordance with the German legal requirements we have
not audited the content of the non-financial statement and the
corporate governance statement which are included in the
Group Management's Report and are identified as unaudited
other information.
Jubany
Dr. Hans-Ulrich Engel
Chief Financial Officer
BASF Report 2017
Consolidated Financial Statements
Statement by the Board of Executive Directors
Statement by the Board of Executive Directors
and assurance pursuant to sections 297(2) and 315(1)
of the German Commercial Code (HGB)
The Board of Executive Directors of BASF SE is responsible
for preparing the Consolidated Financial Statements and
Management's Report of the BASF Group.
The BASF Group Consolidated Financial Statements for
2017 were prepared according to the International Financial
Reporting Standards (IFRS), which are published by the Inter-
national Accounting Standards Board (IASB), London, and
have been endorsed by the European Union.
We have established effective internal control and steering
systems in order to ensure that the BASF Group's Consoli-
dated Financial Statements and Management's Report comply
with applicable accounting rules and to ensure proper
corporate reporting.
Sanjeev Gandhi
The risk management system we have set up is designed
such that the Board of Executive Directors can identify material
risks early on and take appropriate defensive measures as
necessary. The reliability and effectiveness of the internal con-
trol and risk management system are continually audited
throughout the Group by our internal audit department.
Ludwigshafen am Rhein, February 21, 2018
buch
Dr. Kurt Bock
Chairman
Rudenille
Dr. Martin Brudermüller
Vice Chairman
Magel
To the best of our knowledge, and in accordance with the
applicable reporting principles, the Consolidated Financial
Statements of the BASF Group give a true and fair view of the
net assets, financial position and results of operations of the
Group, and the Management's Report of the BASF Group
includes a fair review of the development and performance
of the business as well as position of the BASF Group,
together with a description of the principal opportunities
and risks associated with the expected development of the
BASF Group.
We were elected as group auditor by the annual general meet-
ing on May 12, 2017. We were engaged by the Chairwoman
of the audit committee on July 24, 2017. We have been the
group auditor of BASF SE without interruption since the finan-
cial year 2006.
In our opinion, on the basis of the knowledge obtained in the
audit,
Pursuant to Section 322 (3) sentence 1 HGB, we declare that
our audit has not led to any reservations relating to the legal
compliance of the Consolidated Financial Statements and of
the Group Management's Report.
We satisfied ourselves of the suitability of the estimation
process and the resulting forecasts for accounting purposes
by comparing BASF's oil and gas price projections in the past
ten years with the actual average annual prices.
We also analyzed, on the basis of alternative scenarios
prepared by BASF, the effects of a variation in the oil and gas
price scenario on the recoverability of the assets. We satisfied
ourselves of the appropriateness of the assumptions underly-
ing the alternative scenarios.
Furthermore, we assessed whether the disclosures in the
Notes to the Consolidated Financial Statements regarding
BASF's oil and gas price scenario and estimation uncertainties
related to the scenario are sufficient and appropriate.
Our observations
The estimates and assumptions made in the preparation of the
company's internal forecasts are sufficiently documented and
justified. The assumptions about oil and gas prices made by
the Board of Executive Directors are appropriate in comparison
with the published forecasts of industry associations, analysts,
international institutions and other market participants. Overall,
BASF's oil and gas price forecasts therefore represent a
reasonable basis for calculation.
Financial statement risk
For information on the accounting principles applied, please
refer to Note 1.4 to the Consolidated Financial Statements on
pages 178 and 184. The underlying assumptions used in the
calculation and the disclosures on the impairment test
performed are included in Note 14 to the Consolidated
Financial Statements from page 201 onward.
Intangible assets in the Consolidated Financial Statements of
BASF SE include goodwill in the amount of €9,353 million.
Goodwill has to be tested for impairment annually and when-
ever there is an indication that goodwill may be impaired. The
impairment test for the Construction Chemicals, Pigments and
Surface Treatment units revealed that a change to the key as-
sumptions, which is considered reasonably possible, could
lead to the carrying amount exceeding the recoverable amount.
163
164 Consolidated Financial Statements
Independent Auditor's Report^1
BASF Report 2017
Our audit approach
We examined the forecast for future cash inflows in the detailed
planning period, in particular with respect to whether the
expected development of the relevant sales markets were
given appropriate consideration and are consistent with the
current budget adopted by the Board of Executive Directors
and the Supervisory Board. We compared internal growth
forecasts with industry expectations and those of significant
competitors. We reviewed whether the assumptions in the
budget adopted by the Board of Executive Directors and the
Supervisory Board about the future development of margins
and the amount of investments are appropriate, focusing on
the units for which the Board of Executive Directors considered
deviations from the key assumptions to be reasonably possible
and where these deviations would lead to the carrying amount
of the units exceeding their respective recoverable amounts.
Our review of the appropriateness of the budget adopted by
the Board of Executive Directors and the Supervisory Board
also included a comparison of planning in past business years
with the results actually achieved. For selected units, we
examined whether reasons for not reaching planned values in
the past were given appropriate consideration in current plan-
ning, to the extent that this was relevant.
We assessed the appropriateness of the assumed growth rate
for the period following the detailed planning period on the
basis of industry and macroeconomic studies. We satisfied
ourselves of the methodological appropriateness of the calcu-
lation and the appropriateness of the weighted cost of capital
rates. To this end, we calculated our own expected values for
the assumptions and parameters underlying the weighted cost
of capital rates and compared these with the assumptions and
parameters used. The audit team was supported by our
company valuation specialists.
Key assumptions by the Board of Executive Directors are the
forecasts for future cash inflows in the detailed planning period,
the assumed growth rate for subsequent periods, as well as
the cost of capital. These assumptions have a material impact
on the recoverability of goodwill. The growth forecasts of the
Board of Executive Directors are associated with risks and can
be revised in light of volatile raw materials prices and an
instable macroeconomic environment. Deviations from the key
assumptions, which the Board of Executive Directors consid-
ers reasonably possible, would lead to impairments at the
above units. There is the risk for the financial statements that
impairment has not been identified. In addition, there is also a
risk that the Notes to the Consolidated Financial Statements
do not contain the required disclosures on the key assump-
tions and sensitivities for these units.
- The accompanying Consolidated Financial Statements
comply, in all material respects, with the IFRSS as adopted
by the EU, the additional requirements of German commer-
cial law pursuant to Section 315e (1) of the German Com-
mercial Code (HGB) and full IFRS, and in compliance with
these requirements, give a true and fair view of the assets,
liabilities, and financial position of the Group as at Decem-
ber 31, 2017, and of its financial performance for the financial
year from January 1, 2017 to December 31, 2017, and
- The accompanying Group Management's Report as a whole
provides an appropriate view of the Group's position. In all
material respects, this Group Management's Report is con-
sistent with the Consolidated Financial Statements, complies
with German legal requirements and appropriately presents
the opportunities and risks of future development. Our
opinion on the Group Management's Report does not cover
the content of the non-financial statement and the corporate
governance statement mentioned above.
In order to assess its suitability as a basis for calculation, we
had the company explain to us how the oil and gas price Recoverability of goodwill
scenario was determined. Our audit procedures included,
among others, an assessment of the completeness and
balance of the assumptions used in the estimation process.
We critically examined the assumptions for the macroeconomic
parameters, such as the development of demand for oil and
gas, fiscal considerations of important crude oil and gas-
producing countries, rising marginal production costs, as well
as producers' investment behavior, and assessed whether
these were appropriately reflected in BASF's oil and gas price
scenario. Finally, we compared BASF's oil and gas price
scenario with the published forecasts of industry associations,
analysts, international institutions and other market partici-
pants.
Our audit approach
Basis for the Opinions
We conducted our audit of the Consolidated Financial
Statements and of the Group Management's Report in
accordance with Section 317 HGB and the EU Audit Regula-
tion No. 537/2014 (referred to subsequently as “EU Audit
Regulation") and in compliance with German Generally
Accepted Standards for Financial Statement Audits promul-
gated by the Institute of Public Auditors in Germany (Institut
der Wirtschaftsprüfer, IDW). Our responsibilities under those
requirements and principles are further described in the
"Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements and of the Management's Report"
section of our auditor's report. We are independent of the
group entities in accordance with the requirements of European
law and German commercial and professional law, and we
have fulfilled our other German professional responsibilities in
accordance with these requirements. In addition, in accor-
dance with Article 10 (2) point (f) of the EU Audit Regulation,
we declare that we have not provided non-audit services
prohibited under Article 5 (1) of the EU Audit Regulation. We
believe that the evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions on the
Consolidated Financial Statements and on the Group
Management's Report.
Key Audit Matters in the Audit of the Consolidated
Financial Statements
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
Consolidated Financial Statements for the financial year from
January 1, 2017 to December 31, 2017. These matters were
addressed in the context of our audit of the Consolidated
Financial Statements as a whole, and in forming our opinion
thereon, we do not provide a separate opinion on these
matters.
BASF's oil and gas price scenario: Impact of
assumptions relating to estimation uncertain-
ties on the recoverability of assets and goodwill
The explanations in the Notes to the Consolidated Financial
Statements on the oil and gas price scenario assumed by
BASF as a significant source of estimation uncertainties are
sufficiently detailed and appropriate.
For information on BASF's oil and gas price scenario, please
refer to Note 1.4 to the Consolidated Financial Statements on
pages 183 and 184.
Oil and gas price projections are a key factor in the long-term
earnings forecasts for the Oil & Gas segment, and thus have a
direct impact on the recoverability of the assets recognized in
this segment, including the goodwill allocated to the Explora-
tion & Production cash-generating unit within this segment.
The oil and gas price projections underlying the calculation are
based on an internal estimation process.
It is difficult to forecast future price trends given the current
high volatility of oil and gas prices. The variety of assumptions
underlying the estimation process are subject to significant
judgment. This gives rise to the risk that the oil and gas price
projections are not within an appropriate range and that the
assets of the Oil & Gas segment, including the goodwill
allocated to the Exploration & Production cash-generating
1 This is a translation of the German original. Solely the original text in German language is authoritative.
BASF Report 2017
Consolidated Financial Statements
Independent Auditor's Report^1
unit, have not been measured properly. There is also a risk that
estimation uncertainties have not been sufficiently disclosed in
the Notes to the Consolidated Financial Statements.
Financial statement risk
We declare that the opinions expressed in this auditor's report
are consistent with the additional report to the audit committee
pursuant to Article 11 of the EU Audit Regulation (long-form
audit report).
German public auditor responsible for the
engagement
The German public auditor responsible for the engagement is
Alexander Bock.
5,395
Income taxes
[11]
(1,448)
(1,140)
Income before minority interests
7,800
6,352
Minority interests
[12]
(274)
(199)
Net income
6,078
4,255
4,056
Income before taxes and minority interests
(722)
(560)
(661)
(334)
(482)
70
97
(880)
Other financial expenses
Financial result
(429)
(478)
(359)
(381)
[10]
Other financial result
179
Earnings per share (€)
6.62
2016
Shareholders
Minority
BASF Group
of BASF SE
interests
6,352
Minority
interests
6,078
4,255
4,056
199
Income before minority interests
Remeasurement of defined benefit plans²
1,064
274
[5]
of BASF SE
2017
Shareholders
4.42
Dilution effect (€)
[5]
(0.01)
(0.01)
Diluted earnings per share (€)
BASF Group
[5]
4.41
BASF Report 2017
Consolidated Financial Statements
Statement of income and expense recognized in equity
Statement of income and expense recognized in equity
BASF Group
Statement of comprehensive income¹ (million €)
6.61
76,496
226
(29)
Selling expenses
BASF Report 2017
Explanations in Note
2017
2016
[4]
Gross profit on sales
64,475
[6]
(43,929)
(39,265)
20,546
18,285
[6]
57,550
(8,262)
Cost of sales
Statement of income (million €)
Frankfurt am Main, February 21, 2018
KPMG AG
Wirtschaftsprüfungsgesellschaft
[Original German version signed by:]
Ingmar Rega
Wirtschaftsprüfer
Sales revenue
[German Public Auditor]
167
168
Consolidated Financial Statements
Statement of income
Statement of income
BASF Group
Alexander Bock
Wirtschaftsprüfer
[German Public Auditor]
(17)
(7,764)
[6]
[4]
8,522
6,275
Income from other shareholdings
31
54
Income from operations
Expenses from other shareholdings
Interest income
Interest expenses
Interest result
Other financial income
(60)
(71)
Net income from shareholdings
General administrative expenses
(3,133)
307
[9]
(1,412)
(1,337)
Research and development expenses
[6]
(1,888)
(1,863)
571
Other operating income
1,916
1,780
Other operating expenses
[8]
(2,949)
Income from companies accounted for using the equity method
[7]
1 For a reconciliation of the amounts in the statement of cash flows with the balance sheet item "cash and cash equivalents," see page 171
6
A lease is classified as a finance lease if it substantially
transfers all the risks and rewards related to the leased asset.
Assets subject to a finance lease are capitalized at the lower of
the fair value of the leased assets or the present value of the
minimum lease payments. A leasing liability is recorded in the
same amount. The periodic lease payments must be divided
into principal and interest components. The principal compo-
nent reduces the outstanding liability, while the interest
component represents an interest expense. Depreciation
takes place over the shorter of the useful life of the asset or the
period of the lease.
Number of
BASF Report 2017
Statement of equity1 (million €)
Statement of equity
BASF Group
Statement of equity
Consolidated Financial Statements
172
171
1 More information on the statement of cash flows can be found in the Management's Report (Financial Position) on page 59.
Other information on cash flows can be found in Note 29 on page 229.
1,375
6,495
Cash and cash equivalents at the end of the year
2,241
1,375
Cash and cash equivalents at the beginning of the year
1
9
66
(110)
(933)
5,221
(2,160)
394
Other com-
(103)
shares
outstanding
918,478,694
In the future, expected losses on trade accounts receiv-
able at BASF will largely be calculated on the basis of internal
or external customer ratings and the associated probability of
default.
(2,755)
(2,755)
Changes to income and expense
Net income
Dividend paid
achieved in stages
Effects of acquisitions
32,568
761
31,807
Equity
Minority
interests
BASF SE
Equity of
share-
holders of
prehensive
income²
(4,014)
31,515
3,130
earnings
surplus
Retained
Capital
Subscribed
capital
1,176
As of January 1, 2017
(118)³
(118)
(2,755)
Payments made for acquisitions
(1,389)
(748)
(4,145)
(3,996)
Payments made for financial assets and securities
Payments made for property, plant and equipment and intangible assets
7,717
8,785
Cash provided by operating activities
(187)
(112)
Gains (-)/losses (+) from disposal of noncurrent assets and securities
(547)
(227)
Changes in pension provisions, defined benefit assets and other items
926
618
Changes in operating liabilities and other provisions
(640)
(870)
Changes in receivables
(182)
(150)
(2,664)
(2,828)
177
(6,954)
(5,324)
7,533
8,572
28
19
changes in scope of consolidation
From foreign exchange rates
Change in cash and cash equivalents
Cash provided by/used in financing activities
Net changes in cash and cash equivalents
minority shareholders
To shareholders of BASF SE
Dividends paid
Repayment of financial and similar liabilities
Additions to financial and similar liabilities
Capital increases/repayments and other equity transactions
(6,490)
(3,958)
Cash used in investing activities
1,208
759
Payments received from the disposal of noncurrent assets and securities
664
Payments received for divestitures
(915)
(2,873)
6,078
General information
1.1
173
Consolidated Financial Statements
Notes - Policies and scope of consolidation
1 Summary of accounting policies
Policies and scope of consolidation
BASF Report 2017
4 Granting of BASF shares under the BASF share program "plus"
3 Including profit and loss transfers
2 Details are provided in the table "Income and expense recognized in equity" on page 169.
1 For more information on the items relating to equity, see Notes 19 and 20 from page 209 onward
32,568
761
31,807
(4,014)
31,515
3,130
17
25
(8)
3
(11)4
(482)
BASF SE (registered at the district trade register, or Amts-
gericht, for Ludwigshafen am Rhein, number HRB 6000) is a
publicly listed corporation headquartered in Ludwigshafen am
Rhein, Germany. Its official address is Carl-Bosch-Str. 38,
67056 Ludwigshafen am Rhein, Germany.
11
The Consolidated Financial Statements of BASF SE as of
December 31, 2017 have been prepared in accordance with
the International Financial Reporting Standards (IFRS) of the
International Accounting Standards Board (IASB) and section
315a (1) of the German Commercial Code (HGB). IFRSS are
generally only applied after they have been endorsed by the
European Union. For the 2017 fiscal year, all of the binding
IFRSS and pronouncements of the International Financial
Reporting Interpretations Committee (IFRIC) were applied.
The individual financial statements of the consolidated
companies are prepared as of the balance sheet date of the
Consolidated Financial Statements. The accounting policies
applied are largely the same as those used in 2016, with the
exception of any changes arising from the application of new
or revised standards.
IFRS 9 also contains new requirements for the application
of hedge accounting to better present an entity's risk manage-
ment activities, in particular with respect to the management
of nonfinancial risks.
In the future, impairments are to be recognized for financial
assets not measured at fair value through profit or loss
considering expected credit losses based on the change in
the default risk of the counterparties. The impairment approach
generally adopts a three-stage model to calculate impairment
losses. A simplified approach, which applies to certain financial
instruments such as trade accounts receivable, uses a
two-stage model to assess impairment losses.
BASF Report 2017
Notes - Policies and scope of consolidation
Consolidated Financial Statements
174
IFRS 9 retains "amortized cost" and "fair value" as
measurement paradigms for financial instruments, and
continues to differentiate between changes in fair value recog-
nized through profit or loss or other comprehensive income.
Whether financial assets are measured at amortized cost or
fair value will depend on the business model for managing
financial asset portfolios, and on the cash flow condition (the
solely payments of principle and interest criterion), that is, the
contractual cash flow characteristics of an individual financial
asset.
The IASB published the final version of IFRS 9 – Financial
Instruments on July 24, 2014. IFRS 9 contains new require-
ments for the classification and measurement of financial
instruments, fundamental changes regarding the accounting
treatment of impairments of certain assets, and a revised
approach to hedge accounting. The European Union endorsed
the standard on November 29, 2016. First-time adoption of
IFRS 9 is effective in the first business year beginning on or
after January 1, 2018. Consequently, BASF will apply IFRS 9
for the first time as of January 1, 2018.
IFRS 9 - Financial Instruments
The effects on the BASF Group financial statements of the
IFRSS and IFRICs not yet in force or not yet endorsed by the
European Union in 2017 were reviewed and are explained
below.
IFRSS and IFRICS not yet to be considered
Annual Improvements to IFRSS (2014-2016): Three IFRSS
were amended in the Annual Improvements to IFRSS (2014-
2016), of which only the following had to be applied in 2017:
In IFRS 12, it was clarified that disclosures pursuant to IFRS 12
generally also apply to an entity's interests in subsidiaries, joint
ventures and associated companies that are classified as held
for sale in accordance with IFRS 5, with the exception of the
disclosures outlined in IFRS 12.B10-B16 (Financial Informa-
tion). The clarification is not expected to have any material
effect on BASF.
The amendments to IAS 12 mainly aim to clarify how to
account for deferred tax assets for unrealized losses related to
assets measured at fair value. The application of the amend-
ments has no material effect on BASF.
assets for unrealized losses
Recognition of deferred tax
-
Amendments to IAS 12
For reconciliation reporting, see Note 29 from page 229 onward
The amendments aim to improve the information provided
about changes to an entity's liabilities arising from financing
activities. They specify that an entity must disclose changes to
financial liabilities and related financial assets for which
payments received and payments made are shown under
cash provided by/used in financing activities in the statement
of cash flows.
Amendments to IAS 7 - Disclosure Initiative
Accounting policies applied for the first time in 2017
1.2 Changes in accounting principles
In its meeting on February 19, 2018, the Board of Execu-
tive Directors prepared the Consolidated Financial Statements,
submitted them to the Supervisory Board for review and
approval, and released them for publication.
The Consolidated Financial Statements are presented in
euros. All amounts, including the figures for previous years, are
given in million euros unless otherwise indicated.
6,078
(493)
4,255
34,756
919
33,837
(5,282)
34,826
3,117
1,176
918,478,694
As of December 31, 2017
64
89
(25)
(12)
(13)4
consolidation and other changes
Changes in scope of
(1,355)
(87)
(1,268)
(1,268)
recognized directly in equity
6,352
274
As of January 1, 2016
(493)
918,478,694
3,141
199
4,056
4,056
(2,767)
(103)³
(2,664)
(2,664)
1,176
918,478,694
As of December 31, 2016
consolidation and other changes
Changes in scope of
recognized directly in equity
Changes to income and expense
Net income
Dividend paid
achieved in stages
Effects of acquisitions
31,545
629
30,916
(3,521)
30,120
1,176
The new requirements for classification and measurement
can also have an impact on the accounting treatment of other
shareholdings, which must be measured only at fair value in
accordance with IFRS 9.B5.2.3 in the future.
Changes in inventories
4,213
Notes - Policies and scope of consolidation
BASF Report 2017
Impairments are recognized if the recoverable amount of the
asset is lower than the carrying amount. The recoverable
amount is the higher of either fair value less costs to sell or the
value in use. The value in use is determined on the basis of
future cash inflows and outflows, and the weighted average
cost of capital after taxes, depending on tax rates and
country-related risks. If the reasons for an impairment no
longer exist, the write-downs are reversed up to the value of
the asset, had an impairment not been recognized. Depending
on the type of intangible asset, amortization is reported under
cost of sales, selling expenses, research and development
expenses or other operating expenses.
Intangible assets with indefinite useful lives are trade
names and trademarks that have been acquired as part of
acquisitions. These are measured at cost and tested for
impairment annually, or if there is an indication that their value
has declined.
Internally generated intangible assets primarily com-
prise internally developed software. Such software and other
internally generated assets are measured at cost and
amortized over their estimated useful lives. Impairments are
recognized if the carrying amount of an asset exceeds the
recoverable amount. In addition to those costs directly
attributable to the asset, costs of internally generated intangi-
ble assets also include an appropriate portion of overhead
costs.
The estimated useful lives and amortization methods of
intangible assets are based on historical values, plans and
estimates. The weighted average amortization periods of
intangible assets amounted to:
Average amortization in years
Goodwill is only written down if there is an impairment.
Impairment testing takes place once a year and whenever
there is an indication of an impairment. Impairment reversals
are not conducted for goodwill.
Property, plant and equipment are measured at cost
less depreciation and impairment over their useful lives. The
revaluation method is not applied. Low-value assets are fully
written off in the year of acquisition.
The cost of self-constructed plants includes direct costs,
appropriate allocations of material and production overhead
costs, and a share of the general administrative costs of the
divisions involved in the construction of the plants.
Consolidated Financial Statements
Expenditures related to the scheduled maintenance of
large-scale plants are separately capitalized and depreciated
using the straight-line method over the period until the next
planned turnaround. Costs for the replacement of components
are recognized as assets when an additional future benefit is
expected. The carrying amount of the replaced components is
derecognized. Costs for maintenance and repair as part of
normal business operations are recognized as an expense.
Weighted average depreciation in years
2017
2016
2017
2016
Distribution, supply and similar rights
15
14
Buildings and structural installations
21
Both movable and immovable fixed assets are for the most
part depreciated using the straight-line method, with the
exception of production licenses and plants in the Oil & Gas
segment, which are primarily depreciated based on use in
accordance with the unit of production method. The estimated
useful lives and depreciation methods of property, plant and
equipment are based on historical values, plans and estimates.
The depreciation methods, useful lives and residual values are
reviewed at each balance sheet date. The weighted average
depreciation periods were as follows:
178
Acquired intangible assets (excluding goodwill) with defined
useful lives are generally measured at cost less straight-line
amortization. The useful life is determined using the period of
the underlying contract or the period of time over which the
intangible asset can be expected to be used.
Assets
Norway (NOK)
9.84
9.09
9.33
9.29
Russia (RUB)
69.39
64.30
65.92
74.14
Switzerland (CHF)
South Korea (KRW)
United States (USD)
1.17
1.07
1.11
1,279.61
1.20
1,269.36
1.05
1,276.52
1.13
1.09
1,284.18
1.11
1.4 Accounting policies
Revenue recognition
Revenues from the sale of goods or the rendering of services
are recognized upon the transfer of ownership and risk to the
buyer. They are measured at the fair value of the consideration
received. Sales revenues are reported without consumption
taxes. Expected rebates and other trade discounts are ac-
crued or deducted. Provisions are recognized according to the
principle of individual measurement to cover probable risks
related to the return of products, future warranty obligations
and other claims.
Revenues from the sale of precious metals to industrial
customers are recognized at the time of shipment and the
corresponding purchase prices are recorded at cost of sales.
In the trading of precious metals and their derivatives with
broker-traders, where there is usually no physical delivery,
revenues are netted against their corresponding costs.
Revenues from marketing the natural gas from the Yuzhno
Russkoye gas field are treated in the same manner.
Income relating to the sale or licensing of technologies or
technological expertise are recognized in the income state-
ment according to the contractually agreed-upon transfer of
the rights and obligations associated with those technologies.
22
Product rights, licenses and trademarks
20
19
Investments accounted for using the equity-method:
The carrying amounts of these companies are adjusted
annually based on the pro rata share of net income, dividends
and other changes in equity. Should there be indications of a
permanent reduction in the value of an investment, an impair-
ment is recognized in the income statement.
Inventories are measured at acquisition cost or cost of
conversion based on the weighted average method. If the
market price or fair value of the sales product which forms the
basis for the net realizable value is lower, then the sales
products are written down to this lower value. The net
realizable value is the estimated price in the ordinary course of
business less the estimated costs of completion and the
estimated selling costs.
In addition to direct costs, cost of conversion includes an
appropriate allocation of production overhead costs based on
normal utilization rates of the production plants, provided that
they are related to the production process. Pensions, social
services and voluntary social benefits are also included, as
well as allocations for administrative costs, provided they
relate to the production. Borrowing costs are not included in
cost of conversion.
Inventories may be written down if the prices for the sales
products decline, or in cases of a high rate of days sales of
inventory (DSI). Write-downs on inventories are reversed if the
reasons for them no longer apply.
The exception made by IAS 2 for traders is applied to the
measurement of precious metal inventories. Accordingly,
inventories held exclusively for trading purposes are to be
measured at fair value less costs to sell. All changes in value
are recognized in the income statement.
Deferred taxes: Deferred taxes are recorded for tempo-
rary differences between the carrying amount of assets and
liabilities in the financial statements and the carrying amounts
for tax purposes as well as for tax loss carryforwards and
unused tax credits. This also comprises temporary differences
arising from business combinations, with the exception of
goodwill. Deferred tax assets and liabilities are calculated
using the respective country-specific tax rates applicable for
the period in which the asset or liability is realized or settled.
Tax rate changes enacted or substantively enacted on or
before the balance sheet date are taken into consideration.
Deferred tax assets are offset against deferred tax liabilities
provided they are related to the same taxation authority and
have the same maturities. Surpluses of deferred tax assets are
only recognized provided that the tax benefits are likely to be
realized. The valuation of deferred tax assets is based on the
estimated probability of a reversal of the differences and the
assessment of the ability to utilize tax loss carryforwards and
unused tax credits. This depends on whether future taxable
profits will exist during the period in which temporary
differences are reversed and in which tax loss carryforwards
and unused tax credits can be claimed. The valuation of
deferred tax assets is based on internal projections of the
future earnings of the particular Group company.
179
180
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2017
Changes in deferred taxes in the balance sheet are recorded
as deferred tax expense or income if the underlying trans-
action is not to be recognized directly in equity or in income
and expenses recognized in equity. For those effects which
have been recognized in equity, changes to deferred tax
assets and tax liabilities are also recognized directly in equity.
Deferred tax liabilities are recognized for differences
between the proportional IFRS equity and the tax base of the
investment in a consolidated subsidiary if a reversal of these
differences is expected in the foreseeable future. Deferred tax
liabilities are recognized for dividend distributions which are
planned for the following year if these distributions lead to a
reversal of temporary differences.
For more information, see Note 11 from page 198 onward
Financial instruments
Financial assets and financial liabilities are recognized in the
balance sheet when the BASF Group becomes a party to a
financial instrument. Financial assets are derecognized when
the contractual rights to the cash flows from the financial asset
expire or when the financial asset, with all risks and rewards of
ownership, is transferred. Financial liabilities are derecognized
when the contractual obligations expire, are discharged or
cancelled. Regular-way purchases and sales of financial
instruments are accounted for using the settlement date; in
precious metals trading, the day of trading is used.
The fair value of a financial instrument is the amount that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. When pricing on an active market is
available, for example share prices, these are used as the
basis for the measurement. Otherwise, the measurement is
based on internal measurement models using current market
parameters or external measurements, for example, from
banks. These internal measurements predominantly use the
net present value method and option pricing models.
If there is objective evidence of a permanent impairment of
a financial instrument that is not measured at fair value through
profit or loss, an impairment loss is recognized. If the reason
for the impairment of loans and receivables as well as
held-to-maturity financial instruments no longer exists, the
impairment is reversed up to the amortized cost and recog-
nized in the income statement. Impairments on financial
instruments are booked in separate accounts.
Financial assets and liabilities are divided into the following
measurement categories:
- Financial assets and liabilities at fair value recognized in
the income statement consist of derivatives and other
trading instruments. At BASF, this measurement category
only includes derivatives. Derivatives are reported in other
receivables and miscellaneous assets or other liabilities.
BASF does not make use of the fair value option under
IAS 39. The calculation of fair values is based on market
parameters or measurement models based on such param-
eters. In some exceptional cases, the fair value is calculated
using parameters which are not observable on the market.
- Loans and receivables comprise financial assets with fixed
or determinable payments, which are not quoted on an
active market and are not derivatives or classified as avail-
able-for-sale. This measurement category includes trade
accounts receivable as well as other receivables and loans
reported under other receivables and miscellaneous assets.
Initial measurement is done at fair value, which generally
matches the nominal value of the receivable or loan. Inter-
est-free and low-interest long-term loans and receivables
are recorded at present value. Subsequent measurement
recognized in income is generally made at amortized cost
using the effective interest method.
If there is objective evidence for an impairment of a receiv-
able or loan, an individual valuation allowance is made.
When assessing the need for a valuation allowance, regional
and sector-specific conditions are considered. In addition,
use is made of internal and external ratings as well as the
assessments of debt collection agencies and credit insurers,
when available. A portion of receivables is covered by credit
insurance. Bank guarantees and letters of credit are used to
an insignificant extent. Valuation allowances are only
recognized for those receivables which are not covered by
insurance or other collateral. The valuation allowances for
receivables whose insurance includes a deductible are not
recognized in excess of the amount of the deductible. Write-
downs are based on historical values relating to customer
solvency and the age, period overdue, insurance policies
and customer-specific risks. In addition, a valuation
allowance must be recognized when the contractual condi-
tions which form the basis for the receivable are changed
through renegotiation in such a way that the present value of
the future cash flows decreases.
Furthermore, valuation allowances are made on receiv-
ables based on transfer risks for certain countries.
If, in a subsequent period, the amount of the valuation
allowance decreases and the decrease can be related
objectively to an event occurring after the valuation allowance
was made, then it is reversed in the income statement.
Reversals of valuation allowances may not exceed amortized
cost. Loans and receivables are derecognized when they are
definitively found to be uncollectible.
Government grants: Government grants related to the
acquisition or construction of property, plant and equipment
reduce the acquisition or construction cost of the respective
assets. Other government grants or government assistance
are recognized immediately as other operating income or
treated as deferred income and dissolved over the underlying
period.
20.67
Borrowing costs: Borrowing costs directly incurred as
part of the acquisition, construction or production of a
qualifying asset are capitalized as part of the acquisition or
production cost of that asset. A qualifying asset is an asset for
which the time period necessary to make it ready for its
intended use or sale is longer than one year. Borrowing costs
are capitalized up to the date the asset is ready for its intended
use. The borrowing costs were calculated based on a rate of
2.0% (2016: 2.5%) and adjusted on a country-specific basis, if
necessary. All other borrowing costs are recognized as an
expense in the period in which they are incurred.
Assets subject to operating leases are not capitalized.
Lease payments are recognized in the income statement in
the period they are incurred.
Machinery and technical equipment
10
10
Know-how, patents and production
technologies
15
14
Long-distance natural gas pipelines
Miscellaneous equipment and fixtures
25
25
6
7
Internally generated intangible assets
Other rights and values
4
4
5
5
Emission rights: Emission right certificates, granted free of
charge by the German Emissions Trading Authority (Deutsche
Emissionshandelsstelle) or a similar authority in other coun-
tries, are recognized on the balance sheet with a value of zero.
Certificates purchased on the market are capitalized at cost as
intangible assets. Emissions generated create an obligation to
surrender the emission certificates. Emission certificates
purchased on the market are subsequently measured at fair
value, up to a maximum of the amount of the acquisition costs.
If the fair value is lower than the carrying amount on the
balance sheet date, the emission rights are impaired.
Impairments are recognized if the recoverable amount of the
asset is lower than the carrying amount. The measurement is
based on fair value less costs to sell or the value in use. The
value in use is determined on the basis of future cash inflows
and outflows, and the weighted average cost of capital after
taxes, depending on tax rates and country-related risks. An
impairment is recognized for the difference between the carry-
ing amount and the recoverable amount. If the reasons for an
impairment no longer exist, the write-downs are reversed up to
the value of the asset, had an impairment not been recognized.
BASF Report 2017
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Investment properties held to realize capital gains or rental
income are immaterial. They are valued at the lower of fair
value or acquisition cost less depreciation.
Leases: A lease is an agreement whereby the lessor
conveys to the lessee the right to use an asset for an agreed
period of time in return for a payment or series of payments.
Leasing contracts are classified as either finance or operating
leases.
Leases can be embedded within other contracts. If sepa-
ration is required under IFRS, then the embedded lease is
recorded separately from its host contract and each
component of the contract is carried and measured in accor-
dance with the applicable regulations.
4,291
21.32
23.66
Long-term interests in asso-
On October 12, 2017, the IASB published amendments to
IAS 28 on long-term interests in associated companies and
joint ventures. These amendments clarify that IFRS 9 is to be
applied to long-term interests in associated companies or joint
ventures that are not accounted for using the equity method.
The amendment subject to E.U. endorsement - is man-
datory as of January 1, 2019. The effects are explained under
IFRS 9 Financial Instruments in Note 1.2: Changes in
accounting principles.
-
The IASB issued further amendments to standards and
interpretations whose application is not yet mandatory and is
still subject to E.U. endorsement. These amendments are
unlikely to have a material impact on the reporting of
BASF SE. BASF does not plan on early adoption of these
amendments.
Amendments to IFRS 10 and IAS 28 - Sale or Contribu-
tion of Assets between an Investor and its Associate or
Joint Venture
The IASB issued amendments to IFRS 10 and IAS 28 on
September 11, 2014. The amendments address a known
inconsistency between the requirements of IFRS 10 and
IAS 28 (2011) in the case of the sale of an asset to an
associated company or a joint venture or the contribution of an
asset to an associated company or a joint venture.
IASB has postponed the effective date of the changes
indefinitely.
-
Amendments to IFRS 2 Classification and Measure-
ment of Share-Based Payment Transactions: The
amendments involve a number of individual issues pertain-
ing to the accounting of cash-settled share-based payment
transactions. The amendments relate to the calculation of
fair value of obligations arising from share-based payment
transactions. The amendments are - pending E.U. endorse-
ment to be applied to compensation granted or changed
in business years beginning on or after January 1, 2018.
Amendments to IFRS 9 - Financial assets with a prepay-
ment feature with negative compensation:
The amendments pertain to a limited adjustment of the relevant
criteria for the classification of financial assets. Financial assets
with a prepayment feature with negative compensation may
be recognized under certain conditions at amortized cost or at
fair value through other comprehensive income instead of at
fair value through profit and loss.
The amendments are · subject to E.U. endorsement
effective on January 1, 2019.
Supplementary information on IFRIC 22 - Foreign Cur-
rency Transactions and Advance Consideration: IFRIC 22
addresses an application question for IAS 21 - The Effects of
Changes in Foreign Exchange Rates. It clarifies the point in
time for determining the exchange rate used to translate for-
eign-currency transactions containing advance payments that
have been made or received. The underlying asset, income or
expense is translated using the relevant exchange rate on the
date on which the asset or liability resulting from the prepay-
ment was first recognized. The interpretation is – pending E.U.
endorsement - to be applied in the first reporting period of a
business year beginning on or after January 1, 2018.
175
176
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2017
-
IFRIC 23 Uncertainty over Income Tax Treatments:
IFRIC 23 expands on the requirements in IAS 12 on how to
account for uncertainties surrounding the income tax treat-
ment of circumstances and transactions. IFRIC 23 is - subject
to E.U. endorsement - effective for reporting periods beginning
on or after January 1, 2019.
Annual Improvements to IFRSS (2015-2017): Four IFRSS
were amended in the Annual Improvements to IFRSS (2015-
2017).
In IFRS 3, it was clarified that when a party to a joint
arrangement obtains control of a business that is a joint oper-
ation and had rights to the assets and obligations for the liabil-
ities relating to that joint operation immediately before the
acquisition date, the transaction is a business combination
achieved in stages. The acquirer shall therefore apply the
requirements for a business combination achieved in stages,
including remeasuring its previously held interest in the joint
operation.
In IFRS 11, it was clarified that when an entity obtains joint
control of a business that is a joint operation and had rights to
the assets and obligations for the liabilities relating to that joint
operation immediately before the acquisition date, the previ-
ously held interest in that business is not to be remeasured.
-
IAS 12 was amended to the extent that all income tax
effects of dividend payments must be considered in the same
Iway as the income on which the dividends are based.
Amendments to IAS 28
ciates and joint ventures
BASF has started to analyze the potential effects on its
Consolidated Financial Statements and plans to make use of
the practical expedients. However, it is assumed that a signifi-
cant number of leasing agreements that today represent
operating leases are to be reported in the balance sheet. As
well as increasing BASF's total assets, the type of expenses
associated with operating leases will change, as IFRS 16
replaces the straight-line expenses for operating leases with a
depreciation charge for right-of-use assets and interest
expenses on liabilities arising from the lease. BASF plans to
recognize the adjustments arising from the transition to
IFRS 16 using the modified retrospective method as a cumu-
lative effect directly in other retained earnings as of Janu-
ary 1, 2019 without a restatement of comparative information.
For more information on leasing, see Note 28 from page 228 onward
Depreciation and amortization of intangible assets, property, plant and equipment and financial assets
4,056
6,078
Net income
2016
2017
Consolidated Financial Statements
Statement of cash flows
Statement of cash flows¹ (million €)
BASF Group
Statement of cash flows
BASF Report 2017
Furthermore, the new impairment model is also to be used
for further financial instruments, which are not recognized at
fair value through profit or loss, such as bank deposits, loan
receivables and miscellaneous receivables. Internal and exter-
nal ratings for the respective counterparties will also be used
as a basis for calculating impairments. Since individual valua-
tion allowances were not calculated for the above assets under
IAS 39, the first-time adoption of IFRS 9 will lead to additional
impairments.
With regard to new hedge accounting regulations, BASF
assumes that, in principle, all existing hedge accounting
relationships can be continued under IFRS 9.
In the future, BASF will measure material other sharehold-
ings at fair value in accordance with IFRS 9. This is not
expected to lead to a material implementation effect.
The first-time adoption of IFRS 9 will take place using the
modified retrospective method. BASF expects that this will
result in a reduction of equity between €30 million and €40 mil-
lion, which will be immediately recognized in equity on Janu-
ary 1, 2018. This is primarily due to the recognition of
impairments to trade accounts receivable. The expected
impact constitutes an estimate, which can deviate from the
actual impact.
IFRS 15 - Revenues from Contracts with Customers
The IASB published the new standard on revenue recognition,
IFRS 15, on May 28, 2014. The endorsement by the European
Union was issued in the third quarter of 2016. The standard
particularly aims to standardize existing regulations and thus
improve transparency and comparability of financial informa-
tion. According to IFRS 15, sales revenue is recognized when
control of the agreed-upon goods or services and the benefits
obtainable from them are transferred to the customer. Sales
revenue is measured at the amount the entity expects to
receive in exchange for goods and services. The rules and
definitions of IFRS 15 supersede the content of IAS 11, IAS 18,
and IFRIC 13. The new standard will be effective for reporting
periods beginning on or after January 1, 2018. The potential
impact of the new standard, including the subseqent clarifica-
tions adopted, on BASF's net assets, financial position and
results of operations, was assessed. For this purpose, a
Group-wide analysis was conducted.
Its analysis revealed that the balance sheet presentation of
sales revenue from licenses, which is realized over a period of
time, will change under IFRS 15. This is currently accounted
for as deferred income. Under IFRS 15, this will be presented
in a new balance sheet item, contract liabilities. A reclassi-
fication of approximately €100 million is expected as of Janu-
ary 1, 2018 in connection with the transition to IFRS 15.
Based on its analyses, BASF does not expect any further
material effects on its results of operations or net assets.
IFRS 15 will have a minor impact on BASF, as contracts with
customers of BASF generally only give rise to a single
performance obligation in each case, which is to be fulfilled at
a certain point in time.
BASF will apply IFRS 15 for the first time from January 1,
2018. The modified retrospective method will be used for first-
time adoption. The introduction of the new standard will lead
to changes in the balance sheet in the form of the new balance
sheet items "contract assets" and "contract liabilities," as well
as additional quantitative and qualitative disclosures in the
notes.
IFRS 16 - Leases
The IASB published the new standard on leasing, IFRS 16, on
January 13, 2016. The rules and definitions of IFRS 16 super-
sede the content of IAS 17, IFRIC 4, SIC 15 and SIC 27. The
standard requires an accounting model for a lessee that
recognizes all right-of-use assets and liabilities from lease
agreements in the balance sheet, unless the term is twelve
months or less or the underlying asset is of low value (up to
$5,000). As for the lessor, the new standard substantially
carries forward the accounting requirements of IAS 17 - Leases.
The European Union endorsed the new standard in the fourth
quarter of 2017. The new standard will be effective for report-
ing periods beginning on or after January 1, 2019. BASF does
not plan on an early adoption of these amendments.
BASF Report 2017
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Annual Improvements to IFRSS (2014-2016): Three IFRSS
were amended in the Annual Improvements to IFRSS (2014-
2016) of which both the following amendments are mandatory
as of January 1, 2018: In IAS 28, it was clarified that the elec-
tion to measure an investment in an associated company or a
joint venture held by an entity that is a venture capital
organization or other qualifying entity, can be exercised on an
investment-by-investment basis. The short-term exemptions
in IFRS 1, Appendix E (IFRS 1.E3-E7) for first-time IFRS users
were deleted. The amendments were endorsed by the
European Union in the first quarter of 2018. They are not
expected to have any material effect on BASF.
21.77
Finally, in IAS 23, it was determined that when entities
borrow funds in general for the acquisition of qualifiying assets
that those costs for borrowed capital specifically for the
acquisition of qualifying assets should not be considered in the
determination of the financing rate until their completion.
1.3 Group accounting principles
Brazil (BRL)
China (CNY)
Great Britain (GBP)
Japan (JPY)
3.97
3.43
3.60
3.86
7.80
7.32
7.63
7.35
0.89
0.86
0.88
0.82
135.01
123.40
126.68
120.20
Malaysia (MYR)
4.85
4.73
4.85
4.58
Mexico (MXN)
2016
2017
2016
Transactions between consolidated companies as well as
intercompany profits resulting from trade between consoli-
dated companies are eliminated in full; for joint operations,
they are proportionally eliminated. Material intercompany
profits related to companies accounted for using the equity
method are eliminated.
Scope of consolidation: The scope of consolidation is based
on the application of the standards IFRS 10 and 11.
According to IFRS 10, a group consists of a parent entity
and the subsidiaries controlled by the parent. "Control" of an
investee assumes the simultaneous fulfillment of the following
three criteria:
- The parent company holds decision-making power over the
relevant activities of the investee
- The parent company has rights to variable returns from the
investee
- The parent company can use its decision-making power to
affect the variable returns
Based on corporate governance and potential supplementary
agreements, companies are analyzed for their relevant
activities and variable returns, and the link between the vari-
able returns and the extent to which their relevant activities
could be influenced.
According to IFRS 11, which regulates the accounting of joint
arrangements, a distinction must be made between joint
ventures and joint operations. In the case of a joint venture, the
parties that have joint control of a legally independent company
have rights to the net assets of that arrangement. In joint
operations, the parties that have joint control have direct rights
to the assets and obligations for the liabilities relating to the
arrangement. This requirement is particularly fulfilled if the
production output of the joint arrangement is almost entirely
transferred to the partners, through which the partners
guarantee the joint arrangements' ongoing financing.
Companies whose corporate governance structures
classify them as joint arrangements are analyzed to determine
if they meet the criteria for joint ventures or joint operations as
per IFRS 11. Should the arrangement be structured through a
separate vehicle, its legal form, contractual arrangements and
all other facts and circumstances are reviewed.
In addition to BASF SE, the Consolidated Financial
Statements include all material subsidiaries on a fully consoli-
dated and all material joint operations on a proportionally
consolidated basis. Companies whose business is dormant or
of low volume, and are of minor importance for the presenta-
tion of a true and fair view of the net assets, financial position
and results of operations, are not consolidated, but rather are
reported under other shareholdings. These companies are
carried at amortized cost and are written down in the case of
an impairment. The aggregate assets and equity of these
companies amount to less than 1% of the corresponding value
at the Group level.
Joint ventures and associated companies are accounted
for using the equity method in the Consolidated Financial
Statements. Associated companies are entities in which
significant influence can be exercised over their operating and
financial policies and which are not subsidiaries, joint ventures
or joint operations. In general, this applies to companies in
which BASF has an investment of between 20% and 50%.
Equity-accounted income is reported as part of income from
operations (EBIT).
Consolidation methods: Assets and liabilities of consoli-
dated companies are uniformly recognized and measured in
accordance with the principles described herein. For equity-
accounted companies, material deviations in measurement
resulting from the application of other accounting principles
are adjusted for.
The amendments are - subject to E.U. endorsement - to
be applied for the first time in the reporting period beginning
on or after January 1, 2019.
With the introduction of the cash flow condition in IFRS 9,
which must be considered in the classification of financial
assets, it could happen that financial assets measured at
amortized cost or at fair value through other comprehensive
income according to IAS 39 are to be recognized at fair value
through profit or loss in the future. At BASF, this will mainly
impact securities that are currently classified as available-for-
sale financial assets and thus measured at fair value through
other comprehensive income.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
177
Capital consolidation is conducted at the acquisition date
according to the purchase method. Initially, all assets, liabilities
and additional intangible assets that are to be capitalized are
measured at fair value. Finally, the acquisition cost is compared
with the proportional share of the net assets acquired at fair
value. The resulting positive differences are capitalized as
goodwill. Negative differences are reviewed once more, then
recognized directly in the income statement.
The incidental acquisition costs of a business combination
are recognized in the income statement under other operating
expenses.
Foreign currency translations: The cost of assets
acquired in foreign currencies and revenue from sales in
foreign currencies are determined by the exchange rate on the
date of the transaction. Foreign currency receivables and
liabilities are valued at the exchange rates on the balance
sheet date. Changes in assets and liabilities arising from
foreign currency translation are recognized in the income
statement, and reported under other operating expenses or
income, other financial result, and in the case of available-for-
sale financial assets, in other comprehensive income.
Translation of foreign currency financial statements:
The translation of foreign currency financial statements
depends on the functional currency of the consolidated
companies. For companies whose functional currency is not
the euro, translation into the reporting currency is based on
the closing rate method: Balance sheet items are translated
into euros using closing rates on the balance sheet date;
expenses and income are translated into euros at monthly
average rates and accumulated for the year. The difference
between a company's translated equity at historical rates at
the time of acquisition or retention and its equity at closing
rates on the balance sheet date is reported separately in equity
under other comprehensive income (translation adjustments)
and is recognized in income only upon the company's disposal.
For certain companies outside the eurozone or U.S. dollar
zone, the euro or U.S. dollar is the functional currency. In such
cases, the translation into the functional currency of financial
statements prepared in the local currency is done according to
the temporal method: All nonmonetary assets and related
depreciation and amortization as well as equity are translated
at the exchange rate applying to the respective transactions.
All other balance sheet items are translated using closing rates
on the balance sheet date; other expenses and income are
translated at monthly average rates. The resulting translation
differences are recognized in the income statement under
other operating income or expenses. If necessary, financial
statements in the functional currency are translated into the
presentation currency according to the closing rate method.
Selected exchange rates (€1 equals)
Closing rates
Dec. 31, Dec. 31,
Average rates
2017
BASF Report 2017
290
,
Dr. Kurt Bock discussing business in
South America, the opportunities of
digitalization and future prospects with
young leaders in Brazil.
The content of this paragraph (symbol at the end of the paragraph) or section (symbol
below the section) is not part of the statutory audit of the annual financial statements
but has undergone a separate audit with limited assurance by our auditor.
You can find more information on our website.
You can find more information in this report.
The following symbols indicate important information for the reader:
Further information
This integrated report documents BASF's economic, environmental and social performance
in 2017. We use examples to illustrate how sustainability contributes to BASF's long-term
success and how we as a company create value for our customers, employees,
shareholders, business partners, neighbors and the public.
Integrated reporting
BASF Report 2017
About This Report
About This Report
2
received by external
compliance hotlines
phone calls and emails
Our results
€64.5 billion
in sales, of which
over €9 billion
from innovations that
we have launched in
the past five years
€8.5 billion
in EBIT
€8.3 billion
If the symbol is underlined, it is relevant to the entire chapter.
in EBIT before special
items
This paragraph (symbol at the end of the paragraph) or section (symbol below the
section) shows how the 10 principles of the U.N. Global Compact are implemented in
line with the Blueprint for Corporate Sustainability Leadership.
The BASF Report online
For more information on the Global Reporting Initiative,
see globalreporting.org
The focus of sustainability reporting and the limits of this
report are based on our materiality analysis together with a
strategic internal evaluation defining focus areas along the val-
ue chain.
The information on the financial position and performance of
the BASF Group comply with the requirements of International
Financial Reporting Standards (IFRS), and, where applicable,
the German Commercial Code, German Accounting Stan-
dards (GAS) and the guidelines on alternative performance
measures from the European Securities and Markets Authority
(ESMA). Internal control mechanisms ensure the reliability of
the information presented in this report. BASF's management
confirmed the effectiveness of the internal control measures
and compliance with the regulations for financial reporting.
■ Sustainability reporting focused on material topics
■ Financial reporting according to International
Financial Reporting Standards (IFRS), the German
Commercial Code and German Accounting Standards
(GAS)
Requirements and topics
IIRC framework, see "How we create value" in the introduction
For a visualization of BASF's business model based on the
The GRI and Global Compact Index can be found at basf.com/en/gri-gc
For more information on sustainability, see basf.com/sustainability
For more information on the Global Compact, the implementation of the
Global Compact principles, Global Compact LEAD and Blueprint for
Corporate Sustainability Leadership, see globalcompact.org and
basf.com/en/global-compact
The 2017 Online Report can be found at basf.com/report
We have been active in the International Integrated
Reporting Council (IIRC) since 2014 in order to discuss our
experiences of integrated reporting with other stakeholders
and at the same time, receive inspiration for enhancing our
reporting. This report addresses elements of the IIRC frame-
work by, for example, providing an illustrative overview
of how we create value or demonstrating the relationships
between financial and nonfinancial performance in the sec-
tions on the segments. The information in the BASF Report
2017 also serves as a progress report on BASF's implementa-
tion of the 10 principles of the United Nations Global Compact
and takes into consideration the Blueprint for Corporate Sus-
tainability Leadership of the Global Compact LEAD platform.
The GRI and Global Compact Index can be found in the
online report and provides information on GRI indicators, topics
relevant to the U.N. Global Compact principles and the results
of the audit of this information in the form of an assurance
report by KPMG AG Wirtschaftsprüfungsgesellschaft.
Our sustainability reporting has been based on Global
Reporting Initiative (GRI) standards since 2003. The BASF
Report 2017 was prepared in accordance with the
"Comprehensive" application option of the new Global
Reporting Initiative Standards.
The BASF Report combines the major financial and nonfinancial
information necessary to thoroughly evaluate our performance.
We select the report's topics based on the following reporting
principles: materiality, sustainability context, completeness,
balance, and stakeholder inclusion. In addition to our integrated
report, we publish further information online. Links to this sup-
plementary information are provided in each section.
■ Sustainability reporting is based on the international
standards issued by the Global Reporting Initiative
(GRI)
■ As an integrated report, the BASF Report also serves
as a U.N. Global Compact progress report
Content and structure
About This Report 3
BASF Report 2017
PDF version available for download: basf.com/basf_report_2017.pdf
HTML version with additional features: basf.com/report
If the symbol is underlined, it is relevant to the entire chapter.
Net income of
€3.10
€6.1 billion
Around
800
patents filed
worldwide
20.5%
Proportion of women in
executive positions
Proportion of non-German
senior executives
38.9%
€56.0 million
spent on donations
and sponsorship
Involved in
U.N. Global Compact
since 2000
Around
600
universities, research
institutions and companies
within our global network
In
1
case
we terminated
our collaboration
with suppliers as
a result of
unsatisfactory
sustainability
performance
projects in the
research pipeline
3,000
Around
product applications
assessed and rated
for aspects of
sustainability
dividend per share
€1.4 billion
in income taxes
1,766
million m3
of water discharged
Greenhouse gas emissions:
22.6
million metric tons
CO₂ equivalents
19.2 million MWh
For more information on our selection of sustainability topics,
see page 29 onward and basf.com/materiality
fuel saved through Verbund system
570 million metric tons
of CO2 equivalents
Number of lost-time injuries
per one million working
hours:
1.4
0
transportation incidents
with significant impact on
the environment
Process safety
incidents:
2.0
per one million working
hours
60,000
Customers' use of BASF's climate protection
products avoids
For more information on our control and risk management system,
see page 111 onward
Over
GRI
For nearly two decades, we have been involved in the U.N. Global Compact
network and we actively support the U.N. Sustainable Development Goals. Mobility,
for example, is an established part of our lives. But we also have a responsibility to
design it in a sustainable way. BASF contributes to this with our lightweight
plastics, high-performance catalysts and new battery materials.
Around 10,000 dedicated employees worldwide work in research at BASF to
develop new products for a sustainable future. We often collaborate with customers
and academic partners as well as startups. We believe that innovation and
sustainability are inextricably linked.
In doing so, we rely on research and development, organic growth through
investments in plants, and the continuous refinement of our portfolio. Operational
excellence and cost discipline along our value chains also continue to be essential
for our sustainable success.
Our strategy provides direction for how we further develop BASF. At the core is our
corporate purpose: "We create chemistry for a sustainable future." We are well
aware of the needs of the fast-growing global population. More and more people
need access to food and water, energy, raw materials, housing and healthcare.
At the same time, the Earth's resources are limited. Our products and services
contribute to reconciling the needs with the limitations.
At the end of 2017, our shares were trading for €91.74. This represents a 3.9%
increase over the closing price in 2016, which was also the high for that year. We
propose to you that the dividend be increased by €0.10 to €3.10 per share. The
BASF share would thus once more offer an attractive dividend yield of around 3.4%
based on the 2017 year-end share price. In total, we plan to pay out €2.8 billion to
our shareholders.
The key indicator of the value we produce for you, our shareholders, is EBIT after
cost of capital. This increased once again in 2017 and more than doubled to
€2.7 billion.
BASF achieved strong growth in all regions. We were particularly pleased with our
strong growth in Asia. Our investments there in recent years are paying off. Our
earnings in Asia doubled, making it the most profitable region for BASF.
"For nearly two decades, we have
been involved in the U.N. Global
Compact network."
"BASF achieved strong growth in
all regions. We were particularly
pleased with our strong growth
in Asia."
BASF Report 2017
Letter from the Chairman of the Board of Executive Directors
To Our Shareholders
8
7
We significantly improved our earnings in the Oil & Gas segment, where we also
benefited from the recovery in the oil price. It climbed to an average of $54 per
barrel for Brent crude in 2017 versus an average price of $44 in the previous year.
In an ongoing difficult market environment, our Agricultural Solutions segment was
nearly able to match the 2016 results thanks to a strong fourth quarter. In light of
our promising research pipeline, we take an optimistic view of the future.
Our earnings rose even more sharply, by around one-third. Our EBIT before special
items came in at €8.3 billion, with a significant contribution coming from the
Chemicals segment. Higher margins and volumes in the basic chemicals and
intermediates businesses more than offset the lower margins in our businesses
that are closer to customers. Overall, our earnings in the chemicals business were
significantly higher than in the previous year.
Economic activity picked up in many countries in 2017. We took advantage of this
upturn and markedly increased our sales and earnings compared with the previous
year. We sold higher volumes in all segments and divisions. For basic chemicals in
particular, we also increased our prices significantly. Overall, our sales grew by
12%. One contributing factor was the Chemetall business acquired in December
2016, which comprises tailor-made solutions for metals surface treatment.
The positive development of our business is driven by the performance of our
skilled and dedicated team at BASF. On behalf of the Board of Executive Directors,
I sincerely thank all employees worldwide for their contribution to BASF's success.
Looking back, 2017 was a successful business year in which BASF significantly
exceeded its earnings targets. We achieved strong growth and were able to further
increase our profitability. Moreover, we laid important groundwork for BASF's future
development : - in terms of both people and strategy. With the acquisitions
announced for 2018 we want to further strengthen our company. We are ensuring
our future competitiveness.
Letter from the Chairman of the Board of Executive Directors
In order to strengthen our capacity for innovation, we also utilize the opportunities
offered by digitalization. We are increasingly using digital technologies throughout
our value chains. This helps us to design our processes more effectively and
efficiently. At our sites around the globe, we combine data with modern analytics.
At our Verbund site Ludwigshafen, for example, we use predictive maintenance
techniques at our steam cracker, the heart of our production. Several thousand
sensors record process data, such as temperature and pressure, around the clock.
This makes it easier for us to optimally operate and monitor the plants.
Another example is our digital business models - such as services, platform
solutions and licenses that customers obtain from us and use - which create
additional value for our customers and for BASF.
BASF Report 2017
To Our Shareholders
Letter from the Chairman of the Board of Executive Directors
UN GLOBAL
Chairman of the Board of
Executive Directors
Dr. Kurt Bock
BASF Report 2017
Saori Dubourg testing MaglisⓇ
Agronomic Advice in a rapeseed oil
field with a BASF employee. This
digital application helps farmers to
make more informed decisions
during the growing season.
Saori Dubourg
The Board of Executive Directors of BASF SE
The Board of Executive Directors of BASF SE
To Our Shareholders
10
To Our Shareholders
9
"In the past year we made
important decisions for the
development of our portfolio."
Kurt Bock
Nert Barcl
Yours,
Despite a number of political risks, we expect economic conditions to be solid in
2018. We anticipate that the global economy and chemical production will grow at
the same pace as in 2017. We assume an average oil price of $65 per barrel for
Brent crude and an average annual exchange rate of $1.20 per euro for 2018.
In December 2017, we announced fundamental changes for our oil and gas
activities. BASF and the LetterOne group plan to merge their respective oil and gas
businesses in a joint venture. The new company, Wintershall DEA, should be one of
the largest independent exploration and production companies in Europe, with
excellent growth prospects. We plan to list the company on the stock exchange in
the medium term.
However, we also divest businesses when we believe they could be more
successful in a different constellation. At the end of September 2017, we
transferred our business with leather chemicals to the Stahl Group, a leading
producer of process chemicals for leather products. In return, we now hold a 16%
share in the Stahl Group.
These two transactions exemplify our strategy of broadening BASF's portfolio by
adding fast-growing, cyclically resilient businesses. Innovations play a major role in
this, as they enable us to offer our customers specific and sustainable solutions for
their particular applications.
We want to bolster our Agricultural Solutions segment with the acquisition of
significant parts of Bayer's seed and herbicide businesses. These will be an
excellent complement to our well-established and successful crop protection
business and our biotechnology activities. With this acquisition we aim to expand
our offerings for farmers. We want to enter into the seed business with proprietary
assets in key agricultural markets, which will also allow us to more quickly
implement the results of our seed research.
In the past year we made important decisions for the development of our portfolio.
We plan to acquire Solvay's global polyamide business. This will expand our range
of engineering plastics for the transportation, construction and consumer goods
industries and will strengthen our access to raw materials. Furthermore, we also
expect to improve our access to key growth markets in Asia and South America.
"I am very optimistic about the
future development of our
company, which the BASF team
will shape with great élan."
Dear Shareholder,
I am also very optimistic about the future development of our company, which the
BASF team will shape with great élan. Everyone contributes his or her own
experiences, perspectives, ideas and skills at work each day. My successor, Martin
Brudermüller, has what it takes to maintain our successful track record and
advance the company. I am convinced that BASF will continue to seize
opportunities in the future.
To Our Shareholders
External audit and evaluation
For more information on companies accounted for in the Consolidated
Financial Statements, see the Notes from page 173 onward
For more information on emissions, see page 104 onward
The Consolidated Financial Statements begin on page 159
The list of shares held can be found at basf.com/en/governance
In the section "Environment, Health, Safety and Security,"
we report all data on the emissions and waste of the world-
wide production sites of BASF SE, its subsidiaries, and joint
operations based on our interest. Work-related accidents at all
sites of BASF SE and its subsidiaries as well as joint operations
and joint ventures in which we have sufficient authority in terms
of safety management, are compiled worldwide regardless
of our interest and reported in full. Unless otherwise indicated,
further data on social responsibility and transportation safety
refers to BASF SE and its consolidated subsidiaries.
The section "Working at BASF" refers to employees active
in a company within the BASF Group scope of consolidation
as of December 31, 2017. Our data collection methods for
environmental protection and occupational safety are based
on the recommendations of the European Chemical Industry
Council (CEFIC).
BASF Group's scope of consolidation for its financial
reporting comprises BASF SE, with its headquarters in
Ludwigshafen, Germany, and all of its fully consolidated
material subsidiaries and proportionally included joint opera-
tions. Shares in joint ventures and associated companies are
accounted for, if material, using the equity method in the BASF
Group Consolidated Financial Statements and are thus not
included in the scope of consolidation.
All information and bases for calculation in this report are
founded on national and international standards for financial
and sustainability reporting. The data and information for the
reporting period were sourced from the expert units
responsible using representative methods. The reporting
period was the 2017 business year. Relevant information is
included up to the editorial deadline of February 21, 2018. The
report is published each year in English and German.
The report is published each year in English and
German
■
■ Relevant information included up to the editorial
deadline of February 21, 2018
Data
Our reporting is audited by a third party. KPMG AG Wirtschafts-
prüfungsgesellschaft has audited the BASF Group
Consolidated Financial Statements and the Management's
Report and has approved them free of qualification. The audit
of the Consolidated Financial Statements including the Notes
is based on the likewise audited financial statements of the
BASF Group companies.
BASF Report 2017
4
GOLD Community
PARTICIPANT
LEAD
Global Compact
COMPACT
GLOBAL
WE SUPPORT
BASF Report 2017
COMPACT
About This Report
Statements and figures pertaining to sustainability in the
Management's Report and Consolidated Financial Statements
are also audited. The audit with limited assurance was
conducted in accordance with ISAE 3000 (Assurance
Engagements other than Audits or Reviews of Historical
Financial Information) and ISAE 3410 (Assurance Engagements
on Greenhouse Gas Statements), the relevant international
auditing standards for sustainability reporting. The additional
content provided on the BASF internet sites indicated in this
report is not part of the information audited by KPMG.
BASF
The Independent Auditor's Report can be found on page 162
An assurance report on the sustainability information in the
BASF Report 2017 can be found at
basf.com/sustainability_information
BASF on the capital market
14
The Supervisory Board also engaged KPMG with a
substantive audit with limited assurance of the nonfinancial
statement (NFS).
10
The Board of Executive Directors of BASF SE
7
the Board of Executive Directors
245
235
Supplementary Information on the Oil & Gas Segment
Overviews
159
Letter from the Chairman of
125
17
Corporate Governance
Management's Report
An assurance report on the substantive audit of the NFS
can be found at basf.com/nfs-audit
To Our Shareholders
1
Forward-looking statements and forecasts
Consolidated Financial Statements
This report contains forward-looking statements. These state-
ments are based on current estimates and projections of
BASF management and currently available information. Future
statements are not guarantees of the future developments and
results outlined therein. These are dependent on a number of
factors; they involve various risks and uncertainties; and they
are based on assumptions that may not prove to be accurate.
Such factors include those discussed in the Opportunities and
Risks Report from pages 111 to 118. We do not assume any
obligation to update the forward-looking statements contained
in this report above and beyond the legal requirements.
Proportionally consolidated joint operations particularly com-
prise:
2.2 Joint Operations
Other financial obligations
0.0
2
Total equity and liabilities
(6)
Thereof financial indebtedness
0.1
4
0.0
- Ellba C.V., Rotterdam, Netherlands, which is operated jointly
with Shell and produces propylene oxide and styrene
2
0.0
monomer
2.3 Joint ventures and associated companies
BASF has shareholdings in two material joint ventures.
BASF-YPC Company Ltd., Nanjing, China, is operated by
BASF together with its partner Sinopec at the Verbund site in
Nanjing. BASF's share is 50%.
- BASF DOW HPPO Production B.V.B.A., Antwerp, Belgium,
which is operated jointly with The Dow Chemical Company
to produce propylene oxide
Current assets
1,181
0.1
Noncurrent assets.
2017
Balance sheet
Financial information on the W & G Infrastruktur Finanzierungs
group, Kassel, Germany (100%) (million €)
Financial information on BASF-YPC Company Ltd., Nanjing, China
(100%) (million €)
BASF Report 2017
Notes - Policies and scope of consolidation
Consolidated Financial Statements
186
185
A majority of the activities in the Oil & Gas segment's
Exploration & Production business sector take place through
joint activities, which are not incorporated in separate com-
panies. This primarily relates to activities in Germany, Norway
and Argentina. These are generally accounted for as joint
operations in accordance with IFRS 11 and contribute the
largest part of the sales, depreciation and amortization, and
fixed assets in the Oil & Gas segment.
BASF holds a 50% share in each of these companies and
controls them jointly with the respective partner. The com-
panies sell their products directly to the partners. The partners
ensure the ongoing financing of the companies by purchasing
the production. They were therefore classified as joint
operations in accordance with IFRS 11.
- AO Achimgaz, Novy Urengoy, Russia, which is jointly
operated with Gazprom for the production of natural gas
and condensate
(17)
(3)
Thereof financial indebtedness
Thereof cash and cash equivalents
0.0
0.0
1
Current assets
0.0
(1)
1
Thereof property, plant and equipment
0.0
5
0.0
721
(7)
0.0
Current liabilities
0.0
0.1
0.0
0.0
8
0.0
(2)
0.0
1
3
Equity
0.0
2
0.0
(6)
Assets
Noncurrent liabilities
Thereof marketable securities, cash and
cash equivalents
Total equity and liabilities
2
1
Interest income
2,357
2,162
147
impairments
Interest expenses
107
Thereof financial indebtedness
Depreciation, amortization and
393
282
Current liabilities
560
30
Sales
(8)
23
Noncurrent assets
207
Net income
Income taxes
Interest expenses
Interest income
Income taxes
impairments
2,358
2,761
Sales
114
Net income
Statement of income
Depreciation, amortization and
190
122
Thereof financial indebtedness
Thereof financial indebtedness
842
908
Current assets
1,342
Noncurrent liabilities
923
461
1,254
Noncurrent assets
Balance sheet
2016
2017
1,902
Equity
1,515
Thereof marketable securities, cash and
cash equivalents
231
190
Statement of income
204
124
Noncurrent liabilities
1,760
1,756
Equity
1,902
Total equity and liabilities
Thereof financial indebtedness
2,357
2,162
Assets
99
Current liabilities
Assets
0.0
The intangible asset from the marketing contract for natural
gas from the Yuzhno Russkoye natural gas field is amortized
based on BASF's share of the produced and distributed
volumes.
2
Consolidated Financial Statements
184
183
The assumptions regarding the long-term development of
oil and gas prices are significant for impairment tests in the
Oil & Gas segment. The internal company projections are
based on an empirical analysis of the global oil and gas supply
and demand. Short-term estimates up to three years also
consider the current prices on active markets or forward trans-
actions. In long-term estimates, assumptions are made
regarding factors such as inflation, production quantities and
costs as well as energy efficiency and the substitution of
energy sources. Using external sources and reports, the oil
and gas price estimates are regularly checked for plausibility.
The carrying amount of assets, liabilities and provisions,
contingent liabilities and other financial obligations in the
Consolidated Financial Statements depends on the use of
estimates, assumptions and use of discretionary scope.
Specific estimates or assumptions used in individual
accounting or valuation methods are disclosed in their
respective sections. They are based on the circumstances and
estimates on the balance sheet date and affect the reported
amounts of income and expenses during the reporting periods.
These assumptions particularly concern discounted cash
flows in the context of impairment tests and purchase price
allocations; the determination of useful lives of property, plant
and equipment and intangible assets; the carrying amount of
shareholdings; and the measurement of provisions for such
things as employee benefits, warranties, trade discounts,
environmental protection and taxes. Although uncertainty is
appropriately incorporated in the valuation factors, actual
results can differ from these estimates.
Use of estimates and assumptions in preparing the
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Intangible assets in the Oil & Gas segment relate primarily
to exploration and production rights. During the exploration
phase, these are not subject to amortization but are tested for
impairment annually. When economic success is determined,
the rights are amortized in accordance with the unit of
production method.
An Exploration and Production Sharing Agreement is a type of
contract in crude oil and gas concessions whereby the
expenses and profits from the exploration, development and
production phases are divided between the state and one or
more exploration and production companies using defined
keys. The revenue BASF is entitled to under such contracts is
reported as sales.
Exploration expenses pertain exclusively to the Oil & Gas
segment and include all costs related to areas with unproven
oil or gas deposits. These include costs for the exploration of
areas with possible oil or gas deposits, among others. Costs
for geological and geophysical investigations are always
reported under exploration expenses. In addition, this item
includes valuation allowances for capitalized expenses for
exploration wells which did not encounter proven reserves.
Depreciation of successful exploratory drilling is reported
under cost of sales.
reserves.
The unit of production method is used to depreciate assets
from oil and gas production at the field or reservoir level.
Depreciation is generally calculated on the basis of the
production of the period in relation to the proven, developed
Production costs include all costs incurred to operate,
repair and maintain the wells as well as the associated plant
and ancillary production equipment, including the associated
depreciation.
Exploratory drilling is generally reported under construction
in progress until its success can be determined. When the
presence of hydrocarbons is proven such that the economic
development of the field is probable, the costs remain
capitalized as suspended well costs. At least once a year, all
suspended wells are assessed from an economic, technical
and strategic viewpoint to see if development is still intended.
If this is not the case, the capitalized costs for the well in
question are impaired. When reserves are proven, the
exploration wells are reclassified as machinery and technical
equipment when production begins.
214
An exploration well is a well located outside of an area with
proven oil and gas reserves. A development well is a well
which is drilled to the depth of a reservoir of oil or gas within an
area with proven reserves.
BASF Report 2017
In line with global growth, the demand for oil and gas will
continue to increase. Higher marginal costs of production and
the currently modest levels of investment should lead to a
significant increase in prices in the medium to long-term.
Considering the current high levels of oil inventories and the
assumption of a longer-term increase in oil supplies from the
United States, the oil price scenario has been adjusted
compared with the previous year and is now expected to reach
$100 only by 2022. BASF's gas price scenario assumes only a
moderate increase in gas prices in the E.U. in the next few
years due to overcapacity in gas liquefaction (LNG). After-
wards, a significant increase up to around €30/MWh (approxi-
mately $11/mmBTU) is expected by 2025 as a result of further
increasing demand and higher costs of new production and
liquefaction projects.
- One newly established company with headquarters in the
South America, Africa, Middle East region
- One newly established company with headquarters in Asia
Pacific
- Five acquired companies with headquarters in the regions
Europe and North America
First-time consolidations in 2017 comprised:
In 2017, the scope of consolidation for the Consolidated
Financial Statements encompassed 294 companies (2016:
294). Of this number, 10 companies were first-time consolida-
tions (2016: 46). Since the beginning of 2017, a total of 10
companies (2016: 10) were deconsolidated due to divestiture,
merger, liquidation or immateriality.
Changes in scope of consolidation
For planning purposes in 2018, BASF is using an average
yearly price for oil of $65/bbl (Brent) and for gas of approxi-
mately €16/MWh (roughly $5.5/mmBtu).
2.1
The goodwill impairment test is based on cash-generating
units. At BASF, these largely correspond to the business units,
or in individual cases the divisions. If there is a need for a
valuation allowance, the existing goodwill is, if necessary,
completely written off as a first step. If there is further need for
a valuation allowance, this is allocated to the remaining assets
of the cash-generating unit. Goodwill impairments are reported
under other operating expenses.
An impairment is recognized if the recoverable amount of the
asset is lower than the carrying amount. The impairment of the
asset (excluding goodwill) is made in the amount of the differ-
ence between these amounts.
For more information, see Note 14 from page 201 onward
the respective balance sheet date on the future development
of the operating business. Actual future developments may
vary. Impairment testing relies upon the cash-generating unit's
long-term earnings forecasts, which are based on economic
trends. The weighted average cost of capital (WACC) based
on the Capital Asset Pricing Model plays an important role in
impairment testing. It comprises a risk-free rate, the market
risk premium and the spread for the credit risk. Additional
important assumptions are the forecasts for the detailed
planning period and the terminal growth rates used.
Impairment tests are based on a comparison of the carry-
ing amount and the recoverable amount. The recoverable
amount is the higher of fair value less costs to sell and the
value in use. As a rule, value in use is determined using the
discounted cash flow method. The estimation of cash flows
and the assumptions used consider all information available on
Impairment tests on assets are carried out whenever certain
triggering events indicate that an impairment may be neces-
sary. External triggering events include, for example, changes
in customer industries, technologies used and economic
downturns. Internal triggering events for an impairment test
include lower product profitability, planned restructuring
measures or physical damage to assets.
2 Scope of consolidation
Oil and gas production: Exploration and development
expenditures are accounted for using the successful efforts
method. Under this method, costs of successful exploratory
drilling as well as successful and dry development wells are
capitalized.
Groups of assets and liabilities held for sale, that is
disposal groups, as well as discontinued operations held
for sale: These comprise those assets and directly associated
liabilities shown separately on the balance sheet whose sale
in the context of a single transaction is highly probable. A
transaction is estimated to be highly probable, if there are no
significant risks of completion of the transaction, which usually
requires the conclusion of binding contracts. The assets and
liabilities of disposal groups are recognized at the lower of the
sum of their carrying amounts or fair value less costs to sell;
this does not apply to assets which do not fall under the valua-
tion principles of IFRS 5. Scheduled depreciation of noncurrent
assets and the use of the equity method are suspended.
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Notes Policies and scope of consolidation
Consolidated Financial Statements
182
181
The expenses and income shown in other comprehensive
income are divided into two categories: Items that will be
recognized in the income statement in the future (known as
"recycling") and items that will not be reclassified to the income
statement in the future. The first category includes translation
adjustments, the measurement of securities at fair value, and
changes in the fair value of derivatives held to hedge future
cash flows and net investments in a foreign operation. Items
in other comprehensive income that will not be reclassified to
the income statement at a future date include effects from the
remeasurement of defined benefit plans.
Other comprehensive income
BASF Report 2017
When fair value hedges are used, the asset or liability is
hedged against the risk of a change in fair value. Here, changes
in the market value of the derivative financial instruments are
recognized in the income statement. Furthermore, the carrying
amount of the underlying transaction is adjusted by the profit
or loss resulting from the hedged risk, offsetting the effect in
the income statement.
Financial guarantees of the BASF Group are contracts
that require compensation payments to be made to the
guarantee holder if a debtor fails to make payment when due
under the terms of the financial guarantee. Financial guaran-
tees given by BASF are measured at fair value upon initial
recognition. In subsequent periods, financial guarantees are
carried at the higher of amortized cost or the best estimate of
the present obligation on the reporting date.
Derivative financial instruments can be embedded within other
contracts. If IFRS requires separation, then the embedded
derivative is accounted for separately from its host contract
and measured at fair value.
Income from interest-bearing assets is recognized on the
outstanding receivables on the balance sheet date using
interest rates calculated by means of the effective interest
method. Dividends from shareholdings not accounted for
using the equity method are recognized when the share-
holders' right to receive payment is established.
– Financial liabilities which are not derivatives are initially
measured at fair value, which normally corresponds to the
amount received. Subsequent measurement is carried out
at amortized cost, using the effective interest method.
- Cash and cash equivalents consist primarily of cash on
hand and bank balances with maturities of less than three
months.
The measurement is carried out at fair value. Changes in
fair value are recognized directly in equity (other comprehen-
sive income) and are only recognized in the income state-
ment when the assets are disposed of or have been impaired.
Subsequent reversals are recognized directly in equity (other
comprehensive income). Only in the case of debt instru-
ments, reversals are recognized in the income statement up
to the amount of the original impairment; reversals above
this amount are recognized directly in equity. If the fair value
of available-for-sale financial assets decreases below acqui-
sition costs, the assets are impaired if the decline in value is
material and can be considered lasting. The fair values are
determined using market prices. Shareholdings whose fair
value cannot be reliably determined are carried at acquisition
cost and are written down in the case of an impairment.
When determining the value of these shareholdings, the
acquisition costs constitute the best estimate of their fair
value. This category of shareholdings includes investments
in other shareholdings, provided that these shares are not
publicly traded. There are no plans to sell significant shares
in these shareholdings.
- Available-for-sale financial assets comprise financial
assets which are not derivatives and do not fall under any of
the previously stated valuation categories. This measure-
ment category comprises shareholdings reported under the
item other financial assets which are not accounted for using
the equity method as well as short and long-term securities.
Cash flow hedge accounting is applied in selected cases
to hedge future transactions. The effective portion of the
change in fair value of the derivative is thereby recognized
directly in equity under other comprehensive income, taking
deferred taxes into account. The ineffective portion is recog-
nized immediately in the income statement. In the case of
future transactions that will lead to a nonfinancial asset or a
nonfinancial debt, the cumulative fair value changes in equity
are either charged against the acquisition costs on initial
recognition or recognized in profit or loss in the reporting
period in which the hedged item is recorded in the income
statement. For hedges based on financial assets or debts, the
cumulative fair value changes of the hedges are transferred
from equity to the income statement in the reporting period in
which the hedged item is recognized in the income statement.
The maturity of the hedging instrument is determined based
on the effective date of the future transaction.
Debt
Provisions for pensions and similar obligations: Provisions
for pensions are based on actuarial computations made
according to the projected unit credit method. In doing so,
assumptions for valuation parameters include: future develop-
ments in compensation, pensions and inflation, employee
turnover and the life expectancy of beneficiaries. The resulting
obligations are discounted on the balance sheet date using
the market yields on high-quality corporate fixed-rate bonds
with a minimum of one AA rating.
Similar obligations, especially those arising from
commitments by North American Group companies to pay the
healthcare costs and life insurance premiums of retired staff
and their dependents, are reported under provisions for similar
obligations.
BASF Report 2017
Business combinations: In business combinations, the
acquired assets and liabilities are recognized at fair value on
the date the acquirer effectively obtains control. The fair value
of acquired assets and assumed liabilities at the date of
exchange, as well as the useful lives of the acquired assets,
are determined on the basis of assumptions. The measure-
ment is largely based on projected cash flows. The actual cash
flows can significantly deviate from these estimates. Indepen-
dent external appraisals are used for the purchase price allo-
cation of material business combinations. Valuations in the
course of business combinations are based on existing infor-
mation as of the acquisition date.
Other accounting policies
The probable amount required to settle noncurrent
provisions is discounted if the effect of discounting is material.
In this case, the provision is recognized at present value.
Assumptions must be made in determining the discount rate
(2017: 2.0%; 2016: 2.5%) used for calculating noncurrent
provisions. Financing costs related to unwinding the discount
of provisions in subsequent periods are shown in other
financial result.
For more information, see Note 26 on page 221
Other provisions also cover risks resulting from legal
disputes and proceedings, provided the criteria for recognizing
a provision are fulfilled. In order to determine the amount of the
provisions, the Company takes into consideration the facts
related to each case, the size of the claim, claims awarded in
similar cases and independent expert advice as well as
assumptions regarding the probability of a successful claim
and the range of possible claims. The actual costs can deviate
from these estimates.
Provisions for long-service and anniversary bonuses are
predominantly calculated based on actuarial principles. For
contracts signed under early retirement programs, approved
supplemental payments are accrued in installments until the
end of the exemption phase at the latest. Accounting and
measurement follow the German Accounting Standards
Committee e. V.'s Application Note 1 (IFRS) of December 2012.
Provisions are recognized for expected severance
payments or similar personnel expenses as well as for
demolition expenses and other charges related to restructur-
ing measures that have been planned and publicly announced
by management.
In addition, other provisions also cover expected costs for
rehabilitating contaminated sites, recultivating landfills,
removal of environmental contamination from existing
production or storage sites and similar measures. If BASF is
the only responsible party that can be identified, the provision
covers the entire expected claim. At sites operated together
with one or more partners, the provision generally covers only
BASF's share of the expected claim. The determination of the
amount of the provision is based on the available technical
information on the site, the technology used, legal regulations,
and official obligations.
Provisions are established for certain environmental
protection measures and risks if there exists a present legal or
constructive obligation arising from a past event, and the
expected cash outflow can be estimated with sufficient
reliability. Provisions for restoration obligations primarily
concern the filling of wells and the removal of production
facilities upon the termination of production in the Oil & Gas
segment. When the obligation arises, the provision is measured
at the present value of the future restoration costs. An asset is
capitalized for the same amount as part of the carrying amount
of the plant concerned and is depreciated along with the plant.
The discount on the provision is unwound annually until the
time of the planned restoration.
Provisions for German trade income tax, German corpo-
rate income tax and similar income taxes are determined and
recognized in the amount necessary to meet the expected
payment obligations less any prepayments that have been
made. Other taxes to be assessed are considered accord-
ingly.
Other provisions: Other provisions are recognized when there
is a present obligation as a result of a past event and when
there is a probable outflow of resources whose amount can be
reliably estimated. Provisions are recognized at the probable
settlement value.
For more information on provisions for pensions and similar obligations,
see Note 22 from page 211 onward
Actuarial gains and losses from changes in estimates
relating to the actuarial assumptions used to calculate defined
benefit obligations, the difference between standardized and
actual returns on plan assets, as well as the effects of the
asset ceiling are recognized directly in equity as other
comprehensive income.
The calculation of pension provisions is based on actuarial
reports.
- Three companies headquartered in Europe that had not
been consolidated at the time of the first inclusion in the
Consolidated Financial Statements.
0.0
First-time consolidations in 2016 comprised:
- Two newly established companies with headquarters in the
regions Asia-Pacific and North America
Thereof proportionally consolidated
As of December 31
Thereof proportionally consolidated
10
10
1
153
6
1
3
6
Deconsolidations
1
Thereof proportionally consolidated
46
2
10
56
71
%
Million €
%
Million €
2016
2017
43
Sales
8
8
2
294
294
27
Overview of impact of changes to the scope of consolidation (excluding acquisitions and divestitures)
1
1
3
Asia Pacific
America
Germany
Europe
North
Thereof
Africa,
Middle East
America,
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Scope of consolidation
BASF Report 2017
A list of companies included in the Consolidated Financial
Statements and a list of all companies in which BASF SE has
a shareholding as required by section 313(2) of the German
Commercial Code is provided in the List of Shares Held.
For more information, see Note 3 on page 190
For more information, see basf.com/en/governance
While BASF does not hold majority shares in ZAO Gazprom
YRGM Trading, BASF is entitled to the earnings of the company
due to profit distribution arrangements, so that the company
is fully consolidated in the Group Consolidated Financial
Statements.
- 11 companies headquartered in all regions which had not
been consolidated at the time of the first inclusion in the
Consolidated Financial Statements. Thereof eight were
newly established in 2016.
South
2017
2016
As of January 1
2
5
First-time consolidations
7
8
2
6
Thereof proportionally consolidated
258
294
27
71
42
57
154
- 33 companies in connection with the acquisition of Chemetall
registered in all regions
5
(8)
9
In 2017, BASF sold the following activities:
Divestitures
2,849
155
0.7
518
- On February 28, 2017, BASF sold its inorganic specialties
business to Edgewater Capital Partners LP, Cleveland, Ohio.
The transaction comprised the production site in Evans City,
Pennsylvania, and the product lines for special alcoholates,
boranes and alkali metals manufactured there in the Inter-
mediates division.
0.1
Payments made for acquisitions
Total equity and liabilities
Thereof financial indebtedness
1.1
162
0.4
106
66
On July 17, 2017, BASF sold its Bleaching Clay and Mineral
Adsorbents businesses to EP Minerals LLC, based in Reno,
Nevada. The divestiture affected one global business unit in
the Catalysts division and comprises a production site as
well as a bleaching clay mine in Mississippi and the mineral
rights sublease for a mine in Arizona. Sixty-six employees
transferred to EP Minerals LLC.
On September 29, 2017, BASF completed the combination
of the global leather chemicals business in the Performance
Chemicals division with the Stahl group. The transaction
comprised the global leather chemicals business, as well as
the leather chemicals production site in L'Hospitalet, Spain.
Around 210 jobs were affected worldwide, 110 of which
were in Asia. Under the terms of the agreement, BASF
received a 16% minority interest in the Stahl group as well as
a payment; this resulted in special income. Furthermore, in
the medium to long term, BASF will supply Stahl with
significant volumes of leather chemicals.
Million €
2016
2017
Sales
Effects of divestitures
The following overview shows the effects of the divestitures
conducted in 2017 and 2016 in the Consolidated Financial
Statements. The line item sales reflects the year-on-year
decline resulting from divestitures. The impact on equity relates
mainly to gains and losses from divestitures.
-
-On December 14, 2016, BASF sold the Coatings division's
industrial coatings business to the AkzoNobel Group. The
transaction included technologies, patents and trademarks,
customer relationships, inventories as well as the transfer of
two production sites in England and in South Africa.
- On August 26, 2016, BASF sold its worldwide photoinitiator
business in the Dispersions & Pigments division to IGM
Resins B.V., Waalwijk, Netherlands. The transaction
comprised technology, patents, trademarks, customer
relationships, contracts and inventories as well as the
- On June 30, 2016, BASF completed the sale of its global
polyolefin catalysts business to W.R. Grace & Co., Columbia,
Maryland. The transaction involved technologies, patents,
trademarks and the transfer of production plants in
Pasadena, Texas, and Tarragona, Spain. Around 170
employees transferred to Grace. These activities had been
assigned to the Catalysts division.
In 2016, BASF sold the following activities:
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2017
- On September 30, 2017, BASF concluded the sale of its
production site for electrolytes in Szhou, China, to
Shenzhen Capchem Technology Co. Ltd., based in
Shenzhen, China. The site was allocated to the Catalysts
division.
photoinitiator production site in Mortara, Italy. The sale
affected 120 employees worldwide.
Current liabilities
Thereof financial indebtedness
1.2
Current assets
6.0
3,009
0.5
243
Noncurrent assets
18
0.5
(0.1)
(3)
Other noncurrent assets
0.9
45
0.1
20
0.1
358
1.4
356
0.1
40
Noncurrent liabilities
Equity
4.4
3,367
0.3
261
Total assets
5.9
81
0.1
5
Thereof cash and cash equivalents
(460)
3
%
(0.8)
%
Consolidated Financial Statements
190
189
seed and non-selective herbicide businesses. The assets to be
acquired include Bayer's global glufosinate-ammonium busi-
ness, commercialized under the Liberty®, BastaⓇ and FinaleⓇ
trademarks, as well as its seed businesses for key row crops in
selected markets. The transaction also covers Bayer's trait
research and breeding capabilities for these crops. BASF will
acquire the manufacturing sites for glufosinate-ammonium
production and formulation in Germany, the United States and
Canada, seed breeding facilities in the Americas and Europe
as well as trait research facilities in the United States and
Europe. With the acquisition, which is expected in the first half
of 2018 subject to the closing of Bayer's acquisition of
Monsanto and approval by the relevant authorities, BASF will
expand its crop protection business, strengthen the herbicide
portfolio and enter into its own seed business in key agricultural
markets. More than 1,800 employees are to be transferred to
BASF with the acquisition, strengthening the Crop Protection
division. The purchase price amounts to €5.9 billion, subject to
certain adjustments at closing.
On October 13, 2017, BASF announced that it had signed
an agreement on the acquisition of significant parts of Bayer's
On September 18, 2017, BASF signed an agreement with the
Solvay group on the acquisition of Solvay's global polyamide
business. Solvay and BASF aim to close the transaction in the
third quarter of 2018 after regulatory approvals have been
obtained and the consent of a joint venture partner has been
received. The acquisition would complement BASF's
engineering plastics portfolio and expand the company's
position as a solutions provider for the transportation,
construction and consumer goods industries as well as for
other industrial applications. BASF plans to integrate the global
polyamide business into the Performance Materials and
Monomers divisions. The purchase price on a cash and
debt-free basis and excluding other adjustments is €1.6 billion.
If the transaction is not concluded, the agreement provides for,
subject to certain conditions, a payment of €150 million from
BASF to Solvay.
Notes - Policies and scope of consolidation
Agreed-upon transactions
0.5
403
0.3
222
177
(1)
(4)
701
(0.2)
BASF Report 2017
On December 7, 2017, BASF signed a letter of intent with the
LetterOne group on the merger of their respective oil and gas
businesses in a joint venture, which would operate under the
name Wintershall DEA. The definitive transaction agreements
are to be negotiated over the coming months; the transaction
could close in the second half of 2018, subject to the
Activities not assigned to a particular division are reported
in Other. These include the sale of raw materials, engineering
and other services, rental income and leases, the steering of
the BASF Group by corporate headquarters, and cross-
divisional corporate research. Cross-divisional corporate
research, to which plant biotechnology research also belongs,
works on long-term topics of strategic importance to the
BASF Group. Furthermore, it focuses on the development of
specific key technologies which are of central importance for
the divisions.
The Oil & Gas segment comprises the division of the same
name and focuses on the exploration and production in oil and
gas rich regions in Europe, North Africa, Russia, South America
and the Middle East. It benefits from strong partnerships and
its technological expertise. In Europe, the segment is also
active in the transportation of natural gas together with its
Russian partner Gazprom.
The Agricultural Solutions segment includes the Crop
Protection division, which is active in the areas of chemical
and biological crop protection, seed treatment and water
management as well as for nutrient supply and combating
plant stress. It offers farmers innovative solutions, including
those based on digital technologies, combined with practical
advice. Plant biotechnology research is not assigned to this
segment; it is reported in Other.
chemical and construction industries, as well as applications
for household, sports and leisure. An in-depth understanding
of applications, the development of innovations in close
cooperation with customers, and adaptation to different
regional needs are key success factors. The segment is made
up of the Catalysts, Construction Chemicals, Coatings, and
Performance Materials divisions.
The Functional Materials & Solutions segment bundles
system solutions, services and innovative products for specific
sectors and customers, especially the automotive, electrical,
The Chemicals segment comprises the classic chemicals
business with basic chemicals and intermediates. The focus is
on cost leadership in the value chains, efficient and reliable
production and logistics processes, as well as process inno-
vation. The segment forms the core of BASF's Production
Verbund and is the starting point for a majority of the value
chains. In addition to supplying the chemical industry and
numerous other sectors, Chemicals ensures that other BASF
segments are supplied with chemicals for producing
downstream products. The Chemicals segment is composed
of the Petrochemicals, Monomers and Intermediates divisions.
The Performance Products segment consists of the
Dispersions & Pigments, Care Chemicals, Nutrition & Health
and Performance Chemicals divisions. Tailored solutions play
a key role. They enable our customers to improve the applica-
tion properties of their products or optimize production pro-
cesses, for example. Close customer contact and meeting the
demanding requirements of a wide range of industries are
crucial to business success. As of January 1, 2017, the
activities of the Monomers and Dispersions & Pigments
divisions for the electronics industry were merged into the
global business unit Electronic Materials in the Dispersions &
Pigments division within the Performance Products segment.
BASF thereby strengthens its position as a strategic partner
for the large electronic producers. The 2016 figures have been
restated accordingly.
Intended transactions
BASF's business is conducted by thirteen operating divisions
aggregated into five segments for reporting purposes. The
divisions are allocated to the segments based on their business
models.
For more information, see basf.com/en/governance
audited Consolidated Financial Statements submitted to the
electronic Federal Gazette. The list of shares held is also
published online.
The list of consolidated companies and the complete list of all
companies in which BASF SE has a share as required by
section 313(2) of the German Commercial Code and infor-
mation for exemption of subsidiaries from accounting and
disclosure obligations are an integral component of the
3 BASF Group List of Shares Held in accordance with section 313(2) of the German
Commercial Code
For more information, see the Management's report on page 86 onward
customary regulatory approvals. There is no assurance that
BASF will enter into definitive transaction agreements with
LetterOne or that the intended transaction will be con-
summated. Due to this uncertainty, BASF continues to report
Oil & Gas as continuing operations.
4 Reporting by segment and region
(63)
(13)
1.4
(0.2)
(48)
Current assets
(0.4)
(97)
(0.2)
(64)
(50)
(0.5)
(234)
Noncurrent assets
0.2
93
(15.2)
Thereof property, plant and equipment
(0.3)
Thereof cash and cash equivalents
Total assets
467
0.7
239
1 Thereof from the asset swap with Gazprom: €10.244 million (-14.5%)
Payments received from divestitures
Total equity and liabilities
Thereof financial indebtedness
Current liabilities
Thereof financial indebtedness
Noncurrent liabilities
Equity
(0.4)
(298)
0.1
45
Million €
(10,718)1
3
Financial assets
155
- Wintershall Noordzee B.V., Rijswijk, Netherlands, which is
operated jointly with Gazprom (BASF interest: 50%);
Non-material joint ventures accounted for using the equity
method particularly comprise:
187
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2017
Additionally, W & G Infrastruktur Finanzierungs-GmbH has
become party to the financing arrangement previously
between WIGA Transport Beteiligungs-GmbH & Co. KG and
an international banking consortium; besides WIGA Transport
Beteiligungs-GmbH & Co. KG, W & G Infrastruktur Finan-
zierungs-GmbH functions as a further debtor and assumed
€925 million of financial liabilities previously held by WIGA
Transport Beteiligungs-GmbH & Co. KG against a transfer of
loan receivables to GASCADE Gastransport GmbH and
NEL Gastransport GmbH as well as cash. This was deposited
in BASF's cash pool. In doing so, W & G Infrastruktur
Finanzierungs-GmbH effectively took over the financing func-
tion for both of these companies operating in the regulated
gas transportation business.
– N.E. Chemcat Corporation, Tokyo, Japan, which is operated
jointly with the partner Sumitomo Metal Mining Co. Ltd.
(BASF interest: 50%);
1 The disclosures also contain effects from the transfer of GASCADE Gastransport GmbH
and NEL Gastransport GmbH to W & G Infrastruktur Finanzierungs-GmbH.
881
879
Carrying amount according to the equity method
as of the end of the year
Carrying amount according to the equity method as of
the beginning of the year
Other adjustments of income and expenses
(27)
W & G Infrastruktur Finanzierungs-GmbH, Kassel, Germany, a
joint venture between BASF and Gazprom for the bundling of
the regulated gas transportation business (BASF interest:
50%), was established in August 2017. Effective November
30, 2017, GASCADE Gastransport GmbH, Kassel, Germany,
which was reported as a material associated company in
the previous year, and NEL Gastransport GmbH, Kassel, Ger-
Imany, which was reported as a non-material associated
company in the previous year, were transferred from
W & G Transport Holding GmbH to W & G Infrastruktur
Finanzierungs-GmbH.
(179)
- Heesung Catalysts Corporation, Seoul, South Korea, which
is operated jointly with the partner Heesung (BASF interest:
50%).
Non-material associated companies accounted for using the equity
method (BASF interest) (million €)
209
120
Total comprehensive income
100
(31)
Proportional change of other comprehensive
income
Non-material joint ventures accounted for using the equity method
(BASF interest) (million €)
109
Proportional net income
1,434
1,554
Carrying amount according to the equity method
as of the beginning of the year
2016
2017
151
Thereof dividends
(27)
(179)
881
as of the beginning of the year
Carrying amount according to the equity method
608
Capital measures/dividends/changes in the scope of
consolidation/other adjustments¹
57
768
Proportional change of other comprehensive income
Total comprehensive income¹
473
110
159
57
Proportional net income¹
23
332
Thereof dividends (includes profit and loss transfers)
(62)
Proportional net income
consolidation/other adjustments
Capital measures/dividends/changes in the scope of
140
177
Total comprehensive income
657
Carrying amount according to the equity method as of
the end of the year
(26)
(59)
income
Proportional change of other comprehensive
(8)
Other adjustments of income and expenses¹
166
236
Capital measures/dividends/changes in the scope of
consolidation/other adjustments
0.6
(114)
Other adjustments of income and expense
The following overview shows the effects of the acquisi-
tions conducted in 2017 and 2016 on the Consolidated Finan-
cial Statements. If acquisitions resulted in the transfer of assets
or the assumption of additional liabilities, these are shown as a
net impact.
The preliminary purchase price allocation for the acquisition of
Chemetall was reviewed at the end of the 12-month
measurement period in accordance with IFRS 3 and corrected
to reflect more detailed information on tax matters, provisions
for pensions and a retroactive purchase price adjustment. This
reduced net working capital by €13 million. Taking into account
a cash-effective adjustment, the total purchase price rose by
€6 million. Overall, the adjustments increased goodwill by
€19 million to €1,564 million. The goodwill recognized resulted
primarily from sales synergies arising from the expansion of the
portfolio, and to a smaller extent from cost synergies.
On September 26, 2016, BASF concluded the acquisition of
Guangdong Yinfan Chemistry ("Yinfan”) in Jiangmen, China,
and integrated the business into the Coatings division. This
acquisition enabled BASF to expand its portfolio of auto-
motive refinish coatings in Asia Pacific with the addition of
the Yinfan product range and gain access to a state-of-the-
art production plant for automotive refinish coatings in China.
-On December 14, 2016, BASF concluded the acquisition of
the global surface treatment provider Chemetall from
Albemarle Corp., Charlotte, North Carolina. The acquisition
complements the Coating division's portfolio by adding
customized technology and system solutions for the treat-
ment of surfaces. The purchase price, after adjustments to
the net financial debt and net working capital, amounted to
$3.1 billion.
In 2016, BASF acquired the following activities:
known within the 12-month measurement period, the pur-
chase price allocation will be adjusted accordingly.
BASF Report 2017
Effects of acquisitions and changes in the preliminary purchase price allocations
Notes - Policies and scope of consolidation
188
The purchase prices for businesses acquired in 2017 and
the purchase price adjustments for acquisitions from 2016
totaled €154 million including a contingent consideration; as of
December 31, 2017, payments made for these amounted to
€155 million. The purchase price allocations were carried out
in accordance with IFRS 3. The resulting goodwill amounted to
€97 million. The purchase price allocations consider all the
facts and circumstances prevailing as of the respective dates
of acquisition that were known prior to the preparation of these
Consolidated Financial Statements. In accordance with
IFRS 3, should further facts and circumstances become
- On May 24, 2017, BASF acquired ZedX Inc., Bellefonte,
Pennsylvania. The company develops agronomic weather,
crop and pest models that can rapidly translate data into
insights for more efficient agricultural production. The inte-
gration of the business into the Crop Protection division
strengthens BASF's activities in the area of digital agriculture.
- On September 4, 2017, BASF completed the acquisition of
GRUPO Thermotek, a leading manufacturer of waterproof-
ing systems in Mexico with headquarters in Monterrey,
Mexico. The acquisition strengthens the Construction
Chemicals division's sales channels and its product portfolio,
especially in Mexico. The transaction includes trademarks
such as Thermotek® and Chovatek®.
- Effective January 1, 2017, BASF took over the western
European Construction Chemicals business from the
Henkel group with the trade names ThomsitⓇ and CeresitⓇ
for floor and tile-laying systems as well as sealants for
professional users. This strengthened BASF's portfolio in
the construction chemicals business of the PCI Group,
which belongs to the Construction Chemicals division.
- On February 7, 2017, BASF acquired the private company
Rolic AG headquartered in Allschwil, Switzerland. The
company develops and sells ready-to-use formulations and
functional film products for the display and security industry
against forgery as well as barrier materials and films. With
the acquisition, BASF broadened its technology know-how
and product portfolio of display materials. The largest part of
the activities was integrated into the Dispersions & Pigments
division and a smaller part into the Coatings division.
In 2017, BASF acquired the following activities:
- Wintershall AG, Kassel, Germany, which operates Libyan
exploration and production activities together with Gazprom
Libyen Verwaltungs GmbH (BASF interest: 51%). Despite an
investment of 51%, BASF does not exercise control accord-
ing to IFRS 10, as contractual arrangements with the Libyan
government strictly limit influence on variable returns after
income taxes.
Consolidated Financial Statements
- Stahl Lux 2 S.A., Luxembourg (BASF interest: 16.6%) was
classified as an associated company even though BASF only
has a 16.6% share, as it can exercise significant influence
over the company due to the fact that its approval is required
for certain relevant board resolutions.
2017
Million €
8
Property, plant and equipment
15.4
24.3
1,237
3.3
138
2016
Other intangible assets
1.0
97
Goodwill
%
Million €
%
1,552
- Nord Stream AG, Zug, Switzerland, was classified as an
associated company even though BASF only has a 15.5%
share, as it can exercise significant influence over the
company due to the fact that its approval is required for
certain relevant board resolutions.
- OAO Severneftegazprom, Krasnoselkup, Russia (BASF
interest: 25%, economic share: 35%)
Non-material associated companies accounted for using the
equity method particularly comprise:
(9)
2.4 Acquisitions and Divestitures
140
Proportional net income
825
823
Proportional change of other comprehensive
Carrying amount according to the equity method
as of the beginning of the year
2017
1,554
1,559
Carrying amount according to the equity method
as of the end of the year
1
(1)
2016
income
(27)
19
A material associated company accounted for using the equity
method is Joint Stock Company Achim Trading, Moscow,
Russia (BASF interest: 18.01%, economic share: 25.01%),
which together with Gazprom, will market the output from
blocks IV and V of the Achimov formation. The investment
value in the amount of €768 million remained unchanged in
comparison with the previous year and arose from the fair
value measurement as a result of the asset swap with Gazprom
on September 30, 2015. The company's economic activities
will commence in 2020 with the scheduled start of production
from blocks IV and V. Therefore, there is no relevant financial
information to report according to IFRS 12 in 2017.
823
852
Carrying amount according to the equity method
as of the end of the year
(4)
(4)
Other adjustments of income and expense
For BASF, there are no material financial assets that fall
under this category.
(80)
consolidation/other adjustments
Capital measures/dividends/changes in the scope of
10
113
Total comprehensive income
Acquisitions
(90)
Held-to-maturity financial assets consist of nonderivative
financial assets with fixed or determinable payments and a
fixed term, for which there is the ability and intent to hold
until maturity, and which do not fall under other valuation
categories. Initial measurement is done at fair value, which
matches the nominal value in most cases. Subsequent
measurement is carried out at amortized cost, using the
effective interest method.
BASF Report 2017
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Other adjustments of income and expense
BASF
Africa,
Asia
Pacific
North
America
Thereof
Germany
Europe
America,
South
Consolidated Financial Statements
Notes - Policies and scope of consolidation
Regions 2017 (million €)
BASF Report 2017
1 On January 1, 2017, the Monomers and Dispersions & Pigments divisions' activities for the electronics industry were merged into the global Electronic Materials business unit and
allocated to the Dispersions & Pigments division. For better comparability, the affected figures for 2016 have been adjusted accordingly.
313
4,251
119
16
4
1,097
268
29
152
26
86
707
899
1,161
Thereof impairments and reversals of impairments
depreciation of property, plant and equipment
Middle East
Group
Location of customers
Sales
4,409
14,534
18,570
25,674
37,987
Sales including interregional transfers¹
64,475
4,102
13,658
15,937
19,873
30,778
Sales
Amortization of intangible assets and
Location of companies
8.6
22.3
23.8
13.0
45.3
%
64,475
5,561
14,343
15,357
8,359
29,214
Share
100.0
7,258
121
1,115
6,678
1,543
4,065
7,929
property, plant and equipment
5,089
37
1,121
263
2,305
1,227
136
other intangible assets
10,073
70
1,712
2,093
3,909
2,228
61
Thereof goodwill
76,496
9,374
12,829
8,899
17,359
14,911
833
26,413
investments accounted for using
the equity method
266
3,679
892
1,185
intangible assets (including acquisitions)
Additions to property, plant and equipment and
1,863
398
39
489
393
399
145
75,500
Research and development expenses
25,185
2,190
1,853
4,328
5,840
4,532
Debt
4,647
423
2,581
423
193
1,027
43,928
13,124
Income from operations
1,913
Assets
6,275
432
1,098
1,113
1,582
3,632
Income from operations
67,924
4,361
12,269
17,060
23,241
34,234
57,550
4,135
11,512
14,682
17,540
27,221
Sales including interregional transfers¹
Sales
Location of companies
Share
Sales
100.0
9.2
40,086
21,120
17,714
12,869
1,437
1,424
2,912
4,114
(including acquisitions)
Additions to property, plant and equipment and intangible assets
4,647
1,476
119
1,120
3,052
investments accounted for using the equity method
26,413
57,550
1,947
6,055
6,915
13,990
property, plant and equipment
15,162
528
1,661
5,048
3,249
7,925
Thereof intangible assets
76,496
5,827
4,421
4,742
5,304
14,042
24.4
3,153
investments accounted for using the equity method
25,258
1,764
4,337
5,281
7,019
13,876
property, plant and equipment
13,594
500
1,499
4,428
2,736
7,167
Thereof intangible assets
78,768
5,096
13,547
16,201
24,631
43,924
Assets
8,522
335
2,209
1,236
989
115
1,447
4,715
7,412
12.9
26,039
45.3
%
Group
Middle East
BASF
Africa,
Asia
Pacific
North
America
Thereof
Germany
Europe
South
America,
Location of customers
12,165
21.1
Regions 2016 (million €)
276
516
1,011
1,234
2,399
Amortization of intangible assets and depreciation of property, plant
and equipment including impairments and reversals of impairments
4,364
240
711
958
1,228
2,455
Additions to property, plant and equipment and intangible assets
(including acquisitions)
4,202
Assets
6,275
(1,091)
Perfor-
Segments 2017 (million €)
Positive income taxes in 2017 were primarily a result of
higher income in Norway.
The Oil & Gas segment's other income relates to income
and expenses not included in the segment's income from
operations, interest result and other financial result. As in the
previous year, other income largely consisted of currency
effects from Group loans.
Gazprom. An impairment regarding the exploration potential in
Norway had an offsetting effect.
Income from operations in 2017 increased significantly in
comparison with the previous year. This is primarily attributable
to the increase in oil and gas prices, a higher earnings
contribution from our share in the Yuzhno Russkoje natural
gas field, reversals of impairments in Norway and the
Netherlands, and the sale of shares in the Aguada Pichana
concession in Argentina. In connection with our share in
the Yuzhno Russkoye natural gas field, the excess volumes
received over the last 10 years prior to 2016 were compensated
in the previous year as contractually agreed with our partner,
The reconciliation reporting for Oil & Gas reconciles the income
from operations in the Oil & Gas segment with the contribution
of the segment to the net income of the BASF Group.
BASF Report 2017
Notes - Policies and scope of consolidation
Consolidated Financial Statements
192
Net income
362
719
(76)
(41)
Minority interests
438
760
Income before minority interests
7
(158)
Income taxes
431
918
Income before taxes and minority interests
(74)
Chemicals
mance
Products
Functional
Mate-
rials &
Solutions
Agri-
cultural
Solutions
72,292
2,240
3,653
5,732
21,550
16,723
22,394
Sales including intersegmental transfers
7,817
(2)
409
36
805
(126)
506
Intersegmental transfers
64,475
2,242
3,244
5,696
20,745
16,217
16,331
Sales
Group
Other
Oil & Gas
BASF
6,063
Income from operations
Other income
1
(1,091)
(799)
(182)
(249)
(331)
(28)
39
81
(222)
(224)
(395)
(379)
2016
2017
Income from operations of Other
Miscellaneous income and expenses
Foreign currency results, hedging and other measurement effects
Other businesses
Costs of corporate headquarters
Costs for cross-divisional corporate research
Income from operations (EBIT) of Other (million €)
higher cost efficiency and lower risk of Group-internal trans-
actions. Assets, as well as their depreciation and amortization,
are allocated to the segments based on economic control.
Assets used by more than one segment are allocated based
on the percentage of usage.
Transfers between the segments are generally executed at
adjusted market-based prices which take into account the
Earnings from currency conversion that are not allocated to
the segments are also reported under Other, as are earnings
from the hedging of raw materials prices and foreign currency
exchange risks. Furthermore, revenues and expenses from the
long-term incentive (LTI) program are reported here.
191
Consolidated Financial Statements
Notes - Policies and scope of consolidation
BASF Report 2017
Income from operations of Other increased by €292 million
year-on-year to minus €799 million. The costs for cross-
divisional corporate research decreased by €16 million to
€379 million, whereas the costs of corporate headquarters
at €224 million were €2 million higher than in the previous
year. Income from other businesses rose by €42 million to
€81 million. The line item foreign currency results, hedging
and other measurement effects increased by €303 million to
minus €28 million. This was due to the provisions for the LTI
program: Income in the amount of €68 million arising from their
partial release in 2017 contrasted with expenses of €267 mil-
lion from additions to provisions in the previous year. The line
item miscellaneous income and expenses amounted to
minus €249 million compared with minus €182 million in the
previous year.
Assets of Other (million €)
Assets of businesses included in Other
Net income from shareholdings
499
1,043
Income from operations
2016
2017
9,374
13,676
2,320
2,328
66
70
1,911
6
6,547
2,118
605
606
1,959
December 31, 2016
December 31, 2017
2,007
Reconciliation reporting Oil & Gas (million €)
Assets of Other
Other receivables/prepaid expenses
Defined benefit assets
Cash and cash equivalents/marketable securities
Deferred tax assets
Financial assets
2,513
283
4,208
1,545
Mate-
rials &
Solutions
Perfor-
mance
Products¹
Chemi-
cals¹
Functional
Segments 2016 (million €)
140
7
(79)
2
28
53
129
Thereof impairments and reversals of impairments
4,202
120
1,026
267
706
917
1,166
depreciation of property, plant and equipment
Amortization of intangible assets and
4,364
186
988
185
1,056
Agri-
cultural
Solutions
BASF
Sales
12,905
499
1,037
2,199
1,678
1,953
Income from operations
63,952
2,019
3,099
5,602
19,468
16,027
17,737
800
Sales including intersegmental transfers
1
57,550
2,018
Group
Other
Oil & Gas
2,768
331
33
736
5,569
18,732
15,558
469
4,832
Intersegmental transfers
6,402
1,510
1,149
Additions to property, plant and equipment and
33
804
208
2,045
1,048
103
other intangible assets
9,353
68
1,504
1,929
3,718
2,078
56
Thereof goodwill
78,768
13,676
11,967
8,096
17,364
14,432
13,233
Assets
8,522
(799)
1,043
1,015
4,241
property, plant and equipment
7,497
5,000
1,888
381
46
507
431
395
128
Research and development expenses
44,012
25,757
2,222
1,768
4,385
intangible assets (including acquisitions)
5,419
Debt
4,715
371
2,556
393
369
1,026
investments accounted for using
the equity method
25,258
869
6,363
1,366
4,163
4,461
7,258
5,365
2,526
(46)
(0.3)
(20)
Tax-exempt income
7.5
402
9.1
707
Foreign tax-rate differential
4.4
236
4.0
312
German trade tax
0.2
13
0.2
18
15.0
810
15.0
1,172
Solidarity surcharge
Expected tax based on German corporate income tax (15%)
5,395
7,800
Income before taxes and minority interests
(0.9)
Nondeductible expenses
66
0.8
(178)
(2.9)
(234)
(0.1)
(6)
(5.3)
(416)
Income taxes/effective tax rate
Other
Changes in the tax rate
0.0
(2)
0.0
%
(1)
(2.2)
(119)
(0.9)
(70)
Taxes for prior years
(0.9)
(46)
(1.1)
(86)
(Income after taxes)
Income after taxes of companies accounted for using the equity method
1.4
76
Deferred tax liabilities for the future reversal of temporary differences associated
with shares in participating interests
(3.3)
Million €
Million €
(384)
Deferred tax expense (+) / income (-)
(119)
(70)
Taxes for prior years
1,184
1,438
Foreign income tax
589
464
Corporate income tax, solidarity surcharge and trade taxes (Germany)
1,654
1,832
Current tax expense
2016
2017
Million €
Tax expense
The 30% rate used to calculate deferred taxes for German
Group companies remained unchanged in 2017. The profits of
foreign Group companies are assessed using the tax rates
applicable in their respective countries. These are also
generally used to calculate deferred taxes to the extent that
tax rate adjustments for the future have not yet been enacted.
In Germany, a uniform corporate income tax rate of 15.0% as
well as a solidarity surcharge of 5.5% thereon is levied on all
paid out and retained earnings. In addition to corporate
income tax, income generated in Germany is subject to a
trade tax that varies depending on the municipality in which
the company is represented. Due to a constant rate of
assessment for Ludwigshafen, Germany, in 2017, the
weighted average trade tax rate was 14.1% (2016: 14.1%).
11 Income taxes
The decline in other financial expenses was mostly
attributable to lower costs for the hedging of loans in U.S.
dollars.
In comparison with 2016, income from the capitalization
of borrowing costs declined due to the start up of major
investment projects.
for the respective business year are based on the discount
rate and the defined benefit obligation at the beginning of the
year.
The net interest expense from underfunded pension
plans and similar obligations decreased in comparison with
the previous year, as a result of the reduced net defined benefit
liability as of December 31, 2016. The net interest expenses
The interest result improved by €148 million compared with
the previous year from minus €482 million to minus €334 mil-
lion as a result of higher interest income and lower interest
expenses. Higher interest income arose particularly from
interest rate and currency swaps to hedge BASF bonds as
well as loans granted in connection with the financing of the
Nord Stream 2 project. The decrease in interest expenses was
largely due to lower liabilities to banks, commercial papers and
related hedging transactions.
BASF Report 2017
(514)
From changes in temporary differences
30
(473)
2016
2017
Notes Notes on statement of income
Consolidated Financial Statements
Reconciliation of the income taxes and the effective tax rate
BASF Report 2017
Other taxes included real estate taxes and other compa-
rable taxes totaling €107 million in 2017 and €109 million in
2016.
Changes in valuation allowances on deferred tax assets for tax
loss carryforwards resulted in income of €6 million in 2017 and
expenses of €7 million in 2016.
The changes in temporary differences were largely due to
realization and currency effects in connection with provisions
for pensions, financial liabilites, and intangible assets.
The current tax expense for corporate income tax, solidarity
surcharge and trade taxes (Germany) decreased due to lower
income of the subsidiary companies in Germany.
1,412
1,708
272
%
260
1,448
Tax expense
Other taxes as well as sales and consumption taxes
Income taxes
8
5
From valuation allowances on deferred tax assets
(6)
(416)
From changes in the tax rate
(43)
(3)
From changes in tax loss carryforwards / unused tax credits
1,140
Notes Notes on statement of income
1,448
1,140
Tax loss carryforwards exist in all regions, especially in Europe
and Asia. German tax losses may be carried forward
indefinitely. In foreign countries, tax loss carryforwards are in
some cases only possible for a limited period of time. The bulk
of the tax loss carryforwards will expire in Europe by 2018 and
in Asia by 2022. No deferred tax assets were recognized for
tax loss carryforwards of €804 million (2016: €1,478 million).
Total
279
222
2,384
1,485
279
222
2,383
1,485
1
Germany
Foreign
2016
2017
2016
2017
Deferred
tax assets
Tax loss
carryforwards
Tax loss carryforwards (million €)
The regional distribution of tax loss carryforwards is as follows:
Tax loss carryforwards
Changes in valuation allowances on deferred tax assets
amounted to €92 million, compared with €80 million in 2016.
Thereof €24 million (2016: €30 million) pertained to tax loss
carryforwards.
Undistributed earnings of subsidiaries resulted in tempo-
rary differences of €10,490 million in 2017 (2016: €8,905 mil-
lion) for which deferred tax liabilities were not recognized, as
they are either not subject to taxation on payout or they are
expected to be reinvested for indefinite periods of time.
Deferred taxes result from temporary differences between tax
balances and the measurement of assets and liabilities
according to IFRS as well as from tax loss carryforwards and
unused tax credits. The remeasurement of all the assets and
liabilities associated with acquisitions according to IFRS 3 has
resulted in significant deviations between fair values and the
values in the tax accounts. This leads primarily to deferred tax
liabilities.
BASF Report 2017
Notes Notes on statement of income
Consolidated Financial Statements
Tax obligations
Tax obligations primarily include assessed income taxes and
other taxes as well as estimated income taxes not yet
assessed for the current year. Tax obligations amounted to
€1,119 million in 2017 (2016: €1,288 million).
12 Minority interests
Million €
10,165
10,610
Personnel expenses
627
705
Thereof for pension benefits
1,995
2,139
Social security contributions and
expenses for pensions and assistance
8,170
8,471
Wages and salaries
2016
200
2017
Compared with the same period of 2016, higher minority
interests in profits in 2017 arose particularly due to
increased TDI and MDI sales prices and margins at Shanghai
BASF Polyurethane Company Ltd., Shanghai, China.
For more information on minority interests in consolidated companies,
see Note 21 on page 211
The BASF Group spent €10,610 million on wages and salaries,
social security contributions and expenses for pensions and
assistance in 2017 (2016: €10,165 million). This represented
an increase in personnel expenses of 4.4%. Besides wage
and salary increases, this was particularly due to an increase
in the average number of employees due to the acquisition of
Chemetall. Countering this were the partial reversal of provi-
sions for the Long Term Incentive (LTI) program as well as
currency effects.
Personnel expenses
13 Personnel expenses and employees
199
274
(30)
(25)
Minority interests in losses
Total
Amortization of intangible assets and depreciation of property, plant
and equipment including impairments and reversals of impairments
299
Minority interests in profits
2017
Personnel expenses (million €)
18.6
199
2,731
51
10
Financial assets
3,336
2,635
180
171
Property, plant and equipment
1,719
1,261
90
77
Intangible assets
2016
2017
2016
2017
Deferred tax liabilities
Deferred tax assets
Deferred tax assets and liabilities (million €)
Deferred taxes
Future reversals of temporary differences for shares in
investments that are assumed to have a planning horizon of
one year led to deferred tax income of €1 million in 2017
(2016: €2 million).
Taxes for prior years primarily included reversals of long-term
tax provisions.
In Other, foreign currency translation differences from the
valuation of differences to the tax values as well as additional
tax depreciation on oil and gas production facilities in Norway
led to tax income.
The foreign tax-rate differential increased due to improve-
ment in earnings in countries with a high tax rate, particularly
in Norway, in the Exploration & Production business sector,
and in Belgium.
The BASF Group tax rate amounted to 18.6% in 2017 (2016:
21.1%). The lower tax rates resulting from the tax reform in the
United States led to deferred tax income in the amount of
€379 million.
21.1
49
84
Inventories and accounts receivable
363
2,513
2,118
Total
95
(3,016)
(2,501)
(3,016)
(2,501)
Netting
82
107
42
Other
279
3,317
222
170
156
1,446
1,131
Other provisions and liabilities
431
617
3,028
2,603
Provisions for pensions
498
432
348
Tax loss carryforwards
Consolidated Financial Statements
2016
229
197
Notes Notes on statement of income
Consolidated Financial Statements
196
195
Further income resulted from refunds and compensation
payments in the amount of €431 million in 2017 and
€291 million in 2016. In 2017, these largely included insurance
refunds for the damages caused by the fire at the North Har-
bor in Ludwigshafen, Germany. In the previous year, these
were predominantly due to insurance refunds arising from a
plant outage at the Ellba C.V. joint operation in Moerdijk,
Netherlands. Moreover, income in both years was related to
gains from precious metal trading, refunds of consumption
taxes and a number of additional items.
Other income included government grants and govern-
ment assistance from several countries amounting to
€133 million in 2017 and €156 million in 2016. In both years,
these were primarily attributable to price compensation from
the Argentinian government for gas producers, which was
introduced in connection with the New Gas Price Scheme
(NGPS) in response to the lower, partly locally regulated gas
prices.
Income from the reversal of valuation allowances for
business-related receivables resulted mainly from the
settlement of customer-related receivables for which a
valuation allowance had been recorded.
Reversals of impairment losses on noncurrent assets
amounted to €189 million in 2017. These primarily concerned
oil and gas fields in Norway.
intellectual property assets to UDC Ireland Limited, Dublin,
Ireland. Income of €72 million pertained to real estate
divestitures in several countries.
Gains on divestitures and the disposal of noncurrent
assets in the amount of €195 million resulted from the transfer
of the leather chemicals business to the Stahl group. Further
income of €75 million resulted from the disposal of shares in oil
and gas concessions in Argentina. In the previous year, these
particularly included gains amounting to €349 million from the
sale of the industrial coatings business to AkzoNobel,
Amsterdam, Netherlands. Income of €93 million arose from
the sale of the global polyolefin catalysts business to
W.R. Grace & Co., Columbia, Maryland. Further income of
€83 million resulted from the disposal of BASF's OLED
Income from the translation of financial statements in
foreign currencies contained gains from the translation of
companies whose local currency is different from the functional
currency.
Income from foreign currency and hedging trans-
actions as well as from the measurement of LTI options
pertained to the foreign currency translation of receivables and
payables as well as of currency derivatives and other hedging
transactions. In 2017, there was also income from the reversal
of provisions for the long-term incentive (LTI) program of
€68 million. In 2016, by contrast, there was an expense of
€267 million arising from the long-term incentive (LTI) program.
This was reported under other operating expenses.
Revenue from miscellaneous revenue-generating
activities primarily included income from rentals, catering
operations, cultural events and logistics services.
For more information, see Note 8 from page 196 onward
Income from the adjustment and reversal of provisions
recognized in other operating expenses was largely related
to risks from lawsuits and damage claims, closures and
restructuring measures, employee obligations, and various
other items as part of the normal course of business. Provisions
were reversed or adjusted if the circumstances on the balance
sheet date were such that utilization was no longer expected,
or expected to a lesser extent.
1,780
1,916
716
924
35
38
2
189
667
359
57
44
8 Other operating expenses
Million €
BASF Report 2017
2017
Expenses from the addition of valuation allowances for business-related receivables
106
81
94
104
43
106
Oil and gas exploration expenses
Losses from divestitures and the disposal of noncurrent assets
17
51
Losses from the translation of financial statements in foreign currencies
530
32
204
179
163
Costs from miscellaneous revenue-generating activities
337
311
Amortization, depreciation and impairments of noncurrent assets
464
375
Environmental protection and safety measures, costs of demolition, removal and project
costs that are not subject to mandatory capitalization
Restructuring and integration measures
482
362
2016
Expenses from foreign-currency and hedging transactions as well as from the measurement of
LTI options
Expenses from the consumption of inventories measured at market value and the derecognition
of obsolete inventory
110
178
918,479
6.62
6.61
€
Diluted earnings per share
€
Earnings per share
1,000
outstanding shares
Weighted-average number of
6,078
million €
Net income
2017
Earnings per share
5 Earnings per share
Notes Notes on statement of income
Consolidated Financial Statements
194
193
In the United States, intangible assets, property, plant and
equipment, and investments accounted for using the equity
method amounted to €9,014 million compared with
€10,342 million in the previous year.
In the United States, sales to third parties in 2017 amounted to
€13,909 million (2016: €12,831 million) according to location
of companies and €13,127 million (2016: €11,985 million)
according to location of customers.
1 The sum of sales including interregional transfers for all the regions can differ from the sum of sales including intersegmental transfers for all the segments, as the segments are viewed
globally, and therefore shipments and services between regions within the same segment are not classified as transfers.
4,251
244
463
1,018
1,224
198
6 Functional costs
BASF Report 2017
2016
4,056
918,479
4.42
4.41
80
74
2016
2017
Consolidated Financial Statements
Notes Notes on statement of income
Other operating income
Income from the reversal of valuation allowances for business-related receivables
Other
Reversals of impairment losses on noncurrent assets
Gains on divestitures and the disposal of noncurrent assets
Income from the translation of financial statements in foreign currencies
Income from foreign currency and hedging transactions as well as from the measurement of LTI
options
Income from the adjustment and reversal of provisions recognized in other operating expenses
Revenue from miscellaneous revenue-generating activities
Million €
191
Other operating income
BASF Report 2017
For more information on research and development expenses by
segment, see Note 4 on page 192
Research and development expenses include the costs result-
ing from research projects as well as the necessary license
fees for research activities.
Research and development expenses
General and administrative expenses primarily include the
costs of the central units, the costs of managing business
units and divisions, and costs of general management, the
Board of Executive Directors and the Supervisory Board.
General administrative expenses
Selling expenses particularly include marketing and advertising
costs, freight costs, packaging costs, distribution manage-
ment costs, commissions, and licensing costs.
Selling expenses
Cost of sales includes all production and purchase costs of
the company's own products as well as merchandise which
has been sold in the period, particularly plant, energy and
personnel costs.
Cost of sales
For more information on other operating expenses, see Note 8 from
page 196 onward
Under the cost-of-sales method, functional costs incurred by
the operating functions are determined on the basis of cost
center accounting. The functional costs particularly contain
the personnel costs, depreciation and amortization accumu-
lated on the underlying final cost centers as well as allocated
costs within the cost accounting cycle. Operating expenses
that cannot be allocated to the functional costs are reported
as other operating expenses.
In accordance with IAS 33, a potential dilutive effect must be
considered in the diluted earnings per share for those BASF
shares which will be granted in the future as a part of the BASF
share program "plus." This applies regardless of the fact that
the necessary shares are acquired by third parties on the
market on behalf of BASF, and the fact that there are no plans
for the issuance of new shares. The dilutive effect of the issue
of "plus" shares amounted to €0.01 in 2017 (2016: €0.01).
7
220
Notes on statement of income
Other
68
Net interest income from overfunded pension plans and similar obligations
Income from the capitalization of borrowing costs
(482)
(334)
(661)
(560)
179
226
20
38
159
188
Interest result
Interest expenses
Interest income
Interest and dividend income from securities and loans
Interest income from cash and cash equivalents
(17)
(29)
Net income from shareholdings
(71)
(60)
Expenses from other shareholdings
(53)
(17)
Write-downs on/losses from the sale of shareholdings
(18)
200
(43)
5
Miscellaneous financial income
(880)
277
(722)
Financial result
(381)
(359)
(478)
(429)
(214)
(47)
(36)
Other financial result
Other financial expenses
Miscellaneous financial expenses
Unwinding the discount on other noncurrent liabilities
(7)
(1)
Net interest expense from other long-term personnel obligations
(183)
(175)
Net interest expense from underfunded pension plans and similar obligations
(10)
(3)
Write-downs on/losses from the disposal of securities and loans
Other financial income
97
70
92
Expenses from loss transfer agreements
(231)
31
2016
2017
Income from companies accounted for using the equity method
associated companies
Thereof joint ventures
associated companies
Thereof joint ventures
Proportional net income
Million €
9 Income from companies accounted for using the equity method
product liability case in the Chemicals segment in 2017.
Moreover, 2016 contained expenses of €27 million from the fire
damage at the Ludwigshafen North Harbor, Germany.
In both years, expenses under Other included expenses from
attorneys' fees for litigation cases as well as from REACH, the
provision of services, and the implementation of further
projects. Expenses of €79 million were also recognized for a
Consolidated Financial Statements
Notes Notes on statement of income
BASF Report 2017
Expenses from the addition of valuation allowances
for business-related receivables decreased by €25 million
compared with the previous year. This was predominantly due
to lower additions in the region South America, Africa,
Middle East.
Losses from divestitures and the disposal of noncur-
rent assets of €70 million resulted largely from portfolio
measures in North America in 2017. Further expenses of
€19 million were incurred in connection with the divestiture of
the global industrial coatings business to the AkzoNobel
Group in December 2016. In the previous year, losses of
€17 million had arisen from the reduction in disposal gains
from the asset swap with Gazprom as part of the final purchase
price allocation.
For more information, see Note 7 on page 195 onward
Expenses from foreign-currency and hedging trans-
actions as well as from the measurement of LTI options
were related to foreign currency translations of receivables and
payables as well as changes in the fair value of currency
derivatives and other hedging transactions. In comparison
with the previous year, lower expenses for the hedging of
planned sales were posted due to the depreciation of the
U.S. dollar relative to the euro as well as lower provisions for
the Long-Term-Incentive program.
For more information, see Note 7 on page 195 onward
Costs from miscellaneous revenue-generating
activities concerned the respective item presented in other
operating income.
Amortization, depreciation and impairments of noncurrent
assets arose from impairments in the Oil & Gas segment in the
amount of €83 million in 2017. The Performance Products
segment posted impairments of €23 million in 2017 and
€6 million in 2016. Further impairments of €10 million con-
cerned the Functional Materials & Solutions segment in 2017
and €124 million in 2016. The previous year had recorded
€67 million in impairments in the Chemicals segment and
€24 million in the Agricultural Solutions segment.
Expenses for restructuring and integration measures were
primarily related to severance payments amounting to €83 mil-
lion in 2017 and €190 million in 2016. Further expenses of
€38 million concerned the Coatings division in connection with
the purchase of the global surface technology provider
Chemetall. In the Care Chemicals division, expenses were
incurred for restructuring in the USA in the amount of €12 mil-
lion and €15 million in the Construction Chemicals division for
restructuring in Europe. Furthermore, expenses of €10 million
concerned the Crop Protection division in relation to the
acquisition of significant parts of the seed and non-selective
herbicide businesses from Bayer AG, Leverkusen, Germany.
Expenses of €27 million in 2017 and €39 million in 2016 arose
from the outsourcing of the computer centers. In the previous
year, expenses had primarily affected the Petrochemicals
division in the amount of €37 million and the Dispersions &
Pigments division in the amount of €25 million.
3,133
604
Other operating expenses
54
972
2,949
584
317
Expenses arose from environmental protection and
safety measures, costs of demolition, removal and project
costs that are not subject to mandatory capitalization
according to IFRS. Expenses for demolition, removal and
project planning totaled €279 million in 2017 and €375 million
in 2016. These especially pertained to the Ludwigshafen site
in both years. Further expenses of €54 million in 2017 and
€61 million in 2016 arose from the addition to environmental
provisions. In both years, these concerned several discontin-
ued sites in North America. In the previous year, expenses
were also incurred for landfills in Germany.
157
433
Income from tax allocation to participating interests
6
3
9
5
Income from the disposal of shareholdings
39
22
Dividends and similar income
2016
Income from other shareholdings
2017
Million €
Income from profit transfer agreements
Wintershall Noordzee B.V., Rijswijk, Netherlands. BASF-YPC
Company Ltd., Nanjing, China, also contributed significantly to
this increase.
151
10 Financial result
160
(13)
(10)
(12)
1
(4)
307
(9)
571
Income from companies accounted for using the equity
method increased by a total of €264 million in 2017, primarily
due to higher earnings in the Oil & Gas segment, particularly at
(1)
Changes not recognized in income were primarily related
to changes in the scope of consolidation, translation adjust-
ments and derecognition of uncollectible receivables.
In the current economic environment, BASF has not
observed any material changes in the credit quality of its
receivables. In 2017, individual valuation allowances of
€61 million were recognized for accounts receivable, trade,
and €15 million were reversed. In 2016, individual valuation
allowances of €71 million were recognized for trade accounts
receivable and valuation allowances of €22 million were
reversed.
At BASF, a comprehensive, global credit insurance program
covers trade accounts receivable. As part of a global excess of
loss policy, future bad debts are insured for essentially all
BASF Group companies excluding joint ventures. No compen-
sation claims were incurred in either 2016 or 2017.
Past due more than 90 days
Aging analysis of accounts receivable, trade (million €)
Changes recognized in income contained individual valuation
allowances, group-wise individual valuation allowances and
valuation allowances due to transfer risks.
488
Not yet due
Past due less than 30 days
Past due between 30 and 89 days
In 2017, individual valuation allowances of €10 million were
recognized for other receivables and €6 million were
reversed. In 2016, individual valuation allowances of €27 mil-
lion were recognized for other receivables and €1 million was
reversed.
December 31, 2017
2017
Gross value
Valuation allowances
BASF Report 2017
As of December 31, 2017, the number of employees rose to
115,490 employees compared with 113,830 employees as of
December 31, 2016.
It was distributed over the regions as follows:
Number of employees as of December 31
The average number of employees was distributed over the
regions as follows:
46
Average number of employees
2016
Total
Number of employees
35
36
recognized in
recognized in
Additions not
recognized in
Europe
Reversals not
recognized in
Balance as of
December 31,
income
income
income
income
2016
298
106
40
39
370
75
27
1
24
7
118
373
133
64
71,043
17,583
Thereof Germany
Asia Pacific
18,256
18,156
South America, Africa, Middle East
7,286
7,307
BASF Group
115,490
113,830
Thereof apprentices and trainees
temporary staff
3,103
2,365
2,550
Employees from joint operations are included in the number of
employees at year end relative to BASF's share in the respec-
tive company. In total, this included 472 employees in 2017
(2016: 432 employees).
Notes on balance sheet
14 Intangible assets
Employees from joint operations are included in the average
number of employees relative to BASF's share in the company.
This comprised a total of 437 employees (2016: 404 employ-
ees).
The goodwill of BASF is allocated to 24 cash-generating units
(2016: 22), which are defined either on the basis of business
units or on a higher level.
Annual impairment testing took place in the fourth quarter
of the year on the basis of the cash-generating units.
Recoverable amounts were determined in most cases using
the value in use. This was done using plans approved by
company management and their respective cash flows,
generally for the next five years. Thereafter, a terminal value
was calculated using a forward projection from the last detailed
planning year as a perpetual annuity. The planning is based on
experience, current performance and management's best
possible estimates on the future development of individual
parameters, such as raw materials prices and profit margins.
Oil and gas prices are also among the main input parameters
that provide the basis for the forecast of cash flows in the
current financial plans. Market assumptions regarding, for
example, economic development and market growth are
included based on external macroeconomic sources as well
as sources specific to the industry.
The required discounting of cash flows for impairment
testing is calculated with the weighted average cost of capital
rate after tax, which is determined using the Capital Asset
Pricing Model. It comprises a risk-free rate, a market risk
premium, and a spread for credit risk based on the respective
industry-specific peer group. The calculation also takes into
account capital structure and the beta factor of the respective
peer group as well as the average tax rate of each cash-
generating unit. Impairment tests of the units (excluding
Exploration & Production in the Oil & Gas segment) were
conducted assuming a weighted average cost of capital rate
after taxes between 5.69% and 8.2% (2016: between 5.07%
and 8.01%). This represents a weighted average cost of
capital rate before taxes of between 7.13% and 11.31%
(2016: between 6.43% and 10.77%). A valuation model based
on a field-related valuation approach has been used, for the
unit Exploration & Production in the Oil & Gas segment since
the business year 2016, which considers the expected cash
flows as well as the tax payments in the individual countries.
The period under consideration includes the planned license
terms and the production profiles of the included oil and gas
fields. Furthermore, instead of using a single weighted average
cost of capital rate, the country risk and the specific tax rate is
considered in each case: this leads to a more precise
calculation of the recoverable amount. Considering these
parameters, the capital rate after taxes varied between 7.92%
and 12.85% (2016: between 7.5% and 13.76%) and before
taxes between 11.32% and 20.07% (2016: between 10.96%
and 37.68%).
Reversals
After determining the recoverable amount of the cash-
generating units, it was determined for the large majority of
them that reasonable possible deviations from the key
assumptions would not lead to the carrying amounts of the
units exceeding their respective recoverable amounts. For the
goodwill of the Construction Chemicals division and the
cash-generating units Pigments in the Dispersions & Pigments
division, as well as Surface Treatment in the Coatings division,
this is not the case.
201
3,120
2,334
2,691
temporary staff
18,295
53,390
52,608
North America
17,871
17,308
Asia Pacific
18,132
17,473
2017
2016
Europe
71,653
70,784
South America, Africa, Middle East
BASF Group
7,287
7,321
114,333
111,975
Thereof Germany
54,020
53,318
Thereof apprentices and trainees
2,793
2,838
North America
69,873
Additions
10
Notes Notes on balance sheet
329
126
406
Other receivables and assets which qualify as financial instruments
1,009
940
905
1,017
Prepaid expenses
54
249
111
62
Defined benefit assets
70
66
Tax refund claims
125
787
114
747
Employee receivables
8
Precious metal trading items
258
Miscellaneous
14
6
BASF Report 2017
202
December 31, 2017
Noncurrent
Current
December 31, 2016
Noncurrent
Current
Loans and interest receivables
Derivatives with positive fair values
782
245
568
250
91
321
176
342
Receivables from finance leases
25
4
29
5
Insurance compensation receivables
0
41
746
Balance as
of January 1,
2016
690
74
2017
370
80
38
12
75
349
118
10
6
10
income
112
90
44
12
85
461
BASF Report 2017
Valuation allowances for receivables 2016 (million €)
Accounts receivable, trade
Other receivables
Total
Consolidated Financial Statements
488
Balance as of
December 31,
Reversals not
recognized in
Additions not
recognized in
income
375
63
356
Other receivables and assets which do not qualify as financial
instruments
Other receivables and miscellaneous assets
323
2,165
305
2,061
1,332
3,105
1,210
3,078
The increase in noncurrent loans and interest receivables
I was predominantly due to the loan in the amount of
€325 million granted by Wintershall Nederland Transport and
Trading B.V., Rijswijk, Netherlands, to Nord Stream 2 AG, and
the loan in the amount of €140 million granted by W & G Trans-
port Holding GmbH, Kassel, Germany, to W & G Infrastruktur
Finanzierungs-GmbH, Kassel, Germany, in 2017. In 2017, the
loans granted by the fully consolidated WIGA Transport Betei-
ligungs-GmbH & Co. KG, Kassel, Germany, to NEL Gastrans-
port GmbH, Kassel, Germany, and GASCADE Gastransport
GmbH, Kassel, Germany were transferred to the W & G Infra-
struktur Finanzierungs-GmbH, which is accounted for using
the equity method, and had an offsetting effect of €259 million.
In addition to the loans granted already mentioned, there were
particularly loans and interest receivables from BASF Belgium
Coordination Center Comm. V. Antwerp, Belgium, to finance
the business expansion of Asian companies, and receivables
in favor of BASF SE from the BASF Pensionskasse WaG.
The reduction of noncurrent derivatives with positive fair
values primarily affected the market valuation of combined
interest rate and currency swaps. The change in current
derivatives with positive fair market values was largely
attributable to the lower fair values of precious metal and
foreign currency derivatives.
Prepaid expenses in 2017 included prepayments of
€62 million related to operating activities compared with
€64 million in 2016, as well as €50 million in prepayments for
insurance in 2017 compared with €54 million in 2016.
Prepayments for license costs decreased from €48 million in
2016 to €42 million in 2017.
The increase in current tax refund claims can largely be
traced back to the rise in open income tax receivables.
Precious metal trading items primarily comprise physical
items and precious metal accounts as well as long positions in
precious metals, which are largely hedged through sales or
derivatives.
Valuation allowances for receivables 2017 (million €)
Accounts receivable, trade
Other receivables
Total
Balance as
of January 1,
2017
Additions
recognized in
income
Reversals
recognized in
income
Miscellaneous
Consolidated Financial Statements
Notes Notes on balance sheet
307
In the 2017 business year, the recoverable amount of the
Construction Chemicals unit exceeded the carrying amount by
around €408 million. The weighted average cost of capital rate
after taxes used for impairment testing was 8.2% (2016:
8.01%). The recoverable amount would equal the unit's
carrying amount if the weighted average cost of capital rate
increased by 0.98 percentage points (2016: by 0.69 percent-
age points) or if income from operations of the last detailed
planning year - as the basis for the terminal value - were lower
by 15.97% (2016: by 12.0%).
Reserves and retained earnings
Capital surplus includes effects from BASF's share program,
premiums from capital increases and consideration for
warrants and negative goodwill from the capital consolidation
resulting from acquisitions of subsidiaries in exchange for the
issue of BASF SE shares at par value.
Million €
Legal reserves
Other retained earnings
Retained earnings
Dec. 31,
2017
Dec. 31,
2016
678
625
34.148
30.890
34.826
At the Annual Shareholders' Meeting of May 12, 2017,
shareholders authorized the Board of Executive Directors to
buy back shares up until May 11, 2022, in accordance with
section 71(1) no. 8 of the German Stock Corporation Act. The
buyback cannot exceed 10% of the company's share capital
at the time the resolution was passed and can take place via
the stock exchange, a public purchase offer addressed to all
shareholders, or a public request to the shareholders to submit
sales offers. Until now, this authorization has not been
exercised.
31.515
The acquisition of shares in companies which BASF
already controls or which are included as a joint arrangement
in the Consolidated Financial Statements is treated as a
transaction between shareholders, as long as this does not
lead to a change in the consolidation method. There were no
transactions of this type in 2017, as in the previous year.
Payment of dividends
In accordance with the resolution of the Annual Shareholders'
Meeting on May 12, 2017, BASF SE paid a dividend of €3.00
per share from the retained profit of the 2016 fiscal year. With
918,478,694 qualifying shares, this represented total divi-
dends of €2,755,436,082.00. The remaining €53,131,213.65
in retained profits was recorded under retained earnings.
20 Other comprehensive income
Translation adjustments
Especially the increase in the value of the euro, relative to the
U.S. dollar, in 2017 led to a decrease of €2.081 million in the
translation adjustment to minus €605 million.
Cash flow hedges
Hedging future cash flows at Nord Stream AG, Zug, Switzer-
land, a company accounted for using the equity method,
resulted in a change of minus €17 million in 2017 and of minus
€7 million in 2016.
For more information on cash flow hedge accounting, see Note 27.4 from
page 227 onward
Remeasurement of defined benefit plans
In 2017, other comprehensive income increased by
€1,073 million before taxes due to the positive development of
plan assets. In 2016, the change amounting to minus
€1,842 million was particularly due to the increase in defined
benefit obligations, which resulted from the significant
decrease in the discount rate over the course of the year.
Transfers from other retained earnings increased legal
reserves by €53 million in 2017 (2016: €31 million).
For more information on the remeasurement of defined benefit plans,
see Note 22 from page 211 onward
Authorization of share buybacks
BASF Report 2017
381
2
115
6
159
8
448
487
334
11,539
349
warrants issued, exercise their conversion or option rights.
Until now, this authorization has not been exercised.
11,322
As of December 31, 2017, there were no material other receivables classified as financial instruments that were overdue and for
which no valuation allowance was made.
19 Capital, reserves and retained earnings
Authorized capital
At the Annual Shareholders' Meeting on May 2, 2014, share-
holders authorized the Board of Executive Directors, with the
approval of the Supervisory Board, to increase the subscribed
capital by issuing new registered shares up to a total of
€500 million against cash or contributions in kind through
May 1, 2019. The Board of Executive Directors is empowered,
following the approval of the Supervisory Board, to decide on
the exclusion of shareholders' subscription rights for these
new shares in certain predefined cases covered by the
enabling resolution. Until now, this option has not been
exercised and no new shares have been issued.
BASF SE has only issued fully paid-up registered shares
with no par value. There are no preferences or other restric-
tions. BASF SE does not hold any treasury shares.
Conditional capital
At the Annual Shareholders' Meeting of May 12, 2017,
shareholders authorized the Board of Executive Directors, with
the approval of the Supervisory Board, to issue, on a one-off
basis or in portions on more than one occasion, bearer or
registered convertible bonds and/or bonds with warrants, or
combinations of these instruments, with or without maturity
limitations up to a nominal value of €10 billion through
May 11, 2022. The calculated portion of the share capital
represented by the BASF shares to be issued in connection
with the debt instruments issued under this authorization may
not exceed 10% of the share capital.
To this effect, the share capital was increased conditionally
by up to €117,565,184 by issuing a maximum of 91,847,800
new registered BASF shares. The conditional capital increase
will only be carried out to the extent to which holders of
convertible bonds, or warrants attached to bonds with
209
210
Consolidated Financial Statements
Notes Notes on balance sheet
370
(130)
(178)
(72)
9,477
411
116
1,879
1,150
4,722
December 31, 2017
Balance as of
(1,275)
(806)
(17)
17,755
(78)
(317)
Currency effects
(175)
13
(24)
(178)
14
Transfers
(221)
(28)
Other receivables and miscellaneous assets (million €)
(57)
Accumulated
amortization
Balance as of
(1)
(53)
(17)
(35)
616
72
10
166
70
298
Currency effects
Transfers
Disposals
Additions
consolidation
Changes in scope of
3,927
141
229
2
72
882
435
2,168
January 1, 2017
1
527
26
10,295
Personal care ingredients in the Care Chemicals division
499
2.0%
531
2.0%
Pigments in the Dispersions & Pigments division
389
1.5%
431
2.0%
Surface Treatment in the Coatings division
1.5%
Other cash-generating units
1,490
2.0%
1,555
1,525
0.0-2.0%
1,626
0.0-2.0%
9,353
10,073
1 Growth rates used in impairment tests to determine terminal values in accordance with IAS 36
BASF Report 2017
Goodwill as of December 31
735
2.0%
732
In 2017, the recoverable amount of Pigments exceeded
the carrying amount by €9 million. The weighted average cost
of capital rate after taxes used for impairment testing was
6.05% (2016: 5.09%). The recoverable amount would equal
the unit's carrying amount if the weighted average cost of
capital rate increased by 0.04 percentage points (2016: by
0.51 percentage points) or if income from operations of the last
detailed planning year - as the basis for the terminal value -
were lower by 0.81% (2016: by 13.78%).
An impairment test for the Surface Treatment unit in the
Coatings division was carried out for the first time in the
business year 2017 (acquisition in December 2016). In 2017,
the recoverable amount of this unit exceeded the carrying
amount by €100 million. The weighted average cost of capital
rate after taxes used for the impairment testing of this unit was
8.19% (2016: -). The recoverable amount would equal the
unit's carrying amount if the weighted average cost of capital
rate increased by 0.2 percentage points (2016: -) or if income
from operations of the last detailed planning year - as the basis
for the terminal value – were 6.1% lower (2016: -).
Goodwill of cash-generating units (million €)
2017
2016
Cash-generating unit
Goodwill
Growth rate¹
Goodwill
Growth rate¹
Crop Protection division
1,929
2.0%
2,093
2.0%
Exploration & Production in the Oil & Gas segment
1,504
1,712
Catalysts division (excluding battery materials)
1,285
2.0%
1,390
2.0%
Construction Chemicals division
Development of intangible assets 2017 (million €)
BASF Report 2017
Cost
Notes Notes on balance sheet
Additions
3
19
20
25
34
101
Additions from acquisitions
10
47
56
1
25
235
Disposals
(40)
(20)
(53)
(1)
(79)
December 31, 2016
Gross value
Valuation allowances
10,449
35
97
1
consolidation
Changes in scope of
Know-how,
Internally
Distribution,
supply and
Product rights,
patents and
generated
licenses and
similar rights
trademarks
production
technologies
intangible
Other rights
assets
and values¹
Goodwill
Total
Balance as of
January 1, 2017
5,051
1,339
1,958
92
435
10,214
19,089
Consolidated Financial Statements
18 Receivables and miscellaneous assets
Consolidated Financial Statements
Notes Notes on balance sheet
92
1
1
Currency effects
58
417
(27)
1
30
511
Balance as of December 31, 2016
5,969
35,655
3,711
3,308
6
231
(1)
(1,013)
(1)
Additions
376
2,930
939
307
Transfers
78
Disposals
(100)
(658)
(28)
(182)
(73)
3,691
45,163
Net carrying amount as of
December 31, 2016
5,288
Changes in scope of consolidation
Additions
Disposals
Transfers
Currency effects
Net carrying amount as of December 31
Balance as of January 1
Other financial assets (million €)
Long-term securities
Other financial assets
2017
2016
4,647
4,436
Other shareholdings
Investments accounted for using the equity method (million €)
16 Investments accounted for using the equity method and other financial assets
Consolidated Financial Statements
Notes Notes on balance sheet
14,238
3,469
1,129
5,758
26,413
Additions to property, plant and equipment arising from
investment projects amounted to €4,222 million in 2016.
Material investments were primarily related to the construction
of an integrated aroma ingredients complex in Kuantan,
Malaysia, the TDI complex in Ludwigshafen, Germany, and the
expansion of the dicamba plant in Beaumont, Texas, which
were partially started up in 2016. Further material asset
additions included the construction of an ammonia plant in
Freeport, Texas, and oil and gas production facilities and wells
in Europe and South America.
In addition, investments for expansion purposes were
particularly made at the sites in Ludwigshafen, Germany;
Geismar, Louisiana; Port Arthur, Texas; and Antwerp, Belgium.
Government grants of €1 million were deducted from asset
additions.
Due to acquisitions, property, plant and equipment rose by
€155 million primarily from the acquisition of the global surface
treatment provider Chemetall from Albemarle Corp., Charlotte,
North Carolina.
In 2016, impairments of €254 million were included in
accumulated depreciation. These pertained largely to
impairments of €133 million on machinery and technical
equipment as well as buildings due to the new strategic
direction of individual businesses in the Chemicals and
Functional Materials & Solutions segments. The recoverable
amount of these assets equals their value in use amounting to
€72 million. The weighted average cost of capital rate before
taxes applied ranged between 9.4% and 12.8%.
In 2016, additions to accumulated depreciation contained
reversals of impairments of €2 million.
Disposals of property, plant and equipment were largely
attributable to the sale of assets of the global polyolefin
catalysts business to W.R. Grace & Co., Columbia, Maryland;
the sale of the worldwide photoinitiator business to
IGM Resins B.V., Waalwijk, Netherlands; the sale of the 25%
share in the Byrding field to Statoil; and the sale of industrial
coatings business to the AkzoNobel Group.
Currency effects arose particularly from the appreciation
of the U.S. dollar as well as the Brazilian real relative to the
euro.
BASF Report 2017
(1)
(50)
Changes in scope of consolidation
220
Changes in scope of consolidation
(1)
2
1
Additions
183
67,234
1,300
203
2,536
4,222
Additions from acquisitions
77
54
309
18
6,502
5,972
ciation accor-
ding to the unit
Miscellaneous
buildings
technical
equipment
of production
equipment and Construction in
4,216
method
progress
Total
Cost
Balance as of January 1, 2016
10,711
45,805
fixtures
6
155
Disposals
1,081
Balance as of December 31, 2016
11,257
49,893
7,180
4,437
178
5,989
Accumulated depreciation
Balance as of January 1, 2016
5,637
32,965
2,827
3,152
71,576
46
213
698
(194)
(760)
(30)
(213)
(88)
(1,255)
Transfers
322
2,796
716
165
(3,145)
138
Currency effects
159
41,974
223
152
(82)
Consolidated Financial Statements
204
203
In 2017, additions to accumulated amortization included
impairments of €67 million. This mainly pertained to
impairments of non-strategic know-how, patents and produc-
tion technologies in the Functional Materials & Solutions
segment and exploration potential for oil and gas production in
Norway. Offsetting this, reversals of impairments of €7 million
were included. These related primarily to selling rights in the
Functional Materials & Solutions segment.
The transfers largely concerned the confirmed oil and gas
deposits in the Maria field in Norway to property, plant and
equipment. Non-confirmed deposits in connection with
acquired concessions are reported as intangible assets under
product rights, licenses and trademarks.
Disposals of intangible assets amounting to €221 million were
largely attributable to the derecognition of software fully written
off as well as the sale of the production site for electrolytes in
Suzhou, China, the sale of Bleaching Clay and Mineral
Adsorbents businesses, and the transfer of the global leather
chemicals business to the Stahl group. Related to this,
goodwill of €28 million was derecognized.
Notes Notes on balance sheet
Concessions for oil and gas production under the category
product rights, licenses and trademarks with a net carrying
amount of €234 million in 2017 authorize the exploration and
production of oil and gas in certain areas. At the end of the
term of a concession, the rights are returned.
Additions from acquisitions amounted to €235 million in
2017. Goodwill increased by €79 million as a result of the
following significant acquisitions: Rolic AG headquartered in
Allschwil, Switzerland; GRUPO Thermotek with headquarters
in Monterrey, Mexico; the Henkel group's western European
building material business; and ZedX Inc., Bellefonte,
Pennsylvania. A further addition to goodwill amounting to
€18 million arose primarily from a retroactive purchase price
payment for the acquisition of Chemetall from the previous
year.
Besides goodwill, intangible assets also include acquired
intangible assets as well as internally generated intangible
assets. In addition, they include rights belonging to the Oil &
Gas segment, which are amortized in accordance with the unit
of production method. As of December 31, 2017, their
acquisition costs amounted to €962 million and accumulated
amortization to €312 million; amortization in 2017 amounted
to €41 million.
1 Including licenses to such rights and values
13,594
9,353
189
In connection with these transactions, further additions to
intangible assets amounted to €138 million. These related
predominantly to product rights, licenses and trademarks as
well as know-how, patents and production technologies.
35
Development of intangible assets 2016 (million €)
BASF Report 2017
Goodwill
and values¹
assets
Other rights
intangible
production
technologies
Cost
licenses and
trademarks
generated
patents and
Product rights,
Distribution,
supply and
Internally
Know-how,
similar rights
925
671
2,421
December 31, 2016
6,979
69
10,303
3,107
6,808
90
10,005
December 31, 2017
3,255
Work-in-process, finished goods and merchandise are
combined into one item due to the production conditions in
the chemical industry. Services-in-process primarily relate to
services not invoiced as of the balance sheet date.
A reversal of a write-down on inventory was recognized in the
amount of €18 million in 2017 and a write-down in the amount
of €43 million in 2016.
Of total inventories, €863 million was measured at net
realizable value in 2017 and €836 million in 2016.
207
208
Consolidated Financial Statements
Notes Notes on balance sheet
Cost of sales included inventories recognized as an
expense amounting to €29,941 million in 2017, and
€26,048 million in 2016.
Work-in-process, finished goods and merchandise
Advance payments and services-in-process
Inventories
435
(9)
of December 31, 2017
Net carrying amount as
4,161
124
222
81
954
479
2,301
December 31, 2017
Balance as of
(204)
(17)
(7)
(41)
Total
Balance as of
January 1, 2016
4,063
For a detailed overview of income from companies accounted for using
the equity method, see Note 9 on page 197
17 Inventories
Million €
Raw materials and factory supplies
1,958
1,339
Besides the net income of investments accounted for us-
ing the equity method, transfers include dividend distributions
and other comprehensive income of the companies.
5,051
Balance as of
514
224
4
21
14
December 31, 2016
A significant component of the disposals totaling €82 million
was the capital reduction at W & G Infrastruktur Finan-
zierungs-GmbH, Kassel, Germany.
Additions arose from the completed combination of the
global leather chemicals business with the Stahl group on
September 29, 2017. In connection with this, BASF received a
16.6% share in Stahl Lux 2 S.A., Luxembourg. Additions also
included capital increases amounting to €34 million.
Changes in the scope of consolidation arose particularly
from the first-time consolidation of a company.
(1)
120
(27)
(143)
87
4,715
4,647
December 31, 2017
December 31, 2016
482
468
124
137
606
605
251
Machinery and
Currency effects
13
10
39
18
Additions
2
2
25
consolidation
16,373
8,500
450
91
1,951
1,318
Changes in scope of
92
Additions from acquisitions
1,082
(12)
(16)
(2)
Transfers
(664)
(64)
(60)
(149)
(39)
(343)
Disposals
2,789
1,552
108
44
(17)
Land, land
rights and
3
Thereof depre-
further infrastructure, which are depreciated according to the
unit of production method.
Development of property, plant and equipment 2017 (million €)
Machinery and technical equipment contain oil and gas
deposits, including related wells, production facilities and
Consolidated Financial Statements
Notes Notes on balance sheet
15 Property, plant and equipment
BASF Report 2017
In 2016, additions to accumulated amortization included
impairments of €61 million. This primarily affected impairments
relating to production technologies and distribution rights in
the Functional Materials & Solutions segment in the amount of
€51 million.
Concessions for oil and gas production under the category
product rights, licenses and trademarks with a net carrying
amount of €466 million in 2016 authorize the exploration and
production of oil and gas in certain areas. At the end of the
term of a concession, the rights are returned.
Disposals of intangible assets in the amount of €21 million
were largely attributable to the sale of the 25% share in the
Byrding field to Statoil and the divestiture of the global
photoinitiator business as well as the global polyolefin catalysts
business. Related to this, goodwill of €64 million was
derecognized.
Land, land Machinery and
rights and
Additions from acquisitions amounted to €2,789 million in
2016. Significant acquisitions comprising the purchase of the
global surface treatment provider Chemetall from Albe-
marle Corp., Charlotte, North Carolina, and the automotive
refinishing business from Guangdong Yinfan Chemistry,
Jiangmen, China, led to an increase of goodwill in the amount
of €1,552 million. In connection with these transactions,
additions to intangible assets amounted to €1,237 million.
These were primarily related to customer relationships and
production technologies.
1 Including licenses to such rights and values
15,162
10,073
206
20
1,076
904
2,883
of December 31, 2016
Besides goodwill, intangible assets also include acquired
intangible assets as well as internally generated intangible
assets. In addition, they include rights belonging to the Oil &
Gas segment, which are amortized in accordance with the unit
of production method. As of December 31, 2016, their acqui-
sition costs amounted to €1,029 million and accumulated
amortization to €328 million; amortization in 2016 amounted
to €19 million.
buildings
technical
equipment
Thereof depre-
272
450
1,292
171
Additions
71,576
15
1
14
5,989
4,437
7,180
49,893
11,257
Changes in scope of consolidation
Balance as of January 1, 2017
Cost
Total
Construction in
progress
fixtures
Miscellaneous
equipment and
ciation accor-
ding to the unit
of production
method
Net carrying amount as
2,285
3,927
229
411
2,160
January 1, 2016
Balance as of
amortization
Accumulated
19,089
10,214
BASF Report 2017
865
260
(24)
(339)
Currency effects
Transfers
Disposals
86
14
153
47
(146)
67
196
137
72
882
435
December 31, 2016
Balance as of
105
4
2
(1)
(573)
560
10
1
88
(1)
(55)
(9)
Additions
consolidation
Changes in scope of
3,836
141
4,020
2,168
7
6,065
Balance as of December 31, 2017
(1,956)
(24)
(112)
(310)
(1,626)
(194)
Currency effects
36,110
2
(1)
(50)
Transfers
(1,154)
(32)
(266)
(3)
(761)
(95)
53
4,329
3,264
Additions from acquisitions
Development of property, plant and equipment 2016 (million €)
Notes Notes on balance sheet
Consolidated Financial Statements
206
205
Currency effects reduced property, plant and equipment
by €1,663 million and arose mainly from the depreciation of
the U.S. dollar relative to the euro.
For more information on divestitures, see Note 2.4 from page 187 onward
The transfers largely concerned the confirmed oil and gas
deposits in the Maria field in Norway from intangible assets to
machinery and technical equipment.
Disposals of property, plant and equipment were largely
attributable to the sale of the Bleaching Clay and Mineral
Adsorbents businesses; the production site for electrolytes in
Suzhou, China; the inorganic specialties business; and the
leather chemicals business.
Depreciation also included impairments in the Oil & Gas
segment, which were overcompensated by reversals in the
same segment. These primarily concerned construction in
progress. In total, reversals of impairments in additions to
accumulated depreciation amounted to €182 million.
In 2017, impairments of €262 million were included in
accumulated depreciation. These pertained largely to
machinery and technical equipment and resulted primarily
from the full impairment of a production plant in the Chemicals
segment due to overcapacities. The recoverable amount
equaled value in use and the weighted average cost of capital
rate before taxes was 10.27%.
Acquisitions led to an increase in property, plant and
equipment in the amount of €8 million primarily from the acqui-
sition of GRUPO Thermotek in Monterrey, Mexico.
Government grants for the funding of investment measures
reduced asset additions by €9 million.
Additions to property, plant and equipment arising from
investment projects amounted to €4,020 million in 2017.
Material investments included the acetylene plant currently
under construction as well as plants for the production of
catalysts in Ludwigshafen, Germany. Additions also com-
prised the construction of an aroma ingredients complex in
Kuantan, Malaysia, and the modification of production plants
for plasticizers in Pasadena, Texas, which have already partly
started up. Material investments were also made for the con-
struction of oil and gas facilities and wells in Europe and South
America. Furthermore, investments were particularly made at
the sites in Ludwigshafen, Germany; Antwerp, Belgium;
Shanghai, China; Freeport, Texas; Geismar, Louisiana; and
Port Arthur, Texas.
25,258
4,583
1,123
3,611
14,448
5,104
Net carrying amount as of
December 31, 2017
45,655
Disposals
3,586
216
335
4,387
7,940
50,558
11,169
Balance as of December 31, 2017
(3,619)
(495)
(171)
(563)
(2,458)
(495)
Currency effects
8
185
128
890
(131)
(825)
(17)
(280)
(36)
(1,272)
Transfers
367
(12)
2,635
(2,945)
1
Disposals
3,711
45,163
231
3,308
14
35,655
5,969
Balance as of January 1, 2017
Accumulated depreciation
70,913
4,799
Additions
385
Changes in scope of consolidation
2,878
14
931
Other changes
Currency effects
Net defined benefit liability as of January 1
2016
2017
Development of the net defined benefit liability (million €)
Special contributions were made in 2017 to improve the fund-
ing levels of the plans. These primarily related to BASF Pen-
sionstreuhand e.V. (€500 million), BASF Pensionskasse WaG
(€317 million) and the U.S. plans ($143 million).
The expected contribution payments for 2018 amount to
approximately €200 million.
The standardized return on plan assets is calculated by
multiplying plan assets at the beginning of the year with the
discount rate used for existing defined benefit obligations at
the beginning of the year, taking into account benefit and
contribution payments expected to be made during the year.
Plan assets as of December 31
19,460
(20)
27,603
Effects from acquisitions and divestitures
(2)
(607)
20,648
64
106
Plan settlements
(161)
Past service cost
393
As of December 31, 2017, the weighted average duration of the defined benefit obligation amounted to 15.5 years (previous
year: 15.7 years).
492
Deviation between actual and standardized return on plan assets
1,067
775
Employer contributions
1,102
207
Participants' contributions
48
49
Benefits paid
(919)
(627)
18,681
19,460
(8,143)
Plan assets as of January 1
2016
2017
Notes Notes on balance sheet
Consolidated Financial Statements
Development of plan assets (million €)
BASF Report 2017
Standardized return on plan assets
(6,180)
Employer contributions
(400)
provisions for pensions and similar obligations
Regional allocation of defined benefit plans as of December 31 (million €)
129
397
1,102
207
(10)
(84)
(2)
14
(18)
(18)
221
(98)
(6,223)
70
(6,293)
(8,143)
66
(8,209)
Pension obligations
2017
2016
Plan assets
2017
Net defined benefit liability
2016
2017
2016
(63)
Thereof defined benefit assets
Current service cost
Net defined benefit liability as of December 31
250
(360)
Interest cost
(568)
(671)
Standardized return on plan assets
393
492
Deviation between actual and standardized return on plan assets
1,067
775
Actuarial gains/losses of the defined benefit obligation
6
(2,617)
Changes in asset ceiling recognized directly in equity
Benefits paid by unfunded plans
Effects from acquisitions and divestitures
Past service cost
Other changes
Currency effects
4.625%
Bond 2009/2017
EUR
300
4.69%
300
1.375% Bond 2014/2017
GBP
1.46%
(2)
2016
(1,990)
124
Sensitivity analysis
the BASF Group population and were last updated for the
pension obligations in Germany in 2015 and for the pension
obligations in the United States in 2014.
Actuarial mortality tables (significant countries) as of Dec. 31, 2017
Germany
United States
Switzerland
United Kingdom
Heubeck Richttafeln 2005G (modified)
RP-2014 (modified) with MP-2014 generational
projection
BVG 2015 generational
S1PxA (standard actuarial mortality tables for self-
administered plans (SAPS))
A change in the material actuarial assumptions would have the following effects on the defined benefit obligation:
Sensitivity of the defined benefit obligation as of December 31 (million €)
Discount rate
Projected pension increase
The valuation of the defined benefit obligation is
generally made using the most recent actuarial mortality
tables as of December 31 of the respective business year,
which in Germany and the United States are derived from
Increase by 0.5 percentage points
2017
(1,930)
1,240
Germany
2017
2016
2,200
2,270
1,175
(1,130)
(1,110)
An alternative valuation of the defined benefit obligation was
conducted in order to determine how changes in the underly-
ing assumptions would influence the amount of the defined
benefit obligation. A linear extrapolation of these amounts
based on alternative changes in the assumptions as well as an
addition of combined changes in the individual assumptions is
not possible.
213
Decrease by 0.5 percentage points
A Group-wide, uniform procedure is used to determine
the discount rates used for the valuation of material pension
obligations of the BASF Group. Accordingly, the discount
rates were derived from the yields on corporate bonds in
the respective currency zones with an issuing volume of
more than 100 million units of the respective currency with
a minimum rating of AA- up to AA+ from at least one of the
three rating agencies: Fitch, Moody's, or Standard & Poor's.
The assumptions used to ascertain the defined benefit
obligation as of December 31 are used in the following year
to determine the expenses for pension plans.
2.90
3.10
3.10
Assumptions used to determine expenses for pension benefits in the respective business year
Discount rate
Projected pension increase
United
Germany
United States
Switzerland
Kingdom
2017
2016
2017
2016
2017
2016
2017
2016
1.80
2.50
4.00
4.20
0.60
0.80
2.80
4.00
1.50
1.50
3.10
214
(828)
26,871
Consolidated Financial Statements
Explanation of the amounts in the statement of income and balance sheet
adjustments relating to demographic assumptions
experience adjustments
Effects from acquisitions and divestitures
Past service cost
Plan settlements
Other changes
Currency effects
Defined benefit obligation as of December 31
2017
27,603
2016
24,861
400
360
568
for adjustments relating to financial assumptions
671
(1,024)
48
49
1
2,571
(2)
(20)
(5)
66
8
148
2
(14)
(1,048)
Actuarial gains/losses
Participants' contributions
Benefits paid
Composition of expenses for pension benefits (million €)
Expenses for defined benefit plans
Expenses for defined contribution plans
Expenses for pension benefits (recognized in income from operations)
Net interest expenses from underfunded pension plans and similar obligations
Net interest income from overfunded pension plans
Interest cost for the asset ceiling
Expenses for pension benefits (recognized in the financial result)
BASF Report 2017
2017
2016
402
346
303
281
705
627
175
183
(2)
(5)
173
178
The net interest on the defined benefit liability is recognized in
the financial result. This results from the difference between
the interest cost of the defined benefit obligation and the
standardized return on plan assets as well as the interest cost
for the asset ceiling. The expected contribution payments and
benefits paid over the course of the business year are
considered in the determination of net interest.
Net interest expense of the respective business year is
based on the discount rate and the defined benefit obligation
at the beginning of the year.
Development of defined benefit obligation (million €)
Defined benefit obligation as of January 1
Current service cost
Interest cost
Notes Notes on balance sheet
18,104
26,871
13,576
54
Other
1,406
264
Total
6,469
3,319
35
115
(24)
(24)
(12)
103
109
(225)
(49)
1,312
(2,320)
(377)
(419)
6,707
217
218
Consolidated Financial Statements
Notes Notes on balance sheet
24 Liabilities
Financial indebtedness (million €)
BASF Report 2017
(85)
Carrying amounts based on
effective interest method
and similar commitments
143
Litigation, damage claims, warranties and similar commitments
103
48
109
37
Other
Total
1,312
310
1,406
323
6,707
3,229
6,469
Litigation, damage claims, warranties
2,802
Provisions for environmental protection and remedia-
tion costs cover expected costs for rehabilitating conta-
minated sites, recultivating landfills, removal of environmental
contamination at existing production or storage sites and
similar measures.
Provisions for employee obligations primarily include
obligations for the granting of long-service bonuses and
anniversary payments, variable compensation including
associated social security contributions, as well as provisions
for early retirement programs for employees nearing retirement.
The increase was primarily attributable to higher accruals for
variable compensation components.
For more information on provisions for the long-term incentive program,
see Note 30 from page 231 onward
Obligations from sales and purchase contracts largely
include obligations arising from rebates granted and other
price discounts in the Agricultural Solutions segment,
warranties and product liability, sales commissions, expected
losses on contracts. The increase in provisions resulted from
higher accruals for rebate programs and for product liabilities.
The restructuring measures provisions include severance
payments to departing employees as well as expected costs
for site closures, including the costs for demolition and similar
measures.
Provisions for litigation, damage claims, warranties and
similar commitments contain anticipated expenses from
lawsuits in which BASF is the defendant party, as well as
obligations under damage claims against BASF and fines.
Other largely includes noncurrent tax provisions.
The following table shows the development of other
provisions by category. Other changes include changes in the
scope of consolidation, divestitures, currency effects and the
reclassification of obligations to liabilities when the amount
and timing of these obligations become known.
Development of other provisions in 2017 (million €)
Unwinding
Restoration obligations
(22)
(13)
Restoration obligations primarily relate to the estimated
costs for the filling of wells and the removal of production
equipment after the end of production in the Oil & Gas
segment.
Nominal value
(million,
Effective
Currency
(1,235)
2
1,720
1,933
Employee obligations
600
(37)
(5)
(60)
3
111
588
costs
(154)
Environmental protection and remediation
(87)
(21)
(30)
29
108
2017
Dec. 31,
Other
changes
Reversals
Utilization
of the
discount
Additions
Jan. 1, 2017
1,297
1,296
(93)
2,173
Obligations from sales and purchase
currency of issue)
interest rate
December 31,
2017
December 31,
2016
BASF SE
Commercial paper
USD
1,033
variable Bond 2014/2017
EUR
300
variable
300
5.875% Bond 2009/2017
GBP
400
6.04%
467
208
Restructuring measures
1,080
(128)
(66)
(681)
1,027
928
contracts
1.50
161
18,242
208
143
26,871
27,603
20,648
19,460
(6,223)
(8,143)
215
216
Consolidated Financial Statements
Notes Notes on balance sheet
BASF Report 2017
Explanations regarding plan assets
The target asset allocation has been defined by using asset
liability studies and is reviewed regularly. Accordingly, plan
assets are aligned with the long-term development of the
obligations, taking into consideration the risks associated with
the specific asset classes and the regulations relating to the
investment of plan assets. The existing portfolio structure is
oriented towards the target asset allocation. In addition,
current market assessments are taken into consideration. In
order to mitigate risks and maximize returns, a widely spread
global portfolio of individual assets is held.
Total
Liability-driven investment (LDI) techniques, such as hedg-
ing the risk of changes in interest rates and inflation, are used
in some pension plans, especially in the U.K. and U.S. plans.
2017
2016
Equities
29
28
Debt instruments
52
53
Thereof for government debtors
16
16
for other debtors
36
Structure of plan assets (%)
37
(156)
500
12,282
(4,528)
(5,960)
United States
4,053
4,524
2,687
2,806
(1,366)
(1,718)
Switzerland
2,070
2,272
(144)
1,889
(181)
(298)
United Kingdom
1,884
1,909
1,880
1,898
(4)
(11)
Other
760
656
616
1,974
Real estate
3
4
December 31, 2017
Consolidated Financial Statements
Notes Notes on balance sheet
December 31, 2016
Million €
Restoration obligations
Thereof current
Thereof current
1,296
17
1,297
29
Environmental protection and remediation costs
23 Other provisions
600
588
116
Employee obligations
2,173
1,553
1,933
1,217
Obligations from sales and purchase contracts
1,080
1,070
928
919
Restructuring measures
112
BASF Report 2017
in 2017 and €590 million in 2016.
Contributions to government pension plans were €592 million
Alternative investments
15
15
Cash and cash equivalents
Total
1
100
100
The asset class debt instruments comprises promissory
notes and debentures (Pfandbriefe) in addition to corporate
and government bonds. Government bonds primarily concern
bonds from those countries enjoying the highest credit ratings,
such as the United States, United Kingdom, Germany and
Switzerland. Corporate bonds mainly comprise invest-
ment-grade bonds, whereby particular high-yield bonds are
also held to a limited extent. In connection with the ongoing
monitoring of default risk based on a given risk budget and on
the continuous observation of the development of the credit-
worthiness of issuers, an adjustment of plan asset allocation to
a revised market assessment may be made, if necessary.
Alternative investments largely comprise investments in
private equity, absolute return funds and senior secured loans.
Almost all of the equities are priced on active markets.
The category debt instruments includes promissory notes
and debentures (Pfandbriefe), which were acquired through
private placements with a market value in the amount of
€575 million as of December 31, 2017, and €853 million as of
December 31, 2016. For such securities, especially those held
by domestic pension plans, there is no active market. The
capital market compensates for this lack of fungibility with
yield premiums depending on the maturity. With only a few
exceptions, there is no active market for plan assets in real
estate and alternative investments.
Plan assets contained securities issued by BASF Group
companies with a market value of €15 million in 2017 and
€16 million in 2016. The market value of the properties of
legally independent pension funds rented to BASF Group
companies amounted to €111 million on December 31, 2017,
and €117 million on December 31, 2016.
Since 2010 there has been an agreement between
BASF SE and BASF Pensionskasse about the granting of
profit participation capital with a nominal value of €80 million,
which is used to strengthen the financing of the BASF Pen-
sionskasse. In 2017, a number of special endowments were
provided to improve the funding levels of the plans. No
material transactions beyond this took place between the
legally independent pension funds and BASF Group companies
in 2017.
The funding of the plans was as follows:
Current funding situation of the pension plans as of December 31 (million €)
Unfunded pension plans
Funded pension plans
Total
2017
2016
Defined benefit
obligation
2,814
24,057
Plan assets
Defined benefit
obligation
Plan assets
2,869
20,648
20,648
24,734
19,460
27,603
19,460
Defined contribution plans and government pensions
The contributions to defined-contribution plans contained in
income from operations amounted to €303 million in 2017 and
€281 million in 2016.
119
1.50
1,048
2.60
2.37%
Bond 2016/2031
HKD
1,300
2.37%
139
159
1,450% Bond 2017/2032
EUR
300
1.57%
296
3%
491
Bond 2013/2033
500
3.15%
491
491
2.875%
Bond 2013/2033
EUR
200
3.09%
198
198
1.625% Bond 2017/2037
EUR
EUR
750
492
500
198
40.00
235
BASF TOTAL Petrochemicals LLC, Port Arthur, Texas
Total Petrochemicals & Refining USA,
Inc., Houston, Texas
40.00
243
40.00
260
Shanghai BASF Polyurethane Company Ltd.,
Shanghai, China
Shanghai Huayi (Group) Company,
Shanghai, China, and Sinopec
1.01%
Shanghai Gaoqiao Petrochemical
30.00
199
30.00
BASF TODA Battery Materials, LLC, Tokyo, Japan
BASF Shanghai Coatings Co. Ltd., Shanghai, China
Other
Total
1 Equity interest in W & G Transportation Holding GmbH and OPAL Gastransport GmbH & Co. KG: 50.03 %; voting rights and portion of earnings: 49.98%
TODA KOGYO CORP., Hiroshima, Japan
Shanghai Huayi Fine Chemical Co., Ltd,
Shanghai, China
34.00
198
0.875%
Bond 2016/2031
EUR
Corporation, Shanghai, China
1.73%
736
3.25% Bond 2013/2043
EUR
500
0.88%
494
494
4.875%
Ciba Specialty Chemicals Finance Luxembourg S.A.
Bond 2003/2018
EUR
477
4.88%
474
461
Other bonds
Bond 2016/2026
547
Bonds and other liabilities to the capital market
15,653
13,457
Liabilities to credit institutions
2,379
2,855
Financial indebtedness
18,032
16,312
BASF Report 2017
Breakdown of financial indebtedness by currency (million €)
Euro
U.S. dollar
631
0.75%
995
996
EUR
200
3.27%
199
199
3.89% U.S. Private Placement Series A 2013/2025
USD
250
3.92%
208
237
4.09%
U.S. Private Placement Series B 2013/2028
USD
700
4.11%
582
663
4.43% U.S. Private Placement Series C 2013/2034
BASF Finance Europe N.V.
USD
300
4.45%
250
284
0.0%
Bond 2016/2020
EUR
1,000
0.14%
40.00
British pound
Norwegian krone
Hong Kong dollar
PETRONAS Chemicals Group Berhad,
Kuala Lumpur, Malaysia
26.67
EUR
Bond 2014/2024
2.5%
289
279
1.06%
250
GBP
Bond 2016/2023
0.875%
664
0.83%
850
500
USD
1,255
1,254
1.93%
1,250
EUR
Bond 2012/2022
2%
414
2.65%
500
USD
Bond 2017/2022
2.5%
0.925% Bond 2017/2023
1,016
2.60%
497
198
1.58%
200
EUR
Bond 2016/2031
1.5%
162
2.69%
1,600
NOK
Bond 2017/2029
2.670%
984
497
1.04%
EUR
0.875% Bond 2017/2027
159
147
3.70%
1,450
NOK
3.675% Bond 2013/2025
335
1.87%
300
GBP
1.750% Bond 2017/2025
1,000
1,007
1.47%
1,000
292
BASF Report 2017
21 Minority interests
Consolidated Financial Statements
Notes Notes on balance sheet
BASF PETRONAS Chemicals Sdn. Bhd.,
Group company
WIGA Transport Beteiligungs-GmbH & Co. KG,
W & G Transport Holding GmbH¹,
OPAL Gastransport GmbH & Co. KG¹
BASF India Ltd., Mumbai, India
Shah Alam, Malaysia
Partner
December 31, 2017
variable Bond 2013/2018
December 31, 2016
Equity interest
%
Million €
%
Million €
Gazprom Germania GmbH,
Berlin, Germany
49.981
71
49.981
(43)
Free float
26.67
39
Equity interest
EUR
300
variable
EUR
Bond 2013/2021
1.875%
300
300
variable
300
EUR
variable Bond 2013/2020
1,261
variable
1,250
EUR
variable Bond 2017/2019
749
750
1.44%
750
EUR
1.375% Bond 2014/2019
999
999
1.51%
1,000
EUR
Bond 2012/2018
1.5%
300
300
36
2.80
Argentinian peso
South African rand
Million €
Bills of exchange
Guarantees
Warranties
Collateral granted on behalf of third-party liabilities
Initiated investment projects
Thereof purchase commitments
for the purchase of intangible assets
Payment and loan commitments and other financial obligations
December 31, 2017
December 31, 2016
9
9
The figures listed below are stated at nominal value:
11
49
43
1
1
4,109
5,394
1,045
1,391
16
19
7
25
BASF provides unlimited guarantees, particularly to the Danish
government as well as the state-owned company Nordsøfon-
den, as a precondition for the exploration for and production of
hydrocarbons in the Danish concession area by the joint ven-
ture Wintershall Noordzee B.V., Rijswijk, Netherlands. Partially
countering the possible 100% liability of BASF arising from
these guarantees are the 50% guarantees of the joint-venture
partner in favor of BASF. Drawing on these guarantees was
not foreseeable as of December 31, 2017.
12
26
25 Other financial obligations
93
275
23
254
329
1,264
334
1,267
1,095
3,064
873
2,850
Other liabilities
The increase in current other liabilities was primarily due to
cash deposits from group companies accounted for using the
equity method, which are reported under miscellaneous lia-
bilities. Current derivatives with negative fair values decreased
due to negative fair market values arising from foreign currency
hedging. By contrast, the noncurrent negative fair values
increased. This related primarily to higher negative fair values
from hedging using combined interest and cross-currency
swaps involving USD, GBP and HKD bonds.
Liabilities to credit institutions were secured primarily with
registered land charges. The increase in secured other liabili-
ties compared with December 31, 2016, is primarily attribut-
able to higher collateral for derivative instruments with negative
fair values. As in the previous year, there were no secured
contingent liabilities in 2017.
For more information on financial risks and derivative instruments, see
Note 27 from page 222 onward
Secured liabilities (million €)
Liabilities to credit institutions
Accounts payable, trade
Other liabilities
Secured liabilities
Dec. 31,
Dec. 31,
2017
2016
22
24
6
6
169
63
197
For more information on liabilities arising from leasing contracts, see
Note 28 from page 228 onward
34.00
40.00
57
The financing of the pension plans is determined by the
provisions of the regulatory authority for pensions and the
relevant social and labor law requirements. The defined benefit
plans are administered by a trust company, whose Board of
Trustees, according to the trustee agreement and law,
represents the interests of the beneficiaries and ensures that
the benefits can be paid in the future. The required funding is
determined using technical valuations according to local
regulations every three years.
Other countries
In the case of subsidiaries in other countries, defined benefits
are covered in some cases by pension provisions, but mainly
by external insurance companies or pension funds.
BASF Report 2017
Actuarial assumptions
The valuation of the defined benefit obligation is largely based on the following assumptions:
Assumptions used to determine the defined benefit obligation as of December 31
Discount rate
Projected pension increase
Consolidated Financial Statements
Notes Notes on balance sheet
Germany
2017
The BASF Group maintains defined benefit plans in the
United Kingdom, which were closed for further increases in
benefit from future years of service. Adjustments to compen-
sate for increases in the cost of living until the beginning of
retirement are legally required for beneficiaries of defined
benefit plans.
2016
Switzerland
United
Kingdom
2016
2017
2016
2017
2016
1.90
1.80
3.60
4.00
0.50
0.60
United States
2017
Employees are granted benefits based on a defined contribu-
tion plan.
United Kingdom
The employees of the BASF Group in Switzerland receive a
company pension, which is financed through a pension fund
by employer and employee contributions as well as the return
on assets. The pension plan is accounted for as a defined
benefit plan, as the obligatory minimum pension guaranteed
by law according to the Swiss law "Berufliche Vorsorge (BVG)"
is included in the scheme. All benefits vest immediately.
According to government regulations, the employer is obligat-
ed to make contributions, so that the pension funds are able
to grant minimum benefits guaranteed by law. The pension
funds are managed by boards, where employer and employees
are equally represented, which steer and monitor the benefit
plans and assets.
40.00
86
919
761
8」 8」。
56
88
22 Provisions for pensions and similar obligations
In addition to state pension plans, most employees are granted
company pension benefits from either defined contribution or
defined benefit plans. Benefits generally depend on years of
service, contributions or compensation, and take into
consideration the legal framework of labor, tax and social
security laws of the countries where the companies are
located. To limit the risks of changing financial market
conditions as well as demographic developments, employees
have been almost exclusively offered defined contribution
plans for future years of service in recent years.
The Group Pension Committee monitors the risks of all
pension plans of the Group. In this context, it issues guidelines
regarding the governance and risk management of pension
plans, particularly with regard to the funding of the pension
plans and the portfolio structure of the existing plan assets.
The organization, responsibilities, strategy, implementation
and reporting requirements are documented for the units
involved.
Economic and legal environment of the plans
In some countries - especially in Germany, the United King-
dom, Switzerland and Belgium - there are pension obligations
subject to government supervision or similar legal restrictions.
For example, there are minimum funding requirements to
cover pension obligations, which are based on actuarial
assumptions that may differ from those in IAS 19. Furthermore,
there are restrictions in qualitative and quantitative terms
relating to parts of the plan assets for the investment in certain
asset categories. This could result in fluctuating employer
contributions, financing requirements and the assumption of
obligations in favor of the pension funds to comply with the
regulatory requirements.
The obligations and the plan assets used to fund the obliga-
tions are exposed to demographic, legal and economic risks.
Economic risks are primarily due to unforeseen developments
on commodity and capital markets. They affect, for example,
pension adjustments based on the level of inflation in Germany
and in the United Kingdom, as well as the impact of the
discount rate on the amount of the defined benefit obligation.
In previous years, measures taken to close plans with defined
benefits for future service, especially benefits based on final
pay promises and the assumption of healthcare costs for
former employees, however, led to a reduction in risk with
regard to future benefit levels.
The strategy of the BASF Group with regard to financing
pension commitments is aligned with country-specific
supervisory and tax regulations.
In some countries, pension benefits were granted for
which the employer has a subsidiary liability. Pension benefits
in a number of countries include minimum interest guarantees
to a limited extent. If the pension fund cannot generate the
income needed to service the minimum guarantee, this must
be provided by the employer under the subsidiary liability. To
the extent that recourse to the employer is unlikely based on
the structure and provision of the pension benefits as well as
the asset situation of the pension fund, these plans are treated
as defined contribution plans.
211
212
Consolidated Financial Statements
Notes Notes on balance sheet
BASF Report 2017
Description of the defined benefit plans
The typical plan structure in the individual countries is
described in the following. Different arrangements may exist, in
particular due to the assumption of plans as part of acquisi-
tions; however, these do not have any material impact on the
description of plans in the individual countries.
Germany
For BASF SE and German Group companies, a basic level of
benefits is provided by BASF Pensionskasse WaG, a legally
independent funded plan, which is financed by contributions
of employees and the employer as well as the return on plan
assets. BASF SE ensures the necessary contributions to
adequately finance the benefits promised by BASF Pensions-
kasse WaG. Some of the benefits financed via the
BASF Pensionskasse WaG are subject to adjustments that
must be borne by its member companies to the extent that
these cannot be borne by BASF Pensionskasse WaG due to
the regulations imposed by the German supervisory authority.
In 2004, the basic benefits plan at BASF was closed for newly
hired employees at German BASF companies and replaced by
a defined contribution plan. At BASF SE, occupational pension
promises that exceed the basic level of benefits are financed
under a contractual trust arrangement by BASF Pensionstreu-
hand e.V.; at German Group companies, these benefits are
almost exclusively financed via pension provisions. The
benefits are largely based on cash balance plans. Furthermore,
employees are given the option of participating in various
deferred compensation schemes.
United States
Employees are granted benefits based on defined contribution
plans.
Since 2010, the existing defined benefit plans were closed
to further increases in benefits based on future years of service,
and benefits earned in the past have been frozen. There is no
entitlement to pension adjustments to compensate for cost-
of-living increases.
The legal and regulatory frameworks governing the plans
are based on the U.S. Employee Retirement Income Security
Act (ERISA), which requires the plan sponsor to ensure a
minimum funding level. Any employer contributions necessary
to meet the minimum funding level would be based on the
results of an actuarial valuation. Furthermore, there are
unfunded pension plans that are not subject to ERISA.
Additional similar obligations arise from plans which assume
the healthcare costs and life insurance premiums of retired
employees and their dependents. Such plans are closed to
new entrants since 2007. In addition, the amount of the
benefits for such plans is frozen.
Switzerland
37
66
171
78
28
65
59
63
55
58
53
113
43
29
103
107
18,032
73
16,312
December 31, 2016
2,497
3,767
2,052
1,887
1,845
2,115
1,140
1,304
1,781
1,049
8,717
6,190
December 31, 2017
18,032
118
194
Turkish lira
Ukrainian hryvnia
Japanese yen
Brazilian real
Indonesian rupiah
Other currencies
Total
Maturities of financial indebtedness (million €)
Following year 1
Following year 2
Following year 3
Following year 4
Following year 5
127
Following year 6 and maturities beyond this year
Total
Notes Notes on balance sheet
December 31, 2017
13,326
December 31, 2016
10,897
2,922
3,346
614
(65)
309
159
139
159
137
Consolidated Financial Statements
Chinese renminbi
16,312
Other bonds consist primarily of industrial revenue and
pollution control bonds of the BASF Corporation group that
were used to finance investments in the United States. Both
the weighted-average interest rate of these bonds as well as
their weighted-average effective interest rate amounted to
3.1% in 2017 and 2.1% in 2016. The average residual term
amounted to 183 months as of December 31, 2017 (Decem-
ber 31, 2016: 195 months).
94
1,289
97
791
Other liabilities which qualify as financial instruments
766
1,800
539
1,583
Advances received on orders
564
556
Liabilities related to social security
67
77
95
68
Employee liabilities
28
253
45
310
Liabilities from precious metal trading positions
17
13
Deferred income
Miscellaneous liabilities
Other liabilities which do not qualify as financial instruments
Other liabilities
197
Miscellaneous liabilities
Other bonds
199
212
Liabilities to credit institutions
In order to finance the natural gas transportation business, a
€1,650 million loan was incurred with a 5-year term at an
interest rate of 1.08% in 2014. In 2017, €925 million of this
amount was transferred to the newly established company
W & G Infrastruktur Finanzierungs-GmbH, Kassel, Germany,
accounted for using the equity method, to finance the natural
gas transportation companies, GASCADE Gastranport GmbH,
Kassel, Germany, and NEL Gastransport GmbH, Kassel,
Germany, which are also accounted for using the equity
method.
The weighted average interest rate on loans amounted to
4.1% in 2017 compared with 4.5% in 2016.
Unused credit lines
BASF SE had committed and unused credit lines with variable
interest rates amounting to €6,000 million both as of Decem-
ber 31, 2017 and as of December 31, 2016.
219
220
Consolidated Financial Statements
Notes Notes on balance sheet
Other liabilities (million €)
BASF Report 2017
December 31, 2017
December 31, 2016
280
Noncurrent
Noncurrent
Derivatives with negative fair values
290
274
78
Current
571
Liabilities from finance leases
99
25
84
22
Loan and interest liabilities
283
Current
35
172
n/a
698
4
15
Following year 4
19
3
16
17
3
14
Following year 5
12
2
10
12
3
9
More than 5 years
Total
26
5
21
35
14
21
19
18
4
22
n/a
29
11,190
11,190
LaR
11,190
340
340
aFVtPL
340
14
148
Derivatives with hedge accounting
72
n/a
72
326
72
Other receivables and other assets
5
32
30
4
26
Following year 3
72
24
124
3,996
15,653
15,653
AmC
16,406
AmC
2,379
2,379
AmC
2,379
Liabilities from finance leases
124
398
124
124
Accounts payable, trade
4,971
4,971
AmC
4,971
Derivatives no hedge accounting
551
551
aFVtPL
551
n/a
29
6,684
20,292
1,508
LaR
1,508
Securities
175
175
Afs
175
175
Securities
1
19,809
1
Cash and cash equivalents
6,495
6,495
LaR
6,495
6,495
Total assets
Bonds
Commercial paper
Liabilities to credit institutions
22,780
Htm
36
29
482
18,179
2,379
533
2,102
10,598
23,193
Maturities of contractual cash flows from financial liabilities as of December 31, 2016 (million €)
2017
2018
2019
2020
2021
2022 and thereafter
Total
Bonds and other
liabilities to the
capital market
Liabilities
to credit
institutions
Liabilities
resulting from
derivative finan-
cial instruments
Miscellaneous
liabilities
Total
2,687
1,356
561
Following year 2
278
225
861
Miscellaneous
liabilities
1111
Total
2,097
2,237
34
70
1,578
80
4,553
2,421
1,527
1,097
541
82
2,158
1,219
132
46
1,397
1,865
50
38
2,066
9,234
8
5,701
2,025
128
27.3
Classes and categories of financial instru-
ments
For trade accounts receivable, other receivables and miscella-
neous assets, loans, cash and cash equivalents, as well as
trade accounts payable and other liabilities, the carrying
amount approximates the fair value. Shareholdings which are
not traded on an active market and whose fair value could not
be reliably determined are recognized at amortized cost and
are reported under other financial assets.
The fair value of financial indebtedness is determined on the
basis of interbank interest rates. The difference between carry-
ing amounts and fair values results primarily from changes in
market interest rates.
BASF Report 2017
Carrying amounts and fair values of financial instruments as of December 31, 2017 (million €)
Consolidated Financial Statements
Notes Notes on balance sheet
Total carrying
amount within
Carrying
scope of
application of
20,757
amount
Valuation
category in
accordance
with IAS 392
Thereof
Thereof
fair value
fair value
Fair value
level 13
level 24
Shareholdings¹
Receivables from finance leases
Accounts receivable, trade
Derivatives no hedge accounting
482
IFRS 7
Afs
1,671
2,871
15
88
2,256
936
1,368
11
47
2,362
1,475
10
13
660
53
1,163
5
81
1,249
37
7,269
4
60
305
7,638
15,555
1,551
515
Derivatives with hedge accounting
13
effects
consolidation
Currency
changes in
the scope of
31.12.2017
BASF Report 2017
Non-cash effective changes
Acquisitions/
divestitures/
in cash provi-
ded by/used
in fiancing
activities
Cash-effective
31.12.2016
Reconciliation according to IAS 7 (million €)
Notes Other explanatory notes
Consolidated Financial Statements
230
229
For more information on cash flow from acquisitions and divestitures,
see Note 2.4 from page 187 onward
Cash and cash equivalents were not subject to any
utilization restrictions, as in the previous year.
The payments made for property, plant and equipment,
and intangible assets in the amount of €3,996 million included
investments for 2017, to the extent that they already had an
effect on cash.
Payments of €177 million were received for divestitures in
2017 (2016: €664 million). In the previous year, payments had
been received primarily from the sale of the Coatings division's
industrial coatings business to the AkzoNobel Group and from
the sale of the global polyolefin catalysts business to W.R.
Grace & Co., Columbia, Maryland.
Cash used in investing activities included €150 million in
payments made for acquisitions (2016: €2,828 million). In the
previous year, payments had especially been made for the
acquisition of the global surface treatment provider Chemetall
from Albemarle Corp., Charlotte, North Carolina.
In 2016, cash provided by operating activities included
€262 million in pension benefits paid, which are covered by a
contractual trust arrangement.
In 2017, BASF SE transferred securities in the amount of
€500 million to BASF Pensionstreuhand e.V., Ludwigshafen,
Germany. This transfer was not cash effective and therefore
had no effect on the statement of cash flows.
Other effects
Changes in
fair value
Financial indebtedness
16,312
26
(3)
(23)
542
516
liabilities
Other financing-related
124
376
18,032
541
Interest payments comprised interest payments received of
€161 million (2016: €156 million) and interest paid of €570 mil-
lion (2016: €615 million).
(5)
106
Liabilities from finance leases
(6)
29
(4)
357
Loan liabilities
17
(631)
4
2,330
(31)
225
459
409
498
Nominal value of the future
minimum lease payments
396
320
More than 5 years
Total
757
728
1-5 years
Future minimum lease payments to BASF from
operating lease contracts (million €)
In 2017, claims arising from operating leases amounted to
€93 million (2016: €89 million).
BASF acts as a lessor for finance leases to a minor extent only.
Receivables on finance leases were €29 million in 2017 (2016:
€33 million).
BASF as lessor
1,410
Commitments from operating lease contracts (million €)
360
362
Less than 1 year
Dec. 31, 2016
Dec. 31, 2017
Nominal value of the future
minimum lease payments
Consolidated Financial Statements
Notes Other explanatory notes
BASF Report 2017
previous year, leasing liabilities were not offset by any future
minimum lease payments from subleases.
In the current business year and in the previous year, no
additional lease payments exceeding minimum lease
payments were recognized in the income statement due to
contractual conditions for finance leases. In 2017 and in the
108
In addition, BASF is a lessee under operating lease contracts.
The lease commitments totaling €1,410 million in 2017 (2016:
€1,513 million) are due in the following years:
1,058
1,513
Dec. 31, 2016
1,495
2,147
2016
2017
Dividends received
Interest payments
Income tax payments
Million €
Cash provided by operating activities contained the following
payments:
Statement of cash flows
29 Statement of cash flows and capital structure management
Dec. 31, 2017
Other explanatory notes
93
23
24
49
50
17
19
Less than 1 year
1-5 years
More than 5 years
Total
In 2017, minimum lease payments of €448 million (2016:
€446 million) were included in income from operations. In
2017, conditional lease payments of €1 million (2016: €1 mil-
lion) were also included in income from operations. Further-
more, sublease payments of €3 million were included in income
from operations in 2017 (2016: €4 million).
Future minimum lease payments from subleasing contracts
based on existing agreements amounted to €10 million in
2017 (2016: €12 million).
89
Financial and similar
liabilities
17,291
468
34
468
34
Afs
n/a
34
Accounts receivable, trade
Derivatives no hedge accounting
10,952
10,952
LaR
10,952
Receivables from finance leases
346
aFVtPL
346
14
332
Derivatives with hedge accounting
172
For more information on financing policy and the Statement of Cash
Flows, see the Management's Report from page 58 onward
BASF strives to maintain at least a solid A rating, which ensures
unrestricted access to financial and capital markets.
stable
S-1
A
346
stable
Shareholdings¹
Thereof
fair value
13
n/a
13
13
Other liabilities
3,471
1,878
AmC
1,878
Total liabilities
27,162
level 24
25,569
36
528
Carrying amounts and fair values of financial instruments as of December 31, 2016 (million €)
Total carrying
amount within
Carrying
amount
scope of
application of
IFRS 7
Valuation
category in
accordance
with IAS 392
Thereof
Fair value
fair value
level 13
26,322
180
A-1
stable
For more information on receivables and miscellaneous assets, see
Note 18 from page 208 onward
The assets/liabilities relating to hedging transactions
form part of the balance sheet item derivatives with positive or
negative fair values and include only those transactions which
hedge risks arising from financial indebtedness and financ-
ing-related liabilities secured by micro hedges.
Loan liabilities do not contain any interest components.
Other financing-related liabilities primarily comprise
liabilities from accounts used for cash pooling with BASF
companies not included in the Consolidated Financial
Statements. They are reported in miscellaneous liabilities within
the balance sheet item other liabilities which qualify as financial
instruments.
The reconciliation shows changes in such financial liabilities
and hedging transactions for which payments received and
made are shown under cash provided by/used in financing
activities in the statement of cash flows.
1 Includes additions from leasing contracts
19,472
(734)
97
(645)
10
3,248
For more information on liabilities, see Note 24 from page 218 onward
(118)
411
205
17,496
Total
from hedging transactions
Assets/liabilities
19,590
97
40
(645)
10
2,837
(734)
A
The equity of the BASF Group as reported in the balance sheet
amounted to €34,756 million as of December 31, 2017
(December 31, 2016: €32,568 million); the equity ratio was
44.1% on December 31, 2017 (December 31, 2016: 42.6%).
Currently, BASF has the following ratings, which were
most recently confirmed in the fourth quarter of 2017 (Moody's:
December 19, 2017; Standard & Poor's and Scope: Octo-
ber 18, 2017).
P-1
A1
Outlook
indebtedness
Current
financial
Noncurrent
financial
indebtedness
Dec. 31, 2016
Moody's
Standard & Poor's
Scope
The aim of capital structure management is to maintain the
financial flexibility needed to further develop BASF's business
portfolio and take advantage of strategic opportunities. The
objectives of the company's financing policy are to secure
solvency, limit financial risks and optimize the cost of capital.
Capital structure management focuses on meeting the
requirements needed to ensure unrestricted access to capital
markets and a solid A rating. BASF's capital structure is
managed using selected financial ratios, such as dynamic
debt ratios, as part of the company's financial planning.
Capital structure management
stable
S-1
BASF prefers to access external financing on the capital
markets. A commercial paper program is used for short-term
financing, while corporate bonds are used for financing in the
medium and long term. These are issued in euros and other
currencies with different maturities. The goal is to create a
balanced maturity profile, achieve a diverse range of investors
and optimize our debt capital financing conditions.
A
A-1
A
Standard & Poor's
Scope
stable
P-1
A1
Outlook
indebtedness
Current
financial
Noncurrent
financial
indebtedness
Dec. 31, 2017
Moody's
stable
Liabilities
resulting from
derivative finan-
cial instruments
141
capital market
90
74
(24)
22
2
2
249
(124)
(359)
(390)
(396)
(558)
The decrease in net losses from financial liabilities measured at
amortized cost primarily arose from the currency translation of
financing-related liabilities denominated in foreign currencies,
which resulted in a higher translation gain in 2017 than in the
previous year. There was also a decline in the net loss for
financial instruments measured at fair value through profit or
loss. This development is primarily due to realized and
unrealized results from derivatives to hedge foreign currency
transactions. Countering this was a higher net loss from loans
and receivables largely attributable to the foreign currency
translation of receivables.
The gains and losses from the valuation of securities and shareholdings
recognized in the equity of the shareholders of BASF SE are shown in
the Statement of income and expense recognized in equity on page 169.
BASF Report 2017
Consolidated Financial Statements
Notes Notes on balance sheet
27.4 Derivative instruments and hedge
accounting
The use of derivative instruments
BASF is exposed to foreign-currency, interest-rate and
commodity-price risks during the normal course of business.
These risks are hedged through a centrally determined
strategy employing derivative instruments. Hedging is only
employed for underlying items from the operating business,
cash investments, and financing as well as for planned sales,
raw material purchases and capital measures. The risks from
the underlying transactions and the derivatives are constantly
monitored. Where derivatives have a positive market value,
BASF is exposed to credit risks from derivative transactions in
the event of nonperformance of the other party. To minimize
the default risk on derivatives with positive market values,
transactions are exclusively conducted with creditworthy
banks and partners and are subject to predefined credit limits.
To ensure effective risk management, risk positions are
centralized at BASF SE and certain Group companies. The
contracting and execution of derivative financial instruments
for hedging purposes are conducted according to internal
guidelines, and subject to strict control mechanisms.
The fair values of derivative financial instruments are
calculated using valuation models which use input parameters
observable on the market. Exceptions to this are some
commodity derivatives, whose valuation is based directly on
market prices.
Fair value of derivative instruments (million €)
(166)
(311)
2016
2017
Derivatives with negative fair values
491
515
Amount offset
(46)
Net amount
445
(46)
469
netting
agreements
(101)
(101)
Relating to
financial
collateral
Potential
net amount
(124)
(47)
December 31, 2017
220
The table "Offsetting of financial assets and financial liabilities"
shows the extent to which financial assets and financial liabili-
ties are offset in the balance sheet, as well as potential effects
from the offsetting of instruments subject to a legally enforce-
able global netting agreement or similar agreement. For posi-
tive fair values of combined interest and cross-currency swaps,
the respective counterparties provided cash collaterals in
corresponding amounts to the outstanding fair values.
Deviations from the derivatives with positive fair values and
derivatives with negative fair values reported in other receiv-
ables and other liabilities at the end of 2017 and 2016 arose
from derivatives not subject to any netting agreements as well
as from embedded derivatives and are therefore not included
in the table above.
Net gains and losses from financial instruments comprise the
results of valuations, the amortization of discounts, the recog-
nition and reversal of impairments, results from the translation
of foreign currencies as well as interest, dividends and all other
effects on the earnings resulting from financial instruments.
The line item financial instruments at fair value through profit or
loss contains only those gains and losses from instruments
which are not designated as hedging instruments as defined
by IAS 39. Net gains or net losses from available-for-sale
financial assets contain income and expenses from write-
downs/reversals of write-downs, interest, dividends and the
reclassification of valuation effects from equity on the sale of
the securities and shareholdings.
Net gains and losses from financial instruments (million €)
Loans and receivables
Thereof interest result
Available-for-sale financial assets
Thereof interest result
Financial liabilities measured at amortized cost
Thereof interest result
Financial instruments at fair value through profit or loss
321
Foreign currency forward contracts
Foreign currency options
Foreign currency derivatives
(131)
Cash flow hedge accounting
Some of the planned purchases of naphtha are hedged using
swaps and options on oil and oil products. For the reporting of
these hedges in the Consolidated Financial Statements of the
BASF Group, no hedge accounting was applied in 2017 and
in 2016.
Cash flow hedge accounting continues to be used to a
minor extent for natural gas purchases, so that gains and
losses from hedging instruments are initially recognized in
equity. Gains and losses from hedging instruments are
included in cost of sales at the point in time at which the
hedged item is recognized in profit or loss.
The planned transactions and their effect on earnings
occur in the year following the balance sheet date. In 2017,
effective changes in the fair value of hedging instruments of
€200,000 (2016: €1 million) were recognized in the equity of
the shareholders of BASF SE. In 2017, effective changes in the
fair value of hedging instruments of €300,000 were derecog-
nized from the equity of shareholders of BASF SE and recog-
nized in other operating income (2016: €1 million). The ineffec-
tive part in the change in value of the hedge amounted to minus
€100,000 in 2017 and minus €1 million in 2016. These
amounts were reported in the income statement in other
operating expenses.
BASF also uses cash flow hedge accounting for some foreign
currency derivatives to hedge planned sales denominated in
U.S. dollars. The impact on earnings from the underlying
transactions occurs in 2018. In 2017, the effective change in
values of the hedges was €71 million (2016: €9 million), which
was recognized in the equity of the shareholders of BASF SE.
A total of €44 million (2016: €11 million) was derecognized
from the equity of shareholders of BASF SE and was
recognized in income from foreign currency and hedging
transactions. The hedges were entirely effective.
To hedge foreign currency risk which existed for a part of
the U.S. dollar-denominated purchase price for the acquisition
of Chemetall, BASF used options and foreign currency forward
contracts in the previous year. These were designated as
hedging instruments and led to effective changes in the
amount of €97 million, which was recognized in the equity of
the shareholders of BASF SE. Upon completion of the trans-
action in December 2016, this amount was derecognized from
the equity of the shareholders of BASF SE reducing the
purchase price accordingly and along with that the resulting
goodwill arising from the transaction. The ineffective part of the
fair value changes of the hedging instruments amounted to
minus €10 million and was recognized in other operating
expenses.
227
228
Consolidated Financial Statements
Notes Notes on balance sheet
BASF Report 2017
1
The interest rate risk of the floating rate notes issued by
BASF SE in 2013 was hedged using interest rate swaps. The
bond and the interest rate swaps were designated in a hedg-
ing relationship. The effective changes in the fair value of the
hedging instruments amounting to €6 million were recognized
in equity of the shareholders of BASF SE in 2017. In the previ-
ous year, the variable interest bond issued in 2014 and expired
in 2017 was also hedged by interest rate swaps. The effective
changes in the fair value recognized in equity of the sharehold-
ers of BASF SE amounted to €6 million in 2016. There were no
ineffective parts in either year.
28 Leases
Leased assets
Property, plant and equipment include assets which are considered to be economically owned through a finance lease. They
primarily concern the following items:
Leased assets (million €)
Land, land rights and buildings
Machinery and technical equipment
Miscellaneous equipment and fixtures
Total
Liabilities from finance leases (million €)
December 31, 2017
Acquisition cost
Net book value
December 31, 2016
Acquisition cost
Furthermore, BASF SE's fixed-rate U.S. private placement of
$1.25 billion, issued in 2013, was converted into euros using
currency swaps. This hedge was designated as a cash flow
hedge. The hedge was entirely effective. In 2017, this resulted
in changes in fair value of minus €125 million, which were
recognized in the equity of the shareholders of BASF SE
(2016: minus €33 million). In 2017, €144 million was derecog-
nized from other comprehensive income and recorded as an
expense in the financial result (2016: €38 million income in
financial result).
Derivatives with positive fair values
1
(152)
(1)
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Interest rate swaps
65
December 31, 2016
(163)
37
15
102
(148)
34
3
(13)
(27)
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Derivative financial instruments
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Combined interest and cross-currency swaps
(21)
(175)
45
Thereof designated hedging instruments as defined by IAS 39 (hedge accounting)
Interest derivatives
Commodity derivatives
38
163
(188)
18
(66)
(13)
Gross amount
Amounts which cannot be offset
Due to global
Amounts which can be offset
504
Bonds
12,424
12,424
AmC
13,144
Commercial paper
1,033
1,033
AmC
1,033
2,061
Liabilities to credit institutions
2,855
AmC
2,855
Liabilities from finance leases
106
106
Accounts payable, trade
4,610
4,610
n/a
AmC
106
2,855
4,610
14,921
17,756
172
172
Other receivables and other assets
3,736
1,370
LaR
1,370
Securities
672
672
Afs
15,390
672
Securities
1
1
Htm
Cash and cash equivalents
1,375
1,375
LaR
1,375
1,375
Total assets
672
Net book value
Derivatives no hedge accounting
Derivatives with hedge accounting
Consolidated Financial Statements
Notes Notes on balance sheet
Offsetting of financial assets and financial liabilities as of December 31, 2017 (million €)
Amounts which can be offset
Amounts which cannot be offset
Due to global
BASF Report 2017
Gross amount
Derivatives with positive fair values
Derivatives with negative fair values
376
(373)
Amount offset
(39)
(39)
226
Net amount
Relating to
financial
collateral
Potential
net amount
337
(55)
(10)
272
(412)
(55)
(139)
(606)
Offsetting of financial assets and financial liabilities as of December 31, 2016 (million €)
netting
agreements
623
225
5 Determination of the fair value based on parameters for which there is no observable market data
26
623
26
Other liabilities 6
Total liabilities
2,968
24,645
1,367
23,044
aFVtPL
n/a
AmC
623
0
26
623
26
6 Not including separately shown derivatives as well as receivables and liabilities from finance leases
1,367
23,764
649
Thereof
fair value
level 35
Thereof
fair value
level 35
1 The difference between carrying amount and fair value results from shareholdings measured at acquisition cost, for which the fair value could not be reliably determined (2017: €482
million; 2016: €468 million).
2 Afs: available-for-sale (category: available-for-sale financial assets); LaR: loans and receivables (category: loans and receivables); aFVtPL: at-fair-value-through-profit-or-loss (catego-
ry: financial assets and liabilities at fair value recognized in the income statement); AmC: amortized cost (category: financial liabilities which are not derivatives); Htm: Held-to-maturity
(category: financial assets held to maturity); a more detailed description of the categories can be found in Note 1 from page 173 onward.
3 Determination of the fair value based on quoted, unadjusted prices on active markets
4 Determination of the fair value based on parameters for which directly or indirectly quoted prices on active markets are available
0
33
22
46
3,337
(175)
2,745
45
3,337
(175)
2,476
121
BASF Report 2017
Consolidated Financial Statements
223
Notes Notes on balance sheet
Commodity price risks: Some of BASF's divisions are
exposed to strong fluctuations in raw materials prices. These
result primarily from raw materials (for example naphtha,
propylene, benzene, lauric oils, cyclohexane, methanol, natural
gas, butadiene, LPG condensate and ammonia) as well as
from precious metals. BASF takes the following measures to
reduce price risks associated with the purchase of raw
materials:
- BASF uses commodity derivatives to hedge the risks from
the volatility of raw materials prices. These are primarily
options and swaps on crude oil, oil products and natural
gas.
- In the Oil & Gas segment, risks to margins arise in volatile
markets when purchase and sales contracts are priced
differently. Corresponding oil and gas derivatives are used to
hedge these risks.
- The Catalysts division enters into both short-term and long-
term purchase contracts with precious metal producers. It
also buys precious metals on spot markets from a variety of
business partners. The price risk from precious metals
purchased to be sold on to third parties, or for use in the
production of catalysts, is hedged using derivative
instruments. This is mainly done using forward contracts
which are settled by either entering into offsetting contracts
or by delivering the precious metals.
- In the Crop Protection division, the sales prices of products
are sometimes coupled to the price of certain agricultural
commodities. To hedge the resulting risks, derivatives on
agricultural commodities are concluded.
In addition, BASF holds limited unhedged precious metal and
oil product positions, which can also include derivatives, for
trading on its own account. The value of these positions is
exposed to market price volatility and is subject to constant
monitoring.
In connection with CO2 emissions trading, various types of
CO2 certificates are purchased and sold using forward
contracts. The goal of these transactions is to benefit from
market price differences. These deals are settled by physical
delivery. As of December 31, 2017 and as of December 31,
2016, there were no deals outstanding.
By holding commodity derivatives and precious metal
trading positions, BASF is exposed to price risks. The valua-
tion of commodity derivatives and precious metal trading
positions at fair value means that adverse changes in market
prices could negatively affect the earnings and equity of BASF.
BASF performs value-at-risk analyses for all commodity
derivatives and precious metals trading positions. Using the
value-at-risk analysis, we continually quantify market risk and
forecast the maximum possible loss within a given confidence
interval over a defined period. The value-at-risk calculation is
based on a confidence interval of 95% and a holding period of
one day. The value-at-risk calculation for precious metals is
based on a confidence interval of 99%. BASF uses the
variance-covariance approach.
BASF uses value at risk as a supplement to other risk
management tools. Besides value at risk, BASF sets
volume-based limits as well as exposure and stop-loss limits.
Exposure to commodity derivatives (million €)
(27)
1,700
(13)
600
Variable
interest rate
439
December 31, 2016
Fixed
interest rate
Variable
interest rate
208
610
88
14,703
87
3,329
105
12,564
568
3,748
Nominal and fair values of interest rate swaps and combined interest and cross-currency swaps (million €)
Crude oil, oil products
and natural gas
Interest rate swaps
Combined interest and cross-currency
swaps
Thereof fixed rate
December 31, 2017
Nominal value
Fair value
December 31, 2016
Nominal value
Fair value
600
(13)
1,700
(27)
Thereof payer swaps
December 31, 2017
December 31, 2016
Exposure
For more information on credit risks, see Note 18 from page 208 onward
Liquidity risks
BASF promptly recognizes any risks from cash flow fluctua-
tions as part of the liquidity planning. BASF has ready access
to sufficient liquid funds from our ongoing commercial paper
program and confirmed lines of credit from banks.
27.2
Maturity analysis
The interest and principal payments as well as other payments
for derivative financial instruments are relevant for the presen-
tation of the maturities of the contractual cash flows from
financial liabilities. Future cash flows are not discounted here.
Derivatives are included using their net cash flows,
provided they have a negative fair value and therefore represent
a liability. Derivatives with positive fair values are assets and
are therefore not considered.
Trade accounts payable are generally interest-free and due
within one year. Therefore, the carrying amount of trade
accounts payable equals the sum of future cash flows.
224
Consolidated Financial Statements
Notes Notes on balance sheet
Default and credit risks arise when counterparties do not fulfill
their contractual obligations. BASF regularly analyzes the
creditworthiness of each significant debtor and grants credit
limits on the basis of this analysis. Due to the global activities
and diversified customer structure of the BASF Group, there is
no significant concentration of default risk. The carrying
amount of all receivables, loans and interest-bearing securities
plus the nominal value of other financial obligations subject to
default risk represents the maximum default risk for BASF.
BASF Report 2017
2018
2019
2020
2021
2022
2023 and thereafter
Total
Bonds and other
liabilities to the
Liabilities
to credit
institutions
Maturities of contractual cash flows from financial liabilities as of December 31, 2017 (million €)
569
Default and credit risk
The exposure corresponds to the net amount of all long and
short positions of the respective commodity category.
Value at
Risk
Value at
Exposure
Risk
90
1
6
1
Precious metals
36
2
For more information regarding financial risks and BASF's risk manage-
ment, see the Opportunities and risks report in the Management's
Report from page 111 onward
5
Emission certificates
Agricultural
commodities
Total
0
0
(40)
0
126
3
(29)
2
1
December 31, 2017
Fixed
interest rate
Financial indebtedness
Securities
BASF Report 2017
Consolidated Financial Statements
Notes Notes on balance sheet
Assets used under long-term leases
Assets used under long-term leases primarily concerned
buildings and IT infrastructure.
For more information on liabilities arising from leasing contracts, see
Note 28 from page 228 onward
Obligations arising from long-term leases
Obligations arising from purchase contracts
Obligations arising from purchase contracts resulted primarily
from long-term purchase obligations for raw materials. Firm
purchase obligations as of December 31, 2017, were as
follows:
Obligations arising from purchase contracts (million €)
(excluding finance leases) (million €)
2018
23
2018
2019
2019
273
2020
2020
207
2021
2021
137
2022
2022
362
111
5
27
26
118
43
136
43
113
44
59
25
253
96
28
241
December 31, 2017
December 31, 2016
Minimum lease
payments
Interest portion
Leasing liability
Minimum lease
payments
Interest portion
Leasing liability
Following year 1
32
5
94
9
2023 and maturities beyond this year
320
December 31, 2017
Exposure
Sensitivity
December 31, 2016
Exposure
USD
1,410
(143)
1,849
Sensitivity
(241)
Other
566
Exposure and sensitivity by currency (million €)
(63)
(35)
1,976
(206)
2,113
(276)
Total
Due to the use of options to hedge currency risks, the
sensitivity analysis is not a linear function of the assumed
changes in exchange rates.
Interest rate risks: Interest rate risks result from changes
in prevailing market interest rates, which can cause a change
in the fair value of fixed-rate instruments, and changes in the
interest payments of variable-rate instruments. To hedge these
risks, interest rate swaps and combined interest rate and
currency derivatives are used. While these risks are relevant to
the financing activities of BASF, they are not of material
significance for BASF's operating activities.
The variable interest exposure, which also includes fixed
rate bonds set to mature in the following year, amounted to
minus €986 million as of December 31, 2017 (2016: minus
€2,447 million). An increase in all relevant interest rates by one
percentage point would have raised income before taxes and
minority interests by €4 million as of December 31, 2017, and
raised income before taxes and minority interests by €1 million
as of December 31, 2016. The effect from the items designated
under hedge accounting would have increased the equity of
the shareholders of BASF SE before income taxes by €9 mil-
lion as of December 31, 2017 (2016: increase of €16 million).
Carrying amount of nonderivative interest-bearing financial instruments (million €)
Loans
264
2023 and maturities beyond this year
Total
The sensitivity analysis is conducted by simulating a 10%
appreciation of the respective functional currency against the
other currencies. The effect on BASF's income before taxes
and minority interests would have been minus €252 million as
of December 31, 2017, and minus €300 million as of Decem-
ber 31, 2016. The effect from the items designated under
hedge accounting would have increased the equity of the
shareholders of BASF SE before income taxes by €46 million
as of December 31, 2017 (2016: increase of €24 million). This
only refers to transactions in U.S. dollars. The foreign currency
risk exposure amounted to €1,976 million as of December 31,
2017 and €2,113 million as of December 31, 2016.
Foreign currency risks: Changes in exchange rates could
lead to losses in the value of financial instruments and adverse
changes in future cash flows from planned transactions. For-
eign currency risks from financial instruments result from the
translation at the closing rate of financial receivables, loans,
securities, cash and financial liabilities into the functional cur-
rency of the respective Group company. Foreign currency
contracts in a variety of currencies are used to hedge foreign
exchange risks from nonderivative financial instruments and
planned transactions.
Total
1,410
26 Risks from litigation and claims
7,306
4,776
2,688
2,374
2,362
7,112
26,618
Further possible obligations arising from agreements existing
as of December 31, 2017 are shown in 2.4: Acquisitions and
divestitures.
The foreign currency risk exposure corresponds to the net
amount of the nominal volume of the primary and the deriva-
tive financial instruments which are exposed to currency risks.
In addition, planned purchase and sales transactions of the
respective following year are included, if they fall under the
currency risk management system. Long and short positions
in the same currency are offset against each other.
In the arbitration proceedings initiated in May 2013,
Metrogas S.A., Chile, claims damages valued in an amount of
€227 million as a result of insufficient gas deliveries against
Wintershall Energía S.A., Argentina (WIAR), Total Austral S.A.,
Argentina, and Pan American Energy LLC, Argentina. The
defendants, as sellers, concluded a natural gas supply
contract with Metrogas in 1997. WIAR's share of supply in the
contract is 37,5%. After the resignation of the chairman of the
Arbitral Tribunal in mid-2016, the International Chamber of
Commerce (ICC) nominated a new Arbitral Tribunal that
pursued the arbitration proceedings during 2017. The hearing
took place in April 2017. On February 2, 2018, the Arbitral
Tribunal dismissed the Metrogas claim in its entirety and
imposed the procedural costs on Metrogas.
Between November 2014 and March 2015, a putative class
action lawsuit and several additional lawsuits were filed in the
United States District Court of the Southern District of New
York against BASF Metals Limited (BML), based in the United
Kingdom, along with other defendants, alleging violations of
antitrust and commodities laws stemming from the price
discovery process for platinum and palladium. The lawsuits
were consolidated, and a Second Consolidated Amended
Class Action Complaint was eventually filed in July 2015. This
Complaint also names as a defendant, among others,
BASF Corporation. On September 21, 2015, the defendants
filed a Joint Motion to Dismiss the Second Consolidated
Amended Class Action Complaint, and BML and BASF Cor-
poration filed individual motions to dismiss. On March 28,
2017, the Court dismissed the Second Consolidated
Amended Class Action Complaint against BASF Corporation
and BML on jurisdictional grounds. On May 15, 2017, the
plaintiffs filed an amended Complaint that renews allegations
against defendants and BML, while BASF Corporation is not
named as a defendant. The defendants filed a renewed Joint
Motion to Dismiss and BML filed a renewed Motion to Dismiss.
A pro se complaint filed in September 2015 was dismissed by
the U.S. District Court on October 19, 2017. The plaintiff filed
an appeal to the U.S. Court of Appeals on November 19,
2017.
Furthermore, BASF SE and its affiliated companies are
defendants in or parties to a variety of judicial, arbitrational or
regulatory proceedings on a recurring basis. To our current
knowledge, none of these proceedings will have a material
effect on the economic situation of BASF.
221
222
Consolidated Financial Statements
Notes Notes on balance sheet
27 Supplementary information on financial instruments
BASF Report 2017
27.1
Financial risks
Market risks
BASF Corporation has potential liability under the
Comprehensive Response, Compensation and Liability Act of
1980, as amended, and related state laws for investigation
and cleanup at certain sites. The Lower Passaic River Study
Area (LPRSA) is one such site comprising the lower 17 miles of
the Passaic River in New Jersey. BASF Corporation and more
than 60 other companies (collectively, the Lower Passaic River
Study Area Cooperating Parties Group or CPG) are conduct-
ing a remedial investigation / feasibility study (RI/FS) of the
LPRSA. In 2016, the United States Environmental Protection
Agency (USEPA) selected a final remedy for the lower 8 miles
of the LPRSA. An agreement with USEPA on work in the upper
portion of the LPRSA may occur as early as 2018.
67
520
Purchase/sale of reserves
413
945
Local duties (royalties, export, etc.)
40
91
131
166
Net revenue (less duties)
240
56
416
1,920
Production costs
108
971
264
291
Sales natural gas
Fully consolidated companies
Germany
Europe
Russia
Sales crude oil (including condensate and LPG)
202
75
680
Middle East
56
South
America
Total
Group
94
1,106
74
North Africa,
33
145
18
6
(120)
(49)
Operating income before taxes
11
43
(109)
5
239
312
Income taxes
3
1,261
166
13
4
964
563
Exploration expenses and technology
5
81
9
20
Other
15
Depreciation, amortization and impairment
109
692
14
12
137
130
Rest of
2016 (million €)
132
33
10
158
Fair value of options granted to the Board of Executive Directors in the fiscal year as of grant date
550
Exploration expenses and technology
231
6
15
22
24
149
Depreciation, amortization and impairment
101
82
587
118
2,201
298
263
438
1,066
Local duties (royalties, export, etc.)
47
Production costs
79
Net revenue (less duties)
269
1,064
379
50
439
126
20
10
154
18
94
236
Operating income after taxes
32
101
64
222
172
509
Net income of equity-accounted companies
79
49
4
(18)
47
13
Income taxes
872
Other
(1)
16
25
8
(163)
(115)
Operating income before taxes
45
148
286
-
266
745
80
50
116
3
637,610
(479,111)
(519,984)
(129,630)
(97,424)
2,811,447
570,465
2,849,723
The fair value of the free shares to be granted is recognized
as an expense with a corresponding increase in capital surplus
over the term of the program.
Personnel expenses of €28 million were recorded in
2017 for the BASF incentive share program "plus" (2016:
€28 million).
31 Compensation for the Board of Executive Directors and Supervisory Board
Million €
2017
2016
The free shares to be provided by the Company are measured
at the fair value on the grant date. Fair value is determined on
the basis of the stock price of BASF shares, taking into
account the present value of dividends, which are not paid
during the term of the program. The weighted-average fair
value on the grant date amounted to €86.02 for the 2017
program, and €67.90 for the 2016 program.
Performance-related and not performance-related cash compensation for the
Newly acquired entitlements
Bonus shares issued
Lapsed entitlements
As of December 31
2,849,723
As a result of a resolution by the Board of Executive
Directors in 2002 to settle options in cash, options outstanding
from the LTI programs 2010 to 2017 were valued with the fair
value as of December 31, 2017. A proportionate provision is
recorded for programs in the vesting period. The LTI provision
decreased from €464 million as of December 31, 2016 to
€347 million as of December 31, 2017 due to lower fair values
of the outstanding option rights. The utilization of provisions
amounted to €49 million in 2017 (2016: €25 million). Income
arising from the reversal of provisions amounted to €68 million
in 2017. The previous year had included an expense of
€267 million.
The total intrinsic value of the exercisable options
amounted to €145 million as of December 31, 2017 and
€167 million as of December 31, 2016.
232
Consolidated Financial Statements
Notes - Other explanatory notes
BASF Report 2017
2,829,521
BASF incentive share program
Employees who participate in the BASF incentive share
program "plus" acquire shares in BASF from their variable
compensation. For every 10 BASF shares purchased in the
program, a participant receives one BASF share at no cost
after one, three, five, seven and ten years of holding the BASF
shares. As a rule, the first and second block of ten shares
entitles the participant to receive one BASF share at no extra
cost in each of the next 10 years.
The right to receive free BASF shares lapses if a participant
sells the individual investment in BASF shares, if the participant
stops working for the Company or one year after retirement.
The number of free shares to be granted has developed as
follows:
Number of free shares to be granted (shares)
As of January 1
2017
2016
The "plus" incentive share program was introduced in 1999
and is currently available to employees in Germany, other
European countries and Mexico. Simultaneous participation in
both the "plus" program and the LTI program is not allowed.
360
Board of Executive Directors
360
1,182
154
9
885
111
23
520
Proven reserves as of December 31
117
24
74
15
4
Production
58
Thereof equity-accounted companies
6
505
8
346
6
Thereof equity-accounted companies
360
856
147
8
628
50
23
Proven developed reserves as of December 31
520
Sales natural gas
9
The number of options granted amounted to 1,461,113 in
2017 (2016: 1,710,404).
Extensions and discoveries
Volatility was determined on the basis of the monthly
closing prices over a historical period corresponding to the
remaining term of the options.
76.13
240 Supplementary Information on the Oil & Gas Segment
25
23
85
139
Operating income after taxes
BASF Report 2017
8
141
(18)
154
173
Net income of equity-accounted companies
(63)
(112)
77
Operating income from oil and gas-producing
activities
figures shown for the Oil & Gas segment. Significant deviations
exist in sales revenues that do not include sales from mer-
chandise and services as well as the financing and corporate
overhead costs not included there. Income taxes were com-
puted using currently applicable local income tax rates.
766
249
Group
America
Middle East
Russia
Operating income represents only those revenues and
expenses directly associated with oil, condensate and gas
production. This partially results in significant differences to the
Total
North Africa,
Rest of
Europe
Germany
Sales crude oil (including condensate and LPG)
Fully consolidated companies
2017 (million €)
South
(40)
(26)
BASF Report 2017
3.38
Risk-free interest rate
Volatility BASF share
%
0.19
0.05
%
3.38
23.63
Volatility MSCI Chemicals
Correlation BASF share price:
MSCI Chemicals
%
14.22
14.34
%
73.41
23.11
%
41.23
33.87
Consolidated Financial Statements
Notes Other explanatory notes
231
30 Share price-based compensation program and BASF incentive share program
Share price-based compensation program
In 2017, BASF continued its share price-based compensation
program known as the long-term incentive (LTI) program for
the BASF Group, which has been in place since 1999.
Approximately 1,200 people, in particular the Board of
Executive Directors and senior executives, are currently
eligible to participate in this program. This program provides
for the granting of virtual options, which are settled in cash
when exercised.
Participation in the LTI program is voluntary. In order to
take part in the program, a participant must make a personal
investment: A participant must hold BASF shares amounting
to 10% to 30% of his or her individual variable compensation
for a two-year period from the granting of the option (holding
period). The number of shares to be held is determined by the
amount of variable compensation and the volume-weighted
average market price for BASF shares on the first business
day after the Annual Shareholders' Meeting, which was €87.84
on May 15, 2017.
The participant receives four option rights per invested
share. Each option consists of two parts, right A and right B,
which may be exercised if defined thresholds have been met:
The threshold of right A is met if the price of the BASF share
has increased by more than 30% in comparison with the base
price (absolute threshold). The value of right A is the difference
between the market price of BASF shares on the exercise date
and the base price; it is limited to 100% of the base price. If the
cumulative percentage performance of BASF shares exceeds
the percentage performance of the MSCI World Chemicals
IndexSM (MSCI Chemicals), right B may be exercised (relative
threshold). The value of right B is the base price of the option
multiplied by twice the percentage outperformance of BASF
shares compared with the MSCI Chemicals Index on the exer-
cise date. It is limited to the closing price on the date of exer-
cise minus the computed nominal value of BASF shares.
Beginning with the 2013 LTI program, right B is only valuable if
the price of BASF shares at least corresponds with the base
price. The options of the LTI program 2017 were granted on
July 1, 2017, and may be exercised following a two-year vest-
ing period, between July 1, 2019, and June 30, 2025. During
the exercise period, there are certain times (closed periods)
during which the options may not be exercised. Each option
can only be exercised in full. This means that one of the per-
formance targets must be surpassed. If the other performance
target is not surpassed and the option is exercised, the other
option right lapses. A participant's maximum gain from exer-
cising an option is limited to five times the original individual
investment starting with the 2013 LTI program. The maximum
gain from exercising an option is limited to 10 times the original
individual investment for programs from previous years. Option
rights are nontransferable and are forfeited if the option hold-
ers no longer work for BASF or have sold part of their individual
investment before the expiry of the two-year vesting period.
They remain valid in the case of retirement. For the members
of the Board of Executive Directors, the long-term orientation
of the program is significantly strengthened compared with the
conditions applying to the other participants. The members of
the Board of Executive Directors are required to participate in
the LTI program with at least 10% of their actual annual variable
compensation. In view of this binding personal investment (in
the form of BASF shares), an extended holding period of four
years applies. Members of the Board of Executive Directors
may only exercise their options at least four years after they
have been granted (vesting period).
The 2010 to 2016 programs were structured in a similar
way to the LTI program 2017.
The models used in the valuation of the option plans are
based on the arbitrage-free valuation model according to
Black-Scholes. The fair values of the options are determined
using the binomial model.
Fair value of options and parameters used as of December 31, 2017
2017
LTI program of the year
2016
Fair value
Dividend yield
€
The stated fair values and the valuation parameters relate to
the LTI programs 2017 and 2016. The fair value calculation
was based on the assumption that options will be exercised in
a manner dependent on their potential gains. For the programs
from preceding years, corresponding fair values were com-
puted and valuation parameters were used.
237
Oil and gas reserves
4.0
24
75
12
39
19
Proven reserves as of December 31
Production
Purchase/sale of reserves
4
114
4
3
126
10
(1)
97
21
(1)
Revisions and other changes
520
Extensions and discoveries
57
124
907
291
6
Thereof equity-accounted companies
305
818
114
8
622
55
19
Proven developed reserves as of December 31
466
466
8
451
7
Thereof equity-accounted companies
466
1,198
140
8
1,182
154
9
885
82
82
76
4
2
Thereof equity-accounted companies
Thereof equity-accounted companies
82
478
8
82
218
136
8
50
2
7
15
20
1107
34
Proven developed reserves as of December 31
8
33
166
111
23
as of January 1, in million barrels of oil equivalent
(MMBOE)
Developed and undeveloped gas reserves
Thereof
at equity
Total
Group
South
America
North Africa,
Middle East
Russia
Rest of
Europe
Germany
Consolidated and equity-accounted companies
Gas 2017
72
72
68
4
72
390
8
72
111
305
305
BASF Report 2017
Germany
Consolidated and equity-accounted companies
80
80
74
6
80
320
7
77
144
60
2
60
32
89
89
82
6
1
89
Rest of
Europe
440
North Africa,
Middle East
24.8
6
39
11
(2)
19
8
3
Revisions and other changes
572
1,260
167
11
940
118
24
as of January 1, in million barrels of oil equivalent
(MMBOE)
Developed and undeveloped gas reserves
Thereof
at equity
Total
Group
South
America
Russia
Proven reserves as of December 31
7
184
Middle East
Russia
Europe
Germany
North Africa,
Rest of
Supplementary Information on the Oil & Gas Segment 239
Gas 2016
Thereof equity-accounted companies
Proven developed reserves as of December 31
Thereof equity-accounted companies
Proven reserves as of December 31
Production
Purchase/sale of reserves
2.7
Revisions and other changes
in million barrels (MMbbl)
oil reserves as of January 1,
Proven developed and undeveloped
Consolidated and equity-accounted companies
Oil 2016
South
America
86
Total
Thereof
at equity
127
4
48
2
3
15
22
1100
36
(3)
4
(7)
6
5
96
484
9
96
193
144
42
Group
Production
Extensions and discoveries
1
December 31, 2017
180
734
196
390
73
Associated companies
306
Joint ventures
December 31, 2016
176
172
Nonconsolidated subsidiaries
December 31, 2017
Other liabilities
Other receivables
Other receivables and liabilities with related parties (million €)
44
29
92
75
76
55
69
71
73
77
236
December 31, 2016
Purchase/sale of reserves
Sales and trade accounts receivable from and trade accounts
payable to related parties mainly included business with own
products and merchandise, agency and licensing businesses,
and other operating business.
BASF Group companies have used the following services from KPMG:
33 Services provided by the external auditor
For more information on the members of the Board of Executive
Directors and the Supervisory Board, see Management and Supervisory
Boards and Compensation Report from page 137 onward
For more information about defined benefit plants, the division of risk
between group companies (including non-consolidated subsidiaries),
see Note 22, "Provisions for pensions and similar obligations," from
page 211 onward
For more information on subsidiaries, joint ventures and associated
companies, see the BASF Group List of Shares Held on page 190
For more information on other financial obligations in favor of joint
ventures, see Note 25 from page 220 onward
There were no reportable related party transactions with
members of the Board of Executive Directors or the Supervisory
Board and their related parties in 2017.
Effective December 31, 2017, the present value of the
outstanding minimum rental payments for an office building
including parking area payable by BASF SE to BASF Pen-
sionskasse WaG for the nonterminable basic rental period to
2029 amounted to €55 million.
There were no obligations arising from purchase contracts
with associated companies as of December 31, 2017; as of
December 31, 2016, these amounted to €26 million. Obliga-
tions arising from purchase contracts with joint ventures
amounted to €3 million as of December 31, 2017, whereas
there were no corresponding obligations as of December 31,
2016.
There were obligations from guarantees and other financial
obligations at BASF in favor of nonconsolidated subsidiaries in
the amount of €5 million as of December 31, 2017 (Decem-
ber 31, 2016: €3 million) and in favor of associated companies
in the amount of €23 million as of December 31, 2017 (Decem-
ber 31, 2016: €21 million).
BASF Report 2017
Consolidated Financial Statements
Notes - Other explanatory notes
234
233
The balance of valuation allowances for other receivables
from nonconsolidated subsidiaries decreased from €79 million
as of December 31, 2016 to €74 million as of December 31,
2017. Of this amount, €1 million was recognized as an expense
in 2017 (2016: €26 million).
Of this amount, €5 million was recognized as an expense
in 2017 (2016: €1 million).
The outstanding balances toward related parties were
generally not secured and settled in cash. The balance of
valuation allowances for trade accounts receivable from
associated companies rose from €1 million as of Decem-
ber 31, 2016 to €9 million as of December 31, 2017.
Since the transfer of the global leather chemicals business
to the Stahl group on September 29, 2017, BASF holds a
minority interest in the parent company of the Stahl group, in
which it can exercise significant influence. Sales, receivables,
trade accounts receivable and other obligations resulting from
transactions with Stahl group since then are included in the
tables above in the values for associated companies in 2017.
The €22 million decline in other liabilities from associated
companies in 2017 was largely due to other financing-related
liabilities.
The decline in other receivables from associated compa-
nies and the increase in other receivables from joint ventures
was largely due to the transfer of the financing function for the
regulated gas transportation activities to the newly established
joint venture W & G Infrastruktur Finanzierungs-GmbH, Kassel,
Germany. Receivables from the associated companies
GASCADE Gastransport GmbH, Kassel, Germany, and NEL
Gastransport GmbH, Kassel, Germany, in the amount of
€259 million were transferred to W & G Infrastruktur Finan-
zierungs-GmbH and a loan of €140 million was granted to it.
The cash that was also transferred to the joint venture was
deposited in the BASF Group's cash pool and led to an
increase of €665 million in other liabilities from joint ventures.
For more information, see Note 2.3 from page 186 onward
and transactions.
Other receivables and liabilities primarily arose from
financing activities, from accounts used for cash pooling,
outstanding dividend payments, profit-and-loss transfer
agreements, and other finance-related and operating activities
December 31, 2016
178
97
258
Million €
Accounts payable, trade
December 31, 2017
136
The members of the Board of Executive Directors were
granted 127,276 options under the long-term incentive (LTI)
program in 2017.
Performance-related compensation for the Board of Executive
Directors is based on the return on assets adjusted for special
effects, as well as the performance of the entire Board. Return
on assets corresponds to income before taxes and minority
interests plus interest expenses as a percentage of average
assets.
150.4
1 Compensation for Dr. Harald Schwager and Margret Suckale from their active membership on the Board of Executive Directors in 2017 is included under total compensation for
former members of the Board of Executive Directors
144.3
15.9
7.6
3.0
3.3
Guarantees assumed for members of the Board of Executive Directors and the Supervisory Board
and their surviving dependents
Pension provisions for former members of the Board of Executive Directors
and their surviving dependents¹
Total compensation for former members of the Board of Executive Directors
Compensation for the Supervisory Board
3.3
7.0
Service costs for members of the Board of Executive Directors
21.4
27.5
Total compensation for the Board of Executive Directors
The market valuation of the options of active and former mem-
bers of the Board resulted in income of €5.8 million in 2017. In
2016, the market valuation of the options resulted in expenses
of €30.7 million.
December 31, 2016
135
For more information on the compensation of members of the Board
of Executive Directors, see the Compensation Report from page 140
onward
BASF Report 2017
Accounts receivable, trade
December 31, 2017
Associated companies
Joint ventures
Nonconsolidated subsidiaries
Trade accounts receivable from / trade accounts payable to related parties (million €)
245
307
317
379
Joint ventures
Associated companies
395
413
Nonconsolidated
subsidiaries
2016
2017
Notes Other explanatory notes
Consolidated Financial Statements
Sales to related parties (million €)
The following tables show the volume of business with
related parties that are included at amortized cost or accounted
for using the equity method.
A related party is a natural person or legal entity which can
exert influence on the BASF Group or over which the BASF
Group exercises control or joint control or a significant
influence. In particular, this comprises nonconsolidated
subsidiaries, joint ventures and associated companies.
32 Related-party transactions
For more information on the members of the Supervisory Board and
Board of Executive Directors, including their memberships on other
boards, see page 137 onward
Annual audit
17.4
Audit-related services
BASF Report 2017
Supplementary Information on the Oil & Gas Segment 237
Supplementary Information on the Oil & Gas Segment
(Unaudited)
The following provides supplementary information on the
Exploration & Production business sector of the Oil & Gas
segment. In the absence of detailed disclosure rules in this
area under the International Financial Reporting Standards
(IFRS), the presentation is based on the FASB standard
Extractive Activities - Oil and Gas (Topic 932), which is a fur-
ther development of SFAS 69. In the following sections, the
determination of the amounts complies with the metrics set
out by IFRS that underlie the BASF Group Consolidated Finan-
cial Statements: Operating income from oil and gas-producing
activities; Period expenditures for acquisition, exploration and
development of oil and gas deposits; Capitalized costs relating
to oil and gas producing activities; and Capitalized exploration
drilling: suspended well costs. The definition of companies
accounted for using the equity method also follows the
approach of the Consolidated Financial Statements. The cash
flow from the Yuzhno Russkoye project is shown in the fully
consolidated company responsible for marketing the gas.
According to Topic 932, the current economic conditions
were considered in the determination of oil and gas reserves
as well as the standardized calculation of discounted net cash
flows. The prices used are valued at the average price calcu-
lated from the prices on the first day of the month for the past
12 months. Expected proven reserves and the resulting future
net cash flows can vary significantly from the current estimates.
Furthermore, the realized prices and costs and the actual cash
flows resulting therefrom may differ from the estimate in
amount and distribution over time. Therefore, the values pre-
sented should not be interpreted as a prediction of future cash
flows, nor in their sum as the current value of the company.
Furthermore, different prices, costs and volume estimates
are used for operational decisions as well as for the prepara-
tion of the Consolidated Financial Statements. Therefore, the
reserves and net cash flows shown are not comparable with
statements and values in the Consolidated Financial State-
ments.
According to the requirements in Topic 932, regions with
more than a 15% share of total reserves must be shown sep-
arately. Therefore, the regions in the supplementary informa-
tion differ from those presented in the Group Consolidated
Financial Statements. Aside from the countries Germany and
Russia, this includes the regions: Rest of Europe; North Africa/
Middle East; as well as South America.
The regions include the following countries with operating
activities:
Region
Rest of Europe
North Africa / Middle East
South America
Exploration &
Production
United Kingdom, the
Netherlands, Norway,
Denmark
Libya
Argentina
Exploration
Abu Dhabi
Proven oil and gas reserves are the volumes of crude oil,
natural gas and condensate that, according to the geological,
engineering and economic conditions prevailing at the balance
sheet date, can be produced in future years. Accordingly,
reserve estimates based on this data could be materially dif-
ferent from the volumes that are ultimately recovered. To
reduce uncertainties, BASF works together with independent,
internationally recognized reserve auditors to perform recur-
ring reserves audits of its major crude oil and natural gas fields.
The tables on the following pages show the company's
estimated proven and proven developed reserves as of
December 31, 2016, and 2017, as well as changes attribut-
able to production or other factors.
238 Supplementary Information on the Oil & Gas Segment
Oil 2017
BASF Report 2017
Oil & Gas
Rest of
237
245
Thereof domestic
18.5
The services provided by the external auditor mainly include
services for the annual audit, and to a lesser extent, confirma-
tion services, tax consultation services and other services.
The line item annual audit related to expenses for the audit
of the Consolidated Financial Statements of the BASF Group
as well as the legally required financial statements of BASF SE
and its consolidated subsidiary companies and joint opera-
tions. Tax consultation services pertained especially to the
fees for the finalization of unfiled tax returns for companies
acquired in 2016. Fees for other services primarily included
project-related audits in connection with regulatory demands
as well as other confirmation services.
34 Declaration of Conformity with the German Corporate Governance Code
Declaration pursuant to section 161 AktG
(Stock Corporation Act)
The annual Declaration of Conformity with the German Gover-
nance Code according to section 161 of the German Stock
Corporation Act was signed by the Board of Executive Direc-
tors and the Supervisory Board of BASF SE in December
2017, and is published online.
For more information, see basf.com/en/governance
5
To Our Shareholders
Management's Report
Corporate Governance
Supplementary Information
on the Oil & Gas Segment
Overviews
5
17
125
159
Supplementary Information
on the Oil & Gas Segment
North Africa,
Consolidated Financial Statements
Germany
0.3
0.1
0.1
0.1
0.2
0.3
0.1
0.6
0.4
6.4
6.4
17.5
18.6
2017
Thereof domestic
Total
Other services
Thereof domestic
Thereof domestic
Tax consultation services
Consolidated and equity-accounted companies
0.3
19.3
2016
89
Europe
Russia
Middle East
88
South
America
Total
Group
Proven developed and undeveloped
oil reserves as of January 1,
in million barrels (MMbbl)
Revisions and other changes
Extensions and discoveries
Thereof
at equity
127
184
86
440
4
29
731
3
36
49
1,786
4,767
1,486
Future production/development costs
3,561
3,362
3,476
6,556
9,543
1,538
1,173
at equity
Future revenues
24,475
1,562
6,113
1,426
1,309
Group
214
3,804
2,187
74
10,774
Future net cash flows, not discounted
491
2,089
966
2,589
(22)
Future income taxes
2,002
America
303
Russia
31
411
303
264
71
35
36
37
2016
2017
Number of exploration wells in construction in
progress at equity-accounted companies
as of December 31
Number of exploration wells in
construction in progress
Wells for which drilling is not complete
Wells capitalized less than one year
Wells capitalized more than one year
Total
7,588
4
36
23
27
Europe
Germany
Thereof
Total
South
North Africa,
Rest of
Consolidated and equity-accounted
companies
Supplementary Information on the Oil & Gas Segment 243
Standardized measure of discounted future net cash flows 2017 (million €)
BASF Report 2017
The following information was determined based on the provi-
sions of the standard Extractive Activities - Oil and Gas (Topic
932) published by FASB. Based on this, a standardized
measure of discounted future net cash flows with the relevant
revenues, costs and income tax rates is to be made. The
proven reserves are valued at the average price calculated
from the prices on the first day of the month for the past busi-
ness year. The values thus determined are discounted at a
10% annual discount rate.
27
reserves
Standardized measure of discounted future
net cash flows relating to proven oil and gas
Middle East
133
1,808
(27)
(96)
North Africa,
Russia
Middle East
South
America
Total
Thereof
Rest of
Europe
Group
As of January 1
68
1,020
2,131
104
1,147
at equity
4,470
Germany
BASF Report 2017
1,020
2,131
104
1,147
4,470
82
Consolidated companies and equity-accounted
companies
Thereof equity-accounted companies
25
99
82
82
244 Supplementary Information on the Oil & Gas Segment
Summary of changes in standardized measure of discounted future net cash flows 2017 (million €)
(42)
68
82
costs in the current period
Revisions of previous reserves estimates
46
973
248
90
105
improved recovery, less related costs
1,462
Investments in the period
67
652
79
134
932
72
Sales of oil and gas produced, net of production
Net changes from extensions, discoveries and
2,257
(151)
(868)
(488)
(104)
(282)
(1,893)
143
(94)
balance sheet date
242
1,410
474
205
(74)
Net changes in prices and production costs at
Standardized measure of discounted
future net cash flows
13
2,240
134
Standardized measure of discounted future net cash flows 2016 (million €)
Consolidated and equity-accounted
Rest of
North Africa,
companies
134
Germany
Russia
Middle East
South
America
Total
Group
Thereof
at equity
Europe
Future revenues
135
134
379
1,544
38
285
2,150
(1)
26
Standardized measure of discounted
Thereof equity-accounted companies
170
2,260
176
1,024
5,438
future net cash flows
1,365
6,975
5,732
1,933
Future net cash flows, not discounted
(64)
1,547
163
1,655
3,241
6,710
10% discount rate
(132)
527
1,278
59
508
95
570
1,937
690
3,478
3,428
20,978
3,610
Future production/development costs
1,549
5,264
1,633
1,378
1,203
11,027
1,582
Future income taxes
(120)
164
10% discount rate
3,409
4,126
Changes in estimated investments in future periods
2,021
2,296
2,388
2,480 2,572
2,664
2,755
2,847
2.20
2.50
2.60
1,561
1.70
2.70
2.90
3.00
3.10
Number of shares
as of December 313,6
million
918.5
918.5
918.5
918.5
2.80
918.5
1,791
1.95
3,130
Other liabilities
8.9
24.6
27.5
19.9
19.2
19.7
14.4
13.3
18.9
€
Appropriation of profits
Dividend
Dividend per share³
2,982 2,176
3,737
3,506
2,880
2,826
5,853
2,158
2,808
Net income of BASF SE5
3,434
918.5
1 We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013.
Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
2017
15,162
13,594
26,413
25,258
Investments accounted for using
the equity method
1,146
1,340
1,328
2016
1,852
4,174
3,245
4,436
4,647
4,715
Other financial assets
1,947
1,619
1,953
848
3,459
918.5
2015
2013²
2 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
3 We conducted a two-for-one stock split in the second quarter of 2008.
4 Includes the change in reporting from 2009 onward of the effects of regular extensions of U.S. dollar hedging transactions
5 Calculated in accordance with German GAAP
6 After deduction of repurchased shares earmarked for cancellation
918.5
918.5
918.5
248
Overviews
2014
12,324 12,967 12,537
19,229 23,496 25,260
Ten-year summary
Million €
BASF Report 2017
2008
Intangible assets
Property, plant and equipment
15,032
2009
9,889 10,449 12,245 11,919
16,285 17,241 17,966
2010
2011
2012¹
12,193
16,610
Balance sheet (IFRS)
613
2,240
3,036
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
THOMSIT®
TINUVIN®
ULTRADURⓇ
ULTRAFORMⓇ
ULTRAMIDⓇ
TERMIDOR®
THERMOTEK®
SYSTIVAⓇ
Sustainable Solution SteeringⓇ_ reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
_reg. trademark of BASF Group
.reg. trademark of Conseil
Européen de l'Industrie Chimique
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
SAVIVAⓇ
SERIFEL®
ULTRASONⓇ
REVYSOL®
LIMUSⓇ
MAGLISⓇ
NEALTA®
NODULATOR®
_reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of Bayer Group
.reg. trademark of Bayer Group
_reg. trademark of BASF Group
LibertyLink®
KIXOR®
LibertyⓇ
IRGANOX®
reg. trademark of Bayer Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of Forest
Stewardship Council
OASEⓇ
POLYTHFⓇ
Responsible Care®
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of Henkel AG
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of Bayer Group
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
VIZURA®
Biotechnology
A barrel of oil equivalent (BOE) is an international unit of measure-
ment for comparing the energy content of different fuels. It is equal
to one barrel of crude oil, or 6,000 cubic feet (169 cubic meters) of
natural gas.
Barrel of oil equivalent (BOE)
B
Compliance is an important element of corporate governance. It
refers to the company's behavior in accordance with laws, guide-
lines and voluntary codices.
Compliance
BASF's Competency Model is derived from its strategic principles
and corporate values and translates these into specific day-to-day
behavioral standards. It is applicable worldwide, creating a common
framework for the conduct of all BASF employees and leaders to
enable us to reach our shared goals. The eight competencies are:
Drive Innovation, Collaborate for Achievement, Embrace Diversity,
Communicate Effectively, Drive Sustainable Solutions, Develop Self
and Others, Act with Entrepreneurial Drive, Demonstrate Customer
Focus.
Competency Model
Audits are a strategic tool for monitoring and directing standards.
During a site or plant audit, clearly defined criteria are used to create
a profile on topics such as environment, safety or health.
Audits
VELONDISⓇ
Associated companies are entities in which significant influence can
be exercised over their operating and financial policies and which
are not subsidiaries, joint ventures or joint operations. In general, this
applies to companies in which BASF has an investment of between
20% and 50%.
A
BASF Report 2017
Glossary
Glossary
Overviews
250
1 Trademarks are not registered in all countries.
reg. trademark of BASF Group
.reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
XEMIUM®
VAULTⓇ
Associated companies
2,802
.reg. trademark of Bayer Group
-reg. trademark of BASF Group
78,768
76,496
71,359 70,836
64,204
62,726
59,393 61,175
51,268
50,860
Total equity and liabilities
14,880
1 We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013.
Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
14,339 15,893 14,236 15,317
2,850
2,520
3,564
2,292
2,623
1,993
16,710
16,295 11,680 15,568 16,477
Current liabilities
87
195
Liabilities of disposal groups
3,064
reg. trademark of BASF Group
.reg. trademark of BASF Group
reg. trademark of BASF Group
2 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
Trademarks¹
IRGAFOS®
InVigorⓇ
INTERCEPTOR®
INTEGRAL®
INSCALISⓇ
INITIUM®
HySorbⓇ
HYDRAULANⓇ
FormaldpureⓇ
FLO RITE®
FSC®
FinaleⓇ
BASF Report 2017
DERMAGENISTⓇ
ENGENIA®
ESPAÇO ECO®
F 500®
CLEARFIELD®
CHOVATEK®
CHIMASSORBⓇ
CERESITⓇ
CELLASTOⓇ
BOROCAT®
ADLITE®
ACRONALⓇ
AgCelenceⓇ
BASONATⓇ
BastaⓇ
Trademarks
249
Overviews
CREATOR SPACE®
Biotechnology includes all processes and products that make use of
living organisms, such as bacteria and yeasts, or their cellular con-
stituents.
643
526
2,757
3,289
3,352
3,335
2,925
3,226
3,502 3,369
3,667
3,478
Deferred taxes
Other provisions
2,167
2,467
2,628
2,234
2,894
3,420
3,381
3,317
2,731
Financial indebtedness
8,290
2,093
12,444
6,293
6,313
18,722
156 1,195
1,132 1,253
18,609 22,657
3,203
19,446
314
1,246
25,385
3,188
23,708
(3,461) (3,400)
1,010
630
25,621 27,673
3,165 3,143
26,102 28,777
(5,482)
581
28,195
3,141
3,130
3,117
30,120 31,515
(3,521) (4,014)
629
761
31,545 32,568
34,826
8,209
(5,282)
34,756
Provisions for pensions and similar
obligations
1,712
2,255
2,778
3,189
5,421
3,727
7,313
919
Equity
Other liabilities
Noncurrent liabilities
2,540
2,802
3,229
Tax liabilities
860
1,003
1,140
1,038
870
968
2,844
1,079
1,288
1,119
Financial indebtedness
6,224
2,375
3,369
3,985
4,094
3,256
3,545 4,074
1,082
917
4,971
4,020
15,843
11,670 9,019
898
901 1,142
20,979 21,168 19,313
8,704 11,151 11,839
1,111 1,194 1,197
20,395 22,192 27,271
11,123
869
25,055
12,545
15,535
873
1,095
28,611
29,132
4,610
Accounts payable, trade
2,786
4,738
4,502
Provisions
3,043
3,276
3,324
5,121
3,210 2,628 2,670
5,153
4,861
2,734
540
1,151
(96)
46,270 50,550
47,623
Inventories
6,763
6,776
Accounts receivable, trade
7,752
7,738
8,688
10,167
10,059
10,886
1,332
9,581 10,160 11,266
9,506 10,233 10,385
10,303
9,516
10,952
11,190
Other receivables and miscellaneous
current assets
3,948
3,223
Marketable securities
35
9,693 10,005
Cash and cash equivalents
1,210
1,498
605
606
Deferred taxes
930
1,042
1,112
941
1,473
1,006
2,193
1,720
1,791
2,118
Other receivables and miscellaneous
noncurrent assets
642
946
Noncurrent assets
29,586
31,681
653
34,532
561
911
877
34,087 35,259 38,253 43,939
2,513
Minority interests
2,776
Assets of disposal groups
62,726
64,204 71,359 70,836 76,496
78,768
Subscribed capital
1,176
1,176
1,176
1,176
1,176
1,176
61,175
1,176
1,176
1,176
Capital surplus
3,241
3,229
3,216
Retained earnings
13,250
12,916 15,817
Other comprehensive income
1,176
15
1,835
50,860 51,268 59,393
31,145
3,883
16
1,493
614
3,781
19
3,455
14
3,714
17
Current assets
21,274 19,587
24,861
2,048
295
27,088
1,647
1,827
Total assets
4,032
19
1,718
3,078
3,105
21
2,241
536
1,375
52
6,495
3,264
27,467
25,951
27,420
24,566 25,946
3,095
D
Dodd-Frank Act
The Dodd-Frank Act issued in 2010 comprises accounting and
disclosure obligations for publicly listed U.S. companies regarding
the use of certain raw materials that come from the Democratic
Republic of the Congo or its bordering countries. The companies
must prove that the materials they use do not come from mines in
these conflict areas. The definition of conflict minerals as per the
Dodd-Frank Act includes the following materials and their deriva-
tives: Columbitetantalite (coltan), cassiterite, wolframite and gold.
(42)
25
99
82
82
6
Ten-year summary
247
Trademarks
249
Thereof equity-accounted companies
Glossary
To Our Shareholders
Management's Report
Corporate Governance
Consolidated Financial Statements
159
Supplementary Information on the Oil & Gas Segment
235
Overviews
Übersichten
៩៩៨ ហ
250
125
82
1,147
59
625
212
347
116
1,359
351
17
207
348
4,470
183
926
182
(9)
(9)
Standardized measure of discounted future net
cash flows as of December 31
68
1,020
2,131
104
171
Other
BASF Report 2017
Overviews 247
3,677
7,761
8,586
6,742
7,160
7,626
6,248
6,275
8,522
Income before taxes
6,463
5,976
7,373
8,970
5,977 6,600
7,203
5,548
5,395
7,800
Income before minority interests
3,305
1,655
3,079
Ten-year summary
Income from operations (EBIT)
57,550
Ten-year summary
Million €
2008
2009
2010
2011
20121
2013²
2014
2015
64,475
2016
Sales and earnings
Sales
62,304
50,693
63,873
73,497
72,129
73,973
74,326
70,449
2017
5,074
Accretion of discount
Purchase/sale of reserves
Standardized measure of discounted future net
cash flows as of December 31
170
1,808
Thereof equity-accounted companies
(27)
2,260
26
176
1,024
5,438
(1)
134
134
134
Summary of changes in standardized measure of discounted future net cash flows 2016 (million €)
Consolidated companies and equity-accounted
companies
Germany
Rest of
Europe
North Africa,
Russia
As of January 1
209
135
1,405
(1)
131
(41)
286
(278)
(27)
(187)
(247)
(44)
Purchase/sale of reserves
Net change in income taxes
(61)
Other
(1,779)
(227)
41
(2,171)
(163)
Accretion of discount
115
239
135
140
629
(145)
Net change in income taxes
3,025
South
America
30
283
68
(175)
78
284
(172)
Investments in the period
67
702
Revisions of previous reserves estimates
87
1,000
79
Changes in estimated investments in future periods
2
(39)
63
24
(182)
(132)
(27)
144
Middle East
304
improved recovery, less related costs
(572)
Total
Group
Thereof
at equity
1,351
6,294
346
Sales of oil and gas produced, net of production
costs in the current period
(130)
(747)
(380)
Net changes from extensions, discoveries and
(97)
(1,634)
(105)
Net changes in prices and production costs at
balance sheet date
(186)
(1,416)
(1,292)
(482)
(242)
(3,618)
(280)
6,603
5,067
5,113
5.22
5.61
4.34
4.42
6.62
Adjusted earnings per share³
€
3.85
3.01
5.73
5.25
6.26
5.31
5.44
5.00
4.83
6.44
Cash provided by operating
activities4
5,023
5,693
6,460
5.64
7,105
6.74
1.54
8,576
8,963
9,285
9,224
9,982 10,165
10,610
Research and development
expenses
1,355
1,398
4.96
1,492
1,732
1,849
1,884
1,953
1,863
1,888
Key data
Earnings per share³
€
3.13
1,605
8,228
6,602
6,958
10.8
Return on equity after tax
%
17.0
The EBITDA margin is the margin that we earn on sales from our
operating activities before depreciation and amortization. It is calcu-
lated as income from operations before depreciation, amortization
and valuation allowances as a percentage of sales.
EBITDA margin
Earnings before interest, taxes, depreciation and amortization
(EBITDA): At BASF, EBITDA corresponds to income from operations
before depreciation and amortization (impairments and reversals of
impairments).
EBITDA
EBIT after cost of capital is calculated by deducting the cost of
capital from the EBIT of the operating divisions. The cost of capital
thereby reflects the shareholders' expectations regarding return (in
the form of dividends or share price increases) and interest payable
to creditors. If the EBIT after cost of capital has a positive value, we
have earned a premium on our cost of capital.
EBIT after cost of capital
8.2
Earnings before interest and taxes (EBIT): At BASF, EBIT corre-
sponds to income from operations.
E
The commercial paper program is a framework agreement between
BASF and banks regarding the issuing of debt obligations on the
financial market (commercial paper). The commercial paper is
issued under a rolling program for which the terms can be deter-
mined individually. This requires a good rating.
Commercial paper program
CO2 equivalents are units for measuring the impact of greenhouse
gas emissions on the greenhouse effect. A factor known as the
global warming potential (GWP) shows the impact of the individual
gases compared with CO2 as the reference value.
CO₂ equivalents
The international nonprofit organization CDP (formerly the Carbon
Disclosure Project) analyzes environmental data of companies. The
CDP's indexes serve as assessment tools for investors.
CDP
C
BDO stands for 1,4-Butanediol and is a BASF intermediate. BDO
and its derivatives are used for producing plastics, solvents, elec-
tronic chemicals and elastic fibers.
BDO
EBIT
8,100
8.7
11.5
9,446
7,717
8,785
EBITDA margin
%
15.3
14.6
17.4
16.3
13.9
11.7
14.1
15.1
18.3
19.7
Return on assets
%
13.5
7.5
14.7
16.1
11.0
14.9
7,107
6,364
Personnel expenses
EBIT before special items
6,856
4,852
8,138
8,447
6,647
7,077
7,357 6,739 6,309
8,328
EBIT after cost of capital
12,724
1,621
2,551
1,164
1,768
1,368
194
1,136
2,727
Capital expenditures,
depreciation and amortization
Additions to property, plant and
(226) 3,500
equipment and intangible assets
10,649 10,526
10,432
5,492
4,301
4,255
6,352
Net income
2,912
1,410
4,557
6,188
4,819
11,043
4,792
3,987
4,056
6,078
Income from operations before
depreciation and amortization (EBITDA)
9,562
7,388
11,131
11,993
10,009
5,155
3,634
5,972
5,304
3,417
4,401
4,251
4,202
Thereof property, plant and
equipment
2,481
2,614
2,667
2,618
3,272
2,594
2,770
3,600
3,691
3,586
Number of employees
At year-end
Annual average
96,924 104,779 109,140
95,885 103,612 104,043
111,141 110,782 112,206
110,403 109,969 111,844
113,292 112,435 113,830 115,490
112,644 113,249 111,975 114,333
2,631
3,267
3,407
3,370
3,646
5,263
7,726
7,285
6,013
7,258
4,364
Thereof property, plant and
equipment
2,809
Fully consolidated companies
3,294
3,199
4,084
6,428
6,369
5,742
4,377
4,028
Depreciation and amortization of property,
plant and equipment and intangible assets
3,099
3,711
7
Capitalized exploration drilling (million €)
2,497
212
30
82
740
81
Total expenditures
963
194
1
73
629
66
Development expenditures
184
29
9
111
15
Exploration and technology expenditures
For unproven reserves
8
8
8
8
222
1,155
Total expenditures at equity-accounted companies
87
Equipment and miscellaneous
879
10,322
1,757
412
132
301
34
Unproven oil and gas reserves
Group
Total
South
America
Total
Group
North Africa,
Middle East
140
5,866
Russia
Rest of
Europe
Germany
1,029
Proven oil and gas reserves
Fully consolidated companies
2017 (million €)
Capitalized costs represent total expenditures on proven and unproven oil and gas deposits including the related accumulated
depreciation and amortization.
Capitalized costs relating to oil and gas producing activities
106
19
1,530
888
South
America
Russia
Russia
North Africa,
Rest of
Europe
Germany
For proven reserves
Acquisition expenditures
Fully consolidated companies
2016 (million €)
Total expenditures at equity-accounted companies
Total expenditures
Development expenditures
Exploration and technology expenditures
For unproven reserves
For proven reserves
Acquisition expenditures
Fully consolidated companies
2017 (million €)
Period expenditures include all amounts incurred in connection with the acquisition, exploration or development of oil and gas
deposits, regardless of whether these were capitalized or expensed.
Period expenditures for acquisition, exploration and development of oil and gas deposits
Supplementary Information on the Oil & Gas Segment 241
BASF Report 2017
The following table provides an overview of the capitalization
period, amounts capitalized for exploration drilling, and the
number of suspended exploration wells.
3,767
Middle East
South
America
Total
Group
Rest of
Europe
Germany
34
(5)
18
21
1,045
165
36
87
694
North Africa,
Middle East
63
134
3
75
645
57
131
31
33
12
49
6
914
6
20
Total gross assets
Capitalized exploration drilling:
Suspended well costs
BASF Report 2017
242 Supplementary Information on the Oil & Gas Segment
1,518
93
1,197
228
Investments in equity-accounted companies
6,984
986
73
Exploratory drilling costs are capitalized until the drilling of the
well is complete. If hydrocarbon resources are found whose
commercial development is possible, the costs continue to be
capitalized as construction in progress, subject to further
appraisal activity that may include the drilling of further wells.
Management evaluates all such capitalized costs at least once
a year from both a technical and economic perspective to
confirm the continued intent to develop or otherwise extract
value from the discovery. If this is no longer the case, the
relevant costs are written off. If proven reserves of oil or natural
gas are determined and development is sanctioned, however,
the relevant expenses are transferred within property, plant
and equipment to machinery and technical equipment. Impair-
ments for unsuccessful exploration wells are recognized in
exploration expenses.
1,213
546
Total net assets
(5,381)
(1,044)
(209)
(364)
(2,429)
(1,335)
Accumulated depreciation, amortization and impairments
12,365
2,030
4,166
282
The following table indicates the changes in capitalized
exploration drilling.
Capitalized exploration drilling (million €)
164
December 31
Equity-accounted companies as of
411
303
As of December 31
9
(31)
Translation effect
(75)
894
The last row shows the year-end value for equity-
accounted companies.
Reclassification of successful exploration drilling
(34)
Capitalized exploration drilling charged to expense
103
32
Additions to exploration drilling of the year
423
411
As of January 1
2016
2017
Fully consolidated companies
(49)
1,577
(75)
1,881
97
1,130
307
Investments in equity-accounted companies
6,393
976
77
1,139
3,686
515
Total net assets
1,534
(5,702)
(195)
(391)
(2,487)
(1,436)
Accumulated depreciation, amortization and impairments
2,169
272
1,530
6,173
6,595
1,951
(1,193)
2016 (million €)
12,095
Proven oil and gas reserves
905
Fully consolidated companies
Total gross assets
47
Equipment and miscellaneous
993
297
126
525
45
Unproven oil and gas reserves
858
1,733
10,467
Russia
North Africa,
Middle East
South
America
Total
Rest of
Europe
Group
6,023
1,577
Germany
978
156
You can also order the reports:
OUR COMMITMENT TO SUSTAINABILITY
BASF supports the chemical industry's
global Responsible Care initiative.
Further information
Published on February 27, 2018
You can find this and other BASF publications
online at basf.com
May 3, 2019
Responsible Care®
Phone: +49 621 60-0, email: global.info@basf.com
- Online: basf.com/publications
Contact
General inquiries
Media Relations
Jens Fey, phone: +49 621 60-99123
Sustainability Relations
Quarterly Statement, 1st Quarter 2019 / Annual Shareholders' Meeting 2019
Thorsten Pinkepank, phone: +49 621 60-41976
Investor Relations
Dr. Stefanie Wettberg, phone: +49 621 60-48002
- By phone: +49 621 60-99001
February 26, 2019
Board of Executive Directors
October 26, 2018
FSC® C011291
Internet
This report is printed on
FSC® certified real art paper.
Publisher:
BASF SE
Communications & Government Relations
67056 Ludwigshafen
Printing: Kunst- und Werbedruck, Bad Oeynhausen
Photography:
Cover and page 1:
and Supervisory Board:
Detlef Schmalow
Andreas Pohlmann
Quarterly Statement, 1st Quarter 2018 / Annual Shareholders' Meeting 2018
May 4, 2018
Half-Year Financial Report 2018
July 27, 2018
Quarterly Statement, 3rd Quarter 2018
BASF Report 2018
basf.com
Global Product Strategy (GPS)
ISSN 1866-9387
Global Reporting Initiative (GRI)
The Global Reporting Initiative is a multistakeholder organization. It
was established in 1997 with the aim of developing a guideline for
companies' and organizations' voluntary reporting on their eco-
nomic, environmental and social activities. The GRI Guidelines
became global GRI Standards in 2016.
Greenhouse Gas Protocol (GHG Protocol)
The Greenhouse Gas Protocol, used by many companies in different
sectors as well as nongovernmental organizations and govern-
ments, is a globally recognized standard to quantify and manage
greenhouse gas emissions. The reporting standards and recom-
mendations for implementing projects to reduce emissions are
jointly developed by companies, nongovernmental organizations
and governments under the guidance of the World Resources Insti-
tute and the World Business Council for Sustainable Development.
H
Health Performance Index (HPI)
The Health Performance Index is an indicator developed by BASF to
provide more detailed insight into our approach to health manage-
ment. It comprises five components: confirmed occupational
diseases, medical emergency drills, first aid, preventive medicine
and health promotion.
Field development
The Global Product Strategy aims to establish global product
stewardship standards and practices for companies. The program,
initiated by the International Council of Chemical Associations,
strives to ensure the safe handling of chemicals by reducing existing
differences in risk assessment.
Field development is the term for the installation of production
facilities and the drilling of production wells for the commercial
exploitation of oil and natural gas deposits.
Formulation describes the combination of one or more active
substances with excipients like emulsifiers, stabilizers and other
inactive components in order to improve the applicability and effec-
tiveness of various products, such as cosmetics, pharmaceuticals,
agricultural chemicals, paints and coatings.
I
IAS
IAS stands for International Accounting Standards (see also IFRS).
The International Financial Reporting Standards (until 2001: Interna-
tional Accounting Standards, IAS) are developed and published by
the International Accounting Standards Board, headquartered in
London, England. The "IAS Regulation" made the application of
IFRSS mandatory for listed companies headquartered in the Euro-
pean Union starting in 2005.
252
Overviews
Glossary
Papier aus verantwor-
tungsvollen Quellen
Formulation
In the United Nations Global Compact network, nongovernmental
organizations, companies, international business and employee
representatives, scientists and politicians work on aligning global
business with the principles of sustainable development.
Global Compact
G
Q-BASF
We create chemistry
Report 2017
Overviews 251
Glossary
Eco-Efficiency Analysis
The Eco-Efficiency Analysis is a method developed by BASF for
assessing the economic and environmental aspects of products and
processes. The aim is to compare products with regard to profit-
ability and environmental compatibility.
Enhanced Oil Recovery (EOR)
Enhanced oil recovery (EOR) methods, also called tertiary recovery
or tertiary production methods, are used to increase the recovery
factor from oil reservoirs. Different technologies are employed
depending on reservoir conditions; a distinction is generally made
between thermal and chemical EOR and miscible gas flooding,
which makes use of gases such as carbon dioxide.
Emerging markets
We define the emerging markets as Greater China, the ASEAN
countries (Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos,
the Philippines, Singapore, Thailand, Vietnam), India, Pakistan and
Bangladesh; Central and South America; eastern Europe; the
Middle East, Turkey and Africa.
Equity method
The equity method is used to account for shareholdings in joint
ventures and associated companies. Based on the acquisition costs
of the shareholding as of the acquisition date, the carrying amount is
continuously adjusted to the changes in equity of the company in
which the share is held.
European Water Stewardship (EWS) Standard
The European Water Stewardship (EWS) Standard enables busi-
nesses and agriculture to assess the sustainability of their water
management practices. The criteria are water abstraction volumes,
water quality, conservation of biodiversity and water governance.
The Europe-wide standard came into force at the end of 2011 and
was developed by nongovernmental organizations, governments
and businesses under the direction of the independent organization
European Water Partnership (EWP).
Exploration
Exploration refers to the search for mineral resources, such as crude
oil or natural gas, in the Earth's crust. The exploration process
involves using suitable geophysical methods to find structures that
may contain oil and gas, then proving a possible discovery by means
of exploratory drilling.
F
Free cash flow
Free cash flow is cash provided by operating activities less pay-
ments made for property, plant and equipment and intangible
assets.
COMC 1802 E
MIX
IFRS
FSC
Materiality analysis/material aspects
BASF uses the materiality analysis to determine the significance of
sustainability topics based on internal analyses and the expectations
of external stakeholders.
MDI
MDI stands for diphenylmethane diisocyanate and is one of the
most important raw materials for the production of polyurethane.
This plastic is used for applications ranging from the soles of high-
tech running shoes and shock absorbers for vehicle engines to insu-
lation for refrigerators and buildings.
Million British thermal unit (mmBtu)
The British thermal unit (Btu) is a unit of energy observed in the
Anglo-American measuring system. It is used for indicating values
such as the energy content of gas. One mmBtu (million British
thermal units) is equal to approximately 1,003 cubic feet of gas or 28
cubic meters of gas.
Monitoring system
Monitoring systems and tools serve to measure and ensure the
adherence to standards. One area that is monitored is our voluntary
commitments, such as the adherence to human rights and interna-
tionally recognized labor standards.
MSCI World Chemicals Index
The MSCI World Chemicals Index is a stock index that includes the
world's biggest chemical companies. It measures the performance of
the companies in the index in their respective national currencies,
thus considerably reducing currency effects.
N
Nanomaterials
The International Organization for Standardization defines nano-
materials as materials with one or more external dimensions on a
nanoscale or with internal structure or surface structure on a
nanoscale. For regulatory purposes, there are additional definitions
for nanomaterials worldwide
Naphtha
Naphtha is petroleum that is produced during oil refining. Heavy
naphtha is the starting point for gasoline production. Light naphtha
is the most important feedstock for steam crackers.
BASF Report 2017
Overviews 253
Glossary
NMVOC (Nonmethane Volatile Organic Compounds)
VOCS (volatile organic compounds) are organic substances that are
present in the air as gas at low temperatures. These include some
hydrocarbons, alcohols, aldehydes and organic acids. NMVOCs are
VOCs from which methane is excluded.
M
OHSAS 18001
Long-term incentive program (LTI)
A joint venture is a joint arrangement in which the parties that have
joint control of a legally independent entity have rights to the net
assets of that arrangement. Joint ventures are accounted for using
the equity method in the BASF Group Consolidated Financial State-
ments.
www.fsc.org
BASF Report 2017
BASF Report 2017
ILO Core Labor Standards
The ILO Core Labor Standards are set out in a declaration of the
International Labor Organization (ILO), comprising eight conventions
that set minimum requirements for decent working conditions.
ISO 9001
ISO 9001 is an international standard developed by the International
Organization for Standardization (ISO) that determines minimum
requirements for a quality management system for voluntary certifi-
cation.
ISO 14001
ISO 14001 is an international standard developed by the Interna-
tional Organization for Standardization (ISO) that determines the
general requirements for an environmental management system for
voluntary certification.
ISO 19011
ISO 19011 is an international standard developed by the International
Organization for Standardization (ISO) that determines requirements
for audits of quality management and environmental management
systems.
ISO 50001
ISO 50001 is an international standard developed by the International
Organization for Standardization (ISO) that determines the general
requirements for an energy management system for voluntary certi-
fication.
J
Joint Arrangement
A joint arrangement refers to joint ventures and joint operations, and
describes a jointly controlled arrangement of two or more parties.
This arrangement exists if decisions about relevant activities require
the unanimous consent of all parties sharing control.
Joint Operation
A joint operation is a joint arrangement in which the parties that
share control have direct rights to the assets and liabilities relating to
the arrangement. For joint operations, the proportional share of
assets, liabilities, income and expenses are reported in the BASF
Group Consolidated Financial Statements.
Joint Venture
L
The Occupational Health and Safety Assessment Series (OHSAS)
includes the standard OHSAS 18001, which contains a manage-
ment system for occupational safety. This system can be integrated
into an existing quality and environmental protection management
system and certified accordingly.
The long-term incentive program is a share price-based compensa-
tion program primarily for senior executives of the BASF Group and
members of the Board of Executive Directors. The program aims to
tie a portion of the participants' annual variable compensation to the
long-term, absolute and relative performance of BASF shares by
making an individual investment in the company's stock.
Peak sales potential
Sustainable Solution SteeringⓇ
We use Sustainable Solution SteeringⓇ to review and guide our port-
folio in terms of sustainability. The four categories - Accelerators,
Performers, Transitioners and Challenged - indicate how our products
and solutions already comply with sustainability requirements and
how we can increase their contribution.
T
TDI
TDI stands for toluene diisocyanate and is a raw material for the
production of polyurethane. It is used primarily in the automotive
industry (for example, in seat cushions and interiors) and the furni-
ture industry (for example, for flexible foams for mattresses or
cushioning, or in wood coating).
TUIS
TUIS is a German transport accident information and emergency
response system jointly operated by around 130 chemical compa-
nies. The member companies can be reached by the public author-
ities at any time and provide assistance over the telephone, expert
on-site advice or special technical equipment.
Overviews
Glossary
A steam cracker is a plant in which steam is used to "crack" naphtha
(petroleum) or natural gas. The resulting petrochemicals are the raw
materials used to produce most of BASF's products.
V
A value chain describes the successive steps in a production pro-
cess: from raw materials through various intermediate steps, such
as transportation and production, to the finished product.
Verbund
In the BASF Verbund (pronounced "fair-boond"), production facili-
ties, energy flow, logistics and infrastructure are intelligently net-
worked with each other in order to increase production yields, save
resources and energy, and reduce logistics costs. We also make
use of the Verbund principle for more than production, applying it for
technologies, knowledge, employees, customers, and partners, as
well.
W
Water stress areas
Water stress areas are areas in which water represents a scarce
resource, and where people abstract more than 60% of the water
available. The most important factors leading to water scarcity are:
low precipitation, high temperatures, low air humidity, unfavorable
soil properties and high water abstraction rates.
P
BASF Group 2017 at a glance ↑
BASF Report 2017
Value chain
Steam cracker
254
A spot market is a market where an agreed-upon deal, including
delivery, acceptance and payment, occurs immediately, as opposed
to forward contracts, where the delivery, acceptance and payment
occurs at a point in time after the conclusion of the deal.
Propylene oxide (PO)
Propylene oxide (PO), a very reactive compound, is generated by
the oxidation of propylene and is used as basic chemical for further
processing in the chemical industry.
The peak sales potential of the crop protection pipeline describes the
total peak sales generated for individual products in the research and
development pipeline. Peak sales are the highest sales value to be
expected from one year. The pipeline comprises innovative active
ingredients and system solutions that have been on the market since
2017 or will be launched on the market by 2027.
R
REACH
REACH is a European Union regulatory framework for the registra-
tion, evaluation and authorization of chemicals, and will be imple-
mented gradually until 2018. Companies are obligated to collect
data on the properties and uses of produced and imported
substances and to assess any risks. The European Chemicals
Agency reviews the submitted dossiers and, if applicable, requests
additional information.
Renewable resources
Responsible Care®
Responsible CareⓇ refers to a worldwide initiative by the chemical
industry to continuously improve its performance in the areas of
environmental protection, health and safety.
Retention
The term renewable resources refers to components from biomass
that originate from different sources (plants and microorganisms, for
example), and are used for industrial purposes. Renewable resources
are used for manufacturing numerous products.
Return on assets
Spot market (cash market)
Special items arise from the integration of acquired businesses,
restructuring measures, impairments, gains or losses resulting from
divestitures and sales of shareholdings, and other expenses and
income that arise outside of ordinary business activities.
Profits generated can be used in two ways: distribution to share-
holders or retention within the company.
S
Return on capital employed (ROCE) is a measure of the profitability
of our operations. We calculate this indicator as the EBIT generated
by the operating divisions as a percentage of the average cost of
capital basis. The average cost of capital basis corresponds to the
operating assets of the segments used to determine the cost of
capital plus the customer and supplier financing not included there
and is calculated using the month-end figures in each case.
Special items
Return on assets describes the return we make on the average
assets employed during the year and reflects this return indepen-
dent of the capital structure. It is calculated as income before taxes
and minority interests plus interest expenses as a percentage of
average assets.
ROCE
Integration of sustainability
Investments, acquisitions and divestitures
28
29
Customers
34
Innovation
35
40
51
42
The BASF Group business year
48
Economic environment
48
Results of operations
Financial position
Net assets
Value-based management
Working at BASF
Goals
2 Based on year-end share price
19
Business review by segment
13.9
1 Average, Xetra trading
2
To Our Shareholders
Management's Report
Corporate Governance
5
125
Consolidated Financial Statements
159
Supplementary Information on the Oil & Gas Segment
Overviews
235
245
Overview
The BASF Group
Our strategy
20
23
26
2222222
Corporate strategy
Chemicals
119
Functional Materials & Solutions
98
Product stewardship
101
Transportation and storage
103
Energy and climate protection
104
Water
Air and soil
Production
108
Forecast
111
Opportunities and risks report
111
Economic environment in 2018
20.0
Outlook 2018
122
Management's Report
110
97
Responsible Care Management System
97
Agricultural Solutions
Oil & Gas
Other
14NOSTDO
56
57
60
62
68
75
81
85
90
Regional results
91
Responsibility along the value chain
Suppliers
93
93
Raw materials
95
Environment, health, safety and security
Performance Products
16.3
billion €
14.8
56.70
79.64
€
71.96
77.93
79.28
70.96
88.16
million €
65.74
200.8
264.5
201.9
185.7
million shares
2.8
2.9
3.3
2.9
2.1
224.5
65.61
64.79
97.46
Year high
Year low
Year average
Daily trade in shares¹
2013
2014
2015
2016
2017
Ψ Ψ Ψ Ψ
€
77.49
69.88
70.72
88.31
91.74
€
78.97
87.36
96.72
88.31
Number of shares December 31
million shares
918.5
918.5
€
2.70
2.80
2.90
3.00
3.10
Dividend yield²
%
3.48
4.01
4.10
3.40
3.38
Payout ratio
%
52
50
67
68
47
Price-earnings ratio (P/E ratio)²
Dividend per share
12.5
6.44
5.00
918.5
918.5
918.5
Market capitalization December 31
BASF Report 2017
71.2
64.2
65.0
81.1
84.3
Earnings per share
€
5.22
5.61
4.34
4.42
6.62
Adjusted earnings per share
€
5.31
5.44
4.83
Overview
11.1%
Overview
Lommel
Antwerp
Bruges
Depart
Turnhout
Terneu
Eindhove
Lowing
110
Ghent
Roose
s-Hertogenbosch
Goedereede
Germany. BASF researchers
can perform complex
simulations and modeling
operations in no time thanks
to the new supercomputer's
1.75 petaflops of computing
power.
Dr. Martin Brudermüller at
the supercomputer at the
Ludwigshafen site in
Dr. Martin Brudermüller
Vice Chairman of the
Board of Executive
Directors
106 G8
550
SATA
80602
310381
SATA
Breda
Bre
Vistien
Dussel
Couvin
Caudry
Marche m
Canno
Doua Valenciennes
Charleroi BELGIUM
Dr. Hans-Ulrich Engel at Supply Chain Operations and Information
Services in Ludwigshafen, Germany. A new web-based tracking
system increases supply chain transparency and enables customers
to track their deliveries in real time.
Chief Financial Officer
Dr. Hans-Ulrich Engel
Seraing
Suma Rebec
wave
asion
Maastrich
Liége
trijk
Brussels
Aalst
Cologne
Diest
Leve
Monchengladbach
SSO
Saint
Quentin
905347
SATA
Catalysts
3
Functional Materials & Solutions
- Construction Chemicals
Coatings
32%
- Performance Materials
4
Agricultural Solutions
5
-
Oil & Gas
Other
Crop Protection
9%
3
Oil & Gas
5%
2
4%
Year-end price
6
Performance Chemicals
- Nutrition & Health
25%
$50
The Board of Executive Directors of BASF SE
To Our Shareholders
BASF Report 2017
For more information on the products and services offered by
the segments, see page 34
BASF structure
Percentage of total sales in 2017
- Petrochemicals
1
Chemicals
- Monomers
- Intermediates
25%
4
5
6
-
Dispersions & Pigments
- Care Chemicals
2
Performance Products
90808
Management's Report 19
Fayuniny
Mary
Broad portfolio
5 segments
13 operating divisions
86 strategic business units
At BASF, we create chemistry for a sustainable future. We
combine economic success with environmental protec-
tion and social responsibility. The approximately 115,000
employees in the BASF Group work on contributing to the
success of our customers in nearly all sectors and almost
every country in the world. Our portfolio is arranged
into five segments: Chemicals, Performance Products,
Functional Materials & Solutions, Agricultural Solutions
and Oil & Gas.
Organization of the BASF Group
Thirteen divisions grouped into five segments
■ Regional divisions, functional units and corporate and
research units support our business
Our 13 divisions are aggregated into five segments based on
their business models. The divisions bear operational respon-
sibility and are organized according to sectors or products.
They manage our 55 global and regional business units and
develop strategies for the 86 strategic business units.
Our regional units are responsible for optimizing local infra-
structure, and contribute to tapping our market potential. For
financial reporting purposes, we organize the regional divisions
into four regions: Europe; North America; Asia Pacific; South
America, Africa, Middle East.
Employees contribute to our
success and that of our
customers worldwide
Eight functional units and seven corporate units support
the BASF Group's business activities. The functional and cor-
porate units provide services in areas such as finance, investor
relations, communications, human resources, engineering and
site management, as well as environmental protection, health
and safety. Our research and development organization has
around 10,000 employees in global research units and safe-
guards our innovative capacity and competitiveness.
0.8%
4.8%
10.3%
2007-2017
12.2%
8.8%
8.9%
2012-2017
Long-term performance of BASF shares compared with indexes
(Average annual increase with dividends reinvested)
Business processes are the shared responsibility of the
divisions and the functional units. They closely coordinate the
procurement of raw materials and services, production and
transport to customers.
In 80+ countries
Intelligent networking of
production, technologies,
employees and partners
Verbund concept
The Management's Report comprises the chapter of the
same name on pages 17 to 124, as well as the disclo-
sures required by takeover law, the Compensation Report
and the Declaration of Corporate Governance, which
are presented in the Corporate Governance chapter.
The nonfinancial statement (NFS) is integrated into the
Management's Report.
Nonfinancial statement (NFS) in accordance
with sections 315b and 315c of the German
Commercial Code (HGB)
The NFS disclosures can be found in the relevant sections of
the Management's Report. A table in the section "Integration
of sustainability" on page 33 indicates where the individual
disclosures can be found. In addition to a description of the
business model, the NFS includes disclosures on the following
matters, to the extent that they are required to understand the
development and performance of the business, the Group's
position and the impact of business development on the
following matters:
- Environmental matters
- Employee-related matters
- Social matters
- Respect for human rights
- Anti-corruption and bribery matters
Within the scope of the audit of the annual financial state-
ments, the external auditor KPMG checked pursuant to sec-
tion 317(2) sentence 4 HGB that the NFS was presented in
accordance with the statutory requirements. The Supervisory
Board also engaged KPMG with a substantive audit with limited
assurance of the NFS. An assurance report on this substantive
audit can be found online at basf.com/nfs-audit and is part
of the BASF Report 2017. The audit was conducted in accor-
dance with ISAE 3000 (Assurance Engagements other than
Audits or Reviews of Historical Financial Information) and
ISAE 3410 (Assurance Engagements on Greenhouse Gas
Statements), the relevant international auditing standards for
sustainability reporting.
Compensation Report and disclosures
in accordance with section 315a HGB
The Compensation Report can be found in the Corporate
Governance chapter from page 140 onward, and the disclo-
sures required by takeover law in accordance with section
315a(1) HGB from page 132 onward. They form part of the
Management's Report audited by the external auditor.
Declaration of Corporate Governance
in accordance with section 315d HGB
in connection with section 289f HGB
The Declaration of Corporate Governance can be found in the
Corporate Governance chapter from page 125 onward and is a
component of the Management's Report. It comprises:
- The Corporate Governance Report including the description
of the diversity concept for the composition of the Board of
Executive Directors and the Supervisory Board (excluding
the disclosures required by takeover law in accordance with
section 315a(1) HGB)
- Compliance reporting
- The Declaration of Conformity pursuant to section 161 of the
German Stock Corporation Act
Pursuant to section 317(2) sentence 6 HGB, the external audi-
tor checked that the disclosures according to section 315d
HGB were made.
20 Management's Report
The BASF Group
The BASF Group
BASF Report 2017
The BASF share reached a new high of €97.46 over the
course of 2017. Viewed over a 10-year period, the long-term
performance of BASF shares still clearly surpasses the
German, European and global benchmark indexes. The
assets of an investor who invested €1,000 in BASF shares at
Charlevite
Mizietes
The BASF share closed the 2017 stock market year with a
closing price of €91.74. This equates to a 3.9% rise in the
value of BASF shares compared with the previous year's
closing price, which also marked the high for 2016. Assuming
that dividends were reinvested, BASF shares gained 7.4% in
value in 2017. The benchmark indexes of the German and
European stock markets - the DAX 30 and the EURO STOXX
50 rose by 12.5% and 9.2% over the same period, respec-
tively. The global industry index MSCI World Chemicals gained
23.6%.
■
D-BASF
digital platform.
-
findings - for example on solutions to prevent scale on
glasses will also be available to customers via a
Dr. Markus Kamieth at the Automatic Dish Wash
Laboratory. In the future, fast answers and research
Dr. Markus Kamieth
BASF Report 2017
D-BASE
Sanjeev Gandhi during a visit to the BASF Innovation Campus in Shanghai,
China. Here, BASF employees work hand-in-hand with customers on solutions
for a sustainable future, such as polyurethanes that help make refrigerators more
energy efficient.
Michael Heinz
Sanjeev Gandhi
The Board of Executive Directors of BASF SE
The Board of Executive Directors of BASF SE
To Our Shareholders
12
1-0
11
Sandrucker
Bad know
LUXEMBOURG
D-BASF
Michael Heinz in the control center for automated
guided vehicles (AGV) in Ludwigshafen, Germany,
where the AGVs that transport tank containers at the
site are monitored.
Q-BASE
BASF
BASF share gains 3.9% in 2017
the end of 2007 and reinvested the dividends in additional
BASF shares would have increased to €2,676 by the end of
2017. This represents an annual yield of 10.3%, placing
BASF shares above the returns for the DAX 30 (4.8%), EURO
STOXX 50 (0.8%) and MSCI World Chemicals (6.8%)
indexes.
BASF share performance
The BASF share price rose by 3.9% in 2017, trading
at €91.74 at the year-end. We stand by our ambitious
dividend policy and will propose a dividend of €3.10 per
share at the Annual Shareholders' Meeting - an increase
of 3.3% compared with the previous year. BASF enjoys
solid financing and good credit ratings.
BASF once again recognized
in sustainability indexes
CDP, MSCI ESG
BASF Report 2017
Proposed dividend
per share
BASF share closing price
up by 3.9% year-on-year
€3.10
€91.74
BASF on the capital market
BASF on the capital market
To Our Shareholders
14
Wayne T. Smith at the Battery Materials Pilot Plant
in Beachwood, Ohio. Here, BASF scientists develop
innovative cathode materials for lithium-ion batteries,
which are used in electromobility applications.
Wayne T. Smith
13
00
To Our Shareholders
The Board of Executive Directors of BASF SE
create chemistry
Long-term performance continues to clearly exceed
benchmark indexes
Key BASF share data
BASF Report 2017
BFA
Oct
Nov
Dec
BASF share 7.4%
DAX 30 12.5%
EURO STOXX 50 9.2%
MSCI World Chemicals 23.6%
BASF Report 2017
To Our Shareholders
BASF on the capital market
15
Proposed dividend of €3.10 per share
At the Annual Shareholders' Meeting, the Board of Executive
Directors and the Supervisory Board will propose a dividend
payment of €3.10 per share. We stand by our ambitious
dividend policy and plan to pay out €2.8 billion to our share-
holders.
Sep
Based on the year-end share price for 2017, BASF shares
offer a high dividend yield of around 3.4%. BASF is part of the
DivDAX share index, which contains the 15 companies with
the highest dividend yield in the DAX 30. We aim to increase
our dividend each year, or at least maintain it at the previous
year's level.
3.10
2.80
2.70
2.90
3.00
2.60
2.50
2.20
1.95
1.70
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Broad base of international shareholders
With over 500,000 shareholders, BASF is one of the largest
publicly owned companies with a high free float. An analysis of
the shareholder structure carried out at the end of 2017
showed that, at around 20% of share capital, the United
States and Canada made up the largest regional group of
institutional investors. Institutional investors from Germany
accounted for around 11%. Shareholders from the United
Kingdom and Ireland hold 12% of BASF shares, while
investors from the rest of Europe hold a further 17% of capital.
Approximately 29% of the company's share capital is held by
private investors, nearly all of whom reside in Germany. BASF
is therefore one of the DAX 30 companies with the largest
percentage of private shareholders.
Dividend per share (€ per share)
Aug
Jun
May
BAS
6.8%
BASF share
DAX 30
EURO STOXX 50
MSCI World Chemicals
Weighting of BASF shares in important indexes
as of December 31, 2017
DAX 30
EURO STOXX 50
MSCI World Chemicals
8.1%
3.5%
8.6%
Change in value of an investment in BASF shares in 2017
(With dividends reinvested; indexed)
130
120
110
100
130
120
110
100
90
00
90
Jan
Feb
Mar
Apr
Shareholder structure (by region, rounded)
1
Jul
2
Around 30 financial analysts regularly publish studies on
BASF. The latest analyst recommendations for our shares as
well as the average target share price ascribed to BASF by
analysts can be found online at basf.com/analystestimates.
16
To Our Shareholders
BASF on the capital market
BASF Report 2017
Close dialog with the capital market
■
Roadshows for institutional investors and talks with
rating agencies
BASF R&D Roundtable
Informational events for private investors
Our corporate strategy aims to create long-term value. We
support this strategy through regular and open communica-
tion with all capital market participants. We engage with insti-
tutional investors and rating agencies in numerous one-on-one
meetings, as well as at roadshows and conferences world-
wide, and give private investors an insight into BASF at infor-
mational events. In 2017, around 2,000 private investors took
the opportunity to attend such events.
In 2017, we once again held special events aimed toward
investors who base their investment decisions on sustainability
criteria. There, we outlined in particular our measures for
climate protection, energy efficiency, health and safety. In
addition, we offered several creditor relations roadshows,
where credit analysts and creditors could learn more about our
business and financing strategy.
For more information on our credit ratings, see the Financial Position
on page 58
Analysts and investors have confirmed the quality of our
financial market communications: We took first place in the
"Best IR" category of the Materials sector in the annual survey
conducted by Britain's IR Magazine. In addition, Institutional
Investor Magazine recognized BASF for the best investor
relations program in the Chemicals market segment. The IR
Society awarded BASF first place in the "Best use of digital
communications - international" category of the Best Practice
Awards 2017.
For more information about BASF stock, see basf.com/share
Register for the newsletter with current topics and dates at
basf.com/share/newsletter
Contact the Investor Relations team by phone at +49 621 60-48230 or
email ir@basf.com
Further information on BASF share
Securities code numbers
Germany
United Kingdom
Switzerland
United States (CUSIP number)
ISIN International Securities Identification Number
International ticker symbols
Deutsche Börse
London Stock Exchange
Swiss Exchange
BASF11
0083142
11450563
055262505
DE000BASF111
BAS
Germany
Analysts' recommendations
For more information on water, see page 108 onward
At the end of June 2017, we discussed the opportunities
and potential of digitalization along our value chains with
analysts and investors at an R&D Roundtable held in Ludwigs-
hafen, Germany. We presented digital methods, various tools
and the wide range of applications in research at BASF.
The growing use of digital technologies secures our leading
position in chemistry-based innovations.
For more information on energy and climate protection,
see page 104 onward
United States and Canada
3
4
Rest of Europe
Rest of world
56
United Kingdom and Ireland
Not identified
5
40%
20% 4
12%
17%
5%
6
■
3
C
1
Employees becoming shareholders
In many countries, we offer share purchase programs that turn
our employees into BASF shareholders. In 2017, for example,
23,700 employees (2016: approximately 24,000) purchased
employee shares worth €63 million (2016: €59 million).
For more information on employee share purchase programs,
see page 46
BASF a sustainable investment
■
CDP again awards BASF leadership status and
honors company's sustainable water management
BASF continues to be included in MSCI ESG Ratings
with score of AA
Since 2004, BASF has participated in the CDP's program for
reporting on data relevant to climate protection. The interna-
tional organization CDP represents more than 800 institutional
investors who manage over $100 trillion in assets. BASF again
achieved a score of A- in 2017, awarding it “Leadership"
status. Companies on this level are distinguished by factors
such as the completeness and transparency of their reporting.
They also have approaches in place for managing the oppor-
tunities and risks associated with climate change as well as
corporate strategies to reduce emissions. BASF has also
reported on water management to CDP since 2010 and was
again included in the CDP Water A List in 2017. This assess-
ment includes how transparently companies report on water
management activities, the degree to which risks are reduced
and the extent to which product developments contribute to
sustainable water management at customers. Efficient water
use and the development of sustainable local solutions are
important elements of BASF's water stewardship strategy.
BASF continued to be included in the MSCI ESG Ratings
in 2017 with a score of AA. MSCI made special mention of
BASF's leading environmental protection programs. The
analysts recognized that BASF has made further progress in
reducing greenhouse gas emissions and has one of the lowest
emissions intensities in the chemical industry.
6%
For more information on the key sustainability indexes,
see basf.com/sustainability indexes
In the years ahead, we want to continue to grow in the emerging
markets and expand our position there. We define the emerg-
ing markets as Greater China, the ASEAN countries, India,
Pakistan and Bangladesh; Central and South America;
eastern Europe; the Middle East, Turkey and Africa. Today's
emerging markets are expected to account for around 65% of
global chemical production in 2025. We aim to benefit from
the above-average growth in these regions, which is why we
have invested more than a quarter of our capital expenditures²
(excluding Oil & Gas) there in the past five years.
Growth in the emerging markets gathered pace slightly in
2017. This was attributable on the one hand to more positive
developments in eastern Europe. The eastern European E.U.
countries recorded dynamic growth and the Russian economy
again improved slightly after two years of recession. In Brazil,
too, the economic situation improved markedly over the
course of the year. In China and the other Asian emerging
markets, growth was slightly higher than in 2016, while India
recorded a slight decline. Overall, economic growth in the re-
gion was roughly as strong as in the previous year. Growth in
the Middle East slowed slightly, but increased somewhat in
Africa.
For more information on labor and social standards, see page 47
For more information on the Responsible Care Management System,
see page 97
Compared with 2016, sales (excluding Oil & Gas) at our
companies located in the emerging markets rose by 13% to
€16,853 million, largely as a result of significantly higher sales
volumes and prices. Measured by customer location, we in-
creased sales (excluding Oil & Gas) in the emerging markets
by 15% to €21,496 million. This brought sales to customers in
emerging markets to around 35% of total sales (excluding
Oil & Gas) in 2017. In the years ahead, we want to continue
expanding this percentage based on past and future invest-
ments.
Business expansion in emerging markets
For more information on competition for talent, see page 43
For more information on Corporate Governance, see page 127 onward
For more information on compliance, see page 135 onward
For more information on Supplier Standards, see page 93 onward
-
We are engaged in intensive research and development
activities in our established business areas. One focus of our
research is on the enhancement and innovative application of
specific key technologies. They pool the diverse competencies
of our international Research and Development Verbund to
strengthen our competitive ability in the long-term. In addition,
we are addressing clearly defined topics to drive forward
innovation in new business fields and with new technologies
above and beyond the current focus areas of our divisions. We
are also working on overarching projects with a high techno-
logical, social or regulatory relevance. With our research, we
aim to make a decisive contribution to innovative solutions for
global challenges and contribute to sustainable development.
Our three global technology platforms are based in our key
regions Europe, Asia Pacific and North America: Process
Research & Chemical Engineering (Ludwigshafen, Germany),
Advanced Materials & Systems Research (Shanghai, China)
and Bioscience Research (Research Triangle Park, North
Carolina). We want to continue expanding our research and
development activities on a global level. The stronger presence
of our research and development in key markets opens up
new opportunities to find appropriate solutions for regional
markets, actively participate in worldwide innovation process-
es and gain access to talent.
Innovations in chemistry are indispensable to meeting the
needs of the growing world population on a long-term basis.
The development of innovative products and solutions is, there-
fore, of vital significance for BASF. In the long term, we aim to
continue to significantly increase sales and earnings with new
and improved products. Effective and efficient research lays the
foundation for this. We believe that the digitalization of research
offers great potential and are driving this forward around the
world.
Innovations for a sustainable future
3
For more information on innovation, see page 35 onward
For more information on our goals, see page 26 onward
Excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments
2017
2007
35%
29%
Emerging markets
Industrialized countries
Percentage of BASF Group sales (excluding Oil & Gas) by location of customer
65%
71%
1
Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos, the Philippines, Singapore, Thailand, Vietnam
2
26 Management's Report
Our business partners are expected to comply with pre-
vailing laws and regulations and to align their actions with
internationally recognized principles. We have established
monitoring systems to ensure this.
Sales³ in emerging markets
the global management process for the respect of international
labor norms.
- We source responsibly
BASF Report 2017
Our strategy Goals
Sustainability is key to the company's long-term success and
as such, is embedded into our corporate strategy. We have
systematically formulated expectations for our conduct and
defined focus areas to meet the growing challenges along the
value chain:
- We produce safely for people and the environment
- We produce efficiently
- We value people and treat them with respect
- We drive sustainable products and solutions
For more information on our materiality analysis,
see basf.com/materiality
For more information on our goals, see page 26 onward
For more information on the integration of sustainability,
see page 29 onward
The BASF brand
■
-
Above-average awareness of, and trust in,
BASF brand in chemical industry
Corporate design updated
BASF's success as an integrated global chemical company
relies on having a strong brand. This is derived from our
strategy and our corporate purpose - "We create chemistry
for a sustainable future" - as well as our strategic principles
and values.
-
"Connected" describes the essence of the BASF brand. Con-
nectedness is one of BASF's great strengths. Our Verbund
concept realized in production, technologies, knowledge,
employees, customers and partners enables innovative
solutions for a sustainable future. The claim that "We create
chemistry," as stated in the BASF logo, helps us embed this
solution-oriented strategy in the public perception. Our brand
creates value by helping communicate its benefits for our
stakeholders as well as our values.
Wherever our stakeholders encounter our brand, we want
to convince them that BASF stands for connectedness,
intelligent solutions, value-adding partnerships, an attractive
working environment and sustainability. This contributes to our
customers' confidence in their buying decisions and to our
company value.
We are constantly developing our brand image. We
regularly measure awareness of and trust in our brand, and
therefore in our company. A global market research study
conducted every two years showed in 2016 that, in terms of
awareness and trust, BASF is above the industry average in
numerous countries. Our goal is to continue increasing
awareness of BASF in all of our relevant markets. In 2017, we
updated our corporate design to be able to present our brand
flexibly, uniformly and efficiently in a fast-moving media land-
scape.
Global standards
We act according to our values and internationally
recognized standards of conduct
■ We review our performance with audits
Our standards fulfill or exceed existing laws and regulations and
take internationally recognized principles into account. We
respect and promote:
- The 10 principles of the U.N. Global Compact
- The Universal Declaration of Human Rights and the two U.N.
Human Rights Covenants
- The core labor standards of the ILO and the Tripartite
Declaration of Principles Concerning Multinational Enterprises
and Social Policy (MNE Declaration)
- The OECD Guidelines for Multinational Enterprises
- The Responsible Care® Global Charter
- The German Corporate Governance Code
We stipulate rules for our employees with standards that apply
throughout the Group. We set ourselves ambitious goals with
voluntary commitments and monitor our performance in terms
of the environment, health and safety using our Responsible
Care Management System. In terms of labor and social
standards, this takes place using three elements: the
Compliance Program (including the compliance hotlines,
which can be used for internal and external questions or
complaints), close dialog with our stakeholders (such as with
employee representatives or international organizations), and
Management's Report 25
Our strategy Corporate strategy
Goals
Page 45
We carry out our corporate purpose, "We create chemistry for
a sustainable future," by pursuing ambitious goals along our
entire value chain. In this way, we aim to achieve profitable
growth and take on social and environmental responsibility.
13.1%2
€3.00
€0.10
Premium on cost of
capital
Free cash flow
€2.7 billion
€4.8 billion
2 Baseline 2015: excluding the gas trading and storage business transferred to Gazprom
Employees
Proportion of women in leadership positions
with disciplinary responsibility
2021 Goal
22-24%
International representation among senior
executives³
Senior executives with international
experience
Employee development
Long-term goals
Increase in proportion of non-German senior executives
(baseline 2003: 30%)
Proportion of senior executives with international experience
over 80%
Systematic, global employee development as shared responsibility
of employees and leaders based on relevant processes and tools
Status at end of 2017
More on
20.5%
Page 45
38.9%
Page 45
84.6%
Project implemented
worldwide
We set ourselves goals along the value chain for our
focus areas
Page 44
3 The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive
status by virtue of special expertise.
BASF Report 2017
20.9%
BASF Report 2017
€12.7 billion
3.7%²
Goal areas along the value chain
We are focusing on issues where we as a company can make
a significant contribution.
Suppliers
Procurement
Procurement Q
BASF
Growth and profitability; Employees;
Production; Product stewardship;
Energy and climate protection; Water
Assessment of sustainability performance of relevant suppliers; 1 development of action
plans where improvement is necessary
Customers
Products and solutions
2020 Goal
Status at end of 2017
More on
70%
56%
Page 93
1 Our suppliers are evaluated based on risk due to the size and scale of our supplier portfolio. We define relevant suppliers as those showing an elevated sustainability risk potential as
identified by our risk matrices and our purchasers' assessments. We also use further sources of information to identify relevant suppliers such as evaluations from Together for
Sustainability (TFS), a joint initiative of chemical companies for sustainable supply chains.
Growth and profitability
As determined in 2015, our aim for the years ahead is, on
average, to grow sales slightly faster and EBITDA considerably
faster than global chemical production (excluding pharmaceu-
ticals; 2017: 3.5%; average change since 2015: 3.5%), and to
earn a significant premium on our cost of capital. Moreover,
we strive for a high level of free cash flow each year, either
raising or at least maintaining the dividend at the prior-year
level.
For more information on our results of operations in 2017,
see pages 51 to 55
For more information on our financial position, see pages 57 to 59
Sales
Change since
Average
change since
2017
2016
2015
€64.5 billion
12.0%
EBITDA
Dividends per share
paid out
Our focus areas
We create chemistry
for a sustainable future
Responsible: We act responsibly as an integral part of
society. In doing so, we strictly adhere to our compliance
standards. And in everything we do, we never compromise on
safety.
South America, Africa, Middle East
9%
234
Procurement and sales markets
2
4
■ Around 130,000 customers; broad customer portfolio
More than 70,000 suppliers
■
BASF supplies products and services to around 130,000
customers from various sectors in almost every country in the
world. Our customer portfolio ranges from major global
customers and medium-sized businesses to end consumers.
We work with over 70,000 suppliers from different sectors
worldwide. They supply us with important raw materials,
chemicals, investment goods and consumables, and perform
a range of services. Some of our most important raw materials
are naphtha, natural gas, methanol, ammonia and benzene.
For more information on customers, see page 34; for more information
on suppliers, see page 93 onward
BASF sales by industry 2017
(Direct customers)
22%
>20%
5-10%
<5%
Chemicals and plastics
Consumer goods | Transportation
Agriculture | Construction | Energy and resources
Health and nutrition | Electronics
1
Business and competitive environment
BASF's global presence means that it operates in the context
of local, regional and global developments and is bound by
various conditions. These include:
- Global economic environment
- Legal and political requirements (such as European Union
regulations)
- Trade agreements like the North American Free Trade Agree-
ment (NAFTA)
- Environmental agreements (such as the E.U. Emissions
Trading System)
- Social aspects (such as the U.N. Universal Declaration of
Human Rights)
10-20%
Asia Pacific
24%
North America
Management's Report 21
The BASF Group
BASF sites
Freeport
-Florham Park
Geismar
Antwerp
Ludwigshafen
São Paulo
Kuantan
Regional centers
Selected sites
Verbund sites
◆ Selected research and development sites
Nanjing
- Hong Kong
Sites and Verbund
Six Verbund sites with intelligent plant networking
■ 347 additional production sites worldwide
■ Global Technology and Know-How Verbund
BASF has companies in more than 80 countries. We operate
six Verbund sites and 347 additional production sites world-
wide. Our Verbund site in Ludwigshafen, Germany, is the
world's largest integrated chemical complex owned by a single
company. This was where the Verbund principle was originally
developed and continuously optimized before being imple-
mented at additional sites.
The Verbund system is one of BASF's great strengths.
Here, we add value as one company by using our resources
efficiently. The Production Verbund intelligently links produc-
tion units and their energy supply so that, for example, the
waste heat of one plant provides energy to others. Further-
more, one facility's by-products can serve as feedstock
elsewhere. This not only saves us raw materials and energy, it
also avoids emissions, lowers logistics costs and leverages
synergies.
We also make use of the Verbund principle for more than
production, applying it for technologies, know-how, employ-
ees, customers and partners, as well. Expert knowledge is
pooled in our global research platforms.
For more information on the Verbund concept,
see basf.com/en/verbund
22 Management's Report
The BASF Group
BASF Report 2017
BASF sales by region 2017
(Location of customer)
1
Europe
45%
3
BASF holds one of the top three market positions in around
75% of the business areas in which it is active. Our most
important global competitors include AkzoNobel, Clariant,
Covestro, DowDuPont, DSM, Evonik, Formosa Plastics,
Huntsman, SABIC, Sinopec, Solvay and many hundreds
of local and regional competitors. We expect competitors from
Asia and the Middle East in particular to gain increasing signifi-
cance in the years ahead.
Corporate legal structure
As the publicly traded parent company, BASF SE takes a
central position: Directly or indirectly, it holds the shares in the
companies belonging to the BASF Group, and is also the
largest operating company. The majority of Group companies
cover a broad spectrum of our business. In the BASF Group
Consolidated Financial Statements, 286 companies including
BASF SE are fully consolidated. We consolidate eight joint
operations on a proportional basis, and account for 35 com-
panies using the equity method.
For more information, see the Notes to the Consolidated Financial
Statements from page 184 onward
Europe
737 million
2050
Americas
940 million
Asia
4,194 million
Americas
1,214 million
+29%
7.0 billion
Africa
1,049 million
Source: United Nations 2017
Oceania
37 million
Africa
2,528 million
+141%
Europe
716 million
-3%
9.8 billion
Asia
5,257 million
+25%
Oceania
57 million
+56%
24 Management's Report
Our strategy Corporate strategy
BASF Report 2017
Our values
Our conduct is critical for the successful implementation of our
strategy: This is what our values represent. They guide how
we interact with society, our partners and with each other.
Creative: In order to find innovative and sustainable
solutions, we have the courage to pursue bold ideas. We link
our areas of expertise from many different fields and build
partnerships to develop creative, value-adding solutions. We
constantly improve our products, services and solutions.
Open: We value diversity – in people, opinions and experi-
ences. That is why we foster dialog based on honesty,
respect and mutual trust.
2010
Entrepreneurial: All employees contribute to BASF's suc-
cess as individuals and as a team. We turn market needs
into customer solutions. We succeed in this because we take
ownership and embrace accountability for our work.
World population growth
For more information on business opportunities with sustainability,
see page 29 onward
BASF Report 2017
Our strategy
Corporate strategy
Management's Report 23
Our strategy Corporate strategy
Purpose
Production a
Principles
As strategic basis for our
success on the market
Values
As guideline for our conduct
and actions
With the "We create chemistry" strategy, BASF has set
itself ambitious goals. We want to contribute to a sustain-
able future and have embedded this into our corporate
purpose: "We create chemistry for a sustainable future."
In 2050, nearly 10 billion people will live on Earth. While the
world's population and its demands will keep growing, the
planet's resources are finite. On the one hand, population
growth is associated with huge global challenges; and yet
we also see many opportunities, especially for the chemical
industry.
Our corporate purpose
■ We create chemistry for a sustainable future
We want to contribute to a world that provides a viable future
with enhanced quality of life for everyone. We do so by creating
chemistry for our customers and society and by making the
best use of available resources.
We live our corporate purpose by:
- Sourcing and producing responsibly
- Acting as a fair and reliable partner
- Connecting creative minds to find the best solution for
market needs
For us, this is what successful business is all about.
As an integrated global chemical company, we make important
contributions in the following three areas:
Resources, environment and climate
- Food and nutrition
- Quality of life
In doing so, we act in accordance with four strategic principles.
Our strategic principles
We add value as one company. Our Verbund concept is
unique in the industry. Encompassing the Production Verbund,
Technology Verbund and Know-How Verbund as well as all
relevant customer industries worldwide, this sophisticated and
profitable system will continue to be expanded. This is how we
combine our strengths and add value as one company.
We innovate to make our customers more successful.
We want to align our business optimally with our customers'
needs and contribute to their success with innovative and
sustainable solutions. Through close partnerships with
customers and research institutes, we link expertise in
chemistry, biology, physics, materials science and engineering
to jointly develop customized products, functional materials,
and system solutions as well as processes and technologies.
We drive sustainable solutions. In the future, sustain-
ability will more than ever serve as a starting point for new
business opportunities. That is why sustainability and innova-
tion are becoming significant drivers for our profitable growth.
We form the best team. Committed and qualified employ-
ees around the world are the key to making our contribution
to a sustainable future. Because we want to form the best
team, we offer excellent working conditions and inclusive
leadership based on mutual trust, respect and dedication to
top performance.
For more information on innovation, see page 35 onward
For more information on the Best Team Strategy,
see page 42 onward a
Reduction of worldwide lost-time injury rate
BASF Report 2017
Reduction of worldwide process safety incidents
For more information on the organization of our sustainability
management, see basf.com/sustainabilitymanagement
For more information on our materiality analysis,
see basf.com/materiality
For more information on our financial and sustainability goals,
see page 26 onward
Societal acceptance
Constant dialog with our key stakeholders
Global requirements for community advisory panels
■ Social commitment
integrate these topics into our long-term steering processes to
ensure societal acceptance and take advantage of business
opportunities.
Sustainability management helps to minimize risks. This sup-
ports our long-term economic success and ensures societal
acceptance of our business activities. We aim to reduce
potential risks in the areas of environment, safety and security,
health protection, product stewardship, compliance, and labor
and social standards by setting ourselves globally uniform
requirements. These often go beyond local legal requirements.
Internal monitoring systems and grievance mechanisms
enable us to check compliance with these standards: they
include, for example, questionnaires, audits and compliance
hotlines. All employees, managers and Board members are
required to abide by our global Code of Conduct, which
defines a mandatory framework for our business activities.
Our stakeholders include customers, employees, suppliers
and shareholders, as well as representatives from academia,
industry, politics, society and the media. Parts of our business
activities, such as the use of new technologies, are frequently
viewed by some stakeholders with a critical eye. In order to
increase societal acceptance for our business activities, we
take on these questions, assess our business activities in
terms of their sustainability, and communicate this transpar-
ently. Such dialogs help us to even better understand society's
expectations of us and which measures we need to pursue in
order to establish and maintain trust and build partnerships.
We use a custom model to identify key stakeholders and
involve them more effectively. When selecting our stake-
holders, we assess factors such as their topic-specific exper-
tise and willingness to engage in constructive dialog, for
instance. We draw on the competence of global initiatives and
networks, and contribute our own expertise.
30 Management's Report
Our strategy Integration of sustainability
BASF Report 2017
That is why we are involved in worldwide initiatives with various
stakeholder groups, such as the U.N. Global Compact. BASF's
Chairman of the Board of Executive Directors is a member of
the United Nations Global Compact Board. As a member of the
U.N. Global Compact LEAD initiative, we support the imple-
mentation of the Agenda 2030 and its Sustainable Develop-
ment Goals. BASF is also active in local Global Compact net-
works.
Our investment decisions for property, plant and equip-
ment and financial assets also involve sustainability criteria.
Our decision-making is supported by expert appraisals that
assess economic implications as well as potential effects on
the environment, human rights or local communities.
Relevant topics resulting from these commitments - such as
supply chain responsibility, responsible production, resource
efficiency, energy and climate protection, water, product stew-
ardship, employment and employability, and portfolio
management - form the focal points of our reporting. We also
- We drive sustainable products and solutions
- We value people and treat them with respect
For more information on the development of these performance
indicators, see the Results of Operations on page 51 onward
1 These include fixed assets, intangible assets, investments accounted for using the equity method, inventories, trade accounts receivable, other receivables and other assets generated
by core business activities as well as any assets of disposal groups.
BASF Report 2017
Integration of sustainability
Management's Report 29
Our strategy Integration of sustainability
Sustainability is an integral part of our corporate strategy.
Using the various tools of our sustainability management,
we carry out our company purpose: "We create chemistry
for a sustainable future." We incorporate sustainability
into our business. This is how we seize business opportu-
nities and minimize risks along the value chain.
Strategy
■ Ensuring long-term economic success
■ Taking advantage of business opportunities and
minimizing risks
We aim to add value in the long term for our company, the
environment and society. Sustainability is at the core of what
we do, a driver for growth as well as an element of our risk
management. That is why we incorporate aspects of sustain-
ability into our decision-making processes and have defined
clear responsibilities in our organization. This is how we posi-
tion our company for long-term economic success.
We have created structures to promote sustainable, entre-
preneurial actions all the way from strategy to implementation.
The Corporate Sustainability Board is BASF's central steering
committee for sustainable development. It is composed of the
heads of our business, corporate and functional units, and
regions. A member of the Board of Executive Directors serves
as chair. We have also established an external, independent
Stakeholder Advisory Council. Here, international experts from
academia and society contribute their perspectives to discus-
sions with BASF's Board of Executive Directors, helping us
expand our strengths and identify our potential for improve-
ment.
Through our constant dialog with stakeholders, our internal
analysis methods and our many years of experience, we are
continuously refining our understanding of significant topics
and trends as well as potential opportunities and risks along
our value chain.
For example, we have defined sustainability focus areas
within our corporate strategy. These formulate the commit-
ments with which BASF positions itself in the market and how
it aims to meet the growing challenges along the value chain:
- We source responsibly
- We produce safely for people and the environment
- We produce efficiently
We once again met with the Stakeholder Advisory Council
in 2017 to discuss important aspects of sustainability. The
main topics were strengthening sustainability in the corporate
strategy and challenges in the supply chain. We received and
implemented recommendations for our thematic focus areas.
For example, we initiated a lighthouse project on the circular
economy that is analyzing to what extent waste streams can
be used as raw materials. In 2017, BASF joined the Ellen
MacArthur Foundation's circular economy initiatives to drive
forward existing approaches.
According to our value-based management concept, all
employees can make a contribution in their business area to
help ensure that we earn the targeted premium on our cost of
capital. We pass this value-based management concept on to
our team around the world through seminars and training
events, thereby promoting entrepreneurial thinking at all levels
within BASF.
Our lobbying and political communications are conducted
in accordance with transparent guidelines and our publicly
stated positions. BASF does not financially support political
parties. In the United States, employees at BASF Corporation
have exercised their right to establish a Political Action Com-
mittee (PAC). The BASF Corporation Employee PAC is a volun-
tary, federally registered employee association founded in
1998. It collects donations for political purposes and inde-
pendently decides how these are used, in accordance with
U.S. law.
As a founding member of the U.N. Global Compact, we
support the implementation of the United Nations' Sustainable
Development Goals with our social commitment around the
world. We promote social, educational, cultural, academic and
sports projects as part of our social engagement strategy. The
main aim of these projects is to have a lasting impact on society
and offer learning opportunities for participating cooperation
partners and BASF.
2.7
4.8%
7.3 13.0%
-23456
Culture
For more information on stakeholder dialog, see basf.com/en/dialog
For more information on the Stakeholder Advisory Council,
see basf.com/en/stakeholder-advisory-council
Sports
Other
For more information on our guidelines for responsible lobbying,
see basf.com/guidelines_political_communication
see basf.com/en/starting-ventures
For more information on our production standards, see page 98 onward
For more information on standards in our supply chain,
see page 93 onward
For more information on compliance and our Code of Conduct,
see page 135 onward
per one million working hours
For more information on Starting Ventures,
5.2% 3
2.9
Science
As a responsible neighbor, BASF strives to create a livable
community for our sites' neighbors, employees and their fami-
lies. To achieve this, BASF supports projects that reach out to
as many people as possible and have long-term impact. One
example is the Connected to Care program, where employees
around the world form teams to carry out social projects to-
gether with nonprofit organizations. Employees can suggest
their own ideas or get involved in BASF initiatives.
We also aim to create long-term value for BASF and society
with new business models and cross-industry partnerships.
Our company-wide Starting Ventures program provides access
to growing low-income markets. This helps people with precar-
ious livelihoods to improve their income-earning opportunities
and their quality of life. The program also strengthens our con-
tribution to reaching the U.N. Sustainable Development Goals.
In one project in Kenya and Tanzania, for example, local food
supply and quality of life are improved by fortifying flour with
micronutrients such as vitamin A. This reduces health risks for
the population. To take advantage of these opportunities for
the people there, BASF draws on an established network of
local mills, nonprofit organizations and government authorities.
The BASF Group spent a total of €56.0 million supporting
projects in 2017; we donated 57% of this amount (2016: €47.0
million, of which 49.6% were donations).
BASF Group donations, sponsorship and own projects in 2017
(million €)
2017 Share
6
1
Social projects
Education
21.4 38.2%
5
16.6
29.7% 4
5.1
9.1%
€56.0 million
We have a particular responsibility toward our production
sites' neighbors. With the established community advisory
panels, we promote open exchange between citizens and our
site management, and strengthen trust in our activities. In
2017, we updated our globally binding requirements for com-
munity advisory panels at our sites. These minimum require-
ments are oriented toward the grievance mechanisms outlined
in the U.N. Guiding Principles for Business and Human Rights.
We keep track of their implementation through the existing
global databank of the Responsible Care Management Sys-
tem.
We primarily comment on EBIT before special items on a
segment and division level in our financial reporting. Special
items arise from the integration of acquired businesses,
restructuring measures, impairments, gains or losses resulting
from divestitures and sales of shareholdings, and other
expenses and income that arise outside of ordinary business
activities. Adjusting for special items makes EBIT before
special items an especially suitable figure for illustrating
development over time. In addition to EBIT before special
items, we also report on sales as a further main driver for EBIT
after cost of capital. BASF's nonfinancial targets are focused
more on the long term, and are not used for short-term
steering.
In the area of international development work, we support
the BASF Stiftung, an independent nonprofit organization,
through donations to its projects with various U.N. and non-
governmental organizations. In 2017, BASF supported various
activities by the U.N. Refugee Agency (UNHCR) to give children
in Kenyan refugee camps access to education with its annual
year-end donation campaign to the BASF Stiftung. BASF dou-
bled all donations by employees of German and African Group
companies, bringing the total amount benefiting the refugee
children in Kenya to €642,703. This total donation was again
doubled to €1,285,405 by the German arm of the U.N. refugee
agency.
An important factor in ensuring the successful imple-
mentation of value-based management is linking the goals of
BASF to the individual target agreements of employees. In the
operating units, the most important performance indicator is
EBIT after cost of capital. By contrast, the functional units'
contribution to value is assessed on the basis of effectiveness
and efficiency.
2020 Goal
Status at end of 2017
More on
>99%
76.2%
Page 101
Page 100
2020 Goal
More on
90%
54.3%
Page 105
(40%)
(35.5%)
Status at end of 2017
0.97
Page 99
2.0
per one million working hours
All this forms a consistent system of value drivers and key
indicators for the individual units and levels at BASF. In
addition to EBIT after cost of capital, EBIT and EBIT before
special items are the most significant performance indicators
for measuring economic success as well as for steering the
BASF Group and its operating units.
Health Performance Index
Product stewardship Q
Risk assessment of products that we sell in quantities of more than
one metric ton per year worldwide
Energy and climate protection Q
Management's Report 27
Our strategy Goals
2025 Goals
Status at end of 2017
More on
≤0.5
1.4
Page 98
≤0.5
Page 105
Coverage of our primary energy demand by introducing certified
energy management systems (ISO 50001) at all relevant sites4
Reduction of greenhouse gas emissions per metric ton of sales
product (excluding Oil & Gas, baseline 2002)
Annual goal
>0.9
Water Q
"We add value as one company" is one of the four
principles of our "We create chemistry" strategy. To
create value in the long term, a company's earnings must
exceed the cost of stockholders' equity and borrowing
costs. This is why we strive to earn a significant premium
on our cost of capital. To ensure BASF's long-term
success, we encourage and support all employees in
thinking and acting entrepreneurially in line with our
value-based management concept. Our goal: to create
awareness as to how each and every employee can find
value-oriented solutions in the company's day-to-day
operations and implement these in an effective and
efficient manner.
EBIT after cost of capital
■ Performance and management indicator
Income from operations (EBIT) after cost of capital is a key
performance and management indicator for the BASF Group,
its operating divisions and business units. This figure combines
the company's economic situation as summarized in EBIT with
the costs for the capital made available to us by shareholders
and creditors. When EBIT exceeds cost of capital, we earn a
premium on our cost of capital and exceed the return
expected by our shareholders.
For more information on the development of this key performance
indicator, see the Results of Operations on page 53
■
Cost of capital determined using cost of capital per-
centage and cost of capital basis
To calculate EBIT after cost of capital, we take the BASF
Group's EBIT and deduct the EBIT of activities recognized
under Other - not allocated to the segments - and subtract
the cost of capital of the BASF Group from the resulting figure.
Cost of capital is determined by applying the cost of capital
percentage before taxes to the value of the cost of capital
basis at each month-end. Monthly cost of capital is then add-
ed up over the course of the year.
The cost of capital percentage is determined using the
weighted cost of capital from equity and borrowing costs
(weighted average cost of capital, WACC). To calculate a pre-
tax figure similar to EBIT, it is adjusted using the projected tax
rate for the BASF Group for the business year. In addition, the
projected net expense of Other is already provided for by
an adjustment to the cost of capital percentage. The cost of
equity is ascertained using the Capital Asset Pricing Model.
Borrowing costs are determined based on the financing costs
of the BASF Group.
The cost of capital basis consists of the operating assets
of the segments plus the customer and supplier financing not
included there. Operating assets comprise the current and
noncurrent asset items used by the operating divisions.1
Value-based management throughout the
company
4 The selection of relevant sites is determined by the amount of primary energy used and local energy prices.
Exercising a value-oriented mindset in day-to-day
business by every employee
For us, value-based management means the daily focus
placed on value by all of our employees. To this end, we have
identified value drivers that show how each and every unit in
the company can create value. We develop performance
indicators for the individual value drivers that help us to plan
and pursue changes.
BASF Report 2017
Value-based management
Calculating EBIT after cost of capital
45.2%
Introduction of sustainable water management at all production sites
in water stress areas and at all Verbund sites (excluding Oil & Gas)
100%
2025 Goals
Page 108
Products and solutions Q
Increase the proportion of sales generated by products that make a
particular contribution to sustainable development (Accelerator
products)
More on
Status at end of 2017
Status at end of 2017
More on
28%
27.3%
Page 32
28 Management's Report
2020 Goal
Our strategy Value-based management
Zhejiang University
Hangzhou, China
NAO
Tokyo Institute of Technology
Tokyo, Japan
Shanghai, China
Kyoto University❤
Sichuan University
Chengdu, China
Fudan University❤
Changchun Institute of Applied Chemistry
Changchun, China
Dalian Institute of Chemical Physics
Beijing, China
Beijing Institute of Technology
Beijing, China
Tsinghua University
Network for Asian Open Research
Institute of Chemistry, Chinese Academy of Science
Beijing, China
Kyoto, Japan
Dalian, China
Seoul National University
We also use data mining methods to gain new insights
from very large quantities of existing data. In biotechnology, for
example, data mining helps to identify promising enzymes or
suitable bacteria more quickly as part of product or process
development. This work comes under our Bioscience
Research technology platform.
• Also a partner of the UNIQUE program
For more information on research and development,
see basf.com/innovations
Karlsruhe, Germany
Our competence in the area of material development for
3D processes is demonstrated by the filament Ultrafuse
316LX. It was specially developed for a new process on the
market for metal printing and has been in use since 2017. The
product makes it easier to print 3D metal parts inexpensively
and reliably.
In addition, BASF New Business GmbH acquired the
filament producer Innofil3D B.V. headquartered in Emmen,
Netherlands, in 2017. We can now provide both plastic
granulates and filaments for 3D printing. These long, thin
plastic fibers are used in fused filament fabrication, a special
3D printing process that manufactures items layer by layer
from meltable plastic.
3D printing involves the development of innovative
materials. In the chemical industry, BASF already has a
broad portfolio with materials, system solutions, compo-
nents and services. In 2017, BASF New Business GmbH
established BASF 3D Printing Solutions GmbH in Heidel-
berg, Germany, to continue the targeted expansion of the
business. As a wholly owned subsidiary of BASF, it works
closely together with researchers and application engineers
from BASF as well as external partners, such as universities
and customers.
A further example is the data-based optimization for the
production of dirt-resistant, water-based coatings used in the
furniture industry, for instance. Using electronic data from
previous experiments, researchers from the Advanced Mate-
rials & Systems Research technology platform were able to
quickly determine a successful formulation. Through the com-
bination of laboratory work and virtual experiments, they were
able to create new coatings that meet customer demands in a
very short time.
In 2017, BASF researchers from the Process Research &
Chemical Engineering technology platform demonstrated the
enormous potential of digitalization in research. For the first
time, researchers were able to systematically analyze the
existing data on catalysts used in the production of the inter-
mediate product ethylene oxide, leading to valuable insights.
The correlations between the formulations and the application
properties of the catalysts allow their performance and lifetime
to be predicted more accurately and faster.
Our focus areas in research are derived from the three major
areas in which chemistry-based innovations will play a key role
in the future: resources, environment and climate; food and
nutrition; and quality of life.
Seoul, South Korea
■ Expansion of business activities in 3D printing
Research focus areas - examples
The number and quality of our patents also attest to our
power of innovation and long-term competitiveness. We filed
around 800 new patents worldwide in 2017. In 2017, we once
again ranked among the leading companies in the Patent Asset
Index, a method that compares patent portfolios industry-wide.
For a multiyear overview of research and development expenditures,
see the Ten-year summary on page 247
Ludwigshafen remains the largest site in our Research
Verbund. This is underscored by the investment in the world's
largest supercomputer for research in the chemical industry,
which was put into operation in 2017. With a computing
power of 1.75 petaflops, 1 Quriosity offers around 10 times the
computing power previously available to BASF researchers
worldwide. In collaboration with the Hewlett Packard Enter-
prise group, the new supercomputer was custom designed for
chemical research and will drive forward the digitalization of
BASF research globally.
In addition to the Innovation Campus Shanghai (previously
Innovation Campus Asia Pacific) which opened in 2015, we
inaugurated the Innovation Campus Mumbai in 2017 to further
increase our research capacity in Asia. The new Campus
brings together existing and new research and development
activities in Mumbai, India, under one roof, where up to 300
scientists focus on crop protection and process development.
Our global research and development presence is vital
to our success. We want to continue advancing our research
and development activities, particularly in Asia as well as in
North America, and are adapting this to growth in regional
markets. A stronger presence outside Europe creates new
opportunities for developing and expanding customer relation-
ships and scientific collaborations as well as for gaining access
to talented employees. This strengthens our Research and
Development Verbund and makes BASF an even more attrac-
tive partner and employer.
years ahead, we plan to consistently expand existing expertise
in fields like modeling and simulation and to develop new
digital applications.
Management's Report 37
Innovation
BASF Report 2017
Increased use of digital technologies
Karlsruhe Institute of Technology (KIT)
In 2017, our research pipeline comprised approximately
3,000 projects. Expenses for research and development
amounted to around €1,888 million, just above the prior-year
level (€1,863 million). The operating divisions accounted for
80% of total research and development expenses in 2017.
The remaining 20% related to cross-divisional corporate research
focusing on long-term topics of strategic importance to the
BASF Group. We strive to maintain a high level of spending on
research and development.
Heidelberg University
Stanford University
Stanford, California
UC Berkeley
Berkeley, California
Davis, California
UC Davis
California Research Alliance
CARA
Global network: postdoc centers and UNIQUE excellence program
We continued to refine our innovation approach in 2017
and have identified additional, far-sighted topics that go above
and beyond the current focus areas of our divisions to drive
innovation in new business fields and with new technologies.
The aim is to use these to exploit new business opportunities
within the next few years. We are also working on overarching
projects that are highly relevant from a technological, societal
or regulatory point of view.
UC Santa Barbara
Our cross-divisional corporate research is closely aligned
with the requirements of our operating divisions and allows
considerable space to quickly review creative research
approaches. We strengthen existing and continually develop
new key technologies that are of central significance for our
operating divisions. Examples include polymer technologies,
catalyst processes or biotechnological methods.
The needs of our customers are the starting point for
chemistry-based innovations, requiring market-driven research
and development. Creativity, efficiency and collaboration with
external partners are among the most important success
factors. In order to bring promising ideas to market as quickly
as possible, we regularly assess our research projects using a
multistep process and align our focus areas accordingly.
Globalizing research and strengthening regional com-
petencies
Innovation approach with strong focus on customers
and markets
Strategic focus
BASF Report 2017
Innovation
36 Management's Report
One petaflop is equal to one thousand trillion (1015) operations per second.
The aim of our innovation approach is to increase our
company's power of innovation and to secure our long-term
competitiveness. We aim to achieve this by concentrating our
research focus on topics that are strategically relevant for our
business, strengthening our existing scientific processes and
increasingly using new scientific methods and digital tools,
and optimizing our organizational structures.
Heidelberg, Germany
Santa Barbara, California
UC Riverside
Riverside, California
UC San Diego
San Diego, California
Berlin, Germany
UniCat
Imperial College
London, UK
College Station, Texas
Texas A&M University
● UNIQUE - The BASF Academic Partnership Program
Zurich, Switzerland
ETH Zürich
Caltech
Pasadena, California
University of Freiburg
Freiburg, Germany
Joint Research Network on
Advanced Materials and Systems
JONAS
•
University of Massachusetts
Amherst, Massachusetts
Massachusetts Institute of Technology
Cambridge, Massachusetts
Harvard University
Cambridge, Massachusetts
North American Center for Research
on Advanced Materials
NORA
I.S.I.S - University of Strasbourg
Strasbourg, France
38 Management's Report
243
BASF Report 2017
Total
Acquisi-
tions
Invest-
ments
101
Intangible assets
Investments and acquisitions 2017 (million €)
For more information on our investments from 2018 onward,
see page 124
By investing in our plants, we create the conditions for our
desired growth while constantly improving the efficiency of our
production processes. For the period from 2018 to 2022, we
have planned investments in property, plant and equipment¹
totaling €19.0 billion. We also continue to develop our portfolio
through acquisitions that promise above-average profitable
growth, are driven by innovation, offer added value for our
customers, and reduce the cyclicality of our earnings. Invest-
ments and acquisitions alike are prepared by interdisciplinary
teams and assessed using diverse criteria. In this way, we
ensure that economic, environmental and social concerns are
included in strategic decision-making.
In addition to innovations, investments and acquisitions
make a decisive contribution toward achieving our
ambitious growth goals. We use targeted acquisitions to
supplement our organic growth.
235
Of our portfolio through
acquisitions, divestitures
and cooperative partnerships
Used for
acquisitions in 2017
€243 million
In investments
made in 2017
€4,121 million
BASF Report 2017
Investments, acquisitions and divestitures
Investments, acquisitions and divestitures
40 Management's Report
Optimization
Peak sales describes the highest sales value to be expected in one year. For more information, see the Glossary on page 253
336
97
For more information on nonfinancial disclosures, see page 19
3 Including impairments and reversals of impairments
2 Including capitalized exploration, restoration obligations and IT investments
1 Excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments
For more information on investments within the segments,
see page 60 onward
In the Oil & Gas segment, we invested primarily in field
development projects in Argentina, Norway and Russia in
2017.
In Asia, we started up two large-scale plants in Shanghai,
China, in 2017: one for chemical catalysts and another for
automotive coatings together with our partner Shanghai Huayi
Fine Chemical Co. Ltd., based in Shanghai, China. We built a
new aroma ingredients complex at the integrated chemical
site in Kuantan, Malaysia, together with our partner
PETRONAS Chemicals Group Berhad, headquartered in Kuala
Lumpur, Malaysia. It is in the process of being started up. In
Gimcheon, South Korea, we are constructing a new plant for
UltraformⓇ together with our partner Kolon Plastics Inc., head-
quartered in Gimcheon, South Korea. The new plant is
scheduled for completion in 2018. With these investments, we
are expanding our presence in Asia.
In North America, we are constructing an ammonia
production plant in Freeport, Texas, together with Yara Inter-
national ASA, headquartered in Oslo, Norway. It is scheduled
for completion in 2018. The expansion of the production
facility for dicamba in Beaumont, Texas, is complete and
operational.
Thereof goodwill
Property, plant and equipment²
Total
In Europe, we largely concluded the investment in our
integrated TDI complex at the Ludwigshafen site. We will
strengthen the Ludwigshafen Verbund site by replacing our
acetylene plant, which occupies a central role for many
products and value chains, with a modern, highly efficient
plant by 2019. We are also constructing another production
plant for special zeolites in Ludwigshafen. Special zeolites are
used to produce state-of-the-art exhaust catalysts for
commercial vehicles and passenger cars with diesel engines.
Production startup is scheduled for 2019. At the site in
Antwerp, Belgium, we completed the technical retrofitting of
the superabsorbent plant, where the superabsorbent products
SavivaⓇ and HySorbⓇ can be produced.
Investments
4,364
97
The Joint Research Network on Advanced Materials and
Systems (JONAS) postdoctoral center is active in Europe,
while the Network for Asian Open Research (NAO) covers
the Asia Pacific region. The Network for Advanced Materials
Open Research was renamed the Network for Asian Open
Research in 2017 after NAO's research projects were
expanded to include process research, chemical engineer-
ing and biosciences.
4,121
4,028
8
4,020
We invested €4,020 million in property, plant and equipment in
2017. Total investments were therefore €202 million lower than
in the previous year and €434 million above the level of
depreciation³ in 2017. Our investments in 2017 focused on the
Chemicals, Functional Materials & Solutions and Oil & Gas
segments.
Innovation
Wintershall is working on the development of heat-
resistant and salt-tolerant surfactants together with the
Performance Chemicals division. These substances are used
in enhanced oil recovery to mobilize the oil trapped in the
pores of the rock. Conventional surfactants often cannot be
used because of the high temperatures and high salt concen-
trations of many reservoirs, especially in regions such as the
Middle East, North Africa or in the North Sea. The research
project is currently in the laboratory phase.
For more information on RevysolⓇ, see page 82
20%
Corporate research, Other
2%
Oil & Gas
27%
Agricultural Solutions
€1,888 million
23% 5
3
Functional Materials & Solutions
Performance Products
6
7%
Chemicals
1
123456
Research and development expenses by segment 2017
Innovations in the segments - examples
21%
Oil & Gas: The Wintershall Group concentrates its innovation-
related activities on improving the success rate of exploration,
developing technologies for reservoirs with challenging
development and production conditions, and increasing the
recovery factor of reservoirs.
Chemicals: Our specialty monomers enable innovation in our
customers' downstream applications. These include a new
application with tertiary butylacrylate (tBA) in decorative
paints. tBA is primarily used as a functional component in
water-based exterior paints. Our customers can use tBA to
fomulate dispersions that improve the specific properties of
their exterior paints - such as weathering and surface adhe-
sion without increasing production costs.
BASF is one of the leading global providers in the field of
gas treatment. Our OASE® brand portfolio ranges from gas
treatment agents to licenses for gas treatment processes and
the planning of plants. We have further developed our busi-
ness model and systematically expanded our service offering
with the new OASE® connect online platform, which is partic-
ularly attractive for customers at remote locations. Special
software enables them to find the optimum technical settings
for their plants and manage them more efficiently, achieving
energy savings of up to 20% in the form of electricity and
steam and significantly reducing operating costs at the same
plant output.
Digital innovations are also a key focus in the Crop Protec-
tion division. One example from digital agriculture is the online
platform MaglisⓇ that was launched in 2016, which offers
farmers agronomic information and combines this with IT
solutions and expertise from BASF. MaglisⓇ is used by farmers
worldwide - and we are constantly enhancing it. We are already
testing new applications such as the automated diagnosis of
plant diseases based on photo analysis.
cereal should come on the market in 2019. The market intro-
duction of the new insecticide InscalisⓇ to combat piercing-
sucking pests is planned for 2018. Another new insecticide,
Broflanilide, which helps farmers control chewing insects like
potato beetles and caterpillars in specialty and field crops,
should be on the market from 2020. In Functional Crop Care,
we are pushing ahead with the market introduction of
VelondisⓇ, for example, a biological fungicide for seed treat-
ment. This is planned for 2018.
Our well-stocked innovation pipeline comprises products
with a launch date between 2017 and 2027. With a peak sales
potential¹ of €3.5 billion, the pipeline includes innovations from
all business areas. The first market launches of RevysolⓇ, our
new fungicide, are scheduled for the 2019 growing season
following registration with the relevant authorities. A new her-
bicide with a unique mode of action to control key weeds in
Agricultural Solutions: We are working with farmers around
the globe to improve the quality and yield of their agricultural
production while taking societal expectations and require-
ments into consideration. To achieve this, we constantly invest
in our development pipeline in order to expand our portfolio
both in and beyond conventional crop protection - such as in
biological solutions. In 2017, we invested €507 million in
research and development in the Crop Protection division,
representing around 9% of sales for the segment.
The specialty polyamide UltramidⓇ Deep Gloss picks up
on the trend toward higher quality and functionalized surfaces
in car interiors. UltramidⓇ Deep Gloss is suitable for high gloss
yet resistant components without the need for coating. It offers
excellent resistance to scratching along with high chemical
and good UV resistance. The material reproduces even the
smallest structures true to detail, making haptic design
elements and intuitive user interfaces possible - similar to a
touchscreen. Demand for new operating concepts like this will
continue to grow in the transition to autonomous driving.
UltramidⓇ Deep Gloss also takes into account the automotive
industry's demands with respect to emissions and odor.
Thanks to the biomass balance method developed by BASF,
we are able to flexibly replace fossil resources in our current
Verbund system with sustainably generated bio-based raw
materials by feeding biogas and bionaphtha directly into the
value chain at the very beginning. The first biomass-balanced
products have now been introduced in the area of automotive
refinish coatings. The share of raw materials replaced by
renewable raw materials in the Production Verbund is allocated
to certain refinish coating products according to certified
methods. Coatings in this category add ecological value by
saving on fossil-based raw materials while maintaining their
usual qualities.
39
Management's Report
Innovation
BASF's constant stream of new ideas has secured its
position as the technology leader and largest supplier of hy-
drosulfites for over 100 years. These bleaching and reducing
agents are used in paper production, for example. The new
Adlite®, a hydrosulfite for the paper industry, testifies to our
innovative strength. Adlite® improves the entire paper produc-
tion process and makes it more flexible. It enables our cus-
tomers to achieve a higher degree of whiteness with the same
raw materials and in this way, manufacture higher quality pa-
per. At the same time, AdliteⓇ saves energy and mitigates the
impact on the environment, resulting in lower wastewater res-
idues.
BASF Report 2017
Performance Products: Acronal® 6292 is a new styrene
acrylic binder that enables the production of more environ-
mentally friendly scrub resistant interior wall paints. The poly-
mer's high pigment binding power also means that less binder
is required to produce a scrub resistant paint. This offers a
cost advantage for paint manufacturers. Acronal® 6292 can times
also be used to produce low-emission paints without biocides
BASF's MasterSeal 7000 CR waterproofing system pro-
tects concrete structures in wastewater and biogas plants
exposed to high concentrations of chemicals such as sulfuric
acid. MasterSeal 7000 CR bridges cracks in concrete to
prevent penetration by aggressive substances. This prolongs
the lifetime of concrete structures, contributes to sustainable
water management and simultaneously reduces maintenance
costs. MasterSeal 7000 CR is easy to work with and even
adheres to humid substrates. The quick hardening time allows
water contact only 24 hours after application, reducing down-
Ian important factor in wastewater management.
Functional Materials & Solutions: Formaldpure® is a new
catalyst from BASF, which removes the pollutant formaldehyde
at room temperature with high conversion efficiency. It is suit-
able for use in a wide range of portable and large-scale air
purification equipment. Formaldehyde is used in the manufac-
ture of building materials and household products, so it is
found in homes and buildings as an indoor pollutant. BASF's
Formaldpure® is a thorough, long-life technology that removes
formaldehyde from indoor environments and reduces the
costs otherwise associated with frequent filter changes.
"Cool roofs" are more reflective and so do not heat up
as much in direct sunlight. Roofing membranes made from
thermoplastic polyolefins (TPO) are an energy-saving and
cost-efficient solution here. BASF now offers new plastic
additive systems that are customized for such TPO roof
membrane applications. Combinations of the light stabilizers
Chimassorb and TinuvinⓇ, the antioxidants IrganoxⓇ and
IrgafosⓇ as well as customer-specific plastic additive mixtures
with minimal dust formation protect TPO membranes from the
damaging effects of sunlight, extending their lifetime by up to
30 years.
Pronovum is a new BASF technology in the area of
omega-3 food supplements. Intake of Omega 3 can help
improve consumers' coronary and cognitive health. Indepen-
dent studies have shown that the body processes omega-3
fatty acids formulated with Pronovum four times better than
conventional, highly concentrated omega-3 fatty acids in the
form of the chemical compound ethyl ester. Pronovum is a
patented mixture of omega-3 oils in a new formulation that can
be accessed much better by digestive enzymes.
Fibroblasts are important cells in the skin, which contribute
to skin regeneration. When they lose their vitality, the skin
loses its resilience and elasticity. DermagenistⓇ, a marjoram
leaf extract developed by BASF, restores the skin's density and
firmness. It inhibits the fibroblast ageing process and stimu-
lates the cells to produce structural proteins in the connective
tissue.
- preservatives needed to prevent bacterial growth in tradition-
al water-based paints.
2
-
BASF Report 2017
In 2017, we continued to work on the systematic applica-
tion of digital technologies in research and development. In the
Responsibility for human rights
Page 47 (goals, measures, results)
Global labor and social standards
Suppliers
Page 47 (goals, measures, results)
Page 26 (goals)
Societal acceptance
Responsibility for human rights
Global labor and social standards
Suppliers
Compliance
Suppliers
Management's Report 31
Our strategy Integration of sustainability
Pages 29-30 (goals, measures, results)
Dialog with employee representatives
Page 31 (goals, measures, results)
Pages 93-94 (goals, measures, results)
Pages 135-136 (goals, measures, results)
Page 26 (goals)
Pages 93-94 (goals, measures, results)
The content of this paragraph (symbol at the end of the paragraph) or section (symbol below the section) is not part of the statutory audit of the annual financial statements but has
undergone a separate audit with limited assurance by our external auditor.
If the symbol is underlined, it is relevant to the entire section.
34 Management's Report
Customers
Customers
Page 47 (goals, measures, results)
Page 26 (goals)
BASF Report 2017
Page 46 (goals, measures, results)
Page 45 (goals, measures, results)
Page 46 (goals, measures, results)
Pages 97 and 104-107 (goals, measures, results)
Page 27 (goals)
Pages 97 and 108-109 (goals, measures, results)
Pages 97 and 110 (goals, measures, results)
Pages 97 and 110 (goals, measures, results)
Page 27 (goals)
Page 32 (goals, measures, results)
Page 26 (goals)
Pages 93-94 (goals, measures, results)
Page 27 (goals)
Pages 97, 98-99 (goals, measures, results)
Employees participate in the company's success
Page 27 (goals)
Page 43 (goals, measures, results)
Page 44 (goals, measures, results)
Page 26 (goals)
Page 44 (goals, measures, results)
Page 26 (goals)
Social matters
Respect for human rights
Anti-corruption and bribery matters
1 Key:
Compensation and benefits
Pages 97 and 100 (goals, measures, results)
Pages 97 and 103 (goals, measures, results)
Page 27 (goals)
Around 130,000
Innovative
Innovation
Management's Report 35
Innovation
Around 10,000
Employees in research and
development worldwide
€1,888 million
Spent on research
and development
Around 3,000
BASF Report 2017
Projects in research pipeline
For BASF, innovation is the key to successfully standing
out from the crowd in a challenging market environment. Our
innovative strength is based on a global team of highly
qualified employees with various specializations. We had
around 10,000 employees involved in research and develop-
ment in 2017. Our three global technology platforms are run
from our key regions - Europe, Asia Pacific and North America:
Process Research & Chemical Engineering (Ludwigshafen,
Germany), Advanced Materials & Systems Research (Shanghai,
China) and Bioscience Research (Research Triangle Park,
North Carolina). Together with the development units in our
operating divisions, they form the core of our global Know-
How Verbund. BASF New Business GmbH and BASF Venture
Capital GmbH supplement this network with the task of using
new technologies to tap into attractive markets and new busi-
ness models for BASF.
In 2017, we generated sales of over €9 billion with prod-
ucts launched on the market in the past five years that
stemmed from research and development activities. In the
long term, we aim to continue significantly increasing sales
and earnings with new and improved products.
Global network
Network with around 600 universities, research
institutes and companies
Our global network of about 600 universities, research insti-
tutes and companies forms an important part of our Know-
How Verbund. We collaborate with them in many different
disciplines. The direct access to external scientific expertise,
new technologies and talented minds from various disciplines
helps us to strengthen our portfolio with creative new projects.
For instance, we are working on innovative materials for
electrochemical energy storage with the Karlsruhe Institute of
Technology (KIT) at the BELLA (Battery and Electrochemistry
Laboratory) joint laboratory.
We use the Creator SpaceⓇ approach developed by BASF
to generate innovative ideas and continuously promote
dialog with customers, partners and suppliers. We draw on
cutting-edge innovation methods here.
In our excellence program UNIQUE - The BASF Academic
Partnership Program, we are working with fifteen leading
universities around the world. BASF also runs four postdoctor-
al centers that pool collaborations with several research
groups on a regional level.
A growing need for food, energy and clean water, limited
resources and a booming world population - reconciling
all these factors is the greatest challenge of our time.
Innovations based on chemistry play a key role here, as
they contribute decisively to new solutions. Effective and
efficient research and development is a prerequisite for
innovation as well as an important growth engine for
BASF. We develop innovative processes and products
for a sustainable future and drive forward digitalization in
research worldwide. This is how we ensure our long-
term business success with chemistry-based solutions
for almost all sectors of industry.
Customers from almost
all sectors and countries
in the world
ISO 9001 is a standard published by the International Organization for Standardization (ISO) and sets out the requirements for a quality management system.
In the Oil & Gas segment, we focus on exploration and
production in oil and gas-rich regions in Europe, North Africa,
Russia, South America and the Middle East. We benefit from
strong partnerships and our technological expertise. Together
with our Russian partner Gazprom, we are also active in the
transportation of natural gas in Europe.
In close partnership with
our customers
Flexible
Thanks to in-depth expertise
and wide range of resources
BASF supplies products and services to around 130,000
customers from various sectors in almost every country
in the world. Our customer portfolio ranges from major
global customers and medium-sized businesses to end
consumers.
Customer industry orientation
Innovations and tailored solutions in close partner-
ship with our customers
Our broad portfolio - from basic chemicals to high value-added
products and system solutions - means that we are active in
Imany value chains and value creation networks. As a result,
we work with a wide range of business models, which we
flexibly adapt to the needs of individual industries. This industry
orientation is primarily driven forward and enhanced by the
divisions. Around half of our business units are oriented toward
specific industries.
For more information on the segments, see pages 62, 68, 75, 81 and 85
onward
The close alignment of our business with our customers'
needs is a key element in our "We create chemistry" strategy.
Our ability to combine in-depth expertise with a wide range of
resources to meet specific demands enables us to position
BASF as a solution-oriented system provider. We engage in
close partnerships with customers in which we develop inno-
vations and tailored solutions together and optimize processes
and applications.
Quality management
Our customers' satisfaction is the basis for long-term business
success, which is why quality management is of vital signifi-
cance for BASF. We strive to continually improve processes
and products. This is also reflected in our Global Quality Policy.
The majority of BASF's production sites and business units are
certified according to ISO 9001.1 In addition, we also meet
industry- and customer-specific quality requirements that go
beyond the ISO standard.
Products and customer relations in the segments
The business models used in our divisions are constantly
assessed and refined. We continually adapt our offering to
the changing market conditions - such as growing digitali-
zation to secure our competitiveness.
The Chemicals segment comprises the classic chemicals
business with basic chemicals and intermediates. The focus is
on cost leadership in our value chains, efficient and reliable
production and logistics processes as well as process innova-
tion.
The Performance Products segment concentrates on
tailored solutions. These enable our customers to improve the
application properties of their products or optimize production
processes, for example. Close customer contact and meeting
the demanding requirements of a wide range of industries are
crucial to business success.
The Functional Materials & Solutions segment bundles
our businesses with innovative products as well as system
solutions and services for specific sectors and customers. An
in-depth understanding of applications, the development of
innovations in close cooperation with customers and adapta-
tion to different regional needs are key success factors.
In the Agricultural Solutions segment, we help farmers to
be successful in the complex world of modern agriculture. We
offer them innovative solutions, including solutions based on
digital technologies, combined with practical, pragmatic ex-
pertise to optimize agricultural production and increase the
profitability of their farms.
Our comprehensive understanding of value chains and
value creation networks as well as our global setup and market
knowledge are key success factors.
Pages 97 and 101-102 (goals, measures, results)
Pages 93-94 (goals, measures, results)
Page 27 (goals)
SteeringⓇ
рәбиәтечо
4.3% 0.1%
(2016: 4.2%) (2016: 0.3%)
Meets basic sustainability standards
on the market
Specific sustainability issues which are being
actively addressed
Significant sustainability concern identified
and action plan in development
BASF Report 2017
As well as measuring the impacts of our operations, our busi-
ness activities are guided by sustainability considerations.
For more information on this method and the results of Value to Society,
see basf.com/en/value-to-society
For more information on our sustainability instruments,
see basf.com/en/measurement-methods and page 95
Transitioner
Portfolio management based on sustainability
performance
A significant lever for the steering of our product portfolio,
based on the sustainability performance of our products, is the
Sustainable Solution SteeringⓇ method.
-
By the end of the 2017 business year, BASF had con-
ducted sustainability assessments and ratings for 97.5% of its
entire relevant portfolio¹ of more than 60,000 specific product
applications which account for €58.4 billion in sales. We
consider the products' application in various markets and
industries. Because of increasing sustainability requirements
on the market, we regularly conduct reassessments of existing
product categories as well as of the relevant portfolio.
2020 Goal
Increase proportion of sales
generated by Accelerator products
to 28%
Accelerator products make a particular contribution to
sustainability in the value chain. That is why we want to
increase the proportion of sales from Accelerator products to
28% by 2020.
Transitioners are products with specific sustainability
challenges that are being actively tackled. We are developing
plans of action for all products classified as challenged, even
in the case of portfolio revisions and product reassessments.
These action plans include research projects, reformulations
or even replacing one product with an alternative product. At
the end of 2017, action plans had been created for 100% of
challenged products.
We played a leading role in the development of a cross-
industry framework for portfolio sustainability assessments
published by the World Business Council for Sustainable
Development (WBCSD) in November 2017, contributing our
many years of expertise in the application of this method.
For more information on Sustainable Solution SteeringⓇ,
see basf.com/en/sustainable-solution-steering
Nonfinancial statement (NFS) in accordance
with sections 315b and 315c of the German
Commercial Code (HGB)
Sustainable Solution SteeringⓇ method to manage
our product portfolio
Sustainable
Solution
68.3%
(2016: 68.3%)
Substantial sustainability contribution
in the value chain
■
Implementation of grievance mechanisms at
production sites evaluated
BASF acknowledges its responsibility to respect human rights.
In our own business activities, our aim is to prevent human
rights abuses. As a participant in numerous global value
chains, we are dependent on partners and demand that they
likewise respect human rights and the associated standards.
We offer to help our partners in their efforts to meet their
human rights responsibilities.
We integrate human rights criteria into our business activi-
ties as standard: due diligence processes in investment,
acquisition and divestiture projects, in product assessments
along the product lifecycle, in supplier evaluation processes, in
training for security personnel at our sites, as well as in sys-
tems to monitor labor and social standards.
Employees and third parties can report suspected or actu-
al violations of laws or company guidelines to our compliance
hotline. The hotline received 193 human rights-related com-
plaints in 2017. All complaints received are reviewed and for-
warded to the relevant departments for in-depth investigation.
If justified, suitable measures are taken to address the issue.
We also documented the implementation of our minimum
standards on grievance mechanisms as part of the community
advisory panels at all production sites worldwide in 2017.
These are based on the U.N. Guiding Principles on Business
and Human Rights. Building on this, in 2018 we aim to ensure
the uniform application of these standards at sites with an
established local grievance mechanism.
BASF is part of the Global Business Initiative on Human
Rights (GBI). This group of globally operating companies from
various sectors aims to ensure implementation of the U.N.
Guiding Principles on Business and Human Rights. In 2017,
we again consulted with representatives of civil society at an
international and national level on an ongoing basis, which
provided valuable input for our measures.
For more information on our human rights position,
see basf.com/humanrights and pages 47 and 135
For more information on labor and social standards,
see page 47 onward
For more information on our production standards, see page 98 onward
For more information on standards in our supply chain,
see page 93 onward
For more information on compliance, see page 135 onward
Measuring value added by sustainability and
harnessing business opportunities
Value to Society: method for assessing economic,
environmental and social impact of business
activities along the value chain
We take advantage of business opportunities by offering our
customers innovative products and solutions that contribute
to sustainable development. We ensure that sustainability cri-
teria are integrated into our business units' development and
implementation of strategies, research projects and innovation
processes. For example, we analyze sustainability-related
market trends in customer industries to systematically exploit
new business opportunities.
We want to measure the value proposition of our actions
along the entire value chain, aware that our business activities
are connected to both positive and negative impacts on the
environment and society. We strive to increase our positive
contribution to society and minimize the negative effects of our
business activities.
In order to achieve this, we need to understand how our
actions impact society and the environment. We already have
many years of experience evaluating our products and pro-
cesses using methods such as eco-efficiency analyses, the
Sustainable Solution SteeringⓇ portfolio analysis, or BASF's
corporate carbon footprint.
Building on this, BASF has developed a method with
external experts to perform a monetary assessment of the
economic, ecological, and social impacts of its business activ-
ities along the value chain - the Value to Society approach. It
enables a direct comparison between financial and nonfinan-
cial effects on society, along with how these interact.
This transparency supports the integrated character of our
actions, contributing to BASF's long-term success. The results
of these assessments are helpful in our discussions with stake-
holders, in internal progress measurements, and in decision-
making processes.
We contribute our approach and expertise to current
debates on the monetary value of the economic, environ-
mental and social impact of business decisions. We share our
experience in networks and are involved in the corresponding
standardization processes within the International Organiza-
tion for Standardization (ISO).
Among other initiatives, BASF has participated in the
Coalition for Inclusive Capitalism's Embankment Project since
2017. In the project, leading global companies and investors
are working on a common understanding of how companies
can create value over the long term. The initiative aims to
strengthen trust in business and in this way, generate long-
term corporate value.
32 Management's Report
Our strategy Integration of sustainability
Sustainable Solution SteeringⓇ: How BASF's products contribute to sustainability
27.3%
(2016: 27.2%).
Accelerator
elerator Performer
In order to meet the new reporting requirements of the CSR
Directive Implementation Act, we conducted an additional
internal analysis based on the materiality criteria defined by the
legislation in 2017. Findings of a systematic survey already
conducted internally were used to analyze the effects of
sustainability topics along the value chain on BASF's business.
We were able to derive BASF's impact along the value chain
on the nonfinancial matters defined by the legislation based on
the results of the Value to Society method. The nonfinancial
statement (NFS) in accordance with sections 315b and 315c
of the German Commercial Code is integrated into the
Management's Report.
Pages 97 and 99 (goals, measures, results)
Pages 97 and 100 (goals, measures, results)
Page 27 (goals)
The NFS disclosures can be found in the relevant sections
of the Management's Report and have been prepared in
accordance with the new Global Reporting Initiative Standards
("Comprehensive" application option) and the reporting
requirements of the U.N. Global Compact.
The North American Center for Research on Advanced
Materials (NORA) and the California Research Alliance (CARA)
postdoctoral centers are located in the United States. In 2017,
BASF extended the cooperation between NORA and its
academic partners by another five years and celebrated
the 10-year anniversary of the partnership with Harvard
University. Focus areas include materials science, bioscience,
catalysis research, digitalization and cooperation with start-
ups. The CARA multidisciplinary collaboration has been work-
ing on new functional materials and in the area of biosciences
for three years now. It has established more than 25 research
projects, which have resulted in many scientific discoveries
and patent applications. In 2017, we announced that the
collaboration between CARA researchers and BASF experts
will continue for another five years.
Occupational safety
Suppliers
Management of waste and contaminated sites
Portfolio management
Emissions to air
Water
Energy and climate protection
Transportation and storage
Emergency response and corporate security
Product stewardship
Process safety
The BASF Group
Competition for talent
Topics
Environmental matters
Business model
NFS disclosure
Nonfinancial statement (NFS) disclosures in the relevant chapters of the integrated report
An assurance report on the sustainability information in the
BASF Report 2017 can be found online at
basf.com/sustainability_information
☐ An assurance report on the substantive audit of the nonfinancial
statement can be found online at basf.com/nfs-audit
Both the NFS disclosures and our sustainability reporting
based on the GRI standards have undergone an audit with
limited assurance by our auditor.1 The table below indicates
the sections and subsections in which the individual NFS
disclosures can be found.
Management's Report 33
Our strategy Integration of sustainability
BASF Report 2017
1 Not included in the portfolio are primarily the sales reported under Other (see page 90 for more information on the composition of Other) or not allocated to the operating business (such
as licences).
Employee-related matters
What we expect from our leaders
Learning and development
Health protection
Concepts
Page 20-22
Inclusion of diversity
BASF Group new hires in 2017
Europe
Additions to property, plant and equipment' by region in 2017
4
3
1
North America
Europe
56%
2
North America
20%
3
Asia Pacific
18%
4 South America, Africa, Middle East
6%
1 Including capitalized exploration, restoration obligations
and IT investments
Asia Pacific
Acquisitions
We added €8 million worth of property, plant and equipment
through several acquisitions in 2017. Additions to intangible
assets including goodwill amounted to €235 million.
For more information on acquisitions, see the Notes to the Consolidated
Financial Statements from page 187 onward
On September 18, 2017, we signed an agreement with Solvay
on the acquisition of Solvay's global polyamide business. The
aim is to close the transaction in the third quarter of 2018 after
regulatory approvals have been obtained and the consent of a
joint venture partner has been received. The acquisition would
complement our engineering plastics portfolio and expand our
position as a solutions provider for the transportation, con-
struction and consumer goods industries as well as for other
industrial applications. We plan to integrate the global polyamide
business into the Performance Materials and Monomers divi-
sions. The purchase price excluding adjustments is €1.6 billion.
On October 13, 2017, we signed an agreement with Bayer
AG, Leverkusen, Germany, on the acquisition of significant
parts of Bayer's seed and non-selective herbicide businesses.
The agreement covers Bayer's global glufosinate-ammonium
non-selective herbicide business, commercialized under the
Liberty®, BastaⓇ and Finale® brands, as well as its seed
businesses for key row crops in selected markets. The
acquisition also covers Bayer's trait research and breeding
capabilities for these crops. Closing is expected in the first half
of 2018, subject to Bayer's acquisition of Monsanto and
approval by the relevant authorities. The purchase price
amounts to €5.9 billion, subject to certain adjustments at
closing.
Our aim is to position BASF as an attractive employer and
recruit qualified talent in the global competition for the best
skilled employees and leaders. To this end, we are constantly
working on measures to increase BASF's appeal in the global
labor markets and to help create a compelling total offer pack-
age for employees. We are increasingly using digital platforms
such as our country-specific career websites as well as global
and regional social networks to reach potential candidates.
This enables us to address specific target groups. For instance,
we increased awareness of BASF among digital specialists in
particular with a global campaign on various social media. In
Brazil, we used Snapchat a special instant messenger to
send images and other media - for the first time in 2017 to
directly address candidates for the trainee program and give
them a better understanding of the company. In Germany, we
held the first BASF hackathon. Around 50 university students
solved a specific problem from our divisions within 24 hours
and presented their solutions to a panel of BASF experts. In
North America, the Diverse Leaders program was initiated to
attract talented leadership candidates with an MBA from differ-
ent backgrounds. We once again achieved high scores in a
number of employer rankings in 2017. For example, in a study
conducted by Universum, BASF was again selected by engi-
neering and IT students as one of the 50 most attractive
employers in the world. In North America, BASF was rated one
of the top 50 employers on the employer rating website glass-
door.com. In Asia, Top Employer recognized BASF China as
one of the best employers for the seventh time in succession.
€4,020 million
Focus on social media and online marketing
28.1%
■
115,490
Employees
around the world
Life-long learning
On center stage
BASF Report 2017
3,103
Apprentices¹
in around 50 occupations
Our employees are key to implementing the "We create
chemistry" strategy. We want to attract and retain talented
people for our company and support them in their
development. To do so, we cultivate a working environ-
ment that inspires and connects people. It is founded on
inclusive leadership based on mutual trust, respect and
dedication to top performance.
Strategy
-
Best Team Strategy focuses on excellent people,
workplace and leaders
The Best Team Strategy is derived from our corporate strategy
and plays a key role in achieving our goals. We want to form
the best team. To achieve this, we focus on three strategic
directions: excellent people, excellent place to work and
excellent leaders. Emphasis is placed on our attractiveness in
worldwide labor markets, personal and professional develop-
ment, lifelong learning, and supporting and developing our
leaders. We are committed to complying with internationally
recognized labor and social standards worldwide. In addition,
BASF reacts early to external trends and challenges such as
the advance of globalization and the increasingly rapidly
changing environment, especially as this relates to the digitali-
zation of work.
The Best Team Strategy also addresses the balance
needed between the inherently local nature of human
resources issues and regional or global requirements (concept,
structure, process) for the human resources topics that are of
overriding importance for BASF.
Number of employees
At the end of 2017, BASF had 115,490 employees (2016:
113,830); of these, 3,103 were apprentices (2016: 3,120). The
higher headcount was primarily due to the acquisitions of
Grupo Thermotek, Monterrey, Mexico, Rolic AG, Allschwil,
Switzerland, and the western European building material
business for professional users from the Henkel group.
BASF Group employees by region
(Total: 115,490, thereof 24.6% women, as of December 31, 2017)
North America
18,295
15.8%
HOO!
24.6%
75.4%
Working at BASF
South America,
Working at BASF
42 Management's Report
Positioning as an attractive employer
Competition for talent
Management's Report 43
Working at BASF
BASF Report 2017
1 At BASF, the apprenticeship program trains students for technical, scientific and business vocations as well as for trade and craft professions.
4%
23.9%
71.9%
74.1%
18,256
15.8%
Asia Pacific
25.9%
10!
Germany: 54,020 (46.8%)
23.7% women and 76.3% men
BASF SE: 34,923 (30.2%)
21.5% women and 78.5% men
76.1%
OL
71,653
62.1%
Europe
7,286
6.3%
For more information on agreed transactions, see the Notes to the
Consolidated Financial Statements from page 189 onward
1
Intended transactions
On December 7, 2017, we signed a letter of intent with the
LetterOne group on the merger of our respective oil and gas
businesses including BASF's gas transportation business in
a joint venture, which would operate under the name Winters-
hall DEA. The merger is designed to optimize the portfolio
footprint of the combined business and exploit synergies.
Wintershall DEA would have significant growth potential and
be one of the largest independent European exploration and
production companies. BASF shall initially hold 67% and
LetterOne 33% of the shares in Wintershall DEA.2 Following
the closing of the transaction, we expect to account for our
interest in the joint venture using the equity method in the
Consolidated Financial Statements. In the medium term, BASF
and LetterOne aim to list Wintershall DEA on the stock mar-
kets by way of an initial public offering. The definitive transac-
tion agreements are to be negotiated over the coming
months. There is no assurance that we will reach an agree-
ment with LetterOne and that the intended transaction will be
consummated.
For more information, see page 86 onward
2 BASF's gas transportation business is not included in this shareholding ratio. As of closing, Wintershall DEA would issue a mandatory convertible bond to BASF reflecting the value of
BASF's gas transportation business.
Africa,
Middle East
■
Trends in the chemical industry
24%
700
800
900
1,000
1,100
$/t
Price trends for crude oil (Brent blend) and naphtha ($/barrel, $/metric ton)
Figures that refer to previous years may deviate from last year's report due to statistical
revisions.
600
(0.8%)
2017 0.5%
South America
2016 1.7%
2017 7.2%
Japan
2016 5.8%
2016 0.4%
2017 2.9%
2016 1.0%
2017 3.8%
Emerging markets
of Asia
2016
United States
500
300
South America, Africa,
Middle East
© 2017: $54/bbl
2016: $44bbl
© 2017: $485/t
2016: $385/t
2013
50
Crude oil
Naphtha
60
70
400
80
100
110
120
130
$/bbl
2012
100
200
90
2017 3.8%
European Union
2016 3.4%
Management's Report 41
Investments, acquisitions and divestitures
1
2
Divestitures
On September 29, 2017, we transferred our leather chemicals
business to the Stahl group. In return, we received a minority
share in the Stahl group as well as a payment. Furthermore, in
the medium to long term, we will supply the Stahl group with
significant volumes of leather chemicals from remaining plants.
For more information on divestitures, see the Notes to the Consolidated
Financial Statements from page 188 onward
6
Chemicals
28%
123456
5
18%
Functional Materials & Solutions
22%
€4,020 million
Agricultural Solutions
4%
4
Oil & Gas
Performance Products
Additions to property, plant and equipment' by segment in 2017
BASF Report 2017
1.7%
2017 3.5%
The average price of gas in the United States was $2.97
per mmBtu, above the level of the previous year ($2.49 per
mmBtu). In Europe, the average price of gas on the spot
market was significantly higher than in 2016, at $5.71 per
mmBtu (2016: $4.62 per mmBtu).2 Gas prices in China aver-
aged around $6.24 per mmBtu nationally (2016: $6.54 per
mmBtu), while the average price in the coastal regions was
$7.43 per mmBtu (2016: $7.72 per mmBtu).
The average monthly price for the chemical raw material
naphtha ranged over the course of 2017 between $401 per
metric ton in June and $576 per metric ton in December. At
$485 per metric ton, the annualized average price of naphtha
in 2017 was higher than in 2016 ($385 per metric ton).
Averaging around $54 per barrel in 2017, the price of Brent
blend crude oil rose by about 23% compared with the previ-
ous year ($44 per barrel). The average monthly oil price fluctu-
ated over the course of the year between $47 per barrel in
June and $64 per barrel in December.
Year-on-year increase in gas prices, but with wide
regional variance
Higher prices for crude oil and naphtha
Important raw material price developments
World
(Real change compared with previous year¹)
Chemical production (excluding pharmaceuticals)
The global chemical industry (excluding pharmaceuticals)
grew by 3.5%, roughly on a level with our expectations at the
beginning of 2017 (+3.4%) as well as the 2016 level (+3.4%).
Chemical production in the E.U. expanded at a much faster
rate as a result of growing demand from local customer indus-
tries and higher exports (2017: +3.8%; 2016: +0.4%). By
contrast, the chemical industry in Asia saw lower growth
(2017: +4.1%; 2016: +5.2%). Unusually strong growth in
Japan, primarily from higher exports to China, was unable to
completely offset the decline of growth in China. In North
America, chemical production was negatively impacted by
Hurricane Harvey, which led to significant production outages
in the United States in the third quarter. Chemical production
in the United States nevertheless rose by 2.9%.
■ Global growth in line with expectations
BASF Report 2017
Economic environment
The BASF Group business year
50 Management's Report
1 Figures that refer to previous years may deviate from last year's report due to statistical
revisions.
Agriculture
Electronics
Other (infrastructure, R&D)
Total
2016
3,987
BASF Report 2017
3.1%
Growth in global gross
domestic product
3.3%
Growth in global
industrial production
3.5%
Growth in the global
chemical industry
Global economic expansion in 2017 was stronger than we
expected at the beginning of 2017. Both the advanced
economies and the emerging markets posted significantly
higher growth compared with the previous year. The
economy gained momentum in almost all European Union
(E.U.) countries. In China, economic growth was slightly
stronger than in the previous year on the back of govern-
ment investment incentives. This benefited the neighbor-
ing Asian countries in particular. China's robust economy
also had a positive impact on raw materials exporters
worldwide, enabling Russia and Brazil to shake off reces-
sion, for example. Overall, global gross domestic product
(GDP) grew by 3.1%, significantly faster than in 2016
(+2.4%). The average price for a barrel of Brent blend
crude oil rose to $54 per barrel (2016: $44 per barrel).
For the outlook on the economic environment in 2018,
see page 119 onward
Gross domestic product
(Real change compared with previous year¹)
World
European Union
2017 3.1%
2016 2.4%
2017 2.5%
2016 1.9%
United States
2017 2.3%
2016 1.5%
Emerging markets
of Asia
2017 6.3%
2016 6.1%
2017 1.6%
2016 0.9%
South America
2017 0.8%
2016 (2.9%)
The BASF Group business year
Economic environment
Japan
The BASF Group business year - Economic environment
The guideline provides concrete interpretations for the topics outlined in the global Code of Conduct under "Human Rights and International Labor Standards."
12.4
10,165
4.4
For more information, see the Notes to the Consolidated Financial
Statements from page 200 onward
BASF Report 2017
Management's Report 47
Working at BASF
Global Employee Survey
The BASF Group's Global Employee Survey is an important
feedback tool and is used to actively involve employees in
shaping their working environment. We have conducted the
Global Employee Survey on a regular basis since 2008; the
next one is scheduled for 2018. The results of the 2015 survey
were presented to the Board of Executive Directors and the
Supervisory Board. Employees and leaders in all regions then
discussed the results and identified the necessary improve-
ment measures. These related to topics such as supporting
employees in their professional development, intensifying
feedback, or supporting leaders and their teams in driving
change and innovation.
Dialog with employee representatives
Trust-based cooperation with employee representatives is an
important component of our corporate culture. Our open and
ongoing dialog lays the foundation for balancing the interests
of the company and its employees, even in challenging situa-
tions. If restructuring leads to staff downsizing, for example,
we involve employee representatives to develop socially
responsible implementation measures at an early stage. This is
done in accordance with the respective legal regulations and
the agreements reached. It is important to us that this dialog is
based on the specific operational situation. For example, in
2017 we developed a qualification concept and derived quali-
fication measures from this together with the employee repre-
sentatives at the Ludwigshafen site to familiarize employees
with new digital working practices in production and support
the introduction of applications for mobile devices. By focusing
our discussions on the local and regional situations, we aim to
find tailored solutions to the different challenges and legal
considerations for each site. The BASF Europa Betriebsrat
(European Works Council) addresses cross-border matters in
Europe. The Diálogo Social has established a platform for
dialog in South America.
For more information, see basf.com/employeerepresentation
Global labor and social standards
■
■
Alignment with U.N. Guiding Principles on Business
and Human Rights
Adjusted management process for monitoring
adherence to labor and social standards
As an integral part of society, we act responsibly toward our
employees. Part of this is our voluntary commitment to
respecting international labor and social standards, which we
have embedded in our global Code of Conduct. This encom-
passes internationally recognized labor norms as stipulated in
the United Nations' Universal Declaration of Human Rights,
the OECD Guidelines for Multinational Enterprises, and the
Tripartite Declaration of Principles Concerning Multinational
Enterprises and Social Policy of the International Labour Orga-
nization (ILO). BASF is committed to upholding these stan-
dards worldwide. We mainly approach our adherence to inter-
national labor and social standards using three elements: the
Compliance Program (including external compliance hotlines),
close dialog with our stakeholders (such as with employee
representatives or international organizations) and the global
management process for the respect of international labor
norms.
We completed the restructuring of our management pro-
cess in 2017. A Group-wide guideline now sets out a BASF
standard for compliance with international labor and social
standards. A compliance risk management process monitors
its implementation. We completed a risk-based assessment of
all the countries in which BASF operates by the end of 2017.
In countries where the guideline cannot be readily implement-
ed because of national laws, rules or practices, we will evaluate
to what extent meaningful adaptations can be made within the
scope of local requirements. A centralized due diligence system
is used to regularly assess and document this information, as
well as the set targets and measures to implement the guide-
line. Starting in 2018, the degree of compliance with the
guideline in BASF Group companies will be reviewed using
internal control processes such as compliance audits.
For more information on labor and social standards,
see basf.com/labor_social_standards
For more information on global standards, see page 24
For more information on our sustainability-related risk management,
see page 29
For more information on compliance, see page 135 onward
48 Management's Report
627
1 Figures that refer to previous years may deviate from last year's report due to statistical
revisions.
After moderate growth in the previous year, the global economy
improved steadily in 2017. This trend was supported by
monetary and fiscal policy framework conditions. Interest rates
remained at a very low level in Europe and Japan. In the United
States, the Federal Reserve's policy rate hikes only led to a
moderate increase in long-term interest rates. Global prices for
industrial and energy raw materials rose moderately, which
helped to stabilize the economic situation in the exporting
countries. At the same time, the price level remained low
enough so as not to dampen economic development in the
importing countries. Consumer and investor sentiment contin-
ued to brighten against this backdrop.
Energy and
2017
1.6%
resources
2016
0.2%
2017
2.9%
2016
3.1%
Consumer goods
2017
3.1%
2.3%
2017
7.9%
2016
4.5%
Health and nutrition
2017
4.1%
2016
3.6%
2017
40
2.7%
Trends in the global economy in 2017
2016
2017
Economic trends by region
■ Stronger economic growth in the E.U.
■ Economy firms in the United States
Stable growth in Asia
Slight recovery in South America
In the E.U., GDP growth rose from 1.9% in 2016 to 2.5%
in 2017. The upturn extended to almost all E.U. countries and
was supported by higher consumption and growing invest-
ment. Driven by the more stable global economy, export activ-
ities also provided positive momentum. Germany's economy
saw comparatively strong growth, at 2.5%. Growth rates in
France (+1.9%) and Italy (+1.5%) also exceeded the previous
years' averages. The independence conflict in Catalonia has
had little impact on the Spanish economy (+3.1%) so far.
Growth in the United Kingdom (+1.8%) remained on a level
with the previous year amid uncertainty about the further
course of Brexit negotiations and rising inflation. The central
and eastern E.U. countries recorded dynamic growth of 4.5%
thanks to the upturn at trading partners in western Europe and
the higher absorption of E.U. funds. Russia's GDP rose by
1.7% after a slight decline in the previous year, primarily due to
the recovery in the price of oil and the stabilization of the ruble.
BASF Report 2017
Management's Report 49
The BASF Group business year - Economic environment
In the United States, growth remained modest at the begin-
ning of 2017 but stabilized over the course of the year. This
was mainly attributable to strong private consumption on the
back of the solid labor market situation. Higher levels of invest-
ment also contributed to the positive economic trend. The
hurricanes in Texas and Florida in the fall did not dampen
growth significantly. Overall, the U.S. economy expanded by
2.3% in 2017, considerably faster than in 2016 (+1.5%).
At 6.3%, growth in the emerging markets of Asia was
slightly higher than in the previous year (+6.1%). In China,
government investment incentives compensated for a slow-
down. The Chinese economy grew by 6.9% overall, slightly
faster than in 2016 (+6.7%). In 2017, this was primarily driven
by the electronics industry, while the automotive industry saw
much slower growth than in the previous year. The robust
upward trend in the Chinese construction industry weakened
only slightly. Against this background, GDP in the remaining
emerging markets of Asia rose by 5.5% (2016: +5.3%).
Japan saw much stronger growth than in the previous
year, at 1.6% (2016: +0.9%). The weaker yen and the recovery
of the global economy stimulated demand for Japanese
exports. Private consumption was buoyed by the strong labor
market and a declining savings rate.
South America overcame the severe recession of the
previous year, with GDP rising by 0.8% (2016: -2.9%). In
Argentina, the economy picked up significantly as a result
of economic reforms and grew by 2.8% (2016: -2.2%). The
Brazilian economy also expanded, with growth of 1.0% (2016:
-3.6%) on the back of higher agricultural exports and an
increase in industrial production. With the exception of Vene-
zuela, where the economy again contracted significantly, aver-
age growth in the other countries in the region was on a level
with the previous year.
Trends in key customer industries
■ Growth in global industrial production significantly
higher than in 2016
■ Mixed trends in key customer sectors
Global industrial production grew by 3.3% in 2017, significant-
ly faster than in the previous year (+2.1%). Growth in the
advanced economies accelerated particularly strongly (2017:
+2.6%; 2016: +0.8%) and the emerging markets also posted
a slight increase (2017: +4.0%; 2016: +3.5%).
The uptick in growth was especially pronounced in the
E.U. (2017: +3.3%; 2016: +1.4%) and Japan (2017: +3.9%;
2016: +0.3%). North America saw noticeable growth based
on the low prior-year level (2017: +1.6%; 2016: +0.3%). In the
emerging markets of Asia, growth in industrial production was
down slightly on the previous year, at 5.5% (2016: +5.8%).
Industry growth remained stable in China but cooled some-
what in the other countries. At 0.2%, industrial production in
South America returned to slow growth (2016: -4.6%).
The chemical industry's key customer sectors saw very mixed
trends: Global automotive production only grew by 2.5% in
2017, considerably less than in the previous year (+4.8%).
Growth declined in both China and western Europe; automo-
tive production contracted in the United States. By contrast,
the industry experienced an upturn in Japan. Compared with
the low prior-year level, production increased significantly in
Brazil and Russia. At 2.9%, growth in the construction indus-
try was down only slightly compared with the previous year
(+3.1%). The E.U. saw a strong increase in construction activ-
ity. Growth in the United States again slowed considerably.
Housing construction expanded strongly, while construction
of other structures declined slightly. There was a significant
decline in infrastructure investment. In Asia, growth in the
construction industry was slightly slower but remained at a
high level. After weather-related weaknesses in the previous
year, agricultural output again rose by around 3.1%. Starting
from a low base, South America in particular saw a recovery
(2017: +8.8%; 2016: -3.4%).
Growth in key customer industries
(Real change compared with previous year¹)
Construction
Industry total
2017
3.3%
2016
2.1%
Transportation
2.6%
705
10,610
Thereof for pension benefits
Total personnel expenses
7.2
We offer our leaders learning and development opportuni-
ties for all phases of their career, as well as various formats
that enable them to share knowledge and learn from one
another. Global, regional and local offerings are coordinated.
For instance, the European Emerging Leader program pre-
pares leadership candidates from all over Europe for a leader-
ship role. The global New Leader Program is a basic qualifica-
tion to get new leaders off to a good start in their new, more
responsible role. The modular structure of the program means
that it can be adapted to regional needs. One example of the
development of experienced leaders is a program developed
in North America where experienced leaders from BASF are
brought together with leaders from other companies. This
broadens participants' perspectives, promotes dialog and
builds networks beyond company borders.
Regular feedback plays an important role in the develop-
ment of leaders. One tool is Global Leadership Feedback,
where leaders receive feedback from their employees, manag-
ers, colleagues and customers on their conduct.
Leadership responsibility in the BASF Group
Professionals¹
(Senior) executives²
December 31, 2017
37,642
9,388
Thereof women %
29.7
1 Specialists without disciplinary leadership responsibilities
2 Employees with disciplinary leadership responsibilities
20.5
Learning and development
■ Life-long learning concept
■ Focus on virtual learning and digitalization
Learning and development are essential success factors for a
strong company culture. The skills and competencies of our
employees are critical for profitable growth and lasting suc-
cess. For this reason, we want to further modernize our learn-
ing culture and step up our efforts to promote lifelong, self-
directed learning as part of the Best Team Strategy.
This learning culture is based on systematic employee
development. In our understanding, there is more to develop-
ment than a promotion or a job change - it encompasses all
forms of further development of personal experience and
abilities. We have derived specific day-to-day behavioral stan-
dards from our corporate strategy and integrated these into
our global Competency Model. In regular development meet-
ings, which are held as part of our annual employee dialogs,
employees outline prospects for their individual development
together with their leaders and determine specific measures
for further training and development, which focus on personal
and professional competencies. We have now implemented
our employee development concept worldwide using a struc-
tured process and appropriate tools and have introduced
personal development meetings for all employees.
Our learning activities follow the "70-20-10" philosophy:
We apply the elements “learning from experience" (70%),
"learning from others” (20%) and “learning through courses
and media" (10%). Our learning and development offerings
cover a range of learning goals: starting a career, expanding
knowledge, personal growth and leadership development.
Virtual learning is playing an increasingly important role here. In
Asia, a Virtual Week was held for the first time in 2017, where
over 1,100 employees from 15 countries virtually discussed
topics such digitalization, sustainability and change manage-
ment. In addition, more and more of our academies in the
divisions and functional units, which teach specific profession-
al content, offer virtual training. One example of a successful
development measure in the area of virtual learning is Virtual
Presence, in which employees learn how to communicate
effectively in virtual meetings in an increasingly digital world.
Initially offered to leaders, this training will be available to all
employees starting in 2018. In North America, we expanded
our learning offering with a flexible and efficient new learning
platform that offers compact modules for all employees.
BASF Report 2017
Management's Report
Working at BASF
Inclusion of diversity
Promoting diversity is part of our company culture
The strong global character of our markets translates into dif-
ferent customer requirements - and we want to reflect this
diversity in our workforce, too. For us, diversity is first and
foremost about bringing together employees with different
backgrounds who can draw on different perspectives to grow
our business. At the same time, we want to better understand
our customers' expectations. Diversity also boosts our teams'
performance and power of innovation, and increases creativi-
ty, motivation and identification with the company. Promoting
diversity is an integral part of our corporate culture and as
such, it is also anchored in the global Competency Model as
one of the behaviors expected of employees and leaders. This
is how we promote the appreciation and inclusion of diversity.
Leaders play an important role in its implementation. We sup-
port them by integrating topics such as inclusive leadership
into our leadership development courses. Special seminars
are held to sensitize leaders to the issue of unconscious bias.
The aim is to help leaders remain as objective as possible
when making personnel decisions, for example, to avoid
unconscious biases in favor of or against candidates with
certain characteristics or views.
2021 Goal
Proportion of women in
leadership positions with
disciplinary responsibility
22-24%
Since 2015, BASF has set itself global quantitative goals for
increasing the percentage of women in leadership positions. In
the BASF Group, the global proportion of female leaders with
disciplinary responsibility was 20.5% at the end of 2017 (2016:
19.8%). We aim to increase this ratio to 22-24% worldwide by
2021, so that the proportion of women in leadership positions
reflects that of women in the global company workforce. Con-
sidering the relatively low rate of turnover in the BASF Group's
leadership team, this is an ambitious goal that we want
to achieve through various measures. One example is the
KarrierePlus program, which supports leaders and future
leaders with young children in their professional development
with mentoring, networking events and training. The mentors
gain insights into successful models for flexible work and
leadership. BASF has been a member of the Chefsache initia-
tive since 2016, a network of leaders from industry, academia,
the public sector and media. The initiative aims to initiate social
change such as increasing the percentage of women in lead-
ership positions in Germany. Furthermore, BASF wants to
continue increasing the percentage of senior executives¹ that
Our leaders and their teams should make a sustainable contri-
bution to BASF's success and to safeguarding its future. We
expect our leaders to serve as role models by developing and
implementing business strategies in line with our corporate
values. They should also have a positive impact on shaping
day-to-day business, motivating employees and fostering their
development. These expectations are part of the standard
global nomination criteria for leadership candidates. Our lead-
ership culture is founded on BASF's strategic principles and
values, which are set out in specific behavioral standards in
the global Competency Model, as well as our global Code of
Conduct.
come from countries other than Germany. This figure was at
38.9% at the end of 2017 (2016: 36.4%). Moreover, we intend
to maintain the proportion of senior executives with interna-
tional experience at over 80%. We exceeded this figure again
in 2017, reaching 84.6%. With these goals, we continue to
drive our globally integrated approach to promoting diversity
and leadership development.
Multifaceted offers for leadership development
- Leaders as role models
2,002
2,141
786
8,916
Thereof women %
29.3
30.1
24.9
38.8
29.3
The BASF Group hired 8,916 new employees in 2017. The
average percentage of employees who resigned during their
first three years of employment was 1.3% worldwide in 2017.
This turnover rate was 0.7% in Europe, 1.9% in North America,
3.0% in Asia Pacific and 2.1% in South America, Africa, Middle
East. Our early turnover rate is therefore at a desirable low
level.
Vocational training
- 3,103 apprentices in around 50 occupations worldwide
■ Around €106 million spent on vocational training
Our vocational training plays a key role in securing qualified
employees at our largest site in Ludwigshafen, Germany, as
well as at many other Group companies. We give school
students in the career orientation phase insights into different
training paths with target group-specific measures such as the
Wunschberuf im Praxistest ("Test Drive Your Dream Job") day,
which is held several times a year.
Digitalization is also changing vocational training at BASF.
Course content is adapted to include new Industry 4.0 topics
such as modules on data management or automation, and
modern communication technologies make new learning
methods possible. Young people train for their future profes-
sion in modern workshops and laboratories, where they use
digital technologies from the start.
In 2017, 831 apprentices started their vocational training
at BASF SE and at German Group companies, filling almost
all available vocational program slots in Germany. As of
December 31, 2017, the BASF Group was training 3,103
people in 15 countries and around 50 occupations. We spent
a total of around €106 million on vocational training in 2017.
BASF Group employees by contract type (total: 115,490)
Permanent staff
Apprentices
Temporary staff
December 31, 2017
109,837
Thereof women %
24.1
3,103
2,550
24.3
43.9
We also foster social integration, particularly of young low
achievers and refugees. Examples of this include the Start in
den Beruf, Anlauf zur Ausbildung and Start Integration
programs in the Rhine-Neckar metropolitan region. In 2017,
284 young people in the BASF Training Verbund participated
in these programs in cooperation with partner companies. The
goal of these programs is to prepare participants for a subse-
quent apprenticeship within one year, and ultimately secure
the long-term supply of qualified employees in the region.
Since being launched at the end of 2015, BASF's Start
Integration program has supported 250 refugees with a high
probability of being granted the right to remain in Germany,
helping to integrate them into the labor market. We spent
around €6 million on the BASF Training Verbund in 2017 as
part of our social commitment.
For more information, see basf.com/apprenticeship
44 Management's Report
Working at BASF
BASF Report 2017
What we expect from our leaders
■
For more information, see basf.com/diversity
For more information on diversity in the Board of Executive Directors
and the Supervisory Board, see page 131 onward
Managing demographic change
Balancing personal and professional life
Wide range of offerings for different phases of life
Our identity as an employer includes our belief in supporting
our employees worldwide in balancing their personal and
professional lives. We lay the foundation with a wide range of
offerings to help our employees meet their individual needs
and overcome challenges in different phases of life. We want
to strengthen their identification with the company and bolster
our position as an attractive employer in the competition for
qualified personnel. Our offering includes flexible working
hours, part-time employment and mobile working. Regional
initiatives specifically address the needs of our employees at a
local level. In the United States, a new family-friendly leave
program was introduced in 2017 that enables employees to
concentrate solely or primarily on their families for a certain
period of time in important life-changing situations. Our Work-
Life Management employee center in Ludwigshafen (LuMit)
offers a number of services under one roof: childcare, fitness
and health, social counseling and coaching as well as other
programs to help employees balance professional and per-
sonal life. We also provide social counseling at the Münster
and Schwarzheide sites in Germany as well as in Asia, South
Africa and North America to help employees overcome difficult
life situations and maintain their employability.
Compensation and benefits
Compensation based on employee's position and
individual performance as well as company's success
We want to attract committed and qualified employees, retain
them and motivate them to achieve top performance with an
attractive package including market-oriented compensation,
individual development opportunities and a good working envi-
ronment. Our employees' compensation is based on market-,
position- and performance-related global compensation princi-
ples. By linking compensation to both company and individual
performance, employees can participate in the company's
success and be rewarded for their individual performance. As a
rule, compensation comprises fixed and variable components
as well as benefits that often exceed legal requirements. In
many countries, these include company pension benefits,
supplementary health insurance and share programs. We reg-
ularly review our compensation systems at local and regional
levels.
Employees participate in the company's success
Return on assets determines variable compensation
We want our employees to contribute to the company's long-
term success. This is why the compensation granted to vast
majority of our employees includes variable compensation
components, with which they participate in the success of the
BASF Group as a whole and are recognized for their individual
performance. The same principles basically apply for all
employees worldwide. The amount of the variable component
is determined by the company's economic success (measured
by the return on assets¹ of the BASF Group) as well as
the employee's individual performance. Individual performance
is assessed as part of a globally consistent performance
management process. In numerous BASF Group companies,
employees are offered the chance to purchase shares. Our
plus share program ensures employees' longterm participation
in the company's success through incentive shares: A portion
of the variable compensation can be invested in BASF shares
in order to profit from BASF's long-term development. In 2017,
for example, 23,700 employees worldwide (2016: approx-
imately 24,000) participated in the plus share program.
BASF offers senior executives the opportunity to partici-
pate in a share price-based compensation program. This
longterm incentive (LTI) program ties a portion of their annual
variable compensation to the longterm performance of BASF
shares by making an individual investment in the company's
stock. In 2017, 92% of the approximately 1,200 people eligible
to participate in the LTI program worldwide did so, investing
up to 30% of their variable compensation in BASF shares.
For more information, see the Notes to the Consolidated Financial
Statements from page 231 onward a
Personnel expenses
In 2017, the BASF Group spent €10,610 million on wages and
salaries, social security contributions and expenses for pen-
sions and assistance (2016: €10,165 million). Personnel
expenses thus rose by 4.4%. As well as wage and salary
increases, this was primarily attributable to a higher average
headcount following the acquisition of Chemetall. The partial
release of provisions for the long-term incentive program and
currency effects had an offsetting effect.
BASF Group personnel expenses (million €)
2017
2016
Change
in %
8,471
8,170
3.7
To calculate variable compensation, return on assets is adjusted for special effects.
Wages and salaries
Social security contributions
and expenses for pensions
and assistance
2,139
1,995
BASF Report 2017
Working at BASF
46 Management's Report
45
Leadership duties include "leadership in times of
demographic change"
-
Our aim is to create a suitable framework to help maintain the
employability of our personnel at all stages of life and ensure
the availability of qualified employees - particularly in a techno-
logical environment over the long term. We are working
intensively on future trends like new technologies and digitali-
zation (Industry 4.0). We see digitalization as an opportunity to
meet the challenges of demographic change.
The demographic situation within the BASF Group varies
widely by region. The ever-increasing delay of retirement and
the aging employee population are relevant issues, particularly
in Germany and North America. We address these different
challenges with various measures to manage demographic
change such as health and exercise programs, flexible work-
ing arrangements, age-appropriate workplaces and knowl-
edge management. Demographic analyses for our sites, for
individual plants and specific job profiles make each demo-
graphic situation transparent for the responsible leaders. For
plants and profiles with a particularly critical age structure, we
immediately derive specific measures such as direct knowl-
edge transfer programs or succession planning. Given the
special role that our leaders assume, the topic "leadership in
times of demographic change" forms a part of many of our
leadership programs.
For more information on health protection, see page 100 a
BASF Group employee age structure
(Total: 115,490, thereof 24.6% women, as of December 31, 2017)
Men
Women
38.412
30.0%
76.7%
December 31, 2017
47,478
21,449
+tr
70.0%
8,151
27.7%
72.3%
Up to and including
25 years
Between 26
and 39 years
Between 40
and 54 years
83.4%
16.6%
55 years and up
1 The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive
status by virtue of special expertise.
23.3%
30
2016
2015
2016
2017
2 In contrast to prior-year reports, we refer here to the prices quoted by the Title Transfer Facility (TTF) in the Netherlands. The TTF is the trading point with the largest
trading volume for natural gas in Europe. The previously referenced average of several spot market prices in 2017 was $5.76 per mmBtu (2016: $4.58 per mmBtu).
2014
3.1%
EBITDA before special items rose by €2,200 million year-
on-year to €12,527 million in 2017. At €12,724 million,
EBITDA exceeded the prior-year figure by €2,198 million.
Return on assets (million €)
2017
Income before taxes and minority interests
+ Interest expenses
2016
5,395
661
560
Income from operations before depreciation, amortization and
special items (EBITDA before special items) and income from
operations before depreciation and amortization (EBITDA) are
indicators that describe operational performance independent
of age-related amortization and depreciation of assets and
extraordinary valuation allowances (impairments or reversals
of impairments). Both figures are therefore particularly useful in
cross-company comparisons. EBITDA before special items is
also highly useful in making comparisons over time.
Income before taxes and minority interests
and interest expenses
7,800
4,440
277
197
8,360
4,637
6,192
1,300
1,971
- Adjusted income taxes¹
10,526
12,724
EBITDA
5,937
5,915
Total assets as of January 1
Average assets employed
8,163
Sales
2017 forecast
Performance Products
Chemicals
The BASF Group business year - Results of operations
Management's Report 55
Forecast/actual comparison¹
BASF Report 2017
1 Income taxes in 2017 were also adjusted for the effects of the tax reform in the United States. Of this figure, €379 million related to deferred tax income and €27 million to
current tax expenses.
We calculate return on assets as income before taxes and
minority interests, plus interest expenses, as a percentage
of average assets employed. This indicator reflects the return
independently of capital structure.
8.2
10.8
Total assets as of December 31
%
For information on the earnings per share according to IFRS, see the
Notes to the Consolidated Financial Statements on page 194
In 2017, adjusted earnings per share amounted to €6.44
compared with €4.83 in the previous year.
Compared with earnings per share, this figure has been
adjusted for special items as well as amortization of and
valuation allowances (impairments and reversals of impair-
ments) on intangible assets. Amortization of intangible assets
primarily results from the purchase price allocation following
acquisitions and is therefore of a temporary nature. The effects
of these adjustments on income taxes and on minority
interests are also eliminated. This makes adjusted earnings
per share a suitable measure for making comparisons over
time and predicting future profitability.
918,479
4.83
6.44
€
918,479
in thousands
Weighted average number
of outstanding shares
Adjusted earnings per share
- Adjusted minority interests
Adjusted net income
Adjusted income before
minority interests
6,056
76,496 70,836
78,768 76,496
77,632 73,666
Return on assets
and minority interests
plant and equipment
4,202
plant and equipment before special items
Adjusted earnings per share (million €)
allowances on intangible assets and property,
+ Amortization, depreciation and valuation
The return on assets was 10.8%, compared with 8.2% in the
previous year. The considerable increase in income before
taxes and minority interests with a simultaneous decrease in
interest expenses more than offset the rise in average assets
employed.
6,309
8,328
(34)
194
2016
6,275
2017
8,522
4,199
EBIT before special items
EBIT
EBITDA before special items (million €)
BASF Report 2017
The BASF Group business year - Results of operations
54 Management's Report
Aside from EBIT, EBIT before special items and EBIT after cost
of capital - key performance indicators drawn upon to steer
the BASF Group - we also provide additional performance
indicators in this report that are not defined by IFRS. They
should not be viewed in isolation, but treated as supplementary
information.
Adjusted earnings per share increase from €4.83
to €6.44
EBITDA before special items and EBITDA
considerably higher
Additional indicators for results of operations
1,768
2013
- Special items
4,018
EBITDA before special items
12,527
Adjusted income before taxes
52
59
intangible assets contained in special items
+ Amortization, depreciation and valuation
allowances on intangible assets and property,
- Amortization and valuation allowances on
6,275
8,522
EBIT
560
616
+ Amortization and valuation allowances on
intangible assets
2016
2017
(34)
194
- Special items
EBITDA (million €)
5,395
7,800
minority interests
Income before taxes and
2016
2017
10,327
4,251
considerable increase
slight increase
Oil & Gas
Functional Materials & Solutions
Agricultural Solutions
4,647
6.1
Other financial assets
606
0.8
605
0.8
Deferred tax assets
2,118
2.7
2,513
6.0
3.3
1,332
1.7
1,210
1.6
Noncurrent assets
47,623
60.5
50,550
66.1
Inventories
10,303
Other receivables and miscellaneous assets
4,715
Investments accounted for using the equity method
34.5
Sales in the Functional Materials & Solutions segment
rose considerably, as predicted. EBIT before special items did
not increase slightly as expected, but declined considerably
despite sales growth. The decrease was due to lower margins
and higher fixed costs.
We had forecast considerable growth for sales in the
Agricultural Solutions segment. However, sales only rose
slightly as the higher volumes were partially offset by price
declines, particularly in South America, and negative currency
effects. The lower average margin and the difficult market
environment in Brazil had a stronger impact on earnings devel-
opment than anticipated. Our earnings were also reduced by
the shutdowns of our production facilities in Beaumont, Texas,
and Manatí, Puerto Rico, because of the hurricanes. As a
result, EBIT before special items did not increase slightly, but
declined slightly.
In the Oil & Gas segment, sales and EBIT before special
items rose considerably as expected.
Both sales and EBIT before special items rose considerably
in Other and thus corresponded to our forecast.
In 2017, we invested a total of €3.7 billion in capital expen-
ditures, less than the anticipated level of around €3.9 billion.
Investments in the Chemicals and Oil & Gas segments in
particular were below the values considered in our planning.
For information on our expectations for 2018, see page 122 onward
3 We most recently revised our forecast in October 2017 to a significant increase in EBIT before special items, EBIT and EBIT after cost of capital.
4 Excluding additions to property, plant and equipment resulting from acquisitions, capitalized exploration, restoration obligations and IT investments
56 Management's Report
The BASF Group business year - Net assets
Net assets
Assets
BASF Report 2017
December 31, 2017
Million €
December 31, 2016
%
Million €
%
Intangible assets
13,594
17.3
15,162
19.8
Property, plant and equipment
25,258
32.0
26,413
10,005
13.1
Accounts receivable, trade
11,190
Decline in noncurrent assets mainly due to currency
effects
Total assets amounted to €78,768 million, up €2,272 million
on the prior-year figure.
Noncurrent assets decreased by €2,927 million to
€47,623 million, mostly as a result of currency effects. The
value of intangible assets declined by €1,568 million to
€13,594 million. Additions amounted to €336 million, €97 mil-
lion of which was goodwill. Currency effects reduced intangible
assets by €1,071 million, amortization¹ by €616 million and
disposals by €43 million.
The value of property, plant and equipment declined by
€1,155 million to €25,258 million. Additions amounted to
€4,028 million, €4,020 million of which was attributable to
investments. Depreciation¹ reduced property, plant and equip-
ment by €3,586 million, currency effects by €1,663 million and
disposals by €118 million.
Investments accounted for using the equity method rose
by €68 million to €4,715 million. This was primarily due to the
acquisition of a €184 million minority interest in the Stahl
group, to which we transferred our leather chemicals business.
Currency effects of minus €143 million in particular had an
offsetting effect.
Other financial assets were on a level with the previous year, at
€606 million. Deferred tax assets declined by €395 million to
€2,118 million, primarily from the tax reform in the United
States and lower provisions for pensions and similar
obligations. Other receivables and miscellaneous assets rose
by €122 million year-on-year to €1,332 million, mainly due to
higher loan receivables.
Current assets increased by €5,199 million to €31,145 mil-
lion. This was largely attributable to cash and cash equivalents.
At €6,495 million, these were up €5,120 million on the figure
as of December 31, 2016 and were primarily increased in view
of payment of the purchase prices for the planned acquisition
of significant parts of the seed and non-selective herbicide
businesses from Bayer and the global polyamide business
from Solvay.
The €238 million increase in trade accounts receivable was
attributable to higher sales compared with the previous year.
Inventories rose by €298 million; other receivables and
miscellaneous assets increased by €27 million. Marketable
securities declined by €484 million, mostly from the €500 mil-
lion contribution to BASF Pensionstreuhand e.V., Ludwigs-
hafen am Rhein, Germany.
Sales in the Chemicals segment increased considerably
as forecast, whereby we achieved higher prices than expected.
EBIT before special items was expected to be on a level with
the previous year. However, the higher margins, especially for
the isocyanates business in the Monomers division, signifi-
cantly exceeded our expectations. Margins were also stronger
in the Petrochemicals and Intermediates divisions. As a result,
EBIT before special items was considerably higher than the
2016 figure.
In 2017, BASF Group sales rose considerably in line with our
forecast. EBIT before special items also increased consider-
ably in 2017 and was higher than the slight growth forecast at
the beginning of the year. This was primarily attributable to the
sales and earnings development in the Chemicals segment,
which exceeded our expectations. As a result, we also saw
considerable growth in EBIT in 2017, instead of the slight
increase we had anticipated. We likewise recorded a consider-
able increase in EBIT after cost of capital, contrary to our pre-
diction of a considerable decrease. As well as the higher EBIT
generated by the segments, this was also due to the cost of
capital, which did not increase as strongly as expected due to
currency effects.³
Actual development compared
with outlook for 2017
2 We most recently revised our forecast in October 2017 to a considerable increase in EBIT before special items.
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight"
means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%).
considerable increase
slight increase²
slight decrease
considerable increase
considerable increase
2017 actual
considerable increase
considerable decrease
considerable decrease
before special items
Income from operations (EBIT)
2017 forecast
at prior-year level
slight increase
slight increase
slight increase
considerable increase
considerable increase
slight increase
considerable increase
considerable increase
considerable increase
considerable increase
slight increase
considerable increase
considerable increase
considerable increase
considerable increase
considerable increase
considerable increase
BASF Group
Other
Growth in total assets primarily attributable to higher
cash and cash equivalents
2017 actual
Assets
76,496
14.2
10,952
14.3
Other receivables and miscellaneous assets
3,105
3.9
3,078
4.0
Marketable securities
52
0.1
536
0.7
Cash and cash equivalents
6,495
8.2
1,375
1.8
Current assets
Total assets
31,145
78,768
39.5
25,946
33.9
100.0
100.0
1,368
2015
194
1.97
€
6.62
1.68
1.45
1.63
1.86
€
6,078
1,537
1,336
1.78
1,496
7,800
1,721
1,773
2,007
2,299
(722)
(211)
(185)
(174)
(152)
8,328
1,709
1.40
1.29
6.44
1,866
4,251
1,260
973
1,072
946
10,526
2,487
2,437
2,790
2,812
10,327
2,320
2,490
2,674
2,843
57,550
14,846
Full year
4th quarter
3rd quarter
14,013
14,483
14,208
2nd quarter
1st quarter
1,860
1,760
2,251
2,457
4th quarter
We slightly increased sales in the Performance Products
segment in line with our forecast. Contrary to our expecta-
tions, there was a considerable decline - rather than a slight
increase - in EBIT before special items. This was primarily
attributable to softer margins, mainly as a result of higher raw
BASF Report 2017
Results of operations
Management's Report 51
The BASF Group business year - Results of operations
The world economy and global industrial production saw
much stronger growth in 2017 than in 2016, while growth
in the global chemical industry (excluding pharma-
ceuticals) was roughly on a level with the previous
year. Overall, our business performed extremely well in
this market environment, with considerable sales and
earnings increases. The Chemicals segment made a
particularly strong contribution.
Business reviews by segment can be found from page 60 onward
Sales
■ Sales growth of 12% to €64,475 million
Sales rose by €6,925 million to €64,475 million in 2017. This
was mainly attributable to significantly higher sales prices
in the chemicals business, 1 especially in the Chemicals
segment, as well as volumes growth in all segments. The
Chemetall business, which was acquired from Albemarle in
December 2016, also had a positive impact. Sales were
reduced by slightly negative currency effects in all segments.
Income from operations
■ 32% increase in EBIT before special items to
€8,328 million
Considerable growth in EBIT and EBIT after cost of
capital
Income from operations (EBIT) before special items rose
by €2,019 million to €8,328 million, thanks in particular to the
contribution from the Chemicals segment. Earnings generated
by the Oil & Gas segment and Other also improved consider-
ably. In the Agricultural Solutions segment, EBIT before special
items was only slightly below the prior-year figure after a
strong fourth quarter of 2017. The Performance Products
and Functional Materials & Solutions segments recorded a
considerable decrease. This was due to lower margins result-
ing from the increase in raw materials prices and fixed costs
from factors such as the startup of new plants.
For an explanation of the indicator EBIT before special items,
see page 28
EBIT before special items (million €)
2017 8,328
Sales (million €)
2017
64,475
2016
57,550
2015
70,449
Full year
1,718
15,255
64,475
194
72
198
(70)
(6)
8,522
1,932
1,958
2,181
2,451
4,202
1,050
1,049
1,052
1,051
12,724
2,982
3,007
3,233
3,502
12,527
2,936
2,793
3,291
3,507
16,099
1,464
1,227
6,275
The financial result improved to minus €722 million in 2017,
compared with minus €880 million in the previous year.
■ Earnings per share rise from €4.42 to €6.62
Considerable year-on-year increase in financial result
and net income
Financial result and net income
The calculation of EBIT as part of our statement of income is shown in
the Consolidated Financial Statements on page 168
For an explanation of the indicator EBIT before special items,
see page 28
We once again earned a significant premium on our cost of
capital in 2017. EBIT after cost of capital amounted to
€2,727 million, compared with €1,136 million in the previous
year. The cost of capital rose by €364 million year-on-year.
This was primarily attributable to the increase in noncurrent
assets since the acquisition of Chemetall in December 2016,
as well as the higher level of capital tied up in trade accounts
receivable as a result of sales growth.
7,160
2013
7,626
2014
6,248
2015
6,275
2016
8,522
2017
EBIT (million €)
At €8,522 million, EBIT for the BASF Group in 2017 was
considerably higher than the previous year's level (2016:
€6,275 million). Included in this figure is income from
companies accounted for using the equity method, which rose
from €307 million to €571 million.
(34)
194
Total special items in income before
taxes and minority interests
Special items reported in financial result
(34)
194
Net income from shareholdings decreased from minus
€17 million in 2016 to minus €29 million as a result of lower
income from shareholdings.
Total special items in EBIT
The interest result improved from minus €482 million in
2016 to minus €334 million. Interest expenses declined due to
the overall decrease in liabilities to credit institutions, the
scaling back of the U.S. dollar commercial paper program and
the associated hedging transactions. We also generated higher
interest income from interest/cross-currency swaps and
granting loans.
Income before taxes and minority interests rose from
€5,395 million in the previous year to €7,800 million in 2017.
Income taxes increased from €1,140 million in 2016 to
€1,448 million in 2017. At 18.6%, the tax rate was below the
prior-year level (21.1%), mainly as a result of one-off deferred
tax income in the total amount of €416 million from tax
reforms, of which €379 million in the United States.
1,136
2016
2,727
2017
EBIT after cost of capital (million €)
1 In 2016 and 2017, the cost of capital percentage was 10%.
1,136
2,727
EBIT after cost of capital
6,230
6,594
- Cost of capital¹
(1,091)
(799)
- EBIT of Other
6,275
8,522
EBIT of BASF Group
2016
2017
EBIT after cost of capital (million €)
For information on the tax rate, see the Notes to the Consolidated
Financial Statements from page 198 onward
For information on the items in the statement of income, see the Notes
to the Consolidated Financial Statements from page 194 onward
At €6,078 million, net income was considerably higher
than the prior-year figure of €4,056 million. Earnings per
share increased from €4.42 to €6.62.
Income before minority interests rose from €4,255 million
to €6,352 million. Minority interests amounted to €274 million,
compared with €199 million in 2016.
The other financial result amounted to minus €359 million,
compared with minus €381 million in the previous year.
2014
(44)
Other charges and income
4,056
689
888
1,092
1,387
5,395
995
1,181
1,541
1,678
(880)
(232)
(283)
(177)
(188)
6,309
1,180
1,516
1,707
1,906
(34)
47
(52)
11
(40)
€
234
1.51
0.97
431
145
(27)
(52)
(394)
(133)
2016
2017
Divestitures
Integration costs
Restructuring measures
Special items (million €)
The BASF Group business year - Results of operations
Management's Report 53
BASF Report 2017
Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
2 Quarterly results not audited
1
4.83
0.79
1.10
1.30
1.64
€
4.42
0.75
1.19
13.1
6.0
3rd quarter
Cash provided by/used in financing activities
Dividends
579
3,248
28
19
Changes in financial liabilities
Capital increases/repayments and other equity transactions
Cash used in investing activities
(6,490)
(3,958)
(181)
11
(2,164)
27
(4,145)
(3,996)
Financial assets and other items
Acquisitions/divestitures
Payments made for property, plant and equipment and intangible assets
7,717
8,785
Cash provided by operating activities
(734)
(339)
Miscellaneous items
104
(1,167)
4,291
(2,873)
4,213
(2,767)
(2,160)
12,905
16,331
Chemicals¹
2016
2017
2016
2017
2016
2017
before special items
(EBITDA)
Sales
Income from operations (EBIT)
Income from operations before
depreciation and amortization
BASF Report 2017
Segment overview (million €)
Business review by segment
The BASF Group business year - Business review by segment
60 Management's Report
59
1,375
6,495
Cash and cash equivalents at the end of the year
2,308
1,274
Cash and cash equivalents at the beginning of the year and other changes
(933)
5,221
Net changes in cash and cash equivalents
394
5,374
Depreciation and amortization of intangible assets, property, plant and equipment, and financial assets
Changes in net working capital
6,078
Our interest risk management generally pursues the goal
of reducing interest expenses for the BASF Group and limiting
interest risks. Interest rate hedging transactions are therefore
conducted with banks in order to turn selected liabilities to the
capital market from fixed interest to variable rates or vice versa.
To minimize risks and exploit internal optimization potential
within the Group, we bundle the financing, financial invest-
ments and foreign currency hedging of BASF SE's subsidiaries
within the BASF Group where possible. Foreign currency risks
are primarily hedged centrally by means of derivative financial
instruments in the market.
For more information on the financing tools used, see Note 24 from
page 218 onward and Note 27 from page 222 onward in the Notes to the
Consolidated Financial Statements
Off-balance-sheet financing tools, such as leasing, are of
minor importance to us. BASF Group's most important finan-
cial contracts contain no side agreements with regard to
specific financial ratios (financial covenants) or compliance
with a specific rating (rating trigger).
2,379
€18,032 million
15,653
U.S. dollar commercial paper
Liabilities to banks
23
1,781
2022
1,140
2021
1,845
2020
2,052
2019
2,497
2018
Maturities of financial indebtedness (million €)
We strive to maintain at least a solid "A" rating, which
ensures unrestricted access to financial and capital markets.
Our financing measures are aligned with our operational busi-
ness planning as well as the company's strategic direction and
also ensure the financial flexibility to take advantage of strate-
gic options.
Our financing policy is aimed at ensuring our solvency at all
times, limiting the risks associated with financing and optimiz-
ing our cost of capital. We preferably meet our external financ-
ing needs on the international capital markets.
- "A" ratings confirmed
Financing principles remain unchanged
■
Financing policy and credit ratings
3
Financing instruments (million €)
Net debt
2023 and beyond 8,717
4,056
Rated "A1/P-1/outlook stable" by Moody's, "A/A-1/outlook
stable" by Standard & Poor's and "A/S-1/outlook stable" by
Scope, BASF enjoys good credit ratings, especially compared
with competitors in the chemical industry. These ratings were
most recently confirmed by the above agencies in the fourth
quarter of 2017 (Moody's: December 19; Standard & Poor's
and Scope: October 18).
Management's Report
The BASF Group business year - Financial position
Net income
2016
2017
Statement of cash flows (million €)
1 Including investments to the extent that they already had an effect on cash
Payments made for property, plant and equipment and intangible assets¹
■ Free cash flow
■Cash provided by operating activities
2017
2016
2015
2014
2013
0
2 ---H
4
6
8
10
Cash flow (billion €)
Free cash flow represents the financial resources remain-
ing after deducting payments made for property, plant and
equipment and intangible assets from cash provided by
operating activities. It rose to €4,789 million compared with
€3,572 million in the previous year, primarily due to the
increase in cash provided by operating activities.
Cash and cash equivalents amounted to €6,495 million
as of December 31, 2017. They rose by a cash-effective
amount of €5,221 million in 2017, largely in preparation for
payment of the purchase prices for the planned transactions
with Bayer and Solvay.
Cash provided by financing activities amounted to
€394 million in 2017, compared with cash used in financing
activities of €2,160 million in the previous year. Changes in
financial liabilities resulted in a cash inflow of €3,248 million.
This was mainly due to the issue of bonds with a volume of
around €5 billion. The main offsetting factors were the sched-
uled repayment of four bonds and the scaling back of BASF
SE's U.S. dollar commercial paper program. In 2017, dividends
of €2,755 million were paid to shareholders of BASF SE and
€118 million to minority interests.
For more information on investments and acquisitions,
see page 40 onward
The cash inflow from financial assets and other items in
2017 amounted to €11 million. In the previous year, the acqui-
sition of marketable securities in particular led to net payments
made of €181 million.
Acquisitions and divestitures in 2017 resulted in net pay-
ments received of €27 million. In comparison, net payments of
€2,164 million were made in 2016, primarily as a result of the
acquisition of Chemetall.
Cash used in investing activities amounted to
€3,958 million in 2017 compared with €6,490 million in 2016.
Payments made for property, plant and equipment and intan-
gible assets amounted to €3,996 million, below both the prior-
year figure (€4,145 million) and the level of amortization and
depreciation of intangible assets, property, plant and equip-
ment, and financial assets (€4,213 million).
Cash provided by operating activities improved by
€1,068 million year-on-year to €8,785 million in 2017. This
was due to higher net income. In contrast with the previous
year, the change in net working capital reduced cash flow. This
was largely attributable to the higher level of cash tied up in
inventories and trade accounts receivable for operational
reasons. Miscellaneous items in 2017 mainly related to the
adjustment of earnings contributions from investments
accounted for using the equity method. In the previous year,
this item primarily included the transfer of disposal gains to
cash used in investing activities.
Cash provided by operating activities and free cash
flow significantly above previous year
Statement of Cash Flows
BASF Report 2017
3,114
4,233
2,032
8,522
121
186
9,374
13,676
(1,091)
(799)
Other
1,115
988
12,829
11,967
499
1,043
Oil & Gas
266
185
8,899
8,096
1,037
1,015
Agricultural Solutions
3,679
1,056
17,359
17,364
2,199
1,545
Functional Materials & Solutions
6,275
892
78,768
4,364
2 Additions to property, plant and equipment (thereof from acquisitions: €8 million in 2017 and €155 million in 2016) and intangible assets
(thereof from acquisitions: €235 million in 2017 and €2,789 million in 2016)
1 On January 1, 2017, the Monomers and Dispersions & Pigments divisions' activities for the electronics industry were merged into the global Electronic Materials business unit and
allocated to the Dispersions & Pigments division. For better comparability, the affected figures for 2016 have been adjusted accordingly.
(5%)
Other
4%
Other
16%
Oil & Gas
5%
Oil & Gas
10%
Agricultural Solutions
9%
Agricultural Solutions
18%
Functional Materials & Solutions
32%
Functional Materials & Solutions
19%
Performance Products
25%
Performance Products
42%
Chemicals
25%
Chemicals
Contributions to EBITDA by segment
Contributions to total sales by segment
7,258
76,496
800
14,911
14,432
Other
517
793
1,596
2,069
2,768
3,244
Oil & Gas
1,087
1,033
1,305
1,282
5,569
5,696
Agricultural Solutions
1,946
1,617
2,906
2,251
18,732
20,745
Functional Materials & Solutions
1,777
1,416
2,577
2,427
15,558
16,217
Performance Products¹
2,242
2,018
(679)
(972)
1,678
1,510
Performance Products¹
1,185
1,149
13,124
13,233
1,953
4,208
Chemicals¹
2016
2017
2016
2017
- Cash and cash equivalents
2016
acquisitions²
Assets
(EBIT)
Investments including
Income from operations
Segment overview (million €)
6,309
8,328
10,526
12,724
57,550
64,475
(1,050)
(764)
2017
- Marketable securities
Financial indebtedness
Bonds and other liabilities
to the capital market
The special items recognized in other charges and income
amounted to €234 million in 2017. This figure included rever-
sals of impairments and impairments totaling €197 million in
the Oil & Gas and Functional Materials & Solutions segments.
In the previous year, other charges and income amounted to
minus €44 million.
For the definition of special items, see page 28
Our chemicals business comprises the Chemicals, Performance Products and Functional Materials & Solutions segments.
52 Management's Report
The BASF Group business year - Results of operations
Sales and earnings (million €)
Sales
Income from operations before depreciation and amortization (EBITDA)
and special items
EBITDA
EBITDA margin
Amortization and depreciation¹
Income from operations (EBIT)
Special items
EBIT before special items
Financial result
Income before taxes and minority interests
Income before minority interests
Net income
Earnings per share
Adjusted earnings per share
Sales and earnings by quarter in 2017² (million €)
Sales
Income from operations before depreciation and amortization (EBITDA)
and special items
EBITDA
Amortization and depreciation¹
Income from operations (EBIT)
Special items
EBIT before special items
Divestitures in 2017 resulted in an earnings contribution of
€145 million compared with €431 million in the previous year.
This was mainly due to the transfer of our leather chemicals
business to the Stahl group in the Performance Products
segment, which contributed €195 million.
Financial result
At €52 million, integration costs for acquired businesses
exceeded the prior-year level (2016: €27 million), largely as a
result of the integration of Chemetall.
Special items in EBIT totaled €194 million in 2017, compared
with minus €34 million in the previous year.
Factors influencing sales of the BASF Group
Change in
million €
Change in %
Volumes
2,647
4
Prices
4,595
8
Currencies
(732)
(1)
Acquisitions
873
Divestitures
(460)
(1)
Changes in scope of consolidation
2
Total change in sales
6,925
12
2016 6,309
2015
6,739
2014
7,357
2013 7,077
2
Various restructuring measures led to special items of
minus €133 million, after minus €394 million in 2016.
Income before taxes and minority interests
Net income
Earnings per share
6,275
35.8
194
(34)
8,328
6,309
32.0
(722)
(880)
18.0
7,800
5,395
44.6
6,352
4,255
49.3
6,078
4,056
49.9
€
6.62
4.42
49.8
6.44
4.83
33.3
1st quarter
16,857
2nd quarter
16,264
8,522
(1.2)
4,251
4,202
Adjusted earnings per share
Sales and earnings by quarter in 2016² (million €)
Sales
Income from operations before depreciation and amortization (EBITDA)
and special items
EBITDA
Amortization and depreciation¹
Income from operations (EBIT)
Special items
EBIT before special items
Financial result
Income before taxes and minority interests
Net income
Earnings per share
Adjusted earnings per share
73,973
BASF Report 2017
2016
Change in %
64,475
57,550
12.0
12,527
10,327
21.3
12,724
10,526
20.9
%
19.7
18.3
2017
2014
2013
For more information on the composition and development of individual
asset items, see the Notes to the Consolidated Financial Statements
from page 201 onward
20.0
15,317
18.9
14,880
3.7
2,850
3.9
3,064
4.9
3,767
3.2
2,497
1.7
1,288
1.4
1,119
3.7
2,802
4.1
3,229
4,610
6.3
4,971
Total equity and liabilities
Current liabilities
Other liabilities
Financial indebtedness
Tax liabilities
Provisions
78,768
Accounts payable, trade
100.0
100.0
1
14,401
11,485
536
1,375
6,495
52
3,767
16,312
Dec. 31, 2017
15,535
2,497
18,032
+ Current financial indebtedness
Noncurrent financial indebtedness
For short-term financing, we use BASF SE's U.S. dollar
commercial paper program, which has an issuing volume of up
to $12.5 billion. As of December 31, 2017, no commercial
paper was outstanding under this program (December 31,
2016: $1,089 million). Firmly committed, syndicated credit lines
of €6 billion serve to cover the repayment of outstanding com-
mercial paper, and can also be used for general company pur-
poses. These credit lines were not used at any point in 2017.
Our external financing is therefore largely independent of short-
term fluctuations in the credit markets.
We have solid financing. Corporate bonds form the basis of our
medium to long-term debt financing. These are issued in euros
and other currencies with different maturities as part of our
€20 billion debt issuance program. The goal is to create a
balanced maturity profile, diversify our investor base and
optimize our debt capital financing conditions.
Dec. 31, 2016
12,545
Net debt (million €)
For more information on the development of the balance sheet, see the
Ten-Year Summary on page 248
For more information on the composition and development of individual
equity and liability items, see the Notes to the Consolidated Financial
Statements from page 209 onward
Overall, financial indebtedness grew by €1,720 million to
€18,032 million. Net debt declined by €2,916 million to
€11,485 million. This is calculated by subtracting marketable
securities and cash and cash equivalents from current and
noncurrent financial indebtedness. This balance-related indi-
cator provides information on effective indebtedness.
BASF Report 2017
The BASF Group business year - Financial position
58 Management's Report
40
57
Current liabilities declined by €437 million to €14,880 million.
This was primarily attributable to the €1,270 million decrease
in current financial indebtedness, mostly from the scheduled
repayment of four bonds in EUR and GBP with an aggregate
carrying amount of €1,359 million, as well as the the complete
scaling back of our U.S. dollar commercial paper program,
which accounted for €1,033 million. Current liabilities to banks
declined by €646 million; this mainly related to loans in Brazil.
The reclassification of the above bonds increased current finan-
cial indebtedness accordingly. Current tax liabilities declined by
€169 million. Trade accounts payable rose by €361 million,
current provisions by €427 million and current other liabilities by
€214 million.
an aggregate carrying amount of €1,773 million were reclassi-
fied to current financial indebtedness. Noncurrent liabilities to
banks rose by €170 million, mainly as a result of loans taken
out with the European Investment Bank and the Kreditanstalt
für Wiederaufbau, a German government development bank.
The partial transfer of the financing for gas transportation
activities to a newly established equity-accounted company
had an offsetting effect. Provisions for pensions and similar
obligations decreased by €1,916 million, mainly as a result of
the positive performance of plan assets. Noncurrent other
provisions declined by €189 million. The €586 million decrease
in deferred tax liabilities was largely due to the reduction in the
U.S. corporate tax rate from 35% to 21%, which accounted
for €653 million of this figure. Noncurrent other liabilities rose
by €222 million.
Compared with the end of 2016, noncurrent liabilities grew
by €521 million to €29,132 million. This was primarily attribut-
able to noncurrent financial indebtedness, which increased by
€2,990 million. New bonds in EUR, USD, NOK and GBP were
issued in 2017 with an aggregate carrying amount of €4,852 mil-
lion at the year-end and maturities of between two and 20 years;
they serve general company purposes and to finance the
planned acquisitions of significant parts of the seed and non-
selective herbicide businesses from Bayer and the global poly-
amide business from Solvay. These also included bonds with
nondilutive warrants due in 2023 with a carrying amount of
€664 million. Upon exercise, the warrants will be cash-settled
only; no new shares will be issued, nor will existing shares
of BASF SE be serviced. As a hedge, BASF has purchased
corresponding call options. Three eurobonds due in 2018 with
Equity rose by €2,188 million year-on-year to €34,756 million.
Retained earnings increased by €3,311 million to €34,826 mil-
lion. Other comprehensive income declined by €1,268 million to
minus €5,282 million. This decrease was mainly due to currency
effects, primarily as a result of the weaker U.S. dollar. The
remeasurement of defined benefit plans in particular had an
offsetting effect. The equity ratio was 44.1% (2016: 42.6%).
■ Higher financial indebtedness in preparation for
planned acquisitions
■ Equity ratio at 44.1%, compared with 42.6% in
previous year
Equity and liabilities
76,496
37.4
28,611
37.0
919
(5.2)
(4,014)
(6.7)
(5,282)
41.2
31,515
44.2
34,826
5.6
4,306
5.4
4,293
%
Million €
%
Million €
December 31, 2016
December 31, 2017
Management's Report
The BASF Group business year - Financial position
Equity
Minority interests
Other comprehensive income
Retained earnings
Paid-in capital
Equity and liabilities
Financial position
BASF Report 2017
Including impairments and reversals of impairments
1.2
761
1.0
34,756
29,132
Noncurrent liabilities
1.2
873
1.4
1,095
Other liabilities
16.4
12,545
19.7
15,535
Financial indebtedness
4.3
3,317
74,326
3.5
Deferred tax liabilities
4.8
3,667
4.4
3,478
Other provisions
10.7
8,209
8.0
6,293
Provisions for pensions and similar obligations
42.6
32,568
44.1
2,731
materials prices, which would not be fully passed on via sales
prices.
458
Sales
Chemicals
Contributions to EBIT by segment
Contributions to EBIT before special items by segment
1,227
1,932
1,464
1,958
1,718
2,181
1,866
2,451
(443)
(45)
(256)
(330)
51%
Chemicals
49%
Performance Products
Oil & Gas
Other
(9%)
Other
10%
Oil & Gas
12%
Agricultural Solutions
(147)
12%
18%
Functional Materials & Solutions
19%
Functional Materials & Solutions
18%
Performance Products
17%
Agricultural Solutions
(181)
(245)
(243)
240
492
357
531
427
452
521
724
Functional Materials & Solutions
81
467
567
495
363
543
499
173
12%
(9%)
Agricultural Solutions
590
Other
162
436
178
255
93
183
531
66
Oil & Gas
66
194
93
20
288
270
169
Performance Products²
1 Quarterly results not audited
62 Management's Report
UltramidⓇ Flex F38
Management's Report
The BASF Group business year - Chemicals
How we create value - an example
BASF Report 2017
€2,201 million
Change:
Restated figures; for more information, see page 66
27%
Sales
(1%)
Currencies
0%
Portfolio
2,032
20161
High-performance copolyamide for more sustainable packaging solutions
Value for BASF
Expected average sales growth
by 2025
>25%
The BASF Group business year Chemicals
64 Management's Report
63
Different gases contribute to global warming to different degrees. In order to compare their impact, emissions are usually converted into CO2 equivalents.
On September 18, 2017, we signed an agreement with
Solvay on the acquisition of Solvay's global polyamide busi-
ness by BASF. Solvay and BASF aim to close the transaction
in the third quarter of 2018 after regulatory approvals have
been obtained and the consent of a joint venture partner has
been received. The purchase would strengthen our polyamide
6.6 value chain through increased polymerization capacities
and the backward integration into the key raw material ADN
(adipodinitrile). BASF plans to integrate Solvay's global poly-
amide business into the Monomers and Performance Materials
divisions.
In Ludwigshafen, Germany, we will strengthen the Verbund
by replacing our acetylene plant, which plays a central role
for many products and value chains, with a modern, highly
efficient plant by 2019.
We invest in research and development in order to develop
new technologies and to make our existing technologies even
more efficient. Cost leadership and a clear orientation along
individual value chains are among our most important com-
petitive advantages. We concentrate on the critical success
factors of the classic chemicals business: making use of econ-
omies of scale, the advantages of our Verbund, high
capacity utilization, continuous optimization of access to raw
materials, lean processes, and reliable, cost-effective logistics.
Furthermore, we are constantly improving our global produc-
tion structures and aligning these with regional market require-
ments.
23%
With its production facilities, the Chemicals segment is at the
heart of the Verbund structure and supplies BASF's segments
with basic chemicals for the production of downstream
products. We add value with innovations in processes and
production, and invest in future markets. As a reliable supplier,
we provide chemicals of consistent quality and market them to
customers in downstream industries. We continually improve
our value chains and are expanding our market position
particularly outside Europe - with new processes and tech-
nologies, as well as through investments and collaborations in
future markets.
Strategy
BASF uses a monomer made from a regionally-grown
rapeseed oil in the production of UltramidⓇ Flex F38. This
reduces the consumption of fossil raw materials by around
25% compared with conventional polyamides, and also cuts
greenhouse gas emissions of CO2 equivalents¹ by 25% in
the production process. These emissions are already lower
than industry standards in BASF's Verbund production.
approx.
25%
Fossil raw material savings
Value for the environment and society
UltramidⓇ Flex F38 gives plastics like those used in food
packaging exceptional properties such as high tear resis-
tance, transparency and softness even at lower temperatures.
The innovative copolyamide is partly made from renewable
raw materials, enabling our customers to offer more sustain-
able packaging solutions. We expect the product to generate
average sales growth of over 25% by 2025.
Integrated production facilities form core of Verbund
■ Technology and cost leadership provide most
important competitive edge
Prices
4,233
2017
Percentage of sales:
Intermediates
€2,979 million
11%
Change:
Sales
Most comprehensive inter-
mediates portfolio in the world,
including precursors for coatings,
plastics, textile fibers and crop
protection products
Intermediates
18%
Isocyanates and polyamides as
well as inorganic basic products
and specialties for various
sectors, such as the plastics,
automotive, construction and
electronics industries
Broad range of basic products
and specialties for sectors such
as the chemical and plastics
industries
Petrochemicals
Divisions
The Chemicals segment consists of the Petrochemicals, Monomers and Intermediates
divisions. In our integrated production facilities - our Verbund - we produce a broad range
of basic chemicals and intermediates in Europe, Asia, North America and South America.
BASF Report 2017
Chemicals
The BASF Group business year Chemicals
Monomers
2 On January 1, 2017, the Monomers and Dispersions & Pigments divisions' activities for the electronics industry were merged into the global Electronic Materials business unit and
allocated to the Dispersions & Pigments division. For better comparability, the affected figures for 2016 have been adjusted accordingly.
Change:
Factors influencing sales
5%
Volumes
Income from operations before special items
(million €)
Percentage of sales:
39%
27%
Change:
Petrochemicals
€6,389 million
34%
€12,905 million
27%
Change:
€16,331 million
2017:
Percentage of sales:
43%
€6,963 million
Monomers
20161:
545
1,026
490
14,208
16,857
518
608
538
548
485
476
477
610
Other
922
862
618
739
16,264
14,483
15,255
14,013
Chemicals²
2016
2017
2016
2017
2016
2017
617
2016
4th quarter
3rd quarter
2nd quarter
1st quarter
Income from operations (EBIT) before special items' (million €)
14,846
16,099
2017
814
611
829
3,832
3,921
3,983
3,983
4,142
3,913
4,260
3,741
Performance Products²
4,158
3,227
4,023
3,236
4,045
3,019
4,105
3,423
958
Functional Materials & Solutions
4,408
Oil & Gas
1,281
1,328
1,049
987
1,459
1,526
5,198
1,780
Agricultural Solutions
4,961
5,311
4,660
4,975
4,703
5,261
1,855
457
1,120
458
1,860
1,516
1,760
1,707
2,251
1,906
2,457
1,180
(386)
(233)
(325)
(212)
(151)
(219)
(250)
Other
(38)
163
Income from operations (EBIT)' (million €)
2nd quarter
1,089
Chemicals segment
1,119
460
974
Chemicals²
2016
1st quarter
2017
2017
2016
2017
2016
2017
4th quarter
3rd quarter
2016
Products, customers and applications
260
180
456
531
Functional Materials & Solutions
237
111
473
385
422
512
555
515
Performance Products²
629
1,053
488
1,102
405
194
535
497
94
183
66
170
Oil & Gas
79
207
397
97
320
272
591
533
Agricultural Solutions
458
267
21
Division
Petrochemicals
Monomers
Percentage of sales:
24%
2017:
Nutrition & Health
€1,844 million
Percentage of sales:
12%
€16,217 million
Change:
4%
20161:
€15,558 million
Change:
-5%
Factors influencing sales
Dispersions & Pigments
€5,398 million
€3,896 million
2%
Change:
Performance Chemicals
3%
2
1
EBIT before special items in 2017 was up slightly from the
previous year: Improved margins and higher sales volumes
more than compensated for the rise in fixed costs. The year-
on-year increase in fixed costs was primarily due to a higher
number of plant maintenance activities, the startup of new
production plants in all regions, as well as unplanned repairs.
The construction of the new acetylene plant in Ludwigs-
hafen, Germany, is progressing on schedule.
68 Management's Report
The BASF Group business year - Performance Products
Change:
BASF Report 2017
The Performance Products segment consists of the Dispersions & Pigments, Care
Chemicals, Nutrition & Health and Performance Chemicals divisions. Our offerings
enhance the performance of industrial and consumer products worldwide. With our
tailor-made solutions, our customers can make their production processes more
efficient and give their products improved application properties.
Divisions
Dispersions & Pigments
Raw materials used to
formulate products in the
construction, automotive,
adhesives, printing,
packaging, electronics
and paper industries
Care Chemicals
Ingredients for the
hygiene, cosmetics,
detergent and cleaner
industries as well as for
applications in the
chemical industry
Nutrition & Health
Products for the food
and feed industries,
the flavor and
fragrance industry and
the pharmaceutical
industry
Performance Chemicals
Customized products
for many sectors, from
mining and the fuel
industry to plastics
processing
Sales
Performance Products
6%
Percentage of sales:
33%
BASF Report 2017
How we create value - - an example
Management's Report 69
The BASF Group business year - Performance Products
HydraulanⓇ 406 ESI
New low-viscous brake fluid for enhanced driving safety
Value for BASF
minus €361 million
Market growth
market for brake fluids
as a whole
Value for our customers
2-fold
Lower viscosity compared with
standard products
>50%
BASF has developed and sold brake fluids for the automotive
industry for over 60 years. Hydraulan® 406 ESI enables us to
secure a leading position in the attractive market segment for
low-viscous brake fluids, which is growing twice as fast as the
market as a whole. The new product meets several interna-
tional market standards as well as the new requirements of
automotive manufacturers, particularly with respect to assisted
and autonomous driving.
-
compared with the
38%
Change:
4%
Care Chemicals
€5,079 million
Change:
7%
Percentage of sales:
31%
Income from operations before special items
(million €)
2017
Volumes
Restated figures; for more information, see page 72
5%
1%
1,416
20161 1,777
Portfolio
(1%)
Currencies
(1%)
Sales
Prices
€2,979 million
3
17%
Sales up 34% at €6,963 million, mainly due to higher
prices
Considerable increase in EBIT before special items,
primarily from stronger isocyanate margins
Sales to third parties in the Monomers division rose by
€1,774 million to €6,963 million in 2017, largely as a result of
higher prices. Robust demand and the temporary product
shortages on the market led to a strong price increase, espe-
cially in the isocyanates business. Sales prices for polyamides
also rose. We achieved year-on-year volumes growth with our
new production facilities.
Stronger margins and volumes for isocyanates were the main
reason for the considerable increase in EBIT before special
items in the Monomers division. Earnings were also positively
impacted by the restructuring of our caprolactam production
in Europe. Fixed costs exceeded the prior-year level, mainly
from our new production facilities.
Intermediates
■ Sales growth of 11% to €2,979 million due to higher
prices and volumes
EBIT before special items slightly above the
prior-year level due to margin and volumes growth
■
Sales to third parties in the Intermediates division rose by
€298 million year-on-year to €2,979 million. This was mainly
due to higher prices, particularly in the butanediol and deriva-
tives as well as the acids and polyalcohols businesses. We
were able to raise volumes in all regions in 2017. The amines
business in Europe and Asia showed especially strong growth.
Negative exchange rate effects and the divestiture of the
inorganic specialties business in the first quarter of 2017,
which included the site in Evans City, Pennsylvania, slightly
dampened sales growth.
Volumes
Prices
4%
10%
Portfolio
(1%)
Currencies
Intermediates - Factors influencing sales
(2%)
Monomers
3%
27%
BASF Report 2017
Management's Report 67
The BASF Group business year - Chemicals
Petrochemicals - Sales by region
(Location of customer)
1234
Europe
EBIT before special items considerably exceeded the 2016
figure as a result of higher margins. In Europe in particular,
margins for steam cracker products as well as for alkylene
oxides and glycols rose significantly. Margins for acrylic
monomers and oxo alcohols also developed positively overall,
mainly due to strong demand and low product availability. The
negative impact on earnings in 2017 caused by the North
Harbor accident was offset by insurance payments.
North America
55%
34%
€6,389 million
1
Asia Pacific
8%
2
South America, Africa, Middle East
3
As electronic systems become more and more complex, the
demands on the braking system also increase. Brake fluids are
a safety factor – they must ensure fast signal processing and
breaking reactions. A low viscosity is crucial here. With a
viscosity that is more than 50% lower than standard products,²
Hydraulan® 406 ESI significantly improves braking safety -
even under difficult conditions.
Sales
Monomers - Factors influencing sales
€6,963 million
34%
South America, Africa, Middle East
7%
2
Intermediates - Sales by region
(Location of customer)
3
1
Europe
North America
Asia Pacific
4 South America, Africa, Middle East
4
42%
1
-23
11%
20%
4
Volumes
3%
Prices
33%
Portfolio
0%
Currencies
39%
(2%)
34%
Asia Pacific
Monomers - Sales by region
(Location of customer)
1234
Europe
North America
Sales
Chemicals²
Strategy
■
670,000
680,000
910,000
1,525,000
305,000
250,000
1,510,000
Annual capacity
(metric tons)
South America,
Africa, Middle East
Asia Pacific
Sites
1 All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
North America
Europe
Plasticizers
385,000
430,000
3,480,000
1,445,000
Management's Report 65
Investments
BASF Report 2017
595,000
920,000
675,000
2,610,000
Sulfuric acid
150,000
910,000
820,000
1,625,000
205,000
360,000
2,610,000
545,000
350,000
Propylene oxide
Propylene
Propionic acid
Production capacities of significant products¹
Plastics, coatings and pharmaceutical industries, production
of detergents and cleaners as well as crop protection
products and textile fibers
Use in the BASF Verbund
Industries such as plastics, electronics, lumber, furniture,
packaging, textile, construction and automotive
Use in the BASF Verbund
Chemical and plastics industry, detergent, hygiene,
automotive, packaging and textile industries; production of
paints, coatings, and cosmetics as well as oilfield,
construction and paper chemicals
Use in the BASF Verbund
Product
Customer industries and applications
Basic products: butanediol and derivatives, alkylamines and
alkanolamines, neopentyl glycol, formic and propionic acid
Basic products: isocyanates (MDI, TDI), ammonia,
caprolactam, adipic acid, chlorine, urea, glues and
impregnating resins, caustic soda, polyamides 6 and 6.6,
standard alcoholates, sulfuric and nitric acid
Specialties: special plasticizers, special acrylates
Basic products: ethylene, propylene, butadiene, benzene,
alcohols, solvents, plasticizers, alkylene oxides, glycols and
acrylic monomers
Products
BASF Report 2017
Intermediates
Specialties: specialty amines such as tertiary butylamine and
polyetheramine, gas treatment chemicals, vinyl monomers,
acid chlorides, chloroformates, chiral intermediates
The BASF Group business year - Chemicals
Acrylic acid
Formic acid
PolyTHF®
Polyamide precursors
Polyamide 6 and 6.6
Oxo-C4 alcohols (calculated as butyraldehyde)
Neopentyl glycol
Caustic soda
Isocyanates
Alkylamines
Urea
Ethylene
Ethanolamines and derivatives
Chlorine
Butanediol equivalents
Butadiene
Benzene
Ammonia
Ethylene oxide
Additional annual capacity
Petrochemicals
Sales grow by 27% to €16,331 million, mainly due to
higher prices
Ingredients for detergents and cleaners in household,
institution or industry, such as surfactants, enzymes,
chelating agents, polymers, biocides and products for
optical effects
Solvents and other ingredients for crop protection product
formulations, as well as products for concrete additives and
chemical processes such as metal surface treatments or
textile processing
Superabsorbents for baby diapers, incontinence products
and feminine hygiene articles
Additives for the food and feed industries, such as vitamins,
carotenoids, sterols, enzymes, emulsifiers and omega-3 fatty
acids
Flavors and fragrances, such as geraniol, citronellol,
L-menthol and linalool
Excipients for the pharmaceutical industry and selected,
high-volume active pharmaceutical ingredients, such as
ibuprofen and omega-3 fatty acids
Antioxidants, light stabilizers and flame retardants for plastic
applications
Ingredients for skin and hair cleansing and care products,
such as emollients, cosmetic active ingredients, polymers
and UV filters
Fuel and refinery additives, polyisobutene, brake fluids and
engine coolants, lubricant additives and basestocks,
components for metalworking fluids and compounded
lubricants
Customer industries and applications
Raw materials used to formulate products for industries such
as construction, automotive, adhesive, printing, packaging,
electronics and paper
Cosmetics industry, hygiene industry, detergent and cleaner
industry, agricultural industry and technical applications
Food and feed industries, flavor and fragrance industry and
pharmaceutical industry
Plastics processing industry, automotive industry, fuel and
lubricant industry, oil and gas industry, mining industry,
municipal and industrial water treatment as well as paper
industry and packaging made of paper
Functional chemicals and process chemicals for the
production of paper and cardboard, water treatment
chemicals, membrane technologies, kaolin minerals
Production capacities of significant products¹
Process chemicals for the extraction of oil, gas, metals and
minerals, chemicals for enhanced oil recovery
Product
Polymer dispersions, pigments, resins, high-performance
additives, formulation additives, electronic materials
Performance Chemicals
Global presence ensures reliable supply to customers
in all regions
We take on the challenges posed by important future issues,
especially population growth: scarce resources, environmental
and climatic stressors, greater demand for food and the desire
for better quality of life. In doing so, we focus on research and
development and maintain close relationships to leading
companies in our customer industries. We position ourselves
globally in order to reliably supply customers in all regions.
We invest in the development of innovations that enable our
products and processes - as well as our customers' applica-
tions and processes - to make a contribution to sustainability:
for example, by allowing resources to be used more efficiently.
Our products create additional value for our customers,
providing a competitive advantage. We develop new solutions
together with our customers and strive for long-term partner-
ships that create profitable growth opportunities for both
sides. In this way, we aim to strengthen our focus on highly
specialized applications in the business fields of displays and
semi-conductors in the electronics industry, for example.
A different business model is pursued for standard
products such as vitamins or dispersions for paper coatings.
Here, efficient production setups, backward integration in our
Production Verbund's value chains, capacity management,
and technology and cost leadership are all essential.
We support our customers by serving as a reliable supplier
with consistently high product quality, good value for money
and lean processes. In the Dispersions & Pigments division,
for instance, we draw on our in-depth knowledge of the areas
of application and technological innovations to strengthen
customer relationships in key industries.
At the Caojing site in Shanghai, China, we are planning
a new plant for plastic additives (antioxidants), which is
expected to be completed in 2019. We are expanding our
existing ibuprofen production capacities in Bishop, Texas, and
are planning the construction of a new world-scale ibuprofen
plant in Ludwigshafen, Germany, scheduled for startup in 2021.
1 DOT 3, DOT 4, DOT 5.1
Products
2 Brake fluids in accordance with DOT 3 and DOT 4
The BASF Group business year - Performance Products
Products, customers and applications
BASF Report 2017
Division
Dispersions & Pigments
Care Chemicals
Nutrition & Health
70 Management's Report
■ Tailor-made products and solutions improve our
customers' applications and processes
Anionic surfactants
Chelating agents
Portfolio
20%
Prices
8%
Volumes
Petrochemicals - Factors influencing sales
Sales to third parties in the Petrochemicals division rose by
€1,354 million to €6,389 million in 2017. This was mainly due
to significantly higher sales prices in all regions and in almost
all strategic business units, particularly for steam cracker
products. Prices largely followed the higher raw materials
prices for naphtha and butane, our most important feedstock.
Sales volumes rose overall. Volumes rose significantly in North
America, mainly as a result of higher capacity utilization of
the steam cracker and the condensate splitter in Port Arthur,
Texas. In Europe, sales volumes were up slightly from the
previous year: Higher volumes, especially for steam cracker
products, were able to compensate for the limited volumes
growth for plasticizers and in the alcohols and solvents busi-
ness following the accident at the North Harbor.
0%
Considerable increase in EBIT before special items
due to higher margins
Income from operations (EBIT) before special items rose
by €2,201 million to €4,233 million, mainly as a result of higher
margins for isocyanates in the Monomers division. Stronger
margins in the Petrochemicals and Intermediates divisions
also contributed to the increase in earnings; slightly higher
fixed costs had an offsetting effect. The negative impact
on earnings in 2017 caused by the North Harbor accident
at the Ludwigshafen site in October 2016 was compensated
by insurance payments. EBIT rose by €2,255 million to
€4,208 million. Overall, special items did not have a substantial
impact.
In the Chemicals segment, sales to third parties increased
by €3,426 million to €16,331 million in 2017 (volumes 5%,
prices 23%, portfolio 0%, currencies -1%). This was primarily
attributable to higher prices, especially in the Monomers divi-
sion. We increased volumes in all divisions.
■
Stronger margins increase EBIT before special items
by 108% to €4,233 million
■
Sales rise by 27% to €6,389 million, primarily as a
result of price increases
■
For the Outlook for 2018, see page 123
Citral
Currencies
265,000
Methane sulfonic acid
Nonionic surfactants
Polyisobutene
Superabsorbents
Europe
North America
1
All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
590,000
Sites
South America,
Africa, Middle East
Annual capacity
(metric tons)
600,000
78,000
170,000
30,000
630,000
Asia Pacific
2016
(1%)
2016
2,979
34
5,189
6,963
27
5,035
6,389
27
Change in %
2016
12,905
16,331
Intersegmental transfers
Intermediates
Monomers
Thereof Petrochemicals
2,681
11
6,063
4,832
1,161
1,166
Amortization and depreciation²
24.1
32.9
%
EBITDA margin
Sales to third parties
73
5,374
Income from operations before depreciation and amortization (EBITDA)
26
17,737
22,394
Sales including intersegmental transfers
25
3,114
2017
BASF Report 2017
Segment data¹ (million €)
21,000
Construction: specialty amines plant
Nanjing, China
2019
90,000
n/a
Replacement: acetylene plant
n/a
Ludwigshafen, Germany
750,000
Construction: ammonia plant¹
Startup
Total annual
capacity
(metric tons)
(metric tons)
Project
Freeport, Texas
2018
Location
2019
30,000
The BASF Group business year Chemicals
66 Management's Report
3 Operated by an associated company with Huntsman, Shanghai Hua Yi (Group) Company, Shanghai Chlor-Alkali Chemical Co. Ltd. and Sinopec Group Assets Management Corp.
2 Operated by a joint venture with Sinopec
1 Operated by an associated company with Yara International ASA
2017
480,000
Expansion: propionic acid plant?
240,000
Shanghai, China
2017
60,000
Changeover of plasticizers production to dioctyl
terephthalate (DOTP)
Pasadena, Texas
2019
69,000
Expansion: MDI plant³
4,208
through expansion
13,233
2,895
690
320
Assets
Income from operations (EBIT)
13,124
1
Investments including acquisitions³
1,149
1,185
(3)
Research and development expenses
128
145
(12)
1 On January 1, 2017, the Monomers and Dispersions & Pigments divisions' activities for the electronics industry were merged into the global Electronic Materials business unit and
allocated to the Dispersions & Pigments division. For better comparability, the affected figures for 2016 have been adjusted accordingly.
2 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
3 Additions to intangible assets and property, plant and equipment
0
1,953
108
2,032
EBIT after cost of capital
EBIT before special items
2017
2016
2017
2016
2017
4th quarter
115
3rd quarter
4,233
1st quarter
2nd quarter
The BASF Group business year - Business review by segment
Management's Report 61
BASF Report 2017
2017
Special items
(25)
(79)
68
Sales (million €)
Functional Materials & Solutions
EBIT before special items declined considerably compared
with the previous year. The softer margins resulting from
higher raw materials prices were only partially offset by
volumes growth and lower fixed costs.
The BASF Group business year - Functional Materials & Solutions
Management's Report 75
BASF Report 2017
We generated special income of €195 million from the
transfer of BASF's leather chemicals business to the Stahl
group.
2
2016:
D
€3,896 million
26% 3
25%
10%
39%
South America, Africa, Middle East
The Functional Materials & Solutions segment comprises the Catalysts, Construction
Chemicals, Coatings and Performance Materials divisions. They develop and market
system solutions, services and innovative products for specific sectors and customers,
particularly for the automotive, electronics, chemical and construction industries as well
as for household applications, sports and leisure.
Asia Pacific
1
Divisions
€20,745 million
Automotive and
process catalysts,
battery materials,
€18,732 million
Factors influencing sales
Change:
22%
Catalysts
€6,658 million
Change:
Percentage of sales:
32%
Coatings
€3,969 million
Percentage of sales:
19%
Construction Chemicals
€2,412 million
Change:
11%
Change:
2017:
Percentage of sales:
37%
€7,706 million
12%
Change:
Performance Materials
Sales
Performance Materials
Polyurethanes, thermo-
plastics and foams
Coatings solutions,
surface treatments,
decorative paints
Coatings
Construction Chemicals
Solutions for building
structure and envelopes,
interior construction and
infrastructure
precious metal trading
Catalysts
6%
1,617
Percentage of sales:
2017
2020
Capacity expansion: automotive coatings plant
2018
Construction: plant for concrete additives
2017
2017
78 Management's Report
The BASF Group business year - Functional Materials & Solutions
Segment data (million €)
Sales to third parties
Thereof Catalysts
Construction Chemicals
Coatings
Performance Materials
Capacity expansion: compounding plant for UltramidⓇ and UltradurⓇ
Capacity expansion: plant for emissions catalysts
Capacity expansion: plant for UltrasonⓇ
Yeosu, South Korea
Schwarzheide, Germany
Środa Śląska, Poland
Tultitlán, Mexico
Yangon, Myanmar
2018
2019
Capacity expansion: logistics for floor installation systems
Construction: specialty zeolites plant for emissions catalysts
2018
2019
Construction: plant for functional film coatings
2018
Intersegmental transfers
2017
2018
Construction: chemical catalysts plant
2017
Construction: automotive coatings plant
2017
Construction: technical competence center for automotive coatings
2018
Construction: plant for automotive emissions catalysts
Sales including intersegmental transfers
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
22
7,706
6,888
12
805
736
9
3,249
21,550
11
2,251
2,906
(23)
%
10.9
15.5
19,468
2019
3,969
2,332
Depreciation and amortization¹
Income from operations (EBIT)
Special items
EBIT after cost of capital
Assets
Investments including acquisitions²
BASF Report 2017
3
2017
20,745
18,732
Change in %
11
6,658
6,263
6
2,412
2016
3%
2019
Capacity expansion: plant for cathode materials
How we create value - - an example
BASF Report 2017
BorocatⓇ
A new generation of high-performance refining catalysts
Value for BASF
Expected sales growth
with BorocatⓇ through 2022
>50%
Refineries use fluid catalytic cracking (FCC) catalysts to
extract high-value products like gasoline, diesel or liquid gas
from the residues of crude oil distillation. BorocatⓇ, our new
generation of FCC catalysts, increases the yield of valuable
hydrocarbons especially from heavy crude oil with metal
contaminants. As more and more crude oil of this type is
being produced and processed, we expect sales growth of
over 50% for BorocatⓇ through 2022.
Value for our customers and the environment
Unwanted by-product
hydrogen reduced by
up to
25%
The metals contained in crude oil present a particular chal-
lenge to further processing as they catalyze the generation of
unwanted by-products like hydrogen, reducing the yield of
valuable substances. Our new boron-based catalyst tech-
nology hampers these chemical by-reactions so that up to
25% less hydrogen is produced. This enables refineries to
process heavier, more contaminated crude oil and use these
resources more efficiently.
Strategy
The BASF Group business year - Functional Materials & Solutions
76 Management's Report
minus €329 million
Change:
12%
Income from operations before special items
(million €)
Volumes
4%
2017
North America
Prices
■
5%
1,946
Portfolio
3%
Currencies
(1%)
Sales
11%
2016
Development of innovative products and technolo-
gies in close collaboration with our customers
Focus on specialties and system solutions that allow
our customers to stand out from the competition
We develop innovative products and technologies in close
cooperation with our customers. Our aim is to find the best
solution in terms of cost and functionality, helping our cus-
tomers to drive forward innovation in their industries and
contribute to sustainable development. For instance, the
transformation of mobility is a key trend in the automotive
industry. To address this, we are developing solutions in the
areas of battery materials, emission control, lightweight engi-
neering concepts and coatings together with our customers.
Our specialties and system solutions enable customers to
stand out from the competition.
One focus of our strategy is the ongoing optimization of
our product and services portfolio and our structures accord-
ing to different regional market requirements as well as trends
Automotive and chemical industries, refineries, battery
manufacturers
Solutions for the protection of air quality as well as the
production of fuels, chemicals, plastics and battery materials
Cement and concrete producers, construction companies,
craftspeople, builders' merchants
Solutions for new building construction, maintenance, repair
and renovation of commercial and residential buildings as well
as infrastructure
Automotive industry, body shops, steel industry, aviation,
aluminum applications in the architecture and construction
industries, household appliances, painting businesses and
private consumers
Automotive manufacture, electrical engineering, packaging,
games, sports and leisure, household, mechanical engineering,
construction, medical technology, sanitation and water
industry, solar thermal energy and photovoltaics
Investments
Location
Customer industries and applications
Brighton, Colorado
Gimcheon, South Korea
Greenville, Ohio
Hamm, Germany
Ludwigshafen, Germany
Münster, Germany
Onoda, Japan
Rayong, Thailand
Shanghai, China
Project
Capacity expansion: plant for sealants
Capacity expansion: for CellastoⓇ
Construction: plant for UltraformⓇ
Capacity expansion: resin plant
Dahej, India
Startup
Engineering plastics, biodegradable plastics, standard foams,
foam specialties, polyurethanes
Concrete admixtures, cement additives, underground
construction solutions, flooring systems, sealants, solutions for
the protection and repair of concrete, high-performance
mortars and grouts, tile-laying systems, exterior insulation and
finishing systems, expansion joints, wood protection
in our customer industries. We are positioning ourselves to
grow profitably and faster than the market.
We aim to secure our leading market position in Europe, to
profitably expand our position in the North American market
and to purposefully extend our activities in the growth regions
of Asia, South America, eastern Europe and the Middle East.
New business fields such as battery materials play a particu-
larly important role here.
On September 18, 2017, we signed an agreement with
Solvay on the acquisition of Solvay's integrated polyamide
business. The aim is to close the transaction in the third quar-
ter of 2018 after regulatory approvals have been obtained and
the consent of a joint venture partner has been received. The
acquisition would complement our engineering plastics portfo-
lio and expand our position as a solutions provider for the
transportation, construction and consumer goods industries
as well as for other industrial applications. We plan to integrate
the global polyamide business into the Performance Materials
and Monomers divisions.
BASF Report 2017
Management's Report 77
The BASF Group business year - Functional Materials & Solutions
Products, customers and applications
Coatings solutions for automotive applications, technology and
system solutions for surface treatments, decorative paints
Division
Products
Construction Chemicals
Coatings
Performance Materials
Automotive and process catalysts
Battery materials
Precious and base metal services
Catalysts
Europe
■ EBIT before special items considerably below the
2016 figure due to higher fixed costs
On October 31, 2017, a fire occurred during startup of
the citral plant in Ludwigshafen, Germany. As a result, we
had to declare Force Majeure for all citral- and isoprenol-
based aroma ingredients, and consequently for vitamin A,
vitamin E and several carotenoid products as well.
1,678
1,510
Income from operations (EBIT)
2
899
917
Amortization and depreciation²
16.6
15.0
%
EBITDA margin
(6)
(10)
2,577
Income from operations before depreciation and amortization (EBITDA)
4
16,027
16,723
Sales including intersegmental transfers
8
469
506
2
3,805
3,896
(5)
2,427
1,932
Special items
(99)
positive impact on sales. Portfolio measures and negative
currency effects in all divisions reduced sales slightly.
At €16,217 million, sales to third parties in the Performance
Products segment were €659 million above the prior-
year figure in 2017 (volumes 5%, prices 1%, portfolio -1%,
currencies -1%). This is mainly attributable to volumes
growth in all divisions. Higher sales prices in the Care
Chemicals and Dispersions & Pigments divisions also had a
■ EBIT before special items decreases by 20% to
€1,416 million as a result of lower margins
■ Sales up 4% at €16,217 million, mainly driven by
higher volumes
Performance Products segment
2 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
3 Additions to intangible assets and property, plant and equipment
1 Effective January 1, 2017, the Chemicals and Performance Products segments' activities for the electronics industry were merged and allocated to the Performance Products segment
as the Electronic Materials global business unit. To facilitate comparability, the relevant figures for 2016 have been adjusted accordingly.
(1)
399
(10)
892
800
395
94
Research and development expenses
(3)
14,911
14,432
Assets
(87)
205
26
EBIT after cost of capital
(20)
1,777
1,416
EBIT before special items
Investments including acquisitions³
1,844
7
4,735
2018
Expansion: production plant for dispersions
2017
Expansion: production plant for resins (BasonatⓇ)
2017
Expansion: polyvinylpyrrolidone plant
2017
Construction: polyisobutene plant
2017/2018
Construction: aroma ingredients complex
2017
Expansion: production plant for bismuth vanadate pigments
Construction: production plant for vitamin A
2017
Flexibilization: superabsorbent plant
Project
The BASF Group business year - Performance Products
Management's Report 71
Shanghai, China
Nanjing, China
Ludwigshafen, Germany
Besigheim, Germany
Kuantan, Malaysia
Antwerp, Belgium
Location
Investments
BASF Report 2017
Startup
2020
Construction: production plant for ibuprofen
2021
5,079
6
5,086
5,398
4
15,558
Change in %
2016
2017
16,217
Intersegmental transfers
Performance Chemicals
Nutrition & Health
Care Chemicals
Thereof Dispersions & Pigments
Sales to third parties
BASF Report 2017
Segment data¹ (million €)
The BASF Group business year - Performance Products
72 Management's Report
2019
Construction: production plant for plastic additives
2017
Construction: production plant for emollients and waxes
2018
Expansion: polyacrylamide plant
2017
Construction: production plant for bio-acrylamide
Income from operations (EBIT) before special items
declined by €361 million year-on-year to €1,416 million. This
was largely due to lower margins, primarily as a result
of higher raw materials prices that could not be fully passed
on via sales prices. Compared with 2016, EBIT declined
by €168 million to €1,510 million. Special income in the
Performance Chemicals division from the transfer of BASF's
leather chemicals business to the Stahl group only partially
compensated for the margin-related decline in earnings.
1234
For the Outlook for 2018, see page 123
Management's Report 73
Portfolio
(1%)
Prices
2%
Volumes
In the Performance Chemicals division, sales to third parties
rose by €91 million to €3,896 million compared with 2016.
This was due to higher sales volumes in all regions and
businesses. Volumes growth led to higher sales, especially in
the lubricant and mineral oil additive businesses as well as in
plastic additives. Sales were also positively impacted by the
recovery of the markets for oilfield and mining chemicals.
Lower sales prices, particularly in Asia and South America,
negative currency effects and the transfer of BASF's leather
chemicals business to the Stahl group reduced sales.
Considerable decline in EBIT before special items
due to lower margins
■
■ Sales growth of 2% to €3,896 million from higher
volumes
Performance Chemicals
Nutrition & Health - Factors influencing sales
Sales to third parties in 2017 declined by €88 million to
€1,844 million in the Nutrition & Health division. This was
primarily attributable to portfolio effects. Sales were also
reduced by slightly lower sales prices, especially for vitamins,
as well as negative currency effects. Higher volumes in almost
all business areas had an offsetting effect.
(5%)
706
■
Nutrition & Health
BASF Report 2017
The BASF Group business year - Performance Products
74 Management's Report
In November 2017, we completed the technical retrofitting
of the superabsorbent plant at the site in Antwerp, Belgium,
where the superabsorbent products SavivaⓇ and HySorbⓇ can
be produced.
EBIT before special items declined considerably compared
with 2016. This was mainly due to the ongoing pressure on
margins for superabsorbents and lower margins for oleo-
chemical surfactants. Fixed costs increased slightly as a
result of additional maintenance costs and higher production
volumes. Special charges were predominantly attributable to
restructuring measures in North America.
Despite the rise in sales and volumes, EBIT before special
items declined considerably compared with 2016. This was
mainly due to lower margins as a result of the oil price-related
increase in raw materials prices as well as slightly higher fixed
costs.
2
31%
6%
€5,398 million
3
Sales decline 5% to €1,844 million, primarily as a
result of divestitures
24%
Currencies
Sales
EBIT before special items declined considerably compared
with 2016. This was mainly due to higher fixed costs from the
gradual startup of our new aroma ingredients complex in
Kuantan, Malaysia, as well as the expansion of capacities at
our ibuprofen production facility in Bishop, Texas. Earnings
were also reduced by lower margins, especially for vitamins.
2
4
Performance Chemicals - Sales by region
(Location of customer)
3 €1,844 million
18%
30%
11%
South America, Africa, Middle East
Asia Pacific
North America
41%
2%
(1%)
(1%)
Currencies
Sales
(2%)
Portfolio
(1%)
Prices
6%
Volumes
Performance Chemicals - Factors influencing sales
1234
Europe
(Location of customer)
Nutrition & Health - Sales by region
(5%)
4
1
39%
South America, Africa, Middle East
6%
Volumes
Dispersions & Pigments - Factors influencing sales
7%
(1%)
Currencies
Sales
0%
3%
Prices
Portfolio
5%
Volumes
Care Chemicals - Factors influencing sales
Prices
Sales rose in all regions, buoyed by strong demand.
Higher volumes led to sales growth in Europe in particular.
Considerable decline in EBIT before special items
attributable to lower margins
■
■ 7% increase in sales to €5,079 million largely due to
volumes growth
Care Chemicals
This divestiture reduced sales in the additives business;
sales increased in all other business areas. Our sales volumes
rose in all business areas, particularly in the dispersions and
electronic materials businesses. Sales prices in the dispersions
business increased on the back of higher raw materials prices.
In the remaining business areas, particularly electronic materials
and pigments, sales prices were pushed down by stronger
market competition.
Sales to third parties in the Dispersions & Pigments division
amounted to €5,398 million, up €312 million from the previous
year. This positive development was driven by volumes growth
and higher sales prices in the dispersions business. Portfolio
and currency effects were slightly negative overall. The acqui-
sition of Rolic AG, Allschwil, Switzerland, in February 2017,
had a positive impact on sales, while the divestiture of
the photoinitiator business in August 2016 had a dampening
effect.
EBIT before special items considerably below
prior-year level, mainly due to lower margins
Higher volumes and prices lift sales by 6%
year-on-year to €5,398 million
■
■
Dispersions & Pigments
The BASF Group business year - Performance Products
In the Care Chemicals division, sales to third parties rose by
€344 million to €5,079 million in 2017. This was predomi-
nantly the result of higher sales volumes, particularly in the
hygiene business and of ingredients for the detergents and
cleaners industries as well as for the cosmetics industry. Price
increases on the back of higher raw materials prices, especially
for oleochemical surfactants and fatty alcohols, also had a
positive effect on sales. Currency effects reduced sales slightly.
2%
Care Chemicals - Sales by region
(Location of customer)
4
Asia Pacific
North America
Europe
-234
4
Dispersions & Pigments - Sales by region
(Location of customer)
2
10%
4 South America, Africa, Middle East
18%
Asia Pacific
3
1
€5,079 million
6%
Sales
22%
North America
2
3
50%
Europe
(1%)
Currencies
1
(1%)
Portfolio
BASF Report 2017
707
(30)
1,545
20%
Currencies
(1%)
Sales
22%
Coatings - Sales by region
(Location of customer)
4
Portfolio
1
39%
1
2 North America
3
Asia Pacific
22%
24% 3
€3,969 million
4
Europe
(1%)
Prices
4%
Coatings
■
Sales growth of 22% to €3,969 million from Chemetall
acquisition and higher volumes
EBIT before special items considerably below
prior-year figure due to higher fixed costs and lower
margins
In the Coatings division, sales to third parties in 2017 grew by
€720 million to €3,969 million, mainly as a result of the Che-
metall business acquired in December 2016. We increased
sales volumes in Asia and Europe in particular. Sales were
reduced by negative currency effects, especially in Asia and
North America, as well as slightly lower prices.
Sales of automotive OEM coatings increased thanks to
higher volumes in all regions. We recorded slight sales growth
in the automotive refinish coatings business, as we were able
to more than offset the negative currency effects with higher
sales volumes and the acquisition of Guangdong Yinfan
Chemistry, Jiangmen, China, in September 2016. In the deco-
rative paints business in Brazil, sales were up slightly on the
prior-year figure: currency effects and slight price increases
had a positive impact, while demand declined slightly.
Construction Chemicals - Factors influencing sales
Volumes
2%
Prices
0%
Portfolio
4%
Currencies
(3%)
Sales
3%
Coatings - Factors influencing sales
Volumes
South America, Africa, Middle East
EBIT before special items was considerably below the 2016
figure, primarily as a result of higher raw materials prices.
Special charges mainly arose in connection with the acquisi-
tion of the western European building material business for
professional users from the Henkel group.
15%
The BASF Group business year - Functional Materials & Solutions
1
Europe
48%
3
1
2
North America
21%
4
€7,706 million
Asia Pacific
28%
4
South America, Africa, Middle East
3%
2
EBIT before special items was considerably below the prior-
year figure. This was mainly attributable to lower margins: The
increase in raw materials prices could only be partially offset
by the higher sales prices. Earnings were also reduced by
higher production costs from the startup of new plants. EBIT
before special items in the previous year also included positive
one-off effects from insurance payments and the release of
provisions.
0
3
Performance Materials - Sales by region
(Location of customer)
Portfolio
12%
BASF Report 2017
EBIT before special items in the Coatings division declined
considerably. The Chemetall business made a positive contri-
bution to earnings but was unable to compensate for the
decline in the businesses not affected by the portfolio
measures. The decrease in the latter was mainly due to higher
fixed costs and lower margins as a result of the increase in raw
materials prices. Special charges arose from the integration of
the Chemetall business and the restructuring in connection
with the divestiture of the industrial coatings business, which
was completed in December 2016 and led to special income
in the prior year.
In November 2017, we inaugurated a new large-scale
automotive coatings plant at the Caojing site in Shanghai,
China, to complement our existing automotive coatings plant
there. We also inaugurated a production facility for automotive
OEM coatings in Bangpoo, Thailand. With the expansion, we
aim to even better serve the growing automobile market in
Asia Pacific, especially in China.
Performance Materials
■
Sales growth of 12% to €7,706 million mainly due to
price developments
Considerable decrease in EBIT before special items,
primarily as a result of lower margins
The Performance Materials division increased sales to third
parties by €818 million to €7,706 million in 2017. This was
largely thanks to price increases on the back of a significant
rise in raw materials prices. Higher sales volumes to the auto-
motive, consumer goods and construction industries also
contributed to sales growth, while currency effects had a
negative impact.
There was strong growth in sales to the automotive indus-
try in Europe and Asia in particular thanks to higher prices and
greater demand for polyurethane systems and engineering
plastics. The increase in sales volumes in North and South
America also contributed to the positive sales development.
In the consumer goods industry, sales were likewise up
significantly year-on-year, mainly as a result of higher volumes
in Asia and Europe. We recorded volumes growth, particularly
in our businesses with polyurethane systems, thermoplastic
polyurethanes and biopolymers. Significantly higher prices in
the polyurethane systems business also had a positive effect.
Sales to the construction sector grew, mainly as a result of
the significant increase in sales prices for polyurethane sys-
tems and styrene foams in Europe and Asia. Higher volumes in
all regions also boosted sales.
Performance Materials - Factors influencing sales
Volumes
Prices
6%
7%
0%
Currencies
Sales
(1%)
80 Management's Report
The aforementioned acquisition of the construction
chemicals business and higher volumes led to sales growth in
Europe. In North America, the acquisition of Thermotek only
partially compensated for declining volumes and negative
currency effects. Sales in Asia rose year-on-year due to vol-
umes growth. In the region South America, Africa, Middle
East, sales decreased as a result of negative currency effects
and slightly lower volumes and prices. Demand in the Middle
East in particular did not meet our expectations.
EBIT before special items
Considerable decline in EBIT before special items
due to increase in raw materials prices
■
EBIT before special items down 17% to €1,617 million
due to lower margins and rising fixed costs
In the Functional Materials & Solutions segment, sales to third
parties increased by €2,013 million to €20,745 million. This
was due to higher prices and volumes as well as the
Chemetall business, which was acquired from Albemarle in
December 2016; sales were slightly reduced by currency
effects (volumes 4%, prices 5%, portfolio 3%, currencies
-1%). The volumes growth was largely attributable to higher
demand for our products for the automotive and construction
industries.
At €1,617 million, income from operations (EBIT) before
special items was down €329 million on the 2016 figure,
primarily due to lower margins and higher fixed costs. Special
charges in 2017 mainly related to integration costs in connec-
tion with the Chemetall acquisition as well as the acquisition of
the western European building material business for profes-
sional users from the Henkel group. In 2016, special income
arose from the divestiture of the industrial coatings busi-
ness in the Coatings division. EBIT declined by €654 million to
€1,545 million in 2017.
Sales increase of 6% to €6,658 million largely driven
by higher prices
Considerable improvement in EBIT before special
items, mainly from volumes growth
Sales to third parties in the Catalysts division rose by €395 mil-
lion to €6,658 million in 2017. This was primarily due to higher
sales prices on the back of an increase in precious metal
prices and increased volumes of mobile emissions catalysts.
Currency effects and the divestiture of the polyolefin catalysts
business in June 2016 had a negative impact on sales.
We increased sales volumes for battery materials and
chemical catalysts, while volumes declined in the refining
catalysts business. In precious metal trading, sales rose by
€182 million to €2,518 million. Higher prices more than offset
the decline in volumes.
■
Catalysts - Factors influencing sales
1%
Prices
8%
Portfolio
(1%)
Currencies
(2%)
Sales
Volumes
■ Sales growth of 11% to €20,745 million, mainly from
higher prices and volumes
Functional Materials & Solutions segment
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
2 Additions to intangible assets and property, plant and equipment
In the Construction Chemicals division, sales to third parties
rose by €80 million as against the previous year to €2,412 mil-
lion. This was partly attributable to the acquisition of the Henkel
group's western European building material business for pro-
fessional users in early 2017, as well as the acquisition of the
waterproofing systems supplier Grupo Thermotek, Monterrey,
Mexico, in September 2017. We also increased our sales vol-
umes. Overall, prices remained on a level with the previous
year.
2,199
(72)
253
1,617
1,946
(17)
(190)
813
17,364
1,056
17,359
3,679
431
0
(71)
393
10
Research and development expenses
6%
For the Outlook for 2018, see page 123
Catalysts
Management's Report 79
2
North America
30%
3
€2,412 million
3
Asia Pacific
South America, Africa, Middle East
7%
4
South America, Africa, Middle East
13%
2
2
We considerably increased EBIT before special items year-on-
year, mainly thanks to higher sales volumes.
Construction Chemicals
BASF Report 2017
■
■ Sales up 3% year-on-year at €2,412 million as a result
of acquisitions and higher volumes
1
1
19%
38%
The BASF Group business year - Functional Materials & Solutions
1234
(Location of customer)
Europe
Construction Chemicals - Sales by region
4
(Location of customer)
4
39%
Catalysts - Sales by region
North America
Europe
30%
€6,658 million
Asia Pacific
24%
T
3
1
160
Declaration of Conformity Pursuant to Section 161 AktG
167
Declaration of Corporate Governance
Report of the Supervisory Board
BASF Report 2018
6
166
We create chemistry
Management and Supervisory Boards
Compensation Report
142
140
Compliance
132
Corporate Governance
Corporate Governance Report
131
355
146
90
You can find more information online.
For more information, see page 22
Glossary
☐☐ The content of this section is voluntary, unaudited information,
which was critically read by the auditor.
( ) The content of this section is not part of the statutory audit of
the annual financial statements but has undergone a separate
audit with limited assurance by our auditor.
☐ You can find more information in this report.
The following symbols indicate important information:
Further information
This integrated report documents BASF's economic, environmental
and social performance in 2018. We use examples to illustrate how
sustainability contributes to BASF's long-term success and how we
as a company create value for our customers, employees, share-
holders, business partners, neighbors and the public.
Integrated reporting
[About This Report]
How we create value - an
overview of BASF's business
model based on the IIRC
framework
6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
285
284
280
279
5 Supplementary Information Oil and Gas Business
3
1
Ten-Year Summary
181
Statement of Cash Flows
11
179
Balance Sheet
8
Letter from the Chairman of the Board of Executive Directors
The Board of Executive Directors of BASF SE
BASF on the Capital Market
177
Statement of Income and Expense Recognized in Equity
12
7
176
Statement of Income
170
Independent Auditor's Report
The BASF Report online
169
Statement by the Board of Executive Directors
168
Consolidated Financial Statements
To Our Shareholders
Statement of Equity
182
Notes
Overviews
6
117
90
Responsible Conduct Along the Value Chain
Forecast
41
The BASF Group's Business Year.
25
Our Strategy
270
269
Supplementary Information Oil and Gas Business
Supplementary Information on the Oil and Gas Business
18
16
15
The BASF Group
Overview
Management's Report
5
2
183
Trademarks
HTML version with additional features: basf.com/report
BASF Group's scope of consolidation for its financial reporting com-
prises BASF SE, with its headquarters in Ludwigshafen, Germany,
and all of its fully consolidated material subsidiaries and proportion-
ally included joint operations. Shares in joint ventures and associated
companies are accounted for, if material, using the equity method in
the BASF Group Consolidated Financial Statements and are thus
not included in the scope of consolidation.
■ Integrated BASF Report serves as U.N. Global Compact
progress report
8
12
BASF on the Capital Market
11
The Board of Executive Directors of BASF SE
the Board of Executive Directors
Letter from the Chairman of
Share-
holders
To Our
About This Report
1
60
BASF Report 2018
This report contains forward-looking statements. These statements
are based on current estimates and projections of the Board of
Executive Directors and currently available information. Forward-
looking statements are not guarantees of the future developments
and results outlined therein. These are dependent on a number of
factors; they involve various risks and uncertainties; and they are
based on assumptions that may not prove to be accurate. Such risk
factors include those discussed in Opportunities and Risks on
pages 123 to 130. We do not assume any obligation to update the
forward-looking statements contained in this report above and
beyond the legal requirements.
Forward-looking statements and forecasts
A report on the substantive audit of the NFS can be found at basf.com/nfs-audit-2018
A report on the sustainability information in the BASF Report 2018 can be found at
basf.com/sustainability_information
The Independent Auditor's Report can be found on page 170
KPMG also conducted a substantive audit with limited assurance of
the nonfinancial statement (NFS).
dance with ISAE 3000 (Assurance Engagements other than Audits
or Reviews of Historical Financial Information) and ISAE 3410
(Assurance Engagements on Greenhouse Gas Statements), the
relevant international auditing standards for sustainability reporting.
The additional content provided on the BASF internet sites indicated
in this report is not part of the information audited by KPMG.
Chapter 1 pages 7-14
1 To Our Shareholders
2 Management's Report
Letter from the Chairman of the Board of Executive Directors
3 Corporate Governance
"One of our targets
is to generate sales
of around €22 billion
with Accelerator
products by 2025."
"We want to achieve
CO2-neutral growth
until 2030 and keep
our greenhouse gas
emissions flat at the
2018 level."
"We further developed
our strategy in 2018.
Our strategy
focuses on growth."
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business 6 Overviews
3 Corporate Governance
1 To Our Shareholders 2 Management's Report
Letter from the Chairman of the Board of Executive Directors
About This Report
8
BASF Report 2018
How do we respond to this? Last year, we already began working intensely on making
BASF fit for the future. As part of this, in 2018 we further developed our strategy,
However, market conditions will not get any easier for us in 2019. Political and
economic risks have grown. The geopolitical tensions and trade conflicts, especially
between the United States and China, will continue. We therefore anticipate a slight
decline in global economic growth. Global chemical production will however likely
grow about as strongly as it did in 2018.
We are not satisfied with our business performance in 2018 or with our share price
development. We know that we can do more.
Looking to the stock market, it is clear that the BASF share price was negatively
impacted by the considerable year-on-year decline in earnings as well as the unfavor-
able macroeconomic and geopolitical developments. At the end of 2018, our share
price was €60.40. Compared with the closing price at the end of the previous year,
this represents a decrease of 34%.
Moreover, we noticed a significant cooling in our key markets, especially the auto-
motive industry, in the second half of the year. In addition, demand from our customers
in China decreased considerably. The trade conflict between the United States and
China was a factor in this slowdown.
What are the reasons for this? Two-thirds of the earnings decline in 2018 can be
attributed to the Chemicals segment. Prices for isocyanates fell sharply and cracker
margins were lower than expected in all regions. In the second half of the year, low
water levels on the Rhine River posed a particular challenge for us. At the Ludwigshafen
site, at times we were unable to receive any deliveries of raw materials via inland
waterways. Consequently, we were forced to reduce capacity utilization at our plants.
This alone reduced our earnings by around €250 million.
increase of 2% compared to the previous year. Our EBIT before special items declined
to €6.4 billion, down by 17% compared with 2017. Cash flows from operating activi-
ties amounted to €7.9 billion, down 10% year on year, while free cash flow was €4.0
billion, compared with €4.8 billion in the prior year.
Taking a look at our 2018 financial figures, it is evident that we did not reach our
earnings targets. We reported sales of €62.7 billion in 2018. This represents an
I am very happy to have my first opportunity as Chairman of the Board of Executive
Directors of BASF SE and BASF's Chief Technology Officer to present to you our
annual report. I feel grateful and motivated to take on these new responsibilities, since
I have loved working for this company for the past three decades. We have answers
to the challenges facing society, whether it be climate change, urbanization or
mobility. Every day I get to see how great our team is and how passionate they are
about innovations based on chemistry. Our ambition is clear: We want BASF to remain
the world's leading company in the chemical industry. We want to be the first choice
of our customers and impress them again and again.
Dear shareholder,
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
Statements and figures pertaining to sustainability in the Manage-
ment's Report and Consolidated Financial Statements are also
audited. The audit with limited assurance was conducted in accor-
Content and structure
Our reporting is audited by a third party. KPMG AG Wirtschaftsprü-
fungsgesellschaft has audited the BASF Group Consolidated Finan-
cial Statements and the Management's Report and has approved
them free of qualification. The audit of the Consolidated Financial
Statements including the Notes is based on the likewise audited
financial statements of the BASF Group companies.
The list of shares held can be found at basf.com/en/corporate governance
The detailed GRI and Global Compact Index can be found in the
online report. It provides an overview of all relevant information to
fulfill the GRI indicators, as well as how we contribute to the United
Nations' Sustainable Development Goals (SDGs) and the principles
of the U.N. Global Compact. The results of the limited assurance
audit of this information can also be found here in the form of a
report issued by KPMG AG Wirtschaftsprüfungsgesellschaft.
PARTICIPANT
BASF
GRI
GOLD Community
LEAD
Global Compact
COMPACT
UN GLOBAL
The information on the financial position and performance of the
BASF Group comply with the requirements of International Financial
Reporting Standards (IFRS), and, where applicable, the German
Commercial Code, German Accounting Standards (GAS) and the
guidelines on alternative performance measures from the European
Securities and Markets Authority (ESMA). Internal control mecha-
nisms ensure the reliability of the information presented in this report.
BASF's management confirmed the effectiveness of the internal
control measures and compliance with the regulations for financial
reporting.
COMPACT
WE SUPPORT
receive inspiration for enhancing our reporting. This report address-
es elements of the IIRC framework by, for example, providing an
illustrative overview of how we create value or demonstrating the
relationships between financial and nonfinancial performance in the
sections on the segments. The information in the BASF Report 2018
also serves as a progress report on BASF's implementation of the
10 principles of the United Nations' Global Compact and takes into
consideration the Blueprint for Corporate Sustainability Leadership
of the Global Compact LEAD platform.
PDF version available for download: basf.com/basf_report_2018.pdf integrated reporting with other stakeholders and at the same time,
We have been active in the International Integrated Reporting
Council (IIRC) since 2014 in order to discuss our experiences of
Our sustainability reporting has been based on Global Reporting
Initiative (GRI) standards since 2003 and, since the BASF Report
2017, the "Comprehensive" option of the new Global Reporting
Initiative standards.
We select the report's topics based on the following reporting prin-
ciples: Materiality, sustainability context, completeness, balance
and stakeholder inclusion. In addition to our integrated report, we
publish further information online. Links to this supplementary
information are provided in each section.
The BASF Report combines the major financial and nonfinancial
information necessary to thoroughly evaluate our performance.
■ Financial reporting according to International Financial
Reporting Standards (IFRS), the German Commercial
Code and German Accounting Standards (GAS)
■ Sustainability reporting based on Global Reporting
Initiative (GRI) standards
UN GLOBAL
BASF Report 2018
5
About This Report
The Consolidated Financial Statements begin on page 168
For more information on companies accounted for in the Consolidated Financial Statements,
see the Notes from page 183 onward
Our data collection methods for environmental protection and occu-
pational safety are based on the recommendations of the Interna-
tional Council of Chemical Associations (ICCA) and the European
Chemical Industry Council (CEFIC). In the section "Environmental
Protection, Health and Safety," we report all data including informa-
tion on the emissions and waste of the worldwide production sites
of BASF SE, its subsidiaries, and joint operations based on our
interest. Work-related accidents at all sites of BASF SE and its
subsidiaries as well as joint operations and joint ventures in which
we have sufficient authority in terms of safety management, are
compiled worldwide regardless of our interest and reported in full.
The assets and businesses acquired from Bayer are not yet included
in reporting on environmental protection, health and safety in 2018.
Unless otherwise indicated, further data on social responsibility
and transportation safety refers to BASF SE and its consolidated
subsidiaries.
The section "Employees" refers to employees active in a company
within the BASF Group scope of consolidation as of December 31,
2018.
4
All information and bases for calculation in this report are founded
on national and international standards for financial and sustain-
ability reporting. The data and information for the reporting period
were sourced from the expert units responsible using representative
methods. The reporting period is the 2018 business year. Relevant
information is included up to the editorial deadline of February 20,
2019. The report is published each year in English and German.
■Report published each year in English and German
■ Relevant information included up to the editorial
deadline of February 20, 2019
Data
For more information on our control and risk management system, see page 123 onward
For a visualization of BASF's business model based on the IIRC framework,
see "How we create value" on page 22
The GRI and Global Compact Index can be found at basf.com/en/gri-gc
For more information on the Global Reporting Initiative, see globalreporting.org
For more information on the Global Compact, see globalcompact.org and
basf.com/en/global-compact
For more information on our selection of sustainability topics, see page 36 onward and
basf.com/materiality
The 2018 BASF Online Report can be found at basf.com/report
Material topics along the value chain, which we identified in internal
strategic discussion processes, ongoing global data analysis and
dialog with shareholders, form the focal points of reporting and
define the limits of this report.
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
External audit and evaluation
5
234
on each colored chapter divider
6.62
5.12
€
Earnings per share
Page 60
(22.6%)
6,078
4,707
million €
(22.7%)
Net income
special items
2018 3,386
EBIT before
(71.6%)
2,902
825
million €
EBIT after cost of capital'
2018 | 16,501
2017 | 16,331
2017 4,233
(20.5%)
Assets
86,556
2,028
Research and development
expenses¹
0.5%
10,610
6.0%
115,490
122,404
10,659
million €
Personnel expenses
million €
Employees at year-end
2017
2018
million €
146.0%
4,364
10,735
Investments including
acquisitions²
9.9%
78,768
+/-
7,587
6,033
million €
2017
2018
Segment data
Key data
BASF Group 2018
at a glance
LABmaster sp
BASF
938
We create de
+/-
D-BAS
KAPRES
Petrischalen
We create chemistry
Q-BASF
L
and social performance
Economic, environmental
BASF Report 2018
no
4
Sales¹
million €
62,675
EBIT1
Sales
(16.9%)
7,645
6,353
million €
EBIT before special items¹
million €
Chemicals
(14.9%)
10,765
9,166
million €
EBITDA1
(11.7%)
10,738
9,481
million €
EBITDA before special items¹
2.4%
61,223
1,843
10.0%
million €
Greenhouse gas
million €
2018 | 15,812
2017 | 16,217
Sales
Performance Products
2 Additions to intangible assets and property, plant and equipment
1 Restated figures; for more information, see the Notes to the Consolidated Financial Statements
from page 200 onward
(16.7%)
120
100
EBIT before
special items
Page 74
million €
1,307■
2018
2017 1,617
EBIT before
special items
18.4%
10
BASF Report 2018
Martin Brudermüller
Master Bedenüller
Number of on-site sustainability
audits of raw material suppliers
M Page 67
2018
1,376■
Detailed tables of contents can be found
Contents
For more information on battery materials, see page 33 and from page 74 onward
Globally, BASF is conducting research on innovative cathode materials that
make electromobility a reality. BASF's innovations for high-performance
lithium-ion batteries can help double the real range of a mid-size car from
300 to 600 kilometers by 2025 and significantly reduce the charging time of
electric vehicles. The photo shows a dry room at the research and
development center in Ludwigshafen, Germany, where BASF is working on
cathode materials for lithium-ion batteries and components for next-
generation batteries such as solid-state batteries.
On the cover:
Business success tomorrow means creating value for the environ-
ment, society and business. Our innovations contribute to a sustain-
able future. We support our customers in being more sustainable
through our solutions and create new business opportunities that
reinforce our customer relationships and attract new customers. In
this way, we also contribute to achieving the U.N. Sustainable
Development Goals (SDGs), which were adopted by the United
Nations as globally recognized economic, environmental and social
objectives.
Chemistry for a sustainable future
sustainability reporting to inform
shareholders, employees and the
interested public about the 2018
business year.
Our integrated corporate report
combines financial and
to BASF
Welcome
Page 80
2018
2017 1,033■
EBIT before
special items
734■
2017 | 5,696
2018 | 6,156
million €
Sales
Agricultural Solutions
2017 1,416
Yours,
About This Report
I am certain that BASF will remain the leading global company in this industry. The
entire team at BASF is working together to ensure this. This is our ambition. Dear
shareholders, I am glad that you are accompanying us on this journey.
2019 will be an exceptionally demanding year of transformation
politically and strategically. It will be a year in which we make BASF more agile, flexible
and customer-focused with our strategy. At the same time, we will maintain a balance:
We will introduce structural changes and keep what works, we will achieve cost
savings and invest in the future. We want to implement our internal changes by the
end of 2019. This will require focus, energy and strength - and these are all things we
have.
Our strategy focuses on growth: We want to grow profitably and sustainably. We
invest where we see opportunities for growth. At the same time, we will continue to
rigorously reduce costs wherever it makes sense. In everything that we do, we are
guided by these questions: How can we create more value for our customers, for
society and thus for our shareholders? How can we better meet the expectations of
our customers?
which we presented in November. The measures we have identified will also put us in
a good position to face stronger headwinds.
277
Investments in environmental
protection
product/MWh
production processes
2018 | 21,435
2017 | 20,745
(3.7%)
625
We are driven by our purpose: We create chemistry for a sustainable future. We are
convinced that we will only be successful in the long term if we create value for society
and our innovations address all three dimensions of sustainability: the economic,
environmental and social aspects. This is why we have also set ourselves nonfinancial
targets in addition to our financial targets.
602
Sales
of CO2 equivalents
emissions
million €
Functional Materials & Solutions
(3.5%)
22.6
21.8
million metric tons
kilograms of sales
Sustainability is very important to us. We are therefore aiming for CO2-neutral growth
until 2030, keeping our greenhouse gas emissions flat at the 2018 level. This is very
ambitious since we have already reduced our absolute emissions by half since 1990
while our production volume has doubled over the same period. Most of the potential
for optimization has already been exploited. We are therefore developing new
lower-carbon technologies as part of our Carbon Management Program.
Another BASF targets is to generate sales of around €22 billion with Accelerator
products by 2025. These are innovative products that make a decisive contribution to
sustainability in the value chain. As part of our commitment to sustainability, we are
involved in the U.N. Global Compact and we support the U.N. Sustainable Develop-
ment Goals (SDGs). BASF is a founding member of the Responsible Cobalt Initiative
and the World Economic Forum's Global Battery Alliance. In these initiatives, launched
in 2017, companies and international organizations such as the OECD and UNICEF
are joining forces to tackle the challenges in the battery materials supply chain.
With our ChemCycling project, we want to take plastic waste which cannot be
mechanically recycled and use it as a feedstock. This will reduce our consumption of
economically,
BASF's success is the result of its employees and their outstanding efforts and
commitment to the company. For this excellent team performance and dedication to
BASF, I want to thank all employees on behalf of the Board of Executive Directors.
share. The BASF share would thus offer a dividend yield of 5.3% based on the 2018
year-end share price. In total, we plan to pay out €2.9 billion to our shareholders.
Meeting that the dividend for the 2018 business year be raised by €0.10 to €3.20 per
We stand by our ambitious dividend policy and propose to the Annual Shareholders'
What financial targets have we set for ourselves in our new strategy? We want to grow
profitably and faster than the market. We are targeting an increase in BASF's EBITDA
before special items of 3% to 5% annually and a return on capital employed (ROCE)
well above the cost of capital percentage every year. For our shareholders, we want to
deliver above-average value compared with the chemical industry and increase our
dividend per share each year.
In January 2019, we signed a memorandum of understanding with India's Adani
Group regarding a major investment in the acrylics value chain in India. This would not
only expand our footprint in a fast-growing market. The production facility at Mundra
port would also be our first CO2-neutral site, operated with 100% renewable
energy.
The Verbund remains at the heart of our portfolio. Our new strategy will continue to
utilize the advantages the Verbund offers and we will make it even stronger. Our
investments in our future will therefore focus primarily on our own plants in growth
markets. With our major investment project in the southern Chinese province of
Guangdong, we plan to build a new BASF Verbund site in the world's largest chemical
market. We signed an agreement with the provincial government at the beginning of
2019. We estimate a total investment of around $10 billion to complete the project,
which will be wholly owned by BASF.
"We have the right
strategy, the skills and
the passion necessary
to make BASF fit for
the future."
"Our new strategy
capitalizes on the
advantages of our
Verbund and we will
make the Verbund
even stronger."
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business 6 Overviews
3 Corporate Governance
2 Management's Report
Letter from the Chairman of the Board of Executive Directors
1 To Our Shareholders
About This Report
O
BASF Report 2018
We are also further developing our portfolio with innovations as well as investments
and, where appropriate and necessary, with targeted acquisitions and divestitures.
Our aim is to position each of our businesses so that it can successfully hold its own
against the competition. For example, in 2018 we completed the purchase of signifi-
cant parts of Bayer's crop protection and seed business. We are now the world's
fourth-largest producer of crop protection products and seeds - and we are just as
good and ambitious as our competitors. This transaction has given us new capacity
for innovation and economies of scale.
As a scientist, again and again I am inspired by the creativity and ideas of our employ-
ees. We have a unique wealth of skills, innovative strength and resources that have
made BASF the world's leading chemical company. Nevertheless, we want to improve
even more and increase our sales of innovations. This includes work on breakthrough
innovations, the development of new innovation strategies and structures that bring
our employees in research and development closer to our markets and customers.
In our new strategy, we have identified additional priorities: operational excellence,
digitalization, innovation, portfolio management and employees. In each of these
action areas we want to raise the bar and be the pacesetter in our industry. BASF is
known for the safe and reliable operation of chemical plants. Through operational
excellence, we want to become even stronger and be a leading plant operator. To
achieve this, we are investing €400 million per year - more than ever before - to
optimize our plants. Furthermore, we plan to digitalize 350 production facilities by
2022. We are accelerating BASF's digital transformation and strengthening our digital
competencies. This means we will become faster, more efficient and more effective.
This is our vision of internal collaboration aimed at benefiting our customers. With
simpler and more flexible processes and more agile structures, we will be even better
able to meet our customers' expectations. To accomplish this, we will also be making
some organizational changes. This means that many employees from the central units
will move to the divisions to work even closer to our customers.
fossil resources. We strive to be a pioneer in sustainability in the chemical industry.
After all, sustainability is also a key growth area for BASF, where we want to systemat-
ically utilize our opportunities.
We have the right strategy, the skills and the passion necessary to make BASF fit for
the future. And that is why I am optimistic.
Energy efficiency in
100
1 To Our Shareholders
Furthermore, our training center at the Ludwigshafen site in Ger-
many has offered continuous further education on diverse safety
and security topics for employees and contractors since 2010.
Some 18,000 participants received training there in 2018.
In addition to the legally required briefings, we also held training
courses on safe procedures in 2018 to strengthen risk awareness
among our employees and contractors and prevent work-related
accidents.
A new global tool was launched in mid-2018 to help employ-
ees detect threats faster and better assess the risks involved.
Our new, global requirement on key safety-related workflows
emphasizes risk-conscious, safe working practices. A stan-
dardized risk matrix was adopted in 2018 to be able to deter-
mine and assess the hazard potential of incidents consistently
across the company. We introduced new indicators such as
checking work permits on-site to identify trends at an early
stage. Around the world, employees and experts regularly
share their insights and learnings, including - since 2018-
in short keynote talks.
Global dialog improves risk awareness
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
In 2018, 0.3 work-related accidents per 200,000 working hours¹
occurred at BASF sites worldwide. The proportion of chemical-relat-
ed accidents rose slightly to 6% (2017: 5%). Unfortunately, there
were three fatal work-related accidents in 2018 (2017: 2). BASF is
working together with the authorities to analyze the incidents in
depth and is using the findings to derive appropriate measures.
3 Corporate Governance
1 To Our Shareholders
About This Report
96
96
BASF Report 2018
1 Hours worked by BASF employees, temporary employees and contractors. Our previous goal was to reduce the worldwide lost-time injury rate per one million working hours (BASF and temporary employees) to 0.5 at most by 2025.
2 Management's Report
Safety in production
In February 2018, one employee died from injuries sustained in fall-
ing from a tank container at the Antwerp site in Belgium. Measures
to prevent such accidents were taken following the incident. For
example, existing training was updated to make working at heights
an even greater focus. One employee of a contractor died during
loading work at the Flotzgrün landfill site near Ludwigshafen, Ger-
many, in February 2018. He became trapped during work with a
construction vehicle. In November, one employee of a contractor
died from injuries sustained after being struck by a falling sliding
door at the Jacareí site in Brazil. In all cases, BASF is supporting the
relevant authorities in their investigations into the circumstances and
causes of the accidents. We use the findings of investigations into
accidents to take appropriate measures to prevent these from hap-
pening again.
For more information on occupational safety, see basf.com/occupational_safety
BASF Report 2018
1 Hours worked by BASF employees, temporary employees and contractors. We previously reported on the number of lost-time injuries per one million working hours worldwide (BASF and temporary employees). In 2017, 1.4 work-related accidents per one million working hours occurred at BASF sites worldwide. The rate of work-related
accidents for contractors was 1.4 per one million working hours in 2017. The 2017 figure has been adjusted due to updated data. Under the updated indicator definition, the rate of work-related accidents for 2017 would have been 0.3 per 200,000 working hours.
2 Hours worked by BASF employees, temporary employees and contractors. Our previous goal of reducing process safety incidents to a rate of no more than 0.5 per one million working hours (BASF and temporary employees) by 2025 largely followed the definition set by the European Chemical Industry Council (CEFIC). In 2017, the process
safety incident rate per one million working hours was 2.0.
Effectively reducing process safety incidents starts with knowing the
potential risks. Around the world, we promote initiatives to discuss
incidents and their causes, as well as to sensitize others to potential
safety risks. In North America, for example, a key priority in 2018
was detecting all leaks. At the Ludwigshafen site in Germany and at
other European sites, the focus was on sharing measures to improve
measures.
In 2018, we adapted our reporting on accidents and process safety
incidents to the recommendations of the International Council of
Chemical Associations (ICCA), the European Chemical Industry
Council (CEFIC) and the German Chemicals Industry Association
(VCI). We now apply stricter reporting thresholds and use the num-
ber of process safety incidents per 200,000 working hours as a key
performance indicator. We have set ourselves the goal of reducing
process safety incidents to a rate of no more than 0.1 per
200,000 working hours by 2025. In 2018, we recorded 0.3 process
safety incidents per 200,000 working hours² worldwide. We pursue
continual improvement by investigating every incident in detail,
analyzing root causes and using the findings to derive suitable
≤0.1
process safety incidents
per 200,000 working hours
Reduction of worldwide
2025 target
In order to maintain the highest level of safety at our plants across
their entire life cycle, we review the implementation of our protection
plans in all facilities at regular intervals and depending on risk poten-
tial, as well as the on-time performance of the required safety
inspections and any resulting safety-related measures. We regularly
update our plants' safety and security concepts in line with changing
technologies and as necessary.
Our global process safety standards provide the framework for the
safe construction and operation of our plants as well as the protec-
tion of people and the environment. Our experts have developed a
protection plan with the appropriate safety inspections for every
plant that considers the key aspects of safety, health and environ-
mental protection from conception to startup
and stipulates
specific protection measures.
Process safety is a core part of safe, effective and thus future-proof
production. We meet high safety standards in the planning, con-
struction and operation of our plants around the world. These meet
and, in some cases, go beyond local legal requirements.
■ Global initiatives to reduce process safety incidents
■ Network of experts and global training methods foster
dialog
■ Regular review of plant protection plans and performance
of safety inspections and safety-related measures
Process safety
To prevent work-related accidents, we encourage and promote
risk-conscious behavior and safe working practices for every indi-
vidual, learning from incidents and regular exchange of experiences
(see box on page 97). We are constantly refining and enhancing our
requirements.
97
≤0.1
Reduction of worldwide
Strategy
For occupational and process safety as well as health and
environmental protection and corporate security, we rely on
comprehensive preventive measures and expect the cooper-
ation of all employees and contractors. Our global safety and
security concepts serve to protect our employees, contrac-
tors and neighbors as well as to prevent property and envi-
ronmental damage and protect information and company
assets.
CUSTOMERS
BASF
SUPPLIERS
Safety in production]
■ Global safety standards
5 Supplementary Information Oil and Gas Business 6 Overviews
3 Corporate Governance
2 Management's Report
Safety in production
1 To Our Shareholders
About This Report
95
95
4 Consolidated Financial Statements
■ Strengthening risk awareness
■ Comprehensive incident analyses and global
experience and information exchange
The safety of our employees, contractors, neighbors and protecting
the environment is our top priority. This is why we have set ourselves
ambitious goals for occupational and process safety as well as
health protection.
2025 target
We have adapted our incident reporting and goals to the recom-
mendations of the International Council of Chemical Associations
(ICCA), the European Chemical Industry Council (CEFIC) and the
German Chemicals Industry Association (VCI). Our aim is to reduce
the worldwide lost-time injury rate to no more than 0.1 per
200,000 working hours by 2025.1
■ Employees and contractors worldwide instructed on
safe behavior
■ New tools and global dialog to prevent work-related
accidents
Occupational safety
For more information on the global safety initiative, see basf.com/global-safety-initiative
Our global safety initiative was established in 2008 and plays a key
role in the ongoing development of the safety culture. With over
800 activities at 325 sites, the focus of our Global Safety Days was
"Understand risk, take action!" in 2018. The aim was to increase risk
awareness to identify and eliminate threats before they become a
danger - whether at work, on the road or at home. Around 12,000
employees and contractors registered to participate at the Ludwigs-
hafen site alone. This involvement and lively discussion make a
major contribution to our safety culture.
■ Focus of Global Safety Days: "Understand risk,
take action!"
Global safety initiative
Based on our corporate values, leaders serve as safety role models
for our employees. Since July 2018, individual dialogs with experts
on environmental protection, health, safety and security have been
conducted with newly appointed senior executives to discuss func-
tion-specific issues and challenges.
By 2022, we will introduce digital solutions and applications at more
than 350 of our plants to further increase the safety, security, plan-
ning capability and availability of our plants. For example, aug-
mented reality solutions will support daily operations by providing
direct, fast access to the required information with mobile end
devices and apps. Other digital solutions will enable us to perform
predictive maintenance or efficiently simulate maintenance and
production processes in digital plant models.
minimization measures derived from them are an important preven-
tion tool. We also promote regular dialog across different sites to
strengthen risk awareness among our employees and contractors,
to learn from examples of good practice and in this way, continually
develop the safety culture.
We analyze accidents, incidents and their causes in detail at a
global level to learn from these. Hazard analyses and the risk
We promote risk awareness for every individual with measures such
as systematic hazard assessments, specific and ongoing qualifica-
tion measures and global safety initiatives.
We stipulate globally mandatory standards for safety, security, and
environmental and health protection. A worldwide network of
experts supports us in their implementation. As part of our continu-
ous improvement process, we regularly monitor progress toward
our goals.
lost-time injury rate per
200,000 working hours
BASF Report 2018
40
1 To Our Shareholders
CUSTOMERS
BASF
SUPPLIERS
[Product stewardship]
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
We review the safety of our products from research and
development through production and all the way to our cus-
tomers' application. We continuously work to ensure that our
products pose no risk to people or the environment when
they are used responsibly and in the manner intended.
3 Corporate Governance
1 To Our Shareholders
About This Report
99
BASF Report 2018
We inform business travelers and transferees about appropriate
protection measures prior to and during travel in countries with
elevated security risks. After any major incident such as a terrorist
attack or a natural catastrophe, we can use a standardized global
travel tracking system to locate and contact employees in the
affected regions.
Our worldwide network of information protection officers comprises
more than 600 employees. They support the implementation of our
uniform requirements and hold events and seminars on secure
behaviors. We provided information protection instruction to more
than 33,000 participants in 2018. Our standardized Group-wide
recommendations for the protection of information and knowledge
were expanded to include additional guidance for employees and
updated in line with current developments.
2 Management's Report
Product stewardship
Strategy
■ Global directives with uniformly high standards for
product stewardship
We are committed to continuously minimizing the negative effects of
our products on the environment, health and safety along the value
chain - from development to disposal. This commitment to product
stewardship is enshrined in our Responsible CareⓇ charter and the
initiatives of the International Council of Chemical Associations
(ICCA). We also ensure uniformly high standards for product
stewardship worldwide. In some cases, we have committed to
voluntary initiatives, which go beyond the local legal requirements.
About This Report
1 Our updated corporate strategy realigns our goals from 2019 onward; as a result, we will no longer report on the global risk assessment goal. Furthermore, this goal has become obsolete due to the legal requirement to make chemical risk assessment data available worldwide under regulations such as REACH.
For more information on our strategy and goals, see page 25 onward.
We continue to see a rise in both regulatory requirements for agro-
chemicals and the number of additional studies required to obtain or
extend approval for crop protection products. Potential risks for
people and the environment are carefully assessed and minimized
throughout the research, development and registration process for
crop protection products. We perform a large number of scientific
studies every year to ensure that our products meet the highest
safety requirements.
We apply the experience we have gathered with REACH to fulfill new
legal requirements around the world, such as in South Korea and
Turkey. BASF took the industry lead for a significant share of sub-
stance registrations in South Korea and submitted all registrations
for priority existing chemicals by the July 2018 deadline.
BASF has completed the third and final registration phase of the
E.U. chemicals regulation, REACH, successfully and on time. All
substances produced in annual volumes between one and one
hundred metric tons were registered by the deadline of May 31,
2018. Above and beyond this, our REACH activities continue to be
determined by E.U. authorities' decisions on additional studies in
connection with the evaluation of submitted dossiers. BASF is also
obligated to continuously update the registration dossiers it has
submitted.
■ Final registration phase of REACH successfully
completed
REACH and other chemical regulations
>99%
Risk assessment of
products that we sell in
quantities of more than
one metric ton per year
2020 target¹
By 2020, we will conduct risk assessments for more than 99% of
the substances and mixtures sold by BASF worldwide in quantities
of more than one metric ton per year. We reached 91% of this goal
in 2018 (2017: 76.2%).1 The risk associated with using a substance
is determined by the combination of its hazardous properties and its
potential exposure to people and the environment.
Global target
For more information on GPS, see basf.com/en/gps
Our risk assessment goals support the implementation of initiatives
such as the Global Product Strategy (GPS) of the ICCA. GPS is
establishing worldwide standards and best practices to improve the
safety management of chemical substances. In addition, we are
also involved in initiatives such as workshops and training seminars
in developing countries and emerging markets, including in China
and the Philippines in 2018. In order to facilitate public access to
information, we are involved in the ICCA online portal that provides
more than 4,500 GPS safety summaries.
We provide extensive information on all our chemical sales products
to our customers with safety data sheets in around 40 languages.
This is achieved with the help of a global data base in which we
maintain and evaluate continuously updated environmental, health
and safety data for our substances and products. Our global emer-
gency hotline network provides information around the clock. We
train and support our customers in fulfilling their industry or applica-
tion-specific product requirements. In associations and together
with other manufacturers, BASF is pushing for the establishment of
voluntary global commitments to prevent the misuse of chemicals.
Around the world, we work to sensitize all employees about protect-
ing information and know-how. For example, we further strength-
ened our employees' awareness of risks in 2018 with training, case
studies and interactive offerings. We have defined mandatory
information protection requirements to ensure compliance with our
processes for protecting sensitive information and perform audits to
monitor this.
About This Report
For more information on security, see basf.com/corporate-security
and addressing in depth the issue of cybersecurity. BASF has a
comprehensive program in place to continually improve its ability to
prevent, detect and react to cybersecurity incidents. By establishing
a global Cyber Security Defense Center, BASF significantly expand-
ed the availability of its cybersecurity experts to ensure around-the-
clock protection. We cooperate closely with a global network of
experts and partners to ensure that we can protect ourselves
against cyberattacks as far as possible. In 2018, we therefore
expanded our IT security certification according to ISO 27001,
which was introduced in 2008.
Health Performance Index
Maximum score 1.0
Health protection
Annual target¹
We measure our performance in health protection using the Health
Performance Index (HPI). The HPI comprises five components:
recognized occupational diseases, medical emergency prepared-
ness, first aid, preventive medicine and health promotion. Each
component contributes a maximum of 0.2 to the total score. The
highest possible score is 1.0. Our goal is to reach a value of more
than 0.9 every year. With an HPI of 0.96, we once again reached the
ambitious goal of exceeding 0.9 each year in 2018 (2017: 0.97).1
Our global corporate health management serves to promote and
maintain the health and productivity of our employees. Our world-
wide standards for occupational health are specified in a directive
that is implemented by a global network of experts. This was once
again supported by numerous emergency drills and health promo-
tion measures in 2018.
■ Global standards for corporate health management
■ 2018 Global Health Campaign "Life. Saving. Heroes."
focuses on cardiopulmonary resuscitation (CPR)
> 0.9
Health protection
We are working on increasing the availability of our plants and deter-
mining the optimum point in time for maintenance measures and
revamping/refurbishment. The aim is to further reduce unscheduled
shutdowns. To achieve this, we launched a digitalization project in
2017, which was implemented at a number of plants in Ludwigs-
hafen, Germany in 2018. In 2019, we plan to expand this to further
plants in Ludwigshafen and at our sites in Schwarzheide, Germany,
and Antwerp, Belgium. We want to roll the project out worldwide in
2020.
operational safety. In addition, our training methods are constantly
refined and enhanced to increase risk awareness.
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Safety in production
We play an active role in improving process safety around the world
in a global network of experts, through our involvement in organiza-
tions such as the International Council of Chemical Associations
(ICCA), and by fostering dialog with government institutions.
For more information on process safety, see basf.com/process_safety
Our 2018 Global Health Campaign “Life. Saving. Heroes." focused
on cardiopulmonary resuscitation (CPR). We sensitized our
employees about the issue with the ultimate aim of increasing the
rate of CPR initiated by laypersons. This significantly increases a
person's chances of survival if they suffer cardiac arrest in private life
or at work. Over 480 sites worldwide took part in the health cam-
paign and offered CPR training.
We raise employee awareness of health topics through offers
tailored toward specific target groups. The BASF health checks
form the foundation of our global health promotion program and
are offered to employees at regular intervals.
For more information on occupational medicine, health campaigns and the HPI, see basf.com/health
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
Safety in production
1 To Our Shareholders
About This Report
98
BASF Report 2018
We protect our employees, sites, plants and company know-how
against third-party interference. This includes, for example, potential
terrorist risks in the communities surrounding our production sites
We analyze the potential safety and security risks associated with
investment projects and strategic plans, and define appropriate
safety and security concepts. Our guiding principle is to identify risks
for the company at an early stage, assess them properly and derive
appropriate safeguards.
We regularly check our emergency systems, crisis management
structures and drill procedures with employees, contractors, local
authorities and emergency rescue workers. For example, in 2018
we conducted 224 drills and simulations in Ludwigshafen, Germany,
to instruct participants on our emergency response measures.
We are well prepared for crisis situations thanks to our global crisis
management system. In the event of a crisis, our global, regional or
local emergency response plans and crisis management structures
are engaged, depending on the impact scope. We involve situa-
tion-related partners and suppliers as well as cities, communities
and neighboring companies.
■ Comprehensive protection measures against third-party
interference
■ Regular review of emergency systems and crisis
management structures
Emergency response, corporate security and cybersecurity
Aspects of human rights related to site security are a component of
the global qualification requirements of our security personnel.
Respect for human rights is a mandatory element of any contract
with service providers of the BASF Group who are active in this area.
For more information on emergency response, see basf.com/emergency_response
For more information, see the Notes to the Consolidated Financial Statements on pages 220 and 245
1 Our updated corporate strategy realigns our goals from 2019 onward; as a result, we will convert the Health Performance Index goal into a reporting indicator. For more information on our strategy and goals, see page 25 onward.
1 Including provisions and environmental protection expenses from the discontinued oil and gas business.
2 Investments comprise end-of-pipe measures as well as integrated environmental protection measures.
3 Values shown refer to December 31 of the respective year.
3
Plastic waste is converted
into feedstock by our partners
2
4
5
ㅁ
We can use this to create all kinds
of chemicals and products, including
new plastic
with plastic waste
Consumers and companies use and
dispose of these products
sorted by waste companies
The waste is collected and
Recycling is becoming increasingly important due to the growing awareness of sustainability in the markets and regulatory develop-
ments. In 2018, BASF launched a project to manufacture products from chemically recycled plastic waste on an industrial scale.
Chemical recycling
In 2018, BASF purchased a total of around 30,000 different raw
materials from more than 6,000 suppliers. Important raw materials
include naphtha, natural gas, methanol, ammonia and benzene. In
addition to fossil resources, we also employ renewable raw mate-
rials where appropriate. We use these to manufacture products that
either cannot be made with fossil resources, or only at significantly
greater effort, for example. Depending on the application, either
fossil or renewable raw materials could be the better solution.
Renewable raw materials are not sustainable per se, but can con-
tribute to sustainability by, for example, reducing greenhouse gas
emissions.
Waste companies supply recyclers
Our customers use these to make
their own products
In the ChemCycling project, our partners use thermochemical
processes such as gasification or pyrolysis to transform plastic
waste into syngas or pyrolysis oil. The first pyrolysis oil derived
from plastic waste by our partners was fed into the BASF
Verbund in 2018. The resulting products are of equal quality to
products manufactured from fossil feedstock. Introducing this
recycled feedstock back into the beginning of the value chain
also means that we can calculate the percentage of recycled
materials in certain products manufactured in the Verbund and
offer our customers certified products.
The project's long-term goal is to make plastics recyclable that
cannot yet be recycled, such as mixed plastics or plastics with
residues. In the future, chemical recycling can make a significant
contribution to reducing the amount of plastic waste that is
disposed of in landfill or incinerated, while saving fossil resources.
We are conducting Eco-Efficiency Analyses to ensure that this
approach is sustainable compared with thermal recovery.
-
Palm oil, palm kernel oil, and their derivatives are some of our most
important renewable raw materials. We aim to ensure that these raw
materials come from sustainable, certified sources, and actively
support the Roundtable on Sustainable Palm Oil (RSPO). In 2018,
we published our second progress report - the BASF Palm Progress
Report for greater transparency in the value chain. Based on our
voluntary commitment to sustainably source palm oil products, we
purchased 127,000 metric tons of certified palm kernel oil in 2018.
This represents around 70% of our total volume.
In 2018, around 5.3% of the raw materials we purchased worldwide
were from renewable resources. To make the use of these materials
more competitive, we work on product innovations based on renew-
able raw materials as well as on enhancing production processes.
We also further established our biomass balance approach on the
market in 2018. The goal here is to replace natural gas and naphtha
at the beginning of the value chain with biogas and bio-naphtha
from certified sustainable production. Should a customer select a
biomass balanced product, the proportion of renewable feedstock
to be used is calculated based on the formulation. The calculation
model is certified by an independent third party (TÜV Süd). Our
Verbund production ensures that the characteristics and quality of
all end products remain unchanged and that our customers can use
them as usual. This method has already been applied for more than
60 BASF products - for example, for superabsorbents, dispersions,
plastics such as polyamides and polyurethanes, and for intermedi-
ates available on the market as "drop-in products." These can be
used in place of previously employed products in the production
process without having to change the process itself.
■ Numerous projects and cooperative ventures to improve
sustainability along the value chain
Renewable raw materials
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Raw Materials
1 To Our Shareholders
About This Report
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42
BASF Report 2018
For more information, see basf.com/en/chemcycling
The Verbund system is an important component of our resource
efficiency concept: The by-products of one plant often serve as
feedstock elsewhere, helping us to use raw materials more effi-
ciently. The value created by our Verbund is also part of our contri-
bution to a circular economy. One example is our ChemCycling
project (see box on the right).
Demand for certified products increased significantly again. As a
result, in 2018 we increased sales volumes of certified palm oil and
palm kernel oil-based products for the cosmetics and detergent and
cleaner industries by more than 50% compared with the previous
year. We are expanding our offering of certified sustainable products
in accordance with the RSPO's Mass Balance supply chain model.
This helps our customers to meet their obligations to customers,
consumers and stakeholders. BASF also continues to drive forward
the RSPO supply chain certification of our sites for cosmetic ingre-
dients. In 2018, 22 production sites worldwide were RSPO certified.
Our goal is to only source RSPO certified palm oil and palm kernel
oil by 2020, provided it is available on the market. By 2025, this
voluntary commitment will be expanded to include the most impor-
tant intermediate products based on palm oil and palm kernel oil;
these include fractions and primary oleochemical derivatives as well
as edible oil esters.
Strategy
CUSTOMERS
200 suppliers attended sustainability training in Shanghai as part of
the Tfs initiative. The initiative was named the “Best Third-Sector/
Non-for-Profit Procurement Project" by the global Chartered Insti-
tute of Procurement Supply (CIPS) in September 2018.
BASF is a founding member of the Together for Sustainability (TFS)
initiative of leading chemical companies for the global standardiza-
tion of supplier evaluations and auditing. With the help of TfS, we
promote sustainability in the supply chain. The initiative aims to
develop and implement a global program for the responsible supply
of goods and services and improve suppliers' environmental and
social standards. The evaluation process is simplified for both sup-
pliers and TFS member companies by a globally uniform question-
naire. The 22 members of the initiative conducted a total of
3,767 sustainability assessments - including both initial and
follow-up assessments - and 358 audits in 2018. In 2018, over
■ Together for Sustainability initiative aims to harmonize
and standardize supplier assessments and audits
Evaluating our suppliers
For more information on decent work in global supply chains, see page 39
In Brazil, we work together with the nongovernmental organization
Integrare, which promotes diversity in supply chains. Integrare sup-
ports small and medium-sized businesses run by people with dis-
abilities or socially disadvantaged minorities, for example, by offering
special training and actively encouraging partnerships with larger
companies.
Using TfS evaluations, we pursue a risk-oriented approach with
clearly defined, BASF-specific follow-up processes. A total of
100 raw material supplier sites were audited on sustainability stan-
dards in 2018. We also received sustainability assessments for
546 suppliers from an external service provider. If we identify poten-
tial for improvement, we support suppliers in developing measures
to fulfill our standards. We conduct another review according to a
defined timeframe based on the sustainability risk measured. If the
weak points discovered were particularly severe and we are unable
to confirm any improvement, we reserve the right to terminate the
business relationship. This did not occur in any case in 2018. We
use this approach to evaluate suppliers with an elevated sustain-
ability risk at least every five years. The approach itself is regularly
reviewed to identify possibilities for optimization.
BASF is one of 11 founding members of the German Business Initia-
tive for Sustainable Value Chains established by the German
sustainability network econsense and the Wittenberg Center for
Global Ethics (WCGE). As part of this initiative, we help suppliers to
improve their sustainability performance, for example, through train-
ing. The first supplier training events of the initiative were held in
2018 in China and Mexico.
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
600
2 Management's Report
Supplier Management
tial supply chain risks can be identified and minimized together with
our suppliers.
For more information on Together for Sustainability, see basf.com/en/together-for-sustainability
Audit results
The audits conducted over the past few years have identified some
deviations with respect to environmental, social and corporate
governance standards, for example in waste and wastewater
management and relating to occupational safety, working hours and
minimum wage. In the follow-up audits conducted in 2018, we
found improvements in all areas. None of our 2018 audits identified
instances of child labor. For the suppliers we reviewed, persons
under 18 were excluded from overtime and dangerous work. We did
not find any incidents of forced labor in 2018.
BASF
SUPPLIERS
Raw Materials
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business 6 Overviews
3 Corporate Governance
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5
BASF Report 2018
For more information on the supplier relationship with Lonmin, see basf.com/audits-lonmin.
1 In 2012, an extended strike at a mine operated by Lonmin Plc, London, UK, in Marikana, South Africa, culminated in a violent confrontation between mine workers and armed South African police. Employees of the platinum supplier Lonmin were among the fatalities.
For more information on suppliers, see basf.com/suppliers
BASF undertook a thorough examination of the issues raised at
platinum supplier Lonmin Plc, London, U.K., in connection with the
events in Marikana, South Africa. In 2018, we continued our regular
dialog with both Lonmin and with local stakeholders, such as lead-
ing industry and human rights representatives. Topics discussed
with Lonmin included the results of the follow-up audit, which we
commissioned an internationally recognized audit firm to perform in
2017. This audit identified positive developments in several areas
such as working standards, as well as a number of gaps, for exam-
ple, not implementing a local, anonymous grievance mechanism.
Lonmin introduced this in 2018. We will continue to monitor the
audit process and maintain our dialog with Lonmin. In 2018, BASF
played an active role in the establishment of a sector initiative by
several precious metal processing companies. The initiative aims to
improve the long-term situation in South Africa's platinum mining
belt and tackle challenges together.
BASF Report 2018
Responsible resource management is an integral part of our
strategy. It is applied within the company through our
Verbund concept, our innovative products and the use of
renewable raw materials. In the search for alternative raw
materials, we employ solutions that contribute to sustain-
ability.
In addition, our BASF Palm Sourcing Policy addresses the require-
ments for protecting and preserving forests and peatland, as well as
the involvement of local communities. At the same time, we will step
up our efforts to improve transparency and traceability in the supply
chain. We were most recently able to trace 79% of our overall oil
palm exposure.
91
BASF continues to promote the establishment of a certified and
transparent supply chain for coconut oil in the Philippines and Indo-
nesia in a joint project with Cargill, Proctor & Gamble and the Ger-
man governmental agency for international cooperation (Gesellschaft
SUPPLIERS
BASF
-
CUSTOMERS
-
[The protection of people and the environment is our top
priority. Our core business the development, production,
processing and transportation of chemicals demands a
responsible approach. We systematically address risks with
a comprehensive Responsible Care Management System,
which is continually being further developed. We expect our
employees and contractors to know the risks of working with
our products, substances and plants and handle these
responsibly.
Responsible Care Management System
■ Global directives and standards for safety, security,
health and environmental protection
BASF's Responsible Care Management System comprises the
global directives, standards and procedures for safety, security,
health and environmental protection for the various stations along
our value chain. Our regulations cover the transportation of raw
materials, activities at our sites and warehouses, and distribution of
our products as well as our customers' application of the products.
Specifications for implementing these measures are laid out in bind-
ing directives that are introduced in consultation with employee
representatives. These describe the relevant responsibilities,
requirements and assessment methods. Our policies and require-
ments are constantly updated. We also maintain a dialog with
government institutions, associations and other international organi-
zations.
We set ourselves ambitious goals for safety and security, and health
and environmental protection. We regularly conduct audits to moni-
tor our performance and progress. We assess the potential risks
and weak points of all our activities - from research to production
and logistics - and the effects of these on the safety and security of
our employees, the environment or our surroundings. In our data-
bases, we document accidents, near misses and safety-related
incidents at our sites as well as along our transportation routes to
learn from these; appropriate measures are derived according to
specific cause analyses.
For more information on Responsible Care®, see basf.com/en/responsible-care
Audits
■ 148 safety, security, health and environmental
protection audits performed
Regular audits help ensure that standards are met for safety,
security, health and environmental protection. We conduct audits at
BASF sites and at companies in which BASF is a majority share-
holder. Sites and companies acquired as part of acquisitions are
audited in a timely manner to bring these into line with our standards
and directives as necessary. We have defined our regulations for
Responsible Care audits in a global Group requirement. During our
audits, we create a safety and environmental profile that shows if we
are properly addressing the existing hazard potential. If this is not the
case, we agree on measures and monitor their implementation, for
example, with follow-up audits.
Responsible Care Management System
Our Responsible Care audit system complies with the ISO 19011
standard and is certified according to ISO 9001. Worldwide,
181 BASF production sites are certified in accordance with
ISO 14001 and EMAS (Eco-Management and Audit Scheme)
(2017: 178). In addition, 53 sites worldwide are certified in accor-
dance with OHSAS 18001.
For more information on occupational safety and health protection, see page 96 onward
Costs and provisions for environmental protection in the BASF Group¹
Million €
2018
1,077
1,024
2017
Operating costs for environmental
protection
Investments in new and improved
environmental protection plants and
facilities²
277
234
Provisions for environmental protection
measures and remediation³
639
BASF and Henkel have cooperated with the development organiza-
tion Solidaridad since 2016 to better involve smallholder farmers in
Indonesia and improve their living conditions. Smallholders complete
farming and environmental training as part of the Farmer Field
School initiative, with a focus on efficient and sustainable growing
practices and health and safety standards. Since 2016, more than
1,800 smallholders have completed a training program as part of
the Farmer Field School initiative.
In the BASF Group in 2018, 126 environmental and safety audits
were conducted at 84 sites (2017: 109 audits at 83 sites). The focus
was on auditing sites based on the level of risk. For production
plants with a medium and high hazard potential, we conducted an
additional 44 short-notice audits at 38 sites (2017: 63 audits at
47 sites). We audited 22 sites with respect to occupational medicine
and health protection in 2018 (2017: 13). In addition, 34 health
performance control visits were conducted at sites with low to
medium health risks (2017: 31).]
Health and Safety
■ Regular audits to monitor performance and progress
5 Supplementary Information Oil and Gas Business 6 Overviews
For more information on our voluntary commitment to palm oil products, see
basf.com/en/palm-dialog
BASF Report 2018
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3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
Environmental Protection,
The Sustainable Castor Initiative - Pragati, a joint initiative estab-
lished by BASF together with Arkema, Jayant Agro and Solidaridad,
made further progress in 2018. With the initiative, the project mem-
bers aim to improve the economic situation of castor oil farmers and
their workers in India. Smallholders are trained and audited based
on a newly developed sustainability code. The goal is to optimize
their yields, reduce the impact on the environment and be able to
offer certified sustainable castor oil on the global market. Since the
project was initiated, more than 2,700 smallholders and over
2,000 hectares of land have been certified for sustainable castor oil
cultivation. The smallholders certified under the program have been
able to increase their yields by 55% compared with the 2016 base-
line. In 2018, the project was extended for another three years, from
2019 to 2022.
6 Overviews
Sourcing mineral raw materials responsibly is important to BASF. We
procure a number of mineral raw materials, such as precious metals,
which we use to produce mobile and process emissions catalysts,
as well as various minerals for the production of battery materials.
-
In suspicious cases, we track the origins of minerals as defined in
the Dodd-Frank Act - including tin, tantalum, tungsten, their ores
and gold to see if they come from mines in conflict regions. We
reserve the right to have suppliers audited and, if necessary, termi-
nate our business relationship. The suppliers addressed have con-
firmed to us that they do not source minerals matching this definition
of conflict minerals from the Democratic Republic of Congo or its
neighboring countries.
Mineral raw materials
In addition to responsible procurement of conflict minerals, BASF is
committed to a responsible and sustainable global supply chain for
cobalt and mica.
4 Consolidated Financial Statements
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1 To Our Shareholders
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94
BASF Report 2018
für Internationale Zusammenarbeit, or GIZ), supported by the Rain-
forest Alliance and the Philippine Coconut Authority. Thanks to the
initiative, the first certified sustainable coconut oil was produced in
the Philippines in 2018. The project is partly financed by the
develoPPP.de program of the German Federal Ministry for Eco-
nomic Cooperation and Development (BMZ). It is expected to
improve income and living standards for around 3,300 smallholders.
We intend to implement the E.U. Conflict Minerals Regulation pub-
lished in 2017 by the 2021 deadline. The regulation defines supply
chain due diligence obligations that must be met by importers and
processors of certain mineral raw materials originating from conflict
regions and high-risk areas.
For more information on renewable resources, see basf.com/renewables
BASF mainly uses the mineral raw material mica and mica-based
effect pigments in the production of coatings. Our demand is largely
met with mica from our own mine in Hartwell, Georgia. We require
our mica suppliers to comply with internationally recognized stan-
dards, including the prohibition of child labor. As a member of the
Responsible Mica Initiative, BASF is actively working to eradicate
child labor and unacceptable working conditions in the mica supply
chain in India.
Internationale Zusammenarbeit, or GIZ). The companies tasked GIZ
with setting up a three-year pilot mining project to identify how to
improve working conditions in artisanal mines, as well as living con-
ditions in the surrounding communities in the Democratic Republic
of Congo. Although BASF does not procure cobalt from artisanal
mines in the Democratic Republic of Congo and our suppliers con-
firm that they do not either, we support the cross-industry project as
it contributes to the goals of the Global Battery Alliance.
For instance, BASF is a founding member of the Responsible Cobalt
Initiative and the World Economic Forum's Global Battery Alliance.
These initiatives were created by companies in collaboration with
international organizations such as the OECD and UNICEF to
address fundamental challenges in the supply chain of battery
materials. The most effective way of addressing these challenges
is in cooperation with partners along the value chain. One example
of this is our involvement in a joint pilot project launched in 2018
with BMW, Samsung SDI, Samsung Electronics and the German
governmental agency for international cooperation (Gesellschaft für
SUPPLIERS
BASF
CUSTOMERS
Emissions to air
We want to further reduce emissions to air from our produc-
tion, prevent waste and protect the soil. We have set ourselves
standards for doing so in global directives. If no recovery
options are available for waste, we dispose of it in a proper
and environmentally responsible manner.
4 Consolidated Financial Statements
Waste generation in the BASF Group
Million metric tons
[Air and soil
5 Supplementary Information Oil and Gas Business 6 Overviews
106
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1 To Our Shareholders
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BASF Report 2018
Our climate protection products help us offer solutions to our cus-
tomers to avoid greenhouse gas emissions over their entire lifecycle
as compared with reference products. According to the systematic
sustainability analysis we conduct on our portfolio - using the
Sustainable Solution Steering method – such products are referred
to as "Accelerator" solutions as using them contributes positively to
climate protection and energy as compared with reference prod-
ucts. Two examples are LuprosilⓇ and Lupro-GrainⓇ, propionic
4 BASF operations including the discontinued oil and gas business; according to Greenhouse Gas Protocol,
Scope 1, 2 and 3; categories within Scope 3 are shown in parentheses
640 million metric tons
360
With the use of BASF's
climate protection products
Strategy
Emissions avoided
3 Corporate Governance
■Regular monitoring of emissions to air
2017
Regular monitoring of our emissions to air is a part of environmental
management at BASF. Aside from greenhouse gases, we also mea-
sure emissions of other pollutants into the atmosphere. Our report-
ing does not take into account air pollutant emissions from oil and
gas operations due to their substantial fluctuation during exploration
phases.
of which from oil and gas exploration
2.12
2.31
Total waste generation¹
1,000
2018
In surface landfills
In underground landfills
Recycled
Thermally recovered
Waste disposed of
■ Systematic management of contaminated sites
■ Total waste volume slightly higher
■ Professional disposal of hazardous waste
Management of waste and contaminated sites
Dust¹
NMVOC (nonmethane volatile organic compounds)
SOx (total sulfur oxides)
NOx (total nitrogen oxides).
Air pollutants from BASF operations excluding the oil and gas business
CO (carbon monoxide)
Metric tons
Emissions to air
Our product portfolio contains a variety of catalysts used in the auto-
motive sector and in industry to reduce the emission of air pollutants.
Absolute emissions of air pollutants from our chemical plants
amounted to 25,787 metric tons in 2018. Emissions of
ozone-depleting substances as defined by the Montreal Protocol
totaled 19 metric tons in 2018 (2017: 23 metric tons). Emissions of
heavy metals in 2018 amounted to 2 metric tons (2017: 2 metric
tons¹).
■ Emissions at prior-year level
If soil and groundwater contamination occurs at active or former
BASF sites, proper remediation measures are reviewed based on
prevailing legal and current technical standards, and undertaken as
necessary.
Our Raw Material Verbund helps us prevent or reduce waste. We
regularly carry out audits to inspect external waste disposal compa-
nies to ensure that waste is properly disposed of. In this way, we
also contribute to preventive soil protection and keep today's waste
from becoming tomorrow's contamination.
NH3 (ammonia) and other inorganic substances
Total
Without the use of BASF's
climate protection products
0.590
(C 3b, 3c, 5,
55.759
0.579
0.897
20.378
20.716
24.713
2017
Baseline 2002¹
2018
1 The values for baseline 2002 were not adjusted to reflect the currently applied global warming potential factors.
Energy efficiency (kilograms of sales product per MWh)
Primary energy demand³ (million MWh)
Specific greenhouse gas emissions (metric tons of CO2 equivalents per ton of sales product)
105
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Energy and climate protection
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Greenhouse gas emissions² (million metric tons of CO2 equivalents)
0.12
Key indicators for energy and climate protection in BASF operations excluding the discontinued oil and gas business
57.268
8, 13, 15)
57.364
625
4 Other
42 Customers
Emissions from
the use of end
products (C 11)
Emissions along the entire value chain
Million metric tons of CO2 equivalents
Prevention of greenhouse gas emissions through the use
of BASF products
Incineration with energy
recovery, landfilling (C 12)
For more information on our emissions reporting, see basf.com/corporate_carbon_footprint
For more information on the sustainability analysis of our product portfolio, see pages 37 to 38
An analysis of 22 climate protection product groups revealed that
customers' use of products sold in 2018 helps to avoid 640 million
metric tons of CO2 equivalents. Every product makes an individual
contribution in the value chain of customer solutions. Value chains
are assessed in terms of BASF's economic share of the respective
customer solution. On average, 5% of the emissions avoided were
attributable to BASF in 2018. The calculation of avoided greenhouse
gas emissions took into account the chemical industry standards of
the International Council of Chemical Associations (ICCA) and the
World Business Council for Sustainable Development (WBCSD).
acid-based preservatives that enable feed grains to be stored for up
to 12 months after harvesting without being dried. An Eco-Efficiency
Analysis shows that in addition to ecological and economic advan-
tages, these can reduce greenhouse gas emissions by an average
of 85% per metric ton of feed.
602
16 Disposal
4 Transport
Transport of products,
employees' commuting and
business travel (C 4, 6, 7, 9)
Production (including genera-
22 BASF
52 Suppliers
Purchased products,
services and capital
goods (C 1, 2, 3a)
Greenhouse gas emissions along the BASF value chain in 20184
Million metric tons of CO2 equivalents
Through various measures to reduce our raw material and energy
requirements, the emission of greenhouse gases associated with
producing the raw materials was decreased by a total of around
142,000 metric tons in 2018.
BASF has published a comprehensive corporate carbon footprint
since 2008. This reports on all greenhouse gas emissions along the
value chain and shows the volume of emissions prevented through
the use of our climate protection products. We plan our climate
protection activities along the value chain based on our corporate
carbon footprint.
■ Customers' use of climate protection products
sold in 2018 avoids 640 million metric tons of
CO2 equivalents
■ Reporting on greenhouse gas emissions along
the entire value chain
Carbon footprint and climate protection products
Our research also contributes to increasing the efficiency of
technologies for the use of renewable energy sources.
2 Scope 1 and Scope 2 (location-based) according to the GHG Protocol Standard, excluding emissions from the generation of steam and electricity for sale to third parties
3 Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes
494
0.10
BASF Report 2018
0.89
We will pursue an updated goal from 2019 onward. By 2030, we
want to introduce sustainable water management at all sites in water
stress areas and at our Verbund sites according to our expanded
definition. This almost doubles the number of sites.
tion, maintaining good water quality, preserving conservation areas,
and ensuring continuous improvement processes.
Water
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
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1 To Our Shareholders
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108
Source: Pfister et al., 2009, and Aqueduct, World Resources Institute, 2015
We pursue our goal by applying the European Water Stewardship
standard, which rests on four principles: sustainable water abstrac-
In 2018, around 23% of our production sites were located in water
stress areas. Around 1% of BASF's total water supply was abstract-
ed from these sites.
Our previous goal was to introduce sustainable water management
at all sites in water stress areas and at our Verbund sites by 2025,
covering 93% of BASF's total water abstraction. We achieved
50.0% of this goal in 2018 (2017: 45.2%). In 2018, BASF introduced
sustainable water management at five sites.
Global goal and measures
Updated water goal:
Areas in which ≥40% of
available water is used
by industry, household
and agriculture
Previous water goal:
Areas in which ≥60% of
available water is used
by industry, household
and agriculture
Water stress areas around the world
For more information on the CDP water survey, see basf.com/en/cdp
We offer our customers solutions that help purify water and use it
more efficiently while minimizing pollution.
"A" in 2018 and thus Leadership status for sustainable water
management. CDP's evaluation of sustainable water management
includes how transparently companies report on their water
management activities and what they do to reduce risks, such as
water scarcity. CDP also assesses the extent to which product
developments - even at the customers of the companies under
evaluation can contribute to sustainable water management.
In order to ensure transparency in our reporting on water, we once
again took part in CDP reporting in 2018. BASF achieved a rating of
Water use
From 2019 onward, we will use an expanded definition of water
stress areas: Regions in which more than 40% of available water is
used by industry, household and agriculture in accordance with the
new Global Reporting Initiative (GRI) standard. We will also report on
the water consumption of the BASF Group and water consumption
in water stress areas from 2019 onward.
■ Using water responsibly
We predominantly use water for cooling purposes (87%), after which
we recirculate it back to our supply sources. We reduce our water
use by recirculating as much water as possible. To do this, we use
recooling plants that allow water to be reused several times.
Cooling
Surface water / freshwater
1,409
Brackish water / seawater
Groundwater
246
66
Cooling
BASF Report 2018
6,362
Production
- 87%
13%
1,614'
Discharge
6,609
1,745
Use
Abstraction /
withdrawal
Water in the BASF Group 2018
Million cubic meters per year
A total of 1,614 million cubic meters of water were discharged from
BASF production sites in 2018, including 188 million cubic meters of
treated wastewater from production. Emissions of nitrogen to water
amounted to 3,100 metric tons (2017: 2,800 metric tons). Around
■ Slight decrease in emissions to water
Emissions to water
The supply, treatment, transportation and recooling of water is
associated with a considerable energy demand. We are constantly
working to optimize our energy consumption and the amount of
water we use, and to adapt to the needs of our business and the
environment.
Our water usage totaled 1,745 million cubic meters in 2018. This
demand was covered for the most part by surface water, such as
rivers and lakes. At some sites, we use alternative sources such as
treated municipal wastewater, brackish water or seawater.
Waste recovered
We are introducing sustainable water management at all relevant
production sites. These include our major Verbund sites as well as
the sites in water stress areas. Under our previous definition, these
were regions in which more than 60% of available water is used by
industry, household and agriculture. We consider the quantitative,
qualitative and social aspects of water use. We want to identify
where we can improve at our sites, and use as little water as possi-
ble, especially in water stress areas.
■ Updated water goal from 2019 onward
3,627 3,644
0.87
0.98
Hazardous waste
2018 2017
0.47
0.44
Nonhazardous waste
Classification of waste for disposal²
0.77
0.76
Through incineration
0.39
0.46
0.17
0.20
1.34
1.42
0.52
0.53
0.27
0.36
0.79
Transported hazardous waste
We aim to use water as sparingly as possible and further reduce
emissions to water. To do so, we have set out a Group directive with
globally applicable standards.
0.29
10,712 11,205
■ Sustainable water management
Strategy
Water is of fundamental importance in chemical production.
It is used as a coolant, solvent and cleaning agent, as well as
to make our products. We are committed to its responsible
use along the entire value chain and especially in our produc-
tion sites' water catchment areas. We have set ourselves a
global goal for sustainable water management.
CUSTOMERS
BASF
SUPPLIERS
[Water]
Water
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
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BASF Report 2018
The 2017 figure has been adjusted due to updated data.
1
Relevant sites are documented in a contaminated site database.
Ongoing remediation work around the world continued on schedule
and planning was concluded on future remediation projects.
For more information on provisions for environmental protection, see the Notes to the
Consolidated Financial Statements on pages 220 and 245
We set out global standards for managing contaminated sites.
A worldwide network of experts ensures their proper implementa-
tion. We develop remediation solutions that combine nature conser-
vation, climate protection concerns, costs and social responsibility.
This means making customized decisions on a case-by-case basis,
founded on the legal framework and current technological possibili-
ties.
1 Comprises all production waste and hazardous waste from construction activities
2 The classification of waste into hazardous and nonhazardous waste is performed according to local
regulations.
We aim to avoid waste as far as possible. If waste is unavoidable,
we review the options for recycling or energy recovery to close
materials cycles, using BASF's existing Verbund structures for
efficient waste management. Total waste volume amounted to
2.31 million metric tons in 2018 (+9.0%).
5,022 4,727
1,825 1,753
2,344 2,354
2,257 2,170
25,787 25,853
0.23
We also rely on locally available sources to supply our sites with
energy. We are continuously exploring the use of renewable
energies. The focus here is on the purchase of electricity. It only
makes economic sense to replace highly efficient internal electricity
and steam generation using natural gas once renewable energies
offer the necessary supply security and are available at competitive
prices.
Since 2004, we have participated in the international non-profit
organization CDP's program for reporting on data relevant to climate
protection. BASF achieved a top score of "A" in CDP's rating for
2018, again awarding it Leadership status. Companies on the
Leadership level are distinguished by factors such as the complete-
ness and transparency of their reporting. They also pursue
comprehensive approaches in managing the opportunities and risks
associated with climate change as well as emissions reduction
strategies to achieve company-wide goals.
31.6 million MWh
targets of the Paris climate accord. In November 2018, BASF also
co-signed an open letter published by the Alliance calling for a
pledge to increase efforts to reduce emissions, improved analysis
and reporting of climate-related financial risks as well as a global
carbon pricing mechanism. BASF also supports the recommenda-
tions of the Task Force on Climate-related Financial Disclosures
For more information, see basf.com/carbon-management
Since 2018, we have bundled global activities to reach our
new climate goal and a long-term research and development
program under the banner of carbon management. The
program targets new technologies to significantly reduce
greenhouse gas emissions from production at our Verbund site
in Ludwigshafen, Germany. The focus here is on production
processes for basic chemicals, which account for the highest
share of emissions. These technologies can be transferred to
other sites. Developing the technologies is time-intensive and
involves uncertainties. We expect these new processes to
make a significant contribution to reducing CO2 from 2030. As
well as technical progress, this will require an adequate supply
of renewable energy at competitive prices and a supportive
regulatory framework.
Carbon management
Climate protection is a shared global task. We advocate climate
protection by supporting initiatives to this end. In 2018, BASF
actively contributed to recommendations on energy, climate and
resource efficiency for state and government leaders in a working
group of companies from G20 countries - the Business 20 (B20). As
a member of the Alliance of CEO Climate Leaders, BASF explicitly
encourages companies to step up their commitment to meeting the
Our climate protection activities are based on a comprehensive
analysis of our emissions. We report on greenhouse gas emissions
in accordance with the Greenhouse Gas Protocol Standard as well
as the sector-specific standard for the chemical industry.
We offer our customers solutions that help prevent greenhouse gas
emissions and improve energy and resource efficiency. Around half²
of our total annual research and development spending goes toward
developing these products and optimizing our processes.
Iwith gas and steam turbines, and on the use of heat released by
production processes. Furthermore, we are committed to energy
management that helps us analyze and further improve the energy
efficiency of our plants on an ongoing basis. We continuously ana-
lyze potential risks to our business operations arising in connection
with the topics of energy and climate protection and derive appro-
priate measures.
Most of BASF's greenhouse gas emissions are attributable to the
consumption of energy. At sites that produce their own energy, we
primarily rely on highly efficient combined heat and power plants
Climate protection is very important to us. As a leading chemical
company, we want to achieve CO2-neutral¹ production growth from
2019 to 2030. We have articulated this commitment in our new cli-
mate protection goal, which will apply from 2019. In order to reach
this target, we aim to maintain total greenhouse gas emissions from
our production sites and our energy purchases at the 2018 level.
Sharp increases due to the startup of large-scale plants will be
progressively offset. We will compensate for additional emissions
with optimization measures at existing plants and a focus on pur-
chasing low carbon energy. When deciding on investments and
acquisitions, we systematically consider the effects on greenhouse
gas emissions.
1 BASF operations excluding the discontinued oil and gas business. The goal includes other greenhouse gases according to the Greenhouse Gas Protocol, which are converted into CO₂ equivalents.
2 Costs not relevant to the calculation of this share include research expenses in early innovation stages of the phase-gate process, patent costs and expenses for supporting services.
■ New climate protection goal: CO2-neutral growth
until 2030
Strategy
As an energy-intensive company, we are committed to
energy efficiency and global climate protection. We want to
reduce emissions along the value chain and utilize, for
example, efficient technologies for generating steam and
electricity, energy-efficient production processes, and com-
prehensive energy management. Our climate protection
products make an important contribution toward helping our
customers avoid emissions.
CUSTOMERS
BASF
SUPPLIERS
[Energy and climate protection ]
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
Energy and climate protection
■ We are committed to energy efficiency and global
climate protection along the value chain
BASF Report 2018
103
About This Report
HFC (hydrofluorocarbons)
CH4 (methane)
2018 2020 goal
2017
2016
2015
2014
2013
N2O (nitrous oxide)
CO2 (carbon dioxide)4
%
2002
baseline
Reduction of greenhouse gas emissions per metric ton of sales product
in BASF operations excluding the discontinued oil and gas business
2018
2017
2002
BASF operations including the discontinued oil and gas business²
Scope 13
BASF Group's greenhouse gas emissions according to the Greenhouse Gas Protocol¹
Million metric tons of CO2 equivalents
(TCFD). In 2018, we started comparing our annual reporting with the
TCFD's recommendations and identifying potential action areas.
For more information on climate protection, see basf.com/climate_protection
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
Energy and climate protection
1 To Our Shareholders
1 To Our Shareholders
About This Report
BASF Report 2018
102
101
BASF Report 2018
For more information on nanotechnology and the Nanotechnology Code of Conduct,
see basf.com/nanotechnology
BASF makes successful use of biotechnology. We produce a range
of established products with the help of biotechnological methods.
This provides us with extensive experience in the safe use of bio-
technological methods in research and development as well as in
production. When employing biotechnology, we adhere to all stan-
dards and legal regulations. We are also guided by the code of
conduct set out by EuropaBio, the European biotechnology associ-
ation.
We contribute our expertise in various working groups of the Euro-
pean Chemicals Agency (ECHA) and the OECD's Business and
Industry Advisory Group (BIAC), which develop testing and
implementation guidelines. Together with partners from academia
and government authorities, in 2018 we started work on E.U.-
funded projects to validate alternative testing methods for evaluating
and grouping nanomaterials with a view to regulatory acceptance. In
2018, we were recognized by the European Chemical Industry
Council (CEFIC) for our transparency in addressing questions about
the safety of nanomaterials.
Safe handling of nanomaterials is stipulated in our Nanotechnology
Code of Conduct. In recent years, we have conducted over
250 scientific studies and participated in over 40 different projects
related to the safety of nanomaterials. The results were published in
more than 100 scientific articles. In 2018, we concluded our five-year
Nano-In-Vivo research project in cooperation with German govern-
mental bodies. The project delivered important insights into the
toxicological effects of long-term exposure to nanoparticles and
complements our previous findings that toxicity is determined not
by the size of the particles but by the intrinsic properties of the
substance.
Nanotechnology and biotechnology offer solutions for key societal
challenges - for example, in the areas of climate protection or health
and nutrition.
■ Continual safety research on nano- and biotechnology
Management of new technologies
For more information on alternative methods, see basf.com/alternative_methods
Since 2016, our Experimental Toxicology and Ecotoxicology depart-
ment has been working together with a total of 39 partners on one
of the largest European collaborative projects for alternative
methods. The project, planned to run for six years, aims to develop
alternative methods to the point that chemical risk assessments can
be efficiently conducted largely without animal testing.
We adhere to the specifications laid down by the German Animal
Welfare Act as well as the requirements of the Association for
Assessment and Accreditation of Laboratory Animal Care - - the
highest standard for laboratory animals in the world. We are continu-
ally developing and optimizing alternative methods, and we use
them wherever it is possible and accepted by the authorities. We
use alternative methods in more than a third of our tests. Currently,
33 alternative methods are being used in our labs and another 19
are in the development stage. BASF spent €3.5 million toward this
purpose in 2018. The development of alternative methods for test-
ing the potential of substances to induce developmental toxicity has
been a focus area of our research since 2017.
Before launching products on the market, we subject them to a vari-
ety of environmental and toxicological testing. We apply state-of-
the-art knowledge in the research and development phase of our
products. For instance, we only conduct animal studies when they
are required by law and approved by respective authorities. Animal
studies are at times stipulated by REACH and other national legisla-
tion outside the European Union in order to obtain more information
on the properties and effects of chemical products.
■ Use of alternative methods for animal studies
Environmental and toxicological testing
Product stewardship
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
Drinking water
About This Report
| | | | | |
1 To Our Shareholders
3 Corporate Governance
For more information, see basf.com/distribution_safety and basf.com/emergency_response
We are actively involved in external networks, which quickly provide
information and assistance in emergencies. These include the Inter-
national Chemical Environmental (ICE) initiative and the German
Transport Accident Information and Emergency Response System
(TUIS), in which BASF plays a coordinating role. In 2018, we provid-
ed assistance to other companies in 145 cases worldwide (2017:
178). We apply the experience we have gathered to set up similar
systems in other countries: For example, we intensified our activities
in India in 2018.
Activities in external networks
The low water levels on the Rhine River in 2018 impacted logistics
at the Verbund site in Ludwigshafen, Germany. Under normal condi-
tions, around 40% of incoming volumes are transported to the site
by ship. This makes the Rhine the most important transportation
route for incoming raw materials. As far as possible, we replaced
transportation by ship with alternatives such as rail and truck while
the Rhine was low. We are working on an overarching concept to
make the site more resilient to long periods of low water and are
investigating various measures, including selectively expanding
on-site tank capacities or switching to ships better suited to low
water levels. We intend to implement the first measures in 2019.
Raw materials supply challenges due to low Rhine River
We recorded three incidents in 2018 with spillage of more than
200 kilograms of dangerous goods (2017: 3). None of these trans-
portation incidents had a significant impact on the environment
(2017:0).
We are systematically implementing our measures to improve
transportation safety. We report in particular on goods spillages that
could lead to significant environmental impacts such as dangerous
goods leaks of BASF products in excess of 200 kilograms on public
transportation routes, provided BASF arranged the transport.
Transportation incidents
We stipulate worldwide requirements for our logistics service provid-
ers and assess them in terms of safety and quality. Our experts use
our own evaluation and monitoring tools as well as internationally
approved schemes.
We regularly assess the safety and environmental risks of transport-
ing and storing raw materials and sales products with high hazard
potential using our global guideline. This is based on the guidelines
of the European Chemical Industry Council (CEFIC). We also have
binding global standards for load safety.
■ Risk assessments for transportation and storage
Accident prevention and emergency response
We want our products to be safely loaded, transported, handled
and stored. This is why we depend on reliable logistics partners,
global standards and an effective organization. Our goal is to mini-
mize risks along the entire transportation chain - from loading and
transportation to unloading. Some of our guidelines for the transpor-
tation of dangerous goods go above and beyond national and inter-
national dangerous goods requirements. We have defined global
guidelines and requirements for the storage of our products and
regularly monitor compliance with these.
■ Risk minimization along the entire transportation chain
Strategy
Our regulations and measures for transportation and ware-
house safety cover the delivery of raw materials, the storage
and distribution of chemical products among BASF sites and
customers, and the transportation of waste from our sites to
the disposal facilities.
CUSTOMERS
BASF
SUPPLIERS
Transportation and storage]
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
2 Management's Report
Transportation and storage
Scope 25
14.634
16.813
1 Conversion factor: 0.75 MWh per metric ton of steam
Internally generated 50%
90.0
73.0
39.5
42.3
54.3
%
Waste heat 45%
Purchased 5%
Steam supply
Internally generated 69%
Purchased 31%
Electricity supply
Energy supply of the BASF Group 2018
Certified energy management systems (ISO 50001) at BASF Group
sites worldwide, in terms of primary energy demand
The introduction and implementation of the energy management
systems is steered by a global working group. All energy efficiency
measures are recorded and analyzed in a global database and
made available to BASF sites as best practices. Currently, more
than 150 measures are being pursued to reduce energy consump-
tion and increase competitive ability. Further sites across all regions
were certified in accordance with ISO 50001 in 2018. These include
the Verbund site in Geismar, Louisiana, as well as another 19 sites in
Brazil, India, Malaysia, Thailand, France and the Netherlands, among
other countries. At the moment, 64 sites are certified worldwide,
representing 73.0% of our primary energy demand.
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Energy and climate protection
1 To Our Shareholders
Fossil and residual fuels used for own generation in power
plants of the BASF Group
About This Report
Electricity
15.1 million
MWh
Natural gas
Energy saved in 2018 by the Verbund
and combined heat and power generation
system is an important component of our energy efficiency strategy:
Waste heat from one plant's production process is used as energy
in other plants. In this way, the Verbund saved us around 18.5 mil-
lion MWh in 2018, which translates to 3.7 million metric tons less
CO2 released into the environment. With combined power and
steam generation as well as our continuously enhanced Energy
Verbund, we were thus able to prevent a total of 6.3 million metric
tons of carbon emissions in 2018.
Gas and steam turbines in combined heat and power plants enable
us to fulfill more than 70% of the electricity demand of the BASF
Group. Compared with separate methods of generating steam and
electricity, we saved 13.1 million MWh of fossil fuels and prevented
2.6 million metric tons of carbon emissions in 2018. The Verbund
■ Verbund system as important component of our energy
efficiency strategy
Energy supply and efficiency
2020 goal
2018
2017
2016
2015
37.4 million MWh
Total:
Residual fuels
6.0 Mio. MWh
39.4 million
MWh¹
16.0%
Steam
0.8 million MWh
Coal
2.2%
0.1 million MWh
Heating oil
0.2%
30.5 million MWh
81.6%
We were able to further optimize the resource and energy consump-
tion of our production in numerous projects around the world in
2018. For example, a new boiler was installed at the McIntosh site
in Alabama to generate steam from production residues that were
previously disposed of externally, saving primary energy. Process
improvements at many additional sites have also led to savings in
steam, electricity and fuel.
104
1 The selection of relevant sites is determined by the amount of primary energy used and local energy prices; figures relate to BASF operations including the discontinued oil and gas business.
21.485
26.589
3.361
3.796
5.243
Total
-34.2
-35.5
-37.2
-34.6
-33.9
-34.1
CO₂4
0.091
0.081
0.061
0.064
0.048
0.244
0.740
0.747
6.407
16.956
21.212
BASF Report 2018
-40.0
CO₂4
90%
(BASF operations including the
oil and gas business)
Coverage of our primary
energy demand through
certified energy manage-
ment systems at all
relevant sites
2020 target
-40%
(BASF operations excluding the
oil and gas business)
Reduction of greenhouse
gas emissions per metric
ton of sales product
Baseline 2002
2020 target
This is one of the ways in which we intend to identify and carry out
improvements in energy efficiency, reducing not only greenhouse
gas emissions and saving valuable energy resources, but also
increasing the BASF Group's competitive ability. From 2019 onward,
we will maintain this goal as a reporting indicator to track our prog-
ress in introducing energy management systems.
4 In 2018, we changed how emissions are allocated for two BASF Group companies with interdependent operations, with part of the Scope 2 emissions included within Scope 1. Total emissions (excluding sales of energy
to third parties) remain unchanged. Since double counting of emissions is avoided (see footnote 6), direct emissions from sale of energy to third parties are reduced accordingly.
5 Location-based approach. Under the market-based approach, Scope 2 emissions were 3,657 million metric tons of CO₂ in 2018.
6 Includes sale to BASF Group companies; as a result, emissions reported under Scope 2 can be reported twice in some cases.
3 Emissions of N2O, CH4 and HFC have been translated into CO2 emissions using the Global Warming Potential, or GWP, factor. GWP factors are based on the Intergovernmental Panel on Climate Change (IPCC) 1995
(2002 emissions) and IPCC 2007, errata table 2012 (2017 and 2018 emissions). HFC (hydrofluorocarbons) are calculated using the GWP factors of the individual components.
By 2020, we want to have introduced certified energy management
systems (DIN EN ISO 50001) at all relevant production sites. Taken
together, this represents 90% of BASF's primary energy demand.
We will pursue a new goal from 2019 onward: CO2-neutral growth
until 2030. We will maintain greenhouse gas emissions per metric
ton of sales product as an additional reporting indicator.
We aim to reduce our greenhouse gas emissions per metric ton of
sales product by 40% by 2020, compared with baseline 2002
(BASF operations excluding the discontinued oil and gas business).
In absolute terms, our emissions declined slightly in 2018 compared
with the previous year. We reduced greenhouse gas emissions per
metric ton of sales product by 34.2% compared with baseline
2002 (2017: reduction of 35.5%). Since 1990, we have been able to
lower our overall greenhouse gas emissions from BASF operations
(excluding the oil and gas business) by 49.2% and even reduce
specific emissions by 74.2%.
Global goals and measures
1 BASF reports separately on direct and indirect emissions from the purchase of energy. Scope 1 emissions encompass both direct emissions from production and generation of steam and electricity, as well as
direct emissions from the generation of steam and electricity for sale. Scope 2 emissions comprise indirect emissions from the purchase of energy for BASF's use.
2 The assets and businesses acquired from Bayer are not yet included in the reported greenhouse gas emissions of the BASF Group for 2018.
21.779
22.571
26.936
Total
0.567
1.086
0.347
Sale of energy to third parties (Scope 1)6
23
tion of steam and electricity)
of which recirculating
once-through
everything we do, we are committed to complying with internation-
ally recognized labor and social standards. We want our working
conditions to be a motor for innovation, and one way of achieving
this is through inclusion of diversity. We want our employees to
thrive and best contribute their individual talents - also considering
the increasingly rapidly changing environment, especially as a result
of demographic change and the digitalization of work. Lifelong
learning and individual employee development lay the foundation for
this. Compensation and benefits as well as offerings to balance
personal and professional life complete our attractive total offer
package. We track our employer rankings so that we can continue
to attract talented people to the company in the future. Our employ-
ees play an important role here as ambassadors for BASF.]
BASF Group employees by region
(Total: 122,404, of which 25.1% women, as of December 31, 2018)
North America
20,069
Europe¹
75,188
(#61.4%)
24.4%
Number of employees
At the end of 2018, BASF had 122,404 employees (2017: 115,490);
of these, 3,174 were apprentices¹ (2017: 3,103). 3,226 employees
were on temporary contracts (of which 40.9% were women). The
higher headcount was primarily due to the businesses acquired
from Bayer. In addition, 2,017 employees from the disposal group
for the oil and gas business were included in the number of employ-
ees as of December 31, 2018.
75.6%
Strategy
■ We are committed to valuing and treating people with
respect, and fostering an inspiring working environment
Our employees are key to the successful implementation of BASF's
strategy. They contribute to changing the world we live in for the
better with innovative and sustainable solutions. We remain con-
vinced of the value of excellent employees, leaders and working
conditions, and strive to give our employees the tools and skills
necessary to be able to offer our customers products and services
with an even greater level of differentiation and customization in the
future. As part of the updated corporate strategy, we will sharpen
our focus on employee engagement and impactful leadership. In
1 At BASF, the apprenticeship program trains students for technical, scientific and business vocations as well as for trade and craft professions.
(€ 16.4%)
74.3%
BASF Report 2018
Reusable wastewater
110
55,839 (45.6%) 23.9% 76.1%
35,316 (28.9%) 21.6% 78.4%
1 Of which Germany
Of which BASF SE
74.3%
19,303
(15.8%)
on center stage
Asia
Pacific
71.1%
7,844
(*6.4%)
Middle East
Africa,
South America,
28.9%
25.7%
Employee engagement and
leadership impact
25.7%
122,404
In order to avoid unanticipated emissions and the pollution of sur-
face or groundwater, we create water protection strategies for our
production sites. This is mandatory for all production plants as part
of the Responsible Care® initiative. The wastewater protection plans
involve evaluating wastewater in terms of risk and drawing up suit-
able monitoring approaches. We use audits to check that these
measures are being implemented and complied with.
12,400 metric tons of organic substances were emitted in waste-
water (2017: 13,200 metric tons¹). Our wastewater contained
23 metric tons of heavy metals (2017: 25 metric tons). Phosphorus
emissions amounted to 220 metric tons (2017: 420 metric tons).
Our wastewater is treated through different methods depending
on the type and degree of contamination - including biological
processes, oxidation, membrane technologies, precipitation or
adsorption.
1 The difference between the volume of water drawn and the volume discharged is primarily attributable to evaporation losses during closed-circuit cooling.
2 Total from production processes, graywater, rinsing and cleaning in production
from third parties
21
247
For more information, see basf.com/water
Production 2
239
1,344
Surface water / freshwater
Brackish water / seawater
Groundwater
1,426
4,936
employees around the world
10
1 The 2017 figure has been adjusted due to updated data.
External treatment plant
long-term success. We want to attract and retain talented
people for our company and support them in their develop-
ment. To do so, we cultivate a working environment that
inspires and connects people. It is founded on inclusive
leadership based on mutual trust, respect and dedication to
top performance.
BASF Report 2018
[Our employees make a significant contribution to BASF's
CUSTOMERS
BASF
SUPPLIERS
6 Overviews
5 Supplementary Information Oil and Gas Business
Employees
3 Corporate Governance
2 Management's Report
Employees
1 To Our Shareholders
About This Report
109
4 Consolidated Financial Statements
BASF Report 2018
3 Corporate Governance
114
About This Report
1 To Our Shareholders
2 Management's Report
Employees
4 Consolidated Financial Statements
■ Alignment with U.N. Guiding Principles on Business
and Human Rights
[Dialog with employee representatives]
Trust-based cooperation with employee representatives is an impor-
tant component of our corporate culture. Our open and ongoing
dialog lays the foundation for balancing the interests of the company
and its employees, even in challenging situations. In the case of
organizational changes or if restructuring leads to staff downsizing,
for example, we involve employee representatives to develop social-
ly responsible implementation measures at an early stage.
Our actions are aligned with the respective legal regulations and the
agreements reached, as well as operational considerations. In 2018,
this happened in preparations to transfer the paper and water
chemicals business to a joint venture, for example. We also involved
our employee representatives in full and at an early stage when we
introduced a new global metric for variable compensation. This
ensured wide employee acceptance and seamless implementation
of the change. The early, detailed presentation and explanation of
the updated corporate strategy in 2018 was also a reflection of our
trust-based cooperation.
By focusing our discussions on the local and regional situations, we
aim to find tailored solutions to the different challenges and legal
considerations for each site. This is why the BASF Europa Betriebs-
rat (European Works Council) addresses cross-border matters in
Europe. In South America, we foster dialog with the Diálogo Social.
For more information, see basf.com/employeerepresentation
[International labor and social standards]
1 In calculating ROCE, adjustments are made for negative and positive special items resulting from acquisitions and divestitures (e.g., integration costs in connection with acquisitions and gains or losses from the divestiture of businesses) when these exceed a corridor of plus or minus 1% of the average cost of capital basis. An adjustment of the
ROCE (in the first 12 months after closing) therefore only occurs in cases of exceptionally high special items resulting from acquisitions and divestitures.
5 Supplementary Information Oil and Gas Business 6 Overviews
Our identity as an employer includes our belief in supporting our
employees in balancing their personal and professional lives. We
want to strengthen their identification with the company and our
position in the global competition for qualified personnel. To achieve
this, we have a wide range of offerings aimed at employees in differ-
ent phases of life. These include flexible working hours, part-time
employment and mobile working. Regional initiatives specifically
address the needs of our employees at a local level. Our Work-Life
Management employee center in Ludwigshafen (LuMit) offers a
number of services under one roof: childcare, fitness and health,
social counseling and coaching as well as other programs to help
employees balance professional and personal life. We also provide
social counseling and coaching at the Münster and Schwarzheide
sites in Germany as well as in Asia, South Africa and North America
to help employees overcome difficult life situations and maintain
their employability.
8,470
Balancing personal and professional life]
We act responsibly toward our employees. Part of this is our volun-
tary commitment to respecting international labor and social stan-
dards, which we have embedded in our global Code of Conduct.
This encompasses internationally recognized labor norms as stipu-
lated in the United Nations' Universal Declaration of Human Rights,
the OECD Guidelines for Multinational Enterprises, and the Tripartite
Declaration of Principles Concerning Multinational Enterprises and
Social Policy of the International Labour Organization (ILO). BASF is
committed to complying with these standards worldwide. We main-
ly approach our adherence to international labor and social stan-
dards using three elements: the Compliance Program (including
external compliance hotlines), close dialog with our stakeholders
(such as with employee representatives or international organiza-
tions) and the BASF guideline on compliance with international labor
norms, which was established in 2015 and applies Group-wide.
8,471
0%
Social security contributions and
assistance expenses
Pension expenses
1,459
1,434
■ Wide range of offerings for different phases of life
1.7%
730
705
3.5%
10,659
10,610
0.5%
Total personnel expenses
This guideline concretizes what the human rights issues and inter-
national labor standards in our global Code of Conduct mean as
these relate to our employees. It forms the basis for our global
management process: We monitor and evaluate whether the
national law of all the countries in which BASF operates complies
For more information on BASF's updated corporate strategy and our stronger customer focus,
see page 25 onward
We already use internal control processes such as Responsible
Care audits to review the degree of adherence with the individual
elements of the guideline in BASF Group companies. 1 Beyond this,
we started to integrate our voluntary commitment into the existing
corporate audit process in 2018.
Innovative
in close partnership with our customers
Flexible
thanks to in-depth expertise and wide range of resources
Customer industry orientation
■ Innovations and tailored solutions in close partnership
with our customers
customers from almost all sectors and countries
in the world
■ Updated corporate strategy aligns BASF even closer
with customers
Our broad portfolio from basic chemicals to high value-added
products and system solutions - means that we are active in many
value chains and value creation networks. As a result, we work with
a wide range of business models, which we flexibly adapt to the
needs of individual industries. These range from cost leadership to
tailored, customer-specific solutions for downstream products. This
industry orientation is primarily driven forward and enhanced by the
divisions. Around half of our business units are oriented toward
specific industries.
Aligning our business with our customers' needs is our primary
focus. Our ability to combine in-depth expertise with a wide range of
resources to meet specific demands enables us to position BASF as
a solution-oriented system provider.
Our updated corporate strategy puts an even greater focus on the
customer. We aim to develop custom solutions that are both profit-
able and sustainable in close partnership with our customers, and
optimize processes and applications. Our organization is being
adapted accordingly so that we can work more effectively and effi-
ciently and be even more customer-centric. We want to satisfy
customer requests in a more focused and targeted way, and improve
our reaction times. Our comprehensive understanding of value
chains and value creation networks as well as our global setup and
market knowledge remain key success factors.
We are also pursuing a series of measures that will, among other
things, increase transparency for customers, enhance customer
service and explore joint growth potential. To ensure even stronger
customer communication and better understand our customers'
needs, we regularly ask them for direct feedback on how we are
doing. This gives us a timely insight into customer satisfaction and
we can use the findings to continuously improve our performance.
+/-
-
with international labor and social standards. If the national law
contains no or lower requirements, actions plans are drawn up
to successively close these gaps in a reasonable time frame.
If conflicts with national law or practices arise, we strive to act in
accordance with our values and internationally recognized principles
without violating the law of the country concerned. As part of the
management process, we regularly follow up on and document the
results of the comparison between national law and our guideline,
as well as measures to implement the guideline. This is our central
due diligence system. Based on our guideline, our management
process has been able to improve maternity leave at BASF compa-
nies with no statutory requirements or lower requirements than in
the BASF guideline, for example.
Over 90,000
CUSTOMERS
For more information on labor and social standards, see basf.com/labor_social_standards
For more information on global standards, see page 28
For more information on our sustainability-related risk management, see page 36 onward
For more information on compliance, see page 140 onward
1 Excluding employees of the businesses acquired from Bayer
BASF Report 2018
115
About This Report
BASF supplies products and services to over 90,000 custom-
ers¹ from various sectors in almost every country in the world.
Our customer portfolio ranges from major global customers
and medium-sized businesses to end consumers.
1 To Our Shareholders
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Customer Orientation
SUPPLIERS
BASF
2 Management's Report
Customer Orientation
2017
36.8
Wages and salaries
■ Focus on social media and online marketing
Attracting and retaining the best employees is crucial to our suc-
cess. Having an attractive and compelling total offer package for
employees is becoming increasingly important given the strong
global competition for the best qualified employees and leaders.
This is why we are constantly working on measures to increase
BASF's appeal in the global labor markets.
We are increasingly using digital platforms such as our country-spe-
cific career websites as well as global and regional social networks
to reach potential candidates. This enables us to address specific
target groups. One focus is on the recruitment of digital talents. In
2018, we launched a dedicated global career website for digital tal-
ents to strengthen our position among this group. In Germany, we
also held our second BASF hackathon in 2018 with the motto
"Coding Chemistry." Around 50 university students solved specific
problems from our divisions within 24 hours and presented their
solutions to a panel of BASF experts.
In North America, our #belongatBASF campaign informed social
media users of the benefits of working at BASF in 2018. Employees
also joined in and posted about their personal experiences and their
working day at BASF. In addition, we offered a global livestream
about working at BASF for the first time in 2018, in which our experts
interacted directly with and answered questions from potential
candidates.
We once again achieved high scores in a number of employer rank-
ings in 2018. For example, in a study conducted by Universum,
BASF was again selected by engineering and IT students as one of
the 50 most attractive employers in the world. In North America,
DiversityInc named BASF as one of the top 50 companies for diver-
sity in recruiting for the sixth consecutive year. In Asia, Top Employer
recognized BASF China as one of the best employers for the eighth
time in succession.
BASF Group new hires in 2018¹
■ Positioning as an attractive employer
Europe
Asia Pacific
South America, Africa,
Middle East
Total
Of which women (%)
28.9
December 31, 2018
5,182
North America
2,091
[Competition for talent ]
5 Supplementary Information Oil and Gas Business
21.7
30.2
1 Employees with disciplinary leadership responsibilities
2 Specialists without disciplinary leadership responsibilities
For more information, see basf.com/diversity
For more information on diversity in the Board of Executive Directors and the Supervisory Board,
see page 136 onward
6 Overviews
For more information on health protection, see page 98
112
About This Report
1 To Our Shareholders
2 Management's Report
Employees
3 Corporate Governance
4 Consolidated Financial Statements
BASF Report 2018
29.3
2,094
31.1
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
In addition, more and more academies in the divisions and function-
al units, which teach specific professional content, offer virtual
training. We have offered “virtual presence" training since 2018,
which gives all employees the opportunity to attend professional
development courses via digital communication channels such as
virtual meetings. In 2018, we introduced a global website with an
accompanying learning app to enable employees around the world
to find out about the digital workplace of the future and independent-
ly prepare for the digital transformation. Employees can use the app
to learn about things like digital jargon and technologies, and
acquaint themselves with new working and leadership models.
[Compensation and benefits
■ Compensation based on employee's position and
individual performance as well as company's success
■ ROCE determines variable compensation
3 Corporate Governance
We want to attract engaged and qualified employees, retain them
and motivate them to achieve top performance with an attractive
package including market-oriented compensation, individual
development opportunities and a good working environment so that
they contribute to the company's long-term success. Our employ-
ees' compensation is based on global compensation principles
according to position, market and performance. As a rule, compen-
sation comprises fixed and variable components as well as benefits
that often exceed legal requirements. In many countries, these
benefits include company pension benefits, supplementary health
insurance and share programs. We regularly review our compensa-
tion systems at local and regional levels.
which they participate in the success of the BASF Group as a whole
and are recognized for their individual performance. The same prin-
ciples basically apply for all employees worldwide. The amount of
the variable component is determined by economic success as well
as the employee's individual performance. Since 2018, we have
used the BASF Group's return on capital employed (ROCE) to mea-
sure economic success for the purposes of variable compensation.
This links variable compensation to our ROCE target.1 Individual
performance is assessed as part of a globally consistent perfor-
mance management process.
In numerous Group companies, our "plus" share program ensures
employees' long-term participation in the company's success
through incentive shares. In 2018, for example, 25,586 employees
worldwide (2017: 23,700) participated in the "plus" share program.
BASF offers senior executives the opportunity to participate in a
share price-based compensation program, the long-term incentive
(LTI) program. In 2018, 91% of the approximately 1,100 people eli-
gible to participate in the LTI program worldwide did so, investing up
to 30% of their variable compensation in BASF shares.
For more information, see the Notes to the Consolidated Financial Statements from page 263 onward
Personnel expenses
The BASF Group spent €10,659 million on wages and salaries,
social security contributions and expenses for pensions and assis-
tance in 2018 (2017: €10,610 million). This also includes personnel
expenses from the disposal group for the oil and gas business in the
amount of €276 million (2017: €268 million). The rise in personnel
expenses was primarily driven by the higher average headcount
following the acquisition of significant businesses from Bayer, as well
as higher wages and salaries. The main offsetting effects were the
increase in provisions released for the long-term incentive program
compared with the previous year and currency effects.
BASF Group personnel expenses
Million €
We want our employees to contribute to the company's long-term
success. This is why the compensation granted to vast majority
of our employees includes variable compensation components, with
2 Management's Report
Employees
1 To Our Shareholders
About This Report
758
For more information on the BASF Group's new organizational structure as of January 1, 2019,
see page 19
10,125
30.0
The BASF Group hired 10,125 new employees in 2018. The
percentage of employees who resigned during their first three years
of employment - the early turnover rate - was 1.3% worldwide in
2018. This turnover rate was 0.6% in Europe, 2.3% in North
America, 2.8% in Asia Pacific and 1.7% in South America, Africa,
Middle East. Our early turnover rate is therefore at a desirable low
level.1
As of December 31, 2018, the BASF Group was training
3,174 people in 15 countries and around 50 occupations. We spent
a total of around €110 million¹ on vocational training in 2018.
For more information, see basf.com/apprenticeship
[Learning and development ]
■ Life-long learning concept
■ Focus on virtual learning and digitalization
Learning and development are essential success factors for a strong
company culture. The skills and competencies of our employees are
critical for profitable growth and lasting success. For this reason, we
want to further modernize our learning culture and step up our ef-
forts to promote lifelong, self-directed learning. Employee develop-
ment at BASF is guided by the belief that talent is in everyone. This
means that development opportunities and support are open to all
employees. In our understanding, there is more to development
than a promotion or a job change - it encompasses the develop-
ment of personal experience and abilities.
In regular development meetings, which are held as part of our
annual employee dialogs, employees outline prospects for their indi-
vidual development together with their leaders and determine spe-
cific measures for further training and development, which focus on
personal and professional competencies. Our learning activities fol-
low the "70-20-10" philosophy: We apply the elements "learning
from experience" (70%), "learning from others" (20%) and "learning
through courses and media" (10%). Our learning and development
offerings cover a range of learning goals: Starting a career, expand-
ing knowledge, personal growth and leadership development.
Virtual learning is playing an increasingly important role here.
We held our first ever global virtual "Go Digital!" week in 2018, for
example. This gave employees around the world the chance to find
out about different digitalization topics via online events. BASF
employees and representatives from other companies provided
insights into their digital projects.
1 Excluding employees of the businesses acquired from Bayer
BASF Report 2018
113
2018
For more information on the previous segments and their divisions in 2018,
see pages 60, 67, 74 and 80 onward
2 Management's Report
Economic Environment in 2019
Our customers' satisfaction is the basis for long-term business
success, which is why quality management is of vital significance for
BASF. We strive to continually improve processes and products.
This is also reflected in our Global Quality Policy. The majority of
BASF's production sites and business units are certified according
to ISO 9001.2 In addition, we also meet industry and customer-
specific quality requirements that go beyond the ISO standard.
2.7%
European Union
0.1%
United States
3.2%
Emerging markets of Asia
World
3.6%
1.5%
Japan
South America
Trends in chemical production 2019-2021 (excluding pharmaceuticals)
Real change compared with previous year
World
3.0%
2.0%
European Union
Outlook for chemical production 2019 (excluding pharmaceuticals)
Real change compared with previous year
We expect slightly stronger chemical growth in Japan, driven by
domestic demand and, in part, by exports to China.
BASF Report 2018
118
About This Report
1 To Our Shareholders
2 Management's Report
Economic Environment in 2019
3 Corporate Governance
For South America, we anticipate an upturn in chemical production
in line with the macroeconomic recovery in Brazil.
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
Outlook for the chemical industry
■ Global growth in chemical industry roughly at level of
previous year
Global chemical production (excluding pharmaceuticals) is expected
to grow by 2.7% in 2019, on a level with 2018 (+2.7%). For 2019,
we anticipate a similar expansion rate in the advanced economies
as in the previous year (2018: +1.5%; 2019: +1.6%) and slightly
slower growth in the emerging markets (2018: +3.4%; 2019:
+3.3%).
The development of the world's largest chemical market - China -
has a significant impact on the global growth rate. Our forecast
assumes that chemical production in China will grow by 3.6%,
about as fast as in the previous year in a slightly weaker global
economic environment overall. A stabilization of automotive demand
in China should support demand for chemicals. Based on its large
share of the global market of around 40%, China alone would there-
fore still account for almost 60% of global chemical growth. Chemi-
cal production growth in the remaining emerging markets of Asia is
expected to be similar to that in China.
For the E.U., we anticipate a recovery in chemical production over
the course of 2019 following the slump at the end of 2018. However,
we only expect production to be flat compared with the full-year
2018. Demand from the automotive industry will presumably con-
tinue to decline slightly. Agriculture should see renewed growth. In
the construction industry, too, growth is expected to remain solid.
Base effects should also have a positive impact.
In the United States, we expect slightly lower, but still above-
average growth in chemical production in the coming year. Ongoing
capacity expansions will strengthen the supply side while on the
demand side, industry growth will be slightly weaker.
6 Overviews
We expect stronger growth in agricultural production in 2019
compared with the previous year after 2018 yields were negatively
impacted by the unusual dry period in central and eastern Europe,
parts of North America as well as in Argentina and South Africa.
0.8%
2.9%
Sales, earnings and ROCE forecast for the BASF Group¹
■ Slight sales growth, mainly from higher sales volumes
and portfolio effects
■ EBIT before special items slightly above prior-year level
■ ROCE slightly higher than cost of capital percentage
We have based the outlook on the segment structure as of Janu-
ary 1, 2019, and adjusted the segment data for 2018 accordingly. In
addition to the new segment structure, the composition of a number
of divisions has also changed.
Our forecast for 2019 takes into account the definitive agreement
between BASF and LetterOne to merge their oil and gas businesses.
Closing of the transaction is expected in the first half of 2019, subject
to the required regulatory approvals. Until closing, the earnings of our
oil and gas business will be presented as a separate item, income
after taxes from discontinued operations, and will not be included in
the sales or EBIT before special items of the BASF Group. After clos-
ing, the pro rata share of income after taxes of the joint venture,
Wintershall DEA, will be reported as income from companies
accounted for using the equity method in the BASF Group's EBIT
before special items, presented under Other.
For more information on our expectations for the economic environment in 2019,
see page 117 onward
This outlook also includes the acquisition of Solvay's integrated poly-
amide business, which is expected in the second half of 2019. How-
ever, we currently do not expect this transaction to have any material
effect on sales, EBIT before special items or ROCE at the level of the
BASF Group in 2019.
EBIT before special items will presumably be slightly above the 2018
level. This will largely reflect significantly higher contributions from the
Agricultural Solutions, Industrial Solutions, Surface Technologies and
Nutrition & Care segments. We are forecasting a slight improvement
in earnings in the Chemicals segment. In the Materials segment, by
contrast, we anticipate considerably lower EBIT before special items,
driven by a decline in margins in the isocyanates business. We also
expect the earnings generated by Other to be considerably below the
prior-year figure. Positive measurement effects for our long-term
incentive program arose in 2018, which we do not expect in 2019.
In 2019, we expect to achieve a ROCE slightly above the underlying
cost of capital percentage of 10%. The average cost of capital basis
will increase in 2019 due to the full-year inclusion of the assets
acquired from Bayer in August 2018. As a result, we expect the BASF
Group's ROCE to decline slightly, i.e., at most one percentage point
compared with the previous year. In 2018, ROCE amounted to 11.5%
adjusted to the new segment structure. Compared with the previous
year, we expect a considerable decline in ROCE in the Materials
segment (2018: 26.1%) and a slight decrease in the Chemicals seg-
ment (2018: 17.7%). By contrast, we anticipate slight year-on-year
increases in the Surface Technologies (2018: 4.6%), Nutrition & Care
(2018: 11.8%) and Agricultural Solutions (2018: 5.1%) segments,
and a considerable increase in the Industrial Solutions segment
(2018: 8.7%).
The significant risks and opportunities that could affect our forecast
are described in Opportunities and Risks on pages 123 to 130.
Achievement of our sales and earnings forecast largely depends on
the accuracy of our macroeconomic assumptions for 2019.
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight" means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%).
At a cost of capital percentage of 10% for 2018 and 2019, we define a change in ROCE of 0.1 to 1.0 percentage points as "slight," a change of more than 1.0 percentage points as "considerable" and no change (+/-0 percentage points) as "at prior-year level."
BASF Report 2018
120
We anticipate slightly higher sales for the BASF Group in 2019. The
main contributing factors should be volumes growth and portfolio
effects, especially from the acquisition of significant businesses from
Bayer that was closed in August 2018. We expect considerable sales
growth in the Agricultural Solutions and Nutrition & Care segments as
well as in Other, and slightly higher sales in the Surface Technologies
and Materials segments. Sales in the Chemicals segment are expect-
ed to be on a level with the previous year. Our planning for the Indus-
trial Solutions segment assumes slightly lower sales due to the
transfer of BASF's paper and water chemicals business to the Solenis
group as of January 31, 2019.
United States
We expect growth in our customer industries to continue. For
the automotive industry, we anticipate a slight recovery after
lower production in the previous year. Our outlook assumes
that the trade conflict between the United States and its trading
partners will ease over the course of the year, and that Brexit
will occur without wider economic repercussions.
Outlook 2019
Emerging markets of Asia
4.2%
Japan
0.8%
South America
2.0%
We expect weaker global economic growth in 2019 compared
with 2018. At 2.8%, global GDP growth will presumably be
slower than in 2018 (+3.2%). Chemical production is expected
to increase at a rate of 2.7%, on a level with the previous year
(+2.7%). We anticipate an average oil price of $70 for a barrel
of Brent blend crude and an exchange rate of $1.15 per euro.
Despite the challenging environment characterized by a high
level of uncertainty, we aim to grow profitably and slightly
increase the BASF Group's sales and income from operations
(EBIT) before special items in 2019. The return on capital
employed (ROCE) should slightly exceed the cost of capital
percentage but decline slightly compared with 2018.
BASF Report 2018
About This Report
1 To Our Shareholders
2 Management's Report
Outlook 2019
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
119
We continue to forecast above-average growth in the health and
nutrition sector, albeit slightly weaker than in the previous year. The
expected decline in growth in the food industry is largely in line with
the development of GDP. The pharmaceutical industry will presum-
ably see a stronger decline in growth. Base effects play an important
role there, since value creation in a number of countries - including
Germany - rose exceptionally strongly in the previous year due to
the introduction of new, high-value medications.
The electronics industry will continue to benefit from increasing
digitalization and automation, posting the highest growth rates of all
customer industries. Production is concentrated in Asia and North
America. However, growth is expected to weaken in both Asia and
the United States. Overall, this will lead to a significant slowdown in
global growth.
Growth in consumer goods production should remain stable.
Although global GDP growth - the most important demand driver -
is likely to decline slightly, demand for consumer goods should
stabilize on the back of rising private incomes. The expected regional
differences in growth should follow the GDP trends described
above.
Trends in the global economy in 2019
■ Slower growth forecast for the E.U. and the United States
■ Growth moderation expected in China
■ Continuation of recovery in Brazil
Our forecasts for the E.U. assume that the United Kingdom will
leave the E.U. in 2019, followed by a transitional period lasting until
at least the end of 2020. The slowdown in growth already apparent
in 2018 is likely to continue in the E.U. (the E.U. 27 and the United
Kingdom¹); however, we continue to expect moderate growth over-
all. Both export and domestic demand should see weaker growth.
Germany in particular will be negatively impacted by slower growth
in demand for investment goods, with GDP growth rates slightly
below the E.U. average. As growth of eastern E.U. countries bene-
fited particularly strongly from new inflows of E.U. cohesion and
structural funds in 2017 and 2018, growth will presumably decline
more strongly than in western Europe. For Russia, we expect
weaker GDP growth compared with the previous year.
We are forecasting slower economic momentum for the United
States, although this will still be significantly above the long-term
average. The impetus from the tax reform should slowly taper off.
Consumer purchasing power will presumably be curbed by higher
prices as a result of the hike in import duties on Chinese goods,
while wages continue to see only moderate gains.
Growth in the emerging markets of Asia is also expected to weak-
en slightly. Many Asian markets have close links to China through
foreign trade, so the anticipated growth moderation in China is a
major factor. We expect higher trade tariffs with the United States to
dampen export demand and negatively impact investment propen-
sity. However, the Chinese economy should be supported by
income and sales tax cuts as well as tax concessions for the private
sector. We anticipate growth of just over 6% for China (2018:
+6.6%).
Our macroeconomic forecasts are based on the assumption
that the trade conflict between the United States and its
trading partners will ease over the course of the year, and
that Brexit will occur without wider economic repercussions.
In Japan, growth is expected to remain at the low prior-year level.
Domestic demand should remain stable, although capacity bottle-
necks will have a dampening effect on growth. The expected slow-
down in China will curb export demand. In addition, the sales tax will
be raised in October 2019, which should lead to lower consumer
demand in the fourth quarter.
1 In the rest of this chapter, "E.U." refers to the E.U. 27 and the United Kingdom.
BASF Report 2018
117
About This Report
1 To Our Shareholders
9,648
39,756
In South America, we expect the recovery in Brazil to continue,
provided the newly elected president pursues a liberal,
reform-oriented economic course. By contrast, the Argentinian
economy will likely continue to contract as domestic demand suffers
from high inflation.
3 Corporate Governance
In a challenging environment characterized by a high level of
uncertainty, the global economy is expected to grow by 2.8%
in 2019, slower than in 2018 (+3.2%). In the European Union
(E.U.), we anticipate weaker increases in both domestic
demand and export demand from third countries. The United
States will presumably deliver solid growth, although the
stimulus effects of the tax reform should be less pronounced
than in 2018. Growth in China will continue to cool but remain
high compared with the advanced economies. The economic
recovery in Brazil is expected to hold up. We expect growth
in key customer industries to continue. For the automotive
industry, we anticipate a slight recovery after lower produc-
tion in the previous year. Global chemical production is fore-
cast to grow by 2.7% in 2019, roughly at the same rate as in
2018 (+2.7%). For 2019, we expect an average oil price of
$70 per barrel for Brent crude and an exchange rate of
$1.15 per euro.
Forecast
Customer awards
We again received awards from a number of satisfied customers in
2018. For example, in April 2018 we were named a 2017 General
Motors (GM) Supplier of the Year for the thirteenth time since 2002.
The award is presented to suppliers who distinguish themselves by
meeting performance metrics for quality, execution, innovation and
total enterprise cost.
In October 2018, BASF was recognized by technology company
3M for its contribution to improving 3M's competitiveness with the
2017 3M Supplier of the Year Award in the Technology & Innovation
category.
BMW honored BASF in November 2018 with a BMW Supplier Inno-
Ovation Award 2018 as the winner of the Sustainability category.
BMW said that BASF achieved the best performance in CO2 emis-
sions in the report published by the non-governmental organization
CDP. BASF's anchoring of the fight against climate change within
the company was cited as another reason for the decision. In addi-
tion, BASF develops solutions that help its customers reduce CO2
emissions.
1 The method used to calculate customers in the previous year has been adjusted to the "sold-to" parties of our consolidated companies. The updated figure for 2017 is over 80,000 customers.
2 ISO 9001 is a standard published by the International Organization for Standardization (ISO) and sets out the requirements for a quality management system.
Economic Environment in 2019
BASF Report 2018
About This Report
1 To Our Shareholders
2 Management's Report
Economic Environment in 2019
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
116
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Outlook for gross domestic product 2019
2.0%
Emerging markets of Asia
5.7%
Japan
0.7%
South America
United States
2.5%
■ Weaker growth expected in global industrial production
Overall, we expect global industrial growth to be weaker in 2019, at
2.7% (2018: +3.2%). The trajectory should slow in both the
advanced economies as well as in the emerging markets.
We expect the transportation industry to return to growth after a
slight decline in production in the previous year. In the E.U., automo-
tive production will presumably decline again slightly; a slight decline
in western Europe should contrast with moderate growth in the
eastern E.U. countries. For North America, we are again forecasting
weak growth after the slight decrease in 2018. In Asia, too, we
anticipate a slight recovery overall, as the expiry of the tax incentives
will no longer be felt in China and economic stimuli should take
effect. Dynamic growth is again forecast for India. In Japan and
South Korea, automotive production should return to positive terri-
tory in 2019 after contracting in the previous year. By contrast,
growth in South America will likely decline following the strong
recovery effects in prior years.
In the energy and raw materials sector, we anticipate slightly
weaker production growth for 2019. The main driver is the lower
growth rate forecast for utilities - which accounts for over 40% of
value added in the sector - compared with 2018. This was partly
attributable to the extraordinary weather conditions in 2018, which
led to unusually high electricity and water consumption.
We anticipate largely stable global growth in the construction
industry with wide regional variance. Construction in western
Europe will soften somewhat, partly due to capacity bottlenecks
(Germany) and partly to the limitations of subsidy programs (France).
Private sector construction activity in the United Kingdom is expect-
ed to remain sluggish due to macroeconomic uncertainty. By con-
trast, the construction industry in eastern Europe should remain
dynamic with strong growth rates, although weaker than in the
previous year. We are again seeing a weak development in the
United States against a backdrop of rising mortgage rates and
construction costs, while growth in Asia is expected to remain stable
at a high level, especially in infrastructure. In South America,
we anticipate stronger growth in line with the ongoing economic
recovery in Brazil.
Outlook for key customer industries
1.5%
European Union
2.9%
Real change compared with previous year
World
2.8%
European Union
1.4%
United States
2.3%
Emerging markets of Asia
5.8%
Japan
0.8%
South America
1.8%
Trends in gross domestic product 2019-2021
Average annual real change
World
Quality management
Of which women (%)
For more information on the new segment structure, see The BASF Group on page 19 and
Note 4 to the Consolidated Financial Statements from page 211 onward
About This Report
30.0%
41,910
Women
24.2%
48,826
Men
(Total: 122,404, of which 25.1% women, as of December 31, 2018)
BASF Group employee age structure
employees over the long term. Mixed-age teams also benefit from
the combination of different skills and perspectives, for example, by
bringing together knowledge of digital technologies with many years
of experience and process expertise. We have various measures in
place to foster this transfer of knowledge and experience, and learn-
ing from each other. Given the special role that our leaders assume,
the topic "leadership in times of demographic change" forms a part
of many of our leadership programs.
Diversity also relates to the company's demographic profile, which
varies widely by region within the BASF Group. Our aim is to create
a suitable framework to help maintain the employability of our per-
sonnel at all stages of life and ensure the availability of qualified
Our leaders play an important role in its implementation. We support
them by integrating topics such as inclusive leadership into our
leadership development courses. Special seminars and training
events are held to sensitize leaders to issues such as unconscious
bias. This enables them to remain as objective as possible when
making personnel decisions, for example, to avoid unconscious
biases in favor of or against candidates with certain characteristics
or views.
Promoting and valuing diversity across all hierarchical levels is an
integral part of our strategy and is also embedded in our corporate
values. BASF strives to foster a working environment based on
mutual respect, trust and appreciation. This is enshrined in our
global Competency Model, which provides a framework for our
employees and leaders. The inclusion of diversity is anchored in this
model as one of the behaviors expected of employees and leaders.
The strong global character of our markets translates into different
customer requirements - and we want to reflect this diversity among
our employees, too. For us, diversity means, among other things,
having people from different backgrounds working at our company
who can draw on their individual perspectives and skills to grow our
business. This diversity is important to us because it enables our
employees to better meet our customers' needs. By valuing and
promoting employee diversity, we boost our teams' performance
and power of innovation, and increase creativity, motivation and
each and every individual's identification with the company.
■ Promoting diversity is part of our company culture
[Inclusion of diversity]
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
75.8%
2 Management's Report
Employees
干干
■■27.8%
December 31, 2018
Professionals²
(Senior) executives¹
Leaders and professionals in the BASF Group²
Considering the low rate of turnover in the BASF Group's leadership
team, this is an ambitious goal that we want to achieve through
various measures. At BASF in North America, for example, diversity
considerations such as gender or ethnic background are systematic-
ally considered when drawing up candidate lists and interview pan-
els for all vacant positions. BASF has been a member of the Chef-
sache initiative since 2016, a network of leaders from industry, aca-
demia, the public sector and media. The initiative aims to initiate
social change such as increasing the percentage of women in
leadership positions in Germany. In the BASF Group, the global
proportion of female leaders with disciplinary responsibility was
21.7% at the end of 2018 (2017: 20.5%).
22-24%
Proportion of women in leadership positions
with disciplinary responsibility
2021 target
1 The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive status by virtue of special expertise.
2 Excluding employees of the businesses acquired from Bayer
Since 2015, BASF has set itself global quantitative goals for increas-
ing the percentage of women in leadership positions. We aim to
increase this ratio to 22-24% worldwide by 2021, so that the pro-
portion of women in leadership positions reflects the share of female
employees in the BASF Group when the target was set.
We also promote diversity in leadership development. Our global
approach is evidenced by the high percentage of non-German
senior executives, 1 for example. This was 40.4% at the end of 2018
(2017: 38.9%). Our goal is to continue to maintain this figure at
significantly above the 2003 baseline (30%).
55 years and up
17.2%
82.8%
23,084
40-54 years
26-39 years
Up to and
including 25 years
72.2%
8,584
1 To Our Shareholders
70.0%
111
About This Report
1 To Our Shareholders
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
[Employee engagement]
■ Next employee survey to be conducted in 2019
BASF can rely on the engagement of its employees. Employee
engagement is shown by, for example, a passion for the job, a
dedication to top performance and a commitment to BASF. Previ-
ous global employee surveys have shown that employee engage-
ment is already high, and we aim to keep it this way and increase it
even further where possible. As part of our updated corporate
strategy, we have therefore set ourselves the following goal for
the coming years from 2019 onward: More than 80% of our employ-
ees feel that at BASF, they can thrive and perform at their best. Our
employee engagement level will be regularly calculated as an index
score based on set questions in employee surveys. We identify
improvement areas based on survey results to further strengthen the
engagement of our employees.
2 Management's Report
Employees
Global employee surveys and pulse checks are and will remain an
established feedback tool in the BASF Group, and are used to
actively involve employees in shaping their working environment.
The results are communicated to employees, the Board of Executive
Directors and the Supervisory Board. We have performed regular
global employee surveys since 2008. As part of the updated corpo-
rate strategy, we conducted a global "pulse check" in 2018. We
surveyed around 24,000 randomly chosen employees worldwide on
topics such as customer focus, innovation, digitalization, sustain-
ability and safety awareness. The results of this survey were taken
into account in the strategy development process. We will conduct
the next employee survey in 2019 based on an updated concept.
What we expect from our leaders]
■ Leaders as role models
Our leaders and their teams should make a sustainable contribution
to BASF's success and to safeguarding its future. This is why we
want to strengthen leadership impact. We understand impactful
leadership as leaders that serve as role models by developing and
implementing business strategies in line with our corporate values.
They should also have a positive impact on shaping day-to-day
business, mobilizing employees and fostering their development.
These expectations are part of the standard global nomination crite-
ria for leadership candidates. Our leadership culture is founded on a
global Competency Model, which sets out specific behavioral stan-
dards, as well as our global Code of Conduct. We offer our leaders
learning and development opportunities for each phase of their
career, as well as various formats that enable them to share knowl-
edge and learn from one another. Global, regional and local offerings
are optimally coordinated.
Regular feedback plays an important role in the development of
leaders. In 2018, we tested new digital tools for providing direct,
timely feedback in a number of business and functional units. This
complements BASF's long-established Global Leadership Feed-
back tool, where leaders receive feedback from their employees,
managers, colleagues and customers on different aspects of their
leadership conduct, and derive conclusions and activities from this
in a follow-up process. In the coming years, we will introduce addi-
tional feedback tools. The use of these tools is binding in order to
further enhance our strong feedback culture and promote personal
development among our leaders on a regular basis.
Leaders and digital transformation
Leaders play a special role in driving forward digitalization. We
offer training and other resources to prepare them and help
them inspire their teams about the digital transformation. One
example is the BASF Leadership Camp held in the fall of 2018,
where leaders from all of the regions came together to discuss
topics such as the role of leaders and the challenges of the
digital transformation facing them, as well as the possibilities of
digital project management. Leaders were also given the oppor-
tunity to participate in a modular course with cross-company
digitalization projects. The program was run under the auspices
of the Digital Academy, a network of large companies and the
Mannheim Business School, which aims to drive forward the
digital transformation in Germany.
BASF Report 2018
On January 31, 2019, BASF and Solenis completed the transfer of
BASF's paper and water chemicals business to Solenis as
announced in May 2018.
The business was allocated to the Performance Chemicals division
until this date. As of February 1, 2019, we hold a 49% share in
Solenis. The transaction includes production sites and plants of
BASF's paper and water chemicals business in Bradford and
Grimsby, U.K.; Suffolk, Virginia; Altamira, Mexico; Ankleshwar,
India; and Kwinana, Australia. Since closing, we have accounted
for our share in Solenis' income after taxes using the equity method
due to our significant influence, and included this in EBIT of the
BASF Group, presented in Other.
Kuantan, Malaysia
Mundra, India
Zhanjiang, China
1 In cooperation with Adani Group
Construction: production plant for vitamin A
Construction: production plant for ibuprofen
Capacity expansion: acrylic acid and butyl acrylate
Investment: acrylics value chain¹
Establishment of an integrated Verbund site
ately to changes in equity. To limit the risks of changing financial
market conditions as well as demographic developments, employ-
ees have, for a number of years now, been almost exclusively offered
defined contribution plans for future years of service. Some of these
contribution plans include minimum interest guarantees. If the pen-
sion fund cannot generate this, it must be provided by the employer.
A permanent continuation of the low interest rate environment could
make it necessary to recognize pension obligations and plan assets
for these plans as well.
We stand by our ambitious dividend policy and offer our share-
holders an attractive dividend yield. We aim to increase our dividend
each year.
About This Report
Information on the proposed dividend can be found on page 13
BASF Report 2018
122
Events after the reporting period
Dividend
Information on our financing policies can be found on page 54
Replacement: acetylene plant
Financing
Capex by region 2019-2023
South America, Africa, 1%
Middle East
Location
Project
Asia Pacific 27%
Antwerp, Belgium
Geismar, Louisiana
Capacity expansion: integrated ethylene oxide complex
Capacity expansion: MDI plant
In 2019, we expect cash outflows in the equivalent amount of
around €2.0 billion from the scheduled repayment of bonds. To refi-
nance maturing bonds and to optimize our maturity profile, we
continue to have medium to long-term corporate bonds and our
U.S. dollar commercial paper program at our disposal.
€21.3 billion
130
North America 24%
33% Chemicals
15% Materials
8% Industrial Solutions
5% Alternative sites currently
being investigated
43% Europe
Ludwigshafen, Germany
BASF Report 2018
Acquisitions
For more information on sustainability management, see page 36 onward
Potential applications of digital technologies and solutions along the
entire value chain are investigated in both the operational and func-
tional divisions as well as by cross-divisional teams, and tested in
dedicated pilot projects. They are supported here by the Digitaliza-
tion & Information Services unit. We analyze the opportunities and
risks of digitalization in Production, Logistics, Research & Develop-
ment and for business models as well as in corporate functions such
as Finance, Human Resources, Procurement & Supply Chain Ser-
vices, Legal, Taxes, Insurance & Intellectual Property. The opportuni-
ties and risks of digitalization are steered by the operational and
functional divisions.
The trust of customers and consumers is essential for the success-
ful introduction of new technologies. That is why we enter into dialog
with our stakeholders at an early stage of development.
For more information on portfolio management using the Sustainable Solution Steering method,
see page 37 onward
For more information on innovation and digitalization, see page 31 onward
BASF Report 2018
129
About This Report
1 To Our Shareholders
2 Management's Report
Opportunities and Risks
Surface Technologies 11%
3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
6 Overviews
Portfolio development through investments
Our decisions on the type, scope and locations of our investment
projects are based on assumptions related to the long-term develop-
ment of markets, margins and costs, as well as raw material avail-
ability and country, currency and technology risks. Opportunities
and risks arise from potential deviations in actual developments from
our assumptions.
We expect the increase in chemical production in emerging markets
in the coming years to remain above the global average. This will
create opportunities that we want to exploit by expanding our local
presence.
Research activities funded by the BASF Group promote the targeted
development and enhancement of key technologies as well as the
establishment of new business areas. Focus areas in research are
determined based on their strategic relevance for BASF, above and
beyond existing business areas. We also address the risk of the
technical or economic failure of research and development projects
by maintaining a balanced and comprehensive project portfolio, as
well as through professional, milestone-based project management.
For more information on energy and climate protection, see page 103 onward
For more information on opportunities and risks from energy policies, see page 126
regions: Europe, Asia Pacific and North America. Together with the
development units in our operating divisions, they form the core of
the global Know-How Verbund. Our strong regional presence opens
up opportunities to participate in local innovation processes and
gain access to local talent. We optimize the effectiveness and effi-
ciency of our research activities through our global Know-How
Verbund.
The trend toward increased sustainability requirements in our cus-
tomer industries continues. Our aim is to leverage the resulting
opportunities in a growing market even more effectively in the future
with more sustainable innovations. This is why we applied the
Sustainable Solution Steering method, which is used to evaluate the
sustainability of our product portfolio, to assessments of innovation
projects, and integrated it into an early stage of our research and
development processes as well as the development of our business
strategies. In this way, we want to benefit from the higher profitability
of our Accelerator solutions compared with the rest of our evaluated
portfolio. At the same time, as of 2018, we reduce reputational and
financial risks by phasing out products for which we have identified
substantial sustainability concerns ("Challenged" products) within
five years of initial classification as such at the latest. We must
develop action plans for these products at an early stage to minimize
any potential financial risks. These can include research projects,
reformulations or even replacing one product with another.
For example, the material topic "energy and climate" is analyzed to
enable us to identify, assess and manage climate-related risks and
opportunities. For BASF as an energy-intensive company, these
arise particularly from regulatory changes, such as in carbon prices
through emissions trading systems, taxes or energy legislation.
As part of our sustainability management, we also assess the
opportunities and risks associated with the topics we have identified
as material. These also include the increasing internalization of
external effects, through which positive and negative earnings
contributions from companies' activities that were previously borne
by the community are attributed to these companies.
Sustainability
Recruitment and long-term retention of qualified employees
BASF anticipates growing challenges in attracting qualified employ-
ees in the medium and long term due to demographic change,
especially in North America and Europe. As a result, there is an
increased risk that job vacancies may not be filled with suitable
applicants, or only after a delay. We address these risks with mea-
sures to integrate diversity, employee and leadership development,
and intensified employer branding. At local level, demographic
management includes succession planning, knowledge manage-
ment and offerings to improve the balance between personal and
professional life and promote healthy living. This increases BASF's
appeal as an employer and retains our employees in the long term.
For more information on the individual initiatives and our goals, see page 110 onward
The evaluation of opportunities and risks plays a significant role
during the assessment of acquisition targets. A detailed analysis
and quantification is conducted as part of due diligence. Examples
of risks include increased staff turnover, delayed realization of syner-
gies, or the assumption of obligations that were not precisely quanti-
fiable in advance. If our expectations in this regard are not fulfilled,
risks could arise, such as the need to impair intangible assets;
however, there could also be opportunities, for example, from addi-
tional synergies.
In the future, we will continue to refine our portfolio through acquisi-
tions that promise above-average profitable growth as part of the
BASF Verbund and help to reach a relevant market position. We also
take into account whether they are innovation-driven or offer a
technological differentiation, and make new, sustainable business
models possible.
For more information on our investment plans, see page 122
We are continuing to evaluate an investment in a world-scale
methane-to-propylene complex on the U.S. Gulf Coast and conduct
regular assessments, taking into account raw materials prices and
the relevant market conditions.
Long-term opportunities and risks
Long-term demand development
We assume that chemical production (excluding pharmaceuticals)
will grow slightly faster than global gross domestic product over the
next five years and be slightly below the previous five-year average.
Through our market-oriented and broad portfolio, which we will
continue to strengthen in the years ahead through investments in
new production capacities, research and development activities and
acquisitions, we aim to achieve volumes growth that exceeds this
market growth. Should global economic growth see unexpected,
considerable deceleration, due for example to an ongoing weak
period in the emerging markets, protectionist tendencies or to geo-
political crises, the expected growth rates could prove too ambi-
tious. As a result of our high degree of diversification across various
customer industries and regions, we would still expect our growth to
be above the market average, even under these conditions.
For more information on the corporate strategy, see page 25 onward
Development of competitive and customer landscape
We expect competitors from Asia and the Middle East in particular
to gain increasing significance in the years ahead. Furthermore, we
predict that many producers in countries rich in raw materials will
expand their value chains. We counter this risk through active port-
folio management. We exit markets in which we see only limited
possibilities to stand out from competitors in the long term.
We continuously improve our processes in order to remain competi-
tive through our operational excellence. Our strategic excellence
program, which will run from 2019 to 2021, also contributes to this
aim. The program will include measures focused on production,
logistics, research and development as well as digitalization and
automation activities and organizational development. We expect
this program to contribute around €2 billion in income each year
from 2021 onward.
In order to achieve lasting profitable growth, tap into new market
segments and customers, and make our customers more success-
ful, our research and business focus is on highly innovative business
areas, some of which we enter into through strategic cooperative
partnerships.
Innovation
The central research areas Process Research & Chemical Engineer-
ing, Advanced Materials & Systems Research and Bioscience
Research serve as global platforms headquartered in our key
Nutrition & Care 9%
1 To Our Shareholders
Agricultural Solutions 6%
2018
Forecast 2019
2018
11,694
at prior-year level
1,587
2 Management's Report
Opportunities and Risks
13,270
slight increase
2,400
9,120
slight decline
668
13,655
slight increase
Sales
690
Forecast 2019
BASF Group
About This Report
1 To Our Shareholders
2 Management's Report
Outlook 2019
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Forecast by segment¹,2
Million €
Chemicals
Materials
Industrial Solutions
Surface Technologies
Nutrition & Care
Agricultural Solutions
Other
Income from operations (EBIT)
before special items
5,940
considerable increase
736
Sales in Other are expected to increase considerably in 2019,
mainly as a result of higher volumes in raw materials trading. For
EBIT before special items, we are forecasting a figure considerably
below the previous year due to the positive measurement effects for
our long-term incentive program that arose in 2018, which we do
not expect in 2019.
BASF Report 2018
121
About This Report
1 To Our Shareholders
2 Management's Report
Outlook 2019
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Capital expenditures
■ Capex of around €3.8 billion planned for 2019
We are planning total capital expenditures (additions to property,
plant and equipment excluding acquisitions, IT investments, restora-
tion obligations and right-of-use assets arising from leases) of
around €3.8 billion for the BASF Group in 2019. For the period from
2019 to 2023, we have planned capital expenditures totaling
€21.3 billion. The investment volume in the coming years thus
exceeds that of the planning period 2018 to 2022. Projects currently
being planned or underway include:
Capex: selected projects
Capex by segment 2019-2023
Other 18%
(infrastructure, R&D)
Despite the continuing challenging market environment, we antici-
pate considerable sales growth in the Agricultural Solutions seg-
ment due in particular to the businesses acquired from Bayer and
higher volumes. We also expect a considerable increase in EBIT
before special items overall. In 2019, we will launch a program to
boost efficiency to offset factors such as the rise in fixed costs. We
will also continue to invest at a high level in research and develop-
ment and digitalization.
For the Nutrition & Care segment, we anticipate considerably
higher sales than in 2018, largely from volumes growth in both divi-
sions. In the Nutrition & Health division in particular, our planning
assumes improved product availability following the restart of the
citral plant in Ludwigshafen, Germany, and the ibuprofen plant in
Bishop, Texas, as well as the startup of the menthol plant in Kuantan,
Malaysia. We also expect EBIT before special items to considerably
exceed the prior-year figure, mainly from higher sales volumes.
Softer margins for vitamins and the absence of insurance refunds
compared with the previous year will have an offsetting effect.
In the Surface Technologies segment, sales should rise slightly as
a result of volumes growth and higher prices. Despite the challeng-
ing market situation, especially in the automotive industry, we expect
sales to increase in all divisions. We aim to considerably increase
EBIT before special items, primarily with improved margins and strict
cost discipline.
Sales in the Industrial Solutions segment will likely decrease slightly
in 2019. We expect a considerable decline in sales in the Perfor-
mance Chemicals division due to the transfer of BASF's paper and
water chemicals business to the Solenis group as of January 31,
2019. The higher volumes and prices forecast in the Performance
Chemicals division's remaining businesses as well as in the Disper-
sions & Pigments division and will not be able to completely com-
pensate for this. Despite the continued challenging market environ-
ment, we anticipate a considerable increase in EBIT before special
items for the segment, mainly from higher volumes and stronger
margins.
6,156
considerable increase
734
slight increase
considerable decline
considerable increase
considerable increase
considerable increase
considerable increase
2,840
62,675
5 Supplementary Information Oil and Gas Business 6 Overviews
(462)
€21.3 billion
slight increase
considerable decline
slight increase
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight" means a change of 1-10%, while "considerable"
is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%).
2 We have based the outlook on the segment structure as of January 1, 2019, and adjusted the segment data for 2018 accordingly. In addition to the new segment structure, the composition of a number of divisions has also
changed.
Sales and earnings forecast for the segments
In the Chemicals segment, we expect sales to reach the prior-year
level in 2019. We anticipate higher volumes, especially of styrenes,
plasticizers and oxo alcohols in the Petrochemicals division, and of
amines and polyalcohols in the Intermediates division. By contrast,
we expect lower volumes of steam cracker products due to sched-
uled shutdowns of the steam crackers in Port Arthur, Texas; Ant-
werp, Belgium; and Ludwigshafen, Germany. EBIT before special
items will presumably be slightly above the 2018 level: In particular,
we are forecasting improved margins in the butanediol value chain in
the Intermediates division, as well as for acrylic acid and its deriva-
tives in the Petrochemicals division.
We expect sales in the Materials segment to be slightly above the
prior-year level in 2019. In the Performance Materials division, we
anticipate stronger volumes and higher prices on average. This
should more than offset the significantly lower prices in the isocya-
nates business in the Monomers division as a result of additional
capacities from competitors, especially in the Middle East and Asia.
In addition, the acquisition of Solvay's integrated polyamide busi-
ness is expected to deliver a positive contribution in the second half
of 2019. We anticipate considerably lower EBIT before special items
compared with 2018, driven mainly by the expected decline in mar-
gins in the isocyanates business.
6,353
considerable increase
4 Consolidated Financial Statements
2 Management's Report
Opportunities and Risks
Divisions
& Intellectual Property
Legal, Taxes, Insurance
Corporate
Controlling
Finance
Chief Compliance Officer
Functional and corporate units
Board of Executive Directors
↑
Supervisory Board
Regions
Corporate Audit
Organization of BASF Group's risk management
BASF's Chief Compliance Officer (CCO) manages the implemen-
tation of our Compliance Management System, supported by
additional compliance officers worldwide. He regularly reports to
The management of specific opportunities and risks is largely
delegated to the business units and is steered at a regional or
local level. Risks relating to exchange rates and raw materials
prices are an exception. In this case, there is an initial consolida-
tion at a Group level before derivative hedging instruments, for
example, are used.
A network of risk managers in the business, functional and corpo-
rate units as well as in the regions and at the Verbund sites
advances the implementation of appropriate risk management
practices in daily operations.
-
-
- The Board of Executive Directors is supported by the units
Finance, Corporate Controlling, Corporate Development and
Legal, Taxes, Insurance & Intellectual Property, and the Chief
Compliance Officer. These units coordinate the risk management
process at a Group level and provide the structure and appropri-
ate methodology. Opportunity and risk management is thus inte-
grated into the strategy, planning and budgeting processes.
Risk management is the responsibility of the Board of Executive
Directors, which also determines the processes for approving
investments, acquisitions and divestitures.
-
Organization and responsibilities
-
Corporate
Development
the Board of Executive Directors on the status of implementation
as well as on any significant results. He also provides a status
report to the Supervisory Board's Audit Committee at least once
a year, including any major developments. In the event of signifi-
cant incidents, the Audit Committee is immediately informed by
the Board of Executive Directors.
The internal auditing unit (Corporate Audit) is responsible for regu-
larly auditing the risk management system established by the
Board of Executive Directors in accordance with section 91(2) of
the German Stock Corporation Act. Furthermore, as part of its
monitoring of the Board of Executive Directors, the Supervisory
Board considers the effectiveness of the risk management sys-
tem. The suitability of the early detection system we set up for
risks is evaluated by our external auditor.
Significant features of the internal control and risk
management system with regard to the Group financial
reporting process
For more information on our Group-wide Compliance Program, see page 140 onward
Our Group-wide Compliance Program aims to ensure adherence
to legal regulations and the company's internal guidelines. Our
global employee Code of Conduct firmly embeds these mandato-
ry standards into everyday business. Members of the Board of
Executive Directors are also expressly obligated to follow these
principles.
As part of strategy development in the strategic business units,
the Corporate Development unit conducts strategic opportunity/
risk analyses with a 10-year assessment period. These analyses
are annually reviewed as part of strategic controlling and are
adapted if necessary.
The BASF Group's management is informed about operational
opportunities and risks (observation period of up to one year) in
the monthly management report produced by the Corporate
Controlling unit. In addition, Corporate Controlling and Finance
provide information twice a year on the aggregated opportunity/
risk exposure of the BASF Group. Furthermore, if a new individual
risk is identified which has a more than €10 million impact
on earnings or bears reputational risks, it must be immediately
reported.
-
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
124
BASF Report 2018
- The nonfinancial topics relevant for BASF are addressed by the
responsible functional units, which assess the risks identified as
being relevant according to impact and probability of occurrence.
We identify opportunities and risks that arise in connection with
the topics of environment, society and governance with our
sustainability management tools. We have established global
monitoring systems to check adherence to laws and our voluntary
commitments in these areas. These also incorporate our suppliers.
For more information on our sustainability management processes, see page 36 onward
-
- A catalog of opportunity and risk categories helps to identify all
relevant opportunities and risks as comprehensively as possible.
We use standardized evaluation and reporting tools for the identi-
fication and assessment of risks. The aggregation of opportuni-
ties, risks and sensitivities at division and Group level using a
Monte Carlo simulation helps us to identify effects and trends
across the Group.
Functional units
External auditors
Verbund sites
-
· The Risk Management Policy, applicable throughout the Group,
forms the framework for risk management and is implemented by
the business units according to their particular business condi-
tions.
Instruments
The BASF Group's risk management process is based on the inter-
national risk management standard COSO II Enterprise Risk
Management - Integrated Framework (2004), and has the following
key features:
■ Aggregation at a Group level
■ Decentralized management of specific opportunities
and risks
■ Integrated process for identification, assessment
and reporting
Competition
Margins
Market growth
Business environment and sector
Possible variations related to:
Potential short-term effects on EBIT of key opportunity and risk factors
subsequent to measures taken¹
Ultimately, however, residual risks remain in all entrepreneurial activi-
ties that cannot be ruled out, even by comprehensive risk manage-
ment.
According to our assessment, there continue to be no significant
individual risks that pose a threat to the continued existence of the
BASF Group. The same applies to the sum of individual risks, even
in the case of another global economic crisis.
For 2019, we expect the global economy to continue to grow at a
slightly slower pace than in the previous year. Important opportuni-
ties and risks for our earnings are associated with uncertainty
regarding market growth and the development of key customer
industries, as well as margin volatility. In particular, a further escala-
tion of the trade conflicts between the United States and its trade
partners and a considerable slowdown of the Chinese economy
pose significant risks. Such a development would negatively affect
demand for intermediate and investment goods. This would impact
the emerging markets that export raw materials as well as the
advanced economies. This is especially true for Europe. Further
risks to the global economy arise from an escalation of geopolitical
conflicts.
■ No threat to continued existence of BASF
■ Significant opportunities and risks arise from overall
economic developments and margin volatility
Overall assessment
In order to effectively measure and manage identified opportunities
and risks, we quantify these where appropriate in terms of proba-
bility and economic impact in the event they occur. Where possible,
we use statistical methods to aggregate opportunities and risks into
risk factors. This way, we achieve an overall view of opportunities
and risks at a portfolio level, allowing us to take effective measures
for risk management.
impact the achievement of our goals
Events that can negatively
Risks
Potential successes that
exceed our defined goals
Opportunities
The goal of BASF's risk management is to identify and evalu-
ate opportunities and risks as early as possible and to take
appropriate measures in order to seize opportunities and
limit business losses. The aim is to avoid risks that pose a
threat to BASF's continued existence and to make improved
managerial decisions to create value. We define opportuni-
ties as potential successes that exceed our defined goals.
We understand risk to be any event that can negatively
impact the achievement of our short-term operational or
long-term strategic goals.
Opportunities and Risks
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Regulation/policy
■ Conducted in accordance with standardized Group
guidelines
Company-specific opportunities and risks
Purchasing/supply chain
Investments/production
Acquisitions/divestitures/cooperations
Information technology
Risk management process
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
123
BASF Report 2018
1 Using a 95% confidence interval per risk factor based on planned values; summation is not permissible.
2019 +
-
Outlook
≥ €1,500 million €2,000 million
> €1,000 million <€1,500 million
≥ €500 million
€100 million < €500 million
<€1,000 million
< €100 million
Other financial opportunities and risks
Exchange rate volatility
Financial
Law
Personnel
■ Segregation of duties, principle of dual control and clearly
regulated access rights
■ Annual evaluation of the control environment and relevant
processes at significant companies
The Consolidated Financial Statements are prepared by a unit in the
Finance division. BASF Group's accounting process is based on a
uniform accounting guideline that sets out accounting policies and
the significant processes and deadlines on a Group-wide basis.
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
127
BASF Report 2018
The management of liquidity, currency and interest rate risks is
conducted in the Treasury unit. The management of commodity
price risks takes place in the Procurement & Supply Chain Services
functional unit or in appropriately authorized Group companies.
Detailed guidelines and procedures exist for dealing with financial
Financial opportunities and risks
We use our internal control system to limit risks from potential
infringements of rights or laws. For example, we try to avoid patent
and licensing disputes whenever possible through extensive clear-
ance research. As part of our Group-wide Compliance Program, our
employees receive regular training.
We constantly monitor current and potential legal disputes and
proceedings, and regularly report on these to the Board of Executive
Directors and Supervisory Board. In order to assess the risks from
current legal disputes and proceedings and any potential need to
recognize provisions, we prepare our own analyses and assess-
ments of the circumstances and claims considered. In addition, in
individual cases, we consider the results of comparable proceedings
and, if needed, independent legal opinions. Risk assessment is
particularly based on estimates as to the probability of occurrence
and the range of possible claims. These estimates are the result of
close cooperation between the relevant operating and functional
units together with the Legal and Finance units. If sufficient probabil-
ity of occurrence is identified, a provision is recognized accordingly
for each proceeding. Should a provision be unnecessary, general
risk management continues to assess whether these litigations
nevertheless give rise to a risk for the EBIT of the BASF Group.
Legal disputes and proceedings
based on these regulations. BASF also established the Cyber De-
fense Center in 2015, is a member of Cyber Security Sharing and
Analytics e.V. (CSSA) and a founding member of the German Cyber-
security Organization (DCSO) together with Allianz SE, Bayer AG
and Volkswagen AG.
To minimize such risks, BASF uses globally uniform processes and
systems to ensure IT security, such as stable and redundantly
designed IT systems, backup processes, virus and access protec-
tion, encryption systems as well as integrated, Group-wide stan-
dardized IT infrastructure and applications. The systems used for
information security are constantly tested, continuously updated,
and expanded if necessary. In addition, our employees receive
regular training on information and data protection. IT-related
risk management is conducted using Group-wide regulations for
organization and application, as well as an internal control system
BASF relies on a large number of IT systems. Their nonavailability,
violation of confidentiality or the manipulation of data in critical IT
systems and applications can all have a direct impact on production
and logistics processes. The threat environment has changed in
recent years, as attackers have become better organized, use more
sophisticated technology, and have far more resources available.
If data are lost or manipulated, this can, for example, negatively
affect process safety and the accuracy of our financial reporting.
Unauthorized access to sensitive data, such as personnel records,
competition-related information or research results, can result in
legal consequences or jeopardize our competitive position. This
would also be accompanied by the associated loss of reputation.
Information technology risks
For more information on our compensation system, see page 114
For more information on risks from pension obligations, see page 129
variable compensation, which is linked to the company's success,
among other factors. The correlation between variable compensa-
tion and the success of the company has the effect of minimizing
risk. Another factor is the development of interest rates for discount-
ing pension obligations. Furthermore, changes to the legal environ-
ment of a particular country can have an impact on the development
of personnel expenses for the BASF Group. For countries in which
BASF is active, relevant developments are therefore constantly
monitored in order to recognize risks at an early stage and enable
BASF to carry out suitable measures.
Due to BASF's worldwide compensation principles, the develop-
ment of personnel expenses is partly dependent on the amount of
Personnel
Opportunities and risks arise in connection with acquisitions and
divestitures from the conclusion of a transaction, or it being com-
pleted earlier or later than expected. They relate to the regular
earnings contributions gained or lost as well as the realization of
gains or losses from divestitures if these deviate from our planning
assumptions. In the case of transactions involving the contribution
of businesses to an investment accounted for using the equity
method, a risk of impairment of these investments can arise. The
extent of this risk depends on factors such as the amount of hidden
reserves uncovered within the scope of initial measurement of the
investment accounted for using the equity method.
We are constantly watching our environment in order to identify
possible targets and develop our portfolio appropriately. In addition,
we work together in collaborations with customers and partners to
jointly develop new, competitive products and applications.
risks. Among other things, they provide for the segregation of trad-
ing and back office functions.
Acquisitions, divestitures and cooperations
As a part of risk management, activities in countries with transfer
restrictions are continuously monitored. This includes, for example,
regular analysis of the macroeconomic and legal environment,
shareholders' equity and the business models of the operating units.
The chief aim is the reduction of counterparty, transfer and currency
risks for the BASF Group.
Our competitiveness on global markets is influenced by fluctuations
in exchange rates. For BASF's sales, opportunities and risks arise in
particular when the U.S. dollar exchange rate fluctuates. A full-year
appreciation of the U.S. dollar against the euro by $0.01 would
result in an increase of around €45 million in the BASF Group's EBIT,
assuming other conditions remain the same. On the production
side, we counter exchange rate risks by producing in the respective
currency zones.
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Most employees are granted company pension benefits from either
defined contribution or defined benefit plans. We predominantly
finance company pension obligations externally through separate
plan assets. This particularly includes BASF Pensionskasse WaG
and BASF Pensionstreuhand e.V. in Germany, in addition to the
large pension plans of our Group companies in North America, the
United Kingdom and Switzerland. To address the risk of underfund-
ing due to market-related fluctuations in plan assets, we have
investment strategies that align return and risk optimization to the
structure of the pension obligations. Stress scenarios are also simu-
lated regularly by means of portfolio analyses. An adjustment to the
interest rates used in discounting pension obligations leads immedi-
Risks from pension obligations
For more information on the long-term incentive program, see the Notes to the Consolidated
Financial Statements from page 263 onward
Our senior executives have the opportunity to participate in a share
price-based compensation program. The need for provisions for this
program varies according to the development of the BASF share
price and the MSCI World Chemicals Index; this leads to a corre-
sponding increase or decrease in personnel costs.
Long-term incentive program for senior executives
Asset impairment risks arise if the assumed interest rate in an
impairment test increases, the predicted cash flows decline, or
investment projects are suspended. In the current business environ-
ment, we consider impairment risks for individual assets such as
customer relationships, technologies and trademarks, as well as
goodwill, to be nonmaterial.
Impairment risks
by continuously monitoring the creditworthiness and payment
behavior of our customers and by setting appropriate credit limits.
Due to the global activities and diversified customer structure of the
BASF Group, there are no major concentrations of credit default
risk. Risks are also limited through the use of credit insurance and
bank guarantees.
We limit country-specific risks with measures based on internally
determined country ratings, which are continuously updated to
reflect changing environment conditions. We selectively use invest-
ment guarantees to limit specific country-related risks. We lower
credit risks for our financial investments by engaging in transactions
only with banks with good credit ratings and by adhering to fixed
limits. Creditworthiness is continuously monitored and the limits are
adjusted accordingly. We reduce the risk of default on receivables
Risk of asset losses
For more information on the maturity profile of our financial indebtedness, see the explanations
in the Financial Position on page 54 and the Notes to the Consolidated Financial Statements
from page 246 onward
Risks from fluctuating cash flows are recognized in a timely manner
as part of our liquidity planning. We have access to extensive liquid-
ity at any time thanks to our good ratings, our unrestricted access to
the commercial paper market and committed bank credit lines. In
the short to medium term, BASF is largely protected against poten-
tial refinancing risks by the balanced maturity profile of its financial
indebtedness as well as through diversification in various financial
markets.
Liquidity risks
In the catalysts business, BASF employs commodity derivatives for
precious metals and trades precious metals on behalf of third parties
and on its own account. Appropriate commodity derivatives are also
traded to optimize BASF's supply of refinery products, gas and
other petrochemical raw materials. To address specific risks associ-
ated with these trades, we set and continuously monitor limits with
regard to the type and scope of the deals concluded.
Risks from metal and raw materials trading
In addition to market interest rates, BASF's financing costs are
determined by the credit risk premiums to be paid. These are main-
ly influenced by our credit rating and the market conditions at the
time of issue. In the short to medium term, BASF is largely protected
from the possible effects on its interest result thanks to the balanced
maturity profile of its financial indebtedness.
Interest rate risks result from potential changes in prevailing market
interest rates. These can cause a change in the fair value of fixed-
rate instruments and fluctuations in the interest payments for
variable-rate financial instruments, which would positively or nega-
tively affect earnings. To hedge these risks, interest rate swaps and
combined interest rate and currency derivatives are used in individu-
al cases.
Interest rate risks
Financial currency risks result from the translation of receivables,
liabilities and other monetary items in accordance with IAS 21 at the
closing rate into the functional currency of the respective Group
company. In addition, we incorporate planned purchase and sales
transactions in foreign currencies in our financial foreign currency
risk management. These risks are hedged using derivative instru-
ments, if necessary.
Exchange rate volatility
3 Corporate Governance
For more information on emergency response, see page 98 onward and
basf.com/emergency_response
In the event of a production outage - caused by an accident, for
example - our global, regional or local emergency response plans
and crisis management structures are engaged, depending on the
impact scope. Every region has crisis management teams on a local
and regional level. They not only coordinate the necessary emer-
gency response measures, they also initiate the immediate mea-
sures for damage control and resumption of normal operations as
quickly as possible.
Short-term opportunities and risks
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4 Consolidated Financial Statements
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Opportunities and Risks
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BASF Report 2018
Internal confirmation of the internal control system
All managing directors and chief financial officers of each consol-
idated Group company must confirm to the Board of Executive
Directors of BASF SE every half-year and at the end of the annual
cycle, in writing, that the internal control system is effective with
regard to accounting and reporting.
The managers responsible receive reports on any control weak-
nesses identified and their resolution, and an interdisciplinary
committee investigates their relevance for the BASF Group. The
Board of Executive Directors and the Audit Committee are
informed once control weaknesses have been identified that have
a considerable impact on financial reporting. Only after material
control weaknesses have been resolved does the company's
managing director confirm the effectiveness of the internal control
system.
Monitoring of control weaknesses
After documentation, a review is performed to verify whether the
described controls are capable of adequately covering the risks.
In the subsequent test phase, samples are taken to test whether,
in practice, the controls were executed as described and effec-
tive.
Assessment of control activities
Identification and documentation of control activities
In order to mitigate the risks to the financial reporting processes
listed in our central risk catalog, critical processes and control
activities are documented.
Adherence to internal and external guidelines that are relevant for
the maintenance of a reliable control environment is checked by
means of a standardized questionnaire.
_
In these companies, the process comprises the following steps:
Evaluation of the control environment
Moreover, a centralized selection process identifies companies
that are exposed to particular risks, that are material to the Consoli-
dated Financial Statements of the BASF Group, or that provide
service processes. The selection process is conducted annually. In
the relevant companies, one person is given the responsibility of
monitoring the execution of the requirements for an effective control
system in financial reporting.
The significant risks for the BASF Group regarding a reliable control
environment for proper financial reporting are reviewed and updated
on an annual basis. Risks are compiled into a central risk catalog.
An internal control system for financial reporting continuously moni-
tors these principles. To this end, methods are provided to ensure
that evaluation of the internal control system in financial reporting is
structured and uniform across the BASF Group.
Employees involved in the accounting and reporting process meet
the qualitative requirements and participate in training on a regular
basis. There is a clear assignment of responsibilities between the
specialist units, companies and regional service units involved. We
strictly adhere to the principles of segregation of duties and dual
control, or the "four-eyes principle." Complex actuarial reports and
evaluations are produced by specialized service providers or
specially qualified employees.
There are binding directives for the internal reconciliations and other
accounting operations within the Group. Standard software is used
to carry out the accounting processes for the preparation of the
individual financial statements as well as for the Consolidated Finan-
cial Statements. There are clear rules for the access rights of each
participant in these processes.
Development of demand
Short-term risks from investments can result from, for example,
technical malfunctions or schedule and budget breaches. We
counter these risks with highly experienced project management
and controlling.
The development of our sales markets is one of the strongest sources
of opportunities and risks. More details on our assumptions regarding
short-term growth rates for the global economy, regions and key
customer industries, such as the chemicals, automotive and construc-
tion sectors, can be found under Economic Environment in 2019 on
pages 117 to 119.
Should the macroeconomic environment develop more slowly than
we predict, we expect a lower oil price. In this case, we also expect
the euro to weaken relative to the U.S. dollar in the medium term as
compared with our planning assumptions, as the eurozone's econ-
omy shows a high level of dependency on exports and, in times of
global economic weakness, the U.S. dollar is preferred by portfolio
investors as a safe haven.
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4 Consolidated Financial Statements
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We try to prevent unscheduled plant shutdowns by adhering to high
technical standards and by continuously improving our plants. We
reduce the effects of unscheduled shutdowns on the supply of inter-
mediate and end products through diversification within our global
production Verbund.
Production and investments
We minimize procurement risks through our broad portfolio, global
purchasing activities and the purchase of raw materials on spot
markets. If possible, we avoid procuring raw materials from a single
supplier. When this cannot be avoided, we try to foster competition
or we knowingly enter into this relationship and assess the conse-
quences of potential nondelivery. We continuously monitor the
credit risk of important business partners. We address the risk of
supply interruptions on the procurement and sales side as a result
of extreme weather conditions (such as high/low water levels on
rivers, hurricanes) by switching to unaffected logistics carriers and
the possibility of falling back on unaffected sites within our global
Verbund.
Purchasing and supply chain
Political measures could also give rise to opportunities. For example,
we view the worldwide expansion of renewable energy and mea-
sures to increase energy efficiency as an opportunity for increased
demand for our products, such as our insulation foams for buildings
or our solutions for wind turbines. Our broad product portfolio
enables us to offer alternatives if chemicals have to be substituted
as a result of restrictions in connection with the REACH chemicals
regulation or new standards in our customers' industries.
of a no-deal hard Brexit with no transition phase. Alternative logistics
concepts include, for example, leasing additional warehouse space,
establishing consignment warehouses or technical expansions in
our ERP systems to be able to react to additional customs require-
ments on the systems side as well.
Economic and political uncertainties may arise as a result of Brexit.
At this point in time, it is not yet clear what the future relationship
between the European Union and the United Kingdom will look like
post-Brexit and what specific consequences this will have for our
sites, our supply chains and the regulatory environment. A cross-
divisional Brexit team has been established to prepare the BASF
organization for various exit scenarios and enable it to promptly
react to political decisions. Together with our operating units, suppli-
ers, customers and logistics partners, we have identified problems
and steps to avoid supply chain disruptions, especially in the event
Risks for us can arise from intensified geopolitical tensions, new
trade sanctions, stricter emissions limits for plants or energy and
climate laws. In addition, risks to the BASF Group can be posed by
further regulations in key customer industries or on the use or regis-
tration of agricultural and other chemicals.
Regulation and political risks
We continuously enhance our products and solutions in order to
maintain competitive ability. We watch the market and the competi-
tion, and try to take targeted advantage of opportunities and count-
er emerging risks with suitable measures. Aside from innovation, key
components of our competitiveness are our ongoing cost manage-
ment and our continuous process optimization.
Competition
This would have a negative effect on our EBIT. In addition, the
contribution attributable to BASF from the agreed combination of
BASF's and LetterOne's oil and gas businesses will only be included
in EBIT again on closing of the transaction. This would have a com-
pensating effect on margin pressure in the chemicals business if oil
and gas prices rise. The year's average oil price for Brent crude was
around $71 per barrel in 2018, compared with $54 per barrel in the
previous year. For 2019, we anticipate an average oil price of $70
per barrel. We therefore expect price levels for the raw materials and
petrochemical basic products that are important to our business to
remain constant or decrease slightly.
Margin risks for the BASF Group result on the one hand from a fur-
ther decline in margins in the Chemicals segment or the isocyanates
business. New capacities or raw materials shortages could also
increase margin pressure on a number of products and value chains.
Margin volatility
Weather-related influences can result in positive or negative effects,
especially on our crop protection business.
We also consider risks from deviations in assumptions. We continue
to see a significant macroeconomic risk in a further escalation of the
trade conflicts between the United States and its trade partners and
an increased slowdown of the Chinese economy, which would have
considerable impact on demand for intermediate goods for indus-
trial production as well as investment goods. This would have an
effect on emerging markets that export raw materials as well as on
advanced economies that specialize in technological goods. Risks
to the global economy would also be posed by the possible escala-
tion of geopolitical conflicts.
3 Corporate Governance
Corporate Governance Report
2 Management's Report
-
The independent Supervisory Board members are named under Management and Supervisory
Boards from page 144 onward
For more information on the statutory minimum quotas for the number of women and men on the
Supervisory Board, see the following section
According to the Supervisory Board's assessment, 10 of the 12 cur-
rent members are considered independent based on the above
criteria. Two members of the Supervisory Board no longer meet the
independence criteria as they have been members of the Super-
visory Board since May 1998 and May 2003. These two members
I will not be proposed for reelection in the regular election of the
Supervisory Board at the Annual Shareholders' Meeting on May 3,
2019, and will retire from the Supervisory Board.
According to the Supervisory Board's own assessment, its current
composition already meets nearly all of the requirements of the
competence profile. Only the competence area of digitalization is
not yet completely covered. The Supervisory Board intends to meet
the competence profile in full with its nominations for election to the
Supervisory Board in 2019.
Status of implementation
merely temporary conflict of interest. The Supervisory Board has
additionally defined the following principles to clarify the meaning
of independence: The independence of employee representatives
is not compromised by their role as an employee representative or
employment by BASF SE or a Group company. Prior membership
of the Board of Executive Directors does not preclude indepen-
dence following the expiry of the statutory cooling-off period of
two years. Members who have sat on the Supervisory Board for
more than 15 years are not considered independent. Based on
these criteria, the Supervisory Board should comprise at least
10 independent members; this also means that of the total of six
shareholder representatives, at least four must be independent.
Independence: All Supervisory Board members should be inde-
pendent within the meaning of the criteria specified in the German
Corporate Governance Code. This means that they may not have
a personal or business relationship with BASF, its governing bod-
ies, a controlling shareholder or a company affiliated with this
controlling shareholder that may cause a substantial and not
Commitments to promote the participation of women in
leadership positions at BASF SE
- Availability: Each member of the Supervisory Board ensures that
they invest the time needed to properly perform their role as a
member of the Supervisory Board of BASF SE. The statutory
limits on appointments to governing bodies and the recommen-
dations of the German Corporate Governance Code must be
complied with and the demands of the capital market given
appropriate consideration when accepting further appointments.
Age limit and period of membership: Persons who have
reached the age of 72 on the day of election by the Annual Share-
holders' Meeting should generally not be nominated for election.
Membership on the Supervisory Board should generally not
exceed 15 years; this corresponds to three regular statutory
periods in office.
-
Further composition objectives
- At least 30% under the age of 60
At least 50% of members have different educational backgrounds
and professional experience
At least 30% of members have international experience based on
their background or professional experience
At least 30% women and 30% men
-
Character and integrity: All members of the Supervisory Board
must be personally reliable and have the knowledge and experi-
ence required to diligently and independently perform the work of
a supervisory board member.
■ Minimum quota on Supervisory Board, target figures for
Board of Executive Directors and top management
The supervisory board of a publicly listed European stock corpora-
tion (SE) that is composed of the same number of shareholder and
employee representatives must, according to section 17(2) of the
SE Implementation Act, consist of at least 30% women and 30%
men. Since the 2018 Annual Shareholders' Meeting, the Super-
visory Board of BASF SE comprises four women, of whom two are
shareholder representatives and two are employee representatives,
and eight men; its composition meets the statutory requirements.
On conclusion of the 2018 Annual Shareholders' Meeting, the
departing Supervisory Board member Ralf-Gerd Bastian was
succeeded by Tatjana Diether, who was personally chosen to
replace him as early as late 2013 until the end of the 2019 Annual
Shareholders' Meeting.
As a target figure for the Board of Executive Directors, the Supervi-
sory Board determined that, in accordance with section 111(5) AktG
for the second target-attainment period after the law's entry into
force, which began on January 1, 2017, the Board of Executive
Directors should continue to have at least one female member. With
eight members of the Board of Executive Directors, this represented
12.5% on the date the target was set, and today represents 14.3%
with seven members. The Board of Executive Directors also decided
on target figures for the proportion of women in the two manage-
ment levels below the Board of Executive Directors of BASF SE:
Women are to make up 12.1% of the leadership level directly below
the Board, and the level below that is to comprise 7.3% women.
This corresponds to the status at the time these target figures were
determined. The deadline for achieving the goals for the second
target-attainment period was set for December 31, 2021.
Each BASF SE share represents one vote. All of BASF SE's shares
are registered shares. Shareholders are obliged to have themselves
entered with their shares into the company share register and to
provide the information necessary for registration in the share regis-
ter according to the German Stock Corporation Act. There are no
registration restrictions and there is no limit to the number of shares
that can be registered to one shareholder. Only the persons listed in
the share register are entitled to vote as shareholders. Listed share-
holders may exercise their voting rights at the Annual Shareholders'
Meeting either personally, through a representative of their choice or
through a company-appointed proxy authorized by the sharehold-
Shareholders exercise their rights of co-administration and supervi-
sion at the Annual Shareholders' Meeting, which usually takes place
within the first five months of the business year. The Annual Share-
holders' Meeting elects half of the members of the Supervisory
Board and, in particular, resolves on the formal discharge of the
Board of Executive Directors and the Supervisory Board, the distri-
bution of profits, capital measures, the authorization of share buy-
backs, changes to the Statutes and the selection of the auditor.
■ One share, one vote
■ Shareholders' rights of co-administration and supervision
at the Annual Shareholders' Meeting
Shareholders' rights
For more information on women in leadership positions in the BASF Group worldwide, see page 23
For more information on the inclusion of diversity, including promotion of women, see the chapter on
Employees in the Management's Report on page 112
The November 2015 Employee Participation Agreement relevant to the composition of the
Supervisory Board is available at basf.com/en/corporate governance
BASF views the further development and promotion of women as a
global duty independent of individual Group companies. We set
ourselves ambitious global goals for this and made further progress
in 2018. BASF will continue working on expanding the percentage
of women in its leadership team. The company is carrying out, and
constantly enhancing, worldwide measures to this effect.
6 Overviews
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3 Corporate Governance
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BASF Report 2018
-
ers to vote according to their instructions. Individual instructions are
only forwarded to the company on the morning of the day of the
Annual Shareholders' Meeting. Voting rights can be exercised
according to shareholders' instructions by company-appointed
proxies until the end of the agenda discussion during the Annual
Shareholders' Meeting. There are neither voting caps to limit the
number of votes a shareholder may cast nor special voting rights.
BASF has fully implemented the principle of "one share, one vote."
The Supervisory Board strives to achieve a reasonable level of diver-
sity with respect to character, gender, international representation,
professional background, specialist knowledge and experience as
well as age distribution, and takes the following composition criteria
into account:
6 Overviews
Competence profile, diversity concept and objectives for the
composition of the Supervisory Board
For an individual overview of meeting attendance, see basf.com/supervisoryboard/meetings
With the exception of one Supervisory Board meeting, one Audit
Committee meeting and one Personnel Committee meeting, at
each of which one member was absent, all respective members
attended all meetings of the Supervisory Board and its committees.
For more information on the Supervisory Board's activities and resolutions in the 2018 business year,
see the Report of the Supervisory Board from page 160 onward
- The Strategy Committee met once.
We firmly believe that for corporate responsibility to be a success,
there must be an active culture of living these guidelines within the
company. Thanks to the early introduction of our compliance stan-
dards, which were consolidated in our global Code of Conduct in
2013, these are firmly established and undisputed. We expect all
employees to act in line with these compliance principles. Managers
- The Nomination Committee met three times.
- The Audit Committee met five times.
■ Composition criteria: professional and personal
qualifications, diversity, and independence
- The Personnel Committee met three times.
-
In the 2018 business year, meetings were held as follows:
Meetings and meeting attendance
- Handles the further development of the company's strategy
Prepares resolutions of the Supervisory Board on the company's
major acquisitions and divestitures
Duties
Dr. Jürgen Hambrecht (chairman), Ralf-Gerd Bastian (until May 4,
2018), Dame Alison Carnwath DBE, Michael Diekmann, Waldemar
Helber (since May 4, 2018), Sinischa Horvat, Michael Vassiliadis
Members
· The Supervisory Board met five times.
One important concern of good corporate governance is to ensure
that seats on the responsible corporate bodies, the Board of Execu-
tive Directors and the Supervisory Board, are appropriately filled. On
December 21, 2017, the Supervisory Board therefore agreed on
objectives for the composition, the competence profile and the
diversity concept of the Supervisory Board in accordance with sec-
tion 5.4.1 of the German Corporate Governance Code and section
289f(2) no. 6 of the German Commercial Code (HGB). The guiding
principle for the composition of the Supervisory Board is to ensure
qualified supervision and guidance for the Board of Executive Direc-
tors of BASF SE. Candidates shall be proposed to the Annual
Shareholders' Meeting for election to the Supervisory Board who
can, based on their professional expertise and experience, integrity,
commitment, independence and character, successfully perform
the work of a supervisory board member at an international chemical
company.
Competence profile
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BASF Report 2018
es, corporate governance, communications and the media
Specialist knowledge and experience in sectors outside of the
chemical industry
At least one member with in-depth experience in human resourc-
-
-
- At least one member with in-depth experience in digitalization,
information technology, business models and start-ups
- Appropriate knowledge within the body as a whole of finance,
accounting, financial reporting, law and compliance as well as
one independent member with accounting and auditing expertise
("financial expert") within the meaning of section 100(5) of the
German Stock Corporation Act (AktG)
Members' collective knowledge of the chemical sector and the
related value chains
-
The following requirements and objectives are considered essential
to the composition of the Supervisory Board as a collective body:
- Leadership experience in managing companies, associations and
networks
Diversity concept
All shareholders entered in the share register are entitled to partici-
pate in the Annual Shareholders' Meetings, to have their say con-
cerning any item on the agenda and to request information about
company issues insofar as this is necessary to make an informed
judgment about the item on the agenda under discussion. Regis-
tered shareholders are also entitled to file motions pertaining to
proposals for resolutions made by the Board of Executive Directors
and Supervisory Board at the Annual Shareholders' Meeting and to
contest resolutions of the Meeting and have them evaluated for their
lawfulness in court.
Shareholders who hold at least €500,000 of the company's share
capital, a quota corresponding to 390,625 shares, are furthermore
entitled to request that additional items be added to the agenda of
the Annual Shareholders' Meeting.
Implementation of the German Corporate Governance Code
Compliance
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BASF's Code of Conduct
139
For more information, see Note 33 to the Consolidated Financial Statements on page 267
The total fee paid to KPMG and auditing firms of the KPMG
group by BASF SE and other BASF Group companies for non-audit
services, in addition to the auditing fee, was €1 million in 2018.
This represents around 4.7% of the fees for auditing the financial
statements.
The Annual Shareholders' Meeting of May 4, 2018, once again
elected KPMG AG Wirtschaftsprüfungsgesellschaft as the auditor of
the BASF Group Consolidated Financial Statements and Separate
Financial Statements of BASF SE for the 2018 business year, as well
as the corresponding management's reports. KPMG member firms
also audit the majority of companies included in the Consolidated
Financial Statements. KPMG has been the continuous auditor of
BASF SE since the 2006 Financial Statements. For this reason, a
public call to tender was issued in 2015 to all auditors for the audit
of the 2016 Consolidated and Separate Financial Statements, in line
with the E.U. Regulation 537/2014 of April 16, 2014. Based on the
results of the tendering process, the Audit Committee recom-
mended to the Supervisory Board that it once again propose KPMG
for election. After completing the tendering process, KPMG can
now be proposed for election at the Annual Shareholders' Meeting
as BASF's auditor without further tendering processes up to and
including the 2025 business year. Alexander Bock has been the
auditor responsible for the Consolidated Financial Statements since
auditing the 2017 Financial Statements. Since the 2017 Financial
Statements, the auditor responsible for the Separate Financial
Statements has been Dr. Stephanie Dietz.
Information on the auditor
For more information on securities transactions reported in 2018, see basf.com/en/directorsdealings
In 2018, a total of 28 purchases and one sale by members of the
Board of Executive Directors and the Supervisory Board and mem-
bers of their families subject to disclosure were reported as directors'
dealings, involving between 20 and 15,000 BASF shares or BASF
ADRs. The price per share was between €65.40 and €96.17. The
volume of the individual trades was between €1,709.07 and
€981,000.00. The disclosed share transactions are published on
BASF SE's website.
As legally stipulated by Article 19(1) MAR, all members of the Board
of Executive Directors and the Supervisory Board as well as certain
members of their families are required to disclose the purchase or
sale of financial instruments of BASF SE (e.g., shares, bonds,
options, forward contracts, swaps) to the Federal Financial Supervi-
sory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) and
to the company if transactions within the calendar year exceed the
threshold of €5,000.
BASF Report 2018
Our Group-wide Compliance Program aims to ensure adher-
ence to legal regulations and the company's internal guide-
lines. Our employee Code of Conduct firmly embeds these
mandatory standards into day-to-day business. Members of
the Board of Executive Directors are also expressly obligated
to follow these principles.
Compliance Program and Code of Conduct
■ Integrated into corporate values
ducted at division, regional and country level. The regular compli- Compliance culture at BASF
ance audits performed by the Corporate Audit department are
another source for the systematic identification of risks. These risks
are documented in each risk or audit report. The same applies to
specific risk minimization measures as well as the time frame for
their implementation.
Information Protection
and Insider Trading Laws
Corruption
Conflicts of Interest
Money Laundering
Antitrust Legislation
Imports and Exports
Protection of Data Privacy
Protection of Environment, Health
and Safety
Code of Conduct
stipulates how these
topics are handled
BASF's
Human Rights, Labor
and Social Standards
Gifts and Entertainment
Protection of Company Property and
Property of Business Partners
1 Excluding the assets and businesses acquired from Bayer
Our efforts are principally aimed at preventing violations from the
outset. We perform systematic risk assessments to identify the risk
of compliance violations, including corruption risks. These are con-
Abiding by compliance standards is the foundation of responsible
leadership. This has also been embedded in our values. We are
convinced that compliance with these standards will not only pre-
vent the disadvantages associated with violations, such as penalties
and fines; we also view compliance as the right path toward secur-
ing our company's long-term success.
Based on international standards, BASF's Compliance Program
combines important laws and company-internal policies - often
exceeding legal requirements - with external voluntary commitments
to create a framework that regulates how all BASF employees inter-
act with business partners, officials, colleagues and society. At the
core of our Compliance Program is the global, standardized Code of
Conduct received by every employee. All employees and managers
are obligated to adhere to its guidelines, which describe our princi-
ples for proper conduct and cover topics ranging from corruption
and antitrust laws to human rights, labor and social standards,
conflicts of interest and trade control, and protection of data privacy.
■ Regular compliance training for employees
Share dealings of the Board of Executive Directors and
Supervisory Board (obligatory reportable and publishable
directors' dealings under Article 19(1) of the E.U. Market
Abuse Regulation 596/2014 (MAR))
No member of the Board of Executive Directors or the Supervisory
Board owns shares in BASF SE and related options or other deriva-
tives that account for 1% or more of the share capital. Furthermore,
the total volume of BASF SE shares and related financial instruments
held by members of the Board of Executive Directors and the
Supervisory Board accounts for less than 1% of the shares issued
by the company.
Share ownership by members of the Board of Executive
Directors and the Supervisory Board
BASF SE has taken out liability insurance that covers the activities of
members of the Board of Executive Directors and the Supervisory
Board (directors' and officers' liability insurance). This policy pro-
vides for the level of deductibles for the Board of Executive Directors
as prescribed by section 93(2) sentence 3 AktG and for the level of
deductibles for the Supervisory Board as recommended in section
3.8(3) of the German Corporate Governance Code (10% of damages
up to one-and-a-half times the fixed annual compensation).
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
Corporate Governance Report
2 Management's Report
1 To Our Shareholders
About This Report
137
BASF Report 2018
The appointment and dismissal of members of the Board of Execu-
tive Directors is legally governed by the regulations in Article 39 of
the SE Council Regulation, section 16 of the SE Implementation Act
and sections 84 and 85 AktG as well as Article 7 of the Statutes of
BASF SE. Accordingly, the Supervisory Board determines the num-
ber of members of the Board of Executive Directors (at least two),
appoints the members of the Board of Executive Directors, and can
nominate a chairperson, as well as one or more vice chairpersons.
The members of the Board of Executive Directors are appointed
for a maximum of five years. At BASF, Board members are
As of December 31, 2018, the subscribed capital of BASF SE was
€1,175,652,728.32 divided into 918,478,694 registered shares with
no par value. Each share entitles the holder to one vote at the Annu-
al Shareholders' Meeting. Restrictions on the right to vote or transfer
shares do not exist. The same rights and duties apply to all shares.
According to the Statutes, shareholders are not entitled to receive
share certificates. There are neither different classes of shares nor
shares with preferential voting rights (golden shares).
Disclosures according to section 315a(1) of the German
Commercial Code (HGB) and explanatory report of the
Board of Executive Directors according to section 176(1)
sentence 1 of the German Stock Corporation Act (AktG)
For more information on the Declaration of Conformity 2018, the implementation of the Code's
suggestions and the German Corporate Governance Code, see basf.com/en/corporate governance
The joint Declaration of Conformity 2018 by the Board of Executive Directors and Supervisory Board
of BASF SE is rendered on page 166
Code. We have not implemented the suggestion to enable share-
holders to follow the proceedings of the entire Annual Shareholders'
Meeting online. The Annual Shareholders' Meeting is publicly acces-
sible via online broadcast until the end of the speech by the Chair-
man of the Board of Executive Directors. The subsequent discussion
of items on the agenda is not accessible online in order to preserve
the character of the Annual Shareholders' Meeting as a meeting
attended by our shareholders on-site.
BASF SE follows all recommendations of the German Corporate
Governance Code in its most recently revised version of February
2017. In the same manner, BASF has followed nearly all of the
nonobligatory suggestions of the German Corporate Governance
BASF advocates responsible corporate governance that focuses on
sustainably increasing the value of the company.
■ BASF SE follows all recommendations of German
Corporate Governance Code
6 Overviews
Strategy Committee
initially often only appointed for a term of three years. Reappoint-
ments are permissible. The Supervisory Board can dismiss a mem-
ber of the Board of Executive Directors if there is serious cause to do
so. Serious cause includes, in particular, a gross breach of the duties
pertaining to the Board of Executive Directors and a vote of no
confidence at the Annual Shareholders' Meeting. The Supervisory
Board decides on appointments and dismissals according to its
own best judgment.
Pursuant to Article 12(6) of the Statutes of BASF SE, the Super-
visory Board is authorized to resolve on amendments to the Statutes
that merely concern their wording. This applies in particular to the
adjustment of the share capital and the number of shares after the
redemption of repurchased BASF shares and after a new issue of
shares from authorized capital.
Directors' and officers' liability insurance
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Corporate Governance Report
2 Management's Report
1 To Our Shareholders
About This Report
138
BASF Report 2018
The remaining specifications stipulated in section 315a(1) HGB refer
to situations that are not applicable to BASF SE.
For more information on bonds issued by BASF SE, see basf.com/bonds
In the event of a change of control, members of the Board of Execu-
tive Directors shall, under certain additional conditions, receive
compensation (details of which are listed in the Compensation
Report on page 157). A change of control is assumed when a share-
holder informs BASF of a shareholding of at least 25% or the
increase of such a holding. In addition, employees of BASF SE and
its subsidiaries who are classed as senior executives will receive a
severance payment if their contract of employment is terminated by
BASF within 18 months of a change of control event, provided the
employee has not given cause for the termination. The employee
whose service contract has been terminated in such a case will
receive a maximum severance payment of 1.5 times the annual
salary (fixed component) depending on the number of months that
have passed since the change of control event.
Bonds issued by BASF SE grant the bearer the right to request
early repayment of the bonds at nominal value if, after the date of
issue of the bond, one person - or several persons acting together
- hold or acquire a volume of BASF SE shares that corresponds to
more than 50% of the voting rights (change of control), and one of
the rating agencies named in the bond's terms and conditions with-
draws its rating of BASF SE or the bond, or reduces it to a nonin-
vestment grade rating within 120 days of the change of control
event.
excluded. The Board of Executive Directors is furthermore autho-
rized to retire the shares bought back and to reduce the share cap-
ital by the proportion of the share capital accounted for by the retired
shares.
At the Annual Shareholders' Meeting on May 12, 2017, the Board of
Executive Directors was authorized to purchase up to 10% of the
shares in issue at the time of the resolution (10% of the company's
share capital) until May 11, 2022. At the discretion of the Board of
Executive Directors, the purchase can take place on the stock
exchange or by way of a public purchase offer directed to all share-
holders. The Board of Executive Directors is authorized to sell the
repurchased company shares (a) through a stock exchange,
(b) through a public offer directed to all shareholders and - with the
approval of the Supervisory Board - to third parties, (c) for a cash
payment that is not significantly lower than the stock exchange price
at the time of sale and (d) for contributions in kind, particularly in
connection with the acquisition of companies, parts of companies
or shares in companies or in connection with mergers. In the cases
specified under (c) and (d), the shareholders' subscription right is
By way of a resolution of the Annual Shareholders' Meeting on
May 12, 2017, the share capital was increased conditionally by up
to €117,565,184 by issuing up to 91,847,800 new shares. The
contingent capital increase serves to grant shares to the holders of
convertible bonds or warrants attached to bonds with warrants of
BASF SE or a subsidiary, which the Board of Executive Directors is
authorized to issue up to May 11, 2022, by way of a resolution of
the Annual Shareholders' Meeting on May 12, 2017. A right to
subscribe to the bonds shall be granted to shareholders. The Board
of Executive Directors is authorized to exclude the subscription
right in certain exceptional cases that are defined in Article 5(9) of
the BASF SE Statutes.
ital in certain exceptional cases that are defined in Article 5(8) of the
BASF SE Statutes. This applies in particular if, for capital increases
in return for cash contributions, the issue price of the new shares is
not substantially lower than the stock market price of BASF shares
and the total number of shares issued under this authorization does
not exceed 10% of the shares currently in issue or, in eligible individ-
ual cases, to acquire companies or shares in companies in exchange
for surrendering BASF shares.
Until May 1, 2019, the Board of Executive Directors of BASF SE is
authorized by a resolution passed at the Annual Shareholders'
Meeting of May 2, 2014, to increase subscribed capital - with the
approval of the Supervisory Board - by a total of €500 million
through the issue of new shares against cash or contributions in
kind (authorized capital). A right to subscribe to the new shares shall
be granted to shareholders. This can also be achieved by a credit
institution acquiring the new shares with the obligation to offer these
to shareholders (indirect subscription right). The Board of Executive
Directors is authorized to exclude the statutory subscription right of
shareholders to a maximum amount of a total of 20% of share cap-
According to Article 59(1) of the SE Council Regulation, amend-
ments to the Statutes of BASF SE require a resolution of the Annual
Shareholders' Meeting adopted with at least a two-thirds majority of
the votes cast, provided that the legal provisions applicable to Ger-
man stock corporations under the German Stock Corporation Act
do not stipulate or allow for larger majority requirements. In the case
of amendments to the Statutes, section 179(2) of the German Stock
Corporation Act requires a majority of at least three-quarters of the
subscribed capital represented.
Prepares the recommendations made by the Supervisory Board
for the election of Supervisory Board members for the Annual
Shareholders' Meeting
Identifies suitable candidates for the Supervisory Board based on
objectives for the composition decided on by the Supervisory
Board
-
The fundamental elements of BASF SE's corporate governance
system are: its two-tier system, with a transparent and effective
separation of company management and supervision between
BASF's Board of Executive Directors and the Supervisory Board; the
equal representation of shareholders and employees on the Super-
supervision at the Annual Shareholders' Meeting.
Direction and management by the Board of Executive
Directors
■ Board of Executive Directors strictly separate from the
Supervisory Board
■ Responsible for company management
■ Sets corporate goals and strategic direction
The Board of Executive Directors is responsible for the management
of the company, and represents BASF SE in business undertakings
with third parties. BASF's Board of Executive Directors is strictly
separated from the Supervisory Board, which monitors the Board of
Executive Directors' activities and decides on its composition.
A member of the Board of Executive Directors cannot simultaneous-
ly be a member of the Supervisory Board. As the central duty of
company management, the Board of Executive Directors agrees on
the corporate goals and strategic direction of the BASF Group as
well as its individual business areas; determines the company's
internal organization; and decides on the composition of manage-
ment on the levels below the Board. It also manages and monitors
BASF Group business by planning and setting the corporate bud-
get, allocating resources and management capacities, monitoring
and making decisions on significant individual measures, and super-
vising operational management.
exercise rights of co-administration and supervision at
Annual Shareholders' Meeting
The Board's actions and decisions are geared toward the compa-
ny's best interests. It is committed to the goal of sustainably increas-
ing the company's value. Among the Board's responsibilities is the
preparation of the Consolidated and Separate Financial Statements
of BASF SE and reporting on the company's financial and nonfinan-
cial performance. Furthermore, it must ensure that the company's
activities comply with the applicable legislation and regulatory
requirements, as well as internal corporate directives. This includes
the establishment of appropriate systems for control, compliance
Decisions that are reserved for the Board as a whole by law, through
the Board of Executive Directors' Rules of Procedure or through
resolutions adopted by the Board, are made at regularly held Board
meetings called by the Chairman of the Board of Executive Direc-
tors. Board decisions are based on detailed information and analy-
ses provided by the business areas and specialist units, and, if
deemed necessary, by external consultants. Board decisions can
generally be made via a simple majority. In the case of a tied vote,
the casting vote is given by the Chairman of the Board. However, the
Chairman of the Board does not have the right to veto the decisions
of the Board of Executive Directors. Members of the Board of Exec-
utive Directors are authorized to make decisions individually in their
assigned areas of responsibility.
The Board can set up Board committees to consult and decide on
individual issues such as proposed material acquisitions or divesti-
tures; these must include at least three members of the Board of
Executive Directors. For the preparation of important decisions,
such as those on acquisitions, divestitures, investments and per-
sonnel, the Board has various commissions at the level below the
Board that carefully assess the planned measure and evaluate the
associated opportunities and risks, and based on this information,
report and make recommendations to the Board - independently of
the affected business area.
The Board of Executive Directors informs the Supervisory Board
regularly, without delay and comprehensively, of all issues important
to the company with regard to planning, business development, risk
situation, risk management and compliance. Furthermore, the
Board of Executive Directors coordinates the company's strategic
orientation with the Supervisory Board.
BASF Report 2018
132
About This Report
1 To Our Shareholders
and risk management as well as establishing a company-wide com-
pliance culture with undisputed standards.
Shareholders
appoints, monitors and advises Board of Executive
Directors
Supervisory Board
160
142
142
Declaration of Conformity Pursuant to
Section 161 AktG
166
144
Declaration of Corporate Governance
167
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Corporate Governance Report
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Corporate Governance visory Board; and the shareholders' rights of co-administration and
Report
Corporate governance refers to the entire system for manag-
ing and supervising a company. This includes its organiza-
tion, values, corporate principles and guidelines as well as
internal and external control and monitoring mechanisms.
Effective and transparent corporate governance ensures that
BASF is managed and supervised responsibly with a focus on
value creation. It fosters the confidence of our domestic and
international investors, the financial markets, our customers
and other business partners, employees, and the public in
BASF.
Board of Executive Directors
manages company and represents BASF SE in business
with third parties
2 Management's Report
3 Corporate Governance
Corporate Governance Report
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
6 Overviews
reports to Supervisory Board
The aim is to enable the Supervisory Board to ensure a reasonable
level of diversity with respect to education and professional experi-
ence, cultural background, international representation, gender and
age when appointing members of the Board of Executive Directors.
Independent of these individual criteria, the Supervisory Board is
convinced that ultimately, only a holistic approach can determine an
individual's suitability for appointment to the Board of Executive
Directors of BASF SE. The overall aim is to ensure that the Board of
Executive Directors as a whole has the following profile, which
serves as a diversity concept:
Many years of management experience in scientific, technical and
commercial fields
- International experience based on background and/or profession-
al experience
At least one female Board member
A balanced age distribution to ensure the continuity of the Board's
work and enable seamless succession planning
12 members
6 shareholder representatives elected by
the Annual Shareholders' Meeting and
6 employee representatives
Chairman
elected by the Supervisory Board
The number of Board members is based on the insights gained by
BASF as a company with an integrated leadership culture and is
determined by the needs arising from cooperation within the Board
of Executive Directors. In May 2018, this was reduced from eight to
seven members in the course of the changes to the composition of
the Board of Executive Directors. The standard age limit for mem-
bers of the Board of Executive Directors is 63.
The current composition of the Board of Executive Directors meets
the competence profile and the requirements of the diversity concept
in full.
BASF Report 2018
133
About This Report
1 To Our Shareholders
advises the Board of Executive Directors
140 Report of the Supervisory Board
monitors the Board of Executive Directors
Supervisory Board
The Statutes of BASF SE define certain transactions that require
the Board of Executive Directors to obtain the Supervisory Board's
approval prior to their conclusion. Such cases include the acquisi-
tion and disposal of enterprises and parts of enterprises, as well as
the issue of bonds or comparable financial instruments. However,
this is only necessary if the acquisition or disposal price or the
amount of the issue in an individual case exceeds 3% of the equity
reported in the last approved Consolidated Financial Statements of
the BASF Group.
For more information on risk management, see the Forecast from page 123 onward
The members of the Board of Executive Directors, including their areas of responsibility and
memberships on the supervisory bodies of other companies, are listed from page 142 onward.
Compensation of the Board of Executive Directors is described in detail in the Compensation Report
from page 146 onward.
Competence profile, diversity concept and succession
planning for the Board of Executive Directors
The Supervisory Board works hand in hand with the Board of
Executive Directors to ensure long-term succession planning for the
composition of the Board of Executive Directors. BASF aims to fill
most Board positions with candidates from within the company. It is
the task of the Board of Executive Directors to propose a sufficient
number of suitable candidates to the Supervisory Board.
BASF's long-term succession planning is guided by the corporate
strategy. It is based on systematic management development char-
acterized by the following:
-
-
- Early identification of suitable candidates of different professional
backgrounds, nationalities and genders
Systematic development of leaders through the successful
assumption of tasks with increasing responsibility, where possible
in different business areas, regions and functions
Desire to shape strategic and operational decisions, and proven
success in doing so, as well as leadership skills, especially under
challenging business conditions
Role model function in putting our corporate values into practice
Two-tier management system of BASF SE
Board of Executive Directors
7 members
appointed by the Supervisory Board
Chairman
appointed by the Supervisory Board
appoints the Board of Executive Directors
One key element in the prevention of compliance violations is com-
pulsory training and workshops held as classroom or online courses.
All employees are required within a prescribed time frame to take
part in basic compliance training, refresher courses and special
tutorials dealing with, for example, antitrust legislation, taxes or
trade control regulations. Course materials and formats are con-
stantly updated, taking into account the specific risks of individual
target groups and business areas. In 2018, for instance, we again
asked most of our employees around the world to take part in online
refresher training as part of the compliance program. In total, more
than 96,000 participants worldwide received around 84,000 hours
of compliance training in 2018.1
146
Board of Executive Directors
Supervisory Board
-
Duties
Dame Alison Carnwath DBE (chairman), Ralf-Gerd Bastian
(until May 4, 2018), Tatjana Diether (since May 4, 2018),
Franz Fehrenbach, Michael Vassiliadis
Members
Audit Committee
- Prepares the resolutions made by the Supervisory Board with
regard to the system and amount of compensation paid to mem-
bers of the Board of Executive Directors
When making recommendations for appointments to the Board of
Executive Directors, considers professional qualifications, interna-
tional experience and leadership skills as well as long-term
succession planning, diversity, and especially the appropriate
consideration of women
Prepares the negotiations and resolutions of the Supervisory
Board for the approval of the Financial Statements, the Consoli-
dated Financial Statements and the Management's Reports
including the Nonfinancial Statements and discusses the quarter-
ly statements and the half-year financial report with the Board of
Executive Directors prior to their publication
- Prepares the appointment of members to the Board of Executive
Directors by the Supervisory Board as well as the employment
contracts to be entered into with members of the Board of Execu-
tive Directors
Dr. Jürgen Hambrecht (chairman), Michael Diekmann, Sinischa
Horvat, Michael Vassiliadis
Members
Personnel Committee
The compensation of the Supervisory Board is presented in the Compensation Report from
page 158 onward
A list of the members of the Supervisory Board of BASF SE indicating which members are
shareholder or employee representatives and their appointments to the supervisory bodies of
other companies can be found from page 144 onward
For more information on the Statutes of BASF SE and the Employee Participation Agreement,
see basf.com/statutes and basf.com/en/corporate governance
tee.
Duties
Deals with monitoring the financial reporting process, the annual
audit, the effectiveness of the internal control system, the risk
BASF Report 2018
134
Duties
Dr. Jürgen Hambrecht (chairman), Dame Alison Carnwath DBE,
Prof. Dr. François Diederich, Michael Diekmann, Franz Fehrenbach,
Anke Schäferkordt
Members
Nomination Committee
Dame Alison Carnwath DBE and Franz Fehrenbach are members
with special knowledge of, and experience in, applying accounting
and reporting standards and internal control methods pursuant to
the German Corporate Governance Code.
Code of Conduct
Financial experts
Is authorized to request any information that it deems necessary
from the auditor or Board of Executive Directors; can also view all
of BASF's business documents and examine these and all other
assets belonging to BASF. The Audit Committee can also engage
experts such as auditors or lawyers to carry out these inspections
Is responsible for business relations with the company's external
auditor: prepares the Supervisory Board's proposal to the Annual
Shareholders' Meeting regarding the selection of an auditor, mon-
itors the auditor's independence, defines the focus areas of the
audit together with the auditor, negotiates auditing fees and
establishes the conditions for the provision of the auditor's non-
audit services; the chairman of the Audit Committee regularly
discusses this with the auditor outside of meetings as well
management system, and the internal auditing system as well as
compliance issues
-
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Corporate Governance Report
2 Management's Report
1 To Our Shareholders
About This Report
BASF SE's Supervisory Board has established a total of four Super-
visory Board Committees: the Personnel Committee, the Audit
Committee, the Nomination Committee and the Strategy Commit-
The Board of Executive Directors regularly informs the Supervisory
Board about matters such as the course of business and expected
developments, the financial position and results of operations, cor-
porate planning, the implementation of the corporate strategy,
business opportunities and risks, and risk and compliance manage-
ment. The Supervisory Board has embedded the main reporting
requirements in an information policy. The Chairman of the Supervi-
sory Board is in regular contact with the Board of Executive Direc-
tors, especially with its chairman, outside of meetings as well.
passed by a simple majority vote of the participating members. In
the event of a tie, the vote of the Chairman of the Supervisory Board,
who must always be a shareholder representative, shall be the
casting vote. This resolution process is also applicable for the
appointment and dismissal of members of the Board of Executive
Directors by the Supervisory Board. Resolutions can, as needed,
also be made in writing or through other means of communication
outside of the meetings, as long as no member objects to this form
of passing a resolution.
The meetings of the Supervisory Board and its committees are
called by their chairpersons and, independently, at the request of
one of their members or the Board of Executive Directors. The
shareholder and employee representatives of the Supervisory Board
prepare for Supervisory Board meetings in separate preliminary
discussions in each case. Resolutions of the Supervisory Board are
Management and Supervisory Boards
Compliance
Corporate Governance Report
Governance
Corporate
3
Chapter 3 pages 131-167
132 Compensation Report
140
BASF Report 2018
conducted on compliance
For more information on the BASF Code of Conduct, see basf.com/code_of_conduct
participants in compliance training¹
More than 96,000
forms core of our Compliance Program
The Supervisory Board of BASF SE comprises 12 members. Six
members are each elected for a five-year term by the shareholders
at the Annual Shareholders' Meeting. The remaining six members
are elected by the BASF Europa Betriebsrat (BASF Works Council
Europe), the European employee representation body of the BASF
Group.
In addition to the SE Council Regulation, the relevant legal basis for
the size and composition of the Supervisory Board is provided by
the Statutes of BASF SE and the Agreement Concerning the
Involvement of Employees in BASF SE (Employee Participation
Agreement), which also includes the regulations applicable to BASF
for implementing the gender quota for the Supervisory Board man-
dated by law as of January 1, 2016. The German Codetermination
Act does not apply to BASF as a European stock corporation
(Societas Europaea, SE).
The Supervisory Board appoints the members of the Board of
Executive Directors and supervises and advises the Board of Execu-
tive Directors on management issues. As members of the Supervi-
sory Board cannot simultaneously be on the Board of Executive
Directors, a high level of autonomy is already structurally ensured
with regard to the supervision of the Board of Executive Directors.
■ Four Supervisory Board committees
4 Consolidated Financial Statements
■ Supervisory Board appoints, monitors and advises Board
of Executive Directors
Supervision of company management by the
Supervisory Board
5 Supplementary Information Oil and Gas Business 6 Overviews
84 internal audits
Wintershall Holding GmbH (Chairman of the Supervisory Board)
Wintershall AG (Chairman of the Supervisory Board)
Comparable German and non-German supervisory bodies:
Nord Stream AG (member of the Shareholders' Committee)
Internal memberships within the meaning of section 100(2) of
the German Stock Corporation Act:
First appointed: 2008, term expires: 2023
Dr. Hans-Ulrich Engel
Vice Chairman of the Board of Executive Directors
Degree: Law, 59 years old, 31 years at BASF
First appointed: 2006, term expires: 2023
Chairman of the Board of Executive Directors
Degree: Chemistry, 57 years old, 31 years at BASF
Responsibilities: Legal, Taxes, Insurance & Intellectual Property;
Corporate Development; Corporate Communications & Govern-
ment Relations; Senior Executive Human Resources; Investor Rela-
tions; Compliance; BASF 4.0; Corporate Technology & Operational
Excellence; Digitalization in Research & Development; Innovation
Management
Dr. Martin Brudermüller
There were seven members on the Board of Executive
Directors of BASF SE as of December 31, 2018
Board of Executive Directors
Board of Executive Directors
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Responsibilities: Finance; Oil & Gas; Procurement; Supply Chain
Operations & Information Services; Corporate Controlling; Corpo-
rate Audit
Management and
Supervisory Boards
Comparable German and non-German supervisory bodies:
Solenis UK International Ltd. (member of the Board of Directors
since February 1, 2019)
2 Management's Report
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compliance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
place a key role here - they serve as an example of and communi-
cate our values and culture both internally and externally.
Monitoring adherence to our compliance principles
BASF's Chief Compliance Officer (CCO) reports directly to the
Chairman of the Board of Executive Directors and manages the
further development of our global compliance organization and our
Compliance Management System. He is supported in this task by
more than 100 compliance officers worldwide in the regions and
countries as well as in the divisions. Material compliance topics are
regularly discussed in the compliance committees established at
global and regional level. The CCO reports to the Supervisory
Board's Audit Committee in at least one of its meetings each year on
the status of the Compliance Program as well as any major develop-
ments. In the event of significant incidents, the Audit Committee is
immediately informed by the Board of Executive Directors.
-
We particularly encourage our employees to actively and promptly
seek guidance if in doubt. They can consult their managers, dedi-
cated specialist departments, such as the Legal department, and
company compliance officers. We have also set up more than 50
external hotlines worldwide that our employees can use - including
anonymously to report potential violations of laws or company
guidelines. All hotlines are also open to the public. Each concern is
documented according to specific criteria, properly investigated in
line with standard internal procedures and answered as quickly as
possible. The outcome of the investigation as well as any measures
taken are documented accordingly and included in internal reports.
In 2018, 397 calls and emails were received by our external hotlines
(2017: 290). These concerns involved questions ranging from per-
sonnel management and handling of company property to informa-
tion on the behavior of business partners or human rights issues,
such as on labor and social standards. We launched case-specific
investigations, in accordance with applicable law and internal regu-
lations, into all cases of suspected misconduct that we became
aware of. These include, for example, improved control mecha-
nisms, additional informational and training measures, clarification
and expansion of the relevant internal regulations, as well as disci-
plinary measures as appropriate. Most of the justified cases related
to personal misconduct in connection with the protection of com-
pany property, inappropriate handling of conflicts of interests or gifts
and invitations. In such isolated cases, we took disciplinary mea-
sures up to and including dismissal in accordance with uniform
internal standards and also pursued claims for damages where
there were sufficient prospects of success.
BASF's Corporate Audit department monitors adherence to compli-
ance principles, covering all areas in which compliance violations
could occur. They check that employees uphold regulations and
make sure that the established processes, procedures and monitor-
ing tools are appropriate and sufficient to minimize potential risk or
preclude violations in the first place. In 2018, 84 Group-wide audits
of this kind were performed (2017: 75). Our compliance manage-
ment system itself is also regularly audited by the internal Corporate
Audit department, most recently in November 2018. Overall, the
audits confirmed the effectiveness of the compliance management
system. No irregularities were shown in the audit's focus areas of
antitrust law, trade controls and embargo.
We monitor our business partners in sales for potential compliance
risks based on the global Guideline on Business Partner Due Dili-
gence using a checklist, a questionnaire and an internet-based
analysis. The results are then documented. If a business partner is
not prepared to answer the questionnaire, we do not enter into a
business relationship with them. A dedicated global Supplier Code
of Conduct applies to our suppliers, which covers compliance with
environmental, social and corporate governance standards, among
other requirements. As part of our trade control processes, we also
check whether persons, companies or organizations appear on
sanction lists due to suspicious or illegal activities, and whether
there are business processes with business partners from or in
countries under embargo.
We support the United Nations' Guiding Principles on Business and
Human Rights and are constantly working to enhance our internal
guidelines and processes in keeping with these principles. For
example, there is an internal guideline to respect international labor
and social standards that is applicable throughout the Group.
Outside of our company, too, we support respect for human rights
and the fight against corruption. We are a founding member of the
United Nations Global Compact. As a member of Transparency
International Deutschland and the Partnering Against Corruption
Initiative (PACI) of the World Economic Forum, we assist in the
implementation of these organizations' objectives.
For more information on the Supplier Code of Conduct and supplier assessments,
see page 90 onward
For more information on human rights and labor and social standards, see
basf.com/human_rights
BASF Report 2018
141
About This Report
1 To Our Shareholders
Saori Dubourg
Degree: Chemistry, 48 years old, 20 years at BASF
Responsibilities: Care Chemicals; Dispersions & Pigments;
Nutrition & Health; Performance Chemicals; Advanced Materials &
Systems Research; BASF New Business; Region South America
First appointed: 2017, term expires: 2020
Degree: Business Administration, 47 years old, 22 years at BASF
Responsibilities: Agricultural Solutions; Construction Chemicals;
Bioscience Research; Region Europe
Sanjeev Gandhi
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Supervisory Board
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Roland Strasser, Riedstadt, Germany*2
144
Regional Manager of the Rhineland-Palatinate/Saarland branch
of IG BCE
AbbVie Komplementär GmbH4 (member)
V & B Fliesen GmbH4 (member since September 1, 2018)
The following members left the Supervisory Board on
May 4, 2018
Ralf-Gerd Bastian, Neuhofen, Germany*2
Member of the Works Council of BASF SE, Ludwigshafen Site
(until March 16, 2018)
Member of the Supervisory Board since: May 6, 2003
Michael Vassiliadis, Hannover, Germany*2
Chairman of the Mining, Chemical and Energy Industries Union
Member of the Supervisory Board since: August 1, 2004
Supervisory board memberships:
Member of the Supervisory Board since: May 4, 2018
Supervisory board memberships:
K+S Aktiengesellschaft³ (vice chairman until May 15, 2018)
Steag GmbH (member)
BASF Report 2018
3 Publicly listed
BP plc³ (nonexecutive director since May 21, 2018)
PACCAR Inc.³ (independent member of the Board of Directors)
Coller Capital Ltd.4 (nonexecutive member of the Board of Directors)
Broadwell Capital Limited 4 (nonexecutive member of the Board of
Directors)
Prof. Dr. François Diederich, Dietikon, Switzerland¹
Member of the Supervisory Board since: April 29, 2016
Anke Schäferkordt, Cologne, Germany*1
Member of the Executive Board of Bertelsmann SE & Co. KGaA
(until December 31, 2018)
Chief Executive Officer of Mediengruppe RTL Deutschland GmbH
(until December 31, 2018)
Member of the Supervisory Board since: December 17, 2010
Comparable German and non-German supervisory bodies:
Professor at the Swiss Federal Institute of Technology, Zurich, Métropole Télévision S.A.³ (member of the Supervisory Board until
Switzerland
4 Not publicly listed
Member of the Supervisory Board since: May 19, 1998
Member of the Works Council of BASF SE, Ludwigshafen Site, and
of the BASF Works Council Europe
Member of the Supervisory Board since: May 4, 2018
December 31, 2018)
Denise Schellemans, Brecht, Belgium*2
Full-time trade union delegate
Member of the Supervisory Board since: January 14, 2008
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 136 for the criteria used to determine independence)
1 Shareholder representative
2 Employee representative
Tatjana Diether, Limburgerhof, Germany*2
RAG AG³ (vice chairman)
RAG DSK AG4 (vice chairman)
Henkel AG & Co. KGaA³ (member since April 9, 2018)
This report meets the disclosure requirements of the German Com-
mercial Code, supplemented by the additional requirements based
on the German Act on the Disclosure of Management Board Remu-
neration (VorstOG) as well as the German Act on the Appropriate-
ness of Management Board Remuneration (VorstAG), and is aligned
with the recommendations of the German Corporate Governance
Code (GCGC) in the version dated February 7, 2017.
Changes to the compensation system as of January 1, 2018
By way of a resolution of the Annual Shareholders' Meeting of
May 4, 2018, the further development of the compensation system
for the members of the Board of Executive Directors resolved by the
Supervisory Board of BASF SE was approved with effect as of
January 1, 2018.
One significant change relates to the variable compensation, which
was adapted in accordance with a recommendation of the German
Corporate Governance Code (GCGC) in the version dated Febru-
ary 7, 2017. The further developed compensation system has been
a part of the contracts of the members of the Board of Executive
Directors since January 1, 2018. The individual changes were as
follows:
-
-
From 2018 onward, the previously applicable annual variable
compensation (bonus), which was based on the current and two
preceding years, was replaced by a performance bonus with a
multiple-year, forward-looking assessment basis. The payment of
one part of the performance bonus only occurs after the end of
the four-year performance period.
- Until the end of 2017, the key performance indicator for the com-
pany's success and variable compensation was the return on
assets (ROA). From 2018 onward, it is replaced by the return on
capital employed (ROCE), which serves as a consistent key per-
formance indicator for determining variable compensation for all
other employee groups as well.
This report outlines the main principles of the compensation
for the Board of Executive Directors and discloses the
amount and structure of the compensation of each Board
member. Furthermore, it provides information on end-of-
service undertakings with respect to members of the Board
of Executive Directors, as well as information on the com-
pensation of Supervisory Board members.
A clawback clause was introduced for the variable compensation
and applies in the event of substantial breaches of duty by a
Board member.
- An option was introduced in the Board Performance Pension
enabling members of the Board of Executive Directors to choose
between payment of their pension entitlements in the form of a
lifelong pension or a lump sum (lump-sum option).
Principles and structure
The compensation of the Board of Executive Directors is determined
by the company's size, complexity and financial position, as well as
the performance of the Board of Executive Directors as a whole. It is
designed to promote sustainable corporate development and
ensure a pronounced variability in relation to the performance of the
Board of Executive Directors and the BASF Group's success. The
external and internal appropriateness of the Board's compensation
is reviewed by an independent external auditor on a regular basis.
Globally operating companies based in Europe serve as an external
reference. For internal comparison, compensation, especially for
senior executives, is considered in total as well as over time.
Based on a proposal by the Personnel Committee, the Supervisory
Board determines the structure and amount of compensation of
members of the Board of Executive Directors.
In 2016, the Supervisory Board engaged an independent external
compensation consultant with an appropriateness review. The
results of the appropriateness review revealed that the compensa-
tion granted to BASF's Board of Executive Directors at that time was
below that of the peer group. On this basis, the Supervisory Board
resolved in December 2016 to increase the compensation of the
Board of Executive Directors with effect as of January 1, 2017. The
amount of the increase was determined to position the compensa-
tion granted to BASF's Board of Executive Directors competitively
within the peer group. The introduction of the new compensation
system for the Board of Executive Directors as of January 1, 2018,
had no effect on target compensation or maximum compensation.
For more information on the Supervisory Board and its committees, see page 144 and
from page 162 onward
BASF Report 2018
146
About This Report
· The pensionable age for Board members (Board Performance
Pension) was raised from 60 to 63 years for new members
appointed to the Board of Executive Directors.
Compensation Report
6 Overviews
5 Supplementary Information Oil and Gas Business
Francesco Grioli, Ronnenberg, Germany*2
Member of the Executive Committee of the Mining, Chemical
and Energy Industries Union
Member of the Supervisory Board since: May 2, 2014
Supervisory board memberships:
Gerresheimer AG³ (vice chairman)
Villeroy & Boch AG³ (member until March 23, 2018)
Dr. Markus Kamieth
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 136 for the criteria used to determine independence)
1 Shareholder representative
2 Employee representative
3 Publicly listed
4 Not publicly listed
BASF Report 2018
145
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements
Land Securities Group plc³ (nonexecutive chairman of the Board of
Directors until July 12, 2018)
Siemens AG³ (member)
Fresenius SE & Co. KGaA³ (vice chairman)
Fresenius Management SE4 (member)
Dr. Markus Kamieth
Care Chemicals; Nutrition & Health; Performance Chemicals;
Advanced Materials & Systems Research; Region South America
Sanjeev Gandhi
Construction Chemicals;
Bioscience
Intermediates; Petrochemicals; Greater China & Functions Asia
Pacific; South & East Asia, ASEAN & Australia/New Zealand
Michael Heinz
Engineering & Technical Expertise; Environmental Protection,
Health & Safety; European Site & Verbund Management; Human
Resources
Engineering & Maintenance; Environmental Protection, Health &
Safety; European Site & Verbund Management; Human Resources
Dr. Kurt Bock
Wayne T. Smith
Catalysts; Coatings; Performance Materials; Market & Business
Development, Site & Verbund Management North America;
Regional Functions & Country Platforms North America
Dr. Markus Kamieth
Care Chemicals; Dispersions & Pigments; Nutrition & Health;
Performance Chemicals; Advanced Materials & Systems Research;
BASF New Business; Region South America
Dr. Martin Brudermüller
Petrochemicals; Monomers; Intermediates; Process Research &
Chemical Engineering; Innovation Management; Digitalization in
Research & Development; Corporate Technology & Operational
Excellence; BASF New Business
Saori Dubourg
Division of responsibilities as of January 1, 2019
Legal, Taxes, Insurance & Intellectual Property; Corporate Develop-
ment; Corporate Communications & Government Relations; Senior
Executive Human Resources; Investor Relations; Compliance
Michael Heinz
Dispersions & Pigments; Greater China & Functions Asia Pacific; Agricultural Solutions;
South & East Asia, ASEAN & Australia/New Zealand
Research; Region Europe
Saori Dubourg
Wayne T. Smith
Degrees: Chemical Engineering, Business Administration, 58 years
old, 15 years at BASF
Responsibilities: Catalysts; Coatings; Performance Materials;
Market & Business Development, Site & Verbund Management
North America; Regional Functions & Country Platforms North
America; Process Research & Chemical Engineering
First appointed: 2012, term expires: 2020
The following member left the Board of Executive Directors
on May 4, 2018
Dr. Kurt Bock
Chairman of the Board of Executive Directors
Degree: Business Administration, 60 years old, 27 years at BASF
First appointed: 2003, term expires: 2018
Supervisory board membership until date of retirement
(excluding internal memberships):
Fresenius Management SE (member)
BASF Report 2018
142
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Board of Executive Directors
Division of responsibilities until May 4, 2018
The Chairman of the Board of Executive Directors Dr. Kurt Bock
retired from the Board of Executive Directors following the Annual
Shareholders' Meeting on May 4, 2018. The Supervisory Board
appointed Dr. Martin Brudermüller, previously Vice Chairman, as
Chairman of the Board of Executive Directors and Dr. Hans-Ulrich
Engel as Vice Chairman of the Board of Executive Directors as of
this date. In the course of these changes, the number of Board
members was reduced from eight to seven. Until May 4, 2018, the
areas of responsibility within the Board of Executive Directors were
allocated as follows:
Sanjeev Gandhi
Dr. Martin Brudermüller
1 To Our Shareholders
Legal, Taxes, Insurance & Intellectual Property; Corporate
Development; Corporate Communications & Government Rela-
tions; Senior Executive Human Resources; Investor Relations;
Innovation Management
Franz Fehrenbach, Stuttgart, Germany*1
Chairman of the Supervisory Board of Robert Bosch GmbH
Member of the Supervisory Board since: January 14, 2008
Supervisory board memberships:
Robert Bosch GmbH4 (chairman)
Stihl AG³ (vice chairman)
Linde AG³ (second deputy chairman)
Comparable German and non-German supervisory bodies:
Stihl Holding AG & Co. KG4 (member of the Advisory Board)
Linde plc (member of the Board of Directors since December 22,
2018)
Waldemar Helber, Otterbach, Germany*2
Zürich Versicherungs-Gesellschaft AG4 (independent, nonexecutive Deputy Chairman of the Works Council of BASF SE, Ludwigshafen
Site
Dr. Jürgen Hambrecht, Neustadt an der Weinstraße, Germany*1 member of the Administrative Council)
Chairman of the Supervisory Board of BASF SE
Former Chairman of the Board of Executive Directors of BASF SE
(until May 2011)
Member of the Supervisory Board since: May 2, 2014
Comparable German and non-German supervisory bodies:
Zurich Insurance Group AG³ (independent, nonexecutive member
of the Administrative Council)
Member of the Supervisory Board since: May 2, 2014
Fuchs Petrolub SE³ (chairman)
Trumpf GmbH & Co. KG4 (chairman)
Daimler AG³ (member)
Michael Diekmann, Munich, Germany¹
Vice Chairman of the Supervisory Board of BASF SE
Chairman of the Supervisory Board of Allianz SE
Member of the Supervisory Board since: May 6, 2003
Supervisory board memberships:
Allianz SE3 (chairman)
Supervisory board memberships:
Dame Alison Carnwath DBE, Exeter, England*1
Senior Advisor Evercore Partners
Member of the Supervisory Board since: May 12, 2017
Vice Chairman of the Supervisory Board of BASF SE
Chairman of the Works Council of BASF SE, Ludwigshafen Site;
Chairman of BASF's Joint Works Council and of the BASF Works
Council Europe
Wayne T. Smith
Monomers; Performance Materials; Process Research & Chemical
Engineering; Market & Business Development, Site & Verbund
Management North America; Regional Functions & Country Plat-
forms North America
Dr. Hans-Ulrich Engel
Finance; Oil & Gas; Procurement; Supply Chain Operations & Infor-
mation Services; Corporate Controlling; Corporate Audit
Dr. Hans-Ulrich Engel
Catalysts; Coatings; Oil & Gas; Finance; Procurement & Supply
Chain Services; Digitalization & Information Services; Corporate
Controlling; Corporate Audit
BASF Report 2018
143
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Supervisory Board
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Supervisory Board
In accordance with the Statutes, the Supervisory Board of
BASF SE comprises 12 members
The term of office of the Supervisory Board commenced following
the Annual Shareholders' Meeting on May 2, 2014, in which the
shareholder representatives on the Supervisory Board were elected.
It terminates upon conclusion of the Annual Shareholders' Meeting
that resolves on the discharge of members of the Supervisory Board
for the fourth complete business year after the term of office com-
menced; this is the Annual Shareholders' Meeting on May 3, 2019.
The Supervisory Board comprises the following members:
Sinischa Horvat, Limburgerhof, Germany*2
Construction Chemicals; Crop Protection; Bioscience Research; Compliance; Corporate Technology & Operational Excellence;
Region Europe
First appointed: 2017, term expires: 2020
2 Management's Report
4 Consolidated Financial Statements
+2 pp
Performance factor
0
0.5
1.0
1.5
Values between these figures are interpolated
Determination of the ROCE factor
Target ROCE
The ROCE of the particular financial year serves as the key perfor-
mance indicator for the success of the company when determining
the performance bonus. ROCE is the ratio of income from opera-
tions (EBIT) of the segments in relation to the average operating
assets of the segments, 1 plus the customer and supplier financing
not included there.
A ROCE factor is assigned to each relevant ROCE value. If the
ROCE is two percentage points or more below the target ROCE, the
ROCE factor will decline at a faster rate. The ROCE factor will
increase at a slower rate if the ROCE is two percentage points or
more above the target ROCE.
The ROCE factor is 1.0 if the ROCE achieved in the financial year is
one percentage point above the weighted cost of capital percentage
(based on the weighted average cost of capital, WACC, in accor-
dance with the Capital Asset Pricing Model) for that year, meaning
an appropriate premium on the cost of capital was earned. In calcu-
lating ROCE, adjustments are made for negative and positive special
items resulting from acquisitions and divestitures (e.g., integration
costs in connection with acquisitions and gains or losses from the
divestiture of businesses) when these exceed a corridor of plus or
minus 1% of the average cost of capital basis. An adjustment of the
ROCE (in the first 12 months after closing) therefore only occurs in
cases of exceptionally high special items resulting from acquisitions
and divestitures.
If the target ROCE is met and the target achievement is 100%, the
performance bonus is double the fixed salary (target amount).
1 Corresponds to the income from operations (EBIT) of the operating divisions and the operating assets of the divisions as described in the Invitation to the 2018 Annual Shareholders' Meeting
BASF Report 2018
149
About This Report
1 To Our Shareholders
For more information on operating assets, see Value-Based Management on page 29
2 Management's Report
-2 pp
The Supervisory Board sets a maximum amount for the performance
bonus (cap). The current total cap is €2,500,000 for an ordinary
member of the Board of Executive Directors (performance bonus,
part 1 and performance bonus, part 2). The maximum amount for
the chairman of the Board of Executive Directors is 2 times the
maximum value for an ordinary member, and 1.33 times this value
for the vice chairman.
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Determination of performance factors
An operational performance factor and a strategic performance
factor, each with a value between 0 and 1.5, are determined on the
basis of the target achievement ascertained by the Supervisory
Board. A target achievement rate of 100% equates to a value of 1.0
for the performance factor. The maximum performance factor of 1.5
applies for a target achievement rate of 125% and over; a target
achievement rate of 50% or less represents a performance factor
of 0.
Target achievement and performance factor
Target achievement
ROCE in %
≤ 50% 75% 100%
ROCE factor
ROCE
factor
1.2
1.0
0.8
Above-average
decrease
Below-average
increase
≥ 125%
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business 6 Overviews
Target agreement and target achievement in 2018
€1,600,000
1.04
3. Long-term, share price-based incentive program
(LTI program)
LTI program
-
-
-
- Absolute performance threshold: BASF share price gains at
least 30% compared with the base price for the LTI program
concerned
2
Relative performance threshold: BASF shares outperform the
MSCI World Chemicals Index and no share price loss com-
pared with the base price on the option grant date
Term: eight years
Exercise first possible; four years after the grant date (vesting
period)
- Maximum exercise gain (cap): five times the individual invest-
ment
Degree: Business Administration, 54 years old, 35 years at BASF
Responsibilities: Engineering & Maintenance; Environmental
Protection, Health & Safety; European Site & Verbund Manage-
ment; Human Resources
Michael Heinz
First appointed: 2014, term expires: 2023
Responsibilities: Intermediates; Monomers; Petrochemicals;
Greater China & Functions Asia Pacific; South & East Asia, ASEAN
& Australia/New Zealand
Degrees: Chemical Engineering, Business Administration, 52 years
old, 25 years at BASF
First appointed: 2011, term expires: 2024
Comparable German and non-German supervisory bodies:
BASF Antwerpen N.V. (Chairman of the Administrative Council)
0.8 +0.9
(✗
2
The performance bonus (gross) for 2018 was determined on the
basis of target achievement as ascertained by the Supervisory
Board and ROCE for the 2018 business year.
Operational performance factor (OPF 2018):
The comparison of operational targets (see page 122 of the BASF
Report 2017) with target achievement resulted in an operational
performance factor (OPF 2018) of 0.8:
- Targets for sales and improving operational excellence were met.
Investments did not fully reach the target values in 2018.
EBIT before special items and EBIT after cost of capital were
considerably below the target values. Including the discontinued
oil and gas business, EBIT before special items would have been
slightly below the target value.
Strategic performance factor (SPF 2018):
The strategic targets were almost reached in the first year, which
resulted in a strategic performance factor (SPF 2018) of 0.9:
-
-
The portfolio optimization and long-term investment targets were
exceeded.
Targets for digitalization and sustainability were met.
Volumes growth and sales of innovative products were consider-
ably below the target values.
ROCE factor 2018:
The BASF Group's ROCE, which is used to determine compensa-
tion, was 11.4% in 2018. The target ROCE for 2018 was 11%, with
the average cost of capital unchanged at 10%. Accordingly, the
ROCE factor for 2018 was 1.04.
Performance bonus (gross) for a full-year ordinary member of the Board of Executive Directors
Target amount
OPF 2018+ SPF 2018
2018 performance bonus
(2018-2021):
ROCE factor 2018:
2 Management's Report
1 To Our Shareholders
About This Report
148
The amount of the performance bonus is based on the
achievement of set operational targets and strategic medium-
term objectives, as well as the BASF Group's ROCE.
- 50% of the performance bonus calculated after the first year is
deferred for another three years and only paid out at the end of
the four-year performance period based on the achievement of
strategic targets.
- If the target ROCE is met and the target achievement is 100%,
the performance bonus is double the fixed salary (target
amount).
The annual variable compensation in effect until the end of 2017
was replaced as of 2018 with a forward-looking performance bonus
that is geared to sustainable corporate development and has a
three-year deferral component. The performance bonus is based on
the performance of the Board of Executive Directors as a whole
and the return on capital employed (ROCE) of the BASF Group. The
target ROCE for the variable compensation is one percentage point
above the cost of capital percentage for the financial year, which
is determined using the weighted average cost of capital (WACC)
3. Long-term,
share price-based
incentive program
The annual amount granted is dependent on the fair value of the options as of the grant date and the scope of the
individual investment
Сар
Payment
Four-year, forward-looking performance period
€3,750,000¹.2
4. Fringe benefits
5. Company pension benefits
The annual amount corresponds to the value of nonmonetary compensation
The annual service cost is the accounting figure for the pension entitlements accrued in the relevant business year
1 Amounts apply to an ordinary member of the Board of Executive Directors. The amount for the chairman of the Board of Executive Directors is 2 times this value, and 1.33 times this value for the vice chairman.
2 To reach the cap, a Board member must make the maximum individual investment based on the maximum performance bonus and the set limit on the gain from exercising the options granted must be reached.
BASF Report 2018
147
About This Report
In a period of 4 to 8 years after the grant date,
depending on individual exercise date
Performance bonus
Performance bonus, part 2: after the end of the four-year performance period
Performance bonus, part 1: after the Annual Shareholders' Meeting for the past
business year
5 Supplementary Information Oil and Gas Business
6 Overviews
Individual compensation components
1. Fixed salary
The fixed salary is a set amount of yearly compensation paid out in
equal installments. It is regularly reviewed by the Supervisory Board
and adjusted, when appropriate.
The annual fixed salary for an ordinary member of the Board of
Executive Directors is currently €800,000. The fixed salary for the
chairman of the Board of Executive Directors is 2 times the value for
an ordinary Board member, and 1.33 times this value for the vice
chairman.
2. Performance bonus
Overview of compensation components
1. Fixed salary
2. Performance bonus
Annual amount
Payment
Annual target
Cap
Payment
€800,000¹
In equal installments
€1,600,0001
€2,500,000¹
1 To Our Shareholders
3 Corporate Governance
Compensation Report
2 Management's Report
4 Consolidated Financial Statements
One-year operational targets, primarily earnings, financial,
investment and operational excellence targets such as EBIT
before special items, EBIT after cost of capital, investments
and operational excellence
Multiple-year strategic targets relating to the further
development of BASF, primarily targets for growth, portfolio
optimization, investment and R&D strategy, digitalization,
sustainability and the BASF corporate values
Schematic overview: performance bonus, part 2
Deferral component
(50% of the performance bonus (gross))
(☑
SPF
Year 1
-
+ SPF
+ SPF
4
Year 3 + SPF Year 4
(11)
Performance bonus,
part 2
The Board of Executive Directors' target agreement contains opera-
tional and strategic objectives. The operational targets (primarily
earnings, financial, investment and operational excellence targets)
cover the company's short-term financial performance. The strate-
gic targets relate to BASF's medium and long-term development on
the basis of the corporate strategy. They comprise targets for
growth, portfolio optimization, investment and R&D strategy, digitali-
zation, sustainability and the BASF corporate values.
The achievement of operational and strategic targets is evaluated
separately. The amount of the performance bonus thus takes into
account the Board of Executive Directors' performance for both the
short-term and long-term success of the company.
BASF Report 2018
Year 2
In order to assess the sustainable performance of the Board of
Executive Directors, each year the Supervisory Board sets a
target agreement with the Board of Executive Directors as a
whole. The target agreement contains:
Target agreement
Target agreement and evaluation
5 Supplementary Information Oil and Gas Business 6 Overviews
approach in accordance with the Capital Asset Pricing Model. This
target reflects the strategic goal of achieving a ROCE considerably
above the cost of capital percentage every year, even if the capital
structure and interest rate level change over time. The target value is
thus directly linked to the return expected by investors, which also
serves as orientation for the BASF Group's value-based manage-
ment.
For more information on the determination of the cost of capital percentage,
see Value-Based Management on page 29
Schematic overview: performance bonus, part 1
For each financial year, a member of the Board of Executive Direc-
tors is entitled to a performance bonus with a four-year performance
period. After the first year of this four-year performance period, the
performance bonus (performance bonus (gross)) is determined
based on the achievement of operational targets (operational perfor-
mance factor, OPF) and strategic targets (strategic performance
factor, SPF) as well as the ROCE (ROCE factor). 50% of the amount
is paid out after the Annual Shareholders' Meeting in the following
year (performance bonus, part 1).
OPF Year 1+ SPF Year 1
Target bonus
(x)
ROCE factor
(x)
2
(11)
Performance bonus
(gross)
50%
Performance
bonus, part 1
50%
Deferral
component
The remaining 50% is deferred for another three years and is not
immediately payable (deferral component). The final amount of the
deferral component is determined depending on the degree to
which the strategic targets were achieved within the four-year per-
formance period (strategic performance factor, SPF) and is paid out
after the Annual Shareholders' Meeting in the year following the end
of this four-year performance period (performance bonus, part 2).
3 Corporate Governance
Compensation Report
V & B Fliesen GmbH4 (member until May 31, 2018)
Continental AG³ (member since November 1, 2018)
- Share ownership obligation: Mandatory individual investment in
BASF shares with a holding obligation of 10% of the actual
performance bonus (gross), plus up to an additional 20% of the
actual performance bonus (gross)
An LTI program exists for members of the Board of Executive Direc-
tors. It is also offered to all other senior executives of BASF Group,
with a small number of exceptions. To take part in the program,
each participant must prove an individual investment in BASF shares
and hold the shares for this purpose for a defined period of time
(holding period). The individual investment can amount to a maxi-
mum of 30% of the participant's performance bonus (gross). The
members of the Board of Executive Directors are obligated to invest
at least 10% of their individual performance bonus (gross) in the LTI
Actual amount
2018 performance bonus (gross)
(2018-2021):
€1,414,400
program each year (share ownership obligation). This mandatory
investment is subject to a holding period of four years. For any fur-
ther additional voluntary investment of up to 20% of the performance
bonus (gross), the general holding period of two years applies.
Four options are granted for each BASF share brought into the LTI
program as an individual investment. After a four-year vesting
period, there is a four-year exercise period during which the mem-
bers of the Board of Executive Directors can exercise these options
if performance thresholds are met. During the exercise period, the
exercising of options is prohibited during certain periods (closed
periods). Each member of the Board of Executive Directors can
individually decide on the timing and extent of the exercising of
options. Once the options are exercised, the computed value of the
options is paid out in cash (cash settlement).
BASF Report 2018
150
8885
9555
800
507
800
1,600
800
5385
800
507
973
800
1,416
1,064
Fixed salary
2018
2017
2018
7615
557
LTI program 2009 (2009-2017)
46
1,110
Total
46
84
1656
716
41
27
Fringe benefits
34
1,6376,7
2,0796,7
58
37
112
59
136
2017
33
2018
2018
2018
Compensation allocated in accordance with the German Corporate Governance Code (GCGC)
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Compensation Report
2 Management's Report
1 To Our Shareholders
About This Report
155
BASF Report 2018
1 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
2 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
2,220
6,039
2,556
3,272
2,040
1,872
2,208
The "Compensation allocated in accordance with the German Corporate Governance Code (GCGC)" shown for 2017 and 2018 comprises the fixed and variable compensation components actually allocated,
plus the service cost calculated for each member of the Board of Executive Directors in the reporting years even though this does not actually represent payment in the narrower sense.
Compensation allocated in accordance with the German Corporate Governance Code (GCGC)
Thousand €
Dr. Martin Brudermüller
Chairman of the Board of
Executive Directors
(since May 4, 2018)
2017
1,552
2017
2018
2017
2018
2017
2018
2017
2017
Chairman of the
Board of Executive
Directors
Dr. Kurt Bock
Wayne T. Smith
Dr. Markus Kamieth
Member of the Board of
Executive Directors
(since May 12, 2017)
Michael Heinz
Sanjeev Gandhi
Dr. Hans-Ulrich Engel
Vice Chairman of the
Board of Executive
Directors
(since May 4, 2018)
Saori Dubourg
Member of the Board of
Executive Directors
(since May 12, 2017)
(until May 4, 2018)
859
2,617
544
LTI program 2012 (2012-2020)
LTI program 2011 (2011-2019)
1,6314
1,4014
4,5043
4,0373
LTI program 2010 (2010-2018)
800
1,631
4,504
1,401
4,037
Multiple-year variable compensation
(2018-2021), part 12
492
707
707
LTI program 2013 (2013-2021)
Total
3,524
2,803
697
1,111
1,001
Service cost
2,726
9,817
1,760
2,841
707
1,548
1,541
2,648
3,105
4,432
1,565
1,700
3,346
6,711
1,690
1,085
707
860
1,156
860
1,815
1,251
2,414
One-year variable compensation
603
1,684
1,053
1,026
841
534
834
833
2,398
3,011
858
707
1,815
707
1,815
1,251
Performance bonus 2018
3,629
1,815
1,156
1,815
1,815
1,156
707
1,815
Actual annual variable compensation¹
492
3,629
707
1,815
707
1,156
707
2,414
(325)
(791) (1,023)
(709)
800
1,250
0
800
50% of the 2018 performance bonus (2018-2021),
deferral component
5,464
0
1,682
726
3,972
0
1,596
431
3,257
0
1,292
182
0
1,250
800
0
0
796
2,007
0
492
2,722
0
667
3,972
LTI program 2018 (2018-2026)
431
182
363
LTI program 2017 (2017-2025)
870
0
557
1,250
726
2,722
0
363
0
557
3,200
1,250
0
800
1,600
1,250
0
800
1,019
1,250
0
800
1,600
603
603
870
Annual variable target compensation
1,600
-
Multiple-year variable compensation
870
0
557
1,250
0
800
1,250
1,467
0
1,250
0
800
50% of the 2018 performance bonus (2018-2021)
3,200
-
1,600
1,019
800
(1,142)
1,125
4,594
(1,600)
(1,019)
(1,600)
Total compensation
Plus allocated actual annual variable compensation
Less service cost
Less 50% of the granted 2018 performance bonus
(2018-2021), (deferral component)
Less 50% of the granted 2018 performance bonus
(2018-2021), (one-year component)
Less granted annual variable target compensation
Reconciliation reporting of total compensation pursuant to
section 314(1) no. 6a HGB in connection with GAS 17
7,262
928
3,167
6,752
6,984
1,762
4,158
3,901
(3,200)
(800)
(800)
(800)
(844)
626
(661)
(816)
492
3,629
707
1,815
6,371
707
707
1,815
(557)
(800)
(800)
I
(800)
(557)
1,156
0
1,864
2,526
603
2,842
5,610
6,275
1,053
3,449
3,057
5,348
841
2,933
1,735
6,056
834
3,101
2,796
Service cost
Total
6,937
816
661
661
6,717
1,495
3,762
3,612
Total compensation in accordance with GCGC
325
325
325
3,956
1,142
709
709
844
1,023
1,023
1,023
791
661
709
796
816
957
83.3
200.0
83.3
Francesco Grioli, Supervisory Board member until May 4, 2018
250.0
250.0
50.0
50.0
200.0
200.0
Franz Fehrenbach8
166.6
33.3
133.3
Tatjana Diether, Supervisory Board member since May 4, 20188
200.0
200.0
200.0
Waldemar Helber⁹
200.0
200.0
200.0
200.0
133.3
133.3
Roland Strasser, Supervisory Board member since May 4, 2018
Michael Vassiliadis3,8,9
200.0
200.0
200.0
200.0
200.0
200.0
200.0
200.0
200.0
Anke Schäferkordt
200.0
208.3
8.3
Denise Schellemans
75.0
200.0
312.5
331.3
331.3
31.3
31.3
300.0
300.0
550.0
50.0
50.0
500.0
500.0
Robert Oswald, Vice Chairman until May 12, 20175
Michael Diekmann, Vice Chairman³,4
Dr. Jürgen Hambrecht, Chairman 1.2
2018
2017
2018
125.0
10.4
Sinischa Horvat, Vice Chairman since May 12, 20173,9
300.0
312.5
112.5
112.5
200.0
200.0
Dame Alison Carnwath DBE7.9
258.3
109.3
Prof. Dr. François Diederich
58.3
200.0
83.3
Ralf-Gerd Bastian, Supervisory Board member until May 4, 20186
216.7
325.0
16.7
25.0
200.0
26.0
2017
75.0
275.0
(973)
(800)
(800)
(973)
I
I
(1,416)
Less 50% of the granted 2018 performance bonus
(2018-2021), (deferral component)
(1,416)
Less 50% of the granted 2018 performance bonus
(2018-2021), (one-year component)
(1,600)
(1,019)
(1,600)
(2,128)
Less granted annual variable target compensation
Reconciliation reporting of total compensation pursuant to
section 314(1) no. 6a HGB in connection with GAS 17
1,250
(800)
(800)
Plus allocated actual annual variable compensation
2,414
707
1,815
707
Less service cost
(1,001)
Total compensation
4,007
(1,111)
3,690
0
(697)
(796)
(1,029)
(957)
(789)
3,037
2,612
1,815
1,251
(626)
275.0
160
The expanded scope of the seed and crop protection businesses to be acquired
from Bayer
9 Member of the Strategy Committee
8 Member of the Audit Committee
7 Chairman of the Audit Committee
6 Member of the Audit and Strategy Committees until May 4, 2018
4 Vice Chairman of the Strategy Committee
5 Member of the Personnel and Strategy Committees until May 4, 2018
Member of the Personnel Committee
3
2 Chairman of the Strategy Committee
1 Chairman of the Personnel Committee
3,329.2
3,344.6
404.2
411.4
2,925.0
2,933.2
Total
BASF Report 2018
159
About This Report
1 To Our Shareholders
The conclusion of the agreements to merge the oil and gas businesses of BASF
and LetterOne in a joint venture, Wintershall DEA
The Chairman of the Supervisory Board and the Chairman of the Board of Executive
Directors were also in regular contact outside of Supervisory Board meetings. The
Chairman of the Supervisory Board was always promptly informed of current develop-
ments and significant individual issues. The Supervisory Board was involved at an
early stage in decisions of major importance. The Supervisory Board passed resolu-
tions on all of those individual measures taken by the Board of Executive Directors
which by law or the Statutes required the approval of the Supervisory Board. In the
2018 business year, these included authorizing:
In 2018, the Supervisory Board of BASF SE exercised its duties as required by law and
the Statutes with the utmost care. It regularly monitored the management of the Board
of Executive Directors and provided advice on the company's strategic development
and important individual measures, about which the Supervisory Board was regularly
and thoroughly informed by the Board of Executive Directors. This occurred both during
and outside of the meetings of the Supervisory Board and its committees in the form of
written and oral reports on, for example, all of the major financial key performance indi-
cators (KPIs) of the BASF Group and its segments, the economic situation in the main
sales and procurement markets, and on deviations in business developments from
original plans. Furthermore, the Supervisory Board tackled fundamental questions of
corporate planning, including financial, investment, sales volumes and personnel plan-
ning, as well as measures for designing the future of research and development. The
Supervisory Board discussed in detail the reports from the Board of Executive Directors,
and also deliberated on prospects for the company and its individual business areas
with the Board of Executive Directors. It was convinced of the lawfulness, expediency
and propriety of the Board of Executive Director's company leadership.
Monitoring and consultation in an ongoing dialog with the Board of
Executive Directors
The Supervisory Board addressed its tasks with a sense of responsibility. Its aim is to lay
the best possible foundation for BASF's continued successful and sustainable growth.
- Changes to the Board of Executive Directors and preparations for the Supervisory
Board elections
The further development of the global manufacturing footprint and the planned
establishment of a new Verbund site in southern China
-
BASF Report 2018
- Portfolio measures, in particular the acquisition of the seed and non-selective
herbicides businesses from Bayer, the merger of the oil and gas businesses of
BASF and LetterOne and the transfer of the paper and water chemicals business
to a joint venture with Solenis, with 49% held by BASF, as well as the repositioning
of the construction chemicals business
In an increasingly difficult political and economic environment, the Supervisory Board
addressed the following focus areas at length in 2018:
Dear Shareholder
Report of the
Supervisory Board
Report of the Supervisory Board
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
The updated BASF corporate strategy
1,029
2018
committee memberships
14,076
25,484
Michael Heinz
4,692
25,484
Sanjeev Gandhi
2,040
12,600
Saori Dubourg (since May 12, 2017)
14,076
25,484
Dr. Hans-Ulrich Engel
18,724
33,892
Dr. Martin Brudermüller
2018
2017
Dr. Markus Kamieth (since May 12, 2017)
18,792
Wayne T. Smith
25,484
Thousand €
The present value of pension benefits (defined benefit obligation) is
an accounting figure for the entitlements that the Board members
have accumulated in their years of service at BASF. The table below
shows the defined benefit obligations for the pension entitlements
accrued until the end of 2018 (as of December 31 in each case):
The values for service cost incurred in 2018 contain service cost for
BASF Pensionskasse WaG and Board Performance Pension. Ser-
vice cost for the members of the Board of Executive Directors is
shown individually in the tables "Compensation granted in accor-
dance with the German Corporate Governance Code (GCGC)" and
"Compensation allocated in accordance with the German Corporate
Governance Code (GCGC)."
Pension benefits
For more information on the LTI program, see page 114 and from page 263 onward
The income resulting from the accounting valuation of the option
rights granted to Dr. Kurt Bock, the former Chairman of the Board of
Executive Directors who retired in 2018, is included in the total
compensation for former members of the Board of Executive Direc-
tors and their surviving dependents.
The outstanding option rights held by the members of the Board of
Executive Directors resulted in the following income and expenses in
2018: Dr. Martin Brudermüller: income of €4,170 thousand (2017:
income of €604 thousand); Dr. Hans-Ulrich Engel: income of
€3,821 thousand (2017: income of €1,300 thousand); Saori
Dubourg: expense of €12 thousand (2017: expense of €8 thou-
sand); Sanjeev Gandhi: income of €185 thousand (2017: expense of
€178 thousand); Michael Heinz: income of €2,636 thousand (2017:
income of €226 thousand); Dr. Markus Kamieth: expense of
€13 thousand (2017: expense of €26 thousand); Wayne T. Smith:
income of €1,602 thousand (2017: income of €35 thousand).
The expenses and income reported below are purely accounting
figures that do not equate with the actual gains should options be
exercised. Each member of the Board of Executive Directors may
decide individually on the timing and scope of the exercise of options
of the LTI programs, while taking into account the terms and condi-
tions of the program.
Number of options granted
In 2018, some of the option rights granted resulted in an expense
and some resulted in income. This expense or income refers to the
total of all option rights from the LTI programs 2010 to 2018 and is
calculated as the difference in the fair value of the option rights on
December 31, 2018, compared with the fair value on December 31,
2017, considering the option rights exercised and granted in 2018.
The fair value of the option rights is based primarily on the develop-
ment of the BASF share price and its relative performance compared
with the benchmark index, the MSCI World Chemicals Index.
Accounting valuation of multiple-year
102,900
210,228
Total
28,156
43,008
Dr. Kurt Bock (until May 4, 2018)
7,060
14,076
variable compensation (LTI programs)
2018
The table below shows the options granted to the Board of Execu-
tive Directors on July 1 of both reporting years.
5 Supplementary Information Oil and Gas Business
2,594
2,496
3,972
7,408
3,914
4,525
with GCGC
Total compensation in accordance
325
1,142
709
844
1,023
791
661
603
789
5,389
3,894
3,464
2,202
4 Consolidated Financial Statements
3 Corporate Governance
Compensation Report
2 Management's Report
1 To Our Shareholders
About This Report
156
BASF Report 2018
7 Fringe benefits include the payment of additional taxes and tax back payments for previous years arising in connection with transfers.
6 Overviews
6 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
3 At the end of the regular term of the LTI program 2009, exercise gains that were realized in 2013 were allocated to Dr. Hans-Ulrich Engel and Dr. Kurt Bock in 2017 in accordance with the special conditions of the U.S. LTI program.
1 The basis for the allocated actual annual variable compensation was the return on assets adjusted for special effects and the average performance factor for the current and two preceding years. This includes contributions made to the deferred compensation program.
2 The basis for the performance bonus, part 1, is the ROCE factor and the average of the operating performance factor (OPF) and the strategic performance factor (SPF) in the year the performance bonus was granted. This includes contributions made to the deferred compensation program. 50% of the actual performance bonus is paid out;
the remaining 50% of the actual performance bonus is not paid out for another three years (deferral component).
3,051
10,959
2,469
3,685
2,571
2,481
4 In 2018, at the end of the regular term of the LTI program 2010, exercise gains that were realized in 2017 and 2018 were allocated to Dr. Hans-Ulrich Engel, and exercise gains that were realized in 2016 were allocated to Dr. Kurt Bock in accordance with the special conditions of the U.S. LTI program.
5 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
Total compensation
2017
19,993
Members of the Supervisory Board who are members of a commit-
tee, except for the Nomination Committee, receive an additional
fixed compensation of €12,500. The additional fixed compensation
for members of the Audit Committee is €50,000. The amount of
additional fixed compensation for the chairman of a committee is 2
times this value, and 1.5 times this value for the vice chairman.
Each member of the Supervisory Board receives an annual fixed
compensation of €200,000. The amount for the chairman of the
Supervisory Board is 2.5 times this value, and 1.5 times this value
for the vice chairman compared with the compensation of an ordi-
nary member.
The disclosure of compensation of the Supervisory Board is based
on the German Commercial Code and is aligned with the recom-
mendations of the German Corporate Governance Code (GCGC).
The compensation of the Supervisory Board is regulated by the
Statutes of BASF SE passed by the Annual Shareholders' Meeting.
2 The amount for the chairman of a committee is 2 times this value, and 1.5 times this value for the vice
chairman.
1 The amount for the chairman of the Supervisory Board is 2.5 times this value, and 1.5 times this value
for the vice chairman compared with the compensation of an ordinary member.
- No additional compensation is paid for the Nomination
Committee
Compensation for committee memberships: €12,500²;
Audit Committee: €50,000²
Share purchase and share holding component:
25% of the fixed compensation must be used to purchase
shares in BASF; these shares must be held for the duration
of membership on the Supervisory Board
Compensation of Supervisory Board members
Fixed salary €200,000¹
Compensation of Supervisory Board members
Pension provisions for previous Board members and their surviving
dependents amounted to €159.5 million (2017: €144.3 million).
Option rights that have not yet been exercised on retirement are to
be continued under the conditions of the program including the
associated holding period to emphasize that the compensation for
the Board of Executive Directors is geared to sustainability.
Total
5.7
(5.5)
(4.4)
(16.1)
Each member of the Supervisory Board is required to use 25% of
their fixed compensation to acquire shares in BASF SE, and to hold
these shares for the duration of membership on the Supervisory
Board. This does not apply to the amount of compensation that the
member of the Supervisory Board transfers to a third party on a pro
rata basis as a result of an obligation entered into before their
appointment to the Supervisory Board. In this case, the utilization
and holding obligation applies to 25% of the remaining compensa-
tion after deducting the amount transferred.
The company reimburses members of the Supervisory Board for
out-of-pocket expenses and value-added tax to be paid with regard
to their activities as members of the Supervisory Board or of a com-
mittee. The directors' and officers' liability insurance (D&O insurance)
concluded by the company covers the duties performed by the
members of the Supervisory Board. This policy provides for the
level of deductibles for the Supervisory Board as recommended in
section 3.8(3) of the German Corporate Governance Code (GCGC).
Total compensation of the Supervisory Board in 2018 was around
€3.3 million (2017: around €3.3 million). The compensation of the
individual Supervisory Board members was as follows.
BASF Report 2018
Fixed salary
For more information on share ownership by members of the Supervisory Board, see page 139
In 2018, as in 2017, the company paid the Supervisory Board mem-
ber Prof. Dr. François Diederich a total of CHF 38,400 (2018:
approximately €33,200; 2017: approximately €34,500) for consult-
ing work in the area of chemical research based on a consulting
contract approved by the Supervisory Board. Beyond this, no other
Supervisory Board members received any compensation in 2018 for
services rendered personally, in particular, the rendering of advisory
and agency services.
Compensation for Supervisory Board membership and membership
of Supervisory Board committees is payable after the Annual Share-
holders' Meeting, which takes delivery of the Consolidated Financial
Statements for the business year. Accordingly, compensation relat-
ing to the year 2018 will be paid following the Annual Shareholders'
Meeting on May 3, 2019, taking into account and applying the share
purchase obligation.
135.4
550.0
2017
Compensation for
10.1
Thousand €
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
Compensation Report
2 Management's Report
1 To Our Shareholders
About This Report
158
Compensation of the Supervisory Board of BASF SE
Dr. Martin Brudermüller
10.6
2017
24,952
Dr. Kurt Bock (until May 4, 2018)
4,165
5,098
2,739
4,049
Dr. Markus Kamieth
Wayne T. Smith
11,411
12,735
3,598
4,586
3,665
5,067
11,811
11,985
Dr. Hans-Ulrich Engel
Saori Dubourg
Sanjeev Gandhi
Michael Heinz
17,248
20,313
Total
88,465
74,950
2018
Million €
Total compensation of former members of the Board of Executive
Directors and their surviving dependents
Total compensation for previous Board members and their surviving
dependents amounted to minus €5.5 million in 2018 (2017: €5.7 mil-
lion). This figure also contains payments that previous Board mem-
bers have themselves financed through the deferred compensation
program, as well as the income for 2018 relating to option rights that
previous members of the Board still hold from the time of their active
service period. The decline in total compensation was due to the fair
value measurement of these option rights, which generated total
income of €16.1 million in 2018 (2017: income of €4.4 million).
Former members of the Board of Executive Directors
There is a general limit on severance pay (severance payment cap)
for all Board members. Accordingly, payments made to a Board
member upon premature termination of their contract, without
serious cause, may not exceed the value of two years' compensa-
tion, including fringe benefits, nor compensate more than the
remaining term of the contract. The severance payment cap is to be
calculated on the basis of the total compensation for the past busi-
ness year and, if appropriate, also the expected total compensation
for the current business year. If the appointment to the Board of
Executive Directors is prematurely terminated as the result of a
change of control event, the payments may not exceed 150% of the
severance compensation cap.
gram. For the determination of the accrued pension benefits from
the Board Performance Pension, the time up to the regular expiry of
office is taken into consideration.
5 Supplementary Information Oil and Gas Business 6 Overviews
Retirement and surviving dependents' pensions
Income from the fair value measurement of
option rights
4 Consolidated Financial Statements
2 Management's Report
1 To Our Shareholders
About This Report
157
BASF Report 2018
The following applies to end of service due to a change of control
event: A change of control event, in terms of this provision, occurs
when a shareholder informs BASF of a shareholding of at least 25%,
or the increase of such a holding. If a Board member's appointment
is revoked within one year of a change of control event, the Board
member will receive the contractually agreed payments for the
remaining contractual term of office as a one-off payment (fixed
salary and annual variable target compensation). The Board mem-
ber may also receive the fair value of the option rights acquired in
connection with the LTI program within a period of three months or
may continue to hold the existing rights under the terms of the pro-
In the event that a member of the Board of Executive Directors
appointed before 2017 retires from employment before the age of
60, either because their appointment was not extended or was
revoked for an important reason, they are entitled to pension bene-
fits if they have served on the Board for at least 10 years or if the
period until they reach legal retirement age is less than 10 years. The
company is entitled to offset compensation received for any other
employment against pension benefits until the legal retirement age is
reached.
End-of-service benefits
3 Corporate Governance
Compensation Report
1,684
1,053
1,053
1,416
1,416
800
973
973
973
507
800
800
1,416
800
7611
7611
7611
46
136
136
136
59
112
5381
1,064
One-year variable target compensation
Total
2018
(max)
2018
2018
2018
2018
2018
2018
2017
2018
(min)
(max)
2017
2018
(min)
(max)
2017
2018
(min)
(max)
Fixed salary
Fringe benefits
112
2018
(min)
112
58
800
0
1,250
2,617
1,600
2,398
800
2,398
2,398
0
1,250
1,019
Annual variable target compensation
1,600
1,019
1,600
50% of the 2018 performance bonus (2018-2021)
1,416
0
2,212
973
0
2,128
1,521
0
973
58
58
2,0792,3
1,6372,3 1,6372,3 1,6372,3
1,110
1,552
1,552
1,552
859
1,085
1,085
1,085
544
858
858
858
2,128
1,416
0
2,212
1,600
37
1,521
2018
Directors (since May 12, 2017)
The variable component of the pension unit is the result of multiply-
ing the fixed pension component with a performance factor based
on the relevant ROCE in the reporting year concerned, as well as the
performance factors relevant to the performance bonus (variable
pension component).
BASF Report 2018
151
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
As part of the pension benefits granted to the Board of Executive
Directors (Board Performance Pension), company pension benefits
are intended to accrue annual pension units, the amount of which
depends on the company's success and the performance of the
Board of Executive Directors as a whole in the business year con-
cerned. The method used to determine the amount of the pension
benefits generally corresponds to that used for all other senior
executives of the BASF Group in Germany. The annual pension
benefits accruing to Board members in a given reporting year (pen-
sion unit) are composed of a fixed and a variable component. The
fixed component is calculated by multiplying the annual fixed salary
above the Social Security Contribution Ceiling by 32% (fixed pension
component).
6 Overviews
The sum of the pension units accumulated over the reporting years
determines the respective Board member's pension benefit in the
event of a claim.
This is the amount that is payable on retirement, disability or death.
Pension benefits fall due at the end of service on reaching the age of
60 (for members first appointed to the Board of Executive Directors
after January 1, 2017: on reaching the age of 63), or on account of
disability or death. Pension payments are reviewed on a regular
basis and adjusted by at least 1% each year. Members of the Board
of Executive Directors have the option to choose between payment
of their pension entitlements in the form of a lifelong pension or a
lump sum. The amount of the lump-sum payment is calculated by
capitalizing the annual pension entitlement accrued as of the end of
the service period as a member of the Board of Executive Directors.
The pension units also include survivor benefits. Upon the death of
an active or former member of the Board of Executive Directors, the
surviving spouse receives a survivor pension amounting to 60% of
the Board member's pension entitlement. The orphan pension
amounts to 10% for each half-orphan, 33% for an orphan, 25%
each for two orphans and 20% each for three or more orphans of
the pension entitlement of the deceased (former) Board member.
Total survivor benefits may not exceed 75% of the Board member's
pension entitlement. If the survivor pensions exceed the upper limit,
they will be proportionately reduced.
Board members are members of the BASF Pensionskasse WaG, as
are generally all employees of BASF SE. Contributions and benefits
are determined by the Statutes of the BASF Pensionskasse VVaG
and the General Conditions of Insurance.
Withholding and clawback clause
A withholding and clawback clause was introduced as of January 1,
2018, for the performance bonus and the LTI program for all mem-
bers of the Board of Executive Directors. In the event that a Board
member commits a serious infringement of the Code of Conduct of
BASF Group or of the duty of care as a member of the management
of the company, this provision allows for a reduction or cancellation
of not yet paid variable compensation as well as the clawback of
variable compensation paid out since January 1, 2018.
1,156
The tables on pages 154 to 156 show the granted and allocated
compensation as well as service cost of each member of the Board
of Executive Directors in accordance with section 4.2.5(3) of the
German Corporate Governance Code (GCGC) in the version dated
February 7, 2017.
Due to the changes resolved to the compensation system for the
Board of Executive Directors, this Compensation Report includes a
comparison of the compensation granted and allocated under the
two different systems. The compensation system for the Board of
Executive Directors in effect until the end of 2017 is described in
detail in the 2017 Compensation Report. The following comparison
summarizes the changes.
The amount resulting from the fixed and the variable pension com-
ponent is converted into a pension unit (lifelong pension) using actu-
arial factors (annuity conversion factor). The currently applied annu-
ity conversion factor is based on an actuarial interest rate of 5%, the
probability of death, invalidity and bereavement according to
Heubeck Richttafeln, 2005G (modified) and an assumed pension
increase (at least 1% each year).
Pension benefits due: on reaching the retirement age of 60
(63 for members first appointed to the Board of Executive
Directors since 2017) or on account of disability or death
- Pension entitlement: retirement, disability and surviving
dependents' pensions
Accrual of annual pension units, the amount of which depend
on the company's success and the performance of the Board
of Executive Directors as a whole
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Each option consists of right A (absolute performance threshold)
and right B (relative performance threshold), whose value is deter-
mined by different performance targets. At least one of the two
conditions must be met in order for the option to be exercised:
-
Performance threshold, right A: BASF share price increases at
least 30% compared with the base price on the option grant date
for the LTI program concerned. The value of right A is calculated
as the difference between the market price of BASF shares on the
exercise date and the base price on the option grant date. It is
limited to 100% of the base price (cap). The base price for an LTI
program is the volume-weighted average share price in Deutsche
Börse AG's electronic trading system (Xetra) on the first trading
day after the Annual Shareholders' Meeting of BASF SE in the
year in which the LTI program is granted. The base price for the
LTI program granted in 2018 was €85.45 (2017: €87.84).
Performance threshold, right B: The cumulative percentage per-
formance of the BASF share exceeds that of the MSCI World
Chemicals Index (outperformance) and the price of the BASF
share on the exercise date equals at least the base price. The
value of right B is calculated as the base price of the option multi-
plied by twice the outperformance of BASF shares on the exercise
date. It is limited to the closing price on the date of exercise minus
the computed nominal value of BASF shares.
In total, the maximum exercise gain (cap) is limited to five times the
individual investment and can amount to a maximum of €3,750,000
for an ordinary member of the Board of Executive Directors. The
maximum amount for the chairman of the Board of Executive Direc-
tors is 2 times the maximum value for an ordinary Board member,
and 1.33 times this value for the vice chairman.
Due to the multiple-year exercise period, it can occur that exercise
gains from several LTI program years accumulate inside of one year;
there can also be years without any exercise gains.
For more information on share ownership by members of the Board of Executive Directors,
see page 139
For more information on the LTI program, see page 114 and from page 263 onward
4. Nonmonetary compensation and other additional
compensation (fringe benefits)
Members of the Board of Executive Directors receive various fringe
benefits in addition to the abovementioned cash compensation.
Fringe benefits include delegation allowances, accident insurance
premiums, transportation and benefits from the provision of security
measures by the company. The fringe benefits granted by the com-
pany are subject to specific provisions and thereby also limited in its
amount.
The members of the Board of Executive Directors are covered by a
directors' and officers' liability insurance (D&O insurance) concluded
by the company. This policy provides for the level of deductibles for
the Board of Executive Directors as prescribed by section 93(2)
sentence 3 of the German Stock Corporation Act.
5. Company pension benefits
-
Board Performance Pension
152
2017
BASF Report 2018
1 To Our Shareholders
Compensation granted in accordance with the German
Corporate Governance Code (GCGC)
The table "Compensation granted in accordance with the German
Corporate Governance Code (GCGC)" shows: fixed salary, fringe
benefits, annual variable target compensation/performance bonus,
LTI program measured at fair value as of the grant date and service
cost. The individual compensation components are supplemented
by individually attainable minimum and maximum compensation.
Furthermore, a reconciliation statement for total compensation to
be reported is provided below the table "Compensation granted in
accordance with the German Corporate Governance Code (GCGC)"
due to the disclosures required by section 314(1) no. 6a of the
German Commercial Code (HGB) in connection with the German
Accounting Standard 17 (GAS 17).
BASF Report 2018
153
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
Withholding and clawback clause for the performance bonus and the LTI program
4 Consolidated Financial Statements
6 Overviews
Compensation granted in accordance with the German Corporate Governance Code (GCGC)
Thousand €
Dr. Martin Brudermüller
Chairman of the Board of
Executive Directors (since May 4, 2018)
Dr. Hans-Ulrich Engel
Vice Chairman of the Board of
Executive Directors (since May 4, 2018)
Saori Dubourg
Member of the Board of Executive
Sanjeev Gandhi
5 Supplementary Information Oil and Gas Business
The pensionable age for Board members (Board Performance Pension) was raised from 60 to
63 years for new members appointed to the Board of Executive Directors after January 1, 2017
Option to choose between payment of pension entitlements in the form of a lifelong pension or
a lump sum
The variable component of the pension unit is the result of multiplying the fixed pension
component with a factor based on the relevant ROCE in the reporting year concerned, as well as
the performance factors relevant to the performance bonus
Mandatory individual investment of 10% now based on the performance bonus (gross); up to an
additional 20% of the performance bonus (gross) can be invested on a voluntary basis
2 Management's Report
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Performance bonus / annual variable compensation
Long-term incentive program (LTI)
Company pension benefits
Withholding and clawback clause
Compensation system for the Board of Executive Directors until the end of 2017
Annual variable compensation
The key performance indicator for the company's success is the return on assets (ROA)
- Relevant performance factor is the average of the performance factors in the current and two
preceding business years
Payment in full after the Annual Shareholders' Meeting for the business year
Long-term, share price-based incentive program
Mandatory individual investment of 10% of the actual annual variable compensation; up to an
additional 20% of the actual annual variable compensation can be invested on a voluntary basis
The variable component of the pension unit is the result of multiplying the fixed pension
component with a factor based on the relevant return on assets in the reporting year concerned,
as well as the performance factor used to determine the actual annual variable compensation
None
New compensation system for the Board of Executive Directors as of 2018
Performance bonus
The key performance indicator for the company's success is the return on capital employed
(ROCE)
- Relevant performance factors are the operational performance factor (OPF) for the current
business year and the strategic performance factors (SPF) for the current and the following three
business years
50% paid out at the end of the current business year and 50% after the end of the four-year
performance period
No changes to the program
About This Report
800
Amount of total compensation
1,250
(until May 4, 2018)
2018
2017
2018
(min)
2018
(max)
2018
2017
2018
Chairman of the Board of Executive Directors
(min)
2018
2018
2018
2018
2017
2018
(min)
(max)
2017
2018
(max)
Member of the Board of Executive Directors
(since May 12, 2017)
Dr. Kurt Bock
Wayne T. Smith
1,250
1,753
1,895
4,553
3,772
1 Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
2 Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
3 Fringe benefits include the payment of additional taxes for 2017 and/or 2018 and tax back payments for previous years arising in connection with transfers.
BASF Report 2018
154
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Compensation granted in accordance with the German Corporate Governance Code (GCGC)
Thousand €
Michael Heinz
Dr. Markus Kamieth
2018
(min)
(max)
Fixed salary
41
41
712
1652
1652
1652
84
46
46
46
833
834
834
834
534
841
841
841
1,026
1,053
0
41
0
27
34
Fringe benefits
Total
One-year variable target compensation
800
800
800
800
507
800
800
800
9551
8881
8881
8881
1,600
557
557
557
33
34
34
800
860
3,187
483
LTI program 2018 (2018-2026)
Total
Service cost
Total compensation in accordance with GCGC
973
0
1,521
363
LTI program 2017 (2017-2025)
53
-
887
0
3,620
667
0
2,722
330
0
121
2,212
0
1,416
800
8,409
0
1,250
Multiple-year variable compensation
483
2,303
0
5,832
363
1,640
0
53
1,130
0
2,596
121
1,467
0
3,972
50% of the 2018 performance bonus (2018-2021),
deferral component
1,346
667
4,243
2,722
1,029
1,029
1,029
957
789
789
789
4,722
6,382
2,663
10,707
3,519
4,324
7,475
2,412
3,817
1,887
5,733
0
5,454
5,295
796
626
1,711
626
1,552
626
3,721
9,596
2,822
1,085
6,849
1,616
2,788
858
3,698
5,271
1,111
4,704
1,001
7,620
1,111
697
4,665
4,338
2,398
1,111
261
Other Notes
29 Statement of cash flows and capital structure
management
202
183
261
Notes
5 Earnings per share
4 Reporting by segment and region
2 Scope of consolidation.
1 Summary of accounting policies
3 BASF Group list of shares held pursuant to
Policies and Scope of Consolidation
183
Notes to the Statement of Income
265
section 313(2) of the German Commercial Code
34 Declaration of Conformity with the German
Statement of Equity
219
267
33 Services provided by the external auditor
218
265
32 Related party transactions
218
and Supervisory Board_
31 Compensation of the Board of Executive Directors
211
263
and BASF incentive share program
211
30 Share price-based compensation program
Statement of Cash Flows
19 Capital, reserves and retained earnings
259
177
Recognized in Equity
235
18 Receivables and miscellaneous assets
Statement of Income and Expense
235
17 Inventories
234
equity method and other financial assets.
176
Statement of Income
16 Investments accounted for using the
232
228
219
238
179
20 Other comprehensive income_
239
251
27 Supplementary information on financial instruments
28 Leases
183
.250
26 Risks from litigation and claims
249
25 Other financial obligations
Balance Sheet
246
182
245
240
22 Provisions for pensions and similar obligations
23 Other provisions
181
239
21 Noncontrolling interests
24 Liabilities
Corporate Governance Code
Wayne T. Smith
220
Independent Auditor's
Report¹
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
Independent Auditor's Report
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
169
BASF Report 2018
228
Shuth
Dr. Markus Kamieth
12.6
Michael Heinz
Heinz
TO BASF SE, Ludwigshafen am Rhein
Sanjeev Gandhi
Report on the Audit of the Consolidated Financial
Statements and of the Group Management Report
We have audited the Consolidated Financial Statements of BASF SE
and its subsidiaries (the Group), which comprise the balance sheet
as at December 31, 2018, statement of income, statement of
income and expense recognized in equity, statement of cash flows,
statement of equity for the financial year from January 1, 2018 to
December 31, 2018 and Notes to the Consolidated Financial
Statements, including a summary of significant accounting policies.
In addition, we have audited the Group Management Report of
BASF SE for the financial year from January 1, 2018 to Decem-
ber 31, 2018. In addition, we have been instructed to express an
opinion as to whether the Consolidated Financial Statements
comply with full IFRS. In accordance with the German legal
requirements we have not audited the content of the non-financial
statement and the corporate governance statement which are
included in the Group Management Report and are identified as
unaudited other information.
This is a translation of the German original. Solely the original text in German language is authoritative.
1
Key assumptions by the Board of Executive Directors are the
forecasts for future cash inflows in the detailed planning period, the
assumed growth rate for subsequent periods, as well as the cost of
capital. These assumptions have a material impact on the
recoverability of goodwill. The growth forecasts of the Board of
Executive Directors are associated with risks and can be revised in
Intangible assets in the Consolidated Financial Statements of
BASF SE include goodwill in the amount of €9,211 million. Goodwill
must be tested for impairment annually and whenever there is an
indication that goodwill may be impaired. The impairment test for
the Pigments unit revealed that a change to the key assumptions,
which is considered reasonably possible, could lead to the carrying
amount exceeding the recoverable amount.
Financial statement risk
For information on the accounting principles applied, please refer to
Note 1.4 to the Consolidated Financial Statements on pages 193 to
194 and 201. The underlying assumptions used in the calculation
and the disclosures on the impairment test performed are included
in Note 14 to the Consolidated Financial Statements from page 228
onward.
We conducted our audit of the Consolidated Financial Statements
and of the Group Management Report in accordance with Section
317 HGB and the EU Audit Regulation No. 537/2014 (referred to
subsequently as "EU Audit Regulation") and in compliance with
German Generally Accepted Standards for Financial Statement
Audits promulgated by the Institute of Public Auditors in Germany
(Institut der Wirtschaftsprüfer, IDW). Our responsibilities under those
requirements and principles are further described in the "Auditor's
Responsibilities for the Audit of the Consolidated Financial
Statements and of the Group Management Report" section of our
auditor's report. We are independent of the group entities in
accordance with the requirements of European law and German
commercial and professional law, and we have fulfilled our other
German professional responsibilities in accordance with these
requirements. In addition, in accordance with Article 10 (2) point (f)
of the EU Audit Regulation, we declare that we have not provided
non-audit services prohibited under Article 5 (1) of the EU Audit
Regulation. We believe that the evidence we have obtained is
sufficient and appropriate to provide a basis for our opinions on the
Basis for the opinions
Pursuant to Section 322 (3) sentence 1 HGB, we declare that our
audit has not led to any reservations relating to the legal compliance Recoverability of goodwill
of the Consolidated Financial Statements and of the Group
Management Report.
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the Consolidated
Financial Statements for the financial year from January 1, 2018 to
December 31, 2018. These matters were addressed in the context
of our audit of the Consolidated Financial Statements as a whole,
and in forming our opinion thereon, we do not provide a separate
opinion on these matters.
Key Audit Matters in the Audit of the Consolidated Financial
Statements
Consolidated Financial Statements and on the Group Management
Report.
- The accompanying Group Management Report as a whole
provides an appropriate view of the Group's position. In all material
respects, this Group Management Report is consistent with the
Consolidated Financial Statements, complies with German legal
requirements and appropriately presents the opportunities and
risks of future development. Our opinion on the Group
Management Report does not cover the content of the non-
financial statement and the corporate governance statement
mentioned above.
for the financial year from January 1, 2018 to December 31, 2018,
and
In our opinion, on the basis of the knowledge obtained in the audit,
The accompanying Consolidated Financial Statements comply, in
all material respects, with the IFRSS as adopted by the EU, the
additional requirements of German commercial law pursuant to
Section 315e (1) of the German Commercial Code (HGB) and full
IFRS, and in compliance with these requirements, give a true and
fair view of the assets, liabilities, and financial position of the
Group as at December 31, 2018, and of its financial performance
Opinions
Lumb
Saori Dubourg
Зивар
8 Other operating expenses
7 Other operating income
6 Functional costs
.226
13 Personnel expenses and employees
226
12 Noncontrolling interests
223
11 Income taxes
222
10 Financial result
221
9 Income from companies accounted for using the
equity method
268
35 Non-adjusting post-balance sheet date events
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Vice Chairman and Chief Financial Officer
Dr. Hans-Ulrich Engel
Мине
Chairman and Chief Technology Officer
Dr. Martin Brudermüller
Prederieller
Ludwigshafen am Rhein, February 20, 2019
268
To the best of our knowledge, and in accordance with the applicable reporting
principles, the Consolidated Financial Statements of the BASF Group give a true and
fair view of the net assets, financial position and results of operations of the Group,
and the Management's Report of the BASF Group includes a fair review of the
development and performance of the business as well as position of the BASF Group,
together with a description of the principal opportunities and risks associated with the
expected development of the BASF Group.
We have established effective internal control and steering systems in order to ensure
that the BASF Group's Management's Report and Consolidated Financial Statements
comply with applicable accounting rules and to ensure proper corporate reporting.
The BASF Group Consolidated Financial Statements for 2018 were prepared
according to the International Financial Reporting Standards (IFRS), which are
published by the International Accounting Standards Board (IASB), London, and have
beenendorsed by the European Union.
The Board of Executive Directors of BASF SE is responsible for preparing the
Consolidated Financial Statements and Management's Report of the BASF Group.
and assurance pursuant to sections 297(2)
and 315(1) of the German Commercial Code
(HGB)
Statement by the Board of
Executive Directors
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
Statement by the Board of Executive Directors
The risk management system we have set up is designed such that the Board of
Executive Directors can identify material risks early on and take appropriate defensive
measures as necessary. The reliability and effectiveness of the internal control and risk
management system are continually audited throughout the Group by our internal
audit department.
15 Property, plant and equipment
The Supervisory Board wishes to thank all employees of the BASF Group worldwide
and the management for their personal contribution in the 2018 business year.
Independent Auditor's Report
The Audit Committee is responsible for all the tasks listed in section 107(3) sentence
2 of the German Stock Corporation Act (AktG) and in section 5.3.2 of the German
Corporate Governance Code in the version dated February 7, 2017. This also includes
auditing the Nonfinancial Statements of BASF SE and the BASF Group. The Audit
Committee met five times during the reporting period. Its core duties were to review
BASF SE's Financial Statements and Consolidated Financial Statements, as well as to
discuss the quarterly statements and the half-year financial report with the Board of
The Personnel Committee met three times during the reporting period. With the
exception of one meeting, which one committee member was unable to attend, all
committee members attended the meetings. At its meeting on February 22, 2018, the
Personnel Committee advised on the targets for the Board of Executive Directors for
the 2018 business year. Key topics at the meeting on October 24, 2018, were the
development of leadership at the top levels of management below the Board of
Executive Directors, including long-term succession planning, potential alternate
candidates for that Board of Executive Directors, the extension of Michael Heinz's
appointment, as well as the review of the appropriateness of the compensation
awarded to the Board of Executive Directors. The performance of the Board of Execu-
tive Directors in the 2018 business year and the appointments of the members of the
Board of Executive Directors were discussed at the meeting on December 13, 2018.
For information on the composition of the committees and the tasks assigned to them by the Supervisory Board, see the
Corporate Governance Report on pages 134 to 135
The Supervisory Board of BASF SE has four committees: 1. the committee for per-
sonnel matters of the Board of Executive Directors and the granting of loans in accor-
dance with section 89(4) of the German Stock Corporation Act (Personnel Committee);
2. the Audit Committee; 3. the Nomination Committee; and 4. the Strategy Commit-
tee. Following each Committee meeting, the chairpersons of the Committees reported
in detail about the meetings and the activities of the Committees at the subsequent
meeting of the Supervisory Board.
Committees
For more information on the division of responsibilities within the Board of Executive Directors, see the Corporate Governance
Report from page 142 onward
proposed by the Board of Executive Directors was approved by the Supervisory
Board in each case.
The division of responsibilities within the Board of Executive Directors was reallocated
following the change in chairman and the reduction in the number of Board members
as of May 4, 2018, and due to the reorganization of the segment structure as of Jan-
uary 1, 2019, as part of the updated corporate strategy. The division of responsibilities
The Chairman of the Board of Executive Directors, Dr. Kurt Bock, retired from the
Board of Executive Directors following the Annual Shareholders' Meeting on May 4,
2018, so that he can be elected to the Supervisory Board and appointed as its chair-
man in 2020. He was succeeded as Chairman of the Board of Executive Directors by
Dr. Martin Brudermüller, who previously served as Vice Chairman of the Board of
Executive Directors. Also with effect from May 4, 2018, the Chief Financial Officer,
Dr. Hans-Ulrich Engel, was additionally appointed Vice Chairman of the Board of
Executive Directors. Michael Heinz's appointment to the Board of Executive Directors
was extended to the end of the 2024 Annual Shareholders' Meeting. At the same time,
the number of Board members was reduced from eight to seven following the Annual
Shareholders' Meeting. After being approved by the Annual Shareholders' Meeting on
May 4, 2018, an updated compensation system for the Board of Executive Directors
was introduced with effect as of January 1, 2018. All members of the Board of
Executive Directors agreed to the required change to their employment contracts.
For more information on the compensation of the Board of Executive Directors, see the Compensation Report on
pages 146 to 158
At its meeting on December 13, 2018, the Supervisory Board evaluated, based on the
counsel of the Personnel Committee, the Board of Executive Directors' performance
in 2018.
In several meetings in the 2018 business year, the Supervisory Board conferred on,
and passed resolutions on, personnel topics in the Board of Executive Directors as
well as questions concerning the compensation of the Board of Executive Directors.
Based on preparation conducted by the Personnel Committee, it determined the tar-
gets for the Board of Executive Directors for the 2018 business year at its meeting on
February 22, 2018.
Composition and compensation of the Board of Executive Directors
investment budget for 2019, and as usual authorized the Board of Executive Directors
to procure the necessary financing in 2019.
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
BASF Report 2018
3 Corporate Governance
Report of the Supervisory Board
162
2 Management's Report
1 To Our Shareholders
About This Report
163
For more information on the competence profiles, diversity concepts and composition goals, see page 133 and from
page 135 onward
The Supervisory Board places great value on ensuring good corporate governance: In
2018, it was therefore once again intensely occupied with the corporate governance
standards practiced in the company and the implementation of the recommendations
and suggestions of the German Corporate Governance Code. In addition to the
review of BASF's corporate governance culture, topics of discussion were the draft of
a fundamentally revised German Corporate Governance Code and the proposal to
translate the second E.U. Shareholder Rights Directive into German law and its not
insignificant impact on the current corporate governance system. In addition, the
competence profiles and diversity concepts adopted in 2017 for the Supervisory
Board and the Board of Executive Directors were reviewed and confirmed.
Corporate governance and Declaration of Conformity
The Strategy Committee met once in 2018. The Committee was established to consult
on strategic options for the further development of the BASF Group and has comprised
six members of the Supervisory Board since May 2017. All committee members attend-
ed the meeting. At the meeting, the committee primarily discussed the expanded scope
of the acquisition of the seed and crop protection businesses from Bayer, the combina-
tion of the paper and water chemicals business with Solenis' business and the status of
negotiations with LetterOne on the merger of the oil and gas businesses.
visory Board adopted by the Supervisory Board as well as the competence profile and
diversity concept for the Supervisory Board resolved at the meeting on December 21,
2017. The Nomination Committee met three times in 2018. All committee members
attended all meetings. The meetings addressed, on the one hand, a review of the
competence profile and diversity concept resolved in 2017, as well as the preparation
of the proposals for the election of Supervisory Board members at the 2019 Annual
Shareholders' Meeting. Based on an analysis of the competencies required by the
Supervisory Board as a whole and the competencies already covered, the Nomination
Committee used a broad-based selection process to identify suitable candidates to
be proposed for election as the successors for Prof. Dr. François Diederich and
Michael Diekmann, who will not stand for reelection. The chairman of the committee
regularly informed the Supervisory Board as a whole of the status of the selection
process. The Nomination Committee presented the results of the selection process
together with a nomination proposal for the shareholder representatives to the Super-
visory Board for resolution at its meeting on December 13, 2018.
The Nomination Committee is responsible for preparing candidate proposals for the
Supervisory Board members to be elected by the Annual Shareholders' Meeting. The
Nomination Committee is guided by the objectives for the composition of the Super-
BASF Report 2018
Other important activities included advising the Board of Executive Directors on
accounting issues and the internal control system. The Audit Committee focused on
the internal auditing system at the meeting on July 23, 2018, and compliance in the
BASF Group on December 12, 2018. In these meetings, the head of the Corporate
Audit department and the Chief Compliance Officer reported to the Audit Committee
and answered its questions. In all meetings, the Audit Committee also received
information on the development of risks from litigation.
At the meeting on July 23, 2018, the Audit Committee engaged KPMG AG Wirtschafts-
prüfungsgesellschaft - the auditor elected by the Annual Shareholders' Meeting - with
the audit for the 2018 reporting year and auditing fees were agreed upon. The focus
areas for the annual audit were discussed and defined together with the auditor. The
Audit Committee excluded in principle any service relationships between auditor and
BASF Group companies outside of the audit of the annual financial statements, includ-
ing beyond prevailing legal limitations. These services may only be performed upon
approval by the Audit Committee. For certain nonaudit services beyond the scope of the
audit of the financial reports, the Audit Committee either granted approval for individual
cases or authorized the Board of Executive Directors to engage KPMG AG Wirtschafts-
prüfungsgesellschaft for such services to a very limited extent. At the meeting on
December 12, 2018, the auditors responsible reported on the status of the annual audit,
as well as the focus areas of the audit and the most important individual items.
At the meeting on February 20, 2019, the auditor reported in detail on its audits of
BASF SE's Separate and Consolidated Financial Statements for the 2018 business
year, including the corresponding management's reports, and discussed the results of
its audit with the Audit Committee. The committee's audit also included the nonfinan-
cial statements of BASF SE and the BASF Group. In preparation for the audit, the
Audit Committee had, following a corresponding resolution by the Supervisory Board,
additionally engaged KPMG to perform a substantive audit with limited assurance of
the Nonfinancial Statements and to issue an assurance report on this. KPMG also
reported in detail on the focus, the procedure and the key findings of this audit.
Executive Directors prior to their publication. With the exception of one meeting, which
one member did not attend, all committee members participated in the meetings.
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business 6 Overviews
3 Corporate Governance
Report of the Supervisory Board
1 To Our Shareholders
2 Management's Report
2 Management's Report
About This Report
The partial acquisition of the polyamide value chain from Solvay
Consolidation in the areas of crop protection and seeds, and the acquisition and
integration of the seed business from Bayer
In all meetings, the Supervisory Board discussed the further development of the BASF
Group's business activities through acquisitions, divestitures, transfers to joint ven-
tures and investment projects. Discussions focused on:
A significant component of all Supervisory Board meetings was the Board of Executive
Directors' reports on the current business situation with detailed information on sales
and earnings development, as well as on opportunities and risks for business devel-
opment, the status of important current and planned investment projects, operational
excellence and sustainability, developments on the capital markets, significant mana-
gerial measures taken by the Board of Executive Directors and innovation projects.
An individual overview of attendance at meetings of the Supervisory Board and its committees will be made available on the
company website at basf.com/supervisoryboard/meetings
The Supervisory Board held five meetings in the 2018 business year. With the excep-
tion of one two-day Supervisory Board meeting, which one member of the Superviso-
ry Board was unable to attend on the first day, all members attended all Supervisory
Board meetings in 2018. The members of the Supervisory Board elected by share-
holders and those elected by the employees prepared for the meetings in separate
preliminary discussions in each case, which were also attended by members of the
Board of Executive Directors. All members of the Board of Executive Directors attend-
ed the Supervisory Board meetings unless it was deemed appropriate that the Super-
visory Board discuss individual topics - such as personnel matters relating to the
Board of Executive Directors - without them being present.
Supervisory Board meetings
The assumption of a guarantee by BASF SE as part of in connection with the
acquisition of a 10% share in a concession to produce natural gas and
condensate in the Ghasha field in Abu Dhabi
Report of the Supervisory Board
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
The merger of the oil and gas businesses of BASF and LetterOne in a joint
venture, Wintershall DEA
1 To Our Shareholders
The transfer of the paper and water chemicals business to a joint venture with
Solenis, with 49% held by BASF
The repositioning of the construction chemicals business, including a potential
divestiture
161
BASF Report 2018
At its meeting on December 13, 2018, the Supervisory Board discussed and approved
the Board of Executive Directors' operational and financial planning including the
- Enhancing the company's organization with agile structures and streamlined
decision-making processes
-
- Leveraging the power of innovation, including systematically harnessing the
opportunities of digitalization
- Sustainability as a basis of long-term business success, in particular CO2-neutral
growth
- Focusing on the customer in all activities
- Operational excellence measures in production, including the digitalization of
industrial processes
- Strategic portfolio development
At the strategy meeting on October 24/25, 2018, the Board of Executive Directors
and the Supervisory Board discussed at length the further development of the "We
create chemistry" strategy and agreed on a repositioning of key elements with the
BASF corporate strategy, especially relating to customer focus, sustainability, innova-
tion, digitalization and operations. Key consultation topics were:
The main agenda items at the meeting on July 24, 2018, were the integration and
further development of the seed business acquired from Bayer as well as the BASF
Group's financial and tax strategy.
At its meeting on February 22, 2018, the Supervisory Board reviewed and approved
the Consolidated Financial Statements, Management's Report and the proposal for
the appropriation of profit for the 2017 business year as presented by the Board of
Executive Directors. The Supervisory Board met prior to the Annual Shareholders'
Meeting on May 4, 2018, primarily to prepare for the Annual Shareholders' Meeting.
The expansion of the global manufacturing footprint with the establishment of a
new Verbund site in southern China
The progress of the Nord Stream 2 pipeline project and its project financing
The expansion of the battery materials business by establishing production
capacities in cooperation with Norilsk Nickel and Toda
-
3 Corporate Governance 4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business 6 Overviews
Report of the Supervisory Board
In accordance with the recommendations of the German Corporate Governance Code
and the Guiding principles for the dialogue between investors and German supervisory
boards, the Chairman of the Supervisory Board again sought dialog with investors
where appropriate in 2018. The main topic ahead of the 2018 Annual Shareholders'
Meeting was the changes to the compensation system for the Board of Executive Direc-
tors. Another focus in the second half of the year was the preparations for the Supervi-
sory Board elections at the upcoming 2019 Annual Shareholders' Meeting.
At its meeting of December 13, 2018, the Supervisory Board approved the joint
Declaration of Conformity by the Supervisory Board and the Board of Executive
Directors in accordance with section 161 of the German Stock Corporation Act (AktG).
BASF complies with the recommendations of the German Corporate Governance Code
in the version dated February 7, 2017, without exception. The Corporate Governance
Report provides extensive information on the BASF Group's corporate governance.
2 Management's Report
1 To Our Shareholders
About This Report
166
BASF Report 2018
The Board of Executive Directors
of BASF SE
of BASF SE
The Supervisory Board
Ludwigshafen, December 2018
The recommendations of the Government Commission on the
German Corporate Governance Code as amended on February 7,
2017, published by the Federal Ministry of Justice on April 24, 2017,
in the official section of the electronic Federal Gazette are complied
with and have been complied with since the submission of the last
Declaration of Conformity in December 2017.
The Board of Executive Directors and the Supervisory Board
of BASF SE hereby declare pursuant to section 161 of the
German Stock Corporation Act (AktG)
Declaration of Conformity 2018 of the Board of Executive
Directors and the Supervisory Board of BASF SE
Conformity Pursuant to
Section 161 AktG
Declaration of
6 Overviews
3 Corporate Governance
Declaration of Corporate Governance
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
6 Overviews
14 Intangible assets
Notes to the Balance Sheet
169
Statement by the Board of Executive Directors
Statements
Consoli-
dated
Financial
4
Chapter 4 pages 168-268
167
BASF Report 2018
Pursuant to section 317(2) sentence 6 HGB, the auditor checked
that the disclosures according to section 315d HGB were made.
The Declaration of Corporate Governance, pursuant to section
315d HGB in connection with section 289f HGB, comprises the
subchapters Corporate Governance Report including the descrip-
tion of the diversity concept for the composition of the Board of
Executive Directors and the Supervisory Board (except for the
disclosures pursuant to section 315a(1) HGB), Compliance and
Declaration of Conformity as per section 161 of the German Stock
Corporation Act (AktG) in the Corporate Governance chapter. It is a
component of the Management's Report.
Declaration of Corporate Governance in accordance with
section 315d HGB in connection with section 289f HGB
Corporate Governance
Declaration of
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
Declaration of Conformity Pursuant to Section 161 AktG
2 Management's Report
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Report of the Supervisory Board
2 Management's Report
1 To Our Shareholders
About This Report
164
BASF Report 2018
KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected by the Annual Share-
holders' Meeting for the 2018 reporting year, has audited the Financial Statements of
BASF SE and the BASF Group Consolidated Financial Statements, which were pre-
pared in accordance with the International Financial Reporting Standards (IFRS) as
adopted by the European Union, and the additional requirements that must be applied
in accordance with section 315e(1) of the German Commercial Code (HGB), including
the Management's Report and the accounting records from which they were pre-
pared, and have approved them free of qualification. Furthermore, the auditor certified
that the Board of Executive Directors had taken the measures incumbent on it under
section 91(2) of the German Stock Corporation Act (AktG) in an appropriate manner.
In particular, it had instituted an appropriate information and monitoring system that
fulfilled the requirements of the company and is applicable for the early identification of
developments that could pose a risk to the continued existence of the BASF Group.
The results of the audit as well as the procedure and material findings of the audit of
Separate and Consolidated Financial Statements
Independent of the efficiency review of the Supervisory Board, the Audit Committee
also conducted a self-assessment of its activities in 2018 based on individual discus-
sions by the chairman of the Audit Committee with all of its members. Material topic
areas were the organization and content of the meetings and the supply of information
as the basis of the Committees' work. The Audit Committee discussed the results at
its meeting on December 12, 2018, and resolved, in consultation with the Supervisory
Board, to further intensify its risk management activities, especially in connection with
investments, acquisitions and divestitures.
a self-assessment. This was again conducted in 2018, with the Chairman of the
Supervisory Board holding individual dialogs with each Supervisory Board member
using a structured questionnaire. Topics centered in particular on Supervisory Board
meeting agendas; cooperation with the Board of Executive Directors; information
supply of the Supervisory Board; the composition and work of the committees, and
cooperation between shareholder and employee representatives. The Supervisory
Board does not see any need for external support of its self-assessment. The results
of these individual meetings were presented and thoroughly discussed at the Super-
visory Board meeting on December 13, 2018. Overall, its members rated the Super-
visory Board's activity as efficient.
An important aspect of good corporate governance is the independence of Supervi-
sory Board members and their freedom from conflicts of interest. According to
assessments of the Supervisory Board, 10 of its 12 members can be considered
independent within the meaning of the German Corporate Governance Code and the
additional criteria defined by the Supervisory Board for evaluating their independence.
The criteria used for this evaluation can be found in the Corporate Governance Report
on page 136. Two of the six shareholder representatives on the Supervisory Board
have been members of the Supervisory Board for more than 15 years and are no
longer considered independent due to this long period of Supervisory Board member-
ship. Beyond this limitation, the Supervisory Board does not see any indications that
the Supervisory Board role is not performed completely independently, including for
these Supervisory Board members. Both Supervisory Board members will not stand
for reelection at the 2019 Annual Shareholders' Meeting and will retire from the Super-
visory Board. In cases where Supervisory Board members hold supervisory or
management positions at companies with which BASF has business relations, we see
no impairment of their independence. The scope of these businesses is relatively
marginal and furthermore takes place under conditions similar to those of a third party.
The Supervisory Board reviews the efficiency of its activities every year in the form of
Independence and efficiency review
The full Declaration of Conformity is rendered on page 166 and is available to shareholders on the company website at
basf.com/en/corporate governance
the financial statements are presented in the Auditor's Report, the content of which
has been significantly expanded since the 2017 Financial Statements.
The Auditor's Report is rendered from page 170 onward.
For more information on the auditor, see the Corporate Governance Report on page 139
Beyond the statutory audit of the Financial Statements, KPMG also conducted, on
behalf of the Supervisory Board, a substantive audit with limited assurance of the
Nonfinancial Statements (NFSs) for BASF SE and the BASF Group, which are integral
parts of the respective management's reports. On the basis of its audit, KPMG did not
raise any objections to the nonfinancial reporting and the satisfaction of the relevant
statutory requirements.
1 To Our Shareholders
About This Report
165
BASF Report 2018
Chairman of the Supervisory Board
Jürgen Hambrecht
Janzen Haunbreaks
170
Ludwigshafen, February 21, 2019
The Supervisory Board's term of office ends on conclusion of the 2019 Annual Share-
holders' Meeting. At its meeting on December 13, 2018, the Supervisory Board
resolved on candidate proposals for the election of the six shareholder representatives
based on the recommendation of the Nomination Committee. According to the
Supervisory Board's assessment, these meet the competence profile developed by
the Supervisory Board and the objectives for its composition in full. The six employee
representative were already elected by the BASF Works Council Europe on Novem-
ber 21, 2018, in accordance with the Employee Participation Agreement.
For more information on changes within the Supervisory Board, see the Corporate Governance Report on page 136
Employee representatives Ralf-Gerd Bastian and Francesco Grioli retired from the
Supervisory Board on conclusion of the Annual Shareholders' Meeting on May 4, 2018.
The Supervisory Board expresses its very sincere thanks to Ralf-Gerd Bastian and
Francesco Grioli for their services to the Supervisory Board. They were succeeded by
Tatjana Diether and Roland Strasser, who joined the Supervisory Board as the alternate
members appointed by the BASF Works Council Europe on December 4, 2013, in
accordance with the Employee Participation Agreement dated November 15, 2007.
Composition of the Supervisory Board
Executive Directors regarding the appropriation of profit and the payment of a dividend
of €3.20 per share.
The Audit Committee reviewed the Financial Statements and Management's Report at
its meeting on February 20, 2019, including the reports prepared by the auditor and
the key audit matters specified in the Auditor's Report, and discussed them in detail
with the auditor. The chairman gave a detailed account of the preliminary review at the
Supervisory Board meeting on February 21, 2019. On this basis, the Supervisory
Board has examined the Financial Statements and Management's Report of BASF SE
for 2018, the proposal by the Board of Executive Directors for the appropriation of
profit, and the Consolidated Financial Statements and Management's Report for 2018.
The results of the preliminary review by the Audit Committee and the results of the
Supervisory Board's own examination fully concur with those of the audit. The Super-
visory Board sees no grounds for objection to the management and submitted reports
At its accounts meeting on February 21, 2019, the Supervisory Board approved the
Financial Statements of BASF SE and the Consolidated Financial Statements of the
BASF Group prepared by the Board of Executive Directors, making the 2018 Financial
Statements final. The Supervisory Board concurs with the proposal of the Board of
The auditor's reports were sent in a timely manner to every member of the Supervisory
Board. The auditor attended the accounts review meeting of the Audit Committee on
February 20, 2019, as well as the accounts meeting of the Supervisory Board on
February 21, 2019, and reported on the procedure and material findings of its audit,
including the key audit matters described in the Auditor's Report. The auditor also
provided detailed explanations of the reports on the day before the accounts meeting
of the Supervisory Board.
The assurance report issued by KPMG on the substantive audit of the NFS can be found at basf.com/nfs-audit-2018
Thanks
About This Report
BASF Report 2018
170
The underlying approach used to identify and measure the assets
acquired and liabilities assumed is appropriate and consistent with
the applicable accounting principles.
For information on the accounting principles applied and on BASF's
oil and gas price scenario, please refer to Note 1.4 to the Consoli-
dated Financial Statements on pages 200 and 201. Information on
the discontinued oil and gas business can be found in Note 2.5 to
the Consolidated Financial Statements from page 209 onward.
Financial statement risk
On September 27, 2018, BASF and LetterOne signed an agreement
on the merger of their oil and gas activities. BASF's oil and gas
activities represent a separate, material business area of BASF and
were accounted for as the Oil & Gas segment until signing of the
agreement. BASF will hold a majority share in the newly created
company, which will operate under the name Wintershall Dea. BASF
will lose control over the oil and gas activities as a result of the agree-
ments signed by the shareholders on the management of the newly
created company, and therefore classified these activities as a dis-
continued operation.
Prerequisites for the classification and thus the presentation of the
oil and gas activities as a discontinued operation in accordance with
IFRS 5 include the loss of control over these activities. To assess
this, the future management structure of Wintershall Dea must be
analyzed using the criteria of IFRS 10 (concept of control); this
analysis is complex. Properly accounting for the assets and liabilities
allocated to the discontinued operation, including their subsequent
measurement and the corresponding explanatory disclosures in
the Notes to the Consolidated Financial Statements, are just as
complex.
There is a risk for the Consolidated Financial Statements that the
prerequisites for classification as a discontinued operation are not
met, and thus that its presentation as a discontinued operation in
the Consolidated Financial Statements of the BASF Group is not
correct. In addition, there is a risk that the assets and liabilities
allocated to the discontinued operation are not recognized and
measured properly, and that the corresponding disclosures in the
Notes to the Consolidated Financial Statements are not complete
and appropriate.
Furthermore, the accounting figures for the discontinued operation
must be tested for potential impairment on initial classification. A key
factor in the recoverability of the assets of the oil and gas business,
including the goodwill allocated to the Exploration & Production
cash-generating unit, is BASF's oil and gas price projections. The oil
and gas price projections underlying the calculation are based on an
internal estimation process.
It is difficult to forecast future price trends given the high volatility of
oil and gas prices. The variety of assumptions underlying the
estimation process are subject to significant judgment. This gives
rise to the risk that the oil and gas price projections are not within an
appropriate range and that the assets of the oil and gas business,
including the goodwill allocated to the Exploration & Production
cash-generating unit, were not measured properly on initial
classification as a discontinued operation. There is also a risk that
estimation uncertainties have not been sufficiently disclosed in the
Notes to the Consolidated Financial Statements.
BASF Report 2018
172
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Our observations
In addition, we satisfied ourselves of the correct presentation of the
acquisition in the Consolidated Financial Statements of BASF SE. In
doing so, we also assessed whether the disclosures on the
acquisition contained in the Notes to the Consolidated Financial
Statements are complete and appropriate.
In order to assess the accuracy of the measurement of the
identifiable assets and liabilities, we reproduced selected calcula-
tions taking into account risk-based considerations.
The key assumptions and parameters underlying purchase price
allocation are reasonable and the presentation of the acquisition in
the Notes to the Consolidated Financial Statements is complete and
appropriate.
There is a risk for the Consolidated Financial Statements that the
assets acquired and liabilities assumed have not been identified in
full, or have not been measured correctly. In addition, there is a risk
that the disclosures on the acquisition in the Notes to the
Consolidated Financial statements are not complete and appropri-
ate.
Our audit approach
We consulted our valuation specialists in order to assess the
appropriateness of the identification and measurement approach,
as well as the key assumptions used here, among other things.
To start with, we spoke with members of the Board of Executive
Directors and other BASF employees and assessed the relevant
agreements to gain an understanding of the transaction. We
compared the total purchase price with the underlying purchase
agreement and the records of payment.
In addition, we assessed the competence, abilities and objectivity of
the independent expert engaged by BASF to identify and measure
the identifiable assets and liabilities. We also evaluated whether the
process used to identify the assets acquired and liabilities assumed
meet the requirements of IFRS 3 based on our knowledge of BASF's
business model. We assessed whether the assessment approaches
used are consistent with the relevant accounting principles.
BASF Report 2018
4 Consolidated Financial Statements
Independent Auditor's Report
171
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Supplementary Information Oil and Gas Business
6 Overviews
We discussed the projected development of sales and margins with
the persons responsible for planning. In addition, we evaluated the
consistency of the assumptions with external, industry-specific
market assessments. We compared the licensing fees used in the
measurement of intangible assets with reference values in relevant
databases, taking into consideration the supplied profitability Accounting treatment of the oil and gas business
analyses for the assets concerned. We evaluated the useful lives
applied on the basis of discussions with the client's experts, taking
into account any remaining patent terms and the underlying product
life cycles. The useful lives of assets selected based on risk were
checked for plausibility using existing reference assessments.
Furthermore, we satisfied ourselves of the methodological appropri-
ateness of the calculation and the appropriateness of the weighted
cost of capital rates. To this end, we compared the assumptions and
parameters underlying the cost of capital with our own assumptions
and publicly available data. The audit team was supported by our
company valuation specialists.
About This Report
businesses, the licensing fees used for measurements based on the
relief from royalty method, the underlying useful lives of the identified
assets and the cost of capital.
5 Supplementary Information Oil and Gas Business 6 Overviews
We started by assessing whether the classification of the oil and gas
business as a discontinued operation was performed in accordance
with IFRS 5. In addition, we satisfied ourselves that BASF loses
control over its oil and gas activities as a result of the agreements
signed by the shareholders on the management of the newly created
company. To this end, we evaluated the agreements concluded in
connection with the merger on the management structure and
spoke with members of the Board of Executive Directors and other
BASF employees. Furthermore, we evaluated whether the assets
and liabilities allocated to the discontinued operation were
recognized and measured properly, and assessed whether the
explanations on the discontinued operation in the Notes to the
Consolidated Financial Statements are complete and appropriate.
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Supplementary Information Oil and Gas Business 6 Overviews
Responsibilities of the Board of Executive Directors and the
Supervisory Board for the Consolidated Financial State-
ments and the Group Management Report
Board of Executive Directors is responsible for the preparation of the
Consolidated Financial Statements that comply, in all material
respects, with IFRSS as adopted by the EU, the additional require-
ments of German commercial law pursuant to Section 315e (1) HGB
and full IFRS and that the Consolidated Financial Statements, in
compliance with these requirements, give a true and fair view of the
assets, liabilities, financial position, and financial performance of the
O Group. In addition, the Board of Executive Directors is responsible
for such internal control as they have determined necessary to
enable the preparation of Consolidated Financial Statements that
are free from material misstatement, whether due to fraud or error.
In preparing the Consolidated Financial Statements, the Board of
Executive Directors is responsible for assessing the Group's ability
to continue as a going concern. They also have the responsibility for
disclosing, as applicable, matters related to going concern. In
addition, they are responsible for financial reporting based on the
going concern basis of accounting unless there is an intention to
liquidate the Group or to cease operations, or there is no realistic
alternative but to do so.
Furthermore, the Board of Executive Directors is responsible for the
preparation of the Group Management Report that, as a whole,
provides an appropriate view of the Group's position and is, in all
material respects, consistent with the Consolidated Financial
Statements, complies with German legal requirements, and
appropriately presents the opportunities and risks of future
development. In addition, the Board of Executive Directors is
responsible for such arrangements and measures (systems) as they
have considered necessary to enable the preparation of a Group
Management Report that is in accordance with the applicable
German legal requirements, and to be able to provide sufficient
appropriate evidence for the assertions in the Group Management
Report.
The Supervisory Board is responsible for overseeing the Group's
financial reporting process for the preparation of the Consolidated
Financial Statements and of the Group Management Report.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements and of the Group Management Report
Our objectives are to obtain reasonable assurance about whether
the Consolidated Financial Statements as a whole are free from
material misstatement, whether due to fraud or error, and whether
the Group Management Report as a whole provides an appropriate
view of the Group's position and, in all material respects, is consis-
tent with the Consolidated Financial Statements and the knowledge
obtained in the audit, complies with the German legal requirements
and appropriately presents the opportunities and risks of future
development, as well as to issue an auditor's report that includes our
opinions on the Consolidated Financial Statements and on the
Group Management Report.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Section 317
HGB and the EU Audit Regulation and in compliance with German
Generally Accepted Standards for Financial Statement Audits
promulgated by the Institut der Wirtschaftsprüfer (IDW) will always
detect a material misstatement. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggre-
gate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these Consolidated Financial
Statements and this Group Management Report.
We exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the
Consolidated Financial Statements and of the Group Management
Report, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our
opinions. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, mis-
representations, or the override of internal control.
_
About This Report
173
BASF Report 2018
In accordance with our engagement, we performed a separate
review of the nonfinancial statement. For the type, scope and results
of this review, please refer to our audit report dated, February 20,
2019.
In addition, in order to assess its suitability as a basis for calculation,
we had the company explain to us how the oil and gas price scenario
was determined. Our audit procedures included, among others, an
assessment of the completeness and balance of the assumptions
used in the estimation process. We critically examined the assump-
tions for the macroeconomic parameters, such as the development
of demand for oil and gas, fiscal considerations of important crude
oil and gas-producing countries, rising marginal production costs,
as well as producers' investment behavior, and assessed whether
these were appropriately reflected in BASF's oil and gas price
scenario. Finally, we compared BASF's oil and gas price scenario
with the published forecasts of industry associations, analysts,
international institutions and other market participants.
We satisfied ourselves of the suitability of the estimation process
and the resulting forecasts for accounting purposes by comparing
BASF's oil and gas price projections in the past ten years with the
actual average annual prices.
The explanations in the Notes to the Consolidated Financial
Statements on the oil and gas price scenario assumed by BASF as
a significant source of estimation uncertainties are sufficiently
detailed and appropriate.
We also analyzed, on the basis of alternative scenarios prepared by Other Information
BASF, the effects of a variation in the oil and gas price scenario on
the impairment test on initial classification of the discontinued
operation. We satisfied ourselves of the appropriateness of the
assumptions underlying the alternative scenarios.
Furthermore, we assessed whether the disclosures in the Notes to
the Consolidated Financial Statements on BASF's oil and gas price
scenario and estimation uncertainties related to the scenario are
sufficient and appropriate.
Our observations
The classification of the oil and gas business as a discontinued
operation is appropriate and consistent with IFRS 5. The assets and
liabilities allocated to the discontinued operation are recognized and
measured properly, and the related explanations in the Notes to the
Consolidated Financial Statements are complete and appropriate.
Our audit approach
Overall, the assumptions about oil and gas prices made by the
Board of Executive Directors underlying the impairment test on initial
classification of the discontinued operation are appropriate. The
estimates and assumptions made in the preparation of the com-
pany's internal forecasts are sufficiently documented and justified.
Overall, BASF's oil and gas price forecasts therefore represent a
reasonable basis for calculation.
-
the unaudited part of the Group Management Report described in
section "Opinions", and
the remaining parts of the BASF Report 2018, with the exception
of the audited Consolidated Financial Statements and Group
Management Report and our auditor's report.
Our opinions on the Consolidated Financial Statements and on the
Group Management Report do not cover the other information, and
consequently we do not express an opinion or any other form of
assurance conclusion thereon.
In connection with our audit, our responsibility is to read the other
information and, in so doing, to consider whether the other
information
- is materially inconsistent with the Consolidated Financial
Statements, with the Group Management Report or our
knowledge obtained in the audit, or
otherwise appears to be materially misstated.
The Board of Executive Directors is responsible for the other
information. The other information comprises:
-
Identifying and measuring the assets acquired and liabilities
assumed is complex and is based on discretionary assumptions by
the Board of Executive Directors. The key assumptions are the
projected development of sales and margins in the acquired
On August 1, 2018, BASF SE acquired significant parts of the seed
and non-selective herbicide business as well as assets of Bayer AG.
An additional acquisition of the global vegetable seeds business
followed on August 16, 2018. The total purchase price was
€7,421 million. Taking into account the net assets acquired in the
amount of €6,168 million, goodwill of €1,253 million arose.
BASF Group
Statement of Income and Expense Recognized in Equity
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
Statement of Income and Expense Recognized in Equity
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
176
(0.01)
6.61
6.61
5.11
[5]
(0.01)
(0.01)
Statement of comprehensive income¹
Million €
Income after taxes
Remeasurement of defined benefit plans²
of BASF SE
BASF Group
4,979
Shareholders
2018
4 For more information, see Note 27, "Supplementary information on financial instruments," from page 251 onward
3 FVOCI: fair value through other comprehensive income
2 For more information, see Note 22, "Provisions for pensions and similar obligations," from page 240 onward
[5]
1 For more information on other comprehensive income, see Note 20 on page 239
Other comprehensive income after taxes
Reclassifiable gains/losses after taxes from equity-accounted investments
Reclassifiable gains/losses
Deferred taxes on reclassifiable gains/losses
Reclassification of realized gains/losses recognized in the statement of income
Fair value changes in derivatives designated as cash flow hedges, net
Unrealized gains/losses from currency translation
Unrealized gains/losses from fair value changes in securities measured at FVOCI³
Reclassification of realized gains/losses recognized in the statement of income
Fair value changes in securities measured at FVOCI,³ net4
Unrealized gains/losses in connection with cash flow hedges
Nonreclassifiable gains/losses after taxes from equity-accounted investments
Nonreclassifiable gains/losses
Deferred taxes on nonreclassifiable gains/losses
Comprehensive income
The identifiable assets acquired and liabilities assumed are
recognized at fair value on the date of acquisition in accordance with
IFRS 3. BASF consulted an external expert on the identification and
measurement of the identifiable assets acquired and liabilities
assumed.
6.62
5.12
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Supplementary Information Oil and Gas Business 6 Overviews
light of volatile raw materials prices and an instable macroeconomic
environment. Deviations from the key assumptions, which the Board
of Executive Directors considers reasonably possible, would lead to
an impairment at the above unit. There is the risk for the financial
statements that impairment has not been identified. In addition,
there is also a risk that the Notes to the Consolidated Financial
Statements do not contain the required disclosures on the key
assumptions and sensitivities for this unit.
Our audit approach
parameters underlying the weighted cost of capital rates and
compared these with the assumptions and parameters used. The
audit team was supported by our company valuation specialists.
Finally, we assessed the completeness of the disclosures on the key
assumptions and the sensitivities.
Our observations
The assumptions underlying the calculations of the Board of
Executive Directors are balanced overall. The disclosures in the
Notes on the key assumptions and the sensitivities are complete.
For information on the accounting principles applied, please refer to
Note 1.4 to the Consolidated Financial Statements on page 200.
Information on the acquisition can be found in Note 2.4 to the
Consolidated Financial Statements from page 205 onward.
Financial statement risk
We examined the forecast for future cash inflows in the detailed
planning period, in particular with respect to whether the expected
development of the relevant sales markets were given appropriate Acquisition of agricultural solutions businesses from Bayer
consideration and are consistent with the current budget adopted
by the Board of Executive Directors and the Supervisory Board. We
compared internal growth forecasts with industry expectations and
those of significant competitors. We reviewed whether the assump-
tions in the budget adopted by the Board of Executive Directors and
the Supervisory Board about the future development of margins and
the amount of investments are appropriate, focusing on the unit for
which the Board of Executive Directors considered deviations from
the key assumptions to be reasonably possible and where these
deviations would lead to the carrying amount of the unit exceeding
its recoverable amount. Our review of the appropriateness of the
budget adopted by the Board of Executive Directors and the
Supervisory Board also included a comparison of planning in past
business years with the results actually achieved. For selected units,
we examined whether reasons for not reaching planned values in
the past were given appropriate consideration in current planning, to
the extent that this was relevant.
We assessed the appropriateness of the assumed growth rate for
the period following the detailed planning period on the basis of
industry and macroeconomic studies. We satisfied ourselves of the
methodological appropriateness of the calculation and the
appropriateness of the weighted cost of capital rates. To this end,
we calculated our own expected values for the assumptions and
About This Report
829
760
4,979
[5]
0.78
0.83
[5]
5.84
4.29
[5]
6.62
6,078
4,707
(274)
(274)
(272)
[12]
6,352
6,352
6,078
_
180
BASF Report 2018
1,569
1,815
[7]
(1,888)
(1,843)
(2,028)
[6]
(1,412)
(1,330)
(1,426)
[6]
(8,262)
(8,182)
(8,588)
[6]
1,916
[8]
(2,365)
(2,582)
(42)
(60)
(57)
(78)
31
27
36
20,546
8,522
6,033
[4]
571
323
269
[9]
(2,949)
7,587
(30)
19,632
(43,929)
Income after taxes from discontinued operations
Income after taxes from continuing operations
Income taxes
Income before income taxes
Financial result
Other financial result
Other financial expenses
Other financial income
Interest result
Interest expenses
Interest income
Net income from shareholdings
Income from other shareholdings
Expenses from other shareholdings
Income from operations
Income from companies accounted for using the equity method
Income after taxes
Noncontrolling interests.
Net income
Earnings per share from continuing operations (€)
(41,591)
(44,319)
[6]
2017
previous
64,475
61,223
62,675
[1], [4]
18,356
2017
restated¹
Explanations in Note
BASF Report 2018
1 Figures for 2017 were restated with the presentation of the oil and gas activities as discontinued operations. For more information, see Note 1.4 from page 192 onward
Diluted earnings per share (€)
Dilution effect (€)
Earnings per share (€)
Earnings per share from discontinued operations (€)
2018
174
177
(29)
226
KPMG AG
Wirtschaftsprüfungsgesellschaft
[Original German version signed by:]
Sailer
Wirtschaftsprüfer
[German Public Auditor]
Bock
Wirtschaftsprüfer
[German Public Auditor]
BASF Report 2018
175
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
Statement of Income
Frankfurt am Main, February 20, 2019
The German Public Auditor responsible for the engagement is
Alexander Bock.
We declare that the opinions expressed in this auditor's report are
consistent with the additional report to the audit committee pursuant
to Article 11 of the EU Audit Regulation (long-form audit report).
German Public Auditor Responsible for the Engagement
We were elected as group auditor by the annual general meeting on
May 4, 2018. We were engaged by the Chairwoman of the audit
committee on July 23, 2018. We have been the group auditor of
BASF SE without interruption since the financial year 2006.
174
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Supplementary Information Oil and Gas Business
6 Overviews
6 Overviews
Evaluate the overall presentation, structure and content of the
Consolidated Financial Statements, including the disclosures, and
whether the Consolidated Financial Statements present the
underlying transactions and events in a manner that the
Consolidated Financial Statements give a true and fair view of the
assets, liabilities, financial position and financial performance of
the Group in compliance with IFRSS as adopted by the EU, the
additional requirements of German commercial law pursuant to
Section 315e (1) HGB and full IFRS.
Obtain sufficient appropriate audit evidence regarding the finan-
cial information of the entities or business activities within the
Group to express opinions on the Consolidated Financial
Statements and on the Group Management Report. We are
responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our opinions.
Evaluate the consistency of the Group Management Report with
the Consolidated Financial Statements, its conformity with law,
and the view of the Group's position it provides.
Perform audit procedures on the prospective information
presented by the Board of Executive Directors in the Group
Management Report. On the basis of sufficient appropriate audit
evidence we evaluate, in particular, the significant assumptions
used by the Board of Executive Directors as a basis for the
prospective information, and evaluate the proper derivation of the
prospective information from these assumptions. We do not
express a separate opinion on the prospective information and on
the assumptions used as a basis. There is a substantial
unavoidable risk that future events will differ materially from the
prospective information.
We communicate with the audit committee regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the audit committee with a statement that we have
complied with the relevant independence requirements, and
communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where
applicable, the related safeguards.
From the matters communicated with the audit committee, we
determine those matters that were of most significance in the audit
of the Consolidated Financial Statements of the current period and
are therefore the key audit matters. We describe these matters in
our auditor's report unless law or regulation precludes public
disclosure about the matter.
Other Legal and Regulatory Requirements
Further Information pursuant to Article 10 of the EU Audit
Regulation
-
Statement of Income
BASF Group
Statement of income
[10]
(359)
(360)
(337)
(429)
(399)
(369)
(745)
70
32
(334)
(315)
(366)
(560)
(492)
(540)
39
4,707
(705)
5,288
Million €
Sales revenue
Cost of sales
Gross profit on sales
Selling expenses
General administrative expenses
Research and development expenses
(722)
[2]
4,150
(1,448)
(1,290)
(1,138)
[11]
7,800
6,882
5,592
Obtain an understanding of internal control relevant to the audit of
the Consolidated Financial Statements and of arrangements and
measures (systems) relevant to the audit of the Group Manage-
ment Report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of these systems.
Evaluate the appropriateness of accounting policies used by the
Board of Executive Directors and the reasonableness of estimates
made by the Board of Executive Directors and related disclosures.
Conclude on the appropriateness of the Board of Executive
Directors' use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are
required to draw attention in the auditor's report to the related
disclosures in the Consolidated Financial Statements and in the
Group Management Report or, if such disclosures are inadequate,
to modify our respective opinions. Our conclusions are based on
the audit evidence obtained up to the date of our auditor's report.
However, future events or conditions may cause the Group to
cease to be able to continue as a going concern.
(977)
235
Total assets
31,145
43,221
14,607
6,495
2,300
[1]
[2]
52
344
3,494
3,139
[18]
10,801
10,665
[18]
86,556
78,768
1 As of January 1, 2018, receivables from bank acceptance drafts are no longer reported under trade accounts receivable, but under the item other receivables and miscellaneous assets. The 2017 figures have been restated accordingly. For more information, see Note 18 from page 235 onward
2 For a reconciliation of the amounts in the statement of cash flows with the balance sheet item cash and cash equivalents, see page 181.
BASF Report 2018
Equity attributable to shareholders of BASF SE
Other comprehensive income
Retained earnings
Capital reserves
Subscribed capital
Million €
Equity and liabilities
10,303
Balance Sheet
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
179
6 Overviews
Noncontrolling interests
12,166
Current assets
25,258
20,780
[15]
13,594
16,554
[14]
December 31, 2017
December 31, 2018
Explanations in Note
Noncurrent assets
Other receivables and miscellaneous assets
Deferred tax assets
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment
[16]
2,203
4,715
[16]
Assets of disposal groups
Cash and cash equivalents²
Marketable securities
Other receivables and miscellaneous assets¹
Accounts receivable, trade¹
Inventories
47,623
[17]
43,335
886
[18]
2,118
2,342
[11]
606
570
1,332
Intangible assets
Equity
Other provisions
5,122
29,132
Other operating income
27,118
1,095
705
[24]
15,535
15,332
[24]
2,731
1,787
[11]
3,478
1,860
4,971
NNN
[23]
3,252
78,768
86,556
14,880
23,329
5,753
[2]
3,064
[23]
2,998
2,497
5,509
[24]
1,119
695
[11]
3,229
[24]
Provisions for pensions and similar obligations
6,293
[22]
December 31, 2017
December 31, 2018
Explanations in Note
Total equity and liabilities
Current liabilities
Liabilities of disposal groups
Other liabilities
Financial indebtedness
Tax liabilities
Provisions
Accounts payable, trade
Noncurrent liabilities
Other liabilities
Financial indebtedness
Deferred tax liabilities
[19]
1,176
1,176
[19]
BASF Report 2018
34,756
36,109
919
1,055
[21]
33,837
7,434
35,054
(5,939)
[20]
34,826
36,699
[19]
3,117
3,118
(5,282)
Million €
Assets
BASF Group
159
(126)
(126)
(20)
(20)
12
12
9
9
(87)
(1,964)
(2,051)
22
172
194
137
22
(2,108)
(2,021)
About This Report
177
BASF Report 2018
187
4,810
4,997
294
51
4,099
(87)
(1,268)
(1,355)
22
(608)
(586)
(87)
4,393
1 To Our Shareholders
51
(25)
1,064
1,064
Noncontrolling
interests
6,078
6,352
272
Shareholders
of BASF SE
BASF Group
2017
1
(745)
(745)
(3)
(3)
235
(320)
(320)
9
9
99
99
(48)
(48)
(48)
(48)
23
(25)
23
6
1
1
274
Noncontrolling
interests
753
753
6
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
Statement of Income and Expense Recognized in Equity
(960)
68
8
(2,109)
1,073
(4,014)
(149)
32
1,476
(5,373)
Deferred taxes
Changes
As of January 1, 2017
(5,939)
(113)
(320)
28
(1)
(15)
Balance Sheet
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
Balance Sheet
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
5
178
(5,282)
(96)
39
(605)
(4,620)
As of December 31, 2017
(308)
BASF Report 2018
(466)
(5,365)
As of December 31, 2018
(5,282)
(96)
39
(605)
(4,620)
IFRS 9 transition effect
As of December 31, 2017
(35)
Total income and expense
recognized in equity
Measurement of
securities at fair value
Unrealized gains/losses
from currency translation
Remeasurement of
defined benefit plans
Other comprehensive income
Million €
Development of income and expense recognized in equity attributable to shareholders of BASF SE
6 Overviews
Cash flow hedges
(977)
(14)
As of January 1, 2018
244
11
(2)
235
Deferred taxes
(852)
(14)
(49)
1
(980)
Changes
(5,331)
(110)
4
(605)
(4,620)
141
Other operating expenses
Securities
IAS 12 was amended to the extent that all income tax effects of
dividend payments must be considered in the same way as the
income on which the dividends are based.
(174)³
4,707
4,707
272
4,979
(608)
(608)
22
For more information on leases, see Note 28 from page 259 onward
Amendments to IFRS 9 - Financial Assets with a Prepay-
ment Feature with Negative Compensation
The amendments pertain to the relevant criteria for the classification
of financial assets. Financial assets with a prepayment feature with
negative compensation may be recognized under certain conditions
at amortized cost or at fair value through other comprehensive
income instead of at fair value through profit and loss. The amend-
ments are effective as of January 1, 2019. They are not expected to
have any material effect on BASF.
IFRIC 23 - Uncertainty over Income Tax Treatments
IFRIC 23 expands on the requirements in IAS 12 on how to account
for uncertainties surrounding the income tax treatment of circum-
stances and transactions with respect to both actual and deferred
taxes. The interpretation is effective for reporting periods beginning
on or after January 1, 2019. The amendments have no material
effect on BASF.
Amendments to IAS 28 - Long-Term Interests in Associates
and Joint Ventures
On October 12, 2017, the IASB published amendments to IAS 28
on long-term interests in associated companies and joint ventures.
These amendments clarify that IFRS 9 is to be applied to long-term
interests in associated companies or joint ventures that are not
accounted for using the equity method. The amendments were
adopted as E.U. legislation in the first quarter of 2019 and must be
applied as of January 1, 2019. The effects are explained under
IFRS 9 - Financial Instruments in this Note.
BASF Report 2018
189
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
IFRSS and IFRICS not yet to be considered and not yet
endorsed by the E.U.
The IASB issued further amendments to standards and interpreta-
tions whose application is not yet mandatory and is still subject to
E.U. endorsement. These amendments are unlikely to have a mate-
rial impact on the reporting of BASF. BASF does not plan on early
adoption of these amendments.
Amendments to IFRS 10 and IAS 28 - Sale or Contribution
of Assets between an Investor and an associated company
or Joint Venture
The IASB issued amendments to IFRS 10 and IAS 28 on Septem-
ber 11, 2014. The amendments address a known inconsistency
between the requirements of IFRS 10 and IAS 28 (2011) in the case
of the sale of an asset to an associated company or a joint venture
or the contribution of an asset to an associated company or a joint
venture.
(2,847)
(2,847)
34,726
917
Subscribed
capital
Capital
reserves
918,478,694
1,176
3,117
Retained
earnings
34,826
comprehensive
income²
Other Equity attributable
to shareholders
of BASF SE
Noncontrolling
interests
Equity
IASB has postponed the effective date of the changes indefinitely.
(5,282)
919
34,756
21
(49)
(28)
(2)
(30)
918,478,694
1,176
3,117
34,847
(5,331)
33,809
33,837
Number of shares
outstanding
Annual Improvements to IFRSS (2015-2017)
In IFRS 3, it was clarified that when a party to a joint arrangement
obtains control of a business that is a joint operation and had rights
to the assets and obligations for the liabilities relating to that joint
operation immediately before the acquisition date, the transaction is
a business combination achieved in stages. The acquirer shall there-
fore apply the requirements for a business combination achieved in
stages, including remeasuring its previously held interest in the joint
operation.
IFRIC 22 addresses an application question for IAS 21 - The Effects
of Changes in Foreign Exchange Rates. It clarifies the point in time
for determining the exchange rate used to translate foreign currency
transactions containing advance payments that have been made or
received. The underlying asset, income or expense is translated
using the relevant exchange rate on the date on which the asset or
liability resulting from the prepayment was first recognized. The
amendments have no material effect on BASF.
Amendments to IFRIC 22 - Foreign Currency Transactions
and Advance Consideration
The amendments address a number of individual issues pertaining
to the accounting of cash-settled share-based payment trans-
actions. The amendments relate to the calculation of fair value of
obligations arising from share-based payment transactions. Other
requirements concern the effects of withholding tax obligations on
the classification of compensation programs, as well as the presen-
tation of option rights with respect to the type of compensation to be
received or granted (cash or equity settlement). The amendments
are to be applied to compensation granted or changed in fiscal
years beginning on or after January 1, 2018. The amendments have
no effect on BASF.
Amendments to IFRS 2 - Classification and Measurement of
Share-Based Payment Transactions
In IAS 28, it was clarified that the option to measure an investment
in an associated company or a joint venture held by an entity that is
a venture capital organization or other qualifying entity, can be
exercised on an investment-by-investment basis. The short-term
exemptions in IFRS 1, Appendix E (IFRS 1.E3-E7) for first-time IFRS
users were deleted. The amendments are not expected to have any
material effect on BASF.
Annual Improvements to IFRSS (2014-2016)
Sales revenue for the 2018 fiscal year includes €135 million from
performance obligations fulfilled in prior periods in connection with
sales and usage-based licenses.
BASF applied IFRS 15 as of January 1, 2018, using the modified
retrospective method. As a result, comparative information for
2017 was not restated. In accordance with IFRS 15.C7, only
contracts that had not yet been completed as of the date of initial
application were transitioned to the new standard. Contract modifi-
cations arising before initial application (IFRS 15.C7 A(b)) did not
I have to be accounted for.
Control can be transferred at a certain point in time or over a period
of time. The performance obligations arising from contracts with
BASF's customers are almost always satisfied at a point in time. In
individual cases, in particular for licensing agreements, they are
satisfied over a period of time.
Step 5: Recognize revenue when the performance obligation is
satisfied
- Step 4: Allocate the transaction price to the performance obliga- Sales revenue of €62 million, that was included in contract liabilities
tions
as of January 1, 2018, was recognized in 2018.
The main effect of initial application of the new standard was a
change in presentation within "other liabilities." Deferred sales
revenue of €204 million from licenses and long-term contracts with
customers that was previously presented as deferred income was
reclassified to contract liabilities. The adoption of the new standard
did not lead to any changes in retained earnings.
As part of the adoption of the new standard, the items "contract
assets" and "contract liabilities" were added to the balance sheet. A
contract liability is BASF's obligation to transfer goods or services to
a customer, for which BASF has already received consideration from
the customer. There were no contract assets at any point in time
during 2018.
- Step 3: Determine the transaction price
- Step 2: Identify performance obligations contained in the con-
tracts
Step 1: Identify contracts with customers
-
-
According to IFRS 15, sales revenue is measured at the amount the
entity expects to recognize in exchange for goods and services
when control of the agreed goods or services and the benefits
obtainable from them are transferred to the customer. The standard
provides the following five-step process for revenue recognition:
IFRS 15 - Revenues from Contracts with Customers
IFRS 15 - Revenues from Contracts with Customers was endorsed
by the European Union in the third quarter of 2016 and applied by
BASF for the first time as of January 1, 2018.
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
ASCG Interpretation 4 (IFRS) – Accounting for Interest and
Penalties Related to Income Taxes under IFRSS
The interpretation addresses the accounting for interest and
penalties related to taxes within the meaning of section 3(4) of the
Fiscal Code of Germany (AO) that relate to current income taxes
within the meaning of IAS 12.5 in financial statements presented in
accordance to IFRS as recognized by the European Union. It
prescribes the application of IAS 37 to interest and penalties related
to taxes within the meaning of section 3(4) AO and the implications
for the recognition, measurement and presentation of interest and
penalties related to taxes. At BASF, interest income/expense related
to income taxes in accordance with IAS 12.5 and tax penalties were
BASF Report 2018
188
In IFRS 11, it was clarified that when an entity obtains joint control of
a business that is a joint operation and had rights to the assets and
obligations for the liabilities relating to that joint operation immedi-
ately before the acquisition date, the previously held interest in that
business is not to be remeasured.
190
BASF Report 2018
The amendments issued on October 22, 2018, clarify that a
business is a set of activities and assets with at least one input and
one substantive process that together significantly contribute to the
ability to create outputs. Outputs are defined as the provision of
goods and services to customers. The reference to cost reduction
was removed. In addition, the new provisions also contain an
optional concentration test designed to simplify identification of a
business. Subject to adoption by E.U. legislation, the modified
definition is to be applied to business combinations with an
acquisition date on or after January 1, 2020.
Amendments to IFRS 3 - Business Combinations
The amendments update references to and quotes from the
Conceptual Framework. The amendments are - subject to E.U.
endorsement - to be applied for the first time in the reporting period
beginning on or after January 1, 2020.
Amendments to References to the Conceptual Framework
in IFRS Standards
The revised Conceptual Framework issued on March 29, 2018,
replaces the previous Conceptual Framework from 2010. The main
changes primarily relate to the definition, recognition and
measurement of assets and liabilities, as well as the differentiation
between income and expense and other comprehensive income.
Subject to adoption by E.U. legislation, amendments are effective as
of January 1, 2020.
Conceptual Framework
The amendments relate to the measurement of pension obligations
based on updated assumptions if plan amendment, curtailment or
settlement occurs. After such an event, the past service cost as well
as any gains or losses on the basis of current actuarial assumptions
and a comparison of the resulting pension benefits must be
calculated before and after the change. The periods before and after
the plan amendment, curtailment or settlement are treated
separately in subsequent measurement. The amendments are
- subject to E.U. endorsement - to be applied for the first time in the
reporting period beginning on or after January 1, 2019.
Improvements to IAS 19 - Plan Amendment, Curtailment or
Settlement
The amendments are - subject to E.U. endorsement - to be applied
for the first time in the reporting period beginning on or after
January 1, 2019.
BASF introduced a new software program to manage and measure
leases, in which the relevant leases were documented. The following
statements on the effects of IFRS 16 are based on a simulation
conducted on December 31, 2018, using the data available.
Four IFRSS were amended in the Annual Improvements to IFRSS
(2015-2017).
-
BASF has largely completed its analysis of the effects on the
Consolidated Financial Statements and intends to exercise the
exemption for lease agreements with a term of up to 12 months and
low-value assets. Lease agreements that are already in place as of
December 31, 2018, will not be re-assessed.
The IASB published the new standard on leases, IFRS 16, on Janu-
ary 13, 2016. The rules and definitions of IFRS 16 will supersede the
content of IAS 17, IFRIC 4, SIC-15 and SIC-27. The standard
requires an accounting model for a lessee that recognizes all right-
of-use assets and liabilities from lease agreements in the balance
sheet, unless the term is twelve months or less or the underlying
asset is of low value. As for the lessor, the new standard substan-
tially carries forward the accounting requirements of IAS 17 - Leases.
This means that lessors will continue to classify leases as either
finance or operating leases. The European Union endorsed the new
standard on October 31, 2017. IFRS 16 must be applied for
reporting periods beginning on or after January 1, 2019.
IFRS 16 - Leases
The effects on the BASF Group financial statements of the IFRSS
and IFRICS not yet in force but already endorsed by the European
Union in 2018 were reviewed and are explained below.
IFRSS and IFRICS not yet to be considered but already
endorsed by the E.U.
therefore no longer reported under tax income/ expense for the first
time in 2018; rather, these were shown under other financial result or
other operating expenses. The change in presentation represents a
change in accounting policy within the meaning of IAS 8. As the
effects were not material, the prior-year figures were not restated in
accordance with IAS 8. The interpretation is effective for the first
time for reporting periods beginning on or after January 1, 2018.
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
BASF will generally apply a threshold of €5,000 when identifying
leases to be capitalized. However, in the future, a significant number
of lease agreements that today represent operating leases will be
reported in the balance sheet as right-of-use assets with the
corresponding lease liabilities. As of the date of initial application of
the new standard (January 1, 2019), BASF will measure - in accor-
dance with the modified retrospective method lease liabilities
arising from operating leases with a remaining term of more than
12 months at the present value of the remaining lease payments,
taking into account current incremental borrowing rates. The
right-of-use asset will be recognized at the same amount as the
lease liability. Existing finance leases will not be affected.
BASF Report 2018
4 Granting of BASF shares under BASF's "plus" share program
2 Details are provided in the Statement of Income and Expense Recognized in Equity on page 177.
shareholders of BASF SE
noncontrolling interests
Cash flows from financing activities
Net changes in cash and cash equivalents
2018
2017
4,707
6,078
3,750
4,213
(1,249)
(915)
(394)
(870)
1,113
618
78
(227)
(66)
(112)
7,939
8,785
(3,894)
(3,996)
(1,210)
(748)
(7,362)
(150)
To
Dividends paid
Repayment of financial and similar liabilities.
Additions to financial and similar liabilities
Finally, in IAS 23, it was determined that when entities borrow funds
in general for the acquisition of qualifying assets that those costs for
borrowed capital specifically for the acquisition of qualifying assets
should not be considered in the determination of the financing rate
until their completion.
As well as increasing BASF's total assets by around €1.1 billion, the
presentation of expenses associated with operating leases will
change. For 2019, BASF anticipates a depreciation charge for right-
of-use assets of around €250 million and interest expenses on lease
liabilities of around €20 million. Moreover, the additional liability items
are expected to reduce BASF's equity ratio by 0.5%.
BASF will present the interest component in lease payments in cash
flows from operating activities and the repayment portion in cash
flows from financing activities. Lease payments under short-term
agreements, agreements with low-value assets or variable payments
will be presented in cash flows from operating activities.
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Statement of Cash Flows
5 Supplementary Information Oil and Gas Business
6 Overviews
Statement of Cash Flows
BASF Group
Statement of cash flows¹
107
Million €
Depreciation and amortization of intangible assets and property, plant and equipment
Changes in inventories
Changes in receivables
Changes in operating liabilities and other provisions
Changes in pension provisions, defined benefit assets and other items
Gains (-)/losses (+) from the disposal of noncurrent assets and securities
Cash flows from operating activities
Payments made for property, plant and equipment and intangible assets
Payments made for financial assets and securities
Payments made for acquisitions
Payments received for divestitures
Payments received from the disposal of noncurrent assets and securities
Cash flows from investing activities
Capital increases/repayments and other equity transactions
Net income
3 Including profit and loss transfers
177
759
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Statement of Equity
5 Supplementary Information Oil and Gas Business
6 Overviews
Statement of Equity
BASF Group
Statement of equity¹
Million €
As of December 31, 2017
IFRS 9 transition effect
As of January 1, 2018
Effects of acquisitions achieved in stages
Dividends paid
Income after taxes
Changes to income and expense recognized directly in equity
Changes in scope of consolidation and other changes
As of December 31, 2018
As of January 1, 2017
Effects of acquisitions achieved in stages
Dividends paid
Income after taxes
Changes to income and expense recognized directly in equity
Changes in scope of consolidation and other changes
As of December 31, 2017
1 For more information on the items relating to equity, see Notes 19 and 20 from page 238 onward
About This Report
181
BASF Report 2018
1 More information on the statement of cash flows can be found in the Management's Report (Financial Position) from page 55 onward. Other information on cash flows can be found in Note 29 from page 261 onward.
2 From the third quarter of 2018 onward, cash and cash equivalents presented in the statement of cash flows deviate from the figure in the balance sheet, as cash and cash equivalents of the oil and gas business in the balance sheet have been reclassified to the disposal group.
(11,804)
(3,958)
3
19
6,355
8,572
(3,389)
(5,324)
(2,847)
(2,755)
(174)
(118)
(52)
555
394
5,221
(59)
(110)
9
6,495
1,375
2,519
6,495
Changes in cash and cash equivalents
From foreign exchange rates
changes in the scope of consolidation
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year²
(3,917)
187
(3,021)
First-time adoption effects of IFRS 9 on equity
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
184
BASF Report 2018
At BASF, the definition of a business model for financial asset port-
folios has implications for the accounting treatment of securities,
which were allocated to the "available for sale" category under
IAS 39 and, according to IFRS 9, do not have to be measured at fair
value because of the cash flow condition. If these securities are
managed with the intention of collecting the contractual cash flows,
they are subsequently measured at amortized cost in line with the
requirements of IFRS 9. If, however, these securities classified as
"available for sale” are also managed with the intention of generating
cash flows from their sale, they are subsequently measured at fair
value; fair value changes are recognized in other comprehensive
income.
The introduction of the cash flow condition at BASF mainly resulted
in the reclassification of securities that were allocated to the "avail-
able for sale" category under IAS 39 and subsequently measured at
fair value in the balance sheet, with fair value changes recognized in
other comprehensive income. Provided the contractual cash flows
resulting from these securities are not solely payments of principal
and interest, they continue to be measured at fair value in the
balance sheet; however, fair value changes are recognized directly in
income after taxes. The cash flow condition also leads to minor
changes to the subsequent measurement of other receivables that
were measured at amortized cost under IAS 39. These are now
measured at fair value in the balance sheet, provided the resulting
cash flows are not solely payments of principal and interest. Changes
to the fair value of these other receivables are recognized in profit or
loss as income after taxes.
The first-time adoption of IFRS 9 at BASF follows the modified retro-
spective method, which means that prior-period information is not
restated; this continues to be presented in accordance with IAS 39.
IFRS 9 also contains new requirements for the application of hedge
accounting to better present an entity's risk management activities,
in particular with respect to the management of nonfinancial risks.
Notes
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
183
BASF Report 2018
Unlike in IAS 39, under IFRS 9 impairments of financial assets that
are not measured at fair value through profit or loss are not just
recognized when there is objective evidence of impairment. Rather,
impairment allowances are also to be recognized for expected
credit losses. These are determined based on the credit risk of a
financial asset, as well as any changes to this credit risk: If the credit
risk of a financial asset has increased significantly since initial recog-
nition, expected credit losses are generally recognized over the life-
time of the asset. If, however, the credit risk has not increased
significantly in this period, impairments are generally only recognized
for the 12-month expected credit losses. By contrast, under a sim-
plified approach, impairments for receivables such as lease receiv-
ables and trade accounts receivable always cover the lifetime
expected credit losses of the receivable concerned.
The classification and measurement of financial assets in accor-
dance with IFRS 9 is based on the one hand on the cash flow con-
dition (the "solely payments of principle and interest" criterion), that
is, the contractual cash flow characteristics of an individual financial
asset. On the other hand, it also depends on the business model
used for managing financial asset portfolios.
IFRS 9 contains, in particular, new requirements for the classification
and measurement of financial assets, fundamental changes regard-
ing the accounting treatment of impairments of certain financial
assets, and a revised approach to hedge accounting. IFRS 9 retains
"amortized cost" and "fair value" as measurement bases for financial
instruments and continues to differentiate between changes in fair
value recognized through profit or loss and through other compre-
hensive income.
IFRS 9 · Financial Instruments was endorsed by the European
Union in the fourth quarter of 2016 and applied by BASF for the first
time as of January 1, 2018.
IFRS 9 - Financial Instruments
Accounting policies applied for the first time in 2018
1.2 Changes in accounting principles
In its meeting on February 18, 2019, the Board of Executive
Directors prepared the Consolidated Financial Statements, sub-
mitted them to the Supervisory Board for review and approval, and
released them for publication.
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
LaR
11,190
Accounts receivable, trade
AC
11,162 Accounts receivable, trade
(28)
AC
29 Receivables from finance leases
n/a
29
FVTPL
482 Shareholdings
AfS
The individual financial statements of the consolidated companies
are prepared as of the balance sheet date of the Consolidated
Financial Statements. The accounting policies applied are largely the
same as those used in 2017, with the exception of any changes
arising from the application of new or revised accounting standards.
482
Shareholdings
Measure-
ment
category¹
Carrying
amount
ment para-
meters
measure-
Measure- Changes in
Carrying
ment measurement
amount category¹ categories
Changes in
IFRS 9 as of January 1, 2018
Changes due to
IAS 39 as of December 31, 2017
Million €
At BASF, the recognition of impairments for expected credit losses
mainly impacts the carrying amounts of trade accounts receivable.
It also affects the carrying amounts of other receivables that repre-
sent financial instruments. The table below presents the effects of
the transition from IAS 39 to IFRS 9 on the carrying amounts as of
December 31, 2017, by category of financial instruments:
Reconciliation of carrying amounts of financial assets
Receivables from finance leases
The Consolidated Financial Statements are presented in euros. All
amounts, including the figures for previous years, are given in million
euros unless otherwise indicated.
The Consolidated Financial Statements of BASF SE as of Decem-
ber 31, 2018, have been prepared in accordance with the Inter-
national Financial Reporting Standards (IFRS) of the International
Accounting Standards Board (IASB), and section 315a (1) of the
German Commercial Code (HGB). IFRSS are generally only applied
after they have been endorsed by the European Union. For the 2018
fiscal year, all of the binding IFRSS and pronouncements of the Inter-
national Financial Reporting Interpretations Committee (IFRIC) were
applied.
BASF SE (registered at the district trade register, or Amtsgericht, for
Ludwigshafen am Rhein, number HRB 6000) is a publicly listed
corporation headquartered in Ludwigshafen am Rhein, Germany. Its
official address is Carl-Bosch-Str. 38, 67056 Ludwigshafen am
Rhein, Germany.
6,078
6,078
(2,873)
(118)³
(2,755)
(2,755)
32,568
761
31,807
(4,014)
31,515
3,130
1,176
274
918,478,694
1,055
35,054
(5,939)
36,699
3,118
1,176
918,478,694
11
18
(7)
(8)
14
(586)
36,109
Accounts receivable, trade
6,352
(1,268)
1.1 General information
1 Summary of accounting policies
Policies and Scope of Consolidation
Notes
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
182
BASF Report 2018
(1,268)
34,756
33,837
(5,282)
34,826
3,117
1,176
918,478,694
64
89
(25)
(12)
(13)4
(30)
(87)
919
FVTPL
(1,355)
340
35
466
35
466
Impairments as of January 1, 2018
(under IFRS 9)
Changes in measurement
parameters
Changes in measurement
categories
Changes due to
431
431
Cumulative impairments as of
December 31, 2017 (under IAS 39)
Total impairments for financial assets
Loans and receivables
Held to maturity
Available for sale
Million €
Reconciliation of impairments for financial assets
risks for certain countries and staggered impairments based on
overdue status are no longer recognized under IFRS 9.
The effects of the changes to the valuation allowance model on the
impairments recognized in accordance with IAS 39 as of Decem-
ber 31, 2017, are presented in the table below. These mainly relate
to valuation allowances for financial assets that were allocated to the
"loans and receivables" category under IAS 39. Impairments were
increased due to the recognition of expected credit losses. A
countereffect arose from the fact that impairments to reflect transfer
terparty defaults, and the amount at risk. In the case of receivables
from banks, the expected credit losses are primarily calculated on
the basis of the probabilities of default derived from credit default
swaps for the counterparty concerned.
BASF calculates the expected credit losses of a financial asset as
the probability-weighted present value of each expected cash short-
fall. As a general rule, three key parameters are used here: the
probability of default of the counterparty, the loss ratio if the coun-
At BASF, the credit risk of a financial asset is assessed using both
internal estimates, which are prepared as part of credit manage-
ment, and external rating information on the respective counter-
party. A significant increase in the counterparty's credit risk is
assumed if its rating is lowered by a certain number of notches. The
significance of the increase in credit risk is not reviewed for financial
assets subject to the simplified approach.
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
BASF Report 2018
186
About This Report
1 To Our Shareholders
(5,331)
Derivatives no hedge accounting
(14)
(35)
(5,282)
34,845
25
(7)
(28)
34,826
Deferred taxes for first-time adoption effects
Transfers to/from retained earnings, other
Other comprehensive income after taxes, including noncontrolling interests (prior to application of IFRS 9)
Transfers to/from retained earnings, changes to measurement categories
1 To Our Shareholders
Effects on other comprehensive income
Deferred taxes for first-time adoption effects
Retained earnings as of December 31, 2017 (prior to application of IFRS 9)
Changes to valuation allowances for trade accounts receivable
Changes to valuation allowances for other financial instruments
Transfers to/from other comprehensive income
Effects on retained earnings
Million €
First-time adoption effects of IFRS 9 on equity
The table below shows the first-time adoption effects of IFRS 9 on
retained earnings and other comprehensive income:
Transition effects from the first-time adoption of IFRS 9 were recog-
nized cumulatively in equity as of the date of initial application.
Overall, after allowing for deferred taxes, the first-time adoption of
IFRS 9 reduced equity by €30 million, primarily as a result of the
increase in valuation allowances for trade accounts receivable. By
contrast, the reclassification of components of income that were
presented in other comprehensive income under IAS 39 to retained
earnings did not have any effect on equity.
BASF exercises the option to apply the hedge accounting require-
ments of IFRS 9 only prospectively from January 1, 2018. This
option cannot be applied to changes to the time value component
of options if only its intrinsic value is designated as a hedging
instrument in a hedge accounting relationship. In this case, IFRS 9
stipulates that changes to the fair value of the time value component
during the term of the hedging relationship must be recognized in
other comprehensive income, and that the amounts accumulated
there must be released as an adjustment to the cost of the underlying
item or directly in profit or loss. By contrast, under IAS 39, changes
to the fair value of these time value components were recognized
immediately in profit or loss.
Notes
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
Retained earnings as of January 1, 2018 (following application of IFRS 9)
About This Report
Other comprehensive income after taxes, including noncontrolling interests (following application of IFRS 9)
LaR: Loans and Receivables
AfS
175
Securities - AfS
FVTOCI
33 Securities
(1)
(141)
FVTPL
Other receivables and
miscellaneous assets
0
0
LaR
1,508
13
Other receivables and miscellaneous assets
Other receivables and
miscellaneous assets
1,502
(6)
0
72 Derivatives - hedge accounting
n/a
72
FVTPL
Derivatives no hedge
accounting
340
185
Derivatives hedge accounting
aFVTPL
AC
0
FVTOCI
AC
FVTOCI: at Fair Value through Other Comprehensive Income
BASF Report 2018
13 Securities
(a)FVTPL: (at) Fair Value through Profit or Loss
HtM: Held to Maturity
AC: Amortized Cost
1 AfS: Available for Sale
20,257 Total financial assets
0
AC
6,495 Cash and cash equivalents
0
20,292
LaR
6,495
(35)
Cash and cash equivalents
128
FVTPL
Total financial assets
AC
Securities - HtM
1 Securities
HtM
Securities
FVTOCI
FVTPL
1
128 Securities
2 Management's Report
3 Corporate Governance
Supplier management
Page 115 (goals, measures, results)
Page 23 (goals)
1 To Our Shareholders
About This Report
17
BASF Report 2018
Pages 140-141 (goals, measures, results)
Page 23 (goals)
Anti-corruption and bribery matters
Pages 90-91 (goals, measures, results)
Pages 90-91 (goals, measures, results)
Page 115 (goals, measures, results)
Page 23 (goals)
Page 39 (goals, measures, results)
Page 40 (goals, measures, results)
4 Consolidated Financial Statements
Pages 90-91 (goals, measures, results)
Compliance
5 Supplementary Information Oil and Gas Business 6 Overviews
Our divisions bear operational responsibility and are organized
according to sectors or products. They manage our 54 global and
regional business units and develop strategies for the 86 strategic
business units.1
The BASF Group
- Monomers
Page 115 (goals, measures, results)
- Petrochemicals
Chemicals
1
BASF structure until December 31, 2018¹
Percentage of total sales in 2018
since January 1, 2019
New organization
success and that of our customers worldwide
Seven functional units and eight corporate units support the BASF
Group's business activities. The functional and corporate units pro-
vide services in areas such as finance, human resources, engineer-
ing and site management, environmental protection, health and
Our regional units are responsible for optimizing local infrastructure,
and contribute to tapping our market potential. For financial report-
ing purposes, we organize the regional divisions into four regions:
Europe; North America; Asia Pacific; South America, Africa, Middle
East.
Protection to Agricultural Solutions after the acquisition of significant
businesses from Bayer was closed in August 2018, especially for
seeds.
Until December 31, 2018, our 12 divisions¹ were grouped into four
segments based on their business models: Chemicals, Performance
Products, Functional Materials & Solutions and Agricultural Solutions.
On September 27, 2018, BASF and LetterOne signed a definitive
agreement to merge their oil and gas businesses in a joint venture.
The new joint venture will operate under the name Wintershall DEA.
Since the agreement was signed, we have no longer reported on
BASF's oil and gas business as a separate Oil & Gas segment. Until
closing, its earnings will be presented as a separate item, income
after taxes from discontinued operations. Closing of the transaction
is expected in the first half of 2019, subject to the approvals
of merger control and foreign investment authorities as well as
mining authorities and the German Federal Network Agency. In the
Agricultural Solutions segment, we renamed the division from Crop
■ Regional divisions, functional units and corporate and
research units support our business
■ Twelve divisions grouped into four segments
Organization of the BASF Group until December 31, 2018
employees contribute to our
In 90+ countries
Production, technology, market, digitalization
Intelligent Verbund concept
At BASF, we create chemistry for a sustainable future. We
combine economic success with environmental protection
and social responsibility. The approximately 122,000 employ-
ees in the BASF Group work on contributing to the success of
our customers in nearly all sectors and almost every country
in the world. Until December 31, 2018, our portfolio was
arranged into four segments: Chemicals, Performance Prod-
ucts, Functional Materials & Solutions and Agricultural Solu-
tions. Since January 1, 2019, BASF's activities have been
grouped into six segments: Chemicals, Materials, Industrial
Solutions, Surface Technologies, Nutrition & Care and Agri-
cultural Solutions.
The BASF Group
Page 112 (goals, measures, results)
Page 113 (goals, measures, results)
Pages 113-114 (goals, measures, results)
Page 114 (goals, measures, results)
Pages 95 and 97-98 (goals, measures, results)
Pages 95 and 98-99 (goals, measures, results)
Page 111 (goals, measures, results)
Page 24 (goals)
5
Page 24 (goals)
Pages 18-21
Concepts and results
Portfolio management
Management of waste and contaminated sites.
Water
Emissions to air
Energy and climate protection
Transportation and storage
Product stewardship
Emergency response and corporate security
Process safety
The BASF Group
Topics
Respect for human rights
Social matters
Employee-related matters
Environmental matters
Pages 95 and 100-101 (goals, measures, results)
Pages 95 and 102 (goals, measures, results)
Page 24 (goals)
Pages 95 and 103-106 (goals, measures, results)
Pages 95 and 107 (goals, measures, results)
Pages 95 and 107 (goals, measures, results)
Pages 95 and 98 (goals, measures, results)
Page 24 (goals)
Pages 95 and 96-97 (goals, measures, results)
Page 24 (goals)
Pages 90-91 (goals, measures, results)
Page 23 (goals)
Pages 37-38 (goals, measures, results)
Page 24 (goals)
Responsibility for human rights
Global labor and social standards
Supplier management
Page 111 (goals, measures, results)
Page 23 (goals)
Social commitment
Competition for talent
Learning and development
Compensation and benefits
Inclusion of diversity
What we expect from our leaders
Employee engagement
Health protection
Occupational safety
Supplier management
Pages 95 and 108-109 (goals, measures, results)
Page 24 (goals)
Dialog with employee representatives
Global labor and social standards
Supplier management
4
18
- Intermediates
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
The BASF Group
1 To Our Shareholders
About This Report
19
BASF Report 2018
For more information on the new segment structure as of January 1, 2019, see the Notes to the
Consolidated Financial Statements from page 211 onward
-
In addition to the new segment structure, the composition of a
number of divisions will also change. The propylene oxide and pro-
pylene glycol business will be transferred from the Petrochemicals
division to the Monomers division. The superabsorbents business
will be allocated to the Petrochemicals division rather than the
Care Chemicals division in the future. The styrene, polystyrene and
styrene-based foams business, which previously mainly fell under
the Performance Materials division and a small part under Other, will
be bundled in the Petrochemicals division.
The Agricultural Solutions segment aims to further strengthen
our market position as an integrated provider of crop protection
products and seeds. Its portfolio comprises fungicides, herbicides,
insecticides and biological crop protection products, as well as
seeds and seed treatment products. We also offer farmers digital
solutions combined with practical advice. Our main focus is on
innovation-driven organic growth, targeted portfolio expansion as
well as leveraging synergies from the acquired businesses.
cosmetics, detergent and cleaner industries. We aim to enhance
and broaden our product and technology portfolio. Our goal is to
drive organic growth by focusing on emerging markets, new busi-
ness models and sustainability trends in consumer markets, sup-
ported by targeted acquisitions.
In the Nutrition & Care segment, we strive to expand our position
as a leading provider of nutrition and care ingredients for consumer
products in the area of nutrition, home and personal care. Custom-
ers include food and feed producers as well as the pharmaceutical,
The Surface Technologies segment comprises our businesses
that offer chemical solutions on and for surfaces. Its portfolio
includes coatings, rust protection products, catalysts and battery
materials for the automotive and chemical industries. The aim is to
drive organic growth by leveraging our portfolio of technologies and
know-how, and to establish BASF as a leading and innovative
provider of battery materials as well.
The Industrial Solutions segment develops and markets ingredi-
ents and additives for industrial applications such as polymer dis-
persions, pigments, resins, electronic materials, antioxidants and
admixtures. We aim to drive organic growth in key industries such
as automotive, plastics or electronics and expand our position in
value-enhancing ingredients and solutions by leveraging our com-
prehensive industry expertise and application know-how.
The Materials segment's portfolio comprises advanced materials
and their precursors for new applications and systems. These
include isocyanates and polyamides as well as inorganic basic
products and specialties for the plastics and plastics processing
industries. We aim to grow organically through differentiation via
specific technological expertise, industry know-how and customer
proximity to maximize value in the isocyanate and polyamide value
chains.
The Chemicals segment will remain the cornerstone of our Verbund
structure. It supplies the other segments with basic chemicals and
intermediates, contributing to the organic growth of our key value
chains. Alongside internal accounts, our customers include the
chemical and plastics industries. We aim to increase our competi-
tiveness through technological leadership and operational excel-
lence.
BASF's new segment structure will allow a more differentiated steer-
ing of our businesses according to their market-specific competitive
environment. It will increase transparency regarding the results of
our segments and divisions and highlight the importance of the
Verbund and value chains to our business success. BASF aims to
clearly position its businesses against their relevant competitors and
establish a high-performance organization to enable BASF to be
successful in an increasingly competitive market environment.
Sites and Verbund
We are considering the possibility of merging our construction
chemicals business with a strong partner, as well as the option of
divesting this business. The outcome of this review is open. The
Construction Chemicals division will be reported under the Surface
Technologies segment until signing of a transaction agreement.
■ Six Verbund sites with intelligent plant networking
■ 355 additional production sites worldwide
was originally established and continuously optimized before being
implemented at additional sites.
Business model
20
20
Nanjing
Hong Kong
Kuantan
BASF Report 2018
São Paulo
Geismar
Florham Ludwigshafen
Park
Antwerp
Freeport
development sites
Selected research and
Verbund sites
Selected sites
Regional centers
BASF sites
We also make use of the intelligent Verbund principle for more than
production, applying it for technologies, the market and digitalization
as well. Expert knowledge is pooled in our global research platforms.
For more information on the Verbund concept, see basf.com/en/verbund
The Verbund system is one of BASF's great strengths. We add value
by using our resources efficiently. The Production Verbund intelli-
gently links production units and their energy supply so that, for
example, the waste heat of one plant provides energy to others.
Furthermore, one facility's by-products can serve as feedstock
elsewhere. This not only saves us raw materials and energy, it also
avoids emissions, lowers logistics costs and leverages synergies.
BASF has companies in more than 90 countries. We operate six
Verbund sites and 355 additional production sites worldwide. Our
Verbund site in Ludwigshafen, Germany, is the world's largest
chemical complex owned by a single company that was developed
as an integrated network. This was where the Verbund principle
Nutrition & Care: Care Chemicals and Nutrition & Health
- Agricultural Solutions: Agricultural Solutions
Surface Technologies: Catalysts, Coatings and Construction
Chemicals
Materials: Performance Materials and Monomers
Industrial Solutions: Dispersions & Pigments and
Performance Chemicals
Agricultural Solutions
4
3
- Performance Materials
- Coatings
34%
Functional Materials & Solutions
3
- Construction Chemicals
- Catalysts
- Performance Chemicals.
by embedding business-critical parts of the functional
units into the divisions
- Nutrition & Health
25%
Performance Products
2
- Care Chemicals
Closer to customers
- Dispersions & Pigments
- Agricultural Solutions
10%
1 Excluding the oil and gas activities presented as discontinued operations
5
Chemicals: Petrochemicals and Intermediates
-
-
-
As of January 1, 2019, we have twelve divisions grouped into six
segments as follows:
New organization of the BASF Group as of January 1, 2019
For more information on the effects of the agreement with LetterOne, see page 86
For more information on the products and services offered by the segments,
see from pages 61, 68, 75 and 81 onward
Business processes such as the procurement of raw materials and
services, production and transport to customers are the shared
responsibility of the divisions and the functional units.
26%
safety, investor relations, and communications. Our global research
units safeguard our innovative capacity and competitiveness.
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
The BASF Group
1 To Our Shareholders
About This Report
2
5%
BASF Report 2018
Other
5 Supplementary Information Oil and Gas Business 6 Overviews
NFS disclosure
In addition, BASF will embed business-critical parts of its functional
units such as engineering services, procurement and logistics
into the divisions to bring its employees closer to its customers and
improve customer-specific agility. We will create leaner structures in
our functional units, research and development and in governance
functions.
6 Overviews
20% United States/Canada
lion in assets and 115 major purchasing organizations with $3.3 tril-
lion in purchasing power. After achieving a score of "A-" for several
years, thus attaining "Leadership" status, BASF was included in
CDP's "Climate Change A List" with the highest possible rating of
"A" in 2018. Companies at this level are distinguished by the com-
pleteness and transparency of their reporting, their approaches for
managing the opportunities and risks associated with climate
change, and clear corporate strategies to reduce emissions. BASF
has also reported on water management to CDP since 2010 and
I was again acknowledged as a global leader in sustainable water
management in 2018. The organization awarded BASF an "A-" rat-
ing in recognition of its actions to manage water more sustainably.
BASF continued to be included in the MSCI ESG Ratings in 2018
with a score of "AA." The analysts highlighted BASF's Verbund sys-
tem as a key competitive advantage for resource-efficient processes.
BASF's emissions intensity for greenhouse gases and air pollutants
- one of the lowest compared with competitors in the chemical
industry was also assessed positively.
-
For more information on the key sustainability indexes, see
basf.com/sustainabilityindexes
For more information on energy and climate protection, see page 103 onward
For more information on water, see page 108 onward
In many countries, we offer share purchase programs that turn our
employees into BASF shareholders. In 2018, for example, 25,000 Analysts' recommendations
employees (2017: 23,700) purchased employee shares worth
€79 million (2017: €63 million).
For more information on employee share purchase programs, see page 114
43% Germany
BASF as a sustainable investment
BASF has participated in CDP's program for reporting on data rele-
vant to climate protection since 2004. CDP is an an international
organization representing more than 650 investors with over $87 tril-
Around 25 financial analysts regularly publish studies on BASF. The
latest analyst recommendations for our shares as well as the aver-
age target share price ascribed to BASF by analysts can be found
online at basf.com/analystestimates.
BASF Report 2018
13
About This Report
1 To Our Shareholders
BASF on the Capital Market
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
■ CDP includes BASF in its "Climate Change A List"
■ BASF continues to be rated "AA" by MSCI ESG Research
5 Supplementary Information Oil and Gas Business 6 Overviews
6% Not identified
Broad base of international shareholders
Proposed dividend of €3.20 per share
At the Annual Shareholders' Meeting, the Board of Executive Direc-
tors and the Supervisory Board will propose a dividend payment of
€3.20 per share. We stand by our ambitious dividend policy of
increasing our dividend each year and plan to pay out €2.9 billion to
our shareholders.
Based on the year-end share price for 2018, BASF shares offer a
high dividend yield of around 5.3%. BASF is part of the DivDAX
share index, which contains the 15 companies with the highest
dividend yield in the DAX 30.
Dividend per share
€ per share
1.70
2.20
around 20% of share capital, the United States and Canada made
up the largest regional group of institutional investors. Institutional
investors from Germany accounted for around 13%. Shareholders
from the United Kingdom and Ireland hold 10% of BASF shares,
while investors from the rest of Europe hold a further 17% of capital.
Approximately 30% of the company's share capital is held by private
investors, nearly all of whom reside in Germany. BASF is therefore
one of the DAX 30 companies with the largest percentage of private
shareholders.
Shareholder structure
With over 600,000 shareholders, BASF is one of the largest publicly
owned companies with a high free float. An analysis of the share-
holder structure carried out at the end of 2018 showed that, at
By region, rounded
Rest of world 4%
United Kingdom/Ireland 10%
2.80
2.70
2.60
2.90
3.00 3.10
3.20
Employees becoming shareholders
2.50
2009 2010 2011
2012 2013 2014 2015 2016 2017 2018
Rest of Europe 17%
additional BASF shares would have increased to €3,201 by the end
of 2018. This represents an annual yield of 12.3%, placing BASF
shares above the returns for the DAX 30 (8.2%), EURO STOXX 50
(5.2%) and MSCI World Chemicals (11.4%) indexes.
Close dialog with the capital market
■ Informational events for private investors
€
87.36
96.72
88.31
97.46
97.67
€
65.61
65.74
60.40
56.70
58.40
€
77.93
79.28
70.96
88.16
80.38
Further information on BASF share
Securities code numbers
79.64
■ Roadshows for institutional investors and talks with
rating agencies
91.74
70.72
■ Capital Markets Day on the corporate strategy
Our corporate strategy aims to create long-term value. We support
this strategy through regular and open communication with all capi-
tal market participants. We engage with institutional investors and
rating agencies in numerous one-on-one meetings, as well as at
roadshows and conferences worldwide, and give private investors
an insight into BASF at informational events.
In November 2018, we informed analysts and investors about BASF
Group's updated corporate strategy at our Capital Markets Day in
Ludwigshafen, Germany. Key topics were our even stronger cus-
tomer focus, the new financial and nonfinancial targets, and the
segment structure going forward.
In 2018, we once again offered special events aimed toward
investors who base their investment decisions on sustainability cri-
teria. We outlined in particular our measures for climate protection,
energy efficiency, health and safety. In addition, we offered several
creditor relations roadshows, where credit analysts and creditors
could learn more about our business and financing strategy.
For more information on our credit ratings, see the Financial Position on page 54
Analysts and investors have confirmed the quality of our financial
market communications. We took first place in the "Best ESG
communications" and "Best IR website" categories in the annual
Key BASF share data
Year-end price
Year high
Year low
88.31
Year average
For more information about BASF stock, see basf.com/share
Register for the newsletter with current topics and dates at basf.com/share/newsletter
Contact the Investor Relations team by phone at +49 621 60-48230 or email ir@basf.com
2014
2015
2016
2017
2018
€
69.88
survey conducted by Britain's IR Magazine. Germany's Manager
Magazin also recognized BASF at the presentation of its Investors'
Darling awards with second place in the DAX category and first
place in the digital communications category. In January 2019,
Institutional Investor magazine awarded BASF first place in the
"Best IR in Germany" category for its investor relations program.
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
BASF on the Capital Market
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
BASF on the Capital
Market
In 2018, the stock markets were characterized by long
periods of uncertainty as a result of geopolitical tensions
and trade conflicts, especially between the United States
and China. The BASF share price declined considerably over
the course of the year. We stand by our ambitious dividend
policy and will propose a dividend of €3.20 per share at the
Annual Shareholders' Meeting an increase of 3.2% com-
pared with the previous year.
-
BASF share performance
1 To Our Shareholders
■ BASF share declines 34.2% in 2018
The BASF share closed the 2018 stock market year with a closing
price of €60.40, a decrease of 34.2% compared with the previous
year's closing price. The considerable year-on-year decline in the
BASF Group's earnings was primarily attributable to considerably
lower earnings in the Chemicals segment, mainly as a result of lower
margins for isocyanates and steam cracker products. The segment's
earnings were also negatively impacted by the low water levels on
the Rhine River in the second half of 2018. In addition, geopolitical
tensions and trade conflicts, especially between the United States
and China, led to a slowdown in economic growth over the course
of the year particularly in Asia, and there mainly in China. The ensu-
ing downturn in demand from significant customer industries, in
particular the automotive industry, further weighed on BASF's share
performance.
Assuming that dividends were reinvested, BASF's share perfor-
mance declined by 31.8% in 2018. The benchmark indexes of the
German and European stock markets - the DAX 30 and the EURO
STOXX 50 - lost 18.3% and 12.0% over the same period, respec-
tively. The global industry index MSCI World Chemicals fell by
14.4%.
Viewed over a 10-year period, the long-term performance of BASF
shares still clearly surpasses the German, European and global
benchmark indexes. The assets of an investor who invested €1,000
in BASF shares at the end of 2008 and reinvested the dividends in
Long-term performance of BASF shares compared with indexes
Average annual increase with dividends reinvested
Change in value of an investment in BASF shares in 2018
With dividends reinvested; indexed
110
100
■ Long-term performance continues to clearly exceed
benchmark indexes
90
About This Report
Vice Chairman of the Board of Executive Directors
About This Report
1 To Our Shareholders
2 Management's Report
The Board of Executive Directors of BASF SE
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
The Board of Executive Directors of BASF SE
BAS
11
Dr. Martin Brudermüller
Our
Custom
Saori Dubourg
Michael Heinz
Sanjeev Gandhi
D-BAS
BASF Report 2018
Dr. Markus Kamieth
Wayne T. Smith
Dr. Hans-Ulrich Engel
Chairman of the Board of Executive Directors
90
80
70
12.3%
8.2%
5.2%
90
11.4%
■ BASF share
■ DAX 30 ■ EURO STOXX 50 ■MSCI World Chemicals
80
Weighting of BASF shares in important indexes as of December 31, 2018
2008-2018
70
EURO STOXX 50
MSCI World Chemicals.
6.3%
2.6%
7.0%
12
About This Report
1 To Our Shareholders
BASF on the Capital Market
2 Management's Report
DAX 30
100
4.9%
2.0%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
BASF share -31.8%
DAX 30-18.3%
EURO STOXX 50 -12.0%
MSCI World Chemicals -14.4%
BASF Report 2018
2013-2018
(1.5%)
2.0%
110
Germany
United Kingdom
Switzerland
United States (CUSIP number)
Agricultural Solutions
Other
Discontinued Oil and Gas Business
Regional Results
31
2223
25 Forecast
25
Economic Environment in 2019
29 Outlook 2019
Functional Materials & Solutions
Opportunities and Risks
43
53
58
60
74
80
85
86
172456 10 10 00
36
88
Performance Products
Actual Development Compared with Outlook for 2018
Business Review by Segment
The BASF Group
18
Environmental Protection, Health and Safety
95
22
Employees
110
23 Customer Orientation
116
Chemicals
How We Create Value
Our Strategy
Corporate Strategy
Value-Based Management
Innovation
Integration of Sustainability.
The BASF Group's Business Year
Material Investments and Portfolio Measures
Economic Environment
Results of Operations
Net Assets
Financial Position
Goal Achievement in 2018
117
117
120
Pursuant to section 317(2) sentence 6 HGB, the auditor checked
that the disclosures according to section 315d HGB were made.
Further information
The following symbols indicate important information:
You can find more information in this report.
You can find more information online.
The Compensation Report including the description of the principles ( ) The content of this section is not part of the statutory audit of
of the compensation system in accordance with section 315a(2)
HGB can be found in the Corporate Governance chapter from page
146 onward, and the disclosures in accordance with section 315a(1)
HGB (takeover-related disclosures) from page 137 onward. They
form part of the Management's Report, which is audited as part of
the audit of the annual financial statements.
Consolidated Declaration of Corporate Governance in
accordance with section 315d HGB
in connection with section 289f HGB
The Declaration of Conformity pursuant to section 161 of the
German Stock Corporation Act
The Consolidated Declaration of Corporate Governance in accor-
dance with section 315d HGB in connection with section 289f HGB
can be found in the Corporate Governance chapter from page 131
onward and is a component of the Management's Report. It com-
prises:
the annual financial statements but has undergone a separate
audit with limited assurance by our auditor.
The content of this section is voluntary, unaudited information,
which was critically read by the auditor.
BASF Report 2018
16
About This Report
1 To Our Shareholders
2 Management's Report 3 Corporate Governance
Nonfinancial Statement Disclosures
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
The Corporate Governance Report including the description of
the diversity concept for the composition of the Board of Execu-
tive Directors and the Supervisory Board (excluding the disclo-
sures required by takeover law in accordance with section 315a(1)
HGB)
Compliance reporting
Compensation Report and disclosures in accordance with
section 315a HGB
Within the scope of the audit of the annual financial statements, the
external auditor KPMG checked pursuant to section 317(2) sen-
tence 4 HGB that the NFS was presented in accordance with the
statutory requirements. KPMG also conducted a substantive audit
with limited assurance of the NFS. A report on this substantive audit
can be found online at basf.com/nfs-audit-2018 and is part of the
BASF Report 2018. The audit was conducted in accordance with
ISAE 3000 (Assurance Engagements other than Audits or Reviews
of Historical Financial Information) and ISAE 3410 (Assurance
Engagements on Greenhouse Gas Statements), the relevant inter-
national auditing standards for sustainability reporting.
123
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Overview
Overview
The Management's Report comprises the chapter of the
same name on pages 15 to 130, as well as the disclosures
required by takeover law, the Compensation Report and the
Declaration of Corporate Governance, which are presented
in the Corporate Governance chapter. The Nonfinancial
Statement (NFS) is integrated into the Management's Report.
Nonfinancial Statement (NFS) in accordance
with sections 315b and 315c of the German Commercial
Code (HGB)
The NFS disclosures can be found in the relevant sections of the
Management's Report and have been prepared in accordance with
the appropriate frameworks: the Global Reporting Initiative Stan-
dards ("Comprehensive" application option) and the reporting
requirements of the U.N. Global Compact.
The table on the following page shows the sections and subsections
in which the individual disclosures can be found. In addition to a
description of the business model, the NFS includes disclosures on
the following matters, to the extent that they are required to under-
stand the development and performance of the business, the
Group's position and the impact of business development on the
following matters:
-
-
Environmental matters
- Employee-related matters
Social matters
- Respect for human rights
- Anti-corruption and bribery matters
92
Nonfinancial Statement (NFS) disclosures in the relevant chapters of the integrated report
Raw Materials
90
918.5
918.5
0083142
Market capitalization December 31
billion €
64.2
65.0
81.1
84.3
918.5
55.5
055262505
Earnings per share
DE000BASF111
Adjusted earnings per share
Dividend per share
Dividend yield²
BAS
BFA
BAS
11450563
Price-earnings ratio (P/E ratio)²
918.5
million shares
ISIN International Securities Identification Number
International ticker symbols
Deutsche Börse
London Stock Exchange
Swiss Exchange
Daily trade in shares¹
million €
224.5
264.5
918.5
201.9
229.6
million shares
2.9
3.3
2.9
2.1
2.9
BASF11
Number of shares December 31
185.7
1 Average, Xetra trading
€
5.61
68
47
63
12.5
16.3
20.0
13.9
11.8
2 Based on year-end share price
67
BASF Report 2018
Chapter 2 pages 15-130
2
Manage-
ment's
Report
Overview
16
Nonfinancial Statement Disclosures
17
Responsible Conduct Along the Value Chain
Supplier Management
14
50
%
5.30
4.34
4.42
6.62
5.12
€
5.44
5.00
4.83
6.44
5.87
€
2.80
2.90
3.00
3.10
3.20
%
4.01
4.10
3.40
3.38
90
Payout ratio
3 Corporate Governance
The amendments issued on October 31, 2018, provide a uniform
and more precise definition of the materiality of information provided
in the financial statements, together with accompanying examples.
In this connection, the definitions in the Conceptual Framework,
IAS 1, IAS 8 and the IFRS Practice Statement 2 (Making Materiality
Judgements) were harmonized. Subject to adoption by E.U.
legislation, the amendments are effective as of January 1, 2020.
For more information on the allocation of sales revenue, see Note 4 from page 211 onward and the
Management's Report from page 46 onward
If the consideration promised in a contract includes variable
components, BASF estimates the amount of consideration to which
it will be entitled in exchange for transferring the promised goods to
the customer. Variable components are only recognized as revenue
when it is highly unlikely that a reversal of sales revenue will occur.
Expected rebates and other trade discounts are accrued in
accordance with the principle of individual measurement to cover
probable risks related to the return of goods, future warranty
obligations and other claims.
BASF Report 2018
192
About This Report
1 To Our Shareholders
2 Management's Report
Services rendered to customers are invoiced according to work
completed and recognized as revenue accordingly.
3 Corporate Governance
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
BASF grants customers rebates if the goods purchased by the
customer exceed a contractually defined threshold within the period
specified. Rebates are usually deducted from the amounts payable
by the customer. Depending on the terms of the underlying contract,
BASF uses either the expected value or the most likely amount to
estimate the variable consideration for expected future rebates. The
method that is the best predictor of variable consideration is primarily
determined by the number of volume thresholds contained in the
contract. All available historical, current and forecast information is
taken into account when calculating rebates.
Customers generally have a right of return if the supplied goods do
not meet the agreed specifications. Furthermore, certain contracts
grant the customer the right to return the goods within a defined
period of time. BASF uses the expected value method to estimates
the goods that will be returned, as this method is the best predictor
of the amount of variable consideration to which BASF will be
entitled.
BASF applies the practical expedient in IFRS 15, which means that
it does not adjust the promised amount of consideration for the
effects of a significant financing component if, at contract inception,
it is expected that the period between the transfer of the promised
goods or services to a customer and payment for these goods or
services by the customer will be one year or less.
Pursuant to IFRS 15, no information on remaining performance
obligations as of December 31, 2018 that have an expected original
term of one year or less was reported.
Assets
4 Consolidated Financial Statements
Acquired intangible assets (excluding goodwill) with defined
useful lives are generally measured at cost less straight-line
amortization. The useful life is determined using the period of the
underlying contract or the period of time over which the intangible
asset can be expected to be used.
Sales revenue from the sale of precious metals to industrial
customers is recognized on delivery and the corresponding
purchase prices are recorded as cost of sales. In the trading of
precious metals and their derivatives with traders, where there is
usually no physical delivery, revenues are netted against the associ-
ated costs.
BASF primarily generates income from the sale of goods. It is
recognized as sales revenue at the point in time when control of the
product is transferred from BASF to the customer; this is generally
the case on delivery. If products are delivered to a consignment
warehouse, BASF normally retains control. Revenue is recognized
when the customer consumes the goods. Long-term supply
agreements usually contain variable prices dependent on the
development of raw materials prices and variable volumes.
Switzerland (CHF)
1.13
1.17
1.15
1,277.93
1,279.61
1,299.07
Sales revenue from the sale or licensing of technologies or technical
expertise are recognized according to the contractually agreed-
upon transfer of the rights and obligations associated with these
technologies. Recognition of revenue from granting licenses for
technology and intellectual property depends on whether they are
based on usage rights or access rights. Revenue from a usage-based
rights is recognized at the point in time when the license is granted.
Revenue from access-based rights is recognized over the term of
the contract with the customer. Sales revenue from sales and
usage-based licenses is recognized in accordance with the underly-
ing settlement agreements.
1,276.52
1.20
1.18
1.13
South Korea (KRW)
United States (USD)
1.4 Accounting policies
Revenue recognition
1.11
1.15
Impairments are recognized if the recoverable amount of the asset
is lower than the carrying amount. The recoverable amount is the
higher of either fair value less costs to sell or the value in use. The
value in use is determined on the basis of future cash inflows and
outflows, and the weighted average cost of capital after taxes,
depending on tax rates and country-related risks. If the reasons for
an impairment no longer exist, the write-downs are reversed up to
the value of the asset had an impairment not been recognized.
Depending on the type of intangible asset, amortization is reported
under cost of sales, selling expenses, research and development
expenses or other operating expenses.
Intangible assets with indefinite useful lives are trade names and
trademarks that have been acquired as part of acquisitions. These
are measured at cost and tested for impairment annually, or if there
is an indication that their value has declined.
Internally generated intangible assets primarily comprise
internally developed software. Such software and other internally
generated intangible assets are measured at cost and amortized
over their estimated useful lives. Impairments are recognized if the
carrying amount of an asset exceeds the recoverable amount. In
addition to those costs directly attributable to the asset, costs of
internally generated intangible assets also include an appropriate
portion of overhead costs.
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
Property, plant and equipment are measured at cost less
depreciation and impairment over their useful lives. The revaluation
method is not applied. Low-value assets are fully expensed in the
year of acquisition.
The cost of self-constructed plants includes direct costs, appropriate
allocations of material and production overhead costs, and a share
of the general administrative costs of the divisions involved in the
construction of the plants.
1 To Our Shareholders
Expenditures related to the scheduled maintenance of large-scale
plants are capitalized separately and depreciated using the straight-
line method over the period until the next planned turnaround. Costs
for the replacement of components are recognized as assets if an
additional future benefit is expected. The carrying amount of the
replaced components is derecognized. Costs for maintenance and
repair as part of normal business operations are recognized as an
expense.
Weighted average depreciation in years
Buildings and structural installations
Machinery and technical equipment
Miscellaneous equipment and fixtures
2018
2017
22
21
11
Both movable and immovable fixed assets were, for the most part,
depreciated using the straight-line method, with the exception of
production licenses and plants in the oil and gas business, which
has been classified as a discontinued operation since the end of
September 2018. Until then, these were primarily depreciated based
on use in accordance with the unit of production method. The
estimated useful lives and depreciation methods of property, plant
and equipment are based on historical values, plans and estimates.
The depreciation methods, useful lives and residual values are
reviewed at each balance sheet date. The weighted average
depreciation periods of continuing operations were as follows:
About This Report
193
BASF Report 2018
The estimated useful lives and amortization methods of intangible
assets are based on historical values, plans and estimates. The
weighted average amortization periods of intangible assets were as
follows:
Average amortization in years
Distribution, supply and similar rights
Product rights, licenses and trademarks
Know-how, patents and production technologies
Internally generated intangible assets
Other rights and values
2018
2017
15
15
19
20
15
15
4
4
4
5
Emission rights: Emission rights certificates, which are granted free
of charge by the German Emissions Trading Authority (Deutsche
Emissionshandelsstelle) or a similar authority in other countries, are
recognized in the balance sheet with a value of zero. Certificates
purchased on the market are capitalized at cost as intangible assets.
Emissions generated create an obligation to surrender the emission
certificates. Emission certificates purchased on the market are sub-
sequently measured at fair value, up to a maximum of the amount of
the acquisition costs. If the fair value is lower than the carrying
amount on the balance sheet date, the emission rights are impaired.
Goodwill is only written down in the case of an impairment.
Impairment testing is performed once a year and whenever there is
an indication of impairment. Goodwill impairments are not reversed.
65.92
74.04
69.39
79.72
1.3 Group accounting principles
Amendments to IAS 1 Financial Statement Presentation and
IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Scope of consolidation: The scope of consolidation is based on
the application of the standards IFRS 10 and 11.
1 To Our Shareholders
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
Translation of foreign currency financial statements: The
translation of foreign currency financial statements depends on the
functional currency of the consolidated companies. For companies
whose functional currency is not the euro, translation into the
reporting currency is based on the closing rate method: Balance
sheet items are translated into euros using closing rates on the
balance sheet date; expenses and income are translated into euros
at monthly average rates and accumulated for the year. The
difference between a company's translated equity at historical rates
at the time of acquisition or retention and its equity at closing rates
on the balance sheet date is reported separately in equity under
other comprehensive income (translation adjustments) and is
recognized in income only upon the company's disposal.
For certain companies outside the eurozone or U.S. dollar zone, the
euro or U.S. dollar is the functional currency. In such cases, financial
statements prepared in the local currency are translated into the
functional currency using the temporal method: All nonmonetary
assets and related depreciation and amortization as well as equity
are translated at the exchange rate applying to the respective
transactions. All other balance sheet items are translated using
closing rates on the balance sheet date; other expenses and income
are translated at monthly average rates. The resulting translation
differences are recognized in the income statement under other
operating income or expenses. If necessary, financial statements in
the functional currency are translated into the presentation currency
according to the closing rate method.
Selected exchange rates
€1 equals
Brazil (BRL)
About This Report
According to IFRS 10, a group consists of a parent entity and the
subsidiaries controlled by the parent. "Control" of an investee
assumes the simultaneous fulfillment of the following three criteria:
- The parent company holds decision-making power over the
relevant activities of the investee
-
The parent company has rights to variable returns from the
investee
2 Management's Report
1 To Our Shareholders
About This Report
191
BASF Report 2018
Foreign currency translation: The cost of assets acquired in
foreign currencies and revenue from sales in foreign currencies are
determined by the exchange rate on the date the transaction is
recognized. Foreign currency receivables and liabilities are valued at
the exchange rates on the balance sheet date. Changes in assets
and liabilities arising from foreign currency translation are recognized
in the income statement, and reported under other operating
expenses or income, other financial result, and in the case of
financial assets measured at fair value, in other comprehensive
income.
The incidental acquisition costs of a business combination are
recognized in the income statement under other operating expenses.
Capital consolidation is conducted at the acquisition date according
to the purchase method. Initially, all assets, liabilities and additional
intangible assets that are to be capitalized are measured at fair
value. Finally, the acquisition cost is compared with the proportional
share of the net assets acquired at fair value. The resulting positive
differences are capitalized as goodwill. Negative differences are
reviewed once more, then recognized directly in the income
statement.
Transactions between consolidated companies as well as
intercompany profits resulting from trade between consolidated
companies are eliminated in full; for joint operations, they are
proportionally eliminated. Material intercompany profits related to
companies accounted for using the equity method are eliminated.
Consolidation methods: Assets and liabilities of consolidated
companies are uniformly recognized and measured in accordance
with the principles described herein. For companies accounted for
using the equity method, material deviations in measurement
resulting from the application of other accounting principles are
adjusted for.
Joint ventures and associated companies are accounted for using
the equity method in the Consolidated Financial Statements.
Associated companies are entities that are not subsidiaries, joint
ventures or joint operations, and over whose operating and financial
policies significant influence can be exercised. In general, this
applies to companies in which BASF has an investment of between
20% and 50%. Equity-accounted income is reported as part of
income from operations (EBIT).
In addition to BASF SE, the Consolidated Financial Statements
include all material subsidiaries on a fully consolidated and all
material joint operations on a proportionally consolidated basis.
Companies whose business is dormant or of low volume, and are of
minor importance for the presentation of a true and fair view of the
net assets, financial position and results of operations, are not
consolidated, but rather are reported under other shareholdings.
These companies are carried at amortized cost and are written
down in the case of an impairment. The aggregate assets and equity
of these companies amount to less than 1% of the corresponding
value at Group level.
Companies whose corporate governance structures classify them
as joint arrangements are analyzed to determine if they meet the
criteria for joint ventures or joint operations in accordance with
IFRS 11. Should the arrangement be structured through a separate
vehicle, its legal form, contractual arrangements and all other facts
and circumstances are reviewed.
for the liabilities relating to the arrangement. This requirement is
particularly fulfilled if the production output of the joint arrangement
is almost entirely transferred to the partners, through which the
partners guarantee the joint arrangements' ongoing financing.
According to IFRS 11, which regulates the accounting of joint
arrangements, a distinction must be made between joint ventures
and joint operations. In the case of a joint venture, the parties that
have joint control of a legally independent company have rights to
the net assets of that arrangement. In joint operations, the parties
that have joint control have direct rights to the assets and obligations
Based on corporate governance and any additional agreements,
companies are analyzed for their relevant activities and variable
returns, and the link between the variable returns and the extent to
which their relevant activities could be influenced.
The parent company can use its decision-making power to affect
the variable returns
China (CNY)
10
3.60
Average rates
Malaysia (MYR)
4.73
4.85
4.76
4.85
Mexico (MXN)
22.49
126.68
23.66
21.32
Norway (NOK)
9.95
9.84
9.60
9.33
Russia (RUB)
22.71
130.40
135.01
125.85
Dec. 31,
2018
Dec. 31,
2017
2018
2017
4.44
3.97
4.31
7.88
7.80
7.81
7.63
United Kingdom (GBP)
Japan (JPY)
0.89
0.89
0.88
0.88
Closing rates
7
Sales revenue from contracts with customers is recognized in the
amount of the consideration BASF expects to receive in exchange
for the goods or services when control of the goods or services is
transferred to the customer.
Impairments are recognized if the recoverable amount of the asset
is lower than the carrying amount. The measurement is based on fair
value less costs to sell or the value in use. The value in use is
determined on the basis of future cash inflows and outflows, and the
weighted average cost of capital after taxes, depending on tax rates
and country-related risks. An impairment is recognized for the
difference between the carrying amount and the recoverable
amount. If the reasons for an impairment no longer exist, the
write-downs are reversed up to the value of the asset had an impair-
ment not been recognized.
Similar obligations, especially those arising from commitments by
North American Group companies to pay the healthcare costs and
life insurance premiums of retired staff and their dependents, are
reported under provisions for similar obligations.
Provisions for pensions and similar obligations: Provisions for
pensions are calculated on an actuarial basis in accordance with the
projected unit credit method using assumptions relating to the
following valuation parameters, among others: future developments
in compensation, pensions and inflation, employee turnover and the
life expectancy of beneficiaries. Obligations are discounted based
on the market yields on high-quality corporate fixed-rate bonds
rated between "AA-" to "AA+" by at least one of the following rating
agencies: Fitch, Moody's or Standard & Poor's.
Liabilities
The expenses and income shown in other comprehensive income
are divided into two categories: Items that will be recognized in the
income statement in the future (known as "recycling") and items that
will not be reclassified to the income statement in the future. The first
category includes translation adjustments, the measurement of
securities at fair value, and changes in the fair value of derivatives
held to hedge future cash flows and net investments in foreign
operations. Items in other comprehensive income that will not be
reclassified to the income statement at a future date include effects
from the remeasurement of defined benefit plans.
Other comprehensive income
Derivative financial instruments could be embedded within other
contracts. If IAS 39 required separation, the embedded derivative
was accounted for separately from its host contract and measured
at fair value.
Cash and cash equivalents consisted primarily of cash on hand
and bank balances with maturities of less than three months.
Financial liabilities that were not derivatives were initially
measured at fair value. This usually corresponded to the amount
received. Subsequent measurement was at amortized cost using
the effective interest method.
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
198
BASF Report 2018
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
Actuarial reports are used to calculate the amount of pension
provisions.
BASF applied IAS 39 in 2017. It required recognition of an impair-
Iment loss if there was evidence of a permanent impairment of a
financial instrument not measured at fair value through profit or loss.
If the reason for the impairment of loans and receivables as well as
held-to-maturity financial instruments ceased to exist, the impair-
ment was reversed up to the amortized cost and recognized in the
income statement. Impairments on financial instruments were
recognized in separate accounts.
-
Financial assets and liabilities at fair value recognized in the
income statement consisted of derivatives and other trading
instruments. At BASF, this measurement category included
derivatives only. Derivatives were reported in other receivables
and miscellaneous assets or other liabilities. BASF did not make
use of the fair value option under IAS 39. The calculation of fair
values was based on market parameters or measurement models
based on such parameters. In some exceptional cases, the fair
value was calculated using parameters that are not observable on
the market.
Loans and receivables comprised financial assets with fixed or
determinable payments, which were not quoted on an active
market and were not derivatives or classified as available-for-sale.
This measurement category included trade accounts receivable
as well as other receivables and loans reported under other
receivables and miscellaneous assets. Initial measurement was at
fair value, which generally corresponded to the nominal value of
the receivable or loan. Interest-free and low-interest long-term
loans and receivables were recorded at present value. Subse-
quent measurement recognized in income was generally at
amortized cost using the effective interest method. If there was
objective evidence for an impairment of a receivable or loan, an
individual valuation allowance was made. When assessing the
need for a valuation allowance, regional and sector-specific
conditions were considered. In addition, BASF used internal and
external ratings, as well as the assessments of debt collection
-
agencies and credit insurers, when available. A portion of
receivables was covered by credit insurance. Bank guarantees
and letters of credit were used to an immaterial extent. Valuation
allowances were only recognized for those receivables not
covered by insurance or other collateral. The valuation allowances
for receivables whose insurance included a deductible were not
recognized in excess of the amount of the deductible. Write-
downs were based on historical values relating to customer
solvency and the age, period overdue, insurance policies and
customer-specific risks. In addition, a valuation allowance had to
be recognized when the contractual conditions forming the basis
for the receivable were changed through renegotiation in such a
Iway that the present value of the future cash flows decreased.
Furthermore, valuation allowances were recognized for receiv-
ables based on transfer risks for certain countries. If, in a
subsequent period, the amount of the impairment decreased,
and the decrease could be objectively attributed to an event
occurring after the valuation allowance was made, it was reversed
in the income statement. Reversals of valuation allowances did
not exceed amortized cost. Loans and receivables were derecog-
nized when they were definitively found to be uncollectible.
Held-to-maturity financial assets consisted of nonderivative
financial assets with fixed or determinable payments and a fixed
term, for which there was the intent and ability to hold until
maturity, and which did not fall under other valuation categories.
They were initially recognized at fair value, which corresponded to
the nominal value in most cases. Subsequent measurement was
at amortized cost using the effective interest method. BASF did
not have any material financial assets that fell under this category.
Available-for-sale financial assets comprised financial assets
that were not derivatives and did not fall under any of the above
valuation categories. This measurement category comprised
shareholdings reported under the item other financial assets,
which were not accounted for using the equity method, as well as
short and long-term securities. Measurement was at fair value.
Changes in fair value were recognized directly in equity (other
comprehensive income) and were only recognized in the income
statement when the assets had been disposed of or impaired.
Subsequent reversals were recognized directly in equity (other
comprehensive income). In the case of debt instruments only,
reversals were recognized in the income statement up to the
amount of the original impairment; reversals above this amount
were recognized directly in equity. If the fair value of available-for-
sale financial assets fell below acquisition costs, the assets were
impaired if the decline in value was material and was considered
permanent. The fair values were determined using market prices.
Shareholdings whose fair value could not be reliably determined
were carried at cost and written down in the case of impairment.
Cost represented the best estimate of the fair value of these
shareholdings. This category included investments in other share-
holdings, provided that these shares were not publicly traded.
There were no plans to sell significant shares in these sharehold-
ings.
Financial assets and liabilities were divided into the following mea-
surement categories:
About This Report
Actuarial gains and losses from changes in estimates relating to the
actuarial assumptions used to calculate defined benefit obligations,
the difference between standardized and actual returns on plan
assets, as well as the effects of the asset ceiling are recognized
directly in equity as other comprehensive income.
Provisions for German trade income tax, German corporate income
tax and similar income taxes are calculated and recognized based
on the expected taxable income of the consolidated companies less
any prepayments that have been made. Provisions are set up for
interest accrued. Other taxes to be assessed are considered
accordingly.
6
4 Consolidated Financial Statements
200
BASF Report 2018
Provisions for restoration obligations concern the filling of wells and
the removal of production facilities upon the termination of
production. When the obligation arises, the provision is measured at
the present value of the future restoration costs. An asset of the
same amount is capitalized as part of the carrying amount of the
plant concerned and is depreciated along with the plant. The
discount on the provision is unwound annually until the time of the
planned restoration.
Amortization and depreciation of intangible assets and property,
plant and equipment of the discontinued oil and gas business were
included in the earnings of the BASF Group through September
2018.
Intangible assets in the discontinued oil and gas business relate
primarily to exploration and production rights. During the exploration
phase, these are not subject to amortization but are tested for
impairment annually. When economic success is determined, the
rights are amortized in accordance with the unit of production
method.
The intangible asset from the marketing contract for natural gas
from the Yuzhno Russkoye natural gas field is amortized based on
BASF's share of the produced and distributed volumes.
The unit of production method at the field or reservoir level was used
to depreciate assets from oil and gas production. Depreciation is
generally calculated on the basis of production in the period in rela-
tion to the proven, developed reserves.
Exploration and development expenditures in the discontinued oil
and gas business are accounted for using the successful efforts
method. Under this method, costs of successful exploratory drilling
as well as successful and dry development wells are capitalized.
For more information, see Note 2.5 from page 209 onward and Note 4 from page 211 onward
Discontinued operations: These are classified as held for sale and
are presented as discontinued operations in BASF's Consolidated
Financial Statements in accordance with IFRS 5. Until closing, the
income after taxes of discontinued operations will be shown in
income after taxes of the BASF Group as a separate item (income
after taxes from discontinued operations). The BASF Group's sales
and earnings were retroactively adjusted for the consolidated figures
for discontinued operations as of the beginning of the fiscal year.
The prior-year figures were restated. In addition, the assets and
liabilities of the discontinued operations were reclassified to a
disposal group (assets or liabilities of disposal groups). Depreciation
of noncurrent assets and the use of the equity method are
suspended as of the date when the disposal group is initially
presented. The statement of cash flows was not restated. The
activities of discontinued operations are not allocated to any
reportable segment in financial reporting.
Groups of assets and liabilities held for sale (disposal groups):
These comprise those assets and directly associated liabilities
shown separately on the balance sheet whose sale in the context of
a single transaction is highly probable. A transaction is assumed to
be highly probable if there are no significant risks of completion of
the transaction, which usually requires the conclusion of binding
contracts. The assets and liabilities of disposal groups are recog-
nized at the lower of the sum of their carrying amounts or fair value
less costs to sell; this does not apply to assets that do not fall under
the valuation principles of IFRS 5. Depreciation of noncurrent assets
and the use of the equity method are suspended.
Business combinations: In business combinations, the acquired
assets and liabilities are recognized at fair value on the date the
acquirer effectively obtains control. The fair value of acquired assets
and assumed liabilities at the date of acquisition, as well as the
useful lives of the acquired assets, are determined on the basis of
assumptions. Measurement is largely based on projected cash
flows. Actual cash flows can deviate significantly from those.
Independent external appraisals are used for the purchase price
allocation of material business combinations. Valuations in the
course of business combinations are based on existing information
as of the acquisition date.
Other accounting policies
The probable amount required to settle noncurrent provisions is
discounted if the effect of discounting is material. In this case, the
provision is recognized at present value. Assumptions must be
made in determining the discount rate (2018: 1.5%; 2017: 2.0%)
used for calculating noncurrent provisions. Financing costs related
to unwinding the discount of provisions in subsequent periods are
shown in other financial result.
For more information, see Note 26 from page 250 onward
Provisions are established for certain environmental protection
measures and risks if there is a present legal or constructive
obligation arising from a past event, and the expected cash outflow
can be estimated with sufficient reliability.
In addition, other provisions also cover expected costs for
dismantling existing plants and buildings, rehabilitating contami-
nated sites, recultivating landfills, removal of environmental
contamination from existing production or storage sites and similar
measures. If BASF is the only responsible party that can be identi-
fied, the provision covers the entire expected claim. At sites operated
together with one or more partners, the provision generally covers
only BASF's share of the expected claim. The determination of the
amount of the provision is based on the available technical
information on the site, the technology used, legal regulations, and
official obligations.
Provisions are recognized for expected severance payments or
similar personnel expenses as well as for demolition expenses and
other charges related to restructuring measures that have been
planned and publicly announced by management.
Provisions for long-service and anniversary bonuses are predomi-
nantly calculated based on actuarial principles. For contracts signed
under phased retirement programs, approved supplemental
payments are accrued in installments until the end of the exemption
phase at the latest. Accounting and measurement follow the
German Accounting Standards Committee's Implementation
Guidance 1 (IFRS) dated December 2012.
BASF Report 2018
199
Other provisions: Other provisions are recognized when there is a
present obligation as a result of a past event and when there is a
probable outflow of resources whose amount can be reliably
estimated. Provisions are recognized at the probable settlement
value.
About This Report
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
Other provisions also cover risks resulting from legal disputes and
proceedings, provided the criteria for recognizing a provision are
fulfilled. In order to determine the amount of the provisions, the
company takes into consideration the facts related to each case, the
size of the claim, claims awarded in similar cases and independent
expert advice as well as assumptions regarding the probability of a
successful claim and the range of possible claims. Actual costs can
deviate from these estimates.
1 To Our Shareholders
197
For more information on provisions for pensions and similar obligations, see Note 22 from page 240
onward
When fair value hedge accounting is used, the asset or liability
recognized is hedged against the risk of a change in fair value. The
hedging instruments used, which often take the form of a derivative,
are measured at fair value and changes in fair value are recognized
in the statement of income. The carrying amounts of the assets or
liabilities designated as the underlying transaction are also measured
at fair value through the statement of income.
About This Report
195
BASF Report 2018
Financial assets and financial liabilities are recognized in the
consolidated balance sheet when the BASF Group becomes a
party to a financial instrument. Financial assets are derecognized
when BASF no longer has a contractual right to the cash flows from
the financial asset or when the financial asset is transferred together
with all material risks and rewards of ownership and BASF does not
have control of the financial asset after it has been transferred. For
example, receivables are derecognized when they are definitively
found to be uncollectible. Financial liabilities are derecognized when
the contractual obligations expire, are discharged or cancelled.
Regular-way purchases and sales of financial instruments are
accounted for using the settlement date; in precious metals trading,
the day of trading is used.
Financial instruments
For more information, see Note 11 from page 223 onward
Deferred tax liabilities are recognized for differences between the
proportional IFRS equity and the tax base of the investment in a
consolidated subsidiary if a reversal of these differences is expected
in the foreseeable future. Deferred tax liabilities are recognized for
dividend distributions planned for the following year if these
distributions lead to a reversal of temporary differences.
Changes in deferred taxes in the balance sheet are recorded as
deferred tax expense or income if the underlying transaction is not
to be recognized directly in equity or in income and expenses
recognized in equity. For those effects which have been recognized
in equity, changes to deferred tax assets and tax liabilities are also
recognized directly in equity.
Deferred tax assets are offset against deferred tax liabilities provided
they are related to the same taxation authority and have the same
maturities. Surpluses of deferred tax assets are only recognized
provided that the tax benefits are likely to be realized. The valuation
of deferred tax assets is based on the probability of a reversal of the
differences and the assessment of the ability to utilize tax loss
carryforwards and unused tax credits. This depends on whether
future taxable profits will exist during the period in which temporary
differences are reversed and in which tax loss carryforwards and
unused tax credits can be claimed. The valuation of deferred tax
assets is based on internal projections of the future earnings of the
particular Group company.
Deferred taxes: Deferred taxes are recorded for temporary
differences between the carrying amount of assets and liabilities in
the financial statements and the carrying amounts for tax purposes
as well as for tax loss carryforwards and unused tax credits. This
also comprises temporary differences arising from business
combinations, with the exception of goodwill. Deferred tax assets
and liabilities are calculated using the respective country-specific tax
rates applicable for the period in which the asset or liability is realized
or settled. Tax rate changes enacted or substantively enacted on or
before the balance sheet date are taken into consideration.
The exception made by IAS 2 for traders is applied to the
measurement of precious metal inventories. Accordingly, inventories
held exclusively for trading purposes are to be measured at fair value
less costs to sell. All changes in value are recognized in the state-
ment of income.
Inventories may be written down if the prices for the sales products
decline, or in cases of a high rate of days sales of inventory (DSI).
Write-downs on inventories are reversed if the reasons for them no
longer apply.
In addition to direct costs, cost of conversion includes an appropriate
allocation of production overhead costs based on normal utilization
rates of the production plants, provided that they are related to the
production process. Pensions, social services and voluntary social
benefits are also included, as well as allocations for administrative
costs, provided they relate to the production. Borrowing costs are
not included in cost of conversion.
Investments accounted for using the equity method: The
carrying amounts of these companies are adjusted annually based
on the pro rata share of net income, dividends and other changes in
equity. Should there be indications of a reduction in the value of an
investment, an impairment is recognized in the income statement.
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
Investment properties held to realize capital gains or rental income
are immaterial. They are valued at the lower of fair value or acquisition
cost less depreciation.
BASF Report 2018
Leases: A lease is an agreement whereby the lessor conveys to the
lessee the right to use an asset for an agreed period of time in return
for a payment or series of payments. Lease contracts are classified
as either finance or operating leases.
Assets subject to operating leases are not capitalized. Lease
payments are recognized in the income statement in the period they
are incurred.
A lease is classified as a finance lease if it transfers all material risks
and rewards related to the leased asset. Assets subject to a finance
lease are capitalized at the lower of the fair value of the leased assets
or the present value of the minimum lease payments. A lease liability
is recorded in the same amount. The periodic lease payments must
be divided into principal and interest components. The principal
component reduces the liability, while the interest component
represents an interest expense. Depreciation is recognized over the
shorter of the useful life of the asset or the period of the lease.
Leases can be embedded within other contracts. If separation is
required under IFRS, the embedded lease is recorded separately
from its host contract and each component of the contract is carried
and measured in accordance with the applicable regulations.
1 To Our Shareholders
Borrowing costs: Borrowing costs directly incurred as part of the
acquisition, construction or production of a qualifying asset are
capitalized as part of the acquisition or production cost of that asset.
A qualifying asset is an asset for which the time period necessary to
make it ready for its intended use or sale is longer than one year.
Borrowing costs are capitalized up to the date the asset is ready for
its intended use. The borrowing costs were calculated based on a
rate of 1.5% (previous year: 2.0%) and adjusted on a country-
specific basis, if necessary. All other borrowing costs are recognized
as an expense in the period in which they are incurred.
BASF Report 2018
194
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Government grants: Government grants related to the acquisition
or construction of property, plant and equipment reduce the
acquisition or construction cost of the respective assets. Other
government grants or government assistance are recognized
immediately as other operating income or treated as deferred
income and released over the underlying period.
2 Management's Report
Inventories are measured at acquisition cost or cost of conversion
based on the weighted average method. If the market price or the
fair value of the sales products, which are based on the net realiz-
able values, is lower, then the sales products are written down to
this lower value. The net realizable value is the estimated price in the
ordinary course of business less the estimated costs of completion
and the estimated selling costs.
5 Supplementary Information Oil and Gas Business 6 Overviews
Financial guarantees of the BASF Group are contracts that require
compensation payments to be made to the guarantee holder if a
debtor fails to make payment when due under the terms of a trans-
action entered into with the holder of the guarantee. Financial guar-
antees issued by BASF are measured at fair value upon initial recog-
nition. In subsequent periods, these financial guarantees are carried
at the higher of amortized cost or the best estimate of the present
obligation as of the reporting date.
3 Corporate Governance
Derivative financial instruments can be embedded within other
contracts, creating a hybrid financial instrument. If IFRS requires
separation, the embedded derivative is accounted for separately
from its host contract and measured at fair value. If IFRS 9 does
not provide for separation, the hybrid instrument is accounted for
at fair value in its entirety.
Financial liabilities recognized at fair value through profit or
loss contain derivative financial liabilities. These are likewise mea-
sured at the value of the consideration received as the fair value of
the liability on the date of initial recognition. The latter also rep-
resents the measurement basis for these liabilities in subsequent
measurement. The option to subsequently measure financial lia-
bilities at fair value is not exercised.
Financial liabilities that are measured at amortized cost
generally include all financial liabilities, provided these do not
represent derivatives. They are generally measured at fair value at
the time of initial recognition, which usually corresponds to the
value of the consideration received. Subsequent measurement is
recognized in profit or loss at amortized cost using the effective
interest method. At BASF, for example, bonds and liabilities to
banks reported under financial indebtedness are measured at
amortized cost.
Impairments on financial assets measured at fair value through
other comprehensive income are calculated in the same way as
impairments on financial assets measured at amortized cost and
recognized in profit or loss. The following measurement categories
are used for financial liabilities:
Financial assets measured at fair value through other com-
prehensive income include all assets with contractual terms that
I give rise to cash flows on specified dates, which are solely
payments of principal and interest on the principal amount out-
standing in accordance with the cash flow condition in IFRS 9, to
the extent that the asset is not just held with the intention of col-
lecting the expected contractual cash flows over its term, but also
generating cash flows from its sale. At BASF, certain securities
that are classified as debt instruments are allocated to this cate-
gory. BASF does not exercise the option to subsequently measure
equity instruments through other comprehensive income.
Assets measured at fair value through other comprehensive
income are initially measured at fair value, which usually corre-
sponds to the nominal value of the securities allocated to this
category at the time of acquisition. Subsequent measurement is
likewise at fair value. Changes in the time value are recognized in
other comprehensive income and reclassified to the statement of
income when the asset is disposed of.
A decrease in valuation allowances due, for example, to a
reduction in the credit risk of a counterparty or an objective event
occurring after the valuation allowance is recorded in profit or
loss. Reversals of valuation allowances may not exceed amortized
cost, less any expected future credit losses.
Notes
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
196
BASF Report 2018
About This Report
Regional and, in certain circumstances, industry-specific factors
and expectations are taken into account when assessing the
need for a valuation allowance as part of the calculation of
expected credit losses and individual valuation allowances. In
addition, BASF uses internal and external ratings and the
assessments of debt collection agencies and credit insurers,
when available. Individual valuation allowances are also based on
experience relating to customer solvency and customer-specific
risks. Factors such as credit insurance, which covers a portion of
receivables measured at amortized cost, are likewise considered
when calculating valuation allowances. Bank guarantees and
letters of credit are used to an immaterial extent. Expected credit
losses and individual valuation allowances are only calculated for
those receivables that are not covered by insurance or other
collateral. The valuation allowances for receivables whose
insurance includes a deductible are not recognized in excess of
the amount of the deductible.
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
The fair value of a financial instrument is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
If pricing on an active market is available, for example in the form of
share prices, these are used as the basis for the measurement.
Otherwise, the measurement is based on internal measurement
models using current market parameters or external measurements,
for example, from banks. These internal measurements pre-
dominantly use the net present value method and option pricing
models.
BASF began applying IFRS 9 as of January 1, 2018. Except for
financial assets measured at fair value through profit or loss, this
requires the recognition of impairments for expected credit losses,
independent of the existence of any actual default events and
individual valuation allowances if evidence of a permanent need for
impairment exists. If this evidence no longer exists, the impairment
is reversed in the statement of income up to the carrying amount of
the asset had the default event not occurred. Valuation allowances
are generally recognized in separate accounts.
-
Financial assets recognized at fair value through profit or
loss include all financial assets whose cash flows are not solely
payments of principal and interest in accordance with the cash
flow condition established in IFRS 9. At BASF, derivatives are allo-
cated to this measurement category, for example. BASF does not
generally exercise the fair value option in IFRS 9, which permits
the allocation of financial instruments not to be measured at fair
value through profit or loss on the basis of the cash flow condition
The classification and measurement of financial assets is based on
the one hand on the cash flow condition (the "solely payments of
principle and interest" criterion), that is, the contractual cash flow
characteristics of an individual financial asset. On the other hand, it
also depends on the business model used for managing financial
asset portfolios. Based on these two criteria, BASF uses the follow-
ing measurement categories for financial assets:
Financial assets measured at amortized cost include all assets
with contractual terms that give rise to cash flows on specific
dates, provided that these cash flows are solely payments of
principal and interest on the principal amount outstanding in
accordance with the cash flow condition in IFRS 9, to the extent
that the asset is held with the intention of collecting the expected
contractual cash flows over its term. At BASF, this measurement
category includes trade accounts receivable, as well as receivables
reported under other receivables and miscellaneous assets and
certain securities.
Initial measurement of these assets is generally at fair value, which
usually corresponds to the transaction price at the time of acquisi-
tion. Subsequent measurement effects are recognized in income
using the effective interest method.
Impairments are recognized for expected credit losses in both
initial and subsequent measurement, even before the occurrence
of any default event. If the counterparty is considered as having
defaulted, an individual valuation allowance is generally recog-
nized for the financial assets measured at amortized cost. In
addition, a valuation allowance must be recognized when the
contractual conditions that form the basis for the receivable are
changed through renegotiation in such a way that the present
value of the future cash flows decreases.
The extent of expected credit losses is determined based on the
credit risk of a financial asset, as well as any changes to this
credit risk: If the credit risk of a financial asset has increased
significantly since initial recognition, expected credit losses are
generally recognized over the lifetime of the asset. If, however, the
credit risk has not increased significantly in this period, impair-
ments are generally only recognized for the 12-month expected
credit losses. By contrast, under the simplified approach for
determining expected credit losses permitted by IFRS 9,
impairments for receivables such as lease receivables and trade
accounts receivable always cover the lifetime expected credit
losses of the receivable concerned.
At BASF, the credit risk of a financial asset is assessed using both
internal information and external rating information on the
respective counterparty. A significant increase in the counter-
party's credit risk is assumed if its rating is lowered by a certain
number of notches. The significance of the increase in the credit
risk is not reviewed for trade accounts receivable or lease
receivables. Furthermore, it is generally assumed that the credit
risk for a counterparty with a high credit rating will not have
increased significantly.
or the business model criterion to the above category under
certain circumstances.
In cash flow hedges, future cash flows and the related income and
expenses are hedged against the risk of changes in fair value. To this
end, future underlying transactions and the corresponding hedging
instruments are designated and the cost of hedging are a cash flow
hedge accounting relationship for accounting purposes. The
effective portion of the change in fair value of the hedging instru-
ment, which often meets the definition of a derivative, and the cost
of hedging are recognized directly in equity under other comprehen-
sive income over the term of the hedge, taking deferred taxes into
account. The ineffective portion is recognized immediately in the
income statement. In the case of future transactions that lead to
recognition of a nonfinancial asset or a nonfinancial liability, the
cumulative fair value changes of the hedge in equity are generally
charged against the acquisition costs of the hedged item on its initial
recognition. For hedges based on financial assets, financial liabilities
or future transactions, cumulative fair value changes of the hedges
are transferred from equity to the income statement in the reporting
period in which the hedged item is recognized in the income
statement. The maturity of the hedging instrument is determined
based on the effective date of the future transaction.
2 Management's Report
1 To Our Shareholders
3 Corporate Governance
4 Consolidated Financial Statements
Agreed transactions
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
(0.1)
-
-
On September 18, 2017, BASF signed an agreement with the
Solvay group on the acquisition of Solvay's global polyamide
business, subject to the approval of the relevant antitrust
authorities. The E.U. Commission approved the acquisition of the
polyamide business, subject to certain conditions, on January 18,
2019. These conditions require the sale of parts of the original
transaction volume to a third party. Specifically, this refers to
Solvay's production plants and innovation competencies in the
engineering plastics field in Europe. The sale process has already
begun. The approval process is pending in China. The transaction
is expected to close in the second half of 2019, as soon as all
remaining conditions are met. This includes the divestiture of
businesses and assets to a third party. BASF plans to integrate
the polyamide business into the Performance Materials and
Monomers divisions. Before being adjusted to reflect the
antitrust-related changes to the scope of the transaction, the
purchase price on a cash and debt-free basis and excluding other
adjustments would have been €1.6 billion. If the transaction is not
concluded, the agreement provides for, subject to certain
conditions, a payment of €150 million from BASF to Solvay.
On May 3, 2018, BASF and Solenis announced that they had
signed an agreement on the combination of BASF's paper and
water chemicals business with Solenis. The affected assets and
liabilities were reclassified to a disposal group. BASF and Solenis
closed the transaction on January 31, 2019.
For more information, see Note 2.5 from page 209 onward and Note 35 on page 268
On September 27, 2018, BASF and the LetterOne group signed
a definitive transaction agreement to merge their oil and gas
businesses. The merger is intended to form an independent
European exploration and production company with international
operations.
About This Report
For more information, see Note 2.5 from page 209 onward
-
208
0.1
177
2.5 Discontinued operations/disposal groups
(60)
45
48
0.1
239
0.7
(1)
(13)
(4)
47
0.1
222
0.3
107
BASF Report 2018
Discontinued operations
935
For more information, see Note 1.4 from page 192 onward
(68)
(82)
(26)
(45)
(248)
(20)
Income from companies accounted for using the equity method
99
248
EBIT
1,733
Financial result
(19)
1 Proportional share in relation to the BASF Group
(17)
(80)
As of the binding agreement between BASF and LetterOne to merge
their respective activities on September 27, 2018, the oil and gas
business is presented as a discontinued operation.
(94)
2,070
The joint venture that will result from the merger will operate under
the name Wintershall DEA. Although BASF will receive a majority
stake in Wintershall DEA, the agreement stipulates joint control.
With this transaction, the formation of a leading independent Euro-
pean oil and gas company is being pursued. BASF expects to close
the transaction in the first half of 2019. Until closing, Wintershall and
DEA will continue to operate as independent companies.
BASF's oil and gas activities are bundled in the Wintershall Group.
Wintershall, headquartered in Kassel, Germany, focuses on
exploration and production in oil and gas-rich regions in Europe,
North Africa, Russia, South America and the Middle East.
Wintershall is also active in the transport of natural gas in Europe
with BASF's Russian partner Gazprom.
Impairments were not recorded for the discontinued oil and gas
business on the date of reclassification to "held for sale" or at the
end of the reporting period.
The amounts in the following tables illustrate the consolidated
contribution of discontinued operations.
Earnings from discontinued operations are as follows:
Statement of Income from discontinued operations
Million €
Sales revenue
Cost of sales
Gross profit on sales
Selling expenses
General administrative expenses
Research and development expenses
Other operating income and expenses
2018
2017
4,094
3,252
(2,024) (2,338)
914
Total equity and liabilities
Payments received from divestitures
207
Current liabilities
66
1.2
281
Current liabilities
of which financial indebtedness
Notes
Divestitures
In 2018, BASF sold the following activities:
-
-
Shares in the Aguada Pichana Este concession in Argentina were
sold on January 23, 2018. The sale pertained to the discontinued
oil and gas business.
On January 31, 2018, BASF's production site for styrene
butadiene-based paper dispersions in Pischelsdorf, Austria was
sold to Synthomer Austria GmbH, a subsidiary of the British
specialty chemicals manufacturer Synthomer plc. The styrene
acrylic dispersions that were produced in Pischelsdorf were not
included in the sale. They were bundled with the businesses in
Ludwigshafen, Germany. The sale was made in connection with
the concentration of paper dispersions production in Europe at
the sites in Ludwigshafen and Hamina, Finland, which is designed
to strengthen the Dispersions & Pigments division.
In 2017, BASF sold the following activities:
-
-
0.4
-
of which financial indebtedness
Payments made for acquisitions
Income before income taxes
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
BASF Report 2018
1 Proportional share in relation to the BASF Group
155
7,431
0.1
106
1.1
925
Total equity and liabilities
On February 28, 2017, BASF sold its inorganic specialties
business to Edgewater Capital Partners LP, Cleveland, Ohio. The
transaction comprised the production site in Evans City,
Pennsylvania, and the product lines for special alcoholates,
boranes and alkali metals manufactured there in the Intermediates
division.
On July 17, 2017, BASF sold its bleaching clay and mineral
absorbents businesses to EP Minerals LLC, based in Reno,
Nevada. The divestiture affected one global business unit in the
Catalysts division and comprises a production site as well as a
bleaching clay mine in Mississippi and the mineral rights
sublease for a mine in Arizona. 66 employees transferred to
EP Minerals LLC.
On September 29, 2017, BASF completed the combination of the
global leather chemicals business in the Performance Chemicals
division with the Stahl group. The transaction comprised the
global leather chemicals business, as well as the leather chemi-
cals production site in L'Hospitalet, Spain. Around 210 jobs were
affected worldwide, 110 of which in Asia. Under the terms of the
agreement, BASF received a 16% minority interest in the Stahl
of which property, plant and equipment
(15)
(0.1)
(50)
(0.2)
Current assets
(39)
(0.1)
(48)
(0.2)
of which cash and cash equivalents
Assets
Equity
Noncurrent liabilities
of which financial indebtedness
0.2
93
(21)
Noncurrent assets
-
group as well as a payment; this resulted in special income.
Furthermore, in the medium to long term, BASF will supply Stahl
with significant volumes of leather chemicals.
- On September 30, 2017, BASF concluded the sale of its
production site for electrolytes in Suzhou, China, to Shenzhen
Capchem Technology Co. Ltd., based in Shenzhen, China. The
site was allocated to the Catalysts division.
Effects of divestitures
Sales
The following overview shows the effects of the divestitures
conducted in 2018 and 2017 on the Consolidated Financial
Statements. The sales line item shows the year-on-year decline
resulting from divestitures. The impact on equity related mainly to
gains and losses from divestitures.
2018
of which financial indebtedness
2017
%1
Million €
%1
(157)
(0.3)
(460)
(0.8)
Million €
1,714
3
(885)
896
361
12,846
13,207
158
136
294
614
614
273
273
219
219
158
1,242
896
1,400
128
2
Paper and water
chemicals business
Oil and gas business
Total
39
1,572
1,611
10
724
734
312
6,959
7,271
2,565
2,565
2
128
519
14,088
14,607
3
1,485
1,485
833
833
10
10
228
228
72
72
342
342
4,268
4,265
5,750
5,753
516
8,338
Provisions for pensions and similar obligations
Other provisions
3
307
310
1,605
1,605
1,637
Net assets
1,637
499
217
217
0.1
210
BASF Report 2018
8,854
499
918
Liabilities of the disposal group
Other liabilities
Of other comprehensive income after taxes attributable to BASF SE
shareholders totaling minus €608 million (2017: minus €1,268 mil-
lion), minus €102 million (2017: minus €327 million) related to
discontinued operations and minus €506 million (2017: minus
€941 million) to continuing operations.
BASF Report 2018
209
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
Discontinued operations accounted for the following amounts in
BASF's Statement of Cash Flows:
Disposal groups as of December 31, 2018
Million €
Cash flows from discontinued operations
Million €
(79)
Cash flows from operating activities
1,024
of which impairments and reversals of impairments
(until September 9, 2018)
(158)
829
760
(61)
(41)
768
719
€
0.83
0.78
Income taxes
Income after income taxes
of which attributable to noncontrolling interests
Net income
Earnings per share from discontinued operations
Amortization of intangible assets and depreciation of property,
plant and equipment (until September 30, 2018)
617
Cash flows from investing activities
Cash flows from financing activities
Total
The values for the disposal groups are presented in the following
table.
Other comprehensive income included minus €1,174 million for the
oil and gas disposal group as of December 31, 2018. The paper and
water chemicals business disposal group did not contribute to other
comprehensive income.
Other receivables and miscellaneous assets
Noncurrent assets
Inventories
Accounts receivable, trade
Other receivables and miscellaneous assets
Marketable securities
Cash and cash equivalents
Current assets
Assets of the disposal group
Deferred tax liabilities
Financial indebtedness
Other liabilities
Noncurrent liabilities
Accounts payable, trade
Provisions
Tax liabilities
Financial indebtedness
On May 3, 2018, BASF and Solenis announced that they had signed
an agreement on the combination of BASF's paper and water
chemicals business with Solenis. The relevant assets and liabilities
were reclassified to a disposal group. No impairments were recog-
nized for the disposal group for the paper and water chemicals
business on the date of reclassification to "hold to sell" or at the end
of the reporting period. The business was allocated to the
Performance Chemicals division until the transaction closed on
January 31, 2019.
Groups of assets and liabilities held for sale (disposal
groups)
The carrrying amounts of the balance sheet items of the discontin-
ued operations are presented in the following table "Disposal groups
as of December 31, 2018."
Deferred tax assets
Balance sheet
2018
2017
Goodwill
1,554
1,835
Other intangible assets
Current liabilities
(1,011)
Property, plant and equipment
(346)
(387)
Investments accounted for using the equity method
Other financial assets
197
528
(920)
40
Non-material joint ventures accounted for using the equity method
(BASF interest)
634
(1)
0.0
1
0.0
8
0.0
(6)
-
0.0
(17)
0.1
(6)
0.0
(6)
0.0
BASF Report 2018
203
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
2.2 Joint Operations
0.0
0.0
(6)
0.0
Total equity and liabilities
Other financial obligations
2017
2018
Million €
%
Million €
%
2
0.0
2
0.0
-
2
(7)
0.0
79
0.4
1
0.0
0.0
(8)
0.0
(1)
0.0
(6)
0.0
of which financial indebtedness
Proportionally consolidated joint operations include, in particular:
Ellba C.V., Rotterdam, Netherlands, which is jointly operated with
Shell for the production of propylene oxide and styrene monomer
AO Achimgaz, Novy Urengoy, Russia, which is jointly operated
with Gazprom for the production of natural gas and condensate
and is part of the discontinued oil and gas business
BASF DOW HPPO Production B.V.B.A., Antwerp, Belgium, which
is jointly operated with The Dow Chemical Company for the
production of propylene oxide
BASF holds a 50% share in each of these companies and controls
them jointly with the respective partner. The companies sell their
products directly to the partners. The partners ensure ongoing
financing of the companies by purchasing the production. The
companies were therefore classified as joint operations in
accordance with IFRS 11.
2,042
2,162
1,691
1,756
29
124
28
122
322
282
92
30
2,042
2,162
2,764
2,761
206
207
5
5
9
6
112
159
343
231
201
908
932
A majority of the activities in the discontinued oil and gas business
are conducted through joint activities and not in separate compa-
nies. This primarily relates to activities in Germany, Norway and
Argentina, which are reported as joint operations pursuant to
IFRS 11.
2.3 Joint ventures and associated companies
BASF has a shareholding in a material joint venture. BASF-YPC
Company Ltd., Nanjing, China, is operated by BASF together with
its partner, Sinopec, at the Verbund site in Nanjing. BASF's share
equals 50%.
Financial information on BASF-YPC Company Ltd., Nanjing, China (100%)
Million €
Balance sheet
Noncurrent assets
Current assets
of which marketable securities, cash and cash equivalents
Assets
Equity
Noncurrent liabilities
of which financial indebtedness
-
Current liabilities
Total equity and liabilities
Statement of income
Sales revenue
Depreciation and amortization
Interest income
Interest expenses
Income taxes
Income after taxes
2018
2017
1,110
1,254
of which financial indebtedness
473
Current liabilities
Noncurrent liabilities
- 22 acquired companies with headquarters in Europe (11; one of
those is in Germany), North America (two), South America, Africa,
Middle East (six) and Asia Pacific (three)
-
three newly established companies with headquarters in Europe
(two; none of which in Germany) and Asia Pacific (one)
17 companies that had not been consolidated at the time of initial
inclusion in the Consolidated Financial Statements in Europe (five;
two of those in Germany), North America (eight), South America,
Africa, Middle East (two) and Asia Pacific (two)
Of the 42 companies that were consolidated in the Consolidated
Financial Statements for the first time in 2018, 35 companies were
included for the first time due to the addition of significant parts of
Bayer's seed and non-selective herbicide business (13) and its
vegetable seed business (22) as acquired, new or initially consoli-
dated entities.
- Three companies with headquarters in Europe that had not been
consolidated at the time of initial inclusion in the Consolidated
Financial Statements
Although BASF does not hold majority shares in ZAO Gazprom
YRGM Trading, whose assets and liabilities are part of the disposal
group, BASF is entitled to the earnings of the company due to profit
distribution arrangements. As a result, the company is fully consoli-
dated in the Group Consolidated Financial Statements.
Scope of consolidation
A list of the companies included in the Consolidated Financial
Statements and a list of all companies in which BASF SE has a
shareholding as required by section 313(2) of the German
Commercial Code (HGB) is provided in the list of shares held.
For more information, see Note 3 on page 211
For more information, see basf.com/en/corporate governance
South
America,
Europe
of which
Germany
North
America
Africa,
Asia Pacific
Middle East
2018
2017
As of January 1
153
56
43
71
First-time consolidations in 2018 comprised:
In 2018, a total of 331 companies were included, either partly or
wholly, in the scope of consolidation for the Consolidated Financial
Statements (2017: 294). Of these, 42 companies were first-time
consolidations (2017: 10). Since the beginning of 2018, a total of five
companies (2017: 10) were deconsolidated due to divestiture,
merger, liquidation or immateriality.
2.1 Changes in scope of consolidation
2 Scope of consolidation
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
The assumptions regarding the long-term development of oil and
gas prices are significant for impairment tests in the discontinued oil
and gas business. The internal company projections are based on
an empirical analysis of global oil and gas supply and demand.
Short-term estimates up to three years also consider the current
prices on active markets or forward transactions. In long-term
estimates, assumptions were made regarding factors such as
inflation, production quantities and costs as well as energy efficiency
and the substitution of energy sources. Using external sources and
reports, the oil and gas price estimates were regularly checked for
plausibility.
A valuation model based on a field-related valuation approach is
used for the Exploration & Production unit in the discontinued oil and
gas business. This takes into account the expected cash flows as
well as the tax payments in the individual countries. The period
under consideration includes the planned license terms and the
production profiles of the included oil and gas fields. Furthermore,
instead of using a single weighted average cost of capital rate, the
country risk and the specific tax rate is considered in each case; this
leads to a more precise calculation of the recoverable amount.
Allowing for these parameters, the cost of capital rate after taxes
varied from 6.56% to 10.63% (2017: from 7.92% to 12.85%) and
before taxes from 9.62% to 30.37% (2017: from 11.32% to 36.99%).
Use of estimates and assumptions in preparing the Consoli-
dated Financial Statements
The carrying amount of assets, liabilities and provisions, contingent
liabilities and other financial obligations reported in the Consolidated
Financial Statements depends on the use of estimates, assumptions
and use of discretionary scope. Specific estimates or assumptions
used in individual accounting or valuation methods are disclosed in
their respective sections. They are based on the circumstances and
estimates on the balance sheet date and thus affect the amounts of
income and expenses shown for the reporting periods presented.
These assumptions primarily relate to the determination of
discounted cash flows in the context of impairment tests and
purchase price allocations; the useful lives of property, plant and
equipment and intangible assets; the carrying amount of
shareholdings; and the measurement of provisions for items such as
employee benefits, warranties, trade discounts, environmental
protection and taxes. Although uncertainty is appropriately
incorporated in the valuation factors, actual results can differ from
these estimates.
27
For planning purposes in 2019, BASF assumes an oil price of
$70/bbl (Brent) and for gas of approximately €19/MWh (roughly
$7/mmBtu).
For more information, see Note 14 from page 228 onward
An impairment is recognized if the recoverable amount of the asset
is lower than the carrying amount. The impaired asset (excluding
goodwill) is written down by the amount of the difference between
these amounts.
The goodwill impairment test is based on cash-generating units. At
BASF, these largely correspond to the business units, or in individual
cases the divisions. If there is a need for a valuation allowance, the
existing goodwill is, if necessary, completely written off as a first
step. If there is further need for a valuation allowance, this is allocated
to the remaining assets of the cash-generating unit. Goodwill impair-
ments are reported under other operating expenses.
BASF Report 2018
201
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
Impairment tests on assets are carried out whenever certain
triggering events indicate potential impairment. External triggering
events include, for example, changes in customer industries,
technologies used and economic downturns. Internal triggering
events for an impairment test include lower product profitability,
planned restructuring measures or physical damage to assets.
Impairment tests are based on a comparison of the carrying amount
and the recoverable amount. The recoverable amount is the higher
of fair value less costs to sell and the value in use. As a rule, value in
use is determined using the discounted cash flow method. The
estimation of cash flows and the assumptions used consider all
information available on the respective balance sheet date on the
future development of the operating business. Actual future
developments may vary. Impairment testing relies upon the
cash-generating unit's long-term earnings forecasts, which are
based on macroeconomic trends. The weighted average cost of
capital (WACC) based on the capital asset pricing model plays an
important role in impairment testing. It comprises a risk-free rate, the
market risk premium and the spread for the credit risk. Additional
important assumptions are the forecasts for the detailed planning
period and the terminal growth rates used.
of which financial indebtedness
294
of which proportionally consolidated
First-time consolidations
8
8
First-time consolidations in 2017 comprised:
-
Five acquired companies with headquarters in Europe and North
America
One newly established company with headquarters in Asia Pacific
One newly established company with headquarters in South
America, Africa, Middle East
BASF Report 2018
202
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
Overview of impact of changes to the scope of consolidation (excluding acquisitions and divestitures)
Sales
Noncurrent assets
of which property, plant and equipment
Current assets
of which cash and cash equivalents
Assets
2.3
2
6
of which proportionally consolidated
294
6
2
-
8
8
18
3
10
6
8
42
10
294
of which proportionally consolidated
Deconsolidations
1
2
1
5
10
of which proportionally consolidated
As of December 31
170
59
52
75
34
331
-
Carrying amount according to the equity method as of the beginning of the year
Proportional income after taxes
Equity
881
Notes
-
In 2017, BASF acquired the following activities:
Effective January 1, 2017, BASF took over the western European
Construction Chemicals business from the Henkel group with the
trade names ThomsitⓇ and CeresitⓇ for floor and tile-laying
systems as well as sealants for professional users. This
strengthened BASF's portfolio in the construction chemicals
business of the PCI Group, which belongs to the Construction
Chemicals division.
-
On February 7, 2017, BASF acquired the formerly private
company, Rolic AG, headquartered in Allschwil, Switzerland. The
company develops and sells ready-to-use formulations and
functional film products for the display and security documents as
well as barrier materials and films. With the acquisition, BASF
broadened its technology know-how and product portfolio of
display materials. The largest part of the activities was integrated
into the Dispersions & Pigments division and a smaller part into
the Coatings division.
On May 24, 2017, BASF acquired ZedX Inc., Bellefonte,
Pennsylvania. The company develops agronomic weather, crop
and pest models that can rapidly translate data into insights for
more efficient agricultural production. The integration of the
business into the Agricultural Solutions division strengthens
BASF's activities in the area of digital agriculture.
On September 4, 2017, BASF completed the acquisition of
GRUPO Thermotek, a leading manufacturer of waterproofing
systems in Mexico with headquarters in Monterrey, Mexico. The
acquisition strengthened the Construction Chemicals division's
sales channels and its product portfolio, especially in Mexico. The
transaction includes trademarks such as ThermotekⓇ and
Chovatek®.
5 Supplementary Information Oil and Gas Business 6 Overviews
The purchase prices for businesses acquired in 2018 and the
purchase price adjustments for acquisitions from 2017 totaled
€7,600 million. Payments amounted to €7,431 million in 2018. The
purchase price allocations were carried out in accordance with
IFRS 3. Goodwill resulted in the amount of €1,261 million.
Effects of acquisitions and changes in the preliminary purchase price allocations
Goodwill
Other intangible assets
Property, plant and equipment
Financial assets
2018
2017
Million €
%1
The following overview shows the effects of acquisitions in 2018 and
2017 on the Consolidated Financial Statements. When acquisitions
resulted in the transfer of assets or the assumption of additional
liabilities, these are shown as a net impact.
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
9
636
18
58
5
57
138
774
The purchase price allocations consider all the facts and circum-
stances prevailing as of the respective dates of acquisition that were
known prior to the preparation of these Consolidated Financial
Statements. In accordance with IFRS 3, should further facts and
circumstances become known within the 12-month measurement
period, the purchase price allocation will be adjusted accordingly.
Goodwill of €1,253 million resulted in particular from sales synergies.
The businesses acquired from Bayer contributed €586 million to
sales and minus €256 million to income from operations in 2018. If
Bayer's businesses and assets had been included in BASF's
Consolidated Financial Statements for the first time as of January 1,
2018, sales revenue would have totaled €2,027 million and income
from operations minus €129 million. This pro forma data serves the
purpose of comparability; it does not necessarily provide the values
that would have resulted had the transaction occurred as of Janu-
ary 1, 2018. Furthermore, they are not a forecast of future develop-
ments or results. The majority of total goodwill is tax deductible.
Wintershall Middle East GmbH acquired a 10% stake in Abu
Dhabi National Oil Company's (ADNOC) Ghasha concession in
the United Arab Emirates (UAE) on November 25, 2018. The Hail,
Ghasha, Dalma and other ultra-sour gas and condensate fields
are located in the Al Dhafra region off the coast of the Golf Emirate.
The acquisition in the discontinued oil and gas business marks
Wintershall's entry into natural gas and condensate production in
Abu Dhabi.
Total purchase price
7,421
BASF Report 2018
206
About This Report
1 To Our Shareholders
Million €
%1
1,261
13.7
1,324
3.1
18
0.1
of which cash and cash equivalents
69
3.0
5
0.1
Assets
8,356
9.7
261
0.3
Other noncurrent assets
Equity
10
Current assets
353
0.5
16.2
97
1.0
4,279
58.3
138
3.3
1,425
6.9
8
3
0.1
67
2.1
(3)
(0.1)
Noncurrent assets
7,032
243
879
240
8,195
2.4 Acquisitions and divestitures
Acquisitions
In 2018, BASF acquired the following activities:
· On March 7, 2018, BASF closed the agreement to form BASF
TODA America LLC (BTA), Iselin, New Jersey, for battery materials.
BTA is a cooperative venture between BASF and TODA; BASF
holds a majority share in and control over BTA. With the Battle
Creek site in Michigan and the site contributed by BASF in Elyria,
-
Ohio, the new company took over production of high energy
cathode active materials for e-mobility applications. The transac-
tion strengthens the Catalysts division's battery materials busi-
ness.
3 This item includes effects from discontinued operations in the amount of €87 million in 2018 (€178 million in
2017).
4 In 2018, the amount of €1,613 million was transferred to the assets of the oil and gas disposal group.
On August 1, 2018, BASF closed the acquisition of a range of
businesses and assets from Bayer to complement its own
activities in crop protection, biotechnology and digital farming. At
the same time, the transaction marked BASF's entry into the
seeds, non-selective herbicides and nematicide seed treatments
businesses. The assets acquired included Bayer's global
glufosinate-ammonium business, commercialized under the
Liberty, Basta® and Finale® trademarks, as well as its seed
businesses for key field crops in selected markets. The transac-
tion also covered Bayer's trait research and breeding capabilities
for these crops. BASF acquired the manufacturing sites for
glufosinate-ammonium production and formulation in Germany,
the United States and Canada, seed breeding facilities in the
Americas and Europe as well as trait research facilities in the
United States and Europe. BASF also closed the acquisition of
Bayer's global vegetable seeds business, which mainly operates
under the trademark NunhemsⓇ, on August 16, 2018. The
acquired vegetable seed business comprises 24 crops and about
2,600 varieties. It also includes R&D breeding systems with more
than 100 breeding programs in over 15 cultures. This strengthens
BASF's Agricultural Solutions division. The purchase price
amounted to a total of €7.4 billion and may be subject to further
purchase price adjustments.
BASF Report 2018
205
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
The following table provides the preliminary fair values of the assets
and liabilities acquired from Bayer.
2,327
(1)
803
Capital measures/dividends/changes in the scope of
consolidation/other adjustments²
Other adjustments to income and expenses³
(1,054)
528
Carrying amount according to the equity method
Other adjustments to income and expenses¹
(24)
(12)
as of the end of the year
Carrying amount according to the equity
553
1,509
method as of the end of the year
1 This item includes accumulated effects from the discontinued business in the amount of €12 million in 2018
(€70 million in 2017).
2 In 2018, the amount of €939 million was transferred to the assets of the oil and gas disposal group.
The material associated company in 2017, Joint Stock Company
Achim Trading, Moscow, Russia (BASF interest: 18.01%, economic
share: 25.01%), was transferred to the assets of disposal groups.
Non-material associated companies accounted for using the equity
method include, in particular:
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
Preliminary purchase price allocation for the acquisition of assets and liabilities from Bayer
Million €
Goodwill
Provisions
Tax liabilities
Financial indebtedness
Other liabilities
Current liabilities
Total liabilities
Fair values as of date of acquisition
1,253
4,285
1,404
65
2
7,009
887
61
169
69
1,186
Accounts payable, trade
34
Noncurrent liabilities
Financial indebtedness
Other intangible assets.
Property, plant and equipment
Investments accounted for using the equity method
Other financial assets
Deferred taxes
Other receivables and miscellaneous assets
Noncurrent assets
Inventories
Accounts receivable, trade
Other receivables and miscellaneous assets
Marketable securities
Cash and cash equivalents
Current assets
Total assets
Provisions for pensions and similar obligations
Other provisions
Deferred taxes
Other liabilities
(735)
(1,650)
Carrying amount according to the equity
method as of the beginning of the year
BASF Huntsman Shanghai Isocyanate Investment B.V., Arnheim,
Netherlands (BASF interest: 50%)
Non-material associated companies accounted for using the equity
method (BASF interest)
2018
2017
11
(31)
2018
2017
2,327
2,943
Carrying amount according to the equity
method as of the beginning of the year
Proportional income after taxes³
115
151
1,509
823
Proportional income after taxes¹
Noncurrent liabilities
Capital measures/dividends/changes in the scope of
consolidation/other adjustments4
170
122
Total comprehensive income
(27)
·Yara Freeport LLC, Wilmington, Delaware (BASF interest: 32%)
· CIMO Compagnie industrielle de Monthey S.A., Monthey,
Switzerland (BASF interest: 50%)
16
126
Total comprehensive income
Proportional change of other comprehensive
income
Proportional change of other comprehensive
income
197
106
120
Stahl Lux 2 S.A., Luxembourg (BASF interest: 16.6%) is classified
as an associated company as BASF can exercise significant
influence over the company due to the fact that its approval is
required for certain relevant board resolutions
Million €
(179)
236
Proportional change of other comprehensive income
(6)
(59)
165
177
Total comprehensive income
Capital measures/dividends/changes in the scope of consolidation/other adjustments
(197)
(179)
(197)
Million €
of which dividends
Other adjustments to income and expenses
Carrying amount according to the equity method as of the end of the year
847
5 Supplementary Information Oil and Gas Business 6 Overviews
- Heesung Catalysts Corporation, Seoul, South Korea, which is
operated jointly with the partner Heesung (BASF interest: 50%)
N.E. Chemcat Corporation, Tokyo, Japan, which is operated
jointly with the partner Sumitomo Metal Mining Co. Ltd. (BASF
interest: 50%)
-
Non-material joint ventures accounted for using the equity method
include, in particular:
W & G Infrastruktur Finanzierungs-GmbH, Kassel, Germany, (BASF
interest: 50%), a material joint venture in 2017, was reclassified to
assets of disposal groups.
Notes
879
4 Consolidated Financial Statements
171
2 Management's Report
1 To Our Shareholders
About This Report
204
BASF Report 2018
3 Corporate Governance
of which Germany
Europe
North America
Asia Pacific Africa, Middle East
14,646
26,546
6,965
16,143
South America,
BASF Group
Share
250
Location of customer
Million €
Regions 2018
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
5,340
1 To Our Shareholders
Sales
62,675
%
42.3
585
4,461
3,674
5,317
2,203
1,444
122
289
637
20,780
847
4,416
6,286
6,357
9,231
16,554
466
1,499
7,308
372
3,874
10,735
2,031
3,750
1 The sum of sales including interregional transfers for all the regions can differ from the sum of sales including intersegmental transfers for all the segments, as the segments are viewed globally, and therefore shipments and services between regions within the same segment are not classified as transfers.
BASF Report 2018
216
About This Report
1 To Our Shareholders
2 Management's Report
990
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
Regions 2017
1,180
Million €
Location of customer
Sales
Share
Location of company
Amortization of intangible assets and depreciation of property, plant and equipment including impairments and reversals of
impairments
479
7,281
5,339
13,886
16,659
18,113
28,502
Additions to intangible assets and property, plant and equipment (including acquisitions)
investments accounted for using the equity method
property, plant and equipment
of which intangible assets
Assets
Income from operations
Income from companies accounted for using the equity method
Sales including interregional transfers1
Sales
Location of company
100.0
8.5
23.4
25.8
11.1
3,628
86,556
62,675
24,083
13,576
22,079
23,739
45,562
6,033
201
1,820
802
1,140
3,210
269
233
0
10
36
73,844
4,006
14,872
19,161
35,805
3 Corporate Governance
35,243
Sales including interregional transfers1
6 Functional costs
Under the cost of sales method, functional costs incurred by the
operating functions are determined on the basis of cost center
accounting. The functional costs particularly contain the personnel
costs, depreciation and amortization accumulated on the underlying
final cost centers as well as allocated costs within the cost
accounting cycle. Operating expenses that cannot be allocated to
the functional costs are reported as other operating expenses.
For more information on other operating expenses, see Note 8 from page 220 onward
7 Other operating income
Other operating income
Million €
Income from the adjustment and release of provisions recognized in other operating expenses
Revenue from miscellaneous activities
2018
2017
86
73
158
168
Income from foreign currency and hedging transactions as well as from the measurement of LTI options
Income from the translation of financial statements in foreign currencies
412
177
7
32
Selling expenses primarily include marketing and advertising costs,
freight costs, packaging costs, distribution management costs,
commissions and licensing costs.
Selling expenses
Cost of sales includes all production and purchase costs of the
company's own products as well as merchandise that has been sold
in the period, particularly plant, energy and personnel costs.
Cost of sales
1,569
1,815
Notes
775
36
65
24
3
284
88
996
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
0.83
€
from continuing and discontinued operations
diluted
diluted
from discontinued operations
€
0.78
4.28
4.29
€
ww
5.84
918,479
918,479
5.83
General administrative expenses
€
0.78
2 Management's Report
1 To Our Shareholders
About This Report
218
BASF Report 2018
of the issue of "plus" shares amounted to €0.01 in 2018 (2017:
€0.01).
0.83
share program. This applies regardless of the fact that the necessary
shares are acquired on the market by third parties on behalf of BASF
and that there are no plans to issue new shares. The dilutive effect
6.61
6.62
5.11
5.12
€
€
In accordance with IAS 33, a potential dilutive effect must be
considered in the diluted earnings per share for those BASF
shares that will be granted in the future as part of BASF's "plus"
1.000
General and administrative expenses primarily include the costs of
the central units, the costs of managing business units and divisions,
and costs of general management, the Board of Executive Directors
and the Supervisory Board.
Research and development expenses include the costs resulting
from research projects as well as the necessary license fees for
research activities.
353
Amortization, depreciation and impairments of noncurrent assets
Costs from miscellaneous revenue-generating activities
Expenses from foreign-currency and hedging transactions as well as from the measurement of LTI options
Losses from the translation of financial statements in foreign currencies
Losses from divestitures and the disposal of noncurrent assets
Expenses from the addition of valuation allowances for business-related receivables
Expenses for derecognition of obsolete inventory
Other
Other operating expenses
72
221
151
155
166
130
40
49
36
Expenses arose from environmental protection and safety
measures, costs of demolition and removal, and project costs
not subject to mandatory capitalization pursuant to IFRS.
Expenses for demolition, removal and project planning totaled
€245 million in 2018 and €252 million in 2017. In both years, these
mainly related to the Ludwigshafen site. Further expenses of
€55 million in 2018 and €54 million in 2017 arose from the addition
were incurred for restructuring measures in the Care Chemicals
division in 2018 and €12 million in the previous year. Additionally,
expenses were recognized in the amount of €17 million in connec-
tion with global restructuring measures in the Coatings division in
2018. Expenses were recognized in the Catalysts division in the
amount of €16 million due largely to the restructuring of the global
emissions catalysts business and the restructuring of the licensed
battery materials business.
Restructuring expenses resulted from site closures in North America
in the amount of €13 million and from outsourcing computer centers
in the amount of €11 million in 2018. In the previous year, expenses
of €15 million were incurred in the Construction Chemicals division
for restructuring in Europe, and €27 million for the outsourcing of
computer centers. Further expenses in the amount of €20 million
Expenses from restructuring and integration measures in 2018
were mainly expenses in the amount of €99 million for the integration
of significant parts of Bayer's seed and non-selective herbicide
business as well as its vegetable seed business, which were
acquired in August 2018. These expenses totaled €10 million in the
previous year. In both years, expenses also arose in connection with
the preparation of the acquisition of Solvay's global polyamide
business and the acquisition of global surface technology provider,
Chemetall, in 2016.
2,582
2,365
343
919
220
246
70
70
77
106
822
Environmental protection and safety measures, costs of demolition and removal, and project costs not subject to mandatory
capitalization
359
412
Reversals of impairment losses on noncurrent assets totaled
€3 million in 2018 (2017: €24 million).
Gains on divestitures and the disposal of noncurrent assets
related in the amount of €21 million to the sale of the production site
for styrene butadiene-based paper dispersions in Pischelsdorf,
Austria in 2018 and in the amount of €195 million to the transfer of
the leather chemicals business to the Stahl group in 2017. Income
of €14 million resulted from real estate divestitures in several
countries (2017: €72 million).
Income from the translation of financial statements in foreign
currencies contained gains from the translation of companies
whose local currency is different from the functional currency.
provisions for the long-term incentive (LTI) program in the amount of
€262 million (2017: income of €67 million).
Income from foreign currency and hedging transactions as well
as from the measurement of LTI options pertained to the foreign
currency translation of receivables and payables as well as of
currency derivatives and other hedging transactions. Of material
significance in 2018 was income recorded from the release of
Revenue from miscellaneous activities primarily included income
from rentals, catering operations, cultural events and logistics
services.
BASF Report 2018
For more information, see Note 8 from page 220 onward
Other operating income
Other
Income from the reversal of valuation allowances for business-related receivables
Reversals of impairment losses on noncurrent assets
Gains on divestitures and the disposal of noncurrent assets
For more information on research and development expenses by segment, see Note 4 from page 211
onward
Income from the adjustment and release of provisions recog-
nized in other operating expenses was largely related to risks
from lawsuits and damage claims, closures and restructuring
measures, employee obligations, and various other individual items
as part of the normal course of business. Provisions were reversed
or adjusted if, based on the circumstances on the balance sheet
date, utilization was no longer expected, or expected to a lesser
extent.
Research and development expenses
219
1 To Our Shareholders
Restructuring and integration measures
2017
2018
Million €
Other operating expenses
8 Other operating expenses
About This Report
Further income resulted from refunds and compensation payments
in the amount of €569 million in 2018 and €447 million in 2017. In
2018, these mainly included insurance refunds for the damages
caused by the fires at the citral plant in Ludwigshafen, Germany and
at the North Harbor in Ludwigshafen, Germany, for which there
were insurance refunds in 2017 as well. Moreover, income in both
years was related to gains from precious metal trading, refunds of
consumption taxes and a number of additional items.
Income from the reversal of valuation allowances for busi-
ness-related receivables resulted both from the reversal of
valuation allowances for settled customer receivables for which a
valuation allowance had been recorded previously as well as from
adjusted expectations regarding default on individual customer
receivables.
Notes
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
Other income included government grants and government
assistance from several countries amounting to €43 million in 2018
and €26 million in 2017. These were primarily due to grants for
research projects and regional business development in China.
6,078
4,707
million €
72,237
23
5
9
291
323
4,090
1,838
1,236
2,209
52
7,587
43,924
24,631
16,201
13,547
5,096
3,153
25,258
1,764
4,337
5,281
7,019
61,223
13,876
500
1,499
4,428
2,736
7,167
78,768
13,594
3,583
3,890
14,534
18,570
26,507
BASF Group
Asia Pacific Africa, Middle East
North America
of which Germany
Europe
7,159
South America,
investments accounted for using the equity method
property, plant and equipment
of which intangible assets
Assets
Income from operations
Income from companies accounted for using the equity method
Additions to intangible assets and property, plant and equipment (including acquisitions)
989
15,357
5,016
24,452
About This Report
13,658
15,937
18,663
28,045
14,343
100.0
23.4
25.1
11.7
43.3
%
61,223
8.2
115
1,447
4,715
million €
of which noncontrolling interests
760
829
million €
5,359
61
3,939
233
211
million €
5,592
4,150
million €
million €
Income after taxes from discontinued operations
41
million €
274
272
million €
diluted
from continuing operations
Earnings per share
Income after taxes and noncontrolling interests from discontinued operations
Income after taxes
Weighted average number of outstanding shares
of which noncontrolling interests
6,352
4,979
million €
719
768
Income after taxes and noncontrolling interests
Sales
Income after taxes and noncontrolling interests from continuing operations
Income after taxes from continuing operations
1
Amortization of intangible assets and depreciation of property, plant and equipment including impairments and reversals of
impairments
4,202
276
516
1,011
The sum of sales including interregional transfers for all the regions can differ from the sum of sales including intersegmental transfers for all the segments, as the segments are viewed globally, and therefore shipments and services between regions within the same segment are not classified as transfers.
1,234
4,364
240
711
958
1,228
2,455
2,399
of which noncontrolling interests
In the United States, sales to third parties in 2018 amounted to
€14,775 million (2017: €13,909 million) according to location of
companies and €14,062 million (2017: €13,127 million) according to
location of customers. In the United States, intangible assets,
property, plant and equipment, and investments accounted for
using the equity method amounted to €12,958 million compared
with €9,279 million in the previous year.
BASF Report 2018
2017
2018
Earnings per share
5 Earnings per share
Notes to the Statement of Income
Notes
In China, sales to third parties in 2018 amounted to €7,595 million
(2017: €5,976 million) according to location of companies and
€6,731 million (2017: €6,676 million) according to location of
customers. In China, intangible assets, property, plant and
equipment, and investments accounted for using the equity method
amounted to €4,162 million compared with €4,206 million in the
previous year.
6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
217
5 Supplementary Information Oil and Gas Business
215
214
1 Other includes assets and liabilities as well as amortization of intangible assets and depreciation of property, plant and equipment of the discontinued oil and gas business. For more information, see Note 2.5 from page 209 onward. Additions to intangible assets and property, plant and equipment (including acquisitions) of the discontinued oil
and gas business, also included in Other, amounted to €988 million in 2017.
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
Income from operations (EBIT) of Other
Million €
2017
Income from operations of Other increased by €200 million year
on year from minus €691 million to minus €491 million. The costs
for cross-divisional corporate research increased by €35 million
to €414 million, and the costs of corporate headquarters were
€25 million higher at €249 million. Income from other businesses
fell by €43 million to €38 million. The line item foreign currency
results, hedging and other measurement effects increased by
€239 million to €327 million. This was due to an increase of
€195 million to €262 million from the release of provisions for the LTI
program. The line item miscellaneous income and expenses
amounted to minus €193 million compared with minus €257 million
in the previous year.
Assets of Other
Million €
2018
Costs for cross-divisional corporate research
(414)
(379)
Costs of corporate headquarters
(249)
(224)
Other businesses
About This Report
38
213
1 Indications and sectors are given for the Agricultural Solutions segment, which comprises just one operating division.
7,706
21,435
20,745
2,287
2,357
2,436
2,371
670
663
463
305
300
Agricultural Solutions
6,156
5,696
Other
2,771
2,234
BASF Group
62,675
61,223
BASF Report 2018
81
Foreign currency results, hedging and other measurement
effects
327
2,134
2,007
570
606
Deferred tax assets
2,342
2,118
Cash and cash equivalents/marketable securities
Defined benefit assets
2,644
6,547
63
70
Other receivables/prepaid expenses
1,902
2,328
Operating assets of the former Oil & Gas segment (2017)
and of the oil and gas business disposal group (2018)1
Other assets of the oil and gas business disposal group¹
Assets of Other
12,570
11,967
1,518
23,743
25,643
1 For more information, see Note 2.5 from page 209 onward
Assets of businesses included in Other
Financial assets
2017
Dec. 31,
Dec. 31,
2018
88
Miscellaneous income and expenses
Income from operations of Other
(193)
(491)
(257)
(691)
Segments 2018
Million €
Sales
Intersegmental transfers
7,654
Sales including transfers
Income from companies accounted for using the equity method
Income from operations
Assets
of which goodwill
Liabilities
other intangible assets
property, plant and equipment
investments accounted for using the equity method
Additions to intangible assets and property, plant and equipment (including acquisitions)
Amortization and depreciation of intangible assets and property, plant and equipment
of which impairments and reversals of impairments
Research and development expenses
Chemicals Performance Products Functional Materials & Solutions Agricultural Solutions
3,969
2,412
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
Until the end of 2018, the Functional Materials & Solutions
segment bundled industry and customer-specific system solutions,
services and innovative products, especially for the automotive,
electronics, chemical and construction sectors, as well as applica-
tions for household, sports and leisure. An in-depth understanding
of applications, the development of innovations in close cooperation
with customers, and adaptation to different regional needs were key
success factors. The segment was made up of the Catalysts,
Construction Chemicals, Coatings, and Performance Materials
divisions. The divisions of this segment were allocated to two new
segments as of January 1, 2019:
-
The new Materials segment consists of the Performance
Materials division and the Monomers division, formerly pertaining
to the Chemicals segment. This segment offers advanced
materials and their precursors for new applications and systems.
Its product portfolio includes isocyanates and polyamides as
well as inorganic basic products and specialties for plastics and
plastics processing in various industries.
The new Surface Technologies segment comprises the
Catalysts, Coatings and Construction Chemicals divisions. It
offers a platform for chemical surface solutions. Its product
spectrum includes catalysts and battery materials for the
automotive and chemical industries, surface treatments, colors
and coatings as well as cement modifications and construction
materials.
The Agricultural Solutions segment comprises the Agricultural
Solutions division, which was previously known as Crop Protection
and was renamed after the acquisition of significant businesses from
Bayer and the associated expansion of its portfolio. As an integrated
provider of crop protection and seeds, Agricultural Solutions will
continue to grow, primarily organically through innovation, and
through targeted portfolio enhancement. Its portfolio comprises
fungicides, herbicides, insecticides and biological crop protection
products, as well as seeds and seed treatment products. Further-
more, Agricultural Solutions offers farmers innovative solutions, in-
cluding those based on digital technologies, combined with practical
advice.
Activities that are not allocated to any of the continued operating
divisions continue to be recorded under Other. These include other
businesses such as commodity trading, engineering and other
services, rental income and leases, steering the BASF Group by
corporate headquarters, and cross-divisional corporate research.
Cross-divisional corporate research, which includes plant
biotechnology research, works on long-term topics of strategic
importance to the BASF Group. Furthermore, it focuses on the
development of specific key technologies, which are of central
importance for the divisions.
Earnings from currency translation that are not allocated to the
segments are also reported under Other, as are earnings from the
hedging of raw materials prices and foreign currency exchange
risks. Furthermore, gains and losses from the long-term incentive
(LTI) program are reported here.
Discontinued operations and all remaining activities after divestiture
not previously reported under Other are reported under Other as of
January 1, 2019. The latter includes, for example, participating
interests accounted for using the equity method or supply obliga-
tions assumed in the context of divestitures. Reclassification affects
the remaining activities for the leather and textile chemicals business,
previously recorded in the Performance Products segment, and the
remaining activities for the industrial coatings business, previously
recorded in the Functional Materials & Solutions segment. Further-
more, the following will also be reported here in the future: remanent
fixed costs resulting from organizational changes or restructuring;
function and region-related restructuring costs not allocated to a
division; idle capacity costs from internal human resource platforms.
Since the signing of the binding agreement between BASF and
LetterOne to merge their oil and gas activities, the former Oil & Gas
division has been reported as a discontinued oil and gas business.
The segment of the same name was dissolved. The assets and
liabilities of the oil and gas business were reclassified to a disposal
group as of the end of the third quarter of 2018. Since then, they are
included in Other.
The oil and gas business focuses on exploration and production in
oil and gas-rich regions in Europe, North Africa, Russia, South
America and the Middle East. It benefits from strong partnerships
and its technological expertise. In Europe, it is also active in the
transport of natural gas together with its Russian partner Gazprom.
For more information on the discontinued oil and gas business, see Note 2.5 from page 209 onward
The same accounting rules are used for segment reporting as those
used for the Group, which are presented in Note 1. Transfers
between the segments are generally executed at adjusted
market-based prices, taking into account the higher cost efficiency
and lower risk of intragroup transactions. Assets, as well as their
depreciation and amortization, are allocated to the segments based
on economic control. Assets used by more than one segment are
allocated based on the percentage of usage. Assets not used by the
segments are reported under Other.
BASF Report 2018
212
About This Report
About This Report
1 To Our Shareholders
211
- The new Nutrition & Care segment combines the Care Chemi-
cals and Nutrition & Health divisions. This segment produces
ingredients for consumer products in the area of nutrition, clean-
ers and personal care. Its customers include food and feed
producers as well as the pharmaceutical, cosmetics, and the
detergent and cleaner industries.
BASF Report 2018
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
3
BASF Group list of shares held pursuant to
section 313(2) of the German Commercial Code
(HGB)
The list of consolidated companies and the complete list of all
companies in which BASF SE holds shares as required by section
313(2) HGB and information on the exemption of subsidiaries from
accounting and disclosure obligations are an integral component of
the audited Consolidated Financial Statements submitted to the
electronic Federal Gazette (Bundesanzeiger). The list of shares held
is also published online.
For more information, see basf.com/en/corporate governance
4 Reporting by segment and region
In 2018, BASF's business was conducted by 13 divisions in five
segments until a binding agreement between BASF and LetterOne
was signed on September 27, 2018, to merge their oil and gas
activities; from that date until the end of the year, business was
conducted by 12 divisions in four segments. The divisions are allo-
cated to the segments based on their business models.
BASF adjusted its segment structure as part of its updated strategy.
The changes effective as of January 1, 2019, affect all segments
except the Agricultural Solutions segment. Since then, the 12 divi-
sions are allocated to six segments. The composition of a number of
divisions has changed as well. The propylene oxide and propylene
glycol business will be transferred from the Petrochemicals division
to the Monomers division. The superabsorbents business will be
allocated to the Petrochemicals division rather than the Care Chem-
icals division. The styrene, polystyrene and styrene-based foams
business, which previously fell mainly under Performance Materials
and a small part under Other, will be bundled in Petrochemicals.
The new segment structure will enable an even more differentiated
steering of the businesses, taking into account market-specific
requirements and the competitive environment. It will further increase
the transparency of the segments' results and highlight the impor-
tance of the Verbund and value chains to business success. The
aggregation of the segments based on business models reflects the
divisions' focal points, their customer groups, the focus of their
innovations, their investment relevance and sustainability aspects.
The Chemicals segment comprises the classic chemicals business
with basic chemicals and intermediates. It continues to form the
core of BASF's Production Verbund and contributes to the organic
growth of BASF's key value chains. Customers include the chemical
and plastics industries as well as internal outlets. The segment's
competitiveness will be augmented through technological leader-
ship and operational excellence. The Chemicals segment was
composed of the Petrochemicals, Monomers and Intermediates
divisions until December 31, 2018. As of January 1, 2019, the
Monomers division is allocated to the new Materials segment.
The Performance Products segment consisted of the Disper-
sions & Pigments, Care Chemicals, Nutrition & Health and Perfor-
mance Chemicals divisions until the end of 2018. They focus on
tailor-made solutions enabling customers to improve the application
properties of their products and optimize production processes, for
example. Close customer contact and meeting the demanding
requirements of a wide range of industries were crucial to business
success.
The divisions in this segment were separated into two segments as
of January 1, 2019.
- The new Industrial Solutions segment comprises the
Dispersions & Pigments division and the Performance Chemicals
division. This segment develops and markets ingredients and
additives for industrial applications such as polymer dispersions,
pigments, resins, electronic materials, antioxidants and admix-
tures. Its customers come from key industries such as automo-
tive, plastics and electronics.
BASF Report 2018
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
6,904
6,389
6,464
6,963
3,133
2,979
16,501
16,331
5,292
5,398
4,913
5,079
1,696
1,844
3,911
3,896
15,812
16,217
7,469
6.658
2,456
Seeds & Traits
Functional Crop Care
Insecticides
Herbicides
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
Sales by operating division¹
Million €
2018
2017
Petrochemicals
Monomers
Intermediates
3,856
Chemicals
Care Chemicals
Nutrition & Health
Performance Chemicals
Performance Products
Catalysts
Construction Chemicals
Coatings
Performance Materials
Functional Materials & Solutions
Fungicides
Dispersions & Pigments
BASF Report 2018
16,501
15,812
498
257
(1)
49
18
323
Income from operations
4,208
1,510
1,545
1,015
(691)
7,587
Assets
13,233
14,432
17,364
8,096
25,643
78,768
of which goodwill
56
Income from companies accounted for using the equity method
2,078
1,843
507
16,217
20,745
5,696
2,234
BASF Group
61,223
6,063
506
805
36
(3)
7,407
22,394
16,723
21,550
5,732
2,231
68,630
Research and development expenses
128
395
431
382
3,718
1,929
1,572
27,979
44,012
1,149
800
1,056
185
1,174
4,364
1,166
917
706
267
1,146
4,202
of which impairments and reversals of impairments
129
53
28
2
(72)
140
1,768
4,385
5,419
4,461
9,353
other intangible assets
103
1,048
2,045
208
837
4,241
property, plant and equipment
investments accounted for using the equity method
16,331
7,497
4,163
1,366
7,232
25,258
369
393
2,927
4,715
Liabilities
Additions to intangible assets and property, plant and equipment (including acquisitions)
Amortization and depreciation of intangible assets and property, plant and equipment
5,000
6,105
Sales including transfers
Sales
3,360
1,338
1,235
591
(491)
6,033
13,264
14,903
17,654
16,992
23,743
86,556
55
2,079
3,773
3,236
68
9,211
104
895
1,878
269
4,441
8
22
21,435
6,156
Other²
2,771
BASF Group
837
58
2
62,675
7,500
22,606
16,310
22,272
6,214
2,773
70,175
129
394
412
679
414
2,028
196
43
25
7,343
7,837
735
3,750
29
10
5
7
2
53
2 Other includes assets and liabilities as well as amortization of intangible assets and depreciation of property, plant and equipment of the discontinued oil and gas business. For more information, see Note 2.5 from page 209 onward. Until reclassification to the disposal group, additions to intangible assets and property, plant and equipment
(including acquisitions) of the discontinued oil and gas business, also included in Other, amounted to €468 million in 2018.
BASF Report 2018
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
Segments 2017
Million €
Chemicals Performance Products Functional Materials & Solutions Agricultural Solutions
Other¹
394
682
867
1,072
4,875
4,554
2,660
854
20,780
1,000
360
410
433
2,203
Intersegmental transfers
4,104
4,587
3,080
33,255
50,447
1,325
765
872
7,110
663
10,735
5,421
220
1,026
32
83
83
0
11
0
0
29
(40)
Other
205
205
(53)
0
0
36
222
Tax loss carryforwards
105
738
633
(493)
Deferred tax assets (liabilities) before netting
Netting
(613)
117
153
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
224
BASF Report 2018
1,787
2,342
555
1,185
6
(287)
117
(613)
Deferred tax assets (liabilities) after netting
(1,882)
(1,882)
3,669
4,224
555
1,185
(287)
153
(1)
146
975
(976)
1.609
6
(1)
(126)
(2,464)
1,359
94
(1,265)
156
115
(272)
40
(1,184)
Provisions for pensions
Inventories and accounts receivable
Financial assets
Property, plant and equipment
Intangible assets
Deferred tax
liabilities
Deferred tax
assets
December 31,
2018, net
(5)
4 Consolidated Financial Statements
1,091
52
Other provisions and liabilities
508
2,657
2,149
26
13
122
2
1,986
475
(39)
272
(70)
(40)
38
(62)
(69)
48
60
12
(1)
0
(203)
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
292
Noncontrolling interests in profits
Noncontrolling interests in losses
2018
Million €
Noncontrolling interests
12 Noncontrolling interests
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
(20)
2 Management's Report
About This Report
225
BASF Report 2018
Tax obligations primarily include assessed income taxes and other
taxes as well as estimated income taxes not yet assessed for the
current year. Tax obligations amounted to €695 million as of Decem-
ber 31, 2018 (December 31, 2017: €1,119 million).
Tax liabilities
Tax loss carryforwards exist in all regions, especially in South
America, Asia and Europe. Tax losses in Germany may be carried
forward indefinitely. In foreign countries, tax loss carryforwards are in
some cases only possible for a limited period of time. The bulk of the
tax loss carryforwards will expire in Europe by 2019 and in Asia by
2023. No deferred tax assets were recognized for tax loss carryfor-
wards of €371 million in 2018 (2017: €804 million).
Changes in valuation allowances on deferred tax assets amounted
to €91 million in 2018, compared with €92 million in 2017. Of this
figure, €23 million in 2018 (2017: €24 million) pertained to tax loss
carryforwards.
Undistributed earnings of subsidiaries resulted in temporary
differences of €14,088 million in 2018 (2017: €10,490 million) for
which deferred tax liabilities were not recognized, as they are either
not subject to taxation on payout or they are expected to be
reinvested for an indefinite period of time.
2,731
2,118
1 To Our Shareholders
Total
Total
2017
8,471
8,470
Wages and salaries
2017
2018
2017
2018
Number of employees as of December 31
The number of employees in the BASF Group was distributed over
the regions as follows:
The increase in the number of employees is due primarily to the
acquisition of significant businesses from Bayer in August 2018. As
a result, the number of employees rose by more than 4,500
employees.
272
As of December 31, 2018, the number of employees rose to
122,404 employees compared with 115,490 employees as of
December 31, 2017. That includes 2,017 employees in the disposal
group for the oil and gas business as of December 31, 2018
(December 31, 2017: 1,985 employees).
Personnel expenses
Million €
The BASF Group spent €10,659 million on wages and salaries,
social security contributions and expenses for pensions and
assistance in 2018 (2017: €10,610 million). This amount included
personnel expenses from the disposal group for the oil and gas
business in the amount of €276 million (2017: €268 million). The
increase in personnel expenses is due primarily to the higher average
number of employees resulting from the acquisition of significant
parts of Bayer's business and to the higher level of wages and
salaries. Particularly the year-on-year higher release of provisions for
the long-term incentive (LTI) program as well as currency effects had
a countereffect.
Personnel expenses
13 Personnel expenses and employees
For more information on noncontrolling interests in consolidated companies, see Note 21 on
page 239
Following a negative earnings contribution in 2017, noncontrolling
interests in profits were recorded for BASF TODA Battery
Materials, LLC, Tokyo, Japan in 2018 after expansion of its
production capacities. The company therefore contributed
significantly to the decrease in noncontrolling interests in losses.
The year-on-year decrease in noncontrolling interests in profits in
2018 was mainly due to lower TDI and MDI sales prices and margins
at Shanghai BASF Polyurethane Company Ltd., Shanghai, China.
274
(25)
299
Number of employees
Recognized in
equity
(2,501)
Netting
2018
2017
2018
Deferred tax assets
Tax loss carryforwards
49
10
Financial assets
Million €
2,635
2017
171
Tax loss carryforwards
1,261
77
Intangible assets
The regional distribution of tax loss carryforwards is as follows:
Deferred tax
liabilities
Deferred tax
assets
Million €
Tax loss carryforwards
Deferred tax assets and liabilities 2017
Property, plant and equipment
(2,501)
Inventories and accounts receivable
432
82
42
Other
222
205
1,485
1,143
222
205
1,485
363
1,143
Total
Tax loss carryforwards
Foreign
156
1,131
Other provisions and liabilities
Germany
617
2,603
Provisions for pensions
222
Europe
Other
January 1, 2018, Effects recognized Effects recognized
net
in income in equity (OCI)
1 To Our Shareholders
About This Report
222
(705)
(745)
BASF Report 2018
Financial result
(360)
(337)
(399)
(369)
(219)
(209)
(9)
(5)
Other financial result
Other financial expenses
Miscellaneous financial expenses
Unwinding the discount on other noncurrent liabilities
Net interest expense from other long-term personnel obligations
(1)
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
1,072
Foreign income tax
414
386
Corporate income tax, solidarity surcharge and trade taxes (Germany)
1,506
1,255
2017
2018
Deferred tax expense (+)/income (-)
(169)
Taxes for prior years
The BASF Group tax rate amounted to 21.5% in 2018 (2017:
18.7%). The tax rate reductions resulting primarily from the tax
reform in Belgium led to deferred tax income of €17 million in 2018.
The reduced tax rates resulting from the tax reforms in the United
States, Belgium, France, Germany and Argentina led to deferred tax
income of €426 million in 2017, of which €379 million in the United
States.
Changes in valuation allowances on deferred tax assets for tax loss
carryforwards resulted in income of €1 million in 2018 and of €6 mil-
lion in 2017. Other taxes included real estate taxes and other
comparable taxes totaling €110 million in 2018 and €101 million in
2017.
Tax expense
In Germany, a uniform corporate income tax rate of 15.0% as well as
a solidarity surcharge of 5.5% thereon are levied on all distributed and
retained earnings. In addition to corporate income tax, income
generated in Germany is subject to a trade tax that varies depending
on the municipality in which the company is represented. Due to a
constant rate of assessment for Ludwigshafen, Germany, in 2018,
the weighted average trade tax rate was 14.1% (2017: 14.1%). The
30% rate used to calculate deferred taxes for German Group
companies remained unchanged in 2018. The income of foreign
Group companies are assessed using the tax rates applicable in their
respective countries. These are also generally used to calculate
deferred taxes to the extent that tax rate adjustments for the future
have not yet been enacted.
Million €
Tax expense
Income taxes
11
Notes
6 Overviews
Current tax expense
(133)
Net interest expense from underfunded pension plans and similar obligations
(1)
(492)
165
2017
Interest result
Interest expenses
Interest income
Interest and dividend income from securities and loans
Interest income from cash and cash equivalents
Net income from shareholdings
(30)
(315)
(42)
(57)
(78)
(17)
(24)
Write-downs on/losses from the sale of shareholdings
Expenses from loss transfer agreements
(40)
(54)
Income from other shareholdings
27
Expenses from other shareholdings
1,173
2
The interest result fell by €51 million year on year, from minus
€315 million to minus €366 million, as a result of higher interest
expenses. The increase in interest expenses was mainly due to the
higher financial debt, particularly commercial papers.
(22)
Write-downs on/losses from securities and loans
39
Other financial income
Miscellaneous financial income
Income from the capitalization of borrowing costs
37
30
2
N
Net income from shareholdings decreased from minus €30 million
to minus €42 million due primarily to higher expenses from loss
transfer agreements. One factor was that BASF Digital Farming
GmbH was included for the first time in 2018.
Net interest income from overfunded pension plans and similar obligations
(540)
177
174
14
160
The decline in other financial expenses was primarily attributable
to interest on income taxes.
is based on the discount rate and the defined benefit obligation at
the beginning of the year.
The net interest expense from underfunded pension plans and
similar obligations decreased in comparison with the previous year
as a result of the reduced net defined benefit liability as of Decem-
ber 31, 2017. The net interest expense for the respective fiscal year
Write-downs/losses from securities and loans increased due to
higher valuation allowances on loans and to losses from fair value
measurement of securities.
In comparison with 2017, income from the capitalization of
borrowing costs declined due to the startup of major investment
projects in the United States.
(366)
(203)
(81)
(117)
(18)
Changes in the tax rate
0.0
(1)
0.1
5
Deferred tax liabilities for the future reversal of temporary differences associated with shares in participating
interests
(1.2)
(81)
(3.8)
(0.3)
(203)
(48)
(0.7)
(40)
Income of companies accounted for using the equity method (Income after taxes)
Taxes for prior years
Nondeductible expenses
0.9
62
1.2
64
(0.3)
(0.7)
(19)
(426)
Other
Deferred tax assets and liabilities 2018
Million €
Deferred taxes
tions between fair values and the values in the tax accounts. This
primarily leads to deferred tax liabilities.
Deferred taxes result from temporary differences between tax bal-
ances and the measurement of assets and liabilities according to
IFRS as well as from tax loss carryforwards and unused tax credits.
The remeasurement of all the assets and liabilities associated with
acquisitions according to IFRS 3 has resulted in significant devia-
Notes
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
(6.2)
About This Report
BASF Report 2018
18.7
1,290
21.5
1,138
Income taxes/effective tax rate
(0.5)
(33)
(0.4)
(20)
223
Business
combinations
(0.5)
7.2
Income before income taxes
Reconciliation of income taxes and the effective tax rate
Other taxes as well as sales and consumption taxes
Tax expense
Income taxes
From valuation allowances on deferred tax assets
From changes in tax loss carryforwards/unused tax credits
From changes in the tax rate
From changes in temporary differences
1,520
1,370
230
Expected tax based on German corporate income tax rate (15%)
Solidarity surcharge
232
1,138
5
(2)
(426)
(18)
(34)
(40)
239
(57)
(216)
1,290
(24)
German trade tax
2018
498
7.9
420
4.2
288
2.7
145
0.3
18
0.3
Foreign tax rate differential
Tax-exempt income
15
1,032
15.0
794
6,882
5,288
%
Million €
%
Million €
2017
15.0
36
75,188
Social security contributions and assistance.
expenses
December 31, 2018
16,554
9,211
298
58
3,529
1,463
1,995
Net carrying amount as of
3,814
0
255
94
1,046
376
2,043
As of December 31, 2018
4
1
9
4
1 Including licenses to such rights and values
BASF Report 2018
229
About This Report
As of January 1, 2017
Cost
Million €
Development of intangible assets 2017
In 2018, additions to accumulated amortization contained
impairments of €4 million. This mainly pertained to impairments of
non-strategic know-how, patents and production technologies in
the Functional Materials & Solutions segment and, to a lesser extent,
to the amortization of unused software licenses and discontinued
IT projects. Reversals of impairments of €2 million included in
additions to accumulated amortization had a countereffect. These
related primarily to distribution rights in the Functional Materials &
Solutions segment and to a higher valuation of emissions rights due
to increased fair market values. Until September 30, 2018, they also
included amortization of rights belonging to the Oil & Gas segment
in the amount of €29 million, which were amortized in accordance
with the unit of production method.
Transfers to disposal groups related mainly to the reclassification
of intangible assets from the oil and gas business as of Septem-
ber 30, 2018 and, to a lesser extent, from the paper and water
chemicals business to the disposal groups.
Total
Goodwill
Other rights
and values¹
Internally
generated
intangible
assets
6
production
technologies
Product rights,
licenses and
trademarks
Distribution,
supply and
similar rights
Know-how,
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
patents and
Currency effects
(688)
(128)
479
2,301
As of January 1, 2018
Accumulated amortization
9,211
553
152
4,575
1,839
4,038
954
As of December 31, 2018
5
52
21
(15)
Currency effects
(1,722)
(35)
(15)
(413)
(862)
201
Changes in the scope of consolidation
Additions
81
124
(26)
(13)
(151)
(370)
Transfers to disposal groups
(1)
(1)
0
Transfers
(26)
222
(1)
(5)
(173)
Disposals
85
14
168
49
279
Additions
Changes in the scope of consolidation
(72)
Additions from acquisitions
Disposals
Transfers
Currency effects
Transfers
(178)
616
(72)
(1)
(53)
(17)
(35)
Disposals
As of December 31, 2017
72
166
70
298
Additions
Changes in the scope of consolidation
3.927
141
229
72
882
10
435
Net carrying amount as of
1 Including licenses to such rights and values
230
13,594
9,353
189
35
925
671
2,421
4,161
124
December 31, 2017
222
954
479
2,301
(204)
(17)
(7)
(41)
(9)
(130)
BASF Report 2018
81
Transfers to disposal groups
2,168
Accumulated amortization
235
97
25
56
47
10
101
34
25
20
(40)
19
1
1
19,089
10,214
435
92
1,958
1,339
5,051
Currency effects
3
As of January 1, 2017
(20)
(1)
17,755
9,477
411
116
1,879
1,150
4,722
As of December 31, 2017
(1,275)
(806)
(53)
(17)
(57)
(317)
(175)
13
(24)
(178)
14
(221)
(28)
(79)
(78)
71,653
21
1
2 Management's Report
1 To Our Shareholders
About This Report
BASF Report 2018
227
BASF Group's average number of employees for 2018 includes
2,021 employees from the disposal group for the oil and gas
business (2017: 1,982 employees).
Employees from joint operations are included in the average number
of employees relative to BASF's share in the company. On average,
these had a total of 492 employees (2017: 437 employees).
2,691
3,120
2,793
2,819
of which apprentices and trainees
temporary staff
114,333
118,371
BASF Group
7,287
7,540
South America, Africa, Middle East
18,132
18,713
Asia Pacific
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
Growth rate¹
Goodwill
2017
2018
0.74 percentage points (2017: by 0.04 percentage points) or if
income from operations of the last detailed planning year - as the
basis for the terminal value - were 14.39% lower (2017: 0.81%
lower).
1 Growth rates used in impairment tests to determine terminal values in accordance with IAS 36
2 Reclassification of goodwill from oil and gas business to the disposal group minus €1,572 million
Goodwill as of December 31
Other cash-generating units
Personal Care Ingredients in the Care Chemicals division
Pigments in the Dispersions & Pigments division
Surface Treatment in the Coatings division
Exploration & Production²
Catalysts division (excluding battery materials)
Construction Chemicals division
17,871
Agricultural Solutions division
Million €
Goodwill of cash-generating units
In 2018, the recoverable amount for Pigments exceeded the carry-
ing amount by €192 million. The weighted average cost of capital
rate after taxes used for impairment testing was 5.84% (2017:
6.05%). The recoverable amount would equal the unit's carrying
amount if the weighted average cost of capital rate increased by
After determining the recoverable amount for the cash-generating
units, it was established that reasonable possible deviations from
the key assumptions would not lead to the carrying amounts of
22 units exceeding their respective recoverable amounts. This is not
the case for goodwill for the Pigments unit in the Dispersions &
Pigments division.
before taxes of between 7.0% and 8.5% (2017: between 7.13%
and 11.31%).
The required discounting of cash flows for impairment testing is
calculated using the weighted average cost of capital rate after tax,
which is determined using the capital asset pricing model. It
comprises a risk-free rate, a market risk premium, and a spread for
credit risk based on the respective industry-specific peer group. The
calculation also takes into account capital structure and the beta
factor of the respective peer group as well as the average tax rate of
each cash-generating unit. Impairment tests of the units were
conducted assuming a weighted average cost of capital rate after
taxes of between 5.83% and 6.90% (2017: between 5.69% and
8.2%). This corresponds to a weighted average cost of capital rate
Annual impairment testing was performed in the fourth quarter on
the basis of the cash-generating units. Recoverable amounts were
determined in most cases using the value in use. This was based on
plans approved by company management and their respective cash
flows, generally for the next five years. For the period thereafter, a
terminal value was calculated using a forward projection from the
last detailed planning year as a perpetual annuity. Planning is based
on experience, current performance and management's best
possible estimates on the future development of individual
parameters, such as raw materials prices and profit margins. Oil and
gas prices are also among the main input parameters that provide
the basis for the forecast of cash flows in the current financial plans.
Market assumptions regarding, for example, economic develop-
ment and market growth are included based on external macro-
economic and industry-specific sources.
BASF's goodwill is allocated to 23 cash-generating units (2017:
24), which are defined either on the basis of business units or at a
higher level.
14 Intangible assets
Notes to the Balance Sheet
Cash-generating unit
19,051
North America
53,390
115,490
122,404
7,286
7,844
South America, Africa, Middle East
BASF Group
10,610
10,659
Personnel expenses
18,256
19,303
of which apprentices and trainees
Asia Pacific
730
Pension expenses
18,295
20,069
North America
1,434
1,459
54,020
55,839
of which Germany
705
Goodwill
3,174
temporary staff
54,749
of which Germany
71,043
73,067
Europe
2017
2018
Average number of employees
The average number of employees was distributed over the regions
as follows:
Notes
3,103
6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
226
Employees from joint operations are included in the number of
employees as of the year-end relative to BASF's share in the
company. These had a total of 526 employees (2017: 472 employ-
ees).
BASF Report 2018
2,550
3,226
5 Supplementary Information Oil and Gas Business
Growth rate¹
3,236
2.0%
In addition to goodwill, intangible assets include acquired and
internally generated intangible assets. Intangible assets include
rights of the Oil & Gas segment, which are amortized using the unit
of production method, until the date of reclassification to the disposal
group.
24
(277)
595
4,161
20,368
264
(5)
(3,047)
(294)
155
Additions refer primarily to software licenses purchased or inter-
nally developed software applications. Additions also include
concessions for the search and production of oil and gas in Brazil.
17,755
9,477
411
116
1,879
1,150
4,722
Goodwill
and values¹
Other rights
intangible
assets
Total
production
technologies
Additions from acquisitions amounted to €5,540 million in 2018.
Key acquisitions, the acquisition of significant parts of Bayer's seed
and non-selective herbicide businesses and vegetable seed busi-
ness, as well as the acquisition of Toda America LLC's battery
materials business led to a €1,257 million increase in goodwill. A
further addition to goodwill amounting to €4 million arose from a
retroactive purchase price payment for the acquisition in 2017 of
GRUPO Thermotek based in Monterrey, Mexico. Further additions
to intangible assets in connection with the key acquisitions
mentioned above amounted to €4,279 million. These related
predominantly to know-how, patents and production technologies
in the amount of €2,725 million; product rights, licenses and
trademarks in the amount of €1,054 million, as well as distribution,
supply and similar rights in the amount of €364 million.
Additions
(29)
2
Transfers
(6)
(32)
(1)
(73)
(8)
(174)
Disposals
Disposals of intangible assets amounting to €294 million were
largely attributable to the derecognition of fully amortized assets.
The sale of shares in the Aguada Pichana Este concession in
Argentina and the divestiture of the production site for styrene
butadiene-based paper dispersions in Pischelsdorf, Austria led to a
€6 million disposal of goodwill.
5,540
136
2,725
1,054
364
Additions from acquisitions
47
36
36
35
1
1,261
21
trademarks
generated
2.0%
1,490
2.0%
1,500
1.5%
389
1.5%
403
2.0%
499
1,504
2.0%
2.0%
732
2.0%
753
2.0%
1,285
2.0%
1,298
2.0%
1,929
518
licenses and
1,503
1,525
patents and
Product rights,
Distribution,
supply and
similar rights
Internally
Know-how,
Changes in the scope of consolidation
As of January 1, 2018
Cost
Million €
Development of intangible assets 2018
0.0-2.0%
Notes
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
228
BASF Report 2018
9,353
9,211
0.0-2.0%
5 Supplementary Information Oil and Gas Business 6 Overviews
1
12
1
29
297
250
328
279
2017
2018
Associated companies
of which Joint ventures
Other adjustments to income and expenses
Associated companies
of which Joint ventures
Proportional income after taxes
Million €
31
Income from companies accounted for using the equity method
In both years, expenses under Other included expenses for litiga-
tion, for REACH, for Group management, for Corporate Citizenship,
for the provision of services, and for activities related to the BASF
4.0 project. Expenses in the amount of €79 million were recognized
for a product liability case in the Chemicals segment in 2017.
Losses from divestitures and the disposal of noncurrent assets
totaling €26 million in 2018 were related to the planned merger of
the paper and water chemicals business with Solenis. Losses from
portfolio measures in North America totaled €70 million last year.
Further expenses of €19 million were incurred in 2017 in connection
with the divestiture of the global industrial coatings business to the
AkzoNobel Group in December 2016.
Expenses from foreign currency and hedging transactions as
well as from the measurement of LTI options related to foreign
currency translation of receivables and payables as well as changes
in the fair value of currency derivatives and other hedging transac-
tions. In comparison with the previous year, the increase in currency
translation losses was mainly due to the devaluation of the curren-
cies in Argentina and Brazil.
Costs from miscellaneous revenue-generating activities relate
to the items presented in other operating income.
For more information, see Note 7 from page 219 onward
Amortization, depreciation and impairments of noncurrent
assets amounted to €72 million in 2018. The impairments resulted
primarily from discontinued investment projects. Impairments last
year were related primarily to the Chemicals, Functional Materials &
Solutions and Performance Products segments.
to environmental provisions. In both years, these concerned several
discontinued sites in North America.
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
3
9 Income from companies accounted for using the
equity method
(10)
For more information, see Note 7 from page 219 onward
(9)
Notes
10
Financial result
Financial result
Million €
2018
6 Overviews
22
Dividends and similar income
Income from the disposal of shareholdings
Income from profit transfer agreements
Income from tax allocation to shareholdings
13
(5)
19
5 Supplementary Information Oil and Gas Business
4
3 Corporate Governance
(4)
4 Consolidated Financial Statements
(1)
(1)
Income from companies accounted for using the
equity method
323
Income from companies accounted for using the equity method
decreased by a total of €54 million in 2018 primarily due to lower
earnings at BASF-YPC Company Ltd., Nanjing, China.
269
221
About This Report
1 To Our Shareholders
2 Management's Report
BASF Report 2018
(1)
(3)
53
2
(50)
(1,154)
(32)
(266)
(761)
931
3,586
(12)
335
Currency effects
2,878
385
Additions
14
14
(95)
(194)
6,065
(310)
BASF Report 2018
Changes in the scope of consolidation
233
Transfers
25,258
4,583
1,123
3,611
14,448
(1,626)
5,104
45,655
216
3,264
4,329
36,110
As of December 31, 2017
(1,956)
(24)
(112)
Net carrying amount as of December 31, 2017
45,163
(280)
3,308
128
890
2,635
367
(1,272)
(36)
About This Report
(17)
(825)
(2,945)
(131)
1
7
4,020
2,285
272
450
1,292
171
15
8
231
185
(2,458)
3,711
35,655
5,969
As of January 1, 2017
Accumulated depreciation
Disposals
As of December 31, 2017
Currency effects
Transfers
(495)
Disposals
4,799
4,387
7,940
50,558
11,169
(3,619)
(495)
(171)
(563)
70,913
1 To Our Shareholders
55
3 Corporate Governance
18 Receivables and miscellaneous assets
17 Inventories
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
234
BASF Report 2018
Other shareholdings
Long-term securities
606
570
Other financial assets
124
117
482
Inventories
Other receivables and miscellaneous assets
Million €
Million €
8,507
Work in progress, finished goods and merchandise
245
782
271
224
Loans and interest receivables
3,255
3,541
453
Raw materials and factory supplies
Noncurrent
Current
Noncurrent
2017
2018
December 31, 2017
December 31, 2018
Dec. 31,
Dec. 31,
Current
2017
2018
Dec. 31,
As of January 1
Million €
Investments accounted for using the equity method
For a detailed overview of income from companies accounted for using the equity method, see
Note 9 on page 221
In addition to the net income of investments accounted for using the
equity method, dividend distributions and other comprehensive
income of the companies, transfers included €2,552 million from the
reclassification of investments accounted for using the equity
method to assets of the disposal group for the oil and gas business.
For one investment in the Chemicals segment accounted for using
the equity method, the carrying amount was impaired by €7 million
in 2018.
Additions included capital increases amounting to €55 million in
2018. In 2017, additions were mainly attributable to the combination
of the global leather chemicals business with the Stahl group. In this
connection, BASF received a 16.6% share in Stahl Lux 2 S.A.,
Luxembourg.
16 Investments accounted for using the equity
method and other financial assets
Currency effects reduced property, plant and equipment by
€1,663 million and arose mainly from the depreciation of the U.S.
dollar against the euro.
Transfers pertained mainly to the transfer of confirmed oil and gas
deposits in the Maria field in Norway from intangible assets to
machinery and technical equipment.
Changes in the scope of consolidation
Additions
For more information on divestitures, see Note 2.4 from page 205 onward
Depreciation also included impairments in the former Oil & Gas
segment, which were more than offset by reversals of impairments
in the same segment. These primarily concerned construction in
progress. Overall, reversals of impairments in additions to accumu-
lated depreciation amounted to €182 million.
In 2017, impairments of €262 million were included in accumulated
depreciation. These pertained largely to machinery and technical
equipment and resulted primarily from the full impairment of a
production plant in the Chemicals segment due to overcapacities.
The recoverable amount equaled value in use, and the weighted
average cost of capital rate before taxes was 10.27%.
Acquisitions led to an increase in property, plant and equipment in
the amount of €8 million, primarily from the acquisition of GRUPO
Thermotek in Monterrey, Mexico.
Government grants for funding investment measures reduced asset
additions by €9 million.
Additions to property, plant and equipment arising from investment
projects amounted to €4,020 million in 2017. Material investments
refer to the acetylene plant currently under construction as well as
plants for the production of catalysts in Ludwigshafen, Germany.
Additions also included the construction of an aroma ingredients
complex in Kuantan, Malaysia, and the modification of production
plants for plasticizers in Pasadena, Texas, which have already partly
started up. Material investments were also made for the construc-
tion of oil and gas facilities and wells in Europe and South America.
Furthermore, investments were made at the following sites in
particular: Ludwigshafen, Germany; Antwerp, Belgium; Shanghai,
China; Freeport, Texas; Geismar, Louisiana; and Port Arthur, Texas.
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
Disposals of property, plant and equipment were largely attribut-
able to the sale of the bleaching clay and mineral absorbents
businesses; the production site for electrolytes in Suzhou, China;
the inorganic specialties business; and the leather chemicals
business.
2 Management's Report
Disposals
Currency effects
Dec. 31,
Million €
Other financial assets
1 This item includes effects from the discontinued oil and gas business in the amount of €99 million in 2018
(2017: €248 million).
4,715
2,203
(143)
14
120
Transfers¹
(2,571)
(10)
223
1
(50)
4,647
4,715
2017
2018
Net carrying amount as of December 31
(82)
14
About This Report
71,576
1,425
77
64
634
650
Additions from acquisitions
3,615
2,528
216
Disposals
109
192
Additions
55
85
1
2
5
77
Changes in the scope of consolidation
679
70,913
(71)
(171)
36
121
602
84
Currency effects
(13,135)
(1,883)
(108)
(8,170)
(407)
(10,899)
Transfers to disposal groups
(8)
(1,657)
190
1,159
300
Transfers
(701)
(52)
(245)
92
4,799
7,940
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
231
BASF Report 2018
In 2017, accumulated amortization included impairments of
€67 million. This mainly pertained to impairments of non-strategic
know-how, patents and production technologies in the Functional
Materials & Solutions segment and exploration potential for oil and
gas production in Norway. This was offset by reversals of impair-
ments totaling €7 million. These related primarily to distribution
rights in the Functional Materials & Solutions segment.
Transfers largely concerned the confirmed oil and gas deposits in
the Maria field in Norway to property, plant and equipment.
Non-confirmed deposits in connection with acquired concessions
are reported as intangible assets under product rights, licenses and
trademarks.
Disposals of intangible assets amounting to €221 million were
largely attributable to the derecognition of fully amortized software
as well as the sale of the production site for electrolytes in Suzhou,
China, the sale of the bleaching clay and mineral adsorbents
businesses, and the transfer of the global leather chemicals business
to the Stahl group. Goodwill of €28 million was derecognized in
connection with this.
4 Consolidated Financial Statements
Concessions for oil and gas production included in product rights,
licenses and trademarks had a net carrying amount of €234 mil-
lion in 2017. These authorize the holder to search for and produce
oil and gas in specific areas. At the end of the term of a concession,
the rights are returned.
Additions from acquisitions amounted to €235 million in 2017.
Goodwill rose by €79 million as a result of the following key
acquisitions: Rolic AG headquartered in Allschwil, Switzerland;
GRUPO Thermotek headquartered in Monterrey, Mexico; Henkel
group's western European construction chemicals business; and
ZedX Inc. in Bellefonte, Pennsylvania. A further addition to goodwill
amounting to €18 million arose primarily from a retroactive purchase
price payment for the acquisition of Chemetall in the previous year.
In addition to goodwill, acquired and internally generated intangible
assets, intangible assets included rights belonging to the Oil & Gas
segment in 2017, which were amortized in accordance with the unit
of production method. As of December 31, 2017, their acquisition
costs amounted to €962 million and accumulated amortization to
€312 million; amortization in 2017 amounted to €41 million.
Notes
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
Further additions to intangible assets in connection with these
transactions amounted to €138 million. These related predomi-
nantly to product rights, licenses and trademarks as well as know-
how, patents and production technologies.
4,387
5 Supplementary Information Oil and Gas Business
Notes
50,558
11,169
As of January 1, 2018
Cost
Total
progress
Construction in
Miscellaneous
equipment and
fixtures
the unit of pro-
equipment duction method
6 Overviews
technical
buildings
Machinery and
Land, land
rights and
Million €
production method. The following table presents the development
of property, plant and equipment including these assets until the oil
and gas business was transferred to the disposal group.
Development of property, plant and equipment 2018
Machinery and technical equipment contained oil and gas
deposits, including related wells, production facilities and further
infrastructure, which were depreciated according to the unit of
Property, plant and equipment
15
Of which
depreciation
according to
Changes in the scope of consolidation
Additions
814
12,156
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
6,979
232
BASF Report 2018
Additions to property, plant and equipment arising from investment
projects amounted to €3,615 million in 2018. Investments were
made at the following sites in particular: Ludwigshafen, Germany;
Antwerp, Belgium; Shanghai, China; Geismar, Louisiana; and
Freeport, Texas. Material investments included the acetylene plant
currently under construction as well as plants for the production of
catalysts in Ludwigshafen, Germany. In addition, additions included
renovations to the steam cracker and the construction of a new
propane tank in Antwerp, Belgium. Other investments included the
construction of oil and gas facilities and wells in Europe and South
America.
20,780
1,216
9,851
5,814
Net carrying amount as of December 31, 2018
42,228
6
3,400
32,480
6,342
3,899
As of December 31, 2018
Government grants for funding investment measures reduced asset
additions by €26 million.
In 2018, impairments of €52 million and reversals of impairments of
€1 million were included in accumulated depreciation. The impair-
ments were primarily attributable to construction in progress result-
ing from discontinued investment projects in North America.
5,989
4,437
7,180
49,893
11,257
Total
progress
equipment and Construction in
fixtures
Miscellaneous
Acquisitions led to an increase in property, plant and equipment in
the amount of €1,425 million, primarily from the acquisition of
significant parts of Bayer's seed and non-selective herbicide
businesses and its vegetable seed business.
Of which
depreciation
according to
technical the unit of pro-
equipment duction method
Land, land
rights and
buildings
Currency effects raised property, plant and equipment by €277 mil-
lion and resulted mainly from the appreciation of the U.S. dollar
against the euro.
Additions from acquisitions
As of January 1, 2017
Cost
Development of property, plant and equipment 2017
Million €
Transfers related mainly to the reclassification of operation-ready
assets from construction in progress to other asset categories.
For more information on divestitures, see Note 2.4 from page 205 onward
Disposals of property, plant and equipment included the sale of
production plants for oleochemical surfactants in Mexico and the
production site for styrene butadiene-based paper dispersions in
Pischelsdorf, Austria.
Machinery and
As of December 31, 2018
537
27
498
2,409
354
Additions
6
2
4
Changes in the scope of consolidation
45,655
358
216
4,329
36,110
6,065
As of January 1, 2018
Accumulated depreciation
63,008
3,905
4,616
42,331
3,264
4
34
Disposals
96
458
48
Currency effects
(6,482)
(196)
(87)
(4,923)
(6,118)
3,155
(81)
(10)
(7)
(3)
Transfers
(633)
(52)
(164)
(372)
(45)
Transfers to disposal groups
Derivatives with positive fair values
25
224
Authorization of share buybacks
conversion or option rights. This authorization has not been
exercised to date.
In this connection, the share capital was increased conditionally by
up to €117,565,184 by issuing a maximum of 91,847,800 new
registered BASF shares. The conditional capital increase will only be
carried out to the extent to which holders of convertible bonds, or
warrants attached to bonds with warrants issued, exercise their
By way of a resolution of the Annual Shareholders' Meeting of
May 12, 2017, the Board of Executive Directors was authorized,
with the approval of the Supervisory Board, to issue, on a one-off
basis or in portions on more than one occasion, bearer or registered
convertible bonds and/or bonds with warrants, or combinations of
these instruments, with or without maturity limitations up to a
nominal value of €10 billion until May 11, 2022. The notional interest
in the share capital attributable to the BASF shares to be issued in
connection with the debt instruments issued under this authoriza-
tion may not exceed 10% of the share capital.
Conditional capital
The Annual Shareholders' Meeting of May 2, 2014, authorized the
Board of Executive Directors, with the approval of the Supervisory
Board, to increase subscribed capital by issuing new registered
shares up to a total of €500 million against cash or contributions in
kind until May 1, 2019. The Board of Executive Directors is
authorized, with the approval of the Supervisory Board, to exclude
shareholders' statutory subscription rights in the cases specified in
the authorizing resolution. To date, this option has not been
exercised and no new shares have been issued.
BASF SE has only issued fully paid-up registered shares with no par
value. There are no preferential voting rights or other restrictions.
BASF SE does not hold any treasury shares.
Authorized capital
19 Capital, reserves and retained earnings
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
237
BASF Report 2018
Prior to adoption of IFRS 9, impairments to trade accounts
receivable were calculated using amounts past due, among other
things.
By way of a resolution of the Annual Shareholders' Meeting of
May 12, 2017, the Board of Executive Directors was authorized to
buy back shares until May 11, 2022, in accordance with section
71(1) no. 8 of the German Stock Corporation Act (AktG). The
buyback cannot exceed 10% of the company's share capital at the
time the resolution was passed and can take place via the stock
exchange, a public purchase offer addressed to all shareholders, or
a public invitation to the shareholders to submit sales offers. This
authorization has not been exercised to date.
Reserves and retained earnings
Capital reserves include effects from BASF's share program,
premiums from capital increases and consideration for warrants and
negative goodwill from the capital consolidation resulting from
acquisitions of subsidiaries in exchange for the issue of BASF SE
shares at par value.
Reserves and retained earnings
1 To Our Shareholders
About This Report
238
BASF Report 2018
In accordance with the resolution of the Annual Shareholders'
Meeting on May 4, 2018, BASF SE paid a dividend of €3.10 per
share from the retained profit of the 2017 fiscal year. With
918,478,694 qualifying shares, this represented total dividends of
€2,847,283,951.40. The remaining €282,560,220.29 in retained
profits was recorded under retained earnings.
Payment of dividends
The acquisition of shares in companies that BASF already controls
or that are included in the Consolidated Financial Statements as a
joint arrangement is treated as a transaction between shareholders,
as long as this does not lead to a change in the consolidation
method. There were no transactions of this type in 2018, as in the
previous year.
Transfers from other retained earnings increased legal reserves
by €81 million in 2018 (2017: €53 million).
34,826
The gross values for receivables from bank acceptance drafts as
of December 31, 2017 were removed from the aging analysis of
trade accounts receivable.
36,699
35,932
678
767
2017
December 31,
December 31,
2018
Other retained earnings
Retained earnings
Legal reserves
Million €
34,148
Payment terms are generally agreed upon individually with
customers and, as a rule, are within 90 days. In 2018, valuation
allowances of €128 million were recognized for trade accounts
receivable, and of €117 million were reversed. In the previous year,
valuation allowances of €92 million were recognized for trade
accounts receivable, and of €113 million were reversed.
At BASF, a comprehensive, global credit insurance program covers
accounts receivable, trade. Under a global excess of loss policy,
future bad debts are insured for essentially all BASF Group
companies excluding joint ventures. The program has no impact on
the calculation of impairments in accordance with IFRS 9. No com-
pensation claims were incurred in either 2018 or 2017.
461
Additions not
recognized in
income
Reversals
Additions
January 1, 2017
As of
307
448
Past due more than 90 days
Million €
Reversals not
recognized in
income
6
Past due between 30 and 89 days
Valuation allowances for receivables 2017
1
522
Past due less than 30 days
35
10,065
Not yet due
Valuation
allowances
115
2 Management's Report
121
11,150
85
12
44
90
488
Total
112
10
6
Total
10
Other receivables
349
75
12
38
80
370
Accounts receivable, trade
349
118
Gross value
3 Corporate Governance
5 Supplementary Information Oil and Gas Business
About This Report
239
BASF Report 2018
BASF TODA Battery Materials, LLC, Tokyo, Japan
BASF Shanghai Coatings Co. Ltd., Shanghai, China
Other
1 Partners' equity interest in W & G Transportation Holding GmbH and OPAL Gastransport GmbH & Co. KG: 50.03%; voting rights and share of earnings: 49.98%
919
1,055
Total
86
105
57
40.00
59
40.00
26
34.00
35
34.00
199
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
240
BASF Report 2018
Effective 2010, the existing defined benefit plans were closed to
further increases in benefits based on future years of service, and
Employees are granted benefits based on defined contribution
plans.
United States
For BASF SE and German Group companies, a basic level of
benefits is provided by BASF Pensionskasse WaG, a legally
independent plan, which is financed by employer and employee
contributions as well as the return on plan assets. BASF SE ensures
the necessary contributions to adequately finance the benefits
promised by BASF Pensionskasse WaG. Some of the benefits
financed via BASF Pensionskasse WaG are subject to adjustments
that must be borne by its member companies to the extent that
these cannot be borne by BASF Pensionskasse WaG due to the
regulations imposed by the German supervisory authority. In 2004,
the basic benefit plan was closed for newly hired employees at
German BASF companies and replaced by a defined contribution
plan. At BASF SE, occupational pension promises that exceed the
basic level of benefits are financed under a contractual trust
arrangement by BASF Pensionstreuhand e.V.; at German Group
companies, these benefits are financed primarily via pension
provisions. The benefits are largely based on cash balance plans.
Furthermore, employees are given the option of participating in
various deferred compensation schemes.
Germany
The typical plan structure in the individual countries is described in
the following. Different arrangements may exist, in particular due to
the assumption of plans as part of acquisitions; however, these do
not have any material impact on the description of plans in the
individual countries.
Description of the defined benefit plans
30.00
In some countries, pension benefits were granted for which the
employer has a subsidiary liability. Pension benefits in a number of
countries include minimum interest guarantees to a limited extent. If
the pension fund cannot generate the income needed to provide the
minimum guarantee, this must be provided by the employer under
the subsidiary liability. To the extent that recourse to the employer is
unlikely based on the structure and execution of the pension benefits
as well as the asset situation of the pension fund, these plans are
treated as defined contribution plans.
The obligations and the plan assets used to fund the obligations are
exposed to demographic, legal and economic risks. Economic risks
are primarily due to unforeseen developments on commodity and
capital markets. They affect, for example, pension adjustments
based on the level of inflation in Germany and in the United Kingdom,
as well as the impact of discount rates on the amount of the defined
benefit obligation. In previous years, measures taken to close plans
with defined benefits for future service, especially benefits based on
final pay promises and the assumption of healthcare costs for former
employees led to a reduction in risk with regard to future benefit
levels.
In some countries - especially in Germany, in the United States, in
the United Kingdom and in Switzerland - there are pension obliga-
tions subject to government supervision or similar legal restrictions.
For example, there are minimum funding requirements to cover
pension obligations, which are based on actuarial assumptions that
may differ from those pursuant to IAS 19. Furthermore, there are
qualitative and quantitative restrictions on allocating plan assets to
certain asset categories. This could result in annual fluctuations in
employer contributions, financing requirements and the assumption
of obligations in favor of the pension funds to comply with regulatory
requirements.
Economic and legal environment of the plans
The Group Pension Committee monitors the risks of all pension
plans of the Group. In this context, it issues guidelines regarding the
governance and risk management of pension plans, particularly with
regard to the financing of pension commitments and the portfolio
structure of existing plan assets. The organization, responsibilities,
strategy, implementation and reporting requirements are docu-
mented for the units involved.
In addition to state pension plans, most employees are granted
company pension benefits from either defined contribution or
defined benefit plans. Benefits generally depend on years of service,
contributions or compensation, and take into consideration the legal
framework of labor, tax and social security laws of the countries
where the companies are located. To limit the risks of changing
financial market conditions as well as demographic developments,
employees have, for a number of years now, been almost exclusively
offered defined contribution plans for future years of service.
22 Provisions for pensions and similar obligations
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
The strategy of the BASF Group with regard to financing pension
commitments is aligned with country-specific supervisory and tax
regulations.
178
30.00
243
free float
Gazprom Germania GmbH, Berlin, Germany
Partner
BASF TOTAL Petrochemicals LLC, Port Arthur, Texas
Shanghai BASF Polyurethane Company Ltd., Shanghai,
China
BASF PETRONAS Chemicals Sdn. Bhd., Shah Alam,
Malaysia
BASF India Ltd., Mumbai, India
WIGA Transport Beteiligungs-GmbH & Co. KG,
W & G Transport Holding GmbH',
OPAL Gastransport GmbH & Co. KG1
Group company
Noncontrolling interests
PETRONAS Chemicals Group Berhad, Kuala Lumpur,
Malaysia
21 Noncontrolling interests
Other comprehensive income fell €980 million before taxes in 2018
and rose €1,073 million before taxes in 2017 due to changes in the
value of plan assets.
Remeasurement of defined benefit plans
Hedging future cash flows at Nord Stream AG, Zug, Switzerland,
which is accounted for using the equity method, led to a decrease
of €11 million in 2018 and a decrease of €17 million in 2017.
For more information on cash flow hedge accounting, see Note 27.4 from page 258 onward
Cash flow hedges
Translation adjustments decreased by €139 million year on year. The
change arose primarily from the appreciation of the U.S. dollar
relative to the euro. This was offset in particular by the development
of the Russian ruble.
Unrealized gains/losses from currency translation
20 Other comprehensive income
Notes
6 Overviews
For more information on the remeasurement of defined benefit plans, see Note 22 from page 240
onward
4 Consolidated Financial Statements
December 31, 2018
December 31, 2017
Equity interest
40.00
302
40.00
Total Petrochemicals & Refining USA, Inc., Houston, Texas
Shanghai Hua Yi (Group) Company, Shanghai, China, and
SINOPEC Assets Management Corporation, Bejing, China
TODA KOGYO CORP., Hiroshima, Japan.
Shanghai Huayi Fine Chemical Co., Ltd, Shanghai, China
198
40.00
193
40.00
39
Equity interest
26.67
26.67
71
49.981
141
49.981
Million €
%
Million €
%
42
December 31, 2017
As of
December 31,
2017
(76)
3,494
1,332
3,139
886
2,165
323
2,212
275
Other receivables and assets that do not qualify as financial instruments
Other receivables and miscellaneous assets
375
74
274
48
Miscellaneous
746
780
8
16
0
BASF Report 2018
235
380
1 To Our Shareholders
Gross carrying amounts
Equivalence to external
rating¹
Creditworthiness as
of December 31,
2018
Million €
Accounts receivable, trade
The following table presents the gross values and credit risks for
trade accounts receivable as of December 31, 2018.
Expected losses on trade accounts receivable at BASF are
calculated on the basis of internal or external customer ratings and
the associated probability of default since January 1, 2018.
Precious metal trading items primarily comprise physical items
and precious metal accounts as well as long positions in precious
metals, which are largely hedged through sales or derivatives.
The increase in current tax refund claims is largely attributable to
the rise in open income tax receivables.
787
Prepaid expenses in 2018 mainly included prepayments of
€22 million related to operating activities compared with €62 million
in 2017, as well as €83 million in prepayments for insurance in 2018
compared with €50 million in 2017. Prepayments for license costs
decreased from €42 million in 2017 to €38 million in 2018.
Bank acceptance drafts are used as an alternative form of payment
in China. They can be held until maturity, discounted by a bank and
provided to suppliers as an endorsement in exchange for goods or
services before maturity. Depending on the specific agreement, the
major risks and opportunities either remain with BASF or are
assumed by the counterparty. Only when the counterparty assumes
the default risk is the receivable derecognized. If BASF discounts a
bank acceptance draft with recourse, a liability toward the credit
institution granting the discount is recognized in the amount of the
payment received and held to maturity; if BASF endorses the bank
As of January 1, 2018, receivables from bank acceptance drafts
are no longer reported under trade accounts receivable, but under
other operating receivables, since the remaining credit risks are
toward the issuing bank and no longer the customer. Receivables
from bank acceptance drafts fell by €226 million in 2018. They
totaled €389 million in 2017. This amount was reclassified from
trade accounts receivable to other receivables and miscellaneous
assets in the Balance Sheet as of December 31, 2017.
The increase in noncurrent derivatives with positive fair values
primarily affected the market valuation of combined interest rate and
currency swaps. The change in current derivatives with positive fair
market values was largely attributable to the lower fair values of
precious metal and foreign currency derivatives.
The decrease in noncurrent loans and interest receivables was
predominantly due to the reclassification of a loan in the amount of
€325 million from Wintershall Nederland Transport and Trading B.V.,
Rijswijk, Netherlands, to Nord Stream 2 AG, and a loan in the
amount of €140 million from W & G Transport Holding GmbH,
Kassel, Germany, to W & G Infrastruktur Finanzierungs-GmbH,
Kassel, Germany, to the assets of the disposal groups. In addition to
the above loans, this item included, in particular, loans and interest
receivables from BASF Ireland Ltd., Cork, Ireland, to finance the
business expansion of Asian companies, and receivables in favor of
BASF SE from BASF Pensionskasse WaG.
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
acceptance draft to a supplier with recourse, neither receivables
from bank acceptance drafts nor trade payables are derecognized.
Bank acceptance drafts were endorsed in the amount of €8 million
and not derecognized as of December 31, 2018.
125
891
107
389
163
Receivables from bank acceptance drafts
41
0
0
0
Insurance compensation receivables
10,303
Work in progress, finished goods and merchandise are combined
into one item due to production conditions in the chemical industry.
Services in progress mainly relate to services not invoiced as of the
balance sheet date.
12,166
4
2
23
Receivables from finance leases
69
118
Advance payments and services in progress
321
91
Inventories
from AAA to BBB-
Cost of sales included inventories recognized as an expense
amounting to €31,285 million in 2018, and €29,941 million in 2017.
Of total inventories, €1,120 million was measured at net realizable
value in 2018 and €863 million in 2017.
70
63
Defined benefit assets
249
54
251
57
1,329
1,009
Write-downs on inventory was recognized in the amount of €73 mil-
lion in 2018 and reversals of write-downs in the amount of €18 mil-
lion in 2017.
927
Other receivables and assets that qualify as financial instruments
Prepaid expenses
329
111
267
243
Miscellaneous
Precious metal trading items
Employee receivables
Tax refund claims
611
6,553
About This Report
High/medium credit
rating
(2)
0
0
4
3
6
of which stage 1
27
(63)
3
0
9
11
88
Other receivables
311
(10)
(17)
3
73
0
83
from BB- to D
1
(21)
(1)
126
139
465
Total
24
(61)
0
1
0
7
81
stage 3
Million €
0
0
0
0
2
3
325
stage 2
42
Aging analysis of accounts receivable, trade
The addition and reversal of value allowances included impairments
of €2 million due to a change in valuation parameters and €4 million
due to foreign currency fluctuations.
In 2018, valuation allowances of €11 million were recognized for
other receivables representing financial instruments, and of €9 mil-
lion were reversed. In the previous year, valuation allowances of
€10 million were recognized for all other receivables, and of €6 mil-
lion were reversed.
Million €
Valuation allowances for receivables (financial instruments) 2018
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
As of
1 To Our Shareholders
236
BASF Report 2018
For more information in the effects of implementation of IFRS 9, see Note 1.2 from page 183 onward
Because, pursuant to IAS 39, impairments were only recognized
when objective indications for an impairment were present, initial
application of IFRS 9 resulted in total additional impairments on
trade accounts receivable, loan receivables and other receivables of
of €34 million.
BASF monitors the credit risk associated with counterparties with
which receivables are held in the form of financial instruments. In
accordance with IFRS 9, impairments for expected credit lossses on
receivables are recognized based on this.
4,465
1 Standard & Poor's rating
Low credit rating
stage 3
About This Report
Reclassification
2 Management's Report
Additions
January 1, 2018
(4)
(4)
44
45
52
of which stage 2
353
(13)
(21)
(3)
Reversals
117
128
377
Accounts receivable,
trade
2018
As of
December 31,
Reclassification
to assets of
disposal groups
between stages Translation effect
(1)
Collateral granted on behalf of third-party liabilities
Initiated investment projects
49
50
Warranties
7
75
Guarantees
1
9
11
1
1,045
4,109
of which purchase commitments
1,249
for the purchase of intangible assets
Payment and loan commitments and other financial
obligations
19
16
68
19
249
7,094
Bills of exchange
About This Report
December
37
275
The figures listed below are stated at nominal value:
268
792
329
700
705
2,998
1,095
3,064
Other financial obligations
1 Advances received on orders were reported as other liabilities, which do not represent financial instruments, in the previous year.
Million €
Other liabilities
The decrease in non-current loan and interest liabilities and in
current miscellaneous liabilities resulted primarily from the reclas-
sification to the disposal group for the oil and gas business.
Advances received on orders increased due mainly to first-time
incorporation of the seed business acquired from Bayer. Contract
liabilities, which were reported for the first time with the adoption of
IFRS 15 in 2018, include mainly customer payments entitling them
to access to licenses over an agreed period of time. The majority of
existing contracts have terms of six years. Of the contract liabilities
reported as of December 31, 2018, €31 million are expected to be
recognized as revenue in 2019.
For more information on financial risks and derivative instruments, see Note 27 from page 251
onward
For more information on liabilities arising from leasing contracts, see Note 28 from page 259 onward
BASF Report 2018
December
31, 2018
31, 2017
1 To Our Shareholders
variable
3 Corporate Governance
272
197
140
111
359
1,482
As of December 31, 2018, the companies allocated to the disposal
group accounted for €144 million.
2024 and maturities beyond this year
Total
8,393
5,412
4,424
3,937
5,023
30,080
As of December 31, 2018, the companies allocated to the disposal
group accounted for €5,406 million.
Further possible obligations arising from agreements existing as of
December 31, 2018 are shown under Note 2.4, Acquisitions and
divestitures.
26 Risks from litigation and claims
BASF Corporation has potential liability under the Comprehensive
Response, Compensation and Liability Act of 1980, as amended,
and related state laws for investigation and cleanup at certain sites.
The Lower Passaic River Study Area (LPRSA) is one such site
comprising the lower 17 miles of the Passaic River in New Jersey.
BASF Corporation and more than 60 other companies (collectively,
the Lower Passaic River Study Area Cooperating Parties Group or
CPG) agreed to complete a remedial investigation/feasibility study
(RI/FS) of the LPRSA. In 2016, the United States Environmental
Protection Agency (USEPA) selected a final remedy for the lower
eight miles of the LPRSA. In late 2018, USEPA indicated being
amenable to the CPG's approach for remediation work in the upper
portion of the LPRSA. Completion of the RI/FS and an agreement
with USEPA on a targeted approach for the upper portion of the
LPRSA may occur in late 2019.
Between November 2014 and March 2015, a putative class action
lawsuit and several additional lawsuits were filed in the United States
District Court for the Southern District of New York against BASF
Metals Limited (BML), based in the United Kingdom, along with
other defendants, alleging violations of antitrust and commodities
laws stemming from the price discovery process for platinum and
palladium. The lawsuits were consolidated, and a Second
Consolidated Amended Class Action Complaint was eventually filed
in July 2015. This Complaint also names as a defendant, among
others, BASF Corporation. On September 21, 2015, the defendants
filed a Joint Motion to Dismiss the Second Consolidated Amended
Class Action Complaint, and BML and BASF Corporation filed
individual motions to dismiss. On March 28, 2017, the Court
dismissed the Second Consolidated Amended Class Action
Complaint against BASF Corporation and BML on jurisdictional
grounds. On May 15, 2017, the plaintiffs filed an amended Com-
plaint that renews allegations against defendants and BML, while
BASF Corporation is not named as a defendant. The defendants
filed a renewed Joint Motion to Dismiss, and BML filed a renewed
BASF Report 2018
250
345
403
2 Management's Report
Total
2023
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
BASF provides unlimited guarantees, particularly to the Danish
government as well as the state-owned company Nordsøfonden, as
a precondition for the exploration for and production of hydro-
carbons in the Danish concession area by the joint venture
Wintershall Noordzee B.V., Rijswijk, Netherlands, which is allocated
to the disposal group. BASF's 100% contingent liability under these
guarantees is partially countered by the joint venture partner's 50%
guarantees in favor of BASF. Drawing on these guarantees was not
foreseeable as of December 31, 2018.
Obligations arising from purchase contracts
Obligations arising from purchase contracts resulted primarily from
long-term purchase obligations for raw materials. Firm purchase
obligations as of December 31, 2018, were as follows:
Obligations arising from purchase contracts
Million €
2019
Assets used under long-term leases
2020
2021
Assets used under long-term leases primarily concerned buildings,
vehicles and transportation equipment.
2022
2023
For more information on liabilities arising from leasing contracts, see Note 28 from page 259 onward
Obligations arising from long-term leases (excluding finance leases)
Million €
2019
2020
2021
2022
2024 and maturities beyond this year
4
2,891
78
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
24
Liabilities
Financial indebtedness
Million €
BASF SE
Carrying amounts based on effective
interest method
4 Consolidated Financial Statements
Nominal value (million,
currency of issue)
Effective interest rate
December 31, 2018
December 31, 2017
Commercial Paper
USD
2,922
2,549
variable
Currency
Bond 2013/2018
3 Corporate Governance
1 To Our Shareholders
140
Other
1,312
243
1
(294)
(160)
(53)
1,049
2 Management's Report
Total
3,054
24
(3,021)
(613)
(1,039)
5,112
BASF Report 2018
245
About This Report
6,707
EUR
300
variable
300
300
1.875%
Bond 2013/2021
EUR
1,000
1.47%
1,008
1,007
variable
2.5%
USD
500
2.65%
435
414
1.375%
Bond 2018/2022
GBP
250
Bond 2017/2022
300
EUR
Bond 2013/2020
300
1.5%
Bond 2012/2018
EUR
1,000
1.51%
999
1.375%
Bond 2014/2019
EUR
750
1.44%
750
750
variable
Bond 2017/2019
EUR
1,250
1,252
1,261
variable
(5)
(12)
(30)
84
98
143
119
1,049
222
1,312
310
5,112
3,252
Total
6,707
Provisions for employee obligations primarily include obligations
for the granting of long-service bonuses and anniversary payments,
variable compensation including associated social security
contributions, as well as provisions for early and phased retirement
programs. The decrease was due primarily to releases for the
long-term incentive program.
For more information on provisions for the long-term incentive program, see Note 30 from page 263
onward
Provisions for obligations from sales and purchase contracts
largely comprise obligations arising from rebates granted and other
price discounts in the Agricultural Solutions segment, warranties
and product liabilities, sales commissions and expected losses on
contracts. The increase in provisions resulted from higher accruals
for rebate programs.
Provisions for restructuring measures include severance payments
to departing employees as well as expected costs for site closures,
including the costs for demolition and similar measures.
Development of other provisions in 2018
Provisions for litigation, damage claims, warranties and similar
obligations contain anticipated expenses from lawsuits in which
BASF is the defendant party, as well as obligations under damage
claims against BASF and fines.
Other largely includes noncurrent tax provisions.
The following table shows the development of other provisions by
category. Other changes include reclassifications to disposal
groups, changes in the scope of consolidation, acquisitions,
divestitures, currency effects and the reclassification of obligations
to liabilities when the amount and timing of these obligations become
known.
Restoration obligations pertain mainly to anticipated costs for
dismantling existing plants and buildings. The decrease was due
primarily to the reclassification of the oil and gas business to the
disposal group.
3,229
Other
obligations
48
112
remediation costs
Employee obligations
1,817
1,467
2,173
1,553
Obligations from sales and
1,261
1,253
1,080
1,070
purchase contracts
Restructuring measures
121
98
Litigation, damage claims,
warranties and similar
140
85
103
Provisions for environmental protection and remediation costs
cover expected costs for rehabilitating contaminated sites,
recultivating landfills, removal of environmental contamination at
existing production or storage sites and similar measures.
1.52%
Million €
January 1,
1,509
(1,521)
(319)
(27)
1,817
Obligations from sales and purchase contracts
Restructuring measures
1,080
1,055
(1,044)
2,173
(93)
1,261
143
35
(46)
(15)
4
121
Litigation, damage claims, warranties and
similar obligations
103
263
costs
638
17
2018
Additions
Unwinding of
discount
December 31,
Utilization
Releases Other changes
2018
Restoration obligations
1,296
28
20
(17)
(3)
(1,238)
86
Environmental protection and remediation
600
100
1
(69)
(11)
Employee obligations
278
2%
0.925%
Bond 2013/2033
EUR
200
3.09%
198
198
4%
Bond 2018/2033
AUD
2.875%
160
96
1.625%
Bond 2017/2037
EUR
750
1.73%
737
736
3.25%
4.24%
491
492
3.15%
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
Continued from last page
Financial indebtedness
Million €
Carrying amounts based on effective
interest method
Nominal value (million,
Currency
currency of issue)
Effective interest rate
December 31, 2018
December 31, 2017
3%
Bond 2013/2033
EUR
500
Bond 2013/2043
About This Report
EUR
3.27%
300
4.45%
261
250
BASF Finance Europe N.V.
0.0%
Bond 2016/2020
EUR
1,000
USD
0.14%
996
3.625%
Bond 2018/2025
USD
200
3.69%
174
0.75%
Bond 2016/2026
997
U.S. private placement series C 2013/2034
4.43%
582
199
199
1.025%
Bond 2018/2048
JPY
10,000
1.03%
79
3.89%
U.S. private placement series A 2013/2025
USD
250
3.92%
218
208
4.09%
U.S. private placement series B 2013/2028
USD
700
4.11%
610
200
600
246
Continued on next page
497
1.750%
Bond 2017/2025
GBP
300
1.87%
333
335
0.875%
498
Bond 2018/2025
750
0.97%
745
3.675%
Bond 2013/2025
NOK
1,450
3.70%
146
EUR
2.60%
500
EUR
Bond 2012/2022
Bond 2017/2023
EUR
1,250
1.93%
1,254
1,254
USD
850
0.83%
25 Other financial obligations
664
0.875%
Bond 2016/2023
GBP
250
1.06%
277
279
2.5%
Bond 2014/2024
147
BASF Report 2018
0.875%
EUR
Bond 2016/2031
EUR
500
1.01%
492
492
2.37%
Bond 2016/2031
HKD
0.875%
1,300
145
139
1.450%
Bond 2017/2032
EUR
300
1.57%
296
296
2.37%
198
198
1.58%
1,000
1.04%
986
984
2.670%
Bond 2017/2029
NOK
1,600
2.69%
161
162
1.5%
Bond 2018/2030
EUR
500
1.625%
494
1.5%
Bond 2016/2031
EUR
200
Bond 2017/2027
EUR
127
Environmental protection and
(139)
(5)
Sensitivity analysis
A change in the material actuarial assumptions would have the fol-
lowing effects on the defined benefit obligation:
Sensitivity of the defined benefit obligation as of December 31
Million €
The interest on the net defined benefit liability is recognized in the
financial result. This is the difference between the interest cost of the
defined benefit obligation and the standardized return on plan assets
as well as the interest cost for the asset ceiling. The expected
contribution payments and benefits paid over the course of the fiscal
year are taken into account when determining net interest.
Other changes
Currency effects
experience adjustments
As of December 31, 2018, the weighted average duration of the
defined benefit obligation amounted to 15.4 years (previous year:
(374)
8
1
124
237
(828)
Defined benefit obligation as of December 31
26,651
26,871
Effects from acquisitions and divestitures
Increase by 0.5 percentage
points
173
Expenses for pension benefits
(recognized in the financial result)
Employee contributions
553
568
(1,037)
(1,048)
47
48
Net interest expense from underfunded pension plans and
similar obligations
Actuarial gains/losses
131
133
for adjustments relating to financial assumptions
239
1
Net interest income from overfunded pension plans
(2)
(2)
adjustments relating to demographic assumptions
(163)
(2)
175
Decrease by 0.5 percentage
points
15.5 years).
2018
Million €
2018
2017
Plan assets as of January 1
20,648
19,460
Special contributions were made in 2017 to improve the funding
levels of the plans. These primarily related to BASF Pensionstreu-
hand e.V. (€500 million), BASF Pensionskasse WaG (€317 million)
and the U.S. plans ($143 million).
Regional allocation of defined benefit plans as of December 31
Million €
Development of plan assets
Pension
obligations
Net defined benefit
liability
2018
2017
2018
2017
2018
2017
Standardized return on plan assets
422
Plan assets
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
2017
2018
2017
Discount rate
(1,880)
(1,930)
2,140
2,200
Projected pension
increase
1,190
1,240
(1,080)
(1,130)
Net interest expense of the respective fiscal year is based on the
discount rate and the defined benefit obligation at the beginning of
the year.
An alternative valuation of the defined benefit obligation was
performed to determine how changes in the underlying assumptions
influence the amount of the defined benefit obligation. A linear
extrapolation of these amounts based on alternative changes in the
assumptions as well as an addition of combined changes in the
individual assumptions is not possible.
BASF Report 2018
242
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2 Management's Report
3 Corporate Governance
Benefits paid
705
730
Interest cost
Discount rate
Projected pension
increase
1.70 1.90 4.10 3.60
0.90 0.50
2018 2017
2.90 2.60
1.50 1.50
3.10 3.10
Assumptions used to determine expenses for pension benefits in the
respective business year
Germany
United States
2018 2017 2018 2017 2018 2017
Switzerland
2018 2017 2018 2017
2018 2017
2018 2017
Discount rate
Projected pension
increase
1.90
1.80 3.60 4.00
0.50 0.60
2.60 2.80
1.50 1.50
United
Kingdom
United
Switzerland Kingdom
United States
Germany
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2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
benefits earned in the past were frozen. There is no entitlement to
pension adjustments to compensate for cost-of-living increases.
The legal and regulatory frameworks governing the plans are based
on the U.S. Employee Retirement Income Security Act (ERISA),
which requires the plan sponsor to ensure a minimum funding level.
Any employer contributions necessary to meet the minimum funding
level are based on the results of an actuarial valuation. Furthermore,
there are unfunded pension plans that are not subject to ERISA
requirements.
Additional similar obligations arise from plans that assume the
healthcare costs and life insurance premiums of retired employees
and their dependents. Such plans have been closed to new entrants
since 2007. In addition, the amount of the benefits for such plans
has been frozen.
Switzerland
The employees of the BASF Group in Switzerland receive a company
pension, which is financed through a pension fund by employer and
employee contributions as well as the return on plan assets. The
pension plans are accounted for as defined benefit plans, as the
obligatory minimum pension guaranteed by law under the Swiss
Pension Fund Act (BVG) is included in the scheme. All benefits vest
immediately. According to government regulations, the employer is
obligated to make contributions, so that the pension funds are able
to grant the minimum benefits guaranteed by law. The pension
funds are managed by boards, where employer and employees are
equally represented, which steer and monitor the benefit plans and
asset allocation.
United Kingdom
Employees are granted benefits based on a defined contribution
plan.
The BASF Group also maintains defined benefit plans in the United
Kingdom, which have been closed for further increases based on
future years of service. Adjustments to compensate for increases in
the cost of living until the beginning of retirement are legally required
for beneficiaries of defined benefit plans.
The financing of the pension plans is determined by the provisions
of the regulatory authority for pensions and the relevant social and
labor law requirements. The defined benefit plans are administered
by a trust company, whose Board of Trustees, according to the
trustee agreement and law, represents the interests of the
beneficiaries and ensures that the benefits can be paid in the future.
The required funding is determined using technical valuations
according to local regulations every three years.
Other countries
For subsidiaries in other countries, defined benefits are covered in
some cases by pension provisions, but mainly by external insurance
companies or pension funds.
Actuarial assumptions
The valuation of the defined benefit obligation is based on the
following key assumptions:
Assumptions used to determine the defined benefit obligation as of
December 31
3.10 3.10
393
The assumptions used to ascertain the defined benefit obligation as
of December 31 are used in the following year to determine the
expenses for pension plans.
BASF Report 2018
Expenses for pension benefits
(recognized in income from operations)
2018
2017
Defined benefit obligation as of January 1
26,871
27,603
Current service cost
384
Expenses for defined contribution plans
400
2017
Past service cost
32
2
416
402
Plan settlements
314
303
2018
Expenses for defined benefit plans
Million €
Composition of expenses for pension benefits
241
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2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
S1PxA (standard actuarial mortality tables for self-
administered plans (SAPS))
The valuation of the defined benefit obligation is generally performed
using the most recent actuarial mortality tables as of December 31
of the respective business year, which in Germany and the United
States are derived from the BASF Group population and were last
updated in 2015 for the pension obligations in Germany and in 2018
for the pension obligations in the United States.
Actuarial mortality tables (significant countries) as of December 31, 2018
Germany
United States
Switzerland
United Kingdom
Heubeck Richttafeln 2005G (modified)
RP-2018 (modified) with MP-2018 generational
projection
BVG 2015 generational
Explanation of the amounts in the statement of income and
balance sheet
Development of defined benefit obligation
Million €
A Group-wide, uniform procedure is used to determine the discount
rates applied for valuation of material pension obligations of the
BASF Group. Accordingly, the discount rates were derived from the
yields on corporate bonds in the respective currency zones with an
issue volume of more than 100 million units of the respective
currency with a minimum rating of "AA-" to "AA+" from at least one
of the following three rating agencies: Fitch, Moody's, or Standard &
Poor's.
Development of net defined benefit liability
Germany
18,406 18,104
Equities
25
29
Debt instruments
53
52
of which for government debtors
16
16
2017
for other debtors
36
Real estate
4
3
Alternative investments
16
15
Cash and cash equivalents
2
37
2018
%
Structure of plan assets
221
(7,371)
(6,223)
63
70
provisions for pensions and similar obligations
7,434
(6,293)
Explanations regarding plan assets
The target asset allocation has been defined by using asset liability
studies and is reviewed regularly. Accordingly, plan assets are
aligned with the long-term development of the obligations, taking
into consideration the risks associated with the specific asset
classes and the regulations relating to the investment of plan assets.
The existing portfolio structure is based on the target asset
allocation. In addition, current market assessments are taken into
consideration. In order to mitigate risks and maximize returns, a
widely spread global portfolio of individual assets is held.
Liability-driven investment (LDI) techniques, such as hedging the risk
of changes in interest rates and inflation, are used in some pension
plans, especially for U.K. and U.S. plans.
The expected employer contributions for 2019 amount to approxi-
mately €600 million.
BASF Report 2018
243
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2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
1
(66)
Total
100
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
23
Other provisions
244
Other provisions
of which
current
17
December 31, 2018
December 31, 2017
of which
current
Restoration obligations
86
1,296
Million €
BASF Report 2018
Contributions to government pension plans were €634 million in
2018 and €592 million in 2017.
The contributions to defined contribution plans recognized in income
from operations amounted to €314 million in 2018 and €303 million
in 2017.
exceptions, there is no active market for plan assets in real estate
and alternative investments.
Plan assets as of the balance sheet date contained securities issued
by BASF Group companies with a market value of €9 million in 2018
and €15 million in 2017. The market value of the properties of legally
independent pension funds rented to BASF Group companies
amounted to €112 million on December 31, 2018, and €111 million
on December 31, 2017.
Since 2010, there has been an agreement between BASF SE and
BASF Pensionskasse WaG on the granting of profit participation
capital with a nominal value of €80 million, which is used to
strengthen the financing of the BASF Pensionskasse WaG. In 2017,
a number of special endowments were provided to improve the
funding levels of the plans. Beyond this, there were no material
transactions between the legally independent pension funds and
BASF Group companies in 2018 or 2017.
The asset class debt instruments comprises promissory notes and
debentures (Pfandbriefe) as well as corporate and government
bonds. Government bonds primarily relate to bonds from countries
with the highest credit ratings, such as the United States, the United
Kingdom, Germany and Switzerland. Corporate bonds mainly
comprise bonds from creditworthy debtors, although particular The funding of the plans was as follows:
high-yield bonds are also held to a limited extent. In connection with
the ongoing monitoring of default risk based on a given risk budget
and on the observation of the development of the creditworthiness
of issuers, the plan asset allocation may be adjusted in the case of
a revised market assessment. Alternative investments largely
comprise investments in private equity, absolute return funds and
senior secured loans.
Almost all of the equities are priced on active markets. The category
debt instruments includes promissory notes and debentures
(Pfandbriefe) acquired through private placements with a market
value in the amount of €394 million as of December 31, 2018, and
€575 million as of December 31, 2017. For such securities,
especially those held by domestic pension plans, there is no active
market. The capital market compensates for this lack of fungibility
with yield premiums depending on the maturity. With only a few
Current funding situation of the pension plans as of December 31
Million €
2018
2017
Defined
benefit
obligation Plan assets
Defined
benefit
obligation Plan assets
Unfunded pension plans
Funded pension plans
2,575
2,814
24,076
26,651
19,280
19,280
24,057
26,871
20,648
20,648
Total
Defined contribution plans and government pensions
100
638
(18)
(10)
(8,143)
Employee contributions
47
48
United Kingdom
1,741
1,884
1,733
1,880
(6,223)
(8)
Current service cost
(384)
(400)
Benefits paid
(913)
(919)
Other
806
760
(4)
Net defined benefit liability as of January 1
(181)
(115)
12,621 13,576 (5,785) (4,528)
Deviation between actual and standardized return on plan
assets
(1,043)
1,067
Million €
United States
3,745
4,053
2,448
2,687 (1,297)
(1,366)
2018
2017
Employer contributions
175
1,102
Switzerland
1,953
2,070
1,838
1,889
640
(136)
616
(144)
(607)
Actuarial gains/losses of the defined benefit obligation
63
6
Plan assets as of December 31
19,280
20,648
Benefits paid by unfunded plans
124
171
129
BASF SE disbursed pension payments that are covered by assets of
BASF Pensionstreuhand e.V. Reimbursement of these pension
payments by BASF Pensionstreuhand e.V. in 2018 is included in
other changes in plan assets and relates to the previous year in the
amount of €134 million.
Employer contributions
Effects from acquisitions and divestitures
Other changes
Currency effects
Net defined benefit liability as of December 31
of which defined benefit assets
175
1,102
282
The standardized return on plan assets is calculated by multiplying
plan assets at the beginning of the year with the discount rate used
for existing defined benefit obligations at the beginning of the year,
taking into account benefit and contribution payments to be made
during the year.
1,067
(1,043)
Deviation between actual and standardized return on plan
assets
Past service cost
(32)
(2)
Effects from acquisitions and divestitures
(92)
(2)
Total
26,651 26,871 19,280 20,648
(7,371) (6,223)
Interest cost
(553)
(568)
Past service cost
Standardized return on plan assets
422
393
Plan settlements
Other changes
Currency effects
(135)
106
(166)
500
703
495
Employee liabilities
77
67
85
58
Liabilities related to social security
2,364
766
2,206
437
28
Other liabilities that qualify as financial instruments
94
565
41
Miscellaneous liabilities
564
903
Advances received on orders¹
197
190
Secured liabilities
1,289
262
28
253
43
Kazakhstani tenge
42
37
Other currencies
62
0.88%
99
197
35
23
Other liabilities
Other liabilities that do not qualify as financial instruments
Miscellaneous liabilities
Deferred income
31
155
Contract liabilities
17
34
Liabilities from precious metal trading positions
registered land charges. Other liabilities include collateral for
derivative instruments with negative fair values. As in the previous
year, there were no secured contingent liabilities in 2018.
Liabilities to credit institutions were secured primarily with
212
43
283
75
December 31, 2018
December 31, 2017
December
31, 2018
December
31, 2017
Noncurrent
Current
Noncurrent
Current
Liabilities to credit institutions
18
Million €
22
Liabilities from finance leases
230
308
290
274
Accounts payable, trade
6
6
91
43
Derivatives with negative fair values
Secured liabilities
Million €
Other liabilities
Loan and interest liabilities
169
166
Other liabilities
42
Total
20,841
18,032
Other bonds consist primarily of industrial revenue and pollution
control bonds issued by the BASF Corporation group that were
used to finance investments in the United States. Both the weighted
average interest rate of these bonds and their weighted effective
interest rate amounted to 3.0% in 2018 and 3.1% in 2017. The
average residual term amounted to 168 months as of December 31,
2018 (December 31, 2017: 183 months).
Liabilities to credit institutions
Liabilities to credit institutions stayed at the previous year's level.
The weighted average interest rate on loans amounted to 5.6% in
2018 compared with 4.1% in 2017.
Unused credit lines
BASF SE had committed and unused credit lines with variable
interest rates amounting to €6,000 million both as of December 31,
2018, and as of December 31, 2017.
BASF Report 2018
248
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2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
387
Indonesian rupiah
25
44
2,052
1,335
Following year 2
2,922
6,160
U.S. dollar
Pound sterling
2,497
Following year 1
13,326
12,358
Euro
31, 2017
December
5,509
888
614
Following year 3
Hong Kong dollar
1,781
1,155
Following year 5
127
163
Chinese renminbi
1,140
2,105
Following year 4
309
306
Norwegian krone
1,845
1,178
December
31, 2018
145
December
31, 2017
December
Liabilities to credit institutions
Bonds and other liabilities to the capital market
15,653
18,444
Other bonds
547
Financial indebtedness
588
4.88%
477
EUR
Ciba Specialty Chemicals Finance Luxembourg S.A.
4.875%
Bond 2003/2018
494
474
2,397
2,379
20,841
Million €
Maturities of financial indebtedness
Million €
Breakdown of financial indebtedness by currency
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
247
BASF Report 2018
18,032
31, 2018
139
Following year 6 and maturities beyond this year
9,559
Brazilian real
54
137
54
53
Indian rupee
24
Argentinian peso
73
74
63
99
89
Other bonds
48
South African rand
Japanese yen
99
8,717
58
20,841
Total
Turkish lira
127
65
Australian dollar
Ukrainian hryvnia
18,032
139
The table "Offsetting of financial assets and financial liabilities"
shows the extent to which financial assets and financial liabilities
were offset in the balance sheet, as well as potential effects from the
offsetting of instruments subject to a legally enforceable global
netting agreement (primarily in the form of an ISDA agreement) or
similar agreement. For positive fair values of combined interest rate
and currency swaps, the respective counterparties provided cash
collaterals in an amount comparable to the outstanding fair values.
1 To Our Shareholders
Deviations from the derivatives with positive fair values and
derivatives with negative fair values reported in other receivables
and other liabilities at the end of 2018 and 2017 arose from
derivatives not subject to any netting agreements as well as from
embedded derivatives and are therefore not included in the table
above.
Net gains and losses from financial instruments comprise the results
of valuations, the amortization of discounts, the recognition and
reversal of impairments, results from the translation of foreign
currencies as well as interest, dividends and all other effects on the
earnings resulting from financial instruments. The line item financial
instruments at fair value through profit or loss contains only gains
and losses from instruments that are not designated as hedging
instruments in acordance with IFRS 9.
256
About This Report
6 Overviews
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
Notes
Net gains and losses from financial instruments 2018
Million €
Financial assets measured at amortized cost
(606)
2 Management's Report
(139)
Net amount
(412)
Relating to financial collateral
Potential net amount
(20)
244
(20)
463
(163)
(163)
(48)
33
(150)
150
Amounts that cannot be offset
Offset amounts
Due to global netting agree-
Amount offset
ments
Relating to financial collateral
Potential net amount
(39)
(39)
337
(55)
(10)
272
(55)
BASF Report 2018
(104)
1 To Our Shareholders
372
90
Securities
439
569
311
179
Loans
Variable
interest rate
Fixed
interest rate
interest rate
interest rate
Variable
Fixed
December 31, 2017
December 31, 2018
Million €
Carrying amount of nonderivative interest-bearing financial instruments
Notes
88
87
Financial
indebtedness
15,597
(7)
300
(13)
600
(7)
300
Fair
value
value
Fair Nominal
value
5 Supplementary Information Oil and Gas Business 6 Overviews
Nominal
value
of which fixed rate
Combined interest rate and currency
swaps
of which payer swaps
Interest rate swaps
Million €
Nominal and fair values of interest rate swaps and combined interest
rate and currency swaps
3,329
14,703
5,244
December 31, 2018 December 31, 2017
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
December 31, 2018
Total
Other
USD
Million €
Exposure and sensitivity by currency
The sensitivity analysis is conducted by simulating a 10%
appreciation of the respective functional currency against the other
currencies. The effect on BASF's income before income taxes would
have been minus €373 million as of December 31, 2018, and minus
€252 million as of December 31, 2017. The effect from the items
designated under hedge accounting would have increased
shareholders' equity before income taxes by €33 million as of
December 31, 2018 (2017: increase of €46 million). This only refers
to transactions in U.S. dollars. The foreign currency risk exposure
amounted to €3,185 million as of December 31, 2018, and
€1,976 million as of December 31, 2017.
The foreign currency risk exposure corresponds to the net amount
of the nominal volume of the primary and the derivative financial
instruments that are exposed to currency risks. In addition, planned
purchase and sales transactions of the respective following year are
included if they fall under the currency risk management system.
Long and short positions in the same currency are offset against
each other.
Foreign currency risks: Changes in exchange rates could lead to
losses in the value of financial instruments and adverse changes in
future cash flows from planned transactions. Foreign currency risks
from financial instruments result from the translation at the closing
rate of financial receivables, loans, securities, cash and financial
liabilities into the functional currency of the respective Group
company. Foreign currency contracts in various currencies are used
to hedge foreign exchange risks from nonderivative financial
instruments and planned transactions.
December 31, 2017
Market risks
27 Supplementary information on financial
instruments
Furthermore, BASF SE and its affiliated companies are defendants
in or parties to a variety of judicial, arbitrational and/or regulatory
proceedings on a recurring basis. To our current knowledge, none of
these proceedings will have a material effect on the economic
situation of BASF.
Motion to Dismiss. In 2018, no further developments in this
proceeding occurred. A pro se complaint filed in September 2015
was dismissed by the U.S. District Court on October 19, 2017. The
plaintiff filed an appeal to the U.S. Court of Appeals on Novem-
ber 19, 2017. An oral argument took place on October 18, 2018,
and the Court's decision is still outstanding.
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
27.1 Financial risks
About This Report
Exposure
Exposure
1 To Our Shareholders
About This Report
251
BASF Report 2018
The variable interest risk exposure, which also includes fixed rate
bonds maturing in the following year, amounted to minus €4.802 mil-
lion as of December 31, 2018 (2017: minus €986 million). An
increase in all relevant interest rates by one percentage point would
have lowered income before income taxes by €43 million as of
December 31, 2018, and raised income before income taxes by
€4 million as of December 31, 2017. The effect from the items
designated under hedge accounting would have increased
shareholders' equity before income taxes by €5 million as of
December 31, 2018 (2017: increase of €9 million).
Interest rate risks: Interest rate risks arise from changes in prevailing
market interest rates, which can lead to changes in the fair value of
fixed-rate instruments and in interest payments for variable-rate
instruments. Interest rate swaps and combined interest rate and
currency derivatives are used to hedge these risks. These risks are
relevant to BASF's financing activities but are not of material
significance for BASF's operating activities.
Due to the use of options to hedge currency risks, the sensitivity
analysis is not a linear function of the assumed changes in exchange
rates.
(206)
1,976
Sensitivity
(340)
(63)
566
of which interest result
1,066
(143)
1,410
(236)
2,119
Sensitivity
3,185
Financial assets at fair value through profit or loss
Cash flow hedge accounting
Financial assets at fair value through other comprehensive income
Minimum lease payments
Interest portion
Leasing liability
47
4
43
32
27
28
3
25
37
5
32
24
3
21
22
4
18
17
2
15
19
3
Leasing liability
Interest portion
Minimum lease payments
December 31, 2017
Total
329
170
253
96
Land, land rights and buildings
The increase in leased assets is due primarily from the additions
related to the acquisition of significant parts of Bayer's seed and
non-selective herbicide businesses and its vegetable seed business.
259
BASF Report 2018
About This Report
1 To Our Shareholders
2 Management's Report
16
3 Corporate Governance
5 Supplementary Information Oil and Gas Business
6 Overviews
Notes
Liabilities from finance leases
Million €
Following year 1
Following year 2
Following year 3
Following year 4
Following year 5
More than 5 years
Total
December 31, 2018
4 Consolidated Financial Statements
8
1
7
320
1,482
1,410
Future minimum payments from operating lease contracts included
€144 million for companies in the oil and gas disposal group as of
December 31, 2018.
Future minimum lease payments from subleasing contracts based
on existing agreements amounted to €10 million in 2018 (2017:
€10 million).
In 2018, minimum lease payments of €494 million (2017: €407 mil-
lion) were included in income from operations. In 2018, conditional
lease payments of €1 million (2017: €1 million) were also included in
income from operations. Furthermore, sublease payments of €4 mil-
lion (2017: €3 million) were included in income from operations in
2018.
BASF as lessor
BASF acts as a lessor for finance leases to a minor extent only.
Receivables on finance leases were €25 million in 2018 (2017:
€29 million).
In 2018, claims arising from operating leases amounted to €166 mil-
lion (2017: €93 million).
Future minimum lease payments to BASF from operating lease contracts
Million €
Less than 1 year
1-5 years
More than 5 years
Total
359
Nominal value of future minimum
Dec. 31, 2018
Dec. 31, 2017
30
19
75
50
61
24
166
93
BASF Report 2018
260
lease payments
44
728
362
12
2
10
28
5
23
26
5
21
152
18
134
720
148
124
In the current business year and in the previous year, no additional
lease payments exceeding minimum lease payments were
recognized in the income statement due to contractual conditions
for finance leases. In 2018 and in the previous year, leasing liabilities
were not offset by any future minimum lease payments from
subleases.
In addition, BASF is a lessee under operating lease contracts. The
resulting lease commitments totaled €1,482 million in 2018 (2017:
€1,410 million) and will become due in the following years:
Future minimum payments from operating lease contracts
Million €
Less than 1 year
1-5 years
More than 5 years
Total
Nominal value of future minimum
lease payments
Dec. 31, 2018
Dec. 31, 2017
403
24
of which interest result
113
111
The gains and losses from the valuation of securities recognized in equity are shown in development
of income and expense recognized in equity attributable to shareholders of BASF SE on page 177
257
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1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Notes
27.4 Derivative instruments and hedge accounting
Fair value of derivative instruments
Million €
The use of derivative instruments
BASF is exposed to foreign currency, interest rate and commodity
price risks during the normal course of business. These risks are
hedged using derivative instruments as necessary in accordance
with a centrally determined strategy. Hedging is only employed for
existing items from the product business, cash investments and
financing as well as for planned sales, raw material purchases and
capital measures. The risks from the hedged items and the
derivatives are constantly monitored. Where derivatives have a
positive market value, BASF is exposed to credit risks from derivative
transactions in the event of nonperformance of the other party. To
minimize the default risk on derivatives with positive market values,
transactions are exclusively conducted with creditworthy banks and
partners and are subject to predefined credit limits.
To ensure effective risk management, risk positions are centralized
at BASF SE and certain Group companies. The contracting and
execution of derivative financial instruments for hedging purposes
are conducted according to internal guidelines, and subject to strict
control mechanisms.
The fair values of derivative financial instruments are calculated
using valuation models that use input parameters observable on the
market. Exceptions to this are some commodity derivatives, whose
valuation is based directly on market prices.
Foreign currency forward contracts
Foreign currency options
Foreign currency derivatives
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Interest rate swaps
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Combined interest rate and currency swaps
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Interest derivatives
Commodity derivatives
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Derivative financial instruments
600
BASF is exposed to price risks in the context of procuring naphtha.
Some of the planned purchases of naphtha are hedged using swaps
and options on oil and oil products. The main contractual elements
of these options correspond to the characteristics of the hedged
item. These hedges are not presented using cash flow hedge
accounting in BASF's 2018 or 2017 financial statements.
BASF Report 2018
(396)
(359)
249
of which interest result
Financial liabilities measured at amortized cost
of which interest result
Net gains and losses from financial instruments 2017
Million €
Total
33
58
(45)
40
57
(4)
4
Cash flow hedge accounting continues to be used to a minor extent
for natural gas purchases exposed to commodity price risks,
meaning that gains and losses from hedging instruments are initially
recognized in equity. Commodity price-based options serve as
hedging instruments, for which contract terms are adjusted to reflect
the risks of the hedged item. Gains and losses from hedging
instruments are included in cost of sales in the fiscal year in which
the hedged item is recognized in profit or loss.
(599)
Total
(311)
Loans and receivables
of which interest result
Available-for-sale financial assets
of which interest result
Financial liabilities measured at amortized cost
of which interest result
Financial instruments at fair value through profit or loss
90
(24)
2
(450)
December 31, 2018
(57)
December 31, 2017
65
6 Overviews
Notes
BASF is exposed to foreign currency risks due to planned sales in
U.S. dollars. To some extent, cash flow hedge accounting is applied
using currency options. The hedging rate is $1.1563 per euro. The
impact on earnings from the hedged transactions will occur in 2019.
In 2018, the effective change in the values of the hedges was €8 mil-
lion (2017: €71 million), which was recognized in the equity of the
shareholders of BASF SE. A total of €31 million (2017: €44 million)
was derecognized accordingly from the equity attributable to share-
holders of BASF SE and was recognized in income from foreign
currency and hedging transactions. The hedges were entirely effec-
tive. The decrease in the options' time value component arising in
the amount of €33 million in 2018 was recognized separately in
equity as the cost of hedging and resulted in a reduction in equity.
The reclassification of the accumulated changes in the time value of
options to profit or loss due to the maturity of hedged items had a
countering effect in the amount of €36 million.
The interest rate risk of the variable-rate bonds issued by BASF SE
in 2013 was hedged using interest rate swaps, which converted the
bonds into fixed-interest rate bonds with a rate of 1.45%. The key
terms of the interest rate swap contracts used as hedging instru-
ments largely correspond to the contractual elements of the hedged
item. The bond and the interest rate swaps were designated in a
hedging relationship. The effective changes in the fair value recog-
nized in BASF SE shareholders' equity amounted to €4 million in
2018 (2017: €6 million). Ineffective parts required to be accounted
for did not arise.
Leased assets
Property, plant and equipment include assets that are considered to
be economically owned through a finance lease. They primarily
concern the following items:
Furthermore, BASF SE's fixed-rate U.S. private placement of 28 Leases
$1.25 billion, issued in 2013, was converted to euros using
cross-currency swaps, because the private placement exposes
BASF to a currency risk. The hedging interest rate was 4.13%; and
the hedging foreign exchange rate was $1.3589 per euro. This
hedge was designated as a cash flow hedge. Recognition of ineffec-
tive portions in profit or loss was not required. In 2018, changes in
fair value of €42 million were recognized in shareholders' equity
(2017: minus €125 million). In 2018, €49 million was derecognized
from other comprehensive income and recorded as income in the
financial result (2017: expense of €144 million in financial result).
Leased assets
Million €
December 31, 2018 December 31, 2017
Acquisi-
Net Acquisi-
tion carrying
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
Net
tion carrying
amount
cost
amount
91
74
22
9
Machinery and technical equipment
Miscellaneous equipment and fixtures
127
50
118
43
cost
46
3 Corporate Governance
1 To Our Shareholders
13
37
(44)
102
11
34
(7)
(13)
(7)
(13)
(103)
(175)
2 Management's Report
80
(110)
(188)
(39)
(66)
1
1
(193)
(152)
The planned transactions and their effect on earnings occur in the
year following the balance sheet date. In 2018, effective changes in
the fair value of hedging instruments of €5 million (2017: €200,000)
were recognized in the equity of the shareholders of BASF SE. In
2018, effective changes in the fair value of hedging instruments of
€4 million were derecognized from the equity attributable to
shareholders of BASF SE and recognized in other operating income
(2017: €300,000). Ineffective parts required to be accounted for did
not arise. In 2017, minus €100,000 was recognized as the ineffec-
tive part of value changes of the hedging instruments in other
operating expenses. The change in the options' time value is sepa-
rately recognized in equity and recognized in profit or loss in the year
during which the hedged items matured. In 2018, a decrease in fair
value of minus €2 million was recognized in equity attributable to
shareholders of BASF SE, and €1 million was derecognized,
increasing equity.
BASF Report 2018
258
About This Report
38
(13)
- In the Agricultural Solutions division, the sales prices of products
are sometimes pegged to the price of certain agricultural
commodities. To hedge the resulting risks, derivatives on
agricultural commodities are concluded.
(103)
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
254
BASF Report 2018
6 Does not include separately shown derivatives or receivables and liabilities from finance leases. If miscellaneous receivables are valued at fair value through profit or loss, their valuation is generally based on parameters observ-
able on the market. These are adjusted to reflect valuation-relevant characteristics of the respective assets in the fair value.
5 Fair value was determined based on parameters for which there was no observable market data.
4 Fair value was determined based on parameters for which directly or indirectly quoted prices on active markets were available.
2 AC: amortized cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in Note 1.2 from page 183 onward.
3 Fair value was determined based on quoted, unadjusted prices on active markets.
1 In general, only significant shareholdings are measured at fair value. All insignificant shareholdings are measured at cost. Fair value level 1 is applied to publicly listed shareholdings. Level 2 is applied to shareholdings for which
valuation is based on parameters observable in the market to the greatest extent possible. These may be adjusted to reflect valuation-relevant characteristics of the respective shareholding in the fair value.
16,883
6
29,062
1,971
AC
1,971
28,606
29,666
Total liabilities
3,031
Other liabilities
7
Notes
Carrying amounts and fair values of financial instruments as of December 31, 2017
Million €
Total carrying
amount within
340
340
Derivatives no hedge accounting
11,190
LaR
11,190
11,190
29
n/a
29
29
Afs
525
482
Accounts receivable, trade
Receivables from finance leases
Shareholdings¹
of which fair
value level 35
of which
which fair
value level 24
of which
which fair
value level 13
Fair Value
Valuation
category in
accordance
with IAS 39²
application of
IFRS 7
amount
Carrying
scope of
482
7
n/a
7
15,895
15,895
Bonds
440
2,773
14,999
15,418
17,905
Total assets
2,237
2,237
AC
AC
2,237
Cash and cash equivalents
63
63
FVTPL
63
63
Cash equivalents
445
445
FVTPL
445
445
2,237
aFVtPL
16,351
Commercial papers
7
Derivatives hedge accounting
531
FVTPL
531
531
Derivatives no hedge accounting
5,122
AC
5,122
5,122
Accounts payable, trade
16,351
134
134
4,183
Liabilities from finance leases
2,397
AC
2,397
2,397
Liabilities to credit institutions
2,549
AC
2,549
2,549
n/a
Securities
340
326
5 Fair value was determined based on parameters for which there was no observable market data.
4 Fair value was determined based on parameters for which directly or indirectly quoted prices on active markets were available.
3 Fair value was determined based on quoted, unadjusted prices on active markets.
onward.
1 The difference between carrying amount and fair value results from shareholdings measured at cost, for which the fair value could not be reliably determined (2017: €482 million).
2 Afs: available for sale; LaR: loans and receivables; aFVtPL: at fair value through profit or loss; AmC: amortized cost; Htm: held to maturity; a more detailed description of the categories can be found in Note 1.2 from page 183
16,934
36
26,886
26,133
27,162
Total liabilities
2,442
AmC
2,442
3,471
Other liabilities
13
13
n/a
13
13
Derivatives hedge accounting
515
36
551
6 Not including separately shown derivatives as well as receivables and liabilities from finance leases. Payments received for orders were reported as other liabilities that do not represent financial instruments in the BASF 2017
report. These liabilities were then added to financial instruments.
BASF Report 2018
255
About This Report
ments
Net amount
Amount offset
Due to global netting agree-
Amounts that cannot be offset
Offset amounts
(373)
376
Gross amount
Derivatives with negative fair values
Derivatives with positive fair values
Offsetting of financial assets and financial liabilities as of December 31, 2017
Million €
aFVtPL
483
Gross amount
Derivatives with negative fair values
Derivatives with positive fair values
Million €
Offsetting of financial assets and financial liabilities as of December 31, 2018
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
264
551
551
Derivatives no hedge accounting
6,495
LaR
6,495
6,495
Cash and cash equivalents
Htm
1
1
Securities
175
175
Afs
6,495
175
Securities
1,508
LaR
1,508
3,996
Other receivables and miscellaneous assets
72
72
n/a
72
72
Derivatives hedge accounting
175
14
Total assets
20,292
4,971
AmC
4,971
4,971
Accounts payable, trade
124
n/a
124
124
Liabilities from finance leases
2,379
AmC
22,780
2,379
Liabilities to credit institutions
AmC
Commercial papers
16,406
16,406
AmC
15,653
15,653
Bonds
398
6,684
19,809
2,379
4
134
FVTOCI
1,557
6,569
669
138
902
4,860
Total
Miscellaneous liabilities
Liabilities resulting from
derivative financial
instruments
4
Liabilities to credit
Bonds and other
liabilities to the
capital market
Total
2024 and thereafter
2023
2022
2021
2020
2019
Million €
Maturities of contractual cash flows from financial liabilities as of December 31, 2018
Trade accounts payable are generally interest-free and due within
one year. As a result, the carrying amount of trade accounts payable
equals the sum of future cash flows.
Derivatives are included using their net cash flows, provided they
have negative fair values and therefore represent a liability. Derivatives
with positive fair values are assets and are therefore not taken into
account.
The interest and principal payments as well as other payments for
derivative financial instruments are relevant for the presentation of
the maturities of the contractual cash flows from financial liabilities.
Future cash flows are not discounted here.
27.2 Maturity analysis
18
22
50
1,647
Maturities of contractual cash flows from financial liabilities as of December 31, 2017
24,613
830
399
2,394
20,990
11,045
33
111
979
9,922
1,470
BASF promptly recognizes any risks from cash flow fluctuations as
part of liquidity planning. BASF has ready access to sufficient liquid
funds from the ongoing commercial paper program and confirmed
lines of credit from banks.
23
175
1,207
2,400
25
41
139
2,195
1,482
30
22
181
1,249
65
Million €
Liquidity risks
financial obligations stemming from contingent liabilities not to be
recognized represents the maximum default risk for BASF.
90
8
(12)
Precious metals
Crude oil, oil
products and
natural gas
December 31, 2017
Exposure Value at Risk
December 31, 2018
Exposure Value at Risk
Exposure to commodity derivatives
Million €
BASF uses value at risk in conjunction with other risk management
tools. Besides value at risk, BASF sets volume-based limits as well
as exposure and stop-loss limits.
calculation for precious metals is based on a confidence interval of
99%. BASF uses the variance-covariance approach.
BASF performs value-at-risk analyses for all commodity derivatives
and precious metals trading positions. Using the value-at-risk
analysis, we continually quantify market risk and forecast the
maximum possible loss within a given confidence interval over a
defined period. The value-at-risk calculation is based on a confidence
interval of 95% and a holding period of one day. The value-at-risk
By holding commodity derivatives and precious metal trading
positions, BASF is exposed to price risks. The valuation of
commodity derivatives and precious metal trading positions at fair
value means that adverse changes in market prices could negatively
affect the earnings and equity of BASF.
In connection with carbon emissions trading, various types of
carbon certificates are purchased and sold using forward contracts.
The goal of these transactions is to benefit from market price
differences. These deals are settled by physical delivery. There were
no deals outstanding as of December 31, 2018, or as of Decem-
ber 31, 2017.
In addition, BASF holds limited unhedged precious metal and oil
product positions, which can also include derivatives, for trading on
its own account. The value of these positions is exposed to market
price volatility and is subject to constant monitoring.
· The Catalysts division enters into both short-term and long-term
purchase contracts with precious metal producers. It also buys
precious metals on spot markets from various business partners.
The price risk from precious metals purchased to be sold on to
third parties, or for use in the production of catalysts, is hedged
using derivative instruments. This is mainly performed using
forward contracts, which are settled by either entering into
offsetting contracts or by delivering the precious metals.
-
risks.
- In the discontinued business, margin risks arise in volatile markets
when purchase and sales contracts are priced differently.
Corresponding oil and gas derivatives are used to hedge these
BASF uses commodity derivatives to hedge risks from the volatil-
ity of raw materials prices. These are primarily options and swaps
on crude oil, oil products and natural gas.
Commodity price risks: Some of BASF's divisions are exposed to
strong fluctuations in raw materials prices. These result primarily
from raw materials (for example naphtha, propylene, benzene,
lauric oils, cyclohexane, methanol, natural gas, butadiene, LPG
condensate and ammonia) as well as from precious metals. BASF
takes the following measures to reduce price risks associated with
the purchase of raw materials:
(175)
(103) 3,337
4,183
(175)
3,337
1
112
1
36
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
252
BASF Report 2018
Default and credit risks arise when customers and debtors do not
fulfill their contractual obligations. BASF regularly analyzes the
creditworthiness of the counterparties and grants credit limits on the
basis of this analysis. Due to the global activities and diversified
customer structure of the BASF Group, there is no significant
concentration of default risk. The carrying amount of all receivables,
loans and interest-bearing securities plus the nominal value of
Default and credit risk
For more information on financial risks and BASF's risk management, see the Report on
Opportunities and Risks in the Management's Report from page 123 onward
For more information on credit risks, see Note 18 from page 235 onward
The exposure corresponds to the net amount of all long and short
positions of the respective commodity category.
126
10
150
55
0
0
1
50
Total
Agricultural
commodities
Emission certificates
2
3
2018
institutions
2020
10,665
AC
10,665
10,665
25
n/a
25
25
12
22
34
FVTPL
252
453
of which fair
value level 35
of which fair
value level 24
of which fair
value level 13
Fair value
category in
accordance
with IFRS 92
application of
IFRS 7
Carrying
amount
scope of
Valuation
Accounts receivable, trade
Accounts receivable, trade
Derivatives no hedge accounting
Derivatives hedge accounting
Receivables from finance leases
Shareholdings¹
453
Total carrying
amount within
252
252
4
4
Securities
13
AC
13
13
Securities
85
85
FVTPL
55
FVTPL
FVTPL
85
Other receivables and miscellaneous assets
2019
AC
1,083
3,570
Other receivables and miscellaneous assets
92
93
n/a
93
93
251
85
Million €
1,083
The fair value of financial indebtedness is determined on the basis of
interbank interest rates. The difference between carrying amounts
and fair values results primarily from changes in market interest
rates.
1,219
2,158
82
8
541
1,527
2,421
80
70
34
2,237
4,553
1,578
180
698
2,097
Total
Liabilities resulting from
derivative financial
instruments
Liabilities to credit
institutions
Bonds and other
liabilities to the
capital market
Total
2023 and thereafter
2022
2021
Carrying amounts and fair values of financial instruments as of December 31, 2018
132
46
Miscellaneous liabilities
1,865
For trade accounts receivable, other receivables and miscellaneous
assets, cash and cash equivalents, as well as trade accounts
payable and other liabilities, the carrying amount approximates the
fair value.
1,397
27.3 Classes and categories of financial instruments
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
253
BASF Report 2018
23,193
4 Consolidated Financial Statements
2,102
113
38
2,066
50
861
225
9,234
10,598
18,179
2,379
533
278
In 2017, BASF SE transferred securities in the amount of €500 mil-
lion to BASF Pensionstreuhand e.V., Ludwigshafen am Rhein,
Germany. This transfer was not cash effective and therefore had no
effect on the statement of cash flows.
1 Contributions as of December 31, 2018 include contributions reclassified to the disposal group and therefore deviate from balance sheet values.
2 Includes additions from leasing contracts
In 2018, interest payments comprised interest payments received of
€162 million (2017: €161 million) and interest paid of €555 million
(2017: €570 million).
Total
134
352
1
9
8
124
Liabilities from finance leases
541
498
7
150
376
Other financing-related liabilities
Loan liabilities
(35)
1,058
Assets/liabilities from hedging transactions
115
131
427
2,966
19,472
65
303
(120)
(118)
(281)
22,915
58
131
3,086
19,590
Financial and similar liabilities
889
4
(7)
50
21,351
the oil and gas business disposal group (€219 million). As in the
previous year, cash and cash equivalents were not subject to any
utilization restrictions.
56
Statement of cash flows
For more information on the contribution of discontinued operations on BASF's Statement of Cash
Flows, see Note 2.5 from page 209 onward
For more information on cash flows from acquisitions and divestitures, see Note 2.4 from page 205
onward
Cash and cash equivalents in the amount of €2,519 million reported
in the statement of cash flows as of December 31, 2018 consist of
the balance sheet value (€2,300 million) and the value reclassified to
Payments made for intangible assets and property, plant and equip-
ment amounted to €3,894 million, €102 million lower than in the
previous year.
Cash flows from operating activities contained the following
payments:
Statement of cash flows
29 Statement of cash flows and capital structure
management
Reconciliation according to IAS 7
Million €
Other Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
58
Notes
Dec. 31, 2017
Non-cash-effective changes
Dec. 31, 2018¹
3,252
18,032
Financial indebtedness
409
393
Dividends received
Interest payments
fair value
Changes in
Other
effects
Currency
effects
Acquisitions/
cash flows
divestitures/
from financing changes in scope of
activities
consolidation
2,147
1,981
Income tax payments
Cash effective in
2017
2018
Million €
11
50
3 Corporate Governance
22,980
306
284
180
December 31, 2018
190
December 31, 2017
172
247
December 31, 2018
Other liabilities
Other receivables
December 31, 2017
29
42
71
78
75
75
69
91
77
432
101
734
73
1 To Our Shareholders
About This Report
266
BASF Report 2018
For more information on the members of the Board of Executive Directors and the Supervisory
Board, see Management and Supervisory Boards and Compensation Report from page 142 onward
For more information about defined benefit plants, the division of risk between Group companies,
see Provisions for pensions and similar obligations, from page 240 onward
For more information on other financial obligations in favor of joint ventures, see Note 25 from page
249 onward
For more information on subsidiaries, joint ventures and associated companies, see the BASF Group
list of shares held on page 211
There were no reportable related party transactions with members
of the Board of Executive Directors or the Supervisory Board and
their related parties in 2018.
As of December 31, 2018, the present value of the outstanding
minimum rental payments for an office building including a parking
area payable by BASF SE to BASF Pensionskasse WaG for the
nonterminable basic rental period to 2029 amounted to €52 million.
Obligations arising from purchase contracts with joint ventures
amounted to €3 million as of December 31, 2018 and €3 million as
of December 31, 2017.
There were obligations from guarantees and other financial
obligations at BASF in favor of nonconsolidated subsidiaries in the
amount of €6 million as of December 31, 2018 (December 31, 2017:
€5 million), and in favor of associated companies in the amount of
€17 million as of December 31, 2018 (December 31, 2017:
€23 million).
The balance of valuation allowances for trade accounts receivable
from associated companies decreased from €9 million as of Decem-
ber 31, 2017 to €8 million as of December 31, 2018.
The balance of valuation allowances for other receivables from
nonconsolidated subsidiaries increased from €74 million as of
December 31, 2017 to €76 million as of December 31, 2018. Of this
amount, €2 million was recognized as an expense in 2018 (2017:
€1 million).
The outstanding balances toward related parties were generally not
secured and settled in cash.
Both the increase in other receivables from nonconsolidated
subsidiaries and the decrease in other liabilities to joint ventures in
2018 were due mainly to other finance-related receivables and/or
liabilities.
Other receivables and liabilities primarily arose from financing
activities, from accounts used for cash pooling, outstanding dividend
payments, profit and loss transfer agreements, and other finance-
related and operating activities and transactions.
236
271
70
136
175
December 31, 2017
Sales to related parties
Notes
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
265
BASF Report 2018
Sales from joint ventures with BASF Group companies amounted to
€543 million in 2018, and €598 million in 2017. Sales from asso-
ciated companies with companies in the BASF Group amounted to
€626 million in 2018, and €481 million in 2017.
Sales and trade accounts receivable from and trade accounts
payable to related parties mainly included business with own
products and merchandise, agency and licensing businesses, and
other operating businesses.
Since the transfer of the leather chemicals business to the Stahl
group as of September 29, 2017, BASF holds a minority interest in
the parent company of the Stahl group, over which it can exercise
significant influence. Sales, trade accounts receivable and other
liabilities resulting from transactions with the Stahl group since then
are included in the tables below in the values for associated
companies for 2018 and 2017.
The following tables show the volume of business with related
parties that are included in the Consolidated Financial Statements at
amortized cost or accounted for using the equity method. The
values include sales, receivables, other receivables, liabilities and
other liabilities with respect to the disposal groups and/or discontin-
ued operations.
A related party is a natural person or legal entity that can exert
influence on the BASF Group or over which the BASF Group
exercises control, joint control or a significant influence. In particular,
related parties include nonconsolidated subsidiaries, joint ventures
and associated companies.
32 Related party transactions
For more information on the members of the Supervisory Board and Board of Executive Directors,
including their memberships on other boards, see page 142 onward
For more information on the compensation of members of the Board of Executive Directors, see the
Compensation Report from page 146 onward
The members of the Board of Executive Directors were granted
210,228 option rights under the long-term incentive (LTI) program in
2018. The market valuation of the option rights of active and former
members of the Board of Executive Directors resulted in income
totaling €28.5 million in 2018 (2017: €5.8 million).
Million €
Nonconsolidated subsidiaries
Joint ventures
Associated companies
Accounts payable, trade
December 31, 2018
December 31, 2017
Accounts receivable, trade
December 31, 2018
307
380
379
583
530
2017
2 Management's Report
2018
Associated companies
Joint ventures
Nonconsolidated subsidiaries
Million €
Other receivables from/liabilities to related parties
Associated companies
Joint ventures
Nonconsolidated subsidiaries
Trade accounts receivable from/trade accounts payable to related parties
Million €
413
Until December 31, 2017, performance-related compensation of the
Board of Executive Directors was based on the return on assets
adjusted for special effects, as well as the performance of the Board
of Executive Directors as a whole. Return on assets corresponds to
income before income taxes plus interest expenses as a percentage
of average assets.
3 Corporate Governance
5 Supplementary Information Oil and Gas Business
Supplementary
Information on the
5 Supplementary Information Oil and Gas Business 6 Overviews
Supplementary Information on the Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
270
Supplementary Information on the
Oil and Gas Business
Business
Oil and Gas
Supple-
mentary
Information
5
Chapter 5 pages 269-278
BASF Report 2018
On January 31, 2019, BASF and Solenis concluded the transfer of
BASF's paper and water chemicals business to Solenis that had
been announced in May 2018. BASF gained a share of 49% in
Solenis as of February 1, 2019. 51% of the shares will be held by
funds managed by Clayton, Dubilier & Rice and senior management.
The transaction covered production facilities and plants pertaining
to BASF's paper and water chemicals business in Bradford and
Grimsby, United Kingdom, Suffolk, Virginia, Altamira, Mexico,
Ankleshwar, India and Kwinana, Australia. The BASF Paper and
Water Chemicals business unit's production plants that are tightly
integrated in the Verbund in Ludwigshafen, Germany, and in Nanjing,
China, will remain with BASF, supplying the joint company with
products and raw materials based on medium and long-term supply
agreements. BASF's paper coating chemicals portfolio was not part
of the transaction. As of the closing of the transaction, BASF's share
of Solenis' income after taxes will be accounted for using the equity
method due to BASF's significant influence, and included in EBIT of
the BASF Group, presented in Other.
35 Non-adjusting post-balance sheet date events
For more information, see basf.com/en/corporate governance
The annual Declaration of Conformity with the German Corporate
Governance Code according to section 161 AktG was signed by the
Board of Executive Directors and the Supervisory Board of BASF SE
in December 2018 and is published online.
Oil and Gas Business
(Unaudited)
Declaration pursuant to section 161 of the German Stock
Corporation Act (AktG)
values presented should not be interpreted as a prediction of future
cash flows, nor in their sum as the current value of the company.
According to the requirements in Topic 932, regions with more than
a 15% share of total reserves must be shown separately. Therefore,
the regions in the supplementary information differ from those pre-
sented in the Consolidated Financial Statements. Aside from the
countries Germany and Russia, this includes the regions: Rest of
Europe; North Africa/Middle East; as well as South America.
303
270
BASF Report 2018
The tables on the following pages show the company's estimated
proven and proven developed reserves as of December 31, 2017,
and 2018, as well as changes attributable to production or other
factors.
Proven oil and gas reserves are the volumes of crude oil, natural gas
and condensate that, according to the geological, engineering and
economic conditions prevailing at the balance sheet date, can be
produced in future years. Accordingly, reserve estimates based on
this data could be materially different from the volumes that are ulti-
mately recovered. To reduce uncertainties, BASF works together
with independent, internationally recognized reserve auditors to
perform recurring reserves audits of its major crude oil and natural
gas fields.
Oil and gas reserves
Brazil
Argentina
Abu Dhabi
Libya
Exploration
United Kingdom,
the Netherlands,
Norway,
Denmark
Exploration &
Production
South America
North Africa/Middle East
Rest of Europe
Region
According to Topic 932, the current economic conditions were con-
sidered in the determination of oil and gas reserves as well as the
standardized calculation of discounted net cash flows. The prices
used are valued at the average price calculated from the prices on
the first day of the month for the past 12 months. Expected proven
reserves and the resulting future net cash flows can vary significantly
from the current estimates. Furthermore, the realized prices and
costs and the actual cash flows resulting therefrom may differ from
the estimate in amount and distribution over time. Therefore, the
The following provides supplementary information on the Exploration
& Production business of the discontinued oil and gas business. In
the absence of detailed disclosure rules in this area under the Inter-
national Financial Reporting Standards (IFRS), the presentation is
based on the FASB standard Extractive Activities - Oil and Gas
(Topic 932), which is a further development of SFAS 69. In the follow-
ing sections, the determination of the amounts complies with the
metrics set out by IFRS that underlie the BASF Group Consolidated
Financial Statements: Operating income from oil and gas-producing The regions include the following countries with operating activities:
activities; Period expenditures for acquisition, exploration and devel-
opment of oil and gas deposits; Capitalized costs relating to oil and
gas producing activities; and Capitalized exploration drilling: sus-
pended well costs. Despite its presentation as a discontinued oper-
ation, the main accounting and consolidation methods for the oil and
gas business are unchanged compared with the previous year. The
definition of companies accounted for using the equity method also
follows the approach of the Consolidated Financial Statements. The
cash flow from the Yuzhno Russkoye project is shown in the fully
consolidated company responsible for marketing the gas.
Furthermore, different prices, costs and volume estimates are used
for operational decisions as well as for the preparation of the Consol-
idated Financial Statements. Therefore, the reserves and net cash
flows shown are not comparable with statements and values in the
Consolidated Financial Statements.
34 Declaration of Conformity with the German
Corporate Governance Code
Notes
6 Overviews
2018
The line item annual audit relates to expenses for the audit of the
Consolidated Financial Statements of the BASF Group, the legally
required financial statements of BASF SE and of the subsidiaries
and joint operations included in the Consolidated Financial
Statements as well as the voluntary audit of subgroups and
combined financial statements. Tax consultation services refer
primarily to fees for completion of unfinished tax returns. Fees for
other services primarily include project-related audits in connection
with regulatory demands as well as other confirmation services.
The services provided by the external auditor mainly include services
for the annual audit, and to a lesser extent, confirmation services,
tax consultation services and other services.
of which domestic
Total
Other services
of which domestic
Tax consultation services.
of which domestic
Audit-related services
of which domestic
Annual audit
Million €
Services provided by the external auditor
BASF Group companies used the following services from KPMG:
Services provided by the external auditor
33
Notes
6 Overviews
2017
21.1
18.6
8.2
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
267
BASF Report 2018
22.1
4 Consolidated Financial Statements
19.3
0.1
0.1
0.2
0.3
0.1
0.5
0.4
0.7
6.4
0.1
The annual variable compensation in effect until the end of 2017 was
replaced as of 2018 with a forward-looking performance bonus that
is geared to sustainable corporate development and has a three-year
deferral component. The performance bonus is based on the
performance of the Board of Executive Directors as a whole and the
return on capital employed (ROCE) of the BASF Group. Subject to
certain conditions, ROCE is adjusted for special items from acquisi-
tions and divestitures. The conditions for the adjustment of ROCE
were not met in 2018.
268
144.3
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
262
BASF Report 2018
For more information on BASF's financing policy, see the Management's Report from page 54
onward
BASF strives to maintain a solid "A" rating, which ensures
unrestricted access to financial and capital markets.
stable
S-1
A
stable
A-1
A
stable
P-1
A1
Outlook
Current financial
indebtedness
4 Consolidated Financial Statements
cial indebtedness
5 Supplementary Information Oil and Gas Business
Notes
6.25
10.5
€
2017
2018
LTI program of the year
Correlation BASF share price: MSCI Chemicals
Risk-free interest rate
Volatility BASF share
Volatility MSCI Chemicals
Dividend yield
Fair value
Fair value of options and parameters used as of December 31, 2018
The models used in the valuation of the option plans are based on
the arbitrage-free valuation model according to Black-Scholes. The
fair values of the options are determined using the binomial model.
The 2011 to 2017 programs were structured in a similar way to the
2018 LTI program.
price on the date of exercise less the nominal value of the BASF
share. From the 2013 LTI program onward, right B may only be
exercised if the price of the BASF share equals at least the base
price. The options of the 2018 LTI program were granted as of
July 1, 2018, and may be exercised following a two-year vesting
period, between July 1, 2020, and June 30, 2026. During the
exercise period, there are certain times (closed periods) during
which the options may not be exercised. Each option can only be
exercised in full. This means that one of the thresholds must be
exceeded. If the other threshold is not exceeded and the option is
exercised, the other option right lapses. A participant's maximum
gain from exercising an option is limited to five times the original
individual investment starting with the 2013 LTI program. The
maximum gain from exercising an option is limited to 10 times the
original individual investment for programs from previous years.
Option rights are nontransferable and are forfeited if the option
holders no longer work for the BASF Group or have sold part of their
individual investment before the expiry of the two-year vesting
period. They remain valid in the case of retirement. For the members
of the Board of Executive Directors, the long-term orientation of the
program is significantly strengthened compared with the conditions
applying to the other participants. The members of the Board of
Executive Directors are required to participate in the LTI program
with at least 10% of their actual annual variable compensation. In
view of this binding personal investment (in the form of BASF
shares), an extended holding period of four years applies. Members
of the Board of Executive Directors may only exercise their options
four years after they have been granted at the earliest (vesting
period).
The participant receives four option rights per invested share. Each
option consists of two parts, right A and right B, which may be
exercised if defined thresholds have been met: The threshold of right
A is met if the price of the BASF share has increased by more than
30% in comparison with the base price on the option grant date
(absolute threshold). The value of right A is the difference between
the market price of BASF shares on the exercise date and the base
price; it is limited to 100% of the base price. If the cumulative
percentage performance of BASF shares exceeds the percentage
performance of the MSCI World Chemicals Index SM (MSCI
Chemicals), right B may be exercised (relative threshold). The value
of right B is the base price of the option multiplied by twice the
percentage by which the BASF share outperforms the MSCI
Chemicals Index on the exercise date. It is limited to the closing
Participation in the LTI program is voluntary. In order to take part in
the program, a participant must make a personal investment: A
participant must hold BASF shares amounting to 10% to 30% of his
or her individual variable compensation for a two-year period from
the granting of the option (holding period). The number of shares to
be held is determined by the amount of variable compensation and
the volume-weighted average market price for BASF shares on the
first trading day after the Annual Shareholders' Meeting, which was
€85.45 on May 7, 2018.
The BASF Group continued its share price-based compen-
sation program (the long-term incentive (LTI) program) in 2018.
The program has been in place since 1999 and approximately
1,200 people, in particular the Board of Executive Directors and
senior executives, are currently eligible to participate. It provides
for the granting of virtual options, which are settled in cash when
exercised.
Share price-based compensation program
30 Share price-based compensation program
and BASF incentive share program
6 Overviews
Noncurrent finan-
Scope
Standard & Poor's
For more information on receivables and miscellaneous assets, see Note 18 from page 235 onward
For more information on liabilities, see Note 24 from page 246 onward
The assets/liabilities from hedging transactions form part of the
balance sheet item derivatives with positive or negative fair values
and include only those transactions which hedge risks arising from
financial indebtedness and financing-related liabilities secured by
micro hedges.
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
261
BASF Report 2018
Other financing-related liabilities primarily comprise liabilities from
accounts used for cash pooling with BASF companies not included
in the Consolidated Financial Statements. They are reported in
miscellaneous liabilities within the balance sheet item other liabilities
that qualify as financial instruments.
Loan liabilities do not contain any interest components.
The reconciliation breaks down the changes in financial and similar
liabilities and their hedging transactions into cash-effective and
non-cash-effective changes. The cash-effective changes presented
above correspond to the figures in cash flows from financing
activities.
Payments of €107 million were received for divestitures in 2018
(2017: €177 million).
Cash flows from investing activities included €7,362 million in pay-
ments made for acquisitions (2017: €150 million).
1 Total compensation of former members of the Board of Executive Directors includes compensation for Dr. Kurt Bock before pension benefits in the amount of approximately €1.1 million.
2 Compensation for Dr. Harald Schwager and Margret Suckale for their active membership on the Board of Executive Directors in 2017 is included under total compensation of former members of the Board of Executive Directors
in the amount of approximately €1.0 million each.
In 2018, the amount of €134 million was taken from plan assets of
BASF Pensionstreuhand e.V., Ludwigshafen am Rhein, Germany,
for the reimbursement of pension benefits paid pertaining to 2017.
For more information on the Statement of Cash Flows, see the Management's Report from page 55
onward
Ratings as of December 31, 2018
Capital structure management
The aim of capital structure management is to maintain the financial
flexibility needed to further develop BASF's business portfolio and
take advantage of strategic opportunities. The objectives of the
company's financing policy are to ensure solvency, limit financial
risks and optimize the cost of capital.
Moody's
Ratings as of December 31, 2017
stable
S-1
A
stable
A-1
A
stable
%
P-1
Outlook
Current financial
indebtedness
Noncurrent finan-
cial indebtedness
Scope
Standard & Poor's
Moody's
BASF prefers to access external financing on the capital markets. A
commercial paper program is used for short-term financing, while
corporate bonds are used for financing in the medium and long
term. These are issued in euros and other currencies with different
maturities. The goal is to create a balanced maturity profile, achieve
a diverse range of investors and optimize our debt capital financing
conditions.
The equity of the BASF Group as reported in the balance sheet
amounted to €36,109 million as of December 31, 2018 (Decem-
ber 31, 2017: €34,756 million); the equity ratio was 41.7% on
December 31, 2018 (December 31, 2017: 44.1%).
Capital structure management focuses on meeting the requirements
needed to ensure unrestricted access to the capital market and
a solid "A" rating. The capital structure is managed using selected
financial ratios, such as dynamic debt ratios, as part of the company's
financial planning.
A1
5.3
BASF currently has the following ratings, which were were most
recently confirmed by Moody's on February 15, 2019, by Standard &
Poor's on January 11, 2019, and by Scope Ratings on Decem-
ber 11, 2018.
%
Compensation of the Board of Executive Directors and Supervisory Board
31
Notes
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
2 Management's Report
1 To Our Shareholders
About This Report
264
BASF Report 2018
Personnel expenses of €32 million were recorded in 2018 for BASF's
"plus" incentive share program (2017: €28 million).
The fair value of the free shares to be granted is recognized as an
expense with a corresponding increase in capital reserves over the
term of the program.
The free shares to be provided by the company are measured at the
fair value on the grant date. Fair value is determined on the basis of
the BASF share price, taking into account the present value of
dividends, which are not paid during the term of the program. The
weighted-average fair value on the grant date amounted to €85.45
for the 2018 program, and €86.02 for the 2017 program.
2,811.447
2,927.843
(129,630)
(99,334)
(479,111)
Compensation of the Board of Executive Directors and Supervisory Board
(477,395)
Million €
2018
7.6
5.3
159.5
(4.4)
3.3
3.3
27.5
Total compensation of former members of the Board of Executive Directors and their surviving dependents¹.2
Pension provisions for former members of the Board of Executive Directors and their surviving dependents.
Guarantees assumed for members of the Board of Executive Directors and the Supervisory Board
Compensation of the Supervisory Board
Service costs for members of the Board of Executive Directors
Total compensation of the Board of Executive Directors
Fair value of options granted to the Board of Executive Directors in the fiscal year as of grant date
6.3
18.8
2.7
4.5
14.3
Non-performance-related and performance-related cash compensation of the Board of Executive Directors
2017
24.8
570,465
7.0
2,849,723
1 To Our Shareholders
About This Report
263
BASF Report 2018
As a result of a resolution by the Board of Executive Directors in
2002 to settle option rights in cash, all outstanding option rights
under the 2011 to 2018 LTI programs were valued at fair value as of
December 31, 2018. A proportionate provision is recognized for
programs in the vesting period. The LTI provision decreased from
€347 million as of December 31, 2017, to €56 million as of Decem-
ber 31, 2018, due to lower fair values of the outstanding option
rights. The utilization of provisions amounted to €22 million in 2018
(2017: €49 million). Income arising from the release of provisions
amounted to €268 million in 2018 (2017: €68 million). Of this
The number of options granted amounted to 2,010,720 in 2018
(2017: 1,461,113).
Volatility was determined on the basis of the monthly closing prices
over a historical period corresponding to the remaining term of the
options.
determined/used.
The stated fair values and the valuation parameters relate to the
2018 and 2017 LTI programs. The fair value calculation was based
on the assumption that options will be exercised in a manner
dependent on their potential gains. For the programs from preceding
years, corresponding fair values and valuation parameters were
2 Management's Report
75.24
14.14
15.97
%
23.22
25.32
0.00
693,125
%
(0.12)
78.27
3 Corporate Governance
%
5 Supplementary Information Oil and Gas Business
2017
As of December 31
Lapsed entitlements
Bonus shares issued
2018
Newly acquired entitlements
As of January 1
2,811,447
Shares
The right to receive free BASF shares lapses if a participant sells the
individual investment in BASF shares, if the participant stops working
for a Group company or one year after retirement. The number of
free shares to be granted has developed as follows:
Number of free shares to be granted
Employees who participate in BASF's "plus" incentive share program
acquire shares in BASF from their variable compensation. For every
10 BASF shares purchased in the program, a participant receives
one BASF share at no cost after one, three, five, seven and ten years
of holding these shares. As a rule, the first and second block of ten
shares entitles the participant to receive one BASF share at no extra
cost in each of the next 10 years.
The "plus" incentive share program was introduced in 1999 and is
currently available to employees in Germany, other European
countries and Mexico. Simultaneous participation in both the "plus"
program and the LTI program is not permitted.
BASF incentive share program
The exercisable options had no intrinsic value as of December 31,
2018; their total intrinsic value as of December 31, 2017 was
€145 million.
amount, €6 million was attributable to the disposal group for the
discontinued oil and gas business in 2018 (2017: €1 million).
Notes
6 Overviews
4 Consolidated Financial Statements
Exploration and technology expenditures
Acquisition expenditures
Fully consolidated companies
For unproven reserves
For proven reserves
Total
Group
Rest of
Europe
Russia
North Africa/
Middle East
South
America
134
1
135
Germany
Million €
For proven reserves
Total expenditures for equity-accounted companies
4 Consolidated Financial Statements
3 Corporate Governance
5 Supplementary Information Oil and Gas Business 6 Overviews
Supplementary Information on the Oil and Gas Business
1
2 Management's Report
Period expenditures for acquisition, exploration and
development of oil and gas deposits
Period expenditures include all amounts incurred in connection with
the acquisition, exploration or development of oil and gas deposits,
regardless of whether these were capitalized or expensed.
2018
Million €
Fully consolidated companies
Acquisition expenditures
For unproven reserves
Exploration and technology expenditures
Development expenditures
Total expenditures
2017
1
1,146
134
16
126
Germany
Rest of
Europe
Russia
North Africa/
Middle East
South
America
Total
Group
49
12
33
1 To Our Shareholders
31
131
Development expenditures
68
134
42
149
11
83
9
10
78
191
120
490
64
5
141
820
131
573
73
220
About This Report
24
BASF Report 2018
Production costs
118
231
33
10
158
2,201
550
6
82
15
22
149
Depreciation, amortization and impairments
Exploration expenses and technology
439
50
50
67
Sales natural gas
57
298
263
438
1,066
Local duties (royalties, export, etc.)
47
79
126
Net revenue (less duties)
269
1,064
379
101
587
20
10
18
94
236
Operating income after taxes
32
101
222
(18)
172
509
Net income of equity-accounted companies
79
49
4
132
64
273
47
Income taxes
154
872
Other
(1)
16
25
8
(163)
(115)
Operating income before taxes
45
148
286
266
745
13
645
1,530
3
132
412
879
Equipment and miscellaneous
888
6
301
894
1,951
6,173
1,530
272
2,169
12,095
Total gross assets
34
Unproven oil and gas reserves
Total
Group
10,322
97
1,538
2017
Million €
Fully consolidated companies
Proven oil and gas reserves
Germany
Rest of
Europe
Russia
North Africa/
Middle East
South
America
1,029
5,866
140
1,757
Accumulated depreciation, amortization and impairments
(1,436)
(2,487)
(391)
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
Supplementary Information on the Oil and Gas Business
6 Overviews
Capitalized exploration drilling: suspended well costs
Exploratory drilling costs are capitalized until the drilling of the well is
complete. If hydrocarbon resources are found whose commercial
development is possible, the costs continue to be capitalized as
construction in progress, subject to further appraisal activity that
may include the drilling of further wells. Management evaluates all
such capitalized costs at least once a year from both a technical and
economic perspective to confirm the continued intent to develop or
otherwise extract value from the discovery. If this is no longer the
case, the relevant costs are written off. If proven reserves of oil or
natural gas are determined and development is sanctioned, how-
ever, the relevant expenses are transferred within property, plant
and equipment to machinery and technical equipment. Impairments
for unsuccessful exploration wells are recognized in exploration
expenses.
The following table indicates the changes in capitalized exploration
drilling.
The last row shows the year-end value for equity-accounted compa-
nies.
Capitalized exploration drilling
Million €
Fully consolidated companies
1,261
As of January 1
About This Report
1,144
275
1,534
(195)
(1,193)
(5,702)
Total net assets
515
3,686
1,139
77
976
6,393
Investments in equity-accounted companies
307
1,130
97
40
BASF Report 2018
75
297
6,308
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Supplementary Information on the Oil and Gas Business
Capitalized costs relating to oil and gas producing activities
Capitalized costs represent total expenditures on proven and
unproven oil and gas deposits including the related accumulated
depreciation and amortization.
2018
2 Management's Report
Million €
Proven oil and gas reserves.
Germany
Rest of
Europe
Russia
North Africa/
Middle East
South
America
Fully consolidated companies
1 To Our Shareholders
About This Report
274
134
914
Total expenditures
63
694
87
36
165
1,045
Total expenditures for equity-accounted companies
21
18
(5)
34
BASF Report 2018
Total
Group
1,050
6,783
2,250
13,086
Accumulated depreciation, amortization and impairments
(1,505)
(3,313)
(388)
(209)
(1,363)
(6,778)
Total net assets
543
3,685
982
211
887
420
Investments in equity-accounted companies
1,370
2,048
1,370
151
1,892
11,246
Unproven oil and gas reserves
55
211
269
358
893
Equipment and miscellaneous
943
4
947
Total gross assets
6,998
80
82
116
of which equity-accounted companies
Gas 2017
6
20
15
7
Proven developed reserves as of December 31
2
8
34
136
218
82
8
50
of which equity-accounted companies
Proven reserves as of December 31
Production
184
86
7
440
89
4
29
49
3
3
88
1
Revisions and other changes
Extensions and discoveries
Purchase/sale of reserves
478
82
2
4
Total
Group
Of which
at equity
Developed and undeveloped gas reserves as of January 1, in million barrels of oil equivalent (MMBOE)
23
111
885
9
154
1,182
520
Revisions and other changes
(1)
21
97
(1)
South
America
127
North Africa/
Middle East
Rest of
Europe
76
82
Additions to exploration drilling of the year
Capitalized exploration drilling charged to expense
Reclassification of successful exploration drilling
33
111
72
8
390
72
4
68
72
72
Consolidated and equity-accounted companies
Germany
Russia
10
36
Of which
at equity
8
8
3
125
125
125
138
3
77
24
117
57
17
119
13
179
8
(1)
Russia
North Africa/
Middle East
South
America
Total
Group
Of which
at equity
19
124
907
8
140
1,198
466
1
171
1,126
7
124
1,393
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Oil 2017
5 Supplementary Information Oil and Gas Business
Supplementary Information on the Oil and Gas Business
6 Overviews
Consolidated and equity-accounted companies
Germany
Rest of
Europe
Russia
North Africa/
Middle East
South
America
Total
Group
271
Proven developed and undeveloped oil reserves as of January 1, in million barrels (MMbbl)
221
6
675
7
661
7
675
675
17
103
536
6
104
766
221
5
210
221
50
126
4
18
4
56
50
129
166
687
966
Other
(9)
17
8
(24)
(4)
4
91
7
7
306
1,409
512
89
489
2,805
113
256
30
8
118
525
Exploration expenses and technology
Depreciation, amortization and impairments
7
58
Operating income before taxes
91
417
440
32
25
25
2017
Million €
Fully consolidated companies
Sales crude oil (including condensate and LPG)
Germany
Rest of
Europe
Russia
North Africa/
Middle East
South
America
Total
Group
249
766
(7)
143
686
10
62
179
1,189
Income taxes
26
266
95
52
64
503
Operating income after taxes
Net income of equity-accounted companies
65
151
345
115
3
89
1,326
140
1,198
466
7
451
8
8
466
19
55
622
8
114
818
466
907
124
19
4
Extensions and discoveries
Purchase/sale of reserves
Production
Proven reserves as of December 31
of which equity-accounted companies
Proven developed reserves as of December 31
of which equity-accounted companies
BASF Report 2018
3
12
75
24
114
57
305
16
291
8
Russia
North Africa/
Middle East
South
America
Total
Group
289
1,025
121
89
98
1,622
71
384
391
480
Rest of
Europe
54
Germany
Local duties (royalties, export, etc.)
Net revenue (less duties)
305
305
272
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Supplementary Information on the Oil and Gas Business
Operating income from oil and gas-producing activities
Operating income represents only those revenues and expenses
directly associated with oil, condensate and gas production. This
partly results in significant differences to the figures shown for the
discontinued oil and gas business. Significant deviations exist in
sales revenues that do not include sales from merchandise and
services as well as the financing and corporate overhead costs
not included there. The depreciation and amortization that was
suspended in BASF's Consolidated Financial Statements from the
date of classification as a discontinued operation is also taken into
account. Income taxes were computed using currently applicable
local income tax rates.
2018
Million €
Fully consolidated companies
Sales crude oil (including condensate and LPG)
Sales natural gas
Production costs
2018
134
303
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
Ten-Year Summary
About This Report
Million €
2009
2010
2011
2012²
20133
2014
6 Overviews
Ten-Year Summary
285
Glossary
Overviews
1,024
5,438
134
(27)
26
135
134
134
278
Chapter 6 pages 279-289
Ten-Year Summary
280
Trademarks
284
6
2015
2016
2017
2018
7,626
6,248
6,275
7,5871
6,033
3,079
7,373
8,970
5,977
6,600
7,203
5,548
5,395
6,8821
5,288
7,160
176
6,742
7,761
Sales and earnings
Sales
Income from operations (EBIT)
Income before income taxes
50,693
63,873
73,497
72,129
73,973
74,326
70,449
57,550
61,2231
62,675
3,677
8,586
Income after taxes from continuing operations
2,260
170
1,147
4,470
82
(151)
(868)
(488)
104
(104)
(1,893)
(94)
242
1,410
474
205
(282)
2,131
1,020
68
180
1
65
114
180
180
Germany
Rest of
Europe
North Africa/
Russia
Middle East
South
America
Total
Group
Of which
at equity
(74)
2,257
143
46
(61)
(1,779)
(145)
(227)
41
(2,171)
(163)
115
239
135
140
629
131
(1)
(1)
(44)
1,808
(247)
(27)
973
248
90
105
1,462
72
67
652
79
134
932
7
(41)
286
(278)
(187)
5,752
5,592
Income after taxes from discontinued operations
2,594
2,631
2,770
3,600
3,691
3,586
2,618
3,155
At year-end
Annual average
Personnel expenses
104,779
103,612
109,140
111,141
Number of employees
2,667
2,614
3,750
6,369
5,742
4,377
4,028
5,040
Depreciation and amortization of property, plant and equipment and intangible assets
of which property, plant and equipment
3,711
3,370
3,407
3,267
3,272
3,417
4,401
4,251
4,202
110,782
104,043
110,403
109,969
10,659
1,849
1,884
1,953
1,863
1,843¹
2,028
Research and development expenses
1,398
1,492
1,605
1,732
1 Figures for 2017 were restated with the presentation of the oil and gas activities as discontinued operations. For more information, see the Consolidated Financial Statements from page 200 onward.
2 We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
3 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
BASF Report 2018
280
10,610
6,428
10,165
9,224
112,206
111,844
113,292
112,435
112,644
113,249
113,830
111,975
115,490
122,404
114,333
118,371
7,107
8,228
8,576
8,963
9,285
9,982
4,150
4,084
3,294
5,155
3,987
4,056
6,078
4,707
Income from operations before depreciation and amortization (EBITDA)
4,792
7,388
11,993
10,009
10,432
11,043
10,649
10,526
11,131
4,819
6,188
4,557
760
829
Income after taxes
1,655
5,074
6,603
5,067
5,113
5,492
4,301
4,255
6,352
4,979
Net income
1,410
10,765¹
9,166
EBIT before special items
4,852
825
Capital expenditures, depreciation and amortization
Additions to property, plant and equipment and intangible assets
5,972
5,304
3,646
5,263
7,726
7,285
6,013
7,258
4,364
10,735
of which property, plant and equipment
4,126
2,9021
3,199
1,136
1,368
8,138
8,447
6,647
7,077
7,357
6,739
6,309
7,645¹
6,353
EBIT after cost of capital
(226)
3,500
2,551
1,164
1,768
194
914
253
2,859
393
1,196
9,036
767
(36)
297
5,460
2,601
282
3,284
587
286
1,440
2,859
140
1,737
250
3,014
27,419
5,890
1,540
4,683
3,278
921
1,055
11,477
2,109
28
1,823
1,459
3,285
311
6,906
253
914
5,752
180
1,538
9,543
6,556
3,476
3,362
24,475
3,561
1,486
4,767
1,786
1,173
1,562
10,774
1,426
(22)
Future income taxes
2,562
Future production/development costs
Of which
at equity
65
114
180
180
Million €
Consolidated and equity-accounted companies
Rest of
Germany
Russia
Europe
North Africa/
Middle East
South
Total
America
Group
Future revenues
2,589
4,599
8,243
2018
2017
Wells for which drilling is not complete
10
4
Wells capitalized less than one year
Fully consolidated companies
32
Wells capitalized more than one year
269
264
Total
311
303
35
Capitalized exploration drilling
Million €
The following table provides an overview of the capitalization period,
amounts capitalized for exploration drilling, and the number of sus-
pended exploration wells.
As of December 31
411
46
32
(25)
(34)
(20)
(75)
7
(31)
311
303
Equity-accounted companies as of December 31
123
164
Translation effect
Number of exploration wells in construction in progress
29
29
31
10% discount rate
Standardized measure of discounted future net cash flows
of which equity-accounted companies
Standardized measure of discounted future net cash flows 2017
5 Supplementary Information Oil and Gas Business
Supplementary Information on the Oil and Gas Business
6 Overviews
Germany
Rest of
Europe
Russia
North Africa/
Middle East
South
America
Total
Group
Of which
at equity
1,818
Future net cash flows, not discounted
10,197
Future income taxes
Future revenues
Number of exploration wells in construction in progress
at equity-accounted companies as of December 31
20
23
BASF Report 2018
Standardized measure of discounted future net cash flows
relating to proven oil and gas reserves
The following information was determined based on the provisions
of the standard Extractive Activities - Oil and Gas (Topic 932) pub-
lished by FASB. Based on this, a standardized measure of dis-
counted future net cash flows with the relevant revenues, costs and
income tax rates is to be made. The proven reserves are valued at
the average price calculated from the prices on the first day of the
month for the past business year. The values thus determined are
discounted at a 10% annual discount rate.
276
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Standardized measure of discounted future net cash flows 2018
Million €
Consolidated and equity-accounted companies
Future production/development costs
966
2,089
491
239
846
775
811
(123)
2,548
(110)
619
12
21
62
(694)
191
122
12
(2,526)
(374)
(159)
North Africa/
Middle East
South
America
Total
Group
Of which
at equity
170
1,808
2,260
176
1,024
5,438
134
(192)
(1,211)
(590)
(2)
(321)
22
59
(871)
97
(700)
(703)
12
340
265
154
122
893
144
(1)
(1)
286
1,440
(146)
Russia
254
34
525
94
13
140
831
48
(30)
(439)
(24)
7
30
(456)
(29)
34
34
(34)
Rest of
Europe
Germany
6 Overviews
170
1,808
2,260
176
1,024
5,438
134
of which equity-accounted companies
(27)
26
135
134
Rest of
Europe
BASF Report 2018
277
Standardized measure of discounted future net cash flows
About This Report
(1)
285
6,113
2,002
Future net cash flows, not discounted
74
2,187
3,804
214
1,309
7,588
133
10% discount rate
(96)
379
1,544
38
2,150
2017
1 To Our Shareholders
3 Corporate Governance
As of January 1
Sales of oil and gas produced, net of production costs in the current period
Net changes in prices and production costs at balance sheet date
Net changes from extensions, discoveries and improved recovery, less related costs
Revisions of previous reserves estimates
Investments in the period
Changes in estimated investments in future periods
Purchase/sale of reserves
Net change in income taxes
Accretion of discount
Other
Standardized measure of discounted future net cash flows as of December 31
of which equity-accounted companies
BASF Report 2018
5 Supplementary Information Oil and Gas Business
Supplementary Information on the Oil and Gas Business
Consolidated and equity-accounted companies
2 Management's Report
Summary of changes in standardized measure of discounted future net cash flows 2017
Million €
Standardized measure of discounted future net cash flows as of December 31
4 Consolidated Financial Statements
Summary of changes in standardized measure of discounted future net cash flows 2018
Million €
Consolidated and equity-accounted companies
As of January 1
Sales of oil and gas produced, net of production costs in the current period
Net changes in prices and production costs at balance sheet date
Net changes from extensions, discoveries and improved recovery, less related costs
Revisions of previous reserves estimates
Investments in the period
Changes in estimated investments in future periods
Purchase/sale of reserves
Net change in income taxes
Accretion of discount
Other
of which equity-accounted companies
BASF Report 2018
166
Proven developed reserves as of December 31
North Africa/
Middle East
South
America
Total
Group
Of which
at equity
34
136
218
82
Russia
8
82
6
(43)
10
3
5
(19)
(3)
478
10
Rest of
Europe
5 Supplementary Information Oil and Gas Business
Supplementary Information on the Oil and Gas Business
of which equity-accounted companies
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Consolidated and equity-accounted companies
Germany
6 Overviews
Proven developed and undeveloped oil reserves as of January 1, in million barrels (MMbbl)
Extensions and discoveries
Purchase/sale of reserves
Production
Proven reserves as of December 31
of which equity-accounted companies
Proven developed reserves as of December 31
of which equity-accounted companies
Gas 2018
Revisions and other changes
10
Oil 2018
63
161
68
10
326
61
6
55
61
58
61
Germany
Developed and undeveloped gas reserves as of January 1, in million barrels of oil equivalent (MMBOE)
Revisions and other changes
Extensions and discoveries
of which equity-accounted companies
Production
Proven reserves as of December 31
63
Consolidated and equity-accounted companies
29
Purchase/sale of reserves
132
132
6
15
10
2
54
10
34
21
276
62
82
69
1
63
478
11
75
132
Joint Operation
A joint arrangement refers to joint ventures and joint operations, and
describes a jointly controlled arrangement of two or more parties.
This arrangement exists if decisions about relevant activities require
the unanimous consent of all parties sharing control.
Joint Arrangement
J
ISO 50001 is an international standard developed by the Interna-
tional Organization for Standardization (ISO) that determines the
general requirements for an energy management system for volun-
tary certification.
ISO 50001
ISO 19011
ISO 14001 is an international standard developed by the Interna-
tional Organization for Standardization (ISO) that determines the
general requirements for an environmental management system for
voluntary certification.
ISO 14001
ISO 9001
The ILO Core Labor Standards are set out in a declaration of the
International Labor Organization (ILO), comprising eight conventions
that set minimum requirements for decent working conditions.
ILO Core Labor Standards
The International Financial Reporting Standards (until 2001: Interna-
tional Accounting Standards, IAS) are developed and published by
the International Accounting Standards Board, headquartered in
London, England. The "IAS Regulation" made the application of
IFRSS mandatory for listed companies headquartered in the
European Union starting in 2005.
A joint operation is a joint arrangement in which the parties that share
control have direct rights to the assets and liabilities relating to the
arrangement. For joint operations, the proportional share of assets,
liabilities, income and expenses are reported in the BASF Group
Consolidated Financial Statements.
ISO 19011 is an international standard developed by the Interna-
tional Organization for Standardization (ISO) that also serves as a
ISO 9001 is an international standard developed by the International
Organization for Standardization (ISO) that determines minimum
requirements for a quality management system for voluntary certifi-
cation.
MDI
A joint venture is a joint arrangement in which the parties that have
joint control of a legally independent entity have rights to the net
assets of that arrangement. Joint ventures are accounted for using
the equity method in the BASF Group Consolidated Financial State-
ments.
287
BASF Report 2018
The MSCI World Chemicals Index is a stock index that includes the
world's biggest chemical companies. It measures the performance of
the companies in the index in their respective national currencies, thus
considerably reducing currency effects.
MSCI World Chemicals Index
Monitoring systems and tools serve to measure and ensure the
adherence to standards. One area that is monitored is our voluntary
commitments, such as the adherence to human rights and interna-
tionally recognized labor standards.
Monitoring system
The British thermal unit (Btu) is a unit of energy observed in the
Anglo-American measuring system. It is used for indicating values
such as the energy content of gas. One mmBtu (million British ther-
mal units) is equal to approximately 1,003 cubic feet of gas or 28
cubic meters of gas.
Million British thermal unit (mmBtu)
MDI stands for diphenylmethane diisocyanate and is one of the
most important raw materials for the production of polyurethane.
This plastic is used for applications ranging from the soles of high-
tech running shoes and shock absorbers for vehicle engines to
insulation for refrigerators and buildings.
BASF uses the materiality analysis to determine the significance of
sustainability topics based on internal analyses and the expectations
of external stakeholders.
Materiality analysis/material aspects
M
The long-term incentive program is a share price-based compensa-
tion program primarily for senior executives of the BASF Group and
Long-term incentive program (LTI)
L
Joint Venture
IAS stands for International Accounting Standards (see also IFRS).
The Global Product Strategy aims to establish global product
stewardship standards and practices for companies. The program,
initiated by the International Council of Chemical Associations,
strives to ensure the safe handling of chemicals by reducing existing
differences in risk assessment.
members of the Board of Executive Directors. The program aims to
tie a portion of the participants' annual variable compensation to the
long-term, absolute and relative performance of BASF shares by
making an individual investment in the company's stock.
Global Compact
Free cash flow is cash provided by operating activities less pay-
ments made for property, plant and equipment and intangible
assets.
Free cash flow
Formulation describes the combination of one or more active sub-
stances with excipients like emulsifiers, stabilizers and other inactive
components in order to improve the applicability and effectiveness
of various products, such as cosmetics, pharmaceuticals, agricul-
tural chemicals, paints and coatings.
Formulation
Field development is the term for the installation of production facili-
ties and the drilling of production wells for the commercial exploita-
tion of oil and natural gas deposits.
Field development
F
Exploration refers to the search for mineral resources, such as crude
oil or natural gas, in the Earth's crust. The exploration process
involves using suitable geophysical methods to find structures that
may contain oil and gas, then proving a possible discovery by means
of exploratory drilling.
Exploration
European Water Stewardship (EWS) Standard
The European Water Stewardship (EWS) Standard enables busi-
nesses and agriculture to assess the sustainability of their water
management practices. The criteria are water abstraction volumes,
water quality, conservation of biodiversity and water governance.
The Europe-wide standard came into force at the end of 2011 and
I was developed by nongovernmental organizations, governments
and businesses under the direction of the independent organization
European Water Partnership (EWP).
The equity method is used to account for shareholdings in joint
ventures and associated companies. Based on the acquisition costs
of the shareholding as of the acquisition date, the carrying amount
is continuously adjusted to the changes in equity of the company in
which the share is held.
Equity method
We define the emerging markets as Greater China, the ASEAN
countries (Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos,
the Philippines, Singapore, Thailand, Vietnam), India, Pakistan and
Bangladesh; Central and South America; eastern Europe; the
Middle East, Turkey and Africa.
About This Report
In the United Nations Global Compact network, nongovernmental
organizations, companies, international business and employee
representatives, scientists and politicians work on aligning global
business with the principles of sustainable development.
Global Product Strategy (GPS)
Global Reporting Initiative (GRI)
The Global Reporting Initiative is a multistakeholder organization. It
was established in 1997 with the aim of developing a guideline for
companies' and organizations' voluntary reporting on their econom-
ic, environmental and social activities. The GRI Guidelines became
global GRI Standards in 2016.
guide for auditing management systems, for example for occupa-
tional health and safety, energy, quality and environmental manage-
ment.
ment. It comprises five components: confirmed occupational
diseases, medical emergency drills, first aid, preventive medicine
and health promotion.
6 Overviews
Glossary
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
IAS
1 To Our Shareholders
286
BASF Report 2018
The Health Performance Index is an indicator developed by BASF to
provide more detailed insight into our approach to health manage-
Health Performance Index (HPI)
H
The Greenhouse Gas Protocol, used by many companies in different
sectors as well as nongovernmental organizations and govern-
ments, is a globally recognized standard to quantify and manage
greenhouse gas emissions. The reporting standards and recom-
mendations for implementing projects to reduce emissions are
jointly developed by companies, nongovernmental organizations
and governments under the guidance of the World Resources Insti-
tute and the World Business Council for Sustainable Development.
Greenhouse Gas Protocol (GHG Protocol)
About This Report
1 To Our Shareholders
About This Report
3 Corporate Governance
TDI
T
We use Sustainable Solution Steering to review and guide our port-
folio in terms of sustainability. The four categories - Accelerators,
Performers, Transitioners and Challenged - indicate how our prod-
ucts and solutions already comply with sustainability requirements
and how we can increase their contribution.
Sustainable Solution Steering
A steam cracker is a plant in which steam is used to "crack" naphtha
(petroleum) or natural gas. The resulting petrochemicals are the raw
materials used to produce most of BASF's products.
Steam cracker
A spot market is a market where an agreed-upon deal, including
delivery, acceptance and payment, occurs immediately, as opposed
to forward contracts, where the delivery, acceptance and payment
occurs at a point in time after the conclusion of the deal.
Spot market (cash market)
6 Overviews
Glossary
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
Emerging markets
288
TDI stands for toluene diisocyanate and is a raw material for the
production of polyurethane. It is used primarily in the automotive
industry (for example, in seat cushions and interiors) and the furni-
ture industry (for example, for flexible foams for mattresses or
cushioning, or in wood coating).
Tier 1 suppliers
"Tier" is used in combination with a number (Tier 1, Tier 2, etc.) and
indicates a supplier's position in the supply chain. Tier 1 suppliers
are suppliers that deliver directly to producing companies. Suppliers
usually work together with other suppliers, which are categorized as
Tier 2, Tier 3, etc. based on their role in the value chain.
Traits
Quarterly Statement, Q1 2019 / Annual Shareholders' Meeting 2019
289
BASF Report 2018
We previously defined water stress areas as areas in which water
represents a scarce resource, and where people use 60% or more
of the water available. The most important factors leading to water
scarcity are: low precipitation, high temperatures, low air humidity,
unfavorable soil properties and high water abstraction rates. From
2019 onward, we will expand our definition of water stress areas
and report on regions in which 40% or more of available water is
used by industry, household and agriculture.
-
-
Water stress areas
BASF Report 2018
W
Verbund
A value chain describes the successive steps in a production pro-
cess: from raw materials through various intermediate steps, such
as transportation and production, to the finished product.
Value chain
V
TUIS is a German transport accident information and emergency
response system jointly operated by around 130 company fire
departments within the chemical industry and specialists. The mem-
ber companies can be reached by the public authorities at any time
and provide assistance over the telephone, expert on-site advice or
special technical equipment.
TUIS
Traits are commercial plant characteristics, such as an inherent
resistance to certain herbicides or an inherent defense against
certain insects.
In the BASF Verbund, production facilities and technologies are
intelligently networked, with high-output chemical processes that
use energy and resources efficiently. The by-products of one plant
serve as feedstock elsewhere, creating efficient value chains - from
basic chemicals to high value-added solutions such as coatings
or crop protection products. Our Verbund concept realized in
production, technologies, the market and digitalization enables
innovative solutions for a sustainable future.
2 Management's Report
Special items arise from the integration of acquired businesses,
restructuring measures, impairments, gains or losses resulting from
divestitures and sales of shareholdings, and other expenses and
income that arise outside of ordinary business activities.
SEEbalanceⓇ is the SocioEcoEfficiency analysis developed by BASF.
It can be used to evaluate and compare the environmental impact,
costs and social aspects of products and manufacturing processes.
SEEbalanceⓇ makes sustainable development measurable and
manageable for companies by combining the three dimensions of
sustainability - economy, environment and society - in an integrated
product assessment tool.
The peak sales potential of the Agricultural Solutions pipeline
describes the total peak sales generated for individual products in
the research and development pipeline. Peak sales are the highest
sales value to be expected from one year. The pipeline comprises
Peak sales potential
P
The Occupational Health and Safety Assessment Series (OHSAS)
includes the standard OHSAS 18001, which contains a framework
for an occupational safety management system. This system can be
integrated into an existing quality and environmental protection
management system and certified accordingly.
OHSAS 18001
VOCS (volatile organic compounds) are organic substances that are
present in the air as gas at low temperatures. These include some
hydrocarbons, alcohols, aldehydes and organic acids. NMVOCs are
VOCs from which methane is excluded.
NMVOC (Nonmethane Volatile Organic Compounds)
Naphtha is petroleum that is produced during oil refining. Heavy
naphtha is the starting point for gasoline production. Light naphtha
is the most important feedstock for steam crackers.
Naphtha
The International Organization for Standardization defines nanoma-
terials as materials with one or more external dimensions on a
nanoscale or with internal structure or surface structure on a
nanoscale. For regulatory purposes, there are additional definitions
for nanomaterials worldwide.
Nanomaterials
N
6 Overviews
Glossary
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
innovative products that have been on the market since 2018 or will
be launched on the market by 2028.
Process safety incidents (PSI)
Process safety incidents (PSI) is a worldwide harmonized industry
metric used to report events involving the release of a substance or
energy where this exceeds defined thresholds. BASF has used the
criteria and reporting thresholds developed by the International
Council of Chemical Associations (ICCA) since 2018.
Propylene oxide (PO)
SEEbalance®
S
Return on capital employed (ROCE) is a measure of the profitability
of our operations. This is calculated as the EBIT generated by the
segments as a percentage of the average cost of capital basis. The
average cost of capital basis corresponds to the operating assets of
the segments plus the customer and supplier financing not included
there and is calculated using the month-end figures.
ROCE
Return on assets describes the return we make on the average
assets employed during the year and reflects this return indepen-
dent of the capital structure. It is calculated as income before taxes
and noncontrolling interests plus interest expenses as a percentage
of average assets.
Return on assets
Profits generated can be used in two ways: distribution to share-
holders or retention within the company.
Special items
Retention
Responsible CareⓇ
The term renewable resources refers to components from biomass
used for industrial purposes that originate from different sources, for
example, plants and microorganisms. Among other applications,
renewable resources are used as feedstock for manufacturing
numerous products.
Renewable resources
REACH is a European Union regulatory framework for the registra-
tion, evaluation, authorization and restriction of chemicals, and was
implemented gradually by 2018. Companies are obligated to collect
data on the properties and uses of produced and imported sub-
stances and to assess any risks.
REACH
R
Propylene oxide (PO), a very reactive compound, is generated by
the oxidation of propylene and is used as basic chemical for further
processing in the chemical industry.
Responsible Care® refers to a worldwide initiative by the chemical
industry to continuously improve its performance in the areas of
environmental protection, health and safety.
Enhanced oil recovery (EOR) methods, also called tertiary recovery
or tertiary production methods, are used to increase the recovery
factor from oil reservoirs. Different technologies are employed
depending on reservoir conditions; a distinction is generally made
between thermal and chemical EOR and miscible gas flooding,
which makes use of gases such as carbon dioxide.
Barrel of oil equivalent (BOE)
The Eco-Efficiency Analysis is a method developed by BASF for
assessing the economic and environmental aspects of products
and processes. The aim is to compare products with regard to
profitability and environmental compatibility.
НЕРАХАТМ
FSC®
FLO RITE®
FINALE®
FIBERMAX®
F 500®
EuperlanⓇ OP White
ENGENIA®
CREDENZⓇ
COPEO®
CLEARFIELD®
CHOVATEK®
CERESIT®
CELLASTO®
BastaⓇ
ILEVO®
INITIUM®
INSCALISⓇ
INTEGRAL®
TERMIDOR®
REVYSOL®
SEEBALANCE®
SERIFEL®
STONEVILLEⓇ
SYSTIVAⓇ
LUCANTIN® NXT
LUPRANATⓇ
LUPRO-GRAIN®
LUPROSIL®
LUXIMOⓇ
NAFTOSEAL®
NEALTA®
NODULATOR®
NUNHEMS®
PolyTHF®
PONCHOⓇ
Responsible Care®
LIMUS®
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of Henkel AG
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
_reg. trademark of BASF Group
reg. trademark of Forest
Stewardship Council
trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
_reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
6 Overviews
Trademarks
1 Trademarks are not registered in all countries.
AUROOM®
LIBERTY LINK®
KIXOR®
KEROJET® Aquarius.
KAURITⓇ
KAURANAT®
IRGANOX®
INVIGOR®
INTERCEPTOR®
LIBERTY®
THERMOTEK®
THOMSIT®
TIREXOR®
AgCelenceⓇ
Trademarks¹
15,317
14,236
15,893
14,339
16,710
16,477
15,568
11,680
5,753
1,993
87
195
2,998
3,064
2,850
14,880
23,329
51,268
59,393
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
283
BASF Report 2018
acForm®
1 We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
2 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group
78,768
76,496
70,836
71,359
64,204
62,726
61,175
86,556
Enhanced Oil Recovery (EOR)
ULTRAFORMⓇ
ULTRASIMⓇ
ULTRASON®
VELONDISⓇ
VIZURA®
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
Dodd-Frank Act
D
Compliance is an important element of corporate governance. It
refers to the company's behavior in accordance with laws, guide-
lines and voluntary codices.
Compliance
BASF's Competency Model is derived from our corporate strategy
and our values, and translates these into specific day-to-day
behavioral standards. It is applicable worldwide, creating a common
framework for the conduct of all BASF employees and leaders to
enable us to reach our shared goals. The eight competencies are:
Drive Innovation, Collaborate for Achievement, Embrace Diversity,
Communicate Effectively, Drive Sustainable Solutions, Develop Self
and Others, Act with Entrepreneurial Drive, Demonstrate Customer
Focus.
Competency Model
The commercial paper program is a framework agreement between
BASF and banks regarding the issuing of debt obligations on the
financial market (commercial paper). The commercial paper is
issued under a rolling program for which the terms can be deter-
mined individually. This requires a good rating.
Commercial paper program
CO2 equivalents are units for measuring the impact of greenhouse
gas emissions on the greenhouse effect. A factor known as the
global warming potential (GWP) shows the impact of the individual
gases compared with CO2 as the reference value.
CO2 equivalents
The international nonprofit organization CDP (formerly the Carbon
Disclosure Project) analyzes environmental data of companies. The
CDP's indexes serve as assessment tools for investors.
CDP
We define capex as additions to property, plant and equipment
excluding additions from acquisitions, IT investments, capitalized
exploration, restoration obligations and right-of-use assets arising
from leases.
Capital expenditures (capex)
C
The Dodd-Frank Act issued in 2010 comprises accounting and
disclosure obligations for publicly listed U.S. companies regarding
the use of certain raw materials that come from the Democratic
Republic of the Congo or its bordering countries. The companies
must prove that the materials they use do not come from mines in
these conflict areas. The definition of conflict minerals as per the
Dodd-Frank Act includes the following materials and their deriva-
tives: Columbitetantalite (coltan), cassiterite, wolframite and gold.
E
EBIT
Earnings before interest and taxes (EBIT): At BASF, EBIT corre-
sponds to income from operations.
Eco-Efficiency Analysis
The EBITDA margin is the margin that we earn on sales from our
operating activities before depreciation and amortization as a per-
centage of EBITDA. It is calculated as income from operations
before depreciation, amortization and valuation allowances as a
percentage of sales.
EBITDA margin
6 Overviews
Glossary
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
Breakthrough innovations are radically new products, applications,
processes, services or business models that have a significant
potential competitive advantage and a disruptive effect on the mar-
ket. They can also be achieved by combining individual innovations
and existing technologies to create a new, complex system. Break-
through innovations open up new high-tech fields, markets or indus-
tries, generating value added and benefits for society.
2 Management's Report
About This Report
285
BASF Report 2018
Earnings before interest, taxes, depreciation and amortization
(EBITDA): At BASF, EBITDA corresponds to income from operations
before depreciation and amortization (impairments and reversals of
impairments).
EBITDA
EBIT after cost of capital is calculated by deducting the cost of
capital from the EBIT of the segments. The cost of capital thereby
reflects the shareholders' expectations regarding return (in the form
of dividends or share price increases) and interest payable to credi-
tors. If the EBIT after cost of capital has a positive value, we have
earned a premium on our cost of capital.
EBIT after cost of capital
1 To Our Shareholders
reg. trademark of BASF Group
Breakthrough innovations
Biotechnology
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of Conseil
Européen de l'Industrie Chimique
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
VAULTⓇ HP
reg. trademark of BASF Group
reg. trademark of BASF Group
reg. trademark of BASF Group
VOTIVO®
XARVIO®
XEMIUM®
reg. trademark of BASF Group
A barrel of oil equivalent (BOE) is an international unit of measure-
ment for comparing the energy content of different fuels. It is equal
to one barrel of crude oil, or 6,000 cubic feet (169 cubic meters) of
natural gas.
May 3, 2019
B
Associated companies are entities in which significant influence can
be exercised over their operating and financial policies and which
are not subsidiaries, joint ventures or joint operations. In general, this
applies to companies in which BASF has an investment of between
20% and 50%.
Associated companies
A
Glossary
Biotechnology includes all processes and products that make use of
living organisms, such as bacteria and yeasts, or their cellular con-
stituents.
6 Overviews
Glossary
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
284
BASF Report 2018
5 Supplementary Information Oil and Gas Business
Half-Year Financial Report 2019
2014
Quarterly Statement, Q3 2019
25,258
26,413
25,260
23,496
19,229
16,610
17,966
17,241
16,285
Property, plant and equipment
16,554
13,594
15,162
12,537
12,967
20,780
Investments accounted for using the equity method
1,340
1,328
526
540
643
613
848
1,953
1,619
12,324
Other financial assets
4,715
4,647
4,436
3,245
4,174
3,459
1,852
2,203
605
12,193
12,245
281
BASF Report 2018
4 Calculated in accordance with German GAAP
1 Figures for 2017 were restated with the presentation of the oil and gas activities as discontinued operations. For more information, see the Consolidated Financial Statements from page 200 onward.
2 We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
3 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
918.5
918.5
918.5
918.5
million
Number of shares as of December 31
918.5
918.5
918.5
918.5
918.5
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
10,449
Intangible assets
2018
2017
2016
2015
2014
11,919
2013²
2011
2010
2009
Million €
Balance sheet (IFRS)
6 Overviews
Ten-Year Summary
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
20121
918.5
606
Deferred taxes
10,665
10,8013
10,952
9,516
10,385
10,233
9,506
10,886
10,167
7,738
Accounts receivable, trade
12,166
10,303
10,005
9,693
Other receivables and miscellaneous current assets
3,223
3,883
3,781
536
21
19
17
14
19
16
11,266
15
3,139
3,4943
3,078
3,095
4,032
3,714
3,455
Marketable securities
570
10,160
10,059
911
561
653
946
Other receivables and miscellaneous noncurrent assets
2,342
2,118
2,513
1,791
2,193
1,006
1,473
941
1,112
1,042
877
1,498
1,720
1,210
8,688
6,776
Inventories
43,335
47,623
50,550
46,270
9,581
43,939
35,259
34,087
34,532
31,681
Noncurrent assets
886
1,332
38,253
July 25, 2019
3.20
3.00
4.34
5.61
5.22
5.25
6.74
4.96
1.54
€
Earnings per share
2018
2017
2016
2015
2,520
20133
4.42
6.62
5.12
Adjusted earnings per share
6,602
7,105
6,460
5,693
Cash flows from operating activities
5.87
6.44
2012²
4.83
5.44
5.31
5.64
6.26
5.73
3.01
€
5.00
8,100
2011
2009
Thorsten Pinkepank, phone: +49 621 60-41976
Sustainability Relations
Jens Fey, phone: +49 621 60-99123
Media Relations
Phone: +49 621 60-0, email: global.info@basf.com
General inquiries
Contact
You can find this and other BASF publications
online at basf.com
Published on February 26, 2019
Further information
April 30, 2020
Quarterly Statement, Q1 2020/ Annual Shareholders' Meeting 2020
February 28, 2020
BASF Report 2019
October 24, 2019
Investor Relations
Dr. Stefanie Wettberg, phone: +49 621 60-48002
Internet
basf.com
Key data
Million €
6 Overviews
Ten-Year Summary
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
2010
1 To Our Shareholders
COMC 1902 E
Papler aus verantwor-
tungsvollen Quellen
FSC® C021366
MIX
FSC
www.fsc.org
BASF supports the chemical industry's global Responsible Care initiative.
OUR COMMITMENT TO SUSTAINABILITY
Responsible Care®
About This Report
3.10
6,958
7,717
2,808
2,158
5,853
2,826
2,880
3,506
3,737
2,176
Dividend per share
Dividend
Net income of BASF SE4
Appropriation of profits
11.4
15.4
%
3,130
2,982
1,561
2,021
2.90
2.80
2.70
2.60
2.50
2.20
1.70
Return on capital employed (ROCE)
€
2,847
2,755
2,664
2,572
2,480
2,388
2,296
2,939
9,446
14.1
13.3
Return on assets
14.6
17.61
18.3
15.1
14.9
14.1
13.9
16.3
17.4
14.6
%
EBITDA margin
7,939
8,785
%
7.5
14.7
16.1
14.4
19.7
19.2
19.9
27.5
24.6
8.9
18.9
%
7.1
9.51
8.2
8.7
11.7
11.5
11.0
Return on equity after tax
3,564
IFRS
2,623
12,916
3,118
3,117
3,130
3,141
3,143
3,165
3,188
3,203
3,216
3,229
1,176
1,176
1,176
1,176
1,176
1,176
1,176
1,176
1,176
1,176
2018
2017
2016
2015
2014
20132
15,817
2012¹
19,446
26,102
22,657
18,609
1,055
919
761
629
581
630
1,010
1,246
1,253
1,132
(5,939)
(5,282)
(4,014)
(3,521)
(5,482)
(3,400)
(3,461)
314
1,195
156
36,699
34,826
31,515
30,120
28,777
23,708
25,385
2011
2009
25,946
24,566
27,420
25,951
14,607
3,264
27,467
27,088
24,861
19,587
Current assets
295
614
2,300
6,495
1,375
2,241
1,718
1,827
1,647
2,048
1,493
1,835
Assets of disposal groups
Cash and cash equivalents
344
52
2,292
31,145
2010
43,221
51,268
Equity
Noncontrolling interests
Other comprehensive income
Retained earnings
Capital reserves
Million €
Balance sheet (IFRS)
6 Overviews
Ten-Year Summary
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
282
BASF Report 2018
3 As of January 1, 2018, receivables from bank acceptance drafts are no longer reported under trade accounts receivable, but under the item other receivables and other assets. The 2017 figures have been restated accordingly.
1 We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
2 Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group
86,556
78,768
76,496
70,836
71,359
64,204
62,726
61,175
59,393
Total assets
25,621
Subscribed capital
28,195
3,324
3,276
5,122
4,971
4,610
4,020
4,861
5,153
4,502
5,121
4,738
2,786
Total equity and liabilities
Current liabilities
Liabilities of disposal groups
Other liabilities
Financial indebtedness
Tax liabilities
Provisions
Accounts payable, trade
27,118
29,132
28,611
25,055
27,271
22,192
20,395
3,210
19,313
2,628
2,540
3,036
27,673
2,802
2,240
5,509
2,497
3,767
4,074
3,545
3,256
4,094
3,985
3,369
2,375
695
1,119
1,288
1,082
1,079
968
870
1,038
1,140
1,003
3,252
3,229
2,802
2,670
21,168
2,844
705
2,093
Deferred taxes
1,860
3,478
3,667
3,369
3,502
3,226
2,925
3,335
3,352
3,289
7,434
2,467
6,293
6,313
7,313
3,727
5,421
3,189
2,778
2,255
Provisions for pensions and similar obligations
36,109
34,756
20,979
32,568
31,545
8,209
2,628
Other provisions
2,894
873
869
2,234
1,197
1,194
1,111
1,142
901
15,332
15,535
12,545
11,123
11,839
11,151
898
8,704
3,420
3,381
3,317
2,731
1,787
Financial indebtedness
1,095
Noncurrent liabilities
12,444
11,670
9,019
Other liabilities
For more information, see pages 90 to 91
HEALTH
AND METHOD
DECENT WORK AND
OECONOMIC GROWTH
W
DECENT WORK AND 12 RESPONSIBLE
12 RESPONSE
CLIMATE
13
AND PREDUCTION
ECONOMIC GROWTH
Cover 90% of our relevant spend³ with
sustainability evaluations by 2025, and
have 80% of our suppliers improve their
sustainability performance upon
re-evaluation
For more information, see pages 37 to 38
12
Q
Increase EBITDA before special items
by 3% to 5% per year
For more information, see pages 103 to 106
DECENT WORK AND
16 PEACE JUSTICE
AND STRENE
QUSTRY
AND INFRASTRUCTURE
ECOND GROWTH
DECENT WORK AND
Achieve €22 billion in Accelerator sales²
by 2025
NOUSTRY VA
9AND STRUCTURE
8ETWORK AND
ECONOMIC GROWTH
QNOLSTRY POIN
AND INFRASTRUCTURE
Nonfinancial targets
Grow CO2-neutrally until 2030
Achieve a return on capital employed
(ROCE)¹ considerably above the cost
of capital percentage every year
17 PARTNERSHIPS
NOUSTRY POW
Existing nonfinancial targets
1 Return on capital employed (ROCE) is a measure of the profitability of our
operations. We calculate this indicator as the EBIT generated by the segments as a
percentage of the average cost of capital basis.
2 Accelerator products are products that make a substantial sustainability contribution
in the value chain.
3 We understand relevant spend as procurement volumes with suppliers defined as
relevant. For more information, see page 90.
Increase the dividend per share every
year based on a strong free cash flow
More than 80% of our employees feel
that at BASF, they can thrive and
perform at their best
ON LAND
Increase the proportion of women in
leadership positions with disciplinary
responsibility to 22-24% by 2021
M
For more information, see pages 110 to 115
For more information, see pages 110 to 115
DECENT WORK AND
Grow sales volumes faster than global
chemical production every year
4 EDUCATION
DECENT WORK AND
FOR THE GOALS
15
AND WELL-BEING
Reduce the worldwide lost-time injury
rate per 200,000 working hours to ≤0.1
by 2025
For more information, see pages 96 to 97
DECENT WORK AND
Reduce worldwide process safety
incidents per 200,000 working hours
to ≤0.1 by 2025
For more information, see pages 97 to 98
RESPONSIBLE
O AND SANEATON
AND PRODUCTION
3 GOOD HEALTH
12
3 AND WELL-ENG
Introduce sustainable water
management at all production sites
in water stress areas and at all
Verbund sites by 2030
For more information, see pages 108 to 109
CLEAN WATER 12 RESPONSIBLE 14 LOW WATER
3D HEALTH
15 LAND
Financial targets
Introduction of sustainable water management at all
We want to grow faster than the market and thus
be economically successful and profitable. Further-
more, we want to provide answers to the most
pressing challenges of our time. To combat climate
change and global warming, we have committed
ourselves to growing production volumes without
adding further CO2 emissions until 2030. This means
we will decouple greenhouse gas emissions from
organic growth. We have also defined targets for a
sustainable product portfolio, responsible procure-
ment and engaged employees. Safety for people
and the environment, inclusion of diversity and water
management will remain a top priority.
At BASF, we are passionate about chemistry and our cus-
tomers. Thanks to our expertise, our innovative and entrepre-
neurial spirit, and the power of our Verbund integration, our
innovations have decisively contributed to changing the
world we live in for the better for more than 150 years. To be
the world's leading chemical company for our customers, we
will grow profitably and add value to society. This is how we
create chemistry for a sustainable future.
[Corporate Strategy]
Our Strategy
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business 6 Overviews
3 Corporate Governance
2 Management's Report
Corporate Strategy
1 To Our Shareholders
About This Report
24
24
BASF Report 2018
3 Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos, the Philippines, Singapore, Thailand, Vietnam
Compared with 2017, sales at our companies located in emerging markets rose by 2% to €17,144 mil-
lion, largely as a result of higher sales prices and volumes. Measured by location of customer, we
increased sales in the emerging markets by 1% to €21,799 million. This brought sales to customers in
emerging markets to around 35% of total sales in 2018.
Overall, growth in the emerging markets declined slightly in 2018. We define the emerging markets as
Greater China, the ASEAN countries,³ India, Pakistan and Bangladesh; Central and South America;
eastern Europe; the Middle East, Turkey and Africa. Momentum eased slightly in eastern Europe. The
eastern E.U. countries continued to post dynamic growth, albeit slower than in the previous year.
Russia's output rose faster than in the previous year, buoyed by the comparatively high oil price and
strong growth in the construction sector. In the emerging markets of Asia, which account for over 60%
of the gross domestic product (GDP) of all emerging economies, growth declined slightly. The Chinese
economy noticeably cooled, while India and Thailand saw stronger increases in economic output com-
pared with the previous year. In South America, the economy darkened significantly as Argentina fell
back into recession. Brazil continued its moderate recovery despite political uncertainty ahead of the
presidential elections and production outages caused by strikes in the spring. Although growth slowed
significantly in Turkey, the Middle East as a whole only recorded a slight decline. The oil-producing
states benefited from rising oil prices. Growth remained more or less stable in Africa, too. The weaker
trend in South Africa was offset by a marked upturn in Nigeria.
Page 108
50.0%
More on
5
More on
SDGs
SDG 7, 12, 13, Page 105
14, 15
Reduction of greenhouse gas emissions per metric ton of
sales product (excluding the oil and gas business, baseline
2002)
(40%)
(34.2%)
Today, the world is changing more rapidly than ever before, driven
by demographic change and new digital technologies. Our cus-
tomers in different industries and regions face diverse social and
environmental challenges due to limited natural resources and
increasing consumer demands. Chemistry is key to solving many of
these challenges. By combining our unique expertise with our cus-
tomers' competence, we will jointly develop profitable, innovative
and responsible solutions for these global trends.
SDG 12, 13,
14, 15
1 The selection of relevant sites is determined by the amount of primary energy used and local energy prices; figures relate to BASF operations including the discontinued
oil and gas business.
[Water]
production sites in water stress areas and at all Verbund sites
(excluding the oil and gas business)
2025 goal
100%
Status at
end of 2018
SDGs
Page 104
Our purpose reflects what we do and why we do it: We create
chemistry for a sustainable future. We pursue this purpose with our
corporate strategy, which was updated in 2018. We want to con-
tribute to a world that provides a viable future with enhanced quality
of life for everyone. This is why we offer products and solutions that
make the best use of available resources.
Corporate purpose
We create chemistry for a sustainable future
-70%
by 2050
+300%
Sources: U.N., IEA, UBS Foresight, BASF
As part of our aspiration to be the world's leading chemical company
for our customers, we want to strengthen our passion for customers
throughout the entire organization. We want to grow profitably and
create value for society. To achieve this, we have set ourselves
ambitious financial and nonfinancial targets.
BASF Report 2018
zettabytes by 2020
25
1 To Our Shareholders
2 Management's Report
Corporate Strategy
3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business 6 Overviews
New targets from 2019 onward
Business success tomorrow means creating value
for the environment, society and business. We have
set ourselves new financial and nonfinancial targets
so that our customers, investors, employees and
other stakeholders can track our progress.
About This Report
The new targets will apply from 2019 onward and will
replace our previous goals. In this way, we want to
steer our business into a sustainable future and, at
the same time, contribute to the implementation of
the United Nations' Sustainable Development Goals
(SDGs).
50
Required reduction of
greenhouse gas emissions
to achieve the 2°C goal
Global trends provide opportunities for growth in the chemical industry
Demographic change:
Share of population
aged 60 and over
by 2050
Population growth:
Driven by the
emerging markets
by 2050
Electromobility:
Growing demand
for battery materials
by 2025
China the largest market:
Share of global chemical
market by 2030
+32%
~50%
Our aspiration is to be the world's leading chemical company. With
our updated corporate strategy, which was announced in Novem-
ber 2018, we are targeting profitable growth. We aim to grow organ-
ically and thus will strengthen our customer focus. The Asian market
plays an important role in our growth strategy. With a share of more
than 40%, China is already the largest chemical market and drives
the growth of global chemical production. By 2030, China's share
will increase to nearly 50%, and we want to participate in this
growth. To drive forward our growth in this dynamic market, we plan
to build an integrated Verbund site in Zhanjiang in the southern
Chinese province of Guangdong. We also want to expand our exist-
ing joint venture with Sinopec in Nanjing.
Digitalization:
Rapid growth in
volume of data
Climate change:
+130%
10 AND STRONG
1 To Our Shareholders
BASF Report 2018
ment with variable compensation and pension systems, and our
shareholders' objectives.
Calculating EBIT after cost of capital and ROCE
To calculate EBIT after cost of capital, we take the BASF Group's
EBIT and deduct the EBIT of activities recognized under Other - not
allocated to the divisions - and subtract the cost of capital of the
BASF Group from the resulting figure. Cost of capital is determined
by applying the cost of capital percentage before taxes to the value
of the cost of capital basis at each month-end. Monthly cost of
capital is then added up over the course of the year.
The cost of capital percentage is determined using the weighted
cost of capital from equity and borrowing costs (weighted average
cost of capital, WACC). To calculate a pre-tax figure similar to EBIT,
it is adjusted using the projected tax rate for the BASF Group for the
business year. In addition, the projected net expense of Other is
already provided for by an adjustment to the cost of capital percent-
age. The cost of equity is ascertained using the capital asset pricing
model. Borrowing costs are determined based on the financing
costs of the BASF Group. As in 2017 and 2018, we anticipate a cost
of capital percentage of 10% in 2019.
The cost of capital basis consists of the operating assets of the
segments and is calculated using the month-end figures. Operating
assets comprise the current and noncurrent asset items of the
segments. These include tangible and intangible fixed assets,
investments accounted for using the equity method, inventories,
trade accounts receivable, other receivables and other assets gen-
erated by core business activities and, where appropriate, the assets
of disposal groups. The cost of capital basis also includes customer
and supplier financing.
ROCE is calculated as the EBIT of the segments as a percentage of
the average cost of capital basis at each month-end.
The change to ROCE means that the same logic and data will be
used for internal management, external communication with the
capital markets and variable compensation. This improves the
consistency of the indicators used for BASF's value-based manage-
Value-based management throughout the company
Until the end of the 2018 business year, the most important key
performance indicators for measuring economic success as well as
for steering the BASF Group and its operating units were EBIT after
cost of capital, EBIT and EBIT before special items.
From 2019 onward, we will use ROCE as the most important key
performance indicator for steering the BASF Group. EBIT before
special items and capex (capital expenditure) are key performance
indicators for BASF that have a direct impact on ROCE and as such,
support its management.
EBIT before special items is used to steer profitability at Group
and segment level. As in the past, this is calculated by adjusting
the EBIT reported in the Consolidated Financial Statements for
special items, making it especially suitable for assessing economic
development over time. Special items arise from the integration
of acquired businesses, restructuring measures, certain impair-
ments, gains or losses resulting from divestitures and sales of
shareholdings, and other expenses and income that arise outside
of ordinary business activities.
Capital expenditures (capex) comprises additions to property,
plant and equipment excluding additions from acquisitions, IT
investments, capitalized exploration, restoration obligations and
right-of-use assets arising from leases. It is used to manage cap-
ital employed in the BASF Group. Capex is not just relevant to
ROCE management, but also supports our long-term goal to
increase our dividend each year based on a strong free cash flow.
BASF Report 2018
29
An important part of our value management is the target agreement
process, which aligns individual employee targets with BASF's
targets. Until the end of the 2018 business year, the most important
financial performance indicator in the operating units was EBIT after
cost of capital. This will be replaced by ROCE from 2019 onward. By
contrast, the functional units' contribution to value is assessed
according to effectiveness and efficiency on the basis of quality and
cost targets.
29
From the 2019 business year onward, EBIT after cost of capital will
be replaced by the return on capital employed (ROCE). This is calcu-
lated as the EBIT generated by the segments as a percentage of the
average cost of capital basis. As stated in our strategic goals, we
aim to achieve a ROCE considerably above the cost of capital per-
centage every year.
The BASF Group's steering concept
great strengths. Our Verbund concept - realized in production,
technologies, the market and digitalization enables innovative
solutions for a sustainable future. The claim that "We create
chemistry," as stated in the BASF logo, helps us embed this
solution-oriented strategy in the public perception. Our brand
creates value by helping communicate its benefits for our stake-
holders as well as our values.
Wherever our stakeholders encounter our brand, we want to con-
vince them that BASF stands for connectedness, intelligent solu-
tions, value-adding partnerships, an attractive working environment
and sustainability. This contributes to our customers' confidence
and to our company value.
We are constantly developing our brand image. We regularly mea-
sure awareness of and trust in our brand, and therefore in our
company. A global study conducted by an independent market
research institution every two years again showed in 2018 that, in
terms of awareness and trust, BASF is above the industry average
in numerous countries. Our goal is to continue increasing awareness
of BASF in all of our relevant markets.
BASF Report 2018
28
28
We follow a value-oriented steering concept with our financial tar-
gets. We previously used income from operations (EBIT) after cost
of capital for operational steering as a key target and management
indicator for the BASF Group, its operating divisions and business
units. This figure combines the company's economic performance
as summarized in EBIT with the costs for the capital made available
to us by shareholders and creditors. When EBIT exceeds cost of
capital, we earn a premium on our cost of capital and exceed the
return expected by our shareholders.
About This Report
2 Management's Report
Value-Based Management
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Value-Based Management
A company can only create value in the long term if it gener-
ates earnings that exceed the cost of the capital employed.
This is why we encourage and support all employees in think-
ing and acting entrepreneurially in line with our value-based
management concept. From the 2019 business year onward,
the return on capital employed (ROCE) will replace EBIT after
cost of capital as the most important key performance indi-
cator for steering the BASF Group. ROCE already replaced
the return on assets as the metric for variable compensation
in 2018.
1 To Our Shareholders
BASF's success as an integrated global chemical company relies
on having a strong brand. Our brand and mission are manifested in
our strategy and our corporate purpose - "We create chemistry for
a sustainable future" - as well as our values. "Connected" describes
the essence of the BASF brand. Connectedness is one of BASF's
About This Report
2 Management's Report
Value-Based Management
Location of customer
South America, Africa, Middle East 9%
Asia Pacific 23%
€62,675 million
Procurement and sales markets
BASF sales by industry 2018
BASF sales by region 2018
Direct customers
>20%
Chemicals and plastics
10-20%
Consumer goods | Transportation
5-10%
<5%
42% Europe
1 To Our Shareholders
5 Supplementary Information Oil and Gas Business 6 Overviews
3 Corporate Governance
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Furthermore, we will continue to comment on and forecast sales at
Group and segment level in our financial reporting as a significant
driver for EBIT before special items and thus ROCE.
BASF's nonfinancial targets are focused more on the long term. As
part of the implementation of our strategy, we are investigating the
possibility of establishing short-term steering mechanisms for our
nonfinancial targets as well.
4 Consolidated Financial Statements
For more information on the development of these indicators, see Results of Operations
from page 46 onward
30
30
■ Over 90,000 customers; broad customer portfolio
About This Report
73.0%
2 Management's Report
The BASF Group
BASF Report 2018
INSTITIONS
The BASF brand
For more information on supplier standards, see page 90 onward
We want to make digitalization an integral part of BASF's business.
This will create additional value for our customers, grow our busi-
ness and improve efficiency. By promoting comprehensive digital
skills among our future leaders and our entire workforce, we will
ensure that the necessary resources are available.
For more information on digitalization, see pages 33 and 111
Portfolio
We will sharpen our portfolio and focus our capital allocation more
towards growing business areas. We will focus primarily on organic
growth through capital expenditures and innovation, but also make
targeted acquisitions where this makes strategic sense and creates
value. The new segment structure will create a higher transparency
regarding the steering of our businesses, the importance of value
chains and the role of our Verbund. The physical, technological,
market and digital integration of the Verbund continues to be at the
core of our portfolio and our unique strength.
For more information on our organization and the Verbund, see page 18 onward
Innovation
Digitalization
Our ambition is to be the most attractive partner for our customers
whenever they are confronted with challenges that can be
approached with chemistry. Our research and development compe-
tences are unique in the chemical industry. We aim to build on and
leverage our position as a leading innovator to jointly develop inno-
vations for our customers. We will design our innovation chain to be
as seamless as possible so that we can bring products to the market
more quickly. This means fostering a higher level of excellence
throughout the entire innovation process, starting from the lab all the
Iway to the customer.
Sustainability
We are successful in the long term when our products, solutions
and technologies add value to the environment, society and the
economy. We want to be a thought leader in sustainability and
increase the relevance of sustainability in our decision-making pro-
cesses and business models. This secures the long-term success of
our company, creates business opportunities and establishes us as
a key partner supporting our customers.
For more information on the integration of sustainability, see page 36 onward
Operations
We are committed to running our production safely, efficiently and
reliably so that we can deliver products to our customers on spec
and on time. We aim to further improve the reliability and availability
of our plants, as well as our agility. Above and beyond this, continu-
ous process improvements and effective debottlenecking of our
existing asset base are paramount to ensure our competitiveness.
For more information on operations, see page 96 onward
For more information on innovation, see page 31 onward
Employees
Our
Customers
Digitalization
26
About This Report
1 To Our Shareholders
2 Management's Report
Corporate Strategy
3 Corporate Governance
4 Consolidated Financial Statements
People
5 Supplementary Information Oil and Gas Business 6 Overviews
To reach our goals and be the leading company in the chemical
industry for our customers, we want to strengthen our performance
in innovation and in operations as the leading chemical producer
and plant operator, leverage digital ways of working across the
entire company, and integrate sustainability more deeply into our
business decisions. We want to strengthen our passion for our
customers in all employees. We aim to strengthen our portfolio and
further develop our organization to better meet customer needs
using the power of our Verbund integration. We have defined six
strategic action areas through which we will sharpen our customer
focus.1
Action areas sharpen customer focus
Sustainability
Innovation
Operations
Portfolio
Our strategic action areas
For more information on corporate governance and compliance, see page 132 onward
We aim to clearly position each business against its relevant com-
petitors and establish a high-performance organization to enable us
to be successful in an increasingly competitive market environment.
We will adapt our business models and organizational structures so
that each business unit can optimally serve its market segment. Our
people are what will make the implementation of our updated
strategy successful. We rely on the engagement of our employees
and give them the tools and skills necessary to be able to offer our
customers differentiated and customized products and services.
1 We defined six strategic action areas in our updated corporate strategy, which was announced in November 2018. They build on the four strategic principles of the "We create chemistry" strategy - we add value as one company; we innovate to make our customers more successful; we drive sustainable solutions; we form the best team -
according to global trends and challenges as well as their implications for BASF.
■ We act according to our values and internationally
recognized standards of conduct and review our
performance with audits
Our standards fulfill or exceed existing laws and regulations and take
internationally recognized principles into account. We respect and
promote:
-
The 10 principles of the U.N. Global Compact
- The Universal Declaration of Human Rights and the two U.N.
Human Rights Covenants
· The core labor standards of the ILO and the Tripartite Declaration
of Principles Concerning Multinational Enterprises and Social
Policy (MNE Declaration)
Global standards
The OECD Guidelines for Multinational Enterprises
- The German Corporate Governance Code
We stipulate rules for our employees with standards that apply
throughout the Group. We set ourselves ambitious goals with volun-
tary commitments and monitor our performance in terms of environ-
mental protection, health and safety using our Responsible Care
Management System. In terms of labor and social standards,
this takes place using three elements: the Compliance Program
(including the compliance hotlines, which can be used for internal
and external questions or complaints), close dialog with our stake-
holders (such as with employee representatives or international
organizations), and the global management process to respect
international labor norms.
Our business partners are expected to comply with prevailing laws
and regulations and to align their actions with internationally recog-
nized principles. We have established appropriate monitoring sys-
tems to ensure this.
For more information on labor and social standards, see page 115
For more information on the Responsible Care Management System, see page 95
- The Responsible Care® Global Charter
For more information on employees, see page 110 onward
Entrepreneurial: We focus on our customers, as individuals and
as a company. We seize opportunities and think ahead. We take
ownership and embrace personal accountability.
Open: We value diversity, in people, opinions and experience. This is
why we foster feedback based on honesty, respect and mutual trust.
We learn from our setbacks.
BASF Report 2018
27
27
About This Report
1 To Our Shareholders
2 Management's Report
Corporate Strategy
Responsible: We value the health and safety of people above all
else. We make sustainability part of every decision. We are commit-
ted to strict compliance and environmental standards.
3 Corporate Governance
5 Supplementary Information Oil and Gas Business 6 Overviews
Corporate values
guide our conduct and actions
How we act is critical for the successful implementation of our
strategy: This is what our values represent. They guide our actions
and define how we want to work together - as a team, with our
customers and our partners. Our updated strategy affirms our four
core values creative, open, responsible, entrepreneurial - and
adjusts the descriptions slightly.
-
Creative: We make great products and solutions for our customers.
This is why we embrace bold ideas and give them space to grow.
We act with optimism and inspire one another.
4 Consolidated Financial Statements
90%
SDG 3, 6, 12,
14, 15
2020 goal
Partnerships
Financial
Innovation
countries
06
90
in more than
BASF Group companies
units
strategic
business
86
BASF Report 2018
sites worldwide
additional production
355
Intelligent Verbund system
1 The figures in this graphic have been audited within the scope of the relevant sections of the Management's Report in which they appear.
Verbund sites
6
raw material supplier
sites audited on
sustainability
standards
100
>50 external
compliance
hotlines
employees
Development
opportunities
for all
apprentices
■ More than 70,000 suppliers
BASF supplies products and services to over 90,000 customers'
from various sectors in almost every country in the world. Our cus-
tomer portfolio ranges from major global customers and medium-
sized businesses to end consumers.
We work with over 70,000 Tier 1 suppliers from different sectors
worldwide. They supply us with important raw materials, chemicals,
investment goods and consumables, and perform a range of ser-
vices. Some of our most important raw materials are naphtha, natu-
ral gas, methanol, ammonia and benzene.
For more information on customers, see page 116; for more information on suppliers,
see page 90 onward
Employees
Agriculture | Construction | Energy and resources
Health and nutrition | Electronics
Operations
€62.7 billion
in sales
2 Management's Report
Goal Achievement in 2018
1 To Our Shareholders
About This Report
22
22
bundle partnerships
with university
research groups
8 Academic
Research Alliances
since 2000
Involved in
U.N. Global
Compact
1.3%
Early turnover
rate of
21.7%
Proportion of
women in
leadership
positions
transportation
incidents with
significant impact
on the environment
Number of lost-time
injuries per 200,000
working hours:
0.3
sustainability
for aspects of
product applications
assessed and rated
60,000+
energy efficiency
6.3 million
metric tons
of CO2 saved by
31.6 million
MWh energy
saved by the Verbund
and combined heat and
power generation
Around 900
patents filed
worldwide
Around
3,000
projects in
research
pipeline
€9 billion
from innovations that
we have launched
in the past five years
Sales of around
in income taxes
€4.7 billion
€1.1 billion
Net income of
Environment
3 Corporate Governance
Business and competitive environment
Global economic environment
11,000
employees in
research and
development
We create chemistry
for a sustainable future
Research and
development
expenses of
€2.0 billion
We offer our
Status at
end of 2018
90,000+
customers innovative solutions
for a sustainable future
6 action areas
help us to sharpen our
customer focus
15.1 million
MWh
of electricity
demand
39.4
million
MWh
of steam demand
€277
million
invested in
environmental
protection
4
segments
€10.7 billion
invested in property,
plant and equipment
and intangible
assets
148 safety,
security, health
and environmental
protection audits
Over
12
70,000
suppliers
operating
divisions
ர்த்
122,404
employees
worldwide,
of which 3,174
More than
BASF's global presence means that it operates in the context of
local, regional and global developments and is bound by various
conditions. These include:
in equity
€36.1 billion
- Legal and political requirements (such as European Union regula-
tions)
- International trade agreements
- Industry standards
Environmental agreements (such as the E.U. Emissions Trading
System)
· Social aspects (such as the U.N. Universal Declaration of Human
Rights)
BASF holds one of the top three market positions in around 75% of
the business areas in which it is active. Our most important global
competitors include Arkema, Clariant, Covestro, DowDuPont, DSM,
Evonik, Formosa Plastics, Huntsman, Lanxess, SABIC, Sinopec,
Solvay, Wanhua and many hundreds of local and regional competi-
tors. We expect competitors from Asia and the Middle East in par-
ticular to gain increasing significance in the years ahead.
Corporate legal structure
As the publicly traded parent company, BASF SE takes a central
position: Directly or indirectly, it holds the shares in the companies
belonging to the BASF Group, and is also the largest operating
company. The majority of Group companies cover a broad spec-
trum of our business. In the BASF Group Consolidated Financial
Statements, 323 companies including BASF SE are fully consoli-
dated. We consolidate eight joint operations on a proportional basis,
and account for 35 companies using the equity method.
For more information, see the Notes to the Consolidated Financial Statements from page 202 onward
1
BASF Report 2018
The method used to calculate customers in the previous year has been adjusted to "sold-to" parties of our consolidated companies. The updated figure for 2017 is over 80,000 customers.
21
24
Innovation
Financial
Partnerships
Employees
Operations
Environment
About This Report
1 To Our Shareholders
2 Management's Report
How We Create Value
3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
6 Overviews
How We Create Value
The overview provides examples of how we create value for our company, the environment and society. It is modeled on the framework of the International Integrated Reporting Council (IIRC).1
Our inputs
Our business model
Our outputs
Total assets of
€86.6 billion
4 Consolidated Financial Statements
26% North America
Goal Achievement in 2018
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
23
23
BASF Report 2018
5 The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain
senior executive status by virtue of special expertise.
Page 112
Page 112
85.4%
Proportion of senior executives with
international experience over 80%
SDG 3, 8
– Page 98
Sales² in emerging markets
2018
Status at
2020 goal
end of 2018
SDGs
More on
2008
>99%
91%
SDG 3, 12
– Page 100
Safety in production]
35%
Products and solutions
Status at
end of 2018
5 Supplementary Information Oil and Gas Business 6 Overviews
0.96
>0.9
Business expansion in emerging markets
Annual goal
quantities of more than one metric ton per year worldwide
Risk assessment of products that we sell in
Product stewardship
Health Performance Index
Page 97
SDG 3, 12, 15
0.3
≤0.1
Reduction of worldwide process safety incidents
per 200,000 working hours
Page 37
SDG 3, 8, 9,
12, 13
More on
SDGs
Status at
end of 2018
27.7%
2020 goal
28%
Increase the proportion of sales generated by products that
make a substantial contribution to sustainable development
(Accelerator products)
per 200,000 working hours.
– Page 96
SDG 3, 8
0.3
≤0.1
Reduction of worldwide lost-time injury rate
More on
SDGs
2025 goal
29%
Goal Achievement in 2018
2 Percentage of BASF Group sales by location of customer
2020 goal
€4.0 billion
€0.8 billion
€0.10
€3.10
3.8%
(14.9%)
€9.2 billion
3.3%
2.4%
€62.7 billion
Average change
since 20154
2018
Premium on cost of capital
Dividends per share paid out
EBITDA3
Sales3
Goal areas along the value chain
We carry out our corporate purpose, “We create chemistry for a sustainable future,” by pursuing ambi-
tious goals along our entire value chain. In this way, we aim to achieve profitable growth and take on
social and environmental responsibility. This also helps to achieve the United Nations' Sustainable
Development Goals (SDGs). We are focusing on issues where we as a company can make a significant
contribution, such as sustainable consumption and production, climate protection or fighting hunger.
■Emerging markets Industrialized countries
SUPPLIERS
Procurement
[Procurement]
Status at
end of 2018
Growth and profitability
For more information on our results of operations in 2018, see pages 46 to 50
For more information on our financial position in 2018, see pages 53 to 56
For a definition of "slight" and "considerable," see Actual Development Compared with Outlook for 2018 on page 57
BASF
CUSTOMERS
Growth and profitability; employees;
safety in production; product
stewardship; energy and climate
protection; water
Products and
solutions
As determined in 2015, our aim was, on average, to grow sales slightly faster and EBITDA considerably
faster than global chemical production (excluding pharmaceuticals; 2018: 2.7%; average change since
2015: 3.3%), and to earn a significant premium on our cost of capital. Another goal was to achieve a
high level of free cash flow each year, either raising or at least maintaining the dividend at the prior-year
level.
SDGs
Change
since 2017
More on
65%
71%
Coverage of our primary energy demand by certified energy
management systems (ISO 50001) at all relevant sites¹
40.4%
Long-term goals
Increase in proportion of
non-German senior executives
(baseline 2003: 30%)
Senior executives with
international experience
International representation
among senior executives5
For more information on the SDGs, see sustainabledevelopment.un.org
1 Sustainable Development Goals (SDGs): SDG 1 - No poverty, SDG 2 - Zero hunger, SDG 3 - Good health and well-being, SDG 4 - Quality education,
SDG 5 - Gender equality, SDG 6 - Clean water and sanitation, SDG 7 - Affordable and clean energy, SDG 8 - Decent work and economic growth,
SDG 9 - Industry, innovation and infrastructure, SDG 10 - Reduced inequalities, SDG 11 - Sustainable cities and communities,
SDG 12 - Responsible consumption and production, SDG 13 - Climate action, SDG 14 - Life below water, SDG 15 - Life on land,
SDG 16 - Peace, justice and strong institutions, SDG 17 - Partnerships for the goals
Page 112
SDG 5, 16
21.7%
22-24%
More on
Energy and climate protection]
70%
SDGs
60%
SDG 8, 12,
16, 17
Page 90
Free cash flow
Assessment of sustainability performance of relevant
suppliers²; development of action plans where improvement
is necessary
4 Baseline 2015: excluding the gas trading and storage business transferred to Gazprom
3 The average change was calculated using the changes in the non-adjusted figures from 2015 to 2017 and the change in the adjusted figures from 2018 to 2017. This
gives an approximate average change on a comparable basis in each case. However, the figures does not take into account the structural decline in sales and EBITDA
due to the classification of the oil and gas business as a discontinued operation.
[Employees
Proportion of women in
leadership positions with
disciplinary responsibility
2021 goal
Status at end of 2018
2 Our suppliers are evaluated based on risk due to the size and scale of our supplier portfolio. We define relevant suppliers as Tier 1 suppliers showing an elevated
sustainability risk potential as identified by our risk matrices and our purchasers' assessments. We also use further sources of information to identify relevant suppliers
such as evaluations from Together for Sustainability (TFS), a joint initiative of chemical companies for sustainable supply chains.
1 Not included in the portfolio are primarily the sales reported under Other (see page 85 for more information on the composition of Other) or not allocated to the operating business (such as licenses).
BASF Report 2018
37
For more information on Sustainable Solution Steering, see
basf.com/en/sustainable-solution-steering
We largely achieved our previous goal of increasing the proportion of
sales from Accelerator products to 28% by 2020 at the end of 2018
(proportion of sales in 2018: 27.7%).
рәбиәјречо
Accelerator products make a substantial sustainability contribution
in the value chain. This is why we will pursue a new, ambitious goal
from 2019 onward: We aim to make sustainability an even greater
part of our innovation power and achieve €22 billion in Accelerator
sales by 2025.
By the end of the 2018 business year, BASF had conducted sus-
tainability assessments and ratings for 96.5% of its entire relevant
portfolio¹ of more than 60,000 specific product applications - which
account for €56.2 billion in sales. These consider the products'
application in various markets and industries. Because of increasing
sustainability requirements on the market, we regularly conduct
reassessments of existing product categories as well as of the
relevant portfolio.
A significant steering tool for our product portfolio, based on the
sustainability performance of our products, is the Sustainable Solu-
tion Steering method (see box on page 38).
■ New goal to manage our product portfolio with the
Sustainable Solution Steering method from 2019 onward
■ As of 2018, Challenged products will be phased out within
five years of initial classification
37
For more information on our sustainability instruments, see
basf.com/en/measurement-methods
For more information on this method and the results of Value to Society, see
basf.com/en/value-to-society
To achieve this goal, we will deeply integrate Sustainable Solution
Steering into the research and development pipeline, in business
strategies as well as in merger and acquisition projects.
Portfolio management based on sustainability performance
5 Supplementary Information Oil and Gas Business 6 Overviews
1 To Our Shareholders
5.3% 0.1%
We contribute our approach and expertise to current debates on the
monetary value of the economic, environmental and social impact
of business decisions. We share our experiences in networks and
initiatives such as the Impact Valuation Roundtable or the Embank-
ment Project for Inclusive Capitalism. As part of this project to pro-
mote sustainable governance, financial market participants, compa-
nies and other stakeholders developed metrics and methods to
measure the long-term value created by companies more compre-
hensively. A reporting framework was published in late 2018. We are
also involved in the corresponding standardization processes within
the International Organization for Standardization (ISO).
Performer
Transitioner
Sustainable
Solution
Steering
Accelerator
About This Report
66.9%
(2017: 67.8%¹)
27.7%
Portfolio management: increase Accelerator sales and phase out Challenged products
Substantial sustainability contribution in the value chain
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Integration of Sustainability
(2017: 27.7%)
We also evaluate the usefulness of this method as a basis for strate-
gic assessments and decisions in various projects, for example, by
analyzing the impacts of alternative sites, business units, plants or
forecasts. The results of these assessments are also helpful in our
discussions with stakeholders.
■ Ensuring business success tomorrow by creating value
for the environment, society and business
BASF has also developed a method with external experts to perform
a monetary assessment of the economic, ecological, and social
impacts of its business activities along the value chain - the Value to
Business success tomorrow means creating value for the environ-
ment and society, not just making a profit. This is why, in addition to
our new financial targets, we have also set ourselves new nonfinan-
Ocial targets on climate protection, a sustainable product portfolio,
responsible procurement and engaged employees to steer our
business into a sustainable future.
We identify relevant topics and trends as well as potential opportu-
nities and risks along our value chain through dialog with stakehold-
ers, supported by continuous, worldwide big data analysis. In 2018,
we also co-published a study identifying long-term sustainability
trends between now and 2030, based on an analysis of more than
900 studies from academia, think tanks and market analyses.
Relevant topics resulting from these commitments - such as energy
and climate protection, portfolio management, supply chain respon-
sibility, employee engagement, resource efficiency, responsible
production and water - form the focal points of our reporting. We
integrate these topics into our long-term steering processes to
increase societal acceptance and take advantage of business
opportunities. Here, we consider three dimensions of materiality:
The relevance of sustainability topics to our business, the impacts of
our business activities along the value chain on sustainability topics,
and how important these topics are to our stakeholders.
We value people and treat them with respect
- We drive sustainable products and solutions
- We produce safely for people and the environment
We produce efficiently
We source responsibly
The Corporate Sustainability Board is BASF's central steering com-
mittee for sustainable development. It is composed of the heads of
our business, corporate and functional units, and regions. A mem-
ber of the Board of Executive Directors serves as chair. We have
also established an external, independent Stakeholder Advisory
Council. Here, international experts from academia and society
contribute their perspectives to discussions with BASF's Board of
Executive Directors, helping us expand our strengths and identify
potential for improvement.
We have defined sustainability focus areas in our corporate strategy
to position ourselves in the market and at the same time, meet the
growing challenges along the value chain:
We achieve long-term business success by creating value for the
economy, the environment and society. Sustainability is at the core
of what we do, a driver for growth as well as an element of our risk
management. That is why sustainability is firmly anchored into the
organization, governance and our business models. We support our
customers in being more sustainable and create new business
opportunities that grow our customer relationships. Conducting our
business in a responsible, safe, efficient and respectful way pro-
motes societal acceptance of our business activities.
■ Taking advantage of business opportunities and
minimizing risks
Strategy
(2017: 4.4%) (2017: 0.1%)
Business success tomorrow means creating value for the
environment, society and business. This is why sustainability
has been reinforced as a cornerstone of our updated corpo-
rate strategy. Using the various tools of our sustainability
management, we carry out our company purpose: "We create
chemistry for a sustainable future." We systematically incor-
porate sustainability into our business. We understand future
sustainability trends and derive appropriate measures for our
business to seize business opportunities and minimize risks
along the value chain.
[Integration of Sustainability
Our products, solutions and technologies contribute to achieving
the United Nations' Sustainable Development Goals (SDGs), for
example, on sustainable consumption and production, climate
action or fighting hunger. In this way, we want to make a lasting
contribution to a viable future.
Society approach. It enables a direct comparison between financial
and nonfinancial effects of our business activities on society and
illustrates interdependencies.
Our sustainability management helps to minimize risks and opens
up new opportunities to market more sustainable products. We
reduce potential risks in the areas of environmental protection,
safety and security, health protection, product stewardship, compli-
ance, and labor and social standards by setting ourselves globally
uniform requirements. These often go beyond local legal require-
ments. Internal monitoring systems and grievance mechanisms
enable us to check compliance with these standards: they include,
for example, global surveys, audits and compliance hotlines. All
employees, managers and Board members are required to adhere
to our global Code of Conduct, which defines a binding framework
for our business activities.
For more information on our study on long-term sustainability trends, see
basf.com/sustainability-trends
To achieve this, we need to even better understand how our actions
impact society and the environment. We already have many years of
experience of this from evaluating our products and processes using
methods such as Eco-Efficiency Analysis, the Sustainable Solution
Steering portfolio analysis, or BASF's corporate carbon footprint.
We have completely revised our SEEbalanceⓇ method with respect
to how social aspects are assessed. In a new, qualitative assess-
ment, we analyze and evaluate relevant social issues along the value
chain. Our assessment is guided by standards such as those issued
by the World Business Council for Sustainable Development
(WBCSD) or the Roundtable for Product Social Metrics.
We want to measure the value proposition of our actions along the
entire value chain, aware that our business activities are connected
to both positive and negative impacts on the environment and
society. We strive to increase our positive contribution to society
and minimize the negative impacts of our business activities.
We take advantage of business opportunities by offering our custom-
ers innovative products and solutions that contribute to sustainable
development. We ensure that sustainability criteria are automatically
integrated into our business units' development and implementation
of strategies, research projects and innovation processes. For
example, we analyze sustainability-related market trends in customer
industries to systematically seize new business opportunities.
■ Value to Society: Method for assessing economic,
environmental and social impact of business activities
along the value chain
Measuring value added by sustainability and harnessing
business opportunities
5 Supplementary Information Oil and Gas Business 6 Overviews
We systematically evaluate sustainability criteria as an integral part
of our assessment processes when deciding whether to acquire or
invest in property, plant and equipment or financial assets. These
assess the economic implications and potential impacts on areas
such as the environment, human rights or local communities.
For more information on our financial and sustainability targets, see pages 23 to 24 and 26
For more information on our materiality analysis, see basf.com/materiality
4 Consolidated Financial Statements
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1 To Our Shareholders
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BASF Report 2018
For more information on the organization of our sustainability management, see
basf.com/sustainabilitymanagement
3 Corporate Governance
Evaluating and transparently classifying our products enables us
to systematically improve these in cooperation with our custom-
ers and at the same time, steer our product portfolio. Our aim is
to increase sales from Accelerator products to €22 billion in
2025. We have identified substantial sustainability concerns for
our Challenged products and are developing action plans. These
action plans include research projects, reformulations or even
replacing one product with an alternative product. At the end of
13.8% Social projects
Specific sustainability issues which are being
actively addressed
As a responsible neighbor, BASF strives to create a livable commu-
nity for our sites' neighbors, employees and their families. In Ger-
many, we support regional focus areas in Ludwigshafen and the
Rhine-Neckar metropolitan region such as strengthening participa-
tion and integration among disadvantaged groups or promoting
research and discovery. Examples include the Gemeinsam Neues
schaffen program to foster cooperation between nonprofit organiza-
tions, a new approach to promoting cultural events called Tor 4, with
which BASF aims to promote discourse on relevant social issues
through cultural projects, or a pilot program to integrate people with
immigrant or migrant backgrounds.
We promote social, educational, cultural, academic and sports
projects as part of our social engagement strategy. We focus on
projects that will have a lasting impact on specific target groups and
offer learning opportunities for participating cooperation partners
and BASF. Projects are developed, and impact-related targets
defined together with partners from civil society.
We support the implementation of the United Nations' Sustainable
Development Goals with our social commitment around the world.
■ BASF as a responsible neighbor
Social commitment
5 Supplementary Information Oil and Gas Business 6 Overviews
We also foster social integration, particularly of young low achievers
and refugees. Programs in the Rhine-Neckar metropolitan region
include Start in den Beruf, Anlauf zur Ausbildung and Start Integra-
tion. In 2018, 241 young people in the BASF Training Verbund par-
ticipated in these programs in cooperation with partner companies.
The goal is to prepare participants for a subsequent apprenticeship
within one year, and ultimately secure the long-term supply of quali-
fied employees for BASF and in the region as a whole. Since being
launched at the end of 2015, BASF's Start Integration program has
supported around 350 refugees with a high probability of being
granted the right to remain in Germany, helping to integrate them
4 Consolidated Financial Statements
2 Management's Report
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BASF Report 2018
For more information on labor and social standards, see page 115 onward
For more information on our production standards, see page 96 onward
For more information on standards in our supply chain, see page 90 onward
For more information on compliance, see page 140 onward
3 Corporate Governance
For more information on our fundamental principles, see our human rights position at
basf.com/humanrights
into the labor market. We spent around €5.6 million on the BASF
Training Verbund in 2018.
We also aim to create long-term value for BASF and society with new
business models and cross-industry partnerships. Our company-
wide Starting Ventures program helps people with precarious liveli-
hoods to improve their income-earning opportunities and their
quality of life. At the same time, the program provides access to new
markets and strengthens our contribution to reaching the U.N.
Sustainable Development Goals. One project in Egypt, for example,
helps tomato smallholders to increase their tomato crop yields.
A digital early warning system developed by BASF sends an alert via
SMS or voice message to inform them of any outbreaks of plant
diseases.
40
40
BASF Report 2018
For more information on Starting Ventures, see basf.com/en/starting-ventures
For more information on social commitment at our sites, see ludwigshafen.basf.de/commitment
1 Figure relates to all consolidated companies with employees including joint operations, but excluding the
vegetable seeds business acquired from Bayer (NunhemsⓇ)
41.9% Education
In North America, BASF supported various charitable organizations
to provide relief for the damage caused by hurricanes Michael and
Florence in states such as Florida, North Carolina and Virginia in the
fall of 2018.
5 Supplementary Information Oil and Gas Business 6 Overviews
Science 6.0%
Sports 7.1%
Other 15.6%
BASF Group donations, sponsorship and own projects in 2018¹
The BASF Group spent a total of €38.4 million supporting projects
in 2018; we donated 39% of this amount (2017: €56.0 million, of
which 57% were donations).
In the area of international development work, we support the BASF
Stiftung, an independent nonprofit organization, through donations
to its projects with various U.N. organizations. In 2018, BASF sup-
ported a project spearheaded by the U.N. Children's Fund (UNICEF)
to promote inclusive education in Peru with its annual year-end
donation campaign to the BASF Stiftung. BASF doubled all dona-
tions by employees of participating German and South American
Group companies, bringing the total amount benefiting the children
in Peru to €567,926.64.
Culture 15.6%
Meets basic sustainability standards on the market
BASF has been actively involved in the U.N. Global Compact's
Action Platform on Decent Work in Global Supply Chains since
2018. This cross-industry working group aims to improve working
conditions in global supply chains as these relate to labor and
human rights. The companies involved have developed a voluntary
commitment to more effectively implement the main international
standards the ILO core labor standards, the 10 principles of the
U.N. Global Compact and the U.N. Guiding Principles on Business
and Human Rights - in their respective supply chains through speci-
fic measures such as supplier training, collaboration with partners or
greater transparency. BASF was one of the first companies world-
wide to adopt this voluntary commitment in late 2018.
Employees and third parties can report potential violations of laws or
company guidelines to our complaint hotlines. 231 human rights-
related complaints were received by the hotline as well as by post
and e-mail in 2018. All complaints received are reviewed and
forwarded to the relevant departments for in-depth investigation.
If justified, suitable measures are taken to address the issue.
2 Management's Report
Integration of Sustainability
1 To Our Shareholders
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38
BASF Report 2018
1 Figures for 2017 have been restated due to the agreement between BASF and LetterOne to merge their oil and gas businesses.
3 Corporate Governance
That is why we are active in worldwide initiatives with various stake-
holder groups. We have been a member of the U.N. Global Compact
since 2000. As a recognized LEAD company, we also support the
implementation of the Agenda 2030 and its Sustainable Development
Goals. We are involved in projects such as the U.N. Global Compact's
Action Platforms on Decent Work in Global Supply Chains (SDG 8)
and on Good Health and Well-being (SDG 3), and are a member of
the U.N. Global Compact Expert Network. BASF is also active in
14 local Global Compact networks, including – for the first time - the
United States and Tanzania since 2018.
Our stakeholders include customers, employees, suppliers and
shareholders, as well as representatives from academia, industry,
politics and society. Parts of our business activities, such as the use
of new technologies, are often viewed by some stakeholders with a
critical eye. In order to increase societal acceptance for our business
activities, we address our stakeholders' questions, assess our busi-
ness activities in terms of sustainability aspects, and communicate
transparently. Such dialogs help us to even better understand what
society expects of us and which measures we need to pursue in
order to establish and maintain trust and build partnerships.
■ Circular economy: chemical recycling of plastic waste
■ Continuous dialog with our stakeholders
Stakeholder dialog
2018, action plans had been created for 100% of Challenged
products. To systematically align our portfolio with contributions
to sustainability, as of 2018 we will phase out all Challenged
products within five years of initial classification as such at the
latest. We strive to offer products that make a greater contribu-
tion to sustainability in their area of application to live up to our
own commitments and meet our customers' demands.
Significant sustainability concern identified and
action plan in development
We use a custom model to identify key stakeholders and involve
them more effectively. When selecting our stakeholders, we assess
factors such as their topic-specific expertise and willingness to
engage in constructive dialog, for instance. We draw on the compe-
tence of global initiatives and networks, and contribute our own
expertise.
BASF is part of the Global Business Initiative on Human Rights (GBI).
This group of globally operating companies from various sectors
aims to ensure implementation of the U.N. Guiding Principles on
Business and Human Rights. In 2018, we again consulted with
representatives of civil society at an international and national level
on an ongoing basis, which provided valuable input for our measures.
4 Consolidated Financial Statements
Recognized in 2018 as an
Criteria for monitoring and complying with human rights standards
are integrated into processes at our Group companies around the
world: in supplier evaluation processes, in evaluating investment,
acquisition and divestiture projects, in product assessments along
the product lifecycle, in training for security personnel at our sites,
for example, on response appropriateness, as well as in systems to
monitor labor and social standards.
BASF acknowledges its responsibility to respect human rights. We
have embedded this into our Code of Conduct and our human
rights position. In our own business activities, our aim is to prevent
human rights abuses. As a participant in numerous global value
chains, we are dependent on partners and demand that they like-
wise respect human rights and the associated standards. We offer
to help our partners in their efforts to meet their human rights
responsibilities.
■ Human rights criteria integrated into existing due
diligence processes
Responsibility for human rights
For more information on the ChemCycling project, see pages 34 and 92
For more information on our guidelines for responsible lobbying, see
basf.com/guidelines_political_communication
5 Supplementary Information Oil and Gas Business 6 Overviews
For more information on the Stakeholder Advisory Council, see
basf.com/en/stakeholder-advisory-council
sible Care Management System, which was further expanded in the
regions in 2018.
We have a particular responsibility toward our production sites'
neighbors. With the established community advisory panels, we
promote open exchange between citizens and our site management
and strengthen trust in our activities. Our globally binding require-
ments for community advisory panels at our sites are based on the
grievance mechanism standards in the United Nations' Guiding
Principles on Business and Human Rights. We keep track of their
implementation through the existing global databank of the Respon-
Our lobbying and political communications are conducted in accor-
dance with transparent guidelines and our publicly stated positions.
BASF does not financially support political parties. In the United
States, employees at BASF Corporation have exercised their right to
establish a Political Action Committee (PAC). The BASF Corporation
Employee PAC is a voluntary, federally registered employee associ-
ation founded in 1998. It collects donations for political purposes
and independently decides how these are used, in accordance with
U.S. law.
We once again met with the Stakeholder Advisory Council in 2018
to discuss important aspects of sustainability. The main topics were
strengthening sustainability in the corporate strategy, such as the
discussion on the new sustainability goals. We received and imple-
mented recommendations for our thematic focus areas. For exam-
ple, the Stakeholder Advisory Council encouraged us to push for-
ward with the circular economy as a strategic focus, where BASF
developed a chemical recycling method for plastic waste. As part of
the ChemCycling pilot project, the first pyrolysis oil derived from
plastic waste by our partners was fed into the BASF Verbund in
2018.
for innovative solutions and initiatives driving sustainable
water and climate action
SDG Pioneer
For more information on stakeholder dialog, see basf.com/en/dialog
4 Consolidated Financial Statements
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2 Management's Report
Integration of Sustainability
Technical University of Berlin
Berlin, Germany
UniCat BASF JointLab
BasCat
Battery and Electrochemistry Laboratory
Karlsruhe Institute of Technology (KIT)
Karlsruhe, Germany
BELLA
Catalysis Research Laboratory
Heidelberg University
Heidelberg, Germany
CaRLa
iL
Seoul, South Korea
Kyoto, Japan
Kyoto University
Tokyo, Japan
Sichuan University
Chengdu, China
Zhejiang University
Hangzhou, China
Fudan University
Shanghai, China
Dalian Institute of Chemical Physics
Dalian, China
Seoul National University
Innovation Lab
Karlsruhe Institute of Technology (KIT).
Karlsruhe, Germany
Heidelberg University
■ Research units closer aligned with business and
customer needs
Strategic focus
Our eight academic research alliances are complemented by coop-
erations with around 300 universities and research institutes] as
well as collaborations with a large number of companies. These
academic research alliances and bilateral cooperations have been
integrated into our excellence program, UNIQUE The BASF
Academic Partnership Program.
We are working on innovative components and materials for electro-
chemical energy storage with the Karlsruhe Institute of Technology
(KIT) at the Battery and Electrochemistry Laboratory (BELLA). At the
joint Catalysis Research Laboratory (CaRLa), BASF is researching
homogeneous catalysis in cooperation with the University of Heidel-
berg. BasCat is a joint laboratory operated by the UniCat cluster of
excellence and BASF at the Technical University of Berlin, where
new heterogenous catalysis concepts are being explored together
with the Fritz Haber Institute of the Max Planck Society. The iL (Inno-
vation Lab) in Heidelberg, Germany, focuses on functional printing,
printed sensors and loT (internet of things) applications.
The Northeast Research Alliance (NORA, previously the North
American Center for Research on Advanced Materials) and the
California Research Alliance (CARA) are located in the United States.
NORA focuses on materials science and biosciences, catalysis
research, digitalization and cooperation with startups, while the
interdisciplinary CARA research center works on new functional
materials and in the area of biosciences. The Joint Research Net-
work on Advanced Materials and Systems (JONAS) research center
is active in Europe. Research here concentrates on supramolecular
chemistry as well as nanotechnology and polymer chemistry. At the
Network for Asian Open Research (NAO) in the Asia Pacific region,
research focuses on polymer and colloid chemistry, catalysis and
machine learning.
strengthen our portfolio with creative new projects and in this way,
reach our long-term growth goals. Our eight academic research alli-
ances bundle partnerships with several research groups in a geo-
graphic region or with a specific research focus.
Innovation
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
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31
BASF Report 2018
Heidelberg, Germany
Beijing Institute of Technology
Beijing, China
■ Further development of our innovation strategies
Beijing, China
Changchun, China
Innovation has made BASF the leading chemical company world-
wide. This has always been the key to BASF's success, especially in
a challenging market environment. Our innovative strength is based
on a global team of highly qualified employees with various speciali-
zations. We had more than 11,000 employees involved in research
and development in 2018. Our team grew by around 1,600 research
and development employees at 17 sites around the world in 2018
as a result of the acquisition of a range of businesses and assets
from Bayer. The businesses acquired include research and develop-
ment activities for soybean, cotton, canola and vegetable seeds,
which optimally complement our crop protection and biotechnology
activities.
Our three global research divisions are run from our key regions
Europe, Asia Pacific and North America: Process Research &
Chemical Engineering (Ludwigshafen, Germany), Advanced Materi-
als & Systems Research (Shanghai, China) and Bioscience Research
(Research Triangle Park, North Carolina). Together with the develop-
ment units in our operating divisions, they form the core of our
global Know-How Verbund. BASF New Business GmbH and BASF
Venture Capital GmbH supplement this network with the task of
using new technologies to tap into attractive markets and new
business models for BASF.
[In 2018, we generated sales of around €9 billion with products
launched on the market in the past five years that stemmed from
research and development activities. ] In the long term, we aim to
continue significantly increasing sales and earnings with new and
improved products.
Global network: eight Academic Research Alliances
CARA
California Research
Alliance
A growing need for food, energy and clean water for a boom-
ing world population, limited resources and protecting the
climate-reconciling all these factors is the greatest challenge
of our time. Innovations based on chemistry play a key role
here, as they contribute decisively to new solutions. Effective
and efficient research and development is a prerequisite for
innovation as well as an important growth engine for BASF. We
develop innovative processes, technologies and products for
a sustainable future and drive forward digitalization in research
worldwide. This is how we ensure our long-term business
success with chemistry-based solutions for our customers in
almost all industry sectors.
UC Davis
UC Berkeley
Berkeley, California
Stanford University
Stanford, California
UC Santa Barbara
Santa Barbara, California
Caltech
Pasadena, California
UC Riverside
Riverside, California
UC San Diego
San Diego, California
NORA
Northeast Research Alliance
Davis, California
Innovation
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
Changchun Institute of Applied Chemistry
Network for Asian Open Research
NAO
Zurich, Switzerland
ETH Zürich
University of Freiburg
Freiburg, Germany
Joint Research Network on
Advanced Materials and Systems
I.S.I.S-University of Strasbourg
Strasbourg, France
Our global network of outstanding universities, research institutes
and companies forms an important part of our Know-How Verbund.
It gives us direct access to external scientific expertise, talented
minds from various disciplines as well as new technologies, and
helps us to quickly and efficiently develop marketable innovations,
■ Academic Research Alliances bundle partnerships by
topic and region
■ Close cooperation with universities, research institutes
and companies
Global network
JONAS
Harvard University
Cambridge, Massachusetts
Massachusetts Institute of
Technology
Cambridge, Massachusetts
University of Massachusetts
Amherst, Massachusetts
About This Report
1 To Our Shareholders
2 Management's Report
Innovation
3 Corporate Governance
Tsinghua University
[In 2018, our research pipeline comprised around 3,000 projects.]
Expenses for research and development amounted to €2,028 mil-
lion, above the prior-year level (€1,888 million). The increase was
primarily attributable to the acquisition of the seed business from
Bayer in August 2018. The operating divisions accounted for 80% of
total research and development expenses in 2018. The remaining
20% related to cross-divisional corporate research focusing on
long-term topics of strategic importance to the BASF Group. In the
coming year, we anticipate significantly higher research and develop-
ment expenses due to the acquisition of the research-intensive seed
business.
We will continue to focus on developing attractive innovations for
our customers. Under our updated strategy, research and develop-
ment will be more closely connected organizationally in the future
and thus more focused on customer needs. Our aim is to shorten
the time to market and accelerate the company's organic growth.
Creativity, efficiency and collaboration with external partners are
among the most important success factors here. In order to bring
promising ideas to market as quickly as possible, we regularly
assess our research projects using a multistep process and align
our focus areas accordingly.
The aim of our innovation approach is to increase our company's
power of innovation and to secure our long-term competitiveness.
We aim to achieve this by concentrating our research focus on
topics that are strategically relevant for our business, strengthening
our existing scientific processes as well as increasingly using new
scientific methods and digital tools, as well as optimizing our organi-
zational structures.
About This Report
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BASF Report 2018
Functional Materials & Solutions: 04-115 Quattro is a new sulfuric
acid catalyst from BASF with a unique quattro-shaped geometry - a
combination of four strands. It was developed digitally using fluid
dynamics and strength simulations. The catalyst not only offers excel-
lent mechanical properties, but also provides a 30% greater active
surface area than previous catalysts based on its geometry. For sulfuric
acid producers, this translates into increased capacity and improved
performance in plants with limited catalyst volumes. SO2 off-gas emis-
sions are also reduced, resulting in a significant decrease in SO2
emissions per metric ton of sulfuric acid produced and providing our
customers with a comparative advantage in a very competitive market.
The water that accumulates in aircraft fuel tanks leads to high costs
for airlines, who have to regularly extract this water and address the
potential dangers of ice formation and corrosion in wing tanks. The
performance additive Kerojet® Aquarius disperses the water con-
tained in jet fuel, removing it during the normal combustion process
in the turbine. In this way, BASF's water scavenger makes a signifi-
cant contribution to improving safety and maintenance parameters
by reducing the frequency of cost-intensive water extraction mea-
sures and inhibiting ice formation in wing tanks.
BASF launched Lucantin® NXT, the next generation of carotenoid
formulations, which are nature-identical color pigments used as
feed additives. The new formulations provide markedly improved
product stability to meet various requirements for feed production,
along with excellent bioavailability, enabling the carotenoids to be
efficiently absorbed by the animal. Extensive trials have shown that
LucantinⓇ NXT delivers high homogeneity and a long shelf life while
maintaining egg yolk and broiler skin coloring efficacy. The new
formulations replace the previously used stabilizer ethoxyquin (EQ)
with antioxidants such as propyl gallate, butylhydroxytoluene or
tocopherol. Lucantin® NXT complies with the latest E.U. regulation,
which requires the suspension of EQ as a feed additive.
1 To Our Shareholders
EuperlanⓇ OP White is a wax-based opacifier that gives personal
care products such as shampoos or shower gels a creamy milky-
white appearance. It is readily biodegradable and cold processable.
These unique properties make EuperlanⓇ OP White particularly
suitable for eco-label conforming skin and hair cleansing formula-
tions. As an alternative to conventional opacifiers, the product meets
the growing demand for environmentally friendly ingredients.
We constantly renew our specialty chemicals portfolio, also for the
pharmaceutical industry. Based on its own technology, BASF has
developed optically active key components that are used by our
customers in advanced active ingredients. Optically active sub-
stances comprise mirror-image molecules with different physiological
properties and thus different effects. Thanks to our expertise, we can
selectively produce either the "left-handed" or "right-handed" forms of
these molecules. By isolating these chemical building blocks for our
customers, we help them to significantly improve the quality of life of
people living with HIV, for example, with innovative medications that
reduce the number of HIV viruses in the body and keep this at a low
level.
binder system starts to cure in the press at lower temperatures than
usual. This increases production speed by up to 20%, saving pro-
cess energy and significantly increasing total production capacity.
In 2016, we consolidated marketing activities for our established
binders for the woodworking industry amino resins (such as
KauritⓇ) and isocyanates (such as LupranatⓇ). With KauranatⓇ MS
1001, a modified isocyanate, BASF has now developed a new
product that enables the optimal combination of both binder types.
When Kauranat® MS 1001 is used in a hybrid binder system
together with an amino resin to produce chipboard, for example, the
-
For more information on our ChemCycling project, see Raw Materials on page 92
Chemicals: BASF's ChemCycling project focuses on reusing
plastic waste in chemical production rather than disposing of it.
Thermochemical processes are used to transform plastic waste into
new raw materials, which are then fed into the BASF Verbund instead.
of fossil resources. In October 2018, the first pyrolysis oil derived
from plastic waste by our partners was used in Ludwigshafen, Ger-
many. The new chemical products manufactured from this pyrolysis
oil have the same quality as products made from fossil feedstock.
The Eco-Efficiency Analysis developed by BASF ensures that the
innovative approach also creates value for the environment. Many of
our customers already aim to increase the proportion of recycled
materials in their products. We are currently working with customers
to produce the first prototypes for customer products with chemically
recycled material.
& Solutions
Performance Products: Designers in the furniture industry now
have access to innovative wood fiberboards based on BASF's new
binder technology, acFormⓇ. Unlike standard wood fiberboards,
those novel panels can be 3D-molded and their surfaces can be
structured on standard furniture molding equipment. This opens up
new, cost-efficient design options for large-scale production. Since
acFormⓇ works without formaldehyde, this technology also enables
the woodworking industry to set new standards in workplace health
and safety.
2 Management's Report
Innovation
3 Corporate Governance
4 Consolidated Financial Statements
1 To Our Shareholders
About This Report
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BASF Report 2018
Digital innovation will also contribute to the profitable growth of the
Agricultural Solutions segment. The digital farming activities and asso-
ciated pipeline developments under the xarvioⓇ brand complement our
existing portfolio with additional products and functionalities as well as
access to the latest technologies. This additional expertise to optimize
yields, including scientific data, predictive modeling for seasonal plan-
ning and needs-based recommendations on the application of crop
inputs, will accelerate our digital plans and improve our overall digital
offer. This enables us to offer our customers even better agronomic
support and assistance in optimizing the cultivation of their crops.
business, mainly marketed under the Nunhems® brand, develops
vegetable and hybrid varieties adapted to different growing conditions
and that meet the needs of consumers and the global food value chain
for novel vegetable varieties.
1 Peak sales describes the highest sales value to be expected in one year. For more information, see the Glossary on page 288.
2 GT27™ traits are developed and marketed in cooperation with MS Technologies LLC, West Point, Iowa.
For seeds and traits, the acquired businesses open up new opportu-
nities that contribute to our innovation pipeline. The market launch of
the new herbicide-tolerant soybean seed with the LibertyLink®
GT27™ trait platform² is planned for 2020. This new soybean technol-
ogy will be available to growers under the CredenzⓇ brand as well as
licensee's brands, and will allow farmers to apply LibertyⓇ herbicide
and two other herbicide active ingredients. Registration for one of
these active ingredients is expected for the 2020 growing season.
New cotton technology with herbicide tolerance will also be launched
under our FibermaxⓇ and Stoneville® brands with a new mode of
action. We want to expand the acquired InVigorⓇ canola seed busi-
ness with yellow seed canola, which can be grown under more chal-
lenging conditions such as arid environments. Our vegetable seeds
Our well-stocked innovation pipeline comprises products with a
launch date between 2018 and 2028. With a peak sales potential of
more than €6 billion, the pipeline includes innovations from all busi-
ness areas. This positive development is the result of continual invest-
ment and early consideration of sustainability criteria as part of our
research and development strategy. The first market launches of
RevysolⓇ, our new fungicide, are scheduled for the 2019 growing
season following registration with the relevant authorities. LuximoⓇ
and TirexorⓇ, our new herbicides to manage a broad range of
difficult-to-control grasses and broadleaf weeds, are expected to
enter the market from 2020 onward. We launched the new insecticide
InscalisⓇ in 2018. Another new insecticide, Broflanilide, to help
farmers protect specialty and field crops from insects such as potato
beetles and caterpillars, is planned to be on the market from 2020. In
2018, the Functional Crop Care business launched VelondisⓇ, for
example, a biological fungicide for seed treatment.
To achieve this, we invest continually in developing our pipeline in order
to expand our portfolio in conventional crop protection, seeds, traits
and beyond such as in biological solutions. In 2018, we invested
€679 million in research and development in the Agricultural Solutions
division, representing around 11% of sales for the segment.
-
Agricultural Solutions: We are working with farmers around the
globe to improve the quality and yield of their agricultural production
while taking societal expectations and requirements into consideration.
BASF's UltrasimⓇ simulation tool has long been used to determine
the direction of fibers in injection-molded plastics components after
manufacturing (anisotropic mechanical behavior). The new UltrasimⓇ
thermomechanics module also enables thermal deformation to
be detected at an early stage of development of components like
these. It takes into account the complex thermomechanical material
behavior, the impact of the anisotropic fiber orientation as well as
temperature distribution and temperature changes in the compo-
nent. The tool can be used to simulate the typical temperature load
from minus 40°C to 150°C for various applications. This saves our
customers time and money in the development process as they are
able to identify and avoid component faults at an early stage before
going into serial production. This is crucial for electrical and elec-
tronic equipment used in the automotive industry.
BASF created the AuroomⓇ online platform to visualize automotive
paints virtually. The colors available in the database can be mapped
onto any 3D surface online, showing the characteristics and effects of
the automotive coating in photographic quality. Painted samples are
photographed from different angles and under different lighting, and
processed using a special mathematical model. Digitalization speeds
up the design process for original equipment manufacturers (OEMs),
as they no longer have to wait for all samples to be painted and
shipped. The effect of the color on the entire car body can be simu-
lated in real time and projected onto manufacturers' own models.
MasterTop TC 941 is a non-solvent-based, UV-stable topcoat with
low emissions that offers exceptional cleanability and scratch resis-
tance properties for resin floor systems. Targeted for use in retail and
light industry spaces, MasterTop TC 941 has excellent aesthetic dura-
bility, which reduces cleaning and maintenance bills and leads to a
lower cost of ownership for the customer over the life of the floor.
5 Supplementary Information Oil and Gas Business 6 Overviews
20% Functional Materials
€2,028 million
20% Performance Products
6% Chemicals
Research focus areas - examples
For a multiyear overview of research and development expenditures,
see the Ten-Year Summary on page 280
The number and quality of our patents also attest to our power of
innovation and long-term competitiveness. We filed around 900 new
patents worldwide in 2018. In 2018, we once again ranked among
the leading companies in the Patent Asset Index, a method that
compares patent portfolios industry-wide.
Our global research and development presence is vital to our
success. We want to continue advancing our research and develop-
ment activities, particularly in Asia as well as in North America, and
are adapting this to growth in regional markets. A stronger presence
outside Europe creates new opportunities for developing and
expanding customer relationships and scientific collaborations as
well as for gaining access to talented employees. This strengthens
our Research and Development Verbund and makes BASF an even
more attractive partner and employer.
We continued to work on harnessing the enormous opportunities of
digitalization for research and development in 2018. In the years
ahead, we will continue to consistently expand our expertise in fields
like scientific modeling and simulation and to develop new digital
applications.
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Innovation
1 To Our Shareholders
About This Report
32
32
BASF Report 2018
We believe that the businesses acquired from Bayer offer tremen-
dous innovation potential. The research and breeding capabilities of
the new seed businesses, for instance, provide the opportunity to
further develop and market high-yielding wheat hybrids. In addition,
a breeding project improving the oil quality of Brassica juncea (Indian
mustard) to canola grade and certain non-selective herbicide and
nematicide research projects perfectly complement our existing
R&D activities.
We are fine-tuning our innovation strategies in all of our business
areas to ensure a balanced portfolio of incremental and breakthrough
innovation, as well as of process, product and business model inno-
vation. One of the steps taken in 2018 to further promote break-
through innovation was the establishment of BASF-Inkubator
Chemovator GmbH, based in Mannheim, Germany. This actively
nurtures promising business ideas with the help of external experts,
who act as consultants, coaches, mentors or intermediaries, and
quickly bring these to market readiness. We have also identified addi-
tional, far-sighted topics that go above and beyond the current focus
areas of our divisions. The aim is to use these to exploit new business
opportunities within the next few years. Above and beyond this, we
are working on overarching projects with a high technological, social
or regulatory relevance. For instance, one global research and
development program is focusing on the energy-intensive underlying
production processes for basic chemicals. These basic chemicals
account for more than half of the CO2 emissions produced by the
European chemical industry. The program covers topics such as the
development of new catalysts for methane pyrolysis and the direct
conversion of syngas, as well as research into materials and safety
for the electrification of steam cracker heating.
Our cross-divisional corporate research will remain closely aligned
with the requirements of our operating divisions and allows space to
quickly review creative research approaches. We strengthen existing
and continually develop new key technologies that are of central
significance for our operating divisions, such as polymer technolo-
gies, catalyst processes or biotechnological methods.
■ Increased use of digital technologies
3 Corporate Governance
■ Innovative battery materials for electromobility
Expansion of business activities in 3D printing
- Quality of life
Agricultural Solutions 34%
Corporate research, 20%
Other
Research and development expenses by segment 2018
Innovations in the segments - examples
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Innovation
1 To Our Shareholders
About This Report
BASF Report 2018
BASF is developing new, innovative materials for 3D printing. In
the chemical industry, BASF already has a broad portfolio with
materials, system solutions, components and services. Focus
areas in new materials development are polyamide-based
polymers, thermoplastic polyurethanes and polypropylene, as
well as new photopolymers and filaments with custom attri-
butes. At our laboratories - in Heidelberg and Ludwigshafen,
Germany; Basel, Switzerland; Shanghai, China; and Wyan-
dotte, Michigan - we refine and enhance products such as our
thermoplastic and light-curing plastics, optimize processes and
develop customer applications. In 2018, BASF New Business
GmbH acquired shares in Advanc3D Materials GmbH, Ham-
burg, Germany, and in Setup Performance SAS, Lyon, France,
to continue the targeted expansion of the business.
3D printing
ㅁ
by 2025. In 2018, the focus was on creating pilot-scale customer
models as well as research into materials with a nickel content of
over 80%, which is needed to reach our range and cost targets.
For more information on research and development, see basf.com/innovations
Around the world, experts in the research area Process Research &
Chemical Engineering are working on innovative cathode materials
for lithium-ion batteries to meet the growing demand for powerful,
reliable and low-cost electric vehicles. They aim to create the
highest-density cathode materials on the market by making selec-
tive changes to the chemical composition, structure and the manu-
facturing process. The ultimate goal is to double the on-road range
of a mid-size vehicle from 300 to 600 kilometers on a single battery
charge, halve battery size and reduce charging time to 15 minutes
Our supercomputer Quriosity in Ludwigshafen, Germany, was started
up in the fall of 2017. It is mainly used in product development and
enables us to calculate much more complex models with significant-
ly greater variation in parameters. Previously unknown correlations
can also be identified and used to advance new research
approaches. In 2018, for example, we simulated detergent formula-
tions to determine how existing and potential new BASF products
work at a molecular level. Such simulations enable us to better
identify and exploit correlations in formulations. Another application
is a large database calculated by Quriosity with over 8,000 molecu-
lar properties such as solubility or compatibility with metal surfaces.
Machine learning can be used to establish the link between these
properties and the mode of action of BASF products. This enables
us to identify promising molecules for innovative, customer-centric
products.
Our focus areas in research are derived from the three major areas in
which chemistry-based innovations will play a key role in the future:
- Resources, environment and climate
Food and nutrition
Tokyo Institute of
Technology
42
Additions to property, plant and equipment2 by segment in 2018
Adjusted income after taxes
5,664
6,192
EBITDA margin
%
14.6
17.6
- Adjusted noncontrolling interests
273
277
1 Excluding depreciation, amortization and valuation allowances attributable to the discontinued oil and gas
business
Adjusted net income
5,391
61,223
5,915
918,479 918,479
€
5.87
6.44
Compared with earnings per share, adjusted earnings per share
has firstly been adjusted for special items. Secondly, amortization
and valuation allowances (impairments and reversals of impairments)
on intangible assets were eliminated. Amortization of intangible
assets primarily results from the purchase price allocation following
acquisitions and is therefore of a temporary nature. The effects of
these adjustments on income taxes and on noncontrolling interests
are also considered. This makes adjusted earnings per share a
suitable measure for making comparisons over time and predicting
future profitability.
In 2018, adjusted earnings per share amounted to €5.87 compared
with €6.44 in the previous year.
For information on the earnings per share according to IFRS, see the Notes to the Consolidated
Financial Statements on page 218
49
49
BASF Report 2018
About This Report
1 To Our Shareholders
2 Management's Report
Results of Operations
Weighted average number of outstanding shares (in thousands)
Adjusted earnings per share
3 Corporate Governance
62,675
(34)
3,080
2,959
- Special items
(320)
(58)
+ Valuation allowances on intangible assets and
property, plant and equipment¹
+ Amortization and valuation allowances on intangible assets
563
539
53
219
Depreciation, amortization and valuation
- Amortization and valuation allowances on intangible assets
contained in special items
188
1
32
allowances on intangible assets and
3,133
3,178
property, plant and equipment
EBITDA
Sales revenue
- Adjustments to income taxes
231
537
9,166
10,765
- Adjustments to income after taxes from discontinued
operations
32
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
9,481
2,995
2,645
2,190
1,336
9,166
732
739
795
3,133
9,166
10,765 (14.9%)
Income from operations (EBIT)
1,496
2,263
1,395
469
6,033
EBITDA margin
%
14.6
17.6
Special items
(18)
(66)
(75)
(161)
(320)
1,906
2,263
2,709
3,013
Sales and earnings
Million €
Sales and earnings by quarter in 2018²
Million €
2018
2017
+/-
Q1
Q2
Q3
Q4
Full year
Sales
62,675
61,223
2.4%
Sales
15,700
15,783
15,606
15,586
62,675
Income from operations before depreciation,
9,481
10,738
amortization and special items
(11.7%)
Income from operations before depreciation
and amortization (EBITDA)
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
Depreciation and amortization¹
+ Depreciation and amortization¹
Depreciation and amortization¹
6,352
Income after taxes
(691)
8,278
15.4
Income from operations before depreciation, amortization and
special items (EBITDA before special items) and income from
operations before depreciation and amortization (EBITDA)
are indicators that describe operational performance independent of
age-related depreciation and amortization of assets and extraordi-
nary valuation allowances (impairments or reversals of impairments).
Both figures are therefore particularly useful in cross-company
comparisons. EBITDA before special items is also highly useful in
making comparisons over time. The EBITDA margin is a relative
indicator and is calculated as the ratio of EBITDA to sales revenue,
enabling operational performance to be compared independent of
the size of the underlying business.
EBITDA before special items declined by €1,257 million year on year
to €9,481 million in 2018. At €9,166 million, EBITDA was down
€1,599 million from the prior-year figure. The EBITDA margin was
14.6% in 2018, compared with 17.6% in the previous year.
2018
2017
Intangible assets
13,375
11,666
+ Property, plant and equipment
18,519
18,128
7,587
+ Investments accounted for using the equity method
1,685
+ Inventories
10,951
9,896
EBITDA before special items
+ Accounts receivable, trade
10,320
10,660
Million €
+ Current and noncurrent other receivables
and other assets4
2018
2017
1,749
1,800
1,715
2017
%
BASF Report 2018
47
About This Report
1 To Our Shareholders
2 Management's Report
Results of Operations
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Additional indicators for results of operations
■ ROCE declines from 15.4% to 11.4%, adjusted
earnings per share from €6.44 to €5.87
■ EBITDA before special items and EBITDA
considerably below previous year
We also use alternative performance measures (APMs) to steer the
BASF Group. Investors, analysts and rating agencies use them to
assess our performance. These are not defined by IFRS. As such,
the methods of calculation can differ from those used by other
companies. Alternative performance measures for the results of
operations are EBIT before special items, EBIT after cost of capital,
EBITDA before special items, EBITDA, the EBITDA margin, ROCE¹
and adjusted earnings per share. Other APMs are net debt, 2 free
cash flow² and capital expenditure (capex).³
We have used the indicator return on capital employed (ROCE)
since the 2018 business year. It measures the profitability of the
capital employed by the segments. ROCE was 11.4%, after 15.4%
in the previous year.
11.4
For more information on the determination of ROCE, see page 29
Million €
EBIT of BASF Group
- EBIT of Other
EBIT of segments
Cost of capital basis of segments,
average of month-end figures
ROCE
Capital employed
Million €
2018
6,033
(491)
6,524
56,990
53,750
ROCE
EBIT
6,033
7,587
9,481
10,738
4 Including customer/supplier financing and other adjustments
5 Excluding depreciation, amortization and valuation allowances attributable to the discontinued oil and gas
business
1
The financial return on assets reported in the previous year was the starting point for determining the return on assets, adjusted for special items from acquisitions and divestitures, which was used as a compensation parameter.
The return on assets is no longer reported on, as this was replaced by ROCE as the compensation-relevant indicator from 2018 onward.
2 For more information on these indicators, see the Financial Position from page 53 onward
3 For more information on capex, see Value-Based Management on page 30 and Material Investments and Portfolio Measures on page 41
BASF Report 2018
48
About This Report
1 To Our Shareholders
2 Management's Report
Results of Operations
EBITDA before special items
3 Corporate Governance
5 Supplementary Information Oil and Gas Business
6 Overviews
EBITDA
Million €
Adjusted earnings per share
Million €
2018
2017
2018
2017
EBIT
6,033
7,587
4 Consolidated Financial Statements
78,768
86,556
Assets of the BASF Group as of December 31
+ Assets of disposal groups
276
- Special items
(320)
(58)
Cost of capital basis of segments,
56,990
53,750
average of month-end figures
EBIT before special items
6,353
7.645
+ Deviation from cost of capital basis at closing rates
as of December 31
+ Depreciation and amortization
3,080
2,959
5,823
(625)
+ Assets not included in cost of capital
23,743
25,643
+ Valuation allowances on intangible assets
and property, plant and equipment
48
134
of which disposal group for the
oil and gas business
14,088
Depreciation, amortization and valuation
allowances on intangible assets and
property, plant and equipment
3,128
3,093
4,979
For more information on the results of operations of discontinued operations, see page 86 onward
3,133
EBIT before special items.
6,078
Earnings per share
1.86
1.63
1.45
1.68
6.62
Adjusted earnings per share.
€
1.97
1.78
1.40
1.29
1,537
6.44
BASF Report 2018
50
50
For more information on this transaction, see Note 2.5 to the Consolidated Financial Statements
from page 209 onward
On September 27, 2018, we signed a definitive agreement with the
LetterOne group to merge our respective oil and gas businesses.
The merger aims to create the leading independent company in the
European oil and gas sector. To effect the merger, LetterOne will
contribute all its shares in DEA Deutsche Erdöl AG to Wintershall
Holding GmbH against the issuance of new shares of the company
to LetterOne. The company will then be renamed Wintershall DEA.
BASF will initially hold 67% and LetterOne 33% of Wintershall DEA's
ordinary shares, reflecting the value of the respective exploration
and production businesses of Wintershall and DEA. To reflect the
value of Wintershall's gas transportation business, BASF will receive
additional preference shares. No later than 36 months after closing
but in all cases before an IPO, these preference shares will be con-
verted into ordinary shares of the company Wintershall DEA. This
will increase BASF's share in Wintershall DEA. Closing of the trans-
action is expected in the first half of 2019, subject to the approvals
of merger control and foreign investment authorities as well as
mining authorities and the German Federal Network Agency. Until
closing, Wintershall and DEA will continue to operate as indepen-
dent companies.
For more information, see Events after the reporting period on page 122
On May 3, 2018, BASF and Solenis announced that they had
signed an agreement on the combination of BASF's paper and
water chemicals business with Solenis. BASF and Solenis closed
the transaction on January 31, 2019.
changes to the scope of the transaction, the purchase price on a
cash and debt-free basis and excluding other adjustments would
have been €1.6 billion.
On September 18, 2017, we signed an agreement with the Solvay
group on the acquisition of Solvay's global polyamide business,
subject to the approval of the relevant antitrust authorities. The E.U.
Commission granted conditional clearance for BASF to acquire the
polyamide business on January 18, 2019. They require divesting
parts of the original transaction scope to a third-party buyer, namely
manufacturing assets and innovation capabilities of Solvay for engi-
neering plastics in Europe. The divestment process has started. By
complementing the engineering plastics portfolio, enhancing the
access to key growth markets in Asia and South America as well as
strengthening the value chain through backward integration into key
raw materials, BASF will still achieve its key strategic objectives. The
review procedure in China is ongoing. Closing is expected in the
second half of 2019, as soon as all remaining closing conditions
have been fulfilled, including the sale of the businesses and assets
to be divested to a third party. We plan to integrate the polyamide
business into the Performance Materials and Monomers divisions.
Before being adjusted to reflect the necessary antitrust-related
Agreed transactions
On January 31, 2018, our production site for styrene butadi-
ene-based paper dispersions in Pischelsdorf, Austria, was sold to
Synthomer Austria GmbH, a subsidiary of the British specialty
chemicals manufacturer Synthomer plc. The styrene acrylic disper-
sions that were produced in Pischelsdorf were not included in
the sale. They were bundled with the businesses in Ludwigshafen,
Germany. The sale was made in connection with the concentration
of paper dispersions production in Europe at the sites in Ludwigs-
hafen, Germany, and Hamina, Finland, which is designed to
strengthen the Dispersions & Pigments division.
Divestitures
For more information on acquisitions, see page 81 onward
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments) excluding depreciation and amortization attributable to the discontinued oil and gas business
2 Quarterly results not audited
On August 1, 2018, we closed the acquisition of a range of busi-
nesses and assets from Bayer to complement our activities in crop
protection, biotechnology and digital farming. At the same time, the
transaction marked our entry into the seeds, non-selective herbi-
cides and nematicide seed treatments businesses. The assets
acquired included Bayer's global glufosinate-ammonium business,
commercialized under the LibertyⓇ, BastaⓇ and FinaleⓇ trademarks,
as well as its seed businesses for key field crops in selected mar-
kets. The transaction also covered Bayer's trait research and breed-
ing capabilities for these crops. We also closed the acquisition of
Bayer's global vegetable seeds business, which mainly operates
under the trademark NunhemsⓇ, on August 16, 2018. This strength-
ens the Agricultural Solutions division. The all-cash purchase price
amounted to a total of €7.4 billion and may be subject to purchase
price adjustments.
1,336
1,709
(58)
2,298
2,120
1,702
1,525
7,645
(149)
(162)
(184)
(210)
(705)
2,143
1,888
1,496
1,640
6,882
1,626
1,433
1,260
1,273
5,592
Income after taxes from discontinued operations
146
131
149
334
760
Net income
1,211
On March 7, 2018, we closed the agreement to form BASF Toda
America LLC (BTA), Iselin, New Jersey, for battery materials. BTA is
a cooperative venture between BASF and Toda; BASF holds a
majority share in and control over BTA. With the acquisition of the
Battle Creek site in Michigan and the site contributed by BASF in
Elyria, Ohio, the new company took over production of high energy
cathode active materials for e-mobility applications. The transaction
strengthens the Catalysts division's battery materials business.
For more information on acquisitions, see the Notes to the Consolidated Financial Statements
from page 205 onward
We added €1,425 million worth of property, plant and equipment
through acquisitions in 2018. Additions to intangible assets includ-
ing goodwill amounted to €5,540 million.
6,965
3,770
Total
5,040
1,425
3,615
1,261
1,261
of which goodwill
Property, plant and equipment²
5,695
5,540
155
Acquisi-
tions
10,735
Invest-
ments
Investments and acquisitions 2018
Million €
Investments and acquisitions alike are prepared by interdisciplinary
teams and assessed using various criteria. In this way, we ensure
that economic, environmental and social concerns are included in
strategic decision-making.
For more information on our investments from 2019 onward, see page 122
By investing in our plants, we create the conditions for our desired
growth while constantly improving the efficiency of our production
processes. For the period from 2019 to 2023, we have planned
capital expenditures (capex)1 totaling €21.3 billion worldwide.
In addition to innovations, investments make a decisive con-
tribution toward achieving our ambitious growth goals. We
use targeted acquisitions to supplement our organic growth.
Material Investments and Portfolio
Measures
The BASF Group's
Business Year
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
2 Management's Report 3 Corporate Governance
Material Investments and Portfolio Measures
1 To Our Shareholders
About This Report
BASF Report 2018
Intangible assets
Investments
In North America, we constructed and started operation of an
ammonia production plant in Freeport, Texas, together with Yara
International ASA, headquartered in Oslo, Norway. We started con-
struction of a new MDI synthesis unit in Geismar, Louisiana. Startup
is scheduled for 2020.
Total
Acquisitions
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
2 Management's Report 3 Corporate Governance
Material Investments and Portfolio Measures
1 To Our Shareholders
About This Report
44
41
North America 24%
€3,615 million
BASF Report 2018
3 Including investments in connection with our oil and gas activities until September 2018
2 Including capitalized exploration, restoration obligations and IT investments
1 Additions to property, plant and equipment excluding acquisitions, capitalized exploration, restoration obligations, IT investments and right-of-use assets arising from leases
56% Europe³
South America, Africa, Middle East³ 5%
Asia Pacific 15%
Additions to property, plant and equipment2 by region in 2018
20% Performance Products
36% Chemicals
& Solutions
Functional Materials 23%
€3,615 million
Others³ 15%
(infrastructure, R&D)
Agricultural Solutions 6%
In Europe, we will strengthen the Verbund by replacing our acetylene
plant in Ludwigshafen, Germany, which plays a central role for many
products and value chains, with a modern, highly efficient plant by
the end of 2019. We are also constructing another production plant
for special zeolites in Ludwigshafen, Germany. Special zeolites are
used to produce state-of-the-art exhaust catalysts for commercial
vehicles and passenger cars with diesel engines. Production startup
is scheduled for 2019. In the first quarter of 2018, we started
construction of another production plant for vitamin A, which is
scheduled for startup in 2020.
We invested €3,615 million³ in property, plant and equipment in 2018
(previous year: €4,020 million). Capex¹ accounted for €3,498 million
of this amount (previous year: €3,735 million). Our investments in
2018 focused on the Chemicals, Functional Materials & Solutions
and Performance Products segments.
We will also refine our portfolio through acquisitions that promise
above-average profitable growth as part of the BASF Verbund and
help to reach a relevant market position. We also take into account
whether they are innovation-driven or offer a technological differen-
tiation, and make new, sustainable business models possible.
With a world market share of more than 40%, China is today the
largest chemical market and drives the growth of global chemical
production. We expect China's share to increase to around 50% by
2030. To continue to participate in this growth in Asia in the future,
we are investigating the possibility of building an integrated Verbund
site in Zhanjiang in the southern Chinese province of Guangdong
and expanding the site we operate together with our partner
Sinopec in Nanjing, China.
For more information on investments within the segments, see page 58 onward
In Asia, we started production at the new aroma ingredients com-
plex in 2018, which was built together with our partner PETRONAS
Chemicals Group Berhad, Kuala Lumpur, Malaysia, and at the Ultra-
formⓇ plant in Gimcheon, South Korea, build together with our
partner Kolon Plastics Inc., headquartered in Gimcheon, South
Korea. We are constructing a plant for plastic additives in Shanghai,
China, with startup planned for 2019. These investments strengthen
our presence in Asia.
(104)
3,178 (1.4%)
122
(6)
(16.9%)
Income after taxes from discontinued operations
177
162
235
255
829
Financial result
(745)
(705) (5.7%)
Net income
1,679
1,480
7,645
1,200
4,707
Income before income taxes
5,288
6,882 (23.2%)
Earnings per share
€
1.83
1.61
1.31
0.37
5.12
Income after taxes from continuing
Adjusted earnings per share
348
€
6,353
4,150
2,281
1,972
1,470
630
6,353
Income from operations (EBIT)
Financial result
6,033
7,587 (20.5%)
(181)
(192)
(138)
(234)
EBIT before special items
(745)
2,082
1,714
1,257
235
5,288
Special items
(320)
(58)
Income after taxes from continuing operations
1,581
1,361
1,032
176
Income before income taxes
1.93
1.77
1.51
61,223
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
Depreciation and amortization¹
3,035
2,872
2,517
2,314
10,738
3,030
2,814
2,655
2,266
10,765
738
15,231
764
845
3,178
Special items
Income from operations (EBIT)
EBIT before special items
Financial result
Income before income taxes
Income after taxes from continuing operations
2,292
2,050
1,824
1,421
7,587
831
14,516
15,449
16,027
0.66
5.87
4,150
operations
5,592 (25.8%)
Income after taxes from
829
760
9.1%
discontinued operations.
Sales and earnings by quarter in 2017²
Net income
4,707
6,078 (22.6%)
Million €
Earnings per share
5.12
6.62
(22.7%)
Q1
Q2
Q3
Q4
Full year
Adjusted earnings per share
5.87
6.44
(8.9%)
Sales
(70)
For information on the tax rate, see the Notes to the Consolidated Financial Statements
from page 223 onward
867
At €272 million, noncontrolling interests were on a level with the
previous year. Net income amounted to €4,707 million, consider-
ably below the prior-year figure of €6,078 million. Earnings per
share were €5.12, compared with €6.62 in 2017.
Important raw material price developments
■ Higher prices for crude oil and naphtha
■ Year-on-year increase in gas prices, but with wide
regional variance
The average monthly price for the chemical raw material naphtha
ranged over the course of 2018 between $463 per metric ton in
December and $676 per metric ton in September. At $602 per
metric ton, the annualized average price of naphtha in 2018 was
higher than in 2017 ($485 per metric ton).
The average price of gas in the United States was $3.16 per
mmBtu, above the level of the previous year ($2.97 per mmBtu). In
Europe, the average price of gas at the Title Transfer Facility (TTF)
was significantly higher than in 2017, at $7.90 per mmBtu (2017:
$5.71 per mmBtu). Gas prices in China averaged around $6.38 per
mmBtu nationally (2017: $6.24 per mmBtu), while the average price
in the coastal provinces of Shanghai, Jiangsu, Zhejiang, Shandong
and Guangdong was $7.59 per mmBtu (2017: $7.43 per mmBtu).
Price trends for crude oil (Brent blend) and naphtha
$/barrel, $/metric ton
Chemical production (excluding pharmaceuticals)
The global chemical industry (excluding pharmaceuticals) grew by
2.7%, below our expectations at the beginning of 2018 (+3.6%) and
below 2017 (+3.7%). Chemical production in the E.U. declined
slightly overall after the strong prior year (2018: -0.9%, 2017:
+3.2%), but fell sharply at the end of 2018 in particular. Contributing
factors included capacity bottlenecks, lower export demand and
weaker demand from the automotive industry in the second half of
the year. In Asia, growth slowed overall to 3.4% after 4.5% in the
previous year. At 3.6%, growth in the world's largest chemical
market, China, was lower than in the prior year (+4.0%) and signifi-
cantly lower than forecast at the beginning of the year (+5.0%).
Stagnant demand from the automotive industry and slower momen-
tum in other customer industries had a dampening effect. In Japan,
too, growth fell significantly to 0.9% (2017: +7.1%) due to softer
export demand. By contrast, growth picked up in the United States
on the back of the economic upturn there and new production
capacity (2018: +3.7%; 2017: +2.6%).
Real change compared with previous year
United States
2018
2.7%
2017 3.7%
2018 (0.9%)
European Union
2017 3.2%
2018 3.7%
World
2017 2.6%
■ Global growth weaker than in prior year and below
expectations
6 Overviews
2017 8.5%
2018 4.0%
Health and nutrition
2017 4.4%
2018 1.9%
2017 3.3%
Electronics
Trends in the chemical industry
Agriculture
44
About This Report
1 To Our Shareholders
2 Management's Report
Economic Environment
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
BASF Report 2018
2018 3.6%
Emerging markets of Asia
2017
© 2017: $485/t
© 2017: $54/bbl
700
90
Averaging around $71 per barrel in 2018, the oil price for Brent
crude rose by about 30% compared with the previous year ($54 per
barrel). The average monthly oil price fluctuated over the course of
the year between $81 per barrel in October and $56 per barrel in
December.
600
80
100
500
400
60
300
50
200
40
100
70
800
2018: $71/bbl
110
4.3%
2018 0.9%
2017 7.1%
2018
South America
2017
(0.1%)
0.0%
Japan
$/t
$/bbl
1,100
130
1,000
120
900
Naphtha
2018: $602/t
Crude oil
2018 7.2%
30
2017 3.4%
2017 3.1%
European Union
2017
2.5%
2018 2.9%
2017 2.2%
2018 6.2%
Emerging markets of Asia.
2018 1.9%
2017 6.4%
2017 1.9%
2018
1.0%
South America
2017 1.6%
United States
Japan
2018 0.7%
Economic trends by region
3.3%
2018 3.2%
For information on the items in the statement of income, see the Notes to the Consolidated
Financial Statements from page 218 onward
42
About This Report
1 To Our Shareholders
2 Management's Report
Economic Environment
3 Corporate Governance
4 Consolidated Financial Statements
2017
5 Supplementary Information Oil and Gas Business 6 Overviews
Overall, global economic growth in 2018 was as strong as we
expected at the beginning of the year. However, momentum
slowed considerably over the course of the year. Economic
output in the advanced economies rose at roughly the same
rate as in 2017, while growth in the emerging markets soft-
ened slightly overall. Growth in the European Union (E.U.)
declined significantly. By contrast, gross domestic product
(GDP) in the United States increased faster than expected.
The Chinese economy cooled in the second half of the year.
Global GDP grew by 3.2% overall, only slightly slower than
in 2017 (+3.3%). The global chemical industry (excluding
pharmaceuticals) expanded by 2.7%, below the 2017 figure
(+3.7%). The average price for a barrel of Brent blend crude
oil rose to $71 per barrel (2017: $54 per barrel).
For the outlook on the economic environment in 2019, see page 117 onward
Trends in the global economy in 2018
The global economy continued its growth trajectory in 2018. How-
ever, economic momentum slowed significantly over the course of
the year. Regional trends were also more disparate than in 2017 and
growth in global trade weakened. The escalation of the trade conflict
between the United States and China, as well as fears that the
United States would introduce additional tariffs on automotive
imports increasingly weighed on the economic climate. In addition,
financing conditions for a number of emerging markets deteriorated
following interest rate hikes by the Federal Reserve. This led to
capital outflows into the dollar zone and corresponding currency
devaluations. By contrast, monetary policy in the eurozone and in
Japan remained expansionary.
World
Gross domestic product
Real change compared with previous year
Economic Environment
■ Weaker economic growth in the E.U.
■ Acceleration of growth in the United States
■ Economic cooldown in China
■ Delayed recovery in South America
As we had forecast, GDP growth in the E.U. slowed to just under
2% in 2018 (2017: +2.5%). Besides capacity bottlenecks, the
decline in economic momentum was primarily attributable to weaker
export demand. In addition, the rising oil price led to higher import
values and energy prices drove up inflation, which dampened
growth in consumer purchasing power. Growth in France (+1.5%),
Italy (+0.8%), Spain (+2.5%) and the United Kingdom (+1.4%) was
in line with our expectations, while Germany turned in a disappoint-
ing performance (+1.5%). This was attributable to a large extent to
China. There was a noticeable decline in production in South
America as a whole, primarily as a result of heavy production losses
in Argentina. By contrast, the strong upward trend in agricultural
production continued in Asia, although here too, growth was lower
than in the previous year.
Growth in key customer industries
Real change compared with previous year
Industry total
Transportation
of which: automotive industry
Energy and resources
Construction
The chemical industry's key customer sectors saw very mixed
trends: Global automotive production contracted by 0.8% in
2018, a much weaker performance than in the previous year
(+2.3%). Production fell by 1.3% in the E.U. Difficulties in the intro-
duction of the new WLTP emission standard contributed significant-
ly here. Automotive production declined slightly in North America. In
China and South Korea, it decreased by 3.8% and 2%, respectively,
and was largely flat in Japan (-0.2%). Production growth in the
remaining emerging markets of Asia was slightly stronger than in
2017. India was a particularly large contributor here, with growth of
6.6%. In South America and Russia, automotive production rose
significantly from a low baseline, but not as strongly as in the pre-
vious year. At 3.1%, growth in the construction industry was at the
prior-year level (+3.1%). The E.U. saw much slower growth in con-
struction activity after the exceptionally strong prior year. Moderating
effects came from residential and commercial construction, while
the infrastructure segment saw stronger year-on-year growth.
Growth in the U.S. construction industry remained modest. Only
investment in infrastructure saw significant gains here. In Asia, by
contrast, growth in the construction industry remained at a compara-
tively high level. Agricultural production expanded at a much
slower pace in 2018 compared with the previous year (2018: +1.9%;
2017: 3.3%), as cereal and soybean yields in Europe, North and
South America as well as in South Africa were negatively impacted
by the unusually long dry period. Agricultural output was flat overall
in western Europe and fell significantly in eastern Europe. Substan-
tial losses were also recorded in North America. Alongside
weather-related influences, the trade conflict with China also played
a key role here, which negatively impacted U.S. soybean exports to
2018 3.2%
2018 (0.3%)
2017 2.0%
2018 (0.8%)
2017 2.3%
2018 3.0%
2017 1.7%
2018 3.1%
2017 3.4%
America, too, industrial production again declined slightly (2018:
-0.3%; 2017: -0.8%). In the emerging markets of Asia, growth
in industrial production was roughly on a level with the previous
year, at 5.5% (2017: +5.6%). By contrast, growth in North America
accelerated again markedly (2018: +3.1%; 2017: +1.8%).
The downturn was most pronounced in the E.U. (2018: +1.4%;
2017: +3.1%) and in Japan (2018: +0.9%; 2017: +2.7%). In South
Global industrial production grew by 3.2% in 2018, roughly in line
with our expectations at the beginning of 2018 but down from the
previous year (2017: +3.4%). Growth slowed in both the advanced
economies (2018: +2.1%; 2017: +2.4%) and the emerging markets
(2018: +4.2%; 2017: +4.4%).
difficulties in the introduction of the new Worldwide Harmonized
Light-Duty Vehicles Test Procedure (WLTP) emission standard in the
automotive industry, which also affected its supplier industries and
led to a slight overall decrease in GDP in the third quarter of 2018.
At 4.2%, GDP growth in the eastern E.U. countries remained high
but was lower than in the previous year (+4.6%). According to official
estimates, Russian GDP rose faster than in the previous year, at
2.3% (2017: +1.6%). The economy was supported by the rising oil
price and strong growth in the construction sector, while the weak
ruble and sanctions imposed by the E.U. and the United States had
an offsetting effect. Consumer confidence also declined signifi-
cantly, among other factors due to higher inflation rates and the
increase in the retirement age.
In the United States, the expansionary tax policy led to
stronger-than-expected growth of 2.9% (2017: +2.2%). Rising
employment figures and income tax cuts boosted private consump-
tion; investment was stimulated by the corporate tax reform. By
contrast, headwinds came from foreign trade in the second half of
the year. Exports slowed as a result of China's new import tariffs,
which were introduced in response to higher U.S. duties.
Average annual growth in the emerging markets of Asia declined
only slightly (2018: +6.2%; 2017: +6.4%). However, economic
momentum in China slowed significantly over the course of the year.
Overall, China saw growth of 6.6% in 2018, slower than in 2017
(+6.8%). The trade conflict with the United States in particular unset-
tled consumers and investors. Growth in Chinese industrial produc-
tion declined over the course of the year. Automotive production
declined by 3.8% after tax incentives expired in the previous year.
Momentum slowed somewhat in the electronics industry and
weakened significantly in the textile industry. Growth picked up in
the construction sector. Economic output in the remaining emerging
markets of Asia rose at the same rate as in 2017 (+5.6%).
1 All information relating to past years in this section can deviate from the previous year's report due to statistic revisions. In addition, the baseline for calculating real growth rates for GDP, customer industry and chemical production figures has been adjusted from 2010 to 2015. This changes the market share of individual countries and slightly
increases global growth rates overall.
BASF Report 2018
43
About This Report
1 To Our Shareholders
2 Management's Report
Economic Environment
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
In Japan, growth declined again in 2018 after the exceptionally
strong increase in the previous year (2018: +0.7%; 2017: +1.9%).
Although private sector investment in production facilities continued
to grow dynamically as a result of low interest rates and high
capacity utilization, private consumption only rose moderately and
export growth declined significantly. The trade conflict between the
United States and China also increasingly made itself felt. In addi-
tion, extreme weather conditions and a severe earthquake led to a
decline in GDP in the third quarter of 2018.
South America continued the recovery that started in 2017, albeit
only at a moderate pace (2018: +1.0%; 2017: +1.6%). The truck
drivers' strikes and the political uncertainty ahead of the presidential
elections in the fall prevented a stronger economic recovery in Brazil
(2018: +1.3%; 2017: +1.0%). Argentina suffered a loss of confi-
dence among external investors, succumbed to a severe currency
crisis and fell back into recession (2018: -2.4%; 2017: +2.9%). The
crisis in Venezuela further intensified (2018: -15.0%; 2017: -9.1%),
while the other countries in the region saw stronger growth overall
(2018: +3.0%; 2017: +2.0%).
Trends in key customer industries
■ Growth in global industrial production lower
than in 2017
■ Mixed trends in key customer sectors
2018 2.3%
2013
Consumer goods
2015
(174)
(52)
-Cost of capital²
5,699
5,376
Divestitures
(2)
Integration costs
137
825
2,902
Other charges and income
(42)
(12)
Total special items in EBIT
(320)
EBIT after cost of capital
2 In 2017 and 2018, the cost of capital percentage was 10%.
(691)
- EBIT of Other
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Special items
Million €
EBIT after cost of capital
Million €
2018
(491)
2017
2017
EBIT of BASF Group
6,033
7,587
Restructuring measures
(102)
(131)
2018
At €6,033 million, EBIT for the BASF Group in 2018 was consider-
ably below the previous year's level (2017: €7,587 million). Included
in this figure is income from companies accounted for using the
equity method, which declined from €323 million to €269 million.
EBIT after cost of capital³
Million €
825
2,902
1,136
194
1,368
3 EBIT after cost of capital for 2017 was reduced by the share attributable to oil and gas activities due to their
presentation as discontinued operations. Figures for the years 2014 to 2016 have not been restated.
Financial result and income after taxes
2014
■ Financial result slightly, net income considerably
below previous year
The financial result declined to minus €745 million in 2018, com-
pared with minus €705 million in the previous year.
Net income from shareholdings decreased from minus €30 million
in 2017 to minus €42 million, mainly as a result of higher expenses
from loss transfer agreements.
The interest result declined from minus €315 million in 2017 to
minus €366 million, mainly due to the increase in interest expenses
from the higher level of financial indebtedness.
The other financial result amounted to minus €337 million, compared
with minus €360 million in the previous year. This was largely
attributable to the decrease in other financial expenses, primarily
due to the lower net interest expense from pension plans.
Income before income taxes declined from €6,882 million in the
previous year to €5,288 million in 2018. Income taxes decreased
from €1,290 million in the previous year to €1,138 million in 2018.
At 21.5%, the tax rate was above the prior-year level (18.7%),
which included one-off deferred tax income in the total amount of
€426 million from tax reforms, of which €379 million in the United
States.
2014
Income after taxes from continuing operations declined from
€5,592 million to €4,150 million. Income after taxes from discon-
tinued operations rose from €760 million to €829 million. This was
mainly due to higher oil and gas prices as well as volumes growth in
Norway and Russia. Overall, income after taxes declined from
€6,352 million to €4,979 million.
■ Earnings per share decline from €6.62 to €5.12
2015
2016
2017
EBIT1
Million €
2018
2017
2016
2015
2014
6,033
7,587
6,275
6,248
7,626
1 EBIT for 2017 was reduced by the share attributable to oil and gas activities due to their presentation as
discontinued operations. Figures for the years 2014 to 2016 have not been restated.
We once again earned a significant premium on our cost of capital
in 2018. EBIT after cost of capital amounted to €825 million,
compared with €2,902 million in the previous year. The cost of cap-
ital rose by €323 million year on year. This increase was mainly
attributable to the assets acquired from Bayer in August 2018. By
contrast, the classification of the oil and gas activities as discon-
tinued operations meant that the related assets were retroactively
no longer included in the cost of capital basis.
For an explanation of the indicator EBIT after cost of capital, see page 29
The calculation of EBIT as part of our statement of income is shown in the Consolidated
Financial Statements on page 176
2018
3 Corporate Governance
2 Management's Report
Results of Operations
(58)
EBIT before special items declined slightly in the Performance Prod-
ucts segment, primarily due to lower sales volumes and negative
currency effects.
Change
in %
For an explanation of the indicator EBIT before special items, see pages 29 to 30
442
1
2,715
4
EBIT before special items³
Change
in million €
(2,183)
Million €
629
2018
(157)
0
2017
Changes in scope of consolidation
Total change in sales
(4)
Factors influencing sales of the BASF Group
Acquisitions
Divestitures
Currencies
2016
2017
1 To Our Shareholders
2018
BASF Report 2018
45
About This Report
1 To Our Shareholders
2 Management's Report
Results of Operations
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Results of Operations
The world economy saw slightly weaker growth in 2018 than
in 2017, with momentum increasingly slowing over the course
of the year. Growth in global industrial production was also
down slightly year on year, while the global chemical industry
(excluding pharmaceuticals) saw a stronger decrease. In this
market environment, BASF did not perform as well as we
expected. Although we increased sales slightly, earnings
declined considerably. All segments were affected by the
earnings decrease. Earnings rose in the discontinued oil and
gas business.
Business reviews by segment can be found from page 58 onward
Volumes
Prices
6
0
1
Income from operations
61,223
57,550
70,449
74,326
2 Sales for 2017 were reduced by the share attributable to oil and gas activities due to their presentation
as discontinued operations. Figures for the years 2014 to 2016 have not been restated.
2016
■ Considerable decline in EBIT before special items,
EBIT and EBIT after cost of capital
■ Significant premium on cost of capital again earned
Income from operations (EBIT) before special items decreased by
€1,292 million to €6,353 million as a result of lower contributions
from all segments. The Chemicals segment in particular recorded
considerably lower earnings, mainly due to lower margins for isocya-
nates and steam cracker products. The BASF Group's earnings
were also negatively impacted by the low water levels on the Rhine
River in the second half of 2018. BASF's business with the auto-
motive industry also slowed in the second half of the year. In the
Functional Materials & Solutions segment, EBIT before special items
was considerably below the prior-year figure, primarily due to softer
margins as a result of the increase in raw materials prices and higher
fixed costs. The considerable decline in earnings in the Agricultural
Solutions segment was attributable to negative currency effects
in all regions as well as the strongly negative contribution from
the businesses acquired from Bayer as a result of the late, intra-
year timing of the transaction, the seasonality of the businesses
and costs for integrating the businesses into the BASF Group.
1 Our chemicals business comprises the Chemicals, Performance Products and Functional Materials & Solutions segments.
3 EBIT before special items for 2017 was reduced by the share attributable to oil and gas activities due to
their presentation as discontinued operations. Figures for the years 2014 to 2016 have not been restated.
Special items in EBIT totaled minus €320 million in 2018, com-
pared with minus €58 million in the previous year. Various restructur-
ing measures led to special items of minus €102 million, after minus
€131 million in 2017. At €174 million, integration costs in connection
with business acquisitions were higher than the prior-year level
(2017: €52 million), largely from the integration of the businesses
acquired from Bayer in the Agricultural Solutions segment. Divesti-
tures in 2018 accounted for an earnings contribution of minus
€2 million. The prior-year figure included special income totaling
€137 million, mainly in the Performance Products segment from the
transfer of BASF's leather chemicals business to the Stahl group.
The special items recognized in other charges and income amounted
to minus €42 million in 2018, compared with minus €12 million in the
previous year.
For the definition of special items, see pages 29 to 30
BASF Report 2018
46
64
About This Report
2014
2015
62,675
7,357
2015
2014
1,452
6,353
7,645
2016
6,309
6,739
2
Sales
■ Sales growth of 2% to €62,675 million
Sales rose by €1,452 million to €62,675 million in 2018. This was
primarily attributable to higher sales prices in all segments, particu-
larly in the chemicals business. 1 Sales were also positively impacted
by the acquisition of significant businesses and assets from Bayer in
the Agricultural Solutions segment, which was closed in August
2018, and higher volumes, especially in the Functional Materials &
Solutions segment. This was partly offset by negative currency
effects in all segments.
Sales²
Million €
2018
2017
(6.9)
(5,282)
919
36,109
1.2
(5,939)
1,055
44.2
%
42.4
36,699
5.4
4,293
5.0
Million €
4,294
41.7
34,826
34,756
Noncurrent assets decreased by €4,288 million to €43,335 million.
This is primarily attributable to the reclassification of noncurrent
assets to the disposal groups, mainly for the oil and gas business
and to a minor extent for the paper and water chemicals business.
More information on the above transactions and disposal groups can be found on page 42
of this Management's Report and in Notes 2.4 and 2.5 to the Consolidated Financial Statements
from page 205 onward
7,434
17.7
15,332
%
Financial indebtedness
3.5
2,731
2.1
1,787
Deferred tax liabilities
4.4
3,478
2.1
1,860
Other provisions
8.0
6,293
8.6
Provisions for pensions and similar obligations
Million €
The €2,960 million increase in intangible assets was largely
attributable to acquisition-related additions, which amounted to
€5,540 million as of the year-end, including €1,261 million in good-
will. The main offsetting effects were reclassifications to the disposal
groups and depreciation and amortization.²
December 31, 2018
Current assets rose by €12,076 million to €43,221 million. This was
primarily attributable to reclassifications from noncurrent assets to
the disposal groups. The assets of disposal groups totaled
€14,607 million as of the year-end, of which €14,088 million was
attributable to the discontinued oil and gas business.
At €570 million, other financial assets were down €36 million from
the prior-year level. Deferred tax assets increased by €224 million to
€2,342 million, primarily from higher provisions for pensions and
similar obligations. Other receivables and miscellaneous assets
declined by €446 million year on year to €886 million, mainly due to
the reclassification of loan receivables to the disposal group for the
oil and gas business.
Investments accounted for using the equity method declined by
€2,512 million to €2,203 million, largely due to the reclassification of
oil and gas shareholdings to the disposal group.
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
Inventories increased by €1,863 million. Of this figure, €887 million
resulted from the transaction with Bayer. By contrast, trade accounts
receivable declined by €136 million and other receivables and mis-
cellaneous assets by €355 million, mainly due to lower bank accept-
ance drafts in China and the reclassification to the disposal group for
the discontinued oil and gas business. Marketable securities rose by
€292 million to €344 million following an optimization of current cash
deposits. By contrast, cash and cash equivalents decreased by
€4,195 million to €2,300 million, largely as a result of the purchase
price payment to Bayer.
2 Management's Report
Net Assets
About This Report
51
BASF Report 2018
1 As of January 1, 2018, receivables from bank acceptance drafts are no longer reported under trade accounts receivable, but under the item other receivables and miscellaneous assets. The 2017 figures have been restated accordingly. For more information, see Note 18 to the Consolidated Financial Statements from page 235 onward.
2 Including impairments and reversals of impairments
Property, plant and equipment declined by around 18% to
€20,780 million, mainly as a result of reclassifications totaling
€6,651 million, primarily to the disposal groups. Depreciation and
amortization amounted to €3,155 million, lower than invest-
ments (€3,615 million). Additions from acquisitions amounted to
€1,425 million.
15,535
Total assets amounted to €86,556 million as of December 31,
2018, around 10% higher than the prior-year figure. This increase
was largely driven by the acquisition of significant businesses and
assets from Bayer.
1 To Our Shareholders
For more information on the composition and development of individual asset items,
see the Notes to the Consolidated Financial Statements from page 228 onward
BASF Report 2018
Equity
Noncontrolling interests
Other comprehensive income
Retained earnings
Paid-in capital
Equity and liabilities
Financial Position
Financial Position
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
42
52
December 31, 2017
19.7
We strive to maintain a solid "A" rating, which ensures unrestricted
access to financial and capital markets. Our financing measures are
aligned with our operational business planning as well as the com-
pany's strategic direction and also ensure the financial flexibility to
take advantage of strategic options.
705
53
BASF Report 2018
78,768
100.0
86,556
Total equity and liabilities
18.9
14,880
27.0
23,329
Current liabilities
6.6
5,753
Liabilities of disposal groups
3.9
3,064
3.5
About This Report
2,998
1 To Our Shareholders
3 Corporate Governance
2019
■ Reclassification of material assets to current assets
of disposal groups
Million €
Maturities of financial indebtedness
Million €
Net debt
For more information on the development of the balance sheet, see the Ten-Year Summary
on pages 282 to 283
For more information on the composition and development of individual equity and liability items,
see the Notes to the Consolidated Financial Statements from page 238 onward
Overall, financial indebtedness grew by €2,809 million to
€20,841 million. Together with the decline in cash and cash equiva-
lents, particularly in connection with the purchase price payment for
the acquisition of significant businesses from Bayer, this increased
net debt by €6,712 million compared with December 31, 2017, to
€18,197 million. Net debt is calculated by subtracting marketable
securities and cash and cash equivalents from current and noncur-
rent financial indebtedness. This balance-related indicator provides
information on effective indebtedness.
Current tax liabilities declined by €424 million and current other
liabilities by €66 million, in both cases primarily as a result of the
reclassification to the disposal group for the oil and gas business.
Within current liabilities, the main offsetting effect came from higher
advances on orders. At €3,252 million as of December 31, 2018,
current provisions were slightly above the prior-year level.
The rise in current financial indebtedness was largely due to the
issue of U.S. dollar commercial paper with a carrying amount of
around €2,549 million as of December 31, 2018. The reclassification
of bonds to current financial indebtedness mentioned above con-
trasted with the scheduled repayment of three eurobonds with an
aggregate carrying amount of €1,773 million.
Higher current financial indebtedness (+€3,012 million) and trade
accounts payable (+€151 million) also contributed to the increase in
current liabilities.
Current liabilities rose by €8,449 million to €23,329 million, primarily
as a result of reclassifications to the disposal groups. The liabilities
of disposal groups amounted to €5,753 million as of December 31,
2018. Current liabilities assumed in connection with the transaction
with Bayer during the year amounted to €282 million as of the year-
end.
Noncurrent other provisions declined by €1,618 million, deferred
tax liabilities by €944 million and noncurrent other liabilities by
€390 million. In each case, this was mainly due to reclassifications
to the disposal group for the oil and gas business.
issued in pounds sterling, euros, U.S. dollars, Australian dollars and
Japanese yen with terms of between four and 30 years and an
aggregate carrying amount of €1,866 million as of the year-end. The
intrayear reclassification of liabilities to credit institutions with a car-
rying amount of €499 million to the disposal group for the oil and gas
business was partly offset by long-term loans taken out from banks.
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
2 Management's Report
Financial Position
Other liabilities
Other liabilities
2,497
Compared with the end of 2017, noncurrent liabilities decreased by
€2,014 million to €27,118 million. This was primarily due to the intra-
year reclassification of noncurrent liabilities to the disposal groups,
almost exclusively for the oil and gas business. By contrast, the
transaction with Bayer increased noncurrent liabilities by €636 mil-
lion in 2018.
Equity rose by €1,353 million year on year to €36,109 million.
Retained earnings increased by €1,873 million to €36,699 million.
Other comprehensive income declined by €657 million to minus
€5,939 million. This was mainly due to actuarial losses on the plan
assets for defined benefit plans due to the negative development
of the capital markets. This contrasted with currency effects. The
equity ratio decreased from 44.1% to 41.7%, mainly as a result of
the increase in total assets.
■ Net debt rises by €6,712 million
■ Equity ratio at 41.7%, compared with 44.1% in
previous year
Equity and liabilities
100.0
44.1
1.2
(6.7)
37.0
29,132
31.3
27,118
Noncurrent liabilities
1.4
1,095
0.8
Provisions for pensions and similar obligations rose by €1,141 mil-
lion. This was largely driven by the remeasurement of plan assets.
The reclassification of provisions to the disposal groups had an off-
setting effect.
3.2
23,743
Accounts payable, trade
6.4
5,509
Financial indebtedness
1.4
1,119
0.8
695
Tax liabilities
4.1
3,229
3.8
3,252
Provisions
6.3
4,971
5.9
5,122
The €203 million decline in noncurrent financial indebtedness was
mainly attributable to lower liabilities to credit institutions, which
accounted for €190 million of this decrease. The carrying amounts
of bonds and other liabilities to the capital market were slightly below
the prior-year level as of December 31, 2018. Two eurobonds with
an aggregate carrying amount of €2,002 million were reclassified
to current financial indebtedness in 2018. By contrast, bonds were
■ Acquisition-driven increase in total assets
1,501
100.0
Q1
Q2
Q3
Q4
Chemicals
53%
2018
2017
2018
2017
2018
2017
2018
2017
Performance Products
22%
Chemicals
Contributions to EBIT before special items by segment
4,286
Million €
Business Review by Segment
About This Report
BASF Group
6,033
7,587
86,556
78,768
10,735
4,364
1 Additions to property, plant and equipment (of which from acquisitions: €1,425 million in 2018 and €8 million in 2017) and intangible assets (of which from acquisitions: €5,540 million in 2018 and €235 million in 2017)
BASF Report 2018
58
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Sales¹
1 To Our Shareholders
4,105
4,045
5,261
5,238
4,975
5,518
5,311
Other
(7%)
Agricultural Solutions
1,728
1,855
5,509
1,526
1,243
987
1,684
1,328
Other
5,540
4,132
5,198
Functional Materials & Solutions
4,309
4,023
3,774
4,158
Functional Materials & Solutions
21%
Performance Products
3,991
4,260
3,949
4,142
3,989
3,983
3,883
3,832
Agricultural Solutions
11%
5,139
2 Management's Report
Net Assets
3 Corporate Governance
4 Consolidated Financial Statements
Marketable securities
4.4
3,494
3.6
3,139
Other receivables and miscellaneous assets¹
13.7
10,801
12.3
10,665
Accounts receivable, trade¹
13.1
10,303
14.1
12,166
Inventories
60.5
344
47,623
0.4
0.1
78,768
100.0
86,556
39.5
31,145
50.0
43,221
Total assets
Current assets
16.9
14,607
Assets of disposal groups
8.2
6,495
2.7
2,300
Cash and cash equivalents
52
50.0
43,335
Noncurrent assets
24.0
20,780
Property, plant and equipment
17.3
13,594
19.1
16,554
Intangible assets
%
Million €
%
Million €
December 31, 2017
December 31, 2018
Assets
Net Assets
5 Supplementary Information Oil and Gas Business 6 Overviews
25,258
32.0
Investments accounted for using the equity method
2,203
1.7
1,332
1.0
886
Other receivables and miscellaneous assets
2.7
2,118
2.7
Assets
2,342
0.8
606
0.7
570
Other financial assets
6.0
4,715
2.5
Deferred tax assets
2020
2018
2021
2,205
2,427
1,376
1,416
Other
5%
Functional Materials & Solutions
21,435
20,745
1,917
2,251
1,307
1,617
Agricultural Solutions
6,156
6
5,221
16,217
(3,917)
15,812
10%
25%
2018
2017
2018
2017
2018
2017
Functional Materials & Solutions
34%
Chemicals
16,501
16,331
4,432
5,374
3,386
4,233
Agricultural Solutions
Performance Products
Performance Products
Changes in cash and cash equivalents affecting liquidity
10
3,996
3,894
- Payments made for intangible assets
27
(7,255)
8,785
7,939
Cash flows from operating activities
(3,996)
(3,894)
2017
2018
December 31,
December 31,
Million €
8,785
7,939
(655)
8
11
(3,958)
394
(52)
(2,873)
(3,021)
Billion €
3,248
2,966
Cash flow
19
3
Cash flows from financing activities
Dividends
Changes in financial and similar liabilities
Capital increases/repayments and other equity transactions
4,789
4,045
and property, plant and equipment
Free cash flow
(11,804)
Free cash flow
Income from operations (EBIT)
before special items
Sales
99
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Actual Development Compared with Outlook for 2018
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Actual Development Compared
with Outlook for 2018
Forecast/actual comparison¹
BASF Group sales increased slightly in 2018, in line with our fore-
cast. EBIT before special items declined considerably in 2018 and
was thus lower than the slight increase forecast at the beginning of
the year. On the one hand, we adjusted our forecast in September
2018 to a slight decline in EBIT before special items compared with
the adjusted figure for 2017 as a result of the changed presentation
of the oil and gas business following the signing of the definitive
agreement with LetterOne. On the other, earnings development in
the Functional Materials & Solutions and Performance Products
segments in particular did not meet our expectations. As a result,
EBIT also declined considerably in 2018 instead of slightly as we
had anticipated. EBIT after cost of capital declined considerably, as
expected.
We increased sales slightly in the Chemicals segment, after
predicting a slight decline in sales at the beginning of 2018. The
anticipated decrease in isocyanate prices as a result of additional
capacities occurred later in the year than expected. EBIT before
special items declined considerably as forecast.
Sales in the Performance Products segment declined slightly,
contrary to our forecast of a slight increase. We were unable to
increase sales volumes as expected due to the continued lower
availability of citral-based products in the Nutrition & Health division
and lower sales volumes in the Care Chemicals division, especially
for oleochemical surfactants and fatty alcohols, as well as in the
hygiene business. As a result, EBIT before special items did not
increase considerably as anticipated, but declined slightly.
Sales in the Functional Materials & Solutions segment increased
slightly in line with our forecast. Margins did not improve as expected
due to the increase in raw materials prices, and so we recorded a
Chemicals
Performance Products
Functional Materials & Solutions
Agricultural Solutions
56
Other
BASF Report 2018
Payments made for intangible assets and property, plant and equipment²
Free cash flow
556
4
Cash and cash equivalents at the beginning of the period and other changes
6,436
1,274
Cash and cash equivalents at the end of the year¹
2,519
6,495
0
1 In 2018, cash and cash equivalents presented in the statement of cash flows deviate from the figure in the balance sheet, as cash and cash equivalents of the oil and gas business in the balance sheet have been reclassified to
the disposal group.
2014
2015
2016
2017
2018
Cash flows from operating activities
-
2 Including investments to the extent that they already had an effect on cash
(EBITDA)
BASF Group
Income from operations (EBIT)
BASF Report 2018
57
440
About This Report
1 To Our Shareholders
2 Management's Report
Business Review by Segment
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Business Review by Segment
Segment overview
Million €
Contributions to total sales by segment
Income from operations before
depreciation and amortization
Chemicals
26%
In 2018, we invested a total of €3.5 billion in capital expenditures
(capex), excluding additions from acquisitions, capitalized explora-
tion, IT investments, restoration obligations and right-of-use assets
arising from leases. This includes capex of €383 million in the
former Oil & Gas segment for the first three quarters of 2018.
The figure forecast at the beginning of 2018 was approximately
€4.0 billion and included investments of €0.7 billion in the former
Oil & Gas segment. Capex in the Functional Materials & Solutions
segment and Other in particular was below the planned values.
For information on our expectations for 2019, see page 120 onward
For information on investments, see page 41
Sales
was primarily due to valuation effects for our long-term incentive
program.
We achieved a considerable increase in sales in the Agricultural
Solutions segment, as forecast. The acquisition of significant busi-
nesses from Bayer, which was originally expected in the first half of
2018, was delayed until August 2018. The later-than-expected
closing of the transaction and the seasonality of the businesses
meant that earnings were more negatively impacted than antici-
pated. Earnings were also weighed down by currency effects in all
regions. Consequently, EBIT before special items declined consid-
erably instead of slightly. EBIT before special items excluding the
acquired Bayer activities also declined considerably compared with
the previous year, rather than the slight increase we forecast.
before special items
2018 forecast
slight decline
slight increase
slight increase
considerable increase
slight increase
slight increase
2018 actual
slight increase
slight decline
slight increase
considerable increase
considerable increase
slight increase
2018 forecast
2018 actual
considerable decline
considerable decline
considerable increase
considerable increase
slight decline
slight increase
slight increase²
slight decline
considerable decline
considerable decline
considerable increase
considerable decline
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight" means a change of 1-10%, while
"considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%).
2 We adjusted our forecast in September 2018 to a slight decline in EBIT before special items compared with the adjusted figure for 2017 as a result of the changed presentation of the Wintershall Group following the signing of
the definitive agreement with LetterOne. We revised this forecast in December 2018 to a considerable decline in EBIT before special items.
considerable decline instead of a considerable increase in EBIT
before special items.
In Other, both sales and EBIT before special items increased con-
siderably and were thus higher than our forecast of a slight increase.
The stronger sales development was mainly attributable to higher
sales volumes in raw materials trading. The improvement in earnings
1,335
(339)
(1,167)
1,235
1,545
17,654
17,364
872
1,056
Agricultural Solutions
591
1,015
16,992
8,096
7,110
185
Other
(491)
(691)
Million €
Functional Materials & Solutions
Financing instruments
800
14,432
2018
2017
2018
2017
2018
2017
Chemicals
3,360
4,208
13,264
13,233
1,325
1,149
Performance Products
1,338
1,510
14,903
765
U.S. dollar
For short-term financing, we use BASF SE's U.S. dollar commercial
paper program, which has an issuing volume of up to $12.5 billion.
As of December 31, 2018, commercial paper in the amount of
$2,919 million was outstanding under this program; we did not hold
any commercial paper as of December 31, 2017. Firmly committed,
syndicated credit lines of €6 billion serve to cover the repayment of
outstanding commercial paper, and can also be used for general
company purposes. These were refinanced in January 2019. The
above credit lines were not used at any point in 2018. Our external
financing is therefore largely independent of short-term fluctuations
in the credit markets.
5 Supplementary Information Oil and Gas Business 6 Overviews
2,300
344
18,032
20,841
2,497
5,509
15,535
15,332
Noncurrent financial indebtedness
9,559
2024 and beyond
December 31, 2018 December 31, 2017
1,155
2023
2,105
2022
1,178
6,495
We have solid financing. Corporate bonds form the basis of our
medium to long-term debt financing. These are issued in euros and
other currencies with different maturities as part of our €20 billion
debt issuance program. The goal is to create a balanced maturity
profile, diversify our investor base and optimize our debt capital
financing conditions.
18,197
+ Current financial indebtedness
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Financial Position
1 To Our Shareholders
About This Report
54
54
BASF Report 2018
Our financing policy aims to ensure our solvency at all times, limiting
the risks associated with financing and optimizing our cost of capi-
tal. We preferably meet our external financing needs on the interna-
tional capital markets.
Rated "A1/P-1/outlook stable" by Moody's, "A/A-1/outlook stable"
by Standard & Poor's and "A/S-1/outlook stable" by Scope Ratings,
BASF enjoys good credit ratings, especially compared with competi-
tors in the chemical industry. These ratings were most recently
confirmed by Moody's on February 15, 2019, by Standard & Poor's
on January 11, 2019, and by Scope Ratings on December 11,
2018.
52
■ Financing principles remain unchanged
■ "A" ratings confirmed
Financing policy and credit ratings
Net debt
- Cash and cash equivalents
- Marketable securities
Financial indebtedness
11,485
12
acquisitions¹
Investments including
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
59
55
BASF Report 2018
Cash and cash equivalents amounted to €2,519 million as of
December 31, 2018. They declined by a cash-effective amount of
€3,917 million in 2018, mainly as a result of the purchase price
payment to Bayer.
Cash flows from financing activities amounted to minus
€52 million in 2018, after €394 million in 2017. Changes in financial
and similar liabilities resulted in a cash inflow of €3.0 billion in the
reporting year, around €0.3 billion less than in the previous year. This
was primarily due to the issue of U.S. dollar commercial paper by
BASF SE with a carrying amount of around €2.5 billion and bonds
with a carrying amount of around €1.9 billion. The main offsetting
effect was the repayment of maturing bonds in the amount of
€1.8 billion. In 2018, dividends of €2,847 million were paid to share-
holders of BASF SE and €174 million to noncontrolling interests.
For more information on investments and acquisitions, see page 41 onward
Cash tied up by changes in financial assets and miscellaneous items
amounted to minus €655 million in 2018, after €11 million was
released in 2017. The main contributing factors were higher addi-
tions from marketable securities and financial assets compared with
the previous year, as well as the change in other financing-related
receivables.
1,174
prior-year figure and €144 million higher than amortization of intan-
gible assets and depreciation of property, plant and equipment.
Cash flows from investing activities amounted to minus
€11,804 million in 2018, compared with minus €3,958 million in
2017. Payments made for intangible assets and property, plant and
equipment amounted to €3,894 million, €102 million below the
Cash flows from operating activities declined by €846 million
compared with the previous year to €7,939 million in 2018. This was
mainly due to the decrease in net income, despite lower amortiza-
tion of intangible assets and depreciation of property, plant and
equipment. The change in net working capital had an offsetting
effect. This was primarily attributable to the decline in cash tied up
for receivables and the higher level of cash released from operating
liabilities. This was partly offset by the increase in cash tied up in
inventories. The cash released in miscellaneous items in 2018 was
largely the result of the increase in pension provisions as well as
lower adjustments for non-cash-effective earnings contributions
from equity-accounted investments compared with the previous
year.
■ Cash flows from operating activities and free cash flow
lower year on year
5 Supplementary Information Oil and Gas Business
Statement of cash flows
6 Overviews
Statement of cash flows
(530)
4,213
3,750
6,078
4,707
2017
Free cash flow, which remains after deducting payments made for
intangible assets and property, plant and equipment from cash
flows from operating activities, represents the financial resources
remaining after investments. It declined to €4,045 million compared
with €4,789 million in the previous year due to the decrease in cash
flows from operating activities.
Cash flows from investing activities
Changes in financial assets and miscellaneous items
Acquisitions/divestitures
Payments made for intangible assets and property, plant and equipment
Cash flows from operating activities
Miscellaneous items
Changes in net working capital
Amortization of intangible assets and depreciation of property, plant and equipment
Net income
Million €
Financial Position
Assets
Our interest risk management generally pursues the goal of reducing
interest expenses for the BASF Group and limiting interest risks.
Interest rate hedging transactions are therefore conducted with
banks in order to turn selected liabilities to the capital market from
fixed interest to variable rates or vice versa.
For more information on the financing tools used, see Note 24 from page 246 onward and
Note 27 from page 251 onward in the Notes to the Consolidated Financial Statements
9,166
10,765
6,353
7,645
Chemicals
48%
Performance Products
24%
Functional Materials & Solutions
21%
Segment overview
Million €
Agricultural Solutions
11%
Other
(4%)
Income from operations
(EBIT)
61,223
To minimize risks and leverage internal optimization potential within
the Group, we bundle the financing, financial investments and for-
eign currency hedging of BASF SE's subsidiaries within the BASF
Group where possible. Foreign currency risks are primarily hedged
centrally by means of derivative financial instruments in the market.
62,675
(654)
Off-balance-sheet financing tools, such as leasing, are of minor
importance to us. BASF Group's most important financial contracts
contain no side agreements with regard to specific financial ratios
(financial covenants) or compliance with a specific rating (rating
trigger).
15,895 Bonds and other
liabilities to the capital market
2,397 Liabilities to banks
€20,841 million
commercial paper 2,549
5,696
985
1,282
734
1,033
Contributions to EBITDA by segment
Other
2,771
2,234
(373)
(569)
(450)
BASF Group
609
Acquisitions and divestitures in 2018 resulted in net payments made
of €7,255 million. These mainly related to the purchase price pay-
ment to Bayer, which amounted to €7,208 million including liquid
funds assumed. By contrast, net payments of €27 million were
received in the previous year.
475
Petrochemicals
Intermediates
4%
Prices
(1%)
Volumes
Factors influencing sales
Sales
Most comprehensive intermediates portfolio in the world,
including precursors for coatings, plastics, textile fibers
and crop protection products
Intermediates
Isocyanates and polyamides as well as inorganic basic
products and specialties for various sectors, such as the
plastics, automotive and construction industries
Monomers
€3,133 million
Broad range of basic products for sectors such as the
chemical and plastics industries
Divisions
The Chemicals segment consists of the Petrochemicals, Monomers and Intermediates
divisions. In our integrated production facilities - our Verbund - we produce a broad range of
basic chemicals and intermediates in Europe, Asia, North America and South America for our
customers as well as for internal supply into the BASF Verbund.
Chemicals
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Chemicals
1 To Our Shareholders
About This Report
59
59
Petrochemicals
BASF Report 2018
Change:
5%
60
60
Change: -€847 million
3,386
4,233
2017
2018
Million €
Income from operations before special items
BASF Report 2018
Percentage of sales:
39%
Change:
-7%
€6,464 million
2018:
Monomers
2017:
42%
Change:
1%
1%
Sales
(2%)
Currencies
0%
Portfolio
€6,904 million
Change:
8%
Percentage of sales:
Percentage of sales:
19%
€16,501 million
€16,331 million
1 Quarterly results not audited
1,421
469
567
106
81
Functional Materials & Solutions
325
521
326
427
337
357
247
240
348
Agricultural Solutions
531
259
270
(39)
20
(46)
194
Other
(87)
(233)
(145)
(129)
417
363
402
499
1,824
1,395
2,050
1,906
2,292
2,263
BASF Group
(120)
(162)
(209)
(97)
2017
2018
2017
2018
2017
Chemicals
1,126
974
1,064
1,119
846
1,089
324
1,026
Performance Products
482
25,643
661
663
1,525
207
38
21
(5)
278
533
423
Agricultural Solutions
267
289
Other
397
422
338
531
333
Functional Materials & Solutions
111
137
385
360
405
347
409
(79)
(127)
2018
2017
2018
Q4
Q3
Q2
Q1
Million €
Income from operations (EBIT)1
630
(239)
1,702
2,120
1,972
2,298
2,281
BASF Group
(113)
(161)
(203)
(83)
(99)
1,470
515
272
Performance Products
Q1
10
22%
Performance Products
Million €
56%
Chemicals
Income from operations (EBIT) before special items¹
Contributions to EBIT by segment
15,231
Q2
15,586
15,606
15,449
15,783
16,027
470
BASF Group
602
727
548
827
14,516
Q3
15,700
Functional Materials & Solutions
Q4
(8%)
Other
1,053
1,102
851
1,120
1,074
958
1,134
Chemicals
327
Agricultural Solutions
10%
2018
2017
2017
2018
2017
2018
2017
2018
20%
Cosmetics industry, detergent and cleaner industry,
agrochemical industry, technical applications for
various industries, hygiene industry
Food and feed industries, flavor and fragrance industry,
pharmaceutical industry and ethanol industry
About This Report
Coating, construction, paper, adhesives, printing and
packaging, plastics and electronic industries
Plastics processing industry, automotive industry, fuel and
lubricant industry, oil and gas industry, mining industry,
municipal and industrial water treatment as well as paper
and packaging industry
BASF Report 2018
69
69
5 Supplementary Information Oil and Gas Business
2 Management's Report
Performance Products
3 Corporate Governance
4 Consolidated Financial Statements
6 Overviews
Production capacities of significant products¹
Customer industries and applications
Sites
Product
1 To Our Shareholders
Functional chemicals and process chemicals for the production
of paper and cardboard, water treatment chemicals, membrane
technologies, kaolin minerals
Polymer dispersions, pigments, resins, formulation additives,
electronic materials
Fuel and refinery additives, polyisobutene, brake fluids and
engine coolants, lubricant additives and basestocks,
components for metalworking fluids and compounded
lubricants
South America,
For more information, see Events after the reporting period on page 122
Products, customers and applications
Division
Dispersions & Pigments
Care Chemicals
Nutrition & Health
Performance Chemicals
Process chemicals for the extraction of oil, gas, metals and
minerals, chemicals for enhanced oil recovery
Products
Ingredients for detergents and cleaners in household, institution
or industry, such as surfactants, enzymes, chelating agents,
polymers, biocides and products for optical effects
Excipients for crop protection product formulations, products for
concrete additives and chemical processes such as emulsion
polymerization, metal surface treatments or textile processing,
as well as products for biofuels and other industrial applications
Superabsorbents for baby diapers, incontinence products and
feminine hygiene articles
Additives for the food and feed industries, such as vitamins,
carotenoids, sterols, enzymes, emulsifiers and omega-3 fatty
acids
Industrial enzymes for ethanol production
Flavors and fragrances, such as citral, geraniol, citronellol,
L-menthol and linalool
Excipients for the pharmaceutical industry and selected,
high-volume active pharmaceutical ingredients, such as
ibuprofen and omega-3 fatty acids
Antioxidants, light stabilizers and flame retardants for plastic
applications
Ingredients for skin and hair cleansing and care products, such
as emollients, cosmetic active ingredients, polymers and UV
filters
Europe
Production capacities of significant products¹
Asia Pacific
30,000
635,000
265,000
590,000
Startup
2018-2021
2019
Gradual upgrade of production plants in accordance with the Good Manufacturing
Practice Standard issued by the European Federation for Cosmetic Ingredients
170,000
2022
Construction: production plant for electronic-grade sulfuric acid
Capacity expansion: antioxidants (IrganoxⓇ)
Jiaxing, China
Jurong, Singapore
Kaisten, Switzerland
Kuantan, Malaysia
Ludwigshafen, Germany
On May 3, 2018, BASF and Solenis announced that they had signed
an agreement on the combination of BASF's paper and water chem-
icals business with Solenis. BASF and Solenis closed the transaction
on January 31, 2019.
(EFfCI)
North America
78,000
(metric tons)
Africa, Middle East
Anionic surfactants
Citral
Chelating agents
Methane sulfonic acid
Nonionic surfactants
Polyisobutene
Superabsorbents
600,000
1 All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Location
Antwerp, Belgium
Bishop, Texas
Düsseldorf, Germany
Project
Gradual capacity expansion: alkoxylates
Capacity expansion: production plant for ibuprofen
Annual capacity
Investments
6 Overviews
Change:
-8%
3 Corporate Governance
€15,812 million
Change:
-2%
Change:
-2%
Percentage of sales:
Sales
(2%)
33%
2017:
Nutrition &
Health
€16,217 million
Income from operations before special items
€1.696 million
Nanjing, China
Percentage of sales:
11%
Million €
Care Chemicals
2018
1,376
2018:
Percentage of sales:
25%
(3%)
Currencies
21,000
n/a
2019
Expansion: propionic acid plant²
30,000
69,000
2019
1 Operated by an associated company with Yara International ASA
2 Operated by a joint venture with Sinopec
€4,913 million
BASF Report 2018
62
About This Report
1 To Our Shareholders
2 Management's Report
Chemicals
3 Corporate Governance
(1%)
Change:
0%
€5,292 million
62
2017
1,416
Change:
First-to-the-world dietary management product for patients with non-alcoholic fatty liver disease
Value for BASF
Annual sales potential of
around
€45 million
Hepaxa™ is a breakthrough in the nutritional support of non-
alcoholic fatty liver disease (NAFLD), one of the most common
forms of chronic liver disease worldwide and can help tens of
millions of patients manage NAFLD. Providing highly concentrat-
ed and pure eicosapentaenoic acid (EPA) and docosahexaenoic
acid (DHA), HepaxaTM, which was launched in the United States,
is the first product in the world specifically designed to address a
build-up of fat in the liver, known as steatosis, in NAFLD patients.
We expect an annual sales potential with HepaxaTM of around
€45 million over the medium term.
We plan to increase global production capacities for the antioxi-
dant Irganox 1010 by 40% at our sites in Jurong, Singapore, and
Kaisten, Switzerland. Once the projects are complete - in 2019 in
Kaisten and early 2021 in Jurong - BASF wants to even better meet
the growing demand from customers in Asia and Europe, the Middle
East and Africa at its regional distribution centers. We are expanding
our existing ibuprofen production capacities in Bishop, Texas, and
started construction of a new world-scale ibuprofen plant in
Value for customers
Reduction of fat in the liver of
Нерахатм
up to
NAFLD has become a disease of public health significance
affecting both adults and children. It has been shown that
patients with NAFLD have reduced levels of EPA and DHA.
HepaxaTM helps address a patient's distinct nutritional require-
ment for such omega-3 long chain polyunsaturated fatty acids. A
BASF product-specific clinical trial has shown that Hepaxa™ is
safe and effective in the dietary management of steatosis in
patients with NAFLD. Patients in the trial showed reductions of
fat of up to 44% in the liver after placebo correction.
Ludwigshafen, Germany, which is scheduled for startup in 2022. To
reliably meet the growing demand for high quality dispersions solu-
tions in the ASEAN countries, Australia and New Zealand, we plan
to double the production capacity for acrylics dispersions in Pasir
Gudang, Malaysia. The additional capacities are planned to be
operational in 2020.
BASF Report 2018
68
89
About This Report
1 To Our Shareholders
2 Management's Report
Performance Products
44%
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
How we create value - an example
A different business model is pursued for standard products such as
vitamins or dispersions for paper coatings. Here, efficient production
setups, backward integration in our Production Verbund's value
chains, capacity management, and technology and cost leadership
are all essential.
Change: -€40 million
-3%
Percentage of sales:
31%
BASF Report 2018
20
67
About This Report
We support our customers by serving as a reliable supplier with
consistently high product quality, good value for money and lean
processes. Our in-depth knowledge of the areas of application and
technological innovations strengthen our customer relationships in
key industries.
1 To Our Shareholders
3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
6 Overviews
Strategy
■ Tailor-made products and solutions improve our
customers' applications and processes
■ Global presence ensures reliable supply to customers
in all regions
We take on the challenges posed by important future issues, espe-
cially population growth: scarce resources, environmental and cli-
matic stressors, greater demand for food and the desire for better
quality of life. In doing so, we focus on research and development
and maintain close relationships to leading companies in our cus-
tomer industries. We position ourselves globally in order to reliably
supply customers in all regions. We invest in the development of
innovations that enable our products and processes - as well as our
customers' applications and processes - to make a contribution to
sustainability: for example, by allowing resources to be used more
efficiently.
Our products create additional value for our customers, providing a
competitive advantage. We develop new solutions together with our
customers and strive for long-term partnerships that create profit-
able growth opportunities for both sides.
2 Management's Report
Performance Products
Pasir Gudang, Malaysia
Shanghai, China
Capacity expansion: antioxidants (IrganoxⓇ)
Construction: aroma ingredients complex
Expansion: production plant for dispersions
Construction: production plant for vitamin A
Construction: production plant for ibuprofen
Capacity expansion: polyacrylamide plant
4,432
Income from operations before depreciation and amortization (EBITDA)
22,394
22,606
1%
6,063
6,105
5%
2,979
3,133
(7%)
6,963
6,464
8%
5,374
6,389
1%
16,331
16,501
Sales including intersegment transfers
Intersegment transfers
Intermediates
Monomers
of which Petrochemicals
Sales to third parties
+/-
2017
2018
Million €
6 Overviews
6,904
EBITDA margin
%
26.9
BASF Report 2018
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
2 Additions to intangible assets and property, plant and equipment
128
129
Research and development expenses
15%
1,149
1,325
Investments including acquisitions²
13,233
13,264
Assets
(30%)
2,895
2,030
(20%)
4,233
32.9
Depreciation and amortization
1,072
1,166
Income from operations (EBIT)
3,360
5 Supplementary Information Oil and Gas Business
4,208
(26)
(25)
(4%)
EBIT before special items
EBIT after cost of capital
3,386
Special items
1%
4 Consolidated Financial Statements
2 Management's Report
Chemicals
Propylene oxide
Propylene
Propionic acid
PolyTHF®
Polyamide precursors
Polyamide 6 and 6.6
Oxo-C4 alcohols (calculated as butyraldehyde)
Neopentyl glycol
Caustic soda
Isocyanates
Urea
Ethylene oxide
Ethylene
Ethanolamines and derivatives
Sulfuric acid
Chlorine
Butadiene
Benzene
■
Annual capacity
South America,
Africa, Middle East
Asia Pacific
North America
Europe
Sites
Ammonia
Formic acid
Alkylamines
Acrylic acid
Product
Butanediol equivalents
Plasticizers
■
1 All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
1 To Our Shareholders
About This Report
Segment data - Chemicals
63
63
595,000
920,000
675,000
2,610,000
150,000
350,000
910,000
820,000
1,625,000
205,000
360,000
2,610,000
BASF Report 2018
(metric tons):
1,510,000
250,000
305,000
1,525,000
3 Corporate Governance
910,000
670,000
385,000
430,000
3,480,000
1,445,000
545,000
680,000
6 Overviews
Chemicals segment
At €16,501 million, sales to third parties in the Chemicals segment
in 2018 were €170 million above the prior-year figure (volumes -1%,
prices 4%, portfolio 0%, currencies -2%). This was due to higher
(18%) prices overall in all divisions, especially in Petrochemicals. By con-
trast, the Monomers division saw a decrease in isocyanate prices.
Currency effects had a negative impact on sales. Sales volumes
were also slightly below the prior-year level. We increased volumes
overall in the Petrochemicals and Intermediates divisions despite the
low water levels on the Rhine River, while sales volumes declined
considerably in the Monomers division.
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Performance Products
1 To Our Shareholders
About This Report
99
66
BASF Report 2018
5%
Sales
(2%)
Currencies
Performance Products
0%
5%
Prices
2%
Volumes
The construction of the new acetylene plant in Ludwigshafen, Ger-
many, is progressing according to schedule, with startup planned
by the end of 2019.
EBIT before special items rose slightly compared with the previous
year as a result of improved margins and volumes growth. This was
partly offset by higher fixed costs, mostly from plant shutdowns.
North America 18%
5 Supplementary Information Oil and Gas Business
Asia Pacific 37%
42% Europe
South America, Africa, Middle East 3%
Location of customer
Intermediates - Sales by region
Intermediates - Factors influencing sales
Portfolio
The Performance Products segment consists of the Dispersions & Pigments, Care Chemicals,
Nutrition & Health and Performance Chemicals divisions. Our offerings enhance the perfor-
mance of industrial and consumer products worldwide. With our tailor-made solutions, our
customers can make their production processes more efficient and give their products
improved application properties.
Divisions
Dispersions & Pigments
Capacity expansion: production plant for acrylics dispersions
Construction: production plant for plastic additives
BASF Report 2018
2018
2021
2019
2017/2018
2018
2020
2022
2018
2020
2019
70
10
4 Consolidated Financial Statements
€3,911 million
4%
Raw materials used to formulate products in the
coating, construction, paper, adhesives, printing
and packaging, plastics and electronic industries
Care Chemicals
Ingredients for the cosmetics, detergent and
cleaner industries, agrochemical and technical
applications and the hygiene industry
Nutrition & Health
Products for the food and feed industries, the
flavor and fragrance industry, the pharmaceutical
industry and the ethanol industry
Performance Chemicals
The Intermediates division increased sales to third parties by
€154 million year on year to €3,133 million, primarily due to higher
prices. We were able to increase prices, particularly in the acids and
polyalcohols business in all regions. Prices for butanediol and deri-
vatives rose as well, especially in Europe and North America. We
also increased sales volumes in 2018 - across the entire portfolio in
Asia and above all in the amines and butanediol and derivatives
businesses in North America. Currency effects had a negative
impact on sales.
Customized products for many sectors, from mining
Sales
Factors influencing sales
Performance
Chemicals
Volumes
(2%)
Prices
and the fuel industry to plastics processing
■ Sales growth of 1% to €16,501 million due to higher prices
■ EBIT before special items declines 20% to €3,386 million
primarily as a result of lower margins, impacted by low
water level of Rhine River
■ EBIT before special items slightly above the prior-year
level due to margin and volumes growth
Intermediates
Monomers - Factors influencing sales
Location of customer
Asia Pacific 8%
8%
Sales
(2%)
Currencies
0%
Portfolio
6%
Prices
4%
Volumes
Petrochemicals - Factors influencing sales
The Petrochemicals division increased sales to third parties by
€515 million to €6,904 million in 2018. This was mainly due to sig-
nificantly higher sales prices. These rose in all regions and business
areas, largely following the higher raw materials prices for naphtha
and butane, our most important feedstock. We also increased
volumes. In Europe, sales volumes were slightly higher than in the
previous year, as the supply of raw materials through the North
Harbor and thus production in Ludwigshafen, Germany, was
severely restricted in 2017. However, the low water levels on the
Rhine River in the third and fourth quarters of 2018 led to significant
production limitations. Volumes rose in North America, mainly as a
result of higher capacity utilization of the condensate splitter in Port
Arthur, Texas. Sales were dampened by currency effects.
Petrochemicals - Sales by region
■ Considerable decline in EBIT before special items
attributable to lower margins, higher fixed costs and low
water level of Rhine River
Petrochemicals
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Chemicals
1 To Our Shareholders
About This Report
64
19
Income from operations (EBIT) before special items declined by
€847 million to €3,386 million. This was mainly attributable to lower
margins for isocyanates in the Monomers division and steam cracker
products in the Petrochemicals division. Stronger margins in the
Intermediates division were unable to compensate for this. Plant
shutdowns and the low water levels on the Rhine River in the sec-
ond half of 2018 also contributed to the decline in earnings. EBIT
declined by €848 million to €3,360 million. Overall, special items did
not have a substantial impact.
1%
0%
(8%)
(20%)
■ Sales rise 8% to €6,904 million due to higher prices
and volumes
2% South America, Africa, Middle East
Volumes
(6%)
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Chemicals
1 To Our Shareholders
About This Report
65
BASF Report 2018
The considerable year-on-year decline in EBIT before special items
in the Monomers division was primarily attributable to the lower
margins and volumes in the isocyanates business. Earnings devel-
opment in the fourth quarter of 2018 was also negatively impacted
by the low water levels on the Rhine River. The restructuring of our
caprolactam production in Europe and reduced fixed costs, mainly
owing to lower impairments, had a positive effect on earnings.
20% North America
€6,464 million
39% Europe
Asia Pacific 34%
Monomers - Sales by region
Location of customer
South America, Africa, Middle East 7%
Sales to third parties in the Monomers division decreased by
€499 million to €6,464 million in 2018 due to lower volumes and
negative currency effects. Sales volumes declined year on year as a
result of higher market supply and the low water levels on the Rhine
River. Overall, prices were above the prior-year level. Higher prices
for polyamides in particular compensated for the price decrease in
the isocyanates business on the back of higher market supply.
■ Considerable decline in EBIT before special items largely
from lower margins and volumes in the isocyanates
business
Prices
2%
56% Europe
Portfolio
0%
Currencies
■ Sales increase of 5% to €3,133 million largely driven by
higher prices
(3%)
(7%)
North America 34%
€6,904 million
EBIT before special items declined considerably. Compared with the
very strong prior-year level, margins decreased significantly over the
course of the year, especially for steam cracker products. This was
due to higher market supply as a result of new capacities in the
market, particularly in North America. Fixed costs increased. In the
previous year, we received significantly higher insurance refunds; in
addition, maintenance expenses were up from the 2017 figure. The
low water levels on the Rhine River was a significant contributor to
the decline in earnings.
Monomers
■ Sales down 7% to €6,464 million as a result of lower
volumes and negative currency effects
Sales
€3,133 million
Portfolio
n/a
With its production facilities, the Chemicals segment is at the heart
of the Verbund and supplies BASF's segments with basic chemicals
for the production of downstream products. We add value with
Biomass balance products actively contribute to saving fossil
raw materials and in this way, help reduce greenhouse gas emis-
sions. For instance, using renewable feedstock in the methanol
production process reduces climate-damaging greenhouse gas
emissions by at least 50% compared with conventionally pro-
duced methanol. For the methanol certified according to the
EU-RedCert standard, BASF completely replaces fossil methane
with biomethane made from waste and residual materials.
innovations in processes and production and invest in future mar-
kets. As a reliable supplier, we provide chemicals of consistent
quality and market them to customers in downstream industries. We
continuously improve our value chains and are expanding our mar-
ket position - particularly outside Europe - with new processes and
technologies, as well as through investments and collaborations in
future markets.
We plan to build an integrated Verbund chemical production site in
Zhanjiang in the southern Chinese province of Guangdong. A
non-binding Memorandum of Understanding was signed in July
2018. At the new site, we intend to implement a comprehensive
smart manufacturing concept based on implementing cutting-edge
digital technologies within the plants.
BASF and Sinopec, Beijing, signed a Memorandum of Understand-
ing in October to further strengthen their partnership in chemical
production in China. The partners intend to build an additional steam
cracker and to further expand their existing 50:50 joint venture,
BASF-YPC Company Limited, at our Verbund site in Nanjing.
To support the growing demand for acrylic monomers in Asia Pacific,
BASF PETRONAS Chemicals is looking into expanding the produc-
tion capacity of its acrylic acid plant and butyl acrylate plants at our
Verbund site in Kuantan, Malaysia.
At our Verbund site in Antwerp, Belgium, we are planning a signifi-
cant capacity expansion of the integrated ethylene oxide complex.
The project also includes several downstream derivatives, such as
surfactants.
BASF Report 2018
61
199
About This Report
1 To Our Shareholders
2 Management's Report
Chemicals
3 Corporate Governance
4 Consolidated Financial Statements
■ Integrated production facilities form core of Verbund
■ Technology and cost leadership provide most important
competitive edge
5 Supplementary Information Oil and Gas Business
Strategy
We invest in research and development to develop new technolo-
gies and to make our existing technologies even more efficient. Cost
leadership and a clear orientation along individual value chains are
among our most important competitive advantages. We concen-
trate on the critical success factors of the classic chemicals busi-
ness: leveraging economies of scale and the advantages of our
Verbund, high capacity utilization, continuous optimization of access
to raw materials, lean and energy efficient processes - including
reducing greenhouse gas emissions - and reliable, cost-effective
logistics. Furthermore, we are constantly improving our global pro-
duction structures and aligning these with regional market require-
ments.
1 To Our Shareholders
2 Management's Report
Chemicals
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
How we create value an example
Biomass balance approach for methanol
Fossil resource-saving process expanded
Value for BASF
Annual volume of relevant market in Europe
20.5 million
metric tons
Value for the environment
≥50%
lower greenhouse gas
emissions
Since 2013, BASF has used the biomass balance approach to
promote the use of sustainably produced renewable raw materi-
als in the integrated Production Verbund by replacing fossil
feedstock with biogas or bio-naphtha at the very beginning of the
value chain. BASF has produced methanol according to the
biomass balance approach since 2018. This methanol is certified
according to the EU-RedCert standard. Methanol is an important
raw material for many products in different value chains. Potential
applications are biofuels and fuel additives. The European market
for methyl-tert-butylether (MTBE), a fuel additive manufactured
from methanol, has an annual volume of 20.5 million metric tons.
About This Report
6 Overviews
The new MDI synthesis unit in Geismar, Louisiana, is a major mile-
stone toward increasing MDI production capacity in North America.
This investment supports the growth of our MDI customers in the
North American market.
Location
Project
Additional annual capacity
through expansion (metric tons)
Total annual
capacity (metric tons)
Startup
Freeport, Texas
2019
90,000
n/a
2020
300,000
Geismar, Louisiana
2018
750,000
Construction: ammonia plant¹
Construction: MDI synthesis unit
Replacement: acetylene plant
Construction: specialty amines plant
Plastics, coatings and pharmaceutical industries,
production of detergents and cleaners as well as
crop protection products and textile fibers
In Ludwigshafen, Germany, we will strengthen our Verbund by
replacing our acetylene plant with a modern highly efficient plant by
the end of 2019.
Use in the BASF Verbund
Use in the BASF Verbund
Products, customers and applications
Division
Petrochemicals
Monomers
On September 18, 2017, we signed an agreement with Solvay on
the acquisition of Solvay's integrated polyamide business.
For more information on the current status of the agreement with Solvay, see page 42
Intermediates
Investments
Products
Ethylene, propylene, butadiene, benzene,
alcohols, solvents, plasticizers, alkylene oxides,
glycols and acrylic monomers
Isocyanates (MDI, TDI), ammonia, caprolactam,
adipic acid, chlorine, urea, glues and impregnating
resins, caustic soda, polyamides 6 and 6.6,
standard alcoholates, sulfuric and nitric acid
Basic products: butanediol and derivatives,
alkylamines and alkanolamines, neopentyl glycol,
formic and propionic acid
Specialties: specialty amines such as tertiary
butylamine and polyetheramine, gas treatment
chemicals, vinyl monomers, acid chlorides,
chloroformates, chiral intermediates
Customer industries and applications
Use in the BASF Verbund
Chemical and plastics industry, detergent,
hygiene, automotive, packaging and textile
industries; production of paints, coatings, and
cosmetics as well as oilfield, construction and
paper chemicals
Industries such as plastics, woodworking,
furniture, packaging, textile, construction and
automotive
Nanjing, China
Ludwigshafen, Germany
Dispersions & Pigments
Factors influencing sales
Chemicals
€2,456 million
Construction
Million €
Income from operations before special items
BASF Report 2018
€20,745 million
2017:
18%
Percentage of sales:
Change:
-3%
€3,856 million
Coatings
and foams
Polyurethanes, thermoplastics
Performance Materials
decorative paints
Coatings solutions, surface treatments,
Coatings
and infrastructure
and envelopes, interior construction
Solutions for building structure
Construction Chemicals
2018
1,307
2017
1,617
Enabled business wins since first introduction in 2015
with a value of
Value for BASF
Efficient design for removing hydrocarbons and carbon monoxide with lower consumption of precious metals
Novel diesel oxidation catalyst (DOC)
How we create value an example
The focus is on securing our leading market position in Europe,
profitably expanding our position in the North American market and
purposefully extending our activities in the growth regions of Asia,
South America, eastern Europe and the Middle East. New business
fields such as battery materials play a particularly important role
here. On October 22, 2018, we announced that Harjavalta, Finland,
will be the location of our first site to produce battery materials for
the European automotive market. The plant will be constructed ad-
jacent to the nickel and cobalt refinery owned by Norilsk Nickel
(Nornickel). BASF and Nornickel have signed a long-term, market-
based supply agreement for nickel and cobalt from Nornickel's
metal refinery. With the investment, BASF will be present in all major
regions with local production and increased customer proximity.
We aim to continuously optimize our product and services portfolio
and our structures according to different regional market require-
ments as well as trends in our customer industries.
We develop innovative products and technologies in close coopera-
tion with our customers. Our aim is to find the best solution in terms
of cost and functionality, helping our customers to drive forward
innovation in their industries and contribute to sustainable develop-
ment. For instance, the transformation of mobility is a key trend in
the automotive industry. To address this, we are developing solu-
tions in the areas of battery materials, emission control, lightweight
engineering concepts and coatings together with our customers.
Our specialties and system solutions enable customers to stand out
from the competition.
■ Focus on specialties and system solutions that allow our
customers to stand out from the competition
■ Development of innovative products and technologies in
close collaboration with our customers
battery materials, precious metal trading
Strategy
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
Functional Materials & Solutions
1 To Our Shareholders
About This Report
74
11%
Percentage of sales:
Change: -€310 million
Change:
2%
6 Overviews
Automotive and process catalysts,
Catalysts
35%
Currencies
Sales
།* །* །g 「g 」 ༅ །
Performance Chemicals - Sales by region
Location of customer
South America, Africa, Middle East 10%
Asia Pacific 25%
North America 26%
39% Europe
€3,911 million
Volumes
BASF Report 2018
73
About This Report
1 To Our Shareholders
2 Management's Report
Functional Materials & Solutions
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Functional Materials & Solutions
The Functional Materials & Solutions segment comprises the Catalysts, Construction
Chemicals, Coatings, and Performance Materials divisions. They develop and market system
solutions, services and innovative products for specific sectors and customers, particularly
for the automotive, electronics, chemical and construction industries as well as for household
applications, sports and leisure.
Divisions
Sales
Portfolio
Performance
At €3,911 million, sales to third parties in the Performance Chemi-
cals division were on a level with the previous year. Sales were
positively impacted by higher sales prices in all regions and almost
all business areas, as well as higher volumes in the oilfield and min-
ing chemicals and lubricant and plastic additives businesses. Nega-
tive currency effects, mainly from the U.S. dollar, and the transfer of
BASF's leather chemicals business to the Stahl group dampened
sales development.
■ Sales of €3,911 million at prior-year level
Percentage of sales:
Change:
3%
3%
Sales
Change:
12%
€21,435 million
2018:
Percentage of sales:
36%
(4%)
Currencies
0%
Portfolio
Catalysts
€7,469 million
-1%
Change:
€7,654 million
5%
Prices
Materials
2%
EBIT before special items increased considerably compared with
2017. Insurance refunds for production outages in 2017 and 2018
led to lower fixed costs. Despite higher raw materials prices, we
achieved higher margins in the animal nutrition business in particular.
The citral plant in Ludwigshafen, Germany, was restarted in April
2018. We started production of citral, citronellol and menthol at our
new aroma ingredients complex in Kuantan, Malaysia.
Performance Chemicals
■ EBIT before special items slightly below previous year,
mainly due to lower margins
EBIT before special items declined slightly compared with the previ-
ous year. This was mainly attributable to lower margins, in particular
as a result of negative currency effects. Fixed costs were at the
prior-year level.
80
About This Report
Volumes
(3%)
Prices
3%
39% Europe
Portfolio
0%
Currencies
(3%)
Sales
(3%)
Asia Pacific 32%
€5,292 million
North America 24%
EBIT before special items declined considerably compared with
2017. This was mainly due to lower margins as a result of the
increase in raw materials prices, negative currency effects and
higher fixed costs. In 2017, fixed costs were partly offset by an
insurance refund; in 2018, additional fixed costs arose in connection
with new production facilities in Ludwigshafen, Germany, and a new
electronic materials plant in Yeosu, South Korea.
Care Chemicals
■ Sales decline 3% to €4,913 million due to lower volumes
and currency effects
5% South America, Africa, Middle East
Location of customer
Care Chemicals - Factors influencing sales
Dispersions & Pigments - Sales by region
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Dispersions & Pigments
■ Sales 2% below the prior-year figure at €5,292 million,
largely from negative currency effects
■ Considerable decline in EBIT before special items,
primarily as a result of lower margins and higher
fixed costs
Sales to third parties in the Dispersions & Pigments division
amounted to €5,292 million, €106 million below the prior-year level.
This was mainly due to negative currency effects in almost all
regions. Sales were also reduced by the divestiture of the production
site for styrene butadiene-based paper dispersions in Pischelsdorf,
Austria. The slight increase in prices, especially in the dispersions
and resins businesses, was unable to compensate for this. Volumes
were on a level with the prior year. Higher sales volumes in the
dispersions business in Europe and North America as well as in the
electronic materials business were offset by lower volumes in the
additives and pigments businesses as a result of stronger competi-
tion and in the resins business due to raw materials shortages.
Dispersions & Pigments - Factors influencing sales
■ Considerable increase in EBIT before special items,
primarily from higher margins
Volumes
Prices
2%
Portfolio
(1%)
Currencies
(3%)
Sales
(2%)
0%
3 Corporate Governance
In the Care Chemicals division, sales to third parties declined by
€166 million to €4,913 million in 2018. This was attributable to lower
sales volumes, especially for oleochemical surfactants and fatty
alcohols and in the hygiene business, as well as negative currency
effects. By contrast, sales were positively impacted by higher prices
in almost all business areas.
Location of customer
(13%)
Prices
8%
Portfolio
0%
Currencies
(3%)
Sales
(8%)
Location of customer
South America, Africa, Middle East 10%
Asia Pacific 32%
North America 18%
Volumes
Prices
40% Europe
€1,696 million
Volumes
Nutrition & Health - Factors influencing sales
In the Nutrition & Health division, sales to third parties declined by
€148 million to €1,696 million in 2018. This was mainly attributable
to lower volumes from the reduced availability of citral-based prod-
ucts. In October 2017, a fire occurred during startup of the citral
plant in Ludwigshafen, Germany. As a result, we had to declare
Force Majeure for all citral and isoprenol-based aroma ingredients,
and consequently for vitamin A, vitamin E and several carotenoid
products as well. We were able to gradually lift Force Majeure for
almost all affected products in 2018. Sales were weighed down by
negative currency effects. Higher sales prices had an offsetting
effect.
■ EBIT before special items considerably above the 2017
figure due to lower fixed costs and higher margins
South America, Africa, Middle East 11%
Asia Pacific 18%
50% Europe
€4,913 million
North America 21%
EBIT before special items increased considerably compared with
2017. This was mainly due to higher margins for products for the
cosmetics industry, especially for oleochemical surfactants and fatty
alcohols. Fixed costs declined slightly as a result of currency effects,
insurance refunds and successful restructuring measures, espe-
cially in North America.
BASF Report 2018
72
Care Chemicals - Sales by region
About This Report
2 Management's Report
Performance Products
3 Corporate Governance
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
6 Overviews
Nutrition & Health
Nutrition & Health - Sales by region
Performance Chemicals - Factors influencing sales
■ Sales down 8% year on year at €1,696 million, largely as a
result of lower product availability
1 To Our Shareholders
> €700 million
2 Management's Report
Performance Products
About This Report
Nutrition & Health
Performance Chemicals
Intersegment transfers
Sales including intersegment transfers
Income from operations before depreciation and amortization (EBITDA)
15,812
16,217
(2%)
5,292
5,398
(2%)
4,913
5,079
(3%)
1,696
1,844
(8%)
Care Chemicals
of which Dispersions & Pigments
Sales to third parties
+/-
1 To Our Shareholders
2 Management's Report
Performance Products
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business
6 Overviews
Segment data - Performance Products
Million €
3,911
(5%)
(11%)
3%
Performance Products segment
■ Sales 2% lower at €15,812 million, mainly as a result
of currency effects and lower volumes
■ EBIT before special items down 3% to €1,376 million,
primarily due to lower sales volumes and negative
currency effects
At €15,812 million, sales to third parties in the Performance Prod-
ucts segment in 2018 were €405 million below the prior-year figure
(volumes -2%, prices 4%, portfolio -1%, currencies -3%). This is
mainly attributable to negative currency effects in all divisions. Sales
were also negatively impacted by lower volumes in the Nutrition &
Health and Care Chemicals divisions as well as portfolio effects.
Higher sales prices in all divisions had an offsetting effect.
Despite an overall improvement in margins, income from operations
(EBIT) before special items declined by €40 million year on year to
€1,376 million. This was largely due to lower sales volumes and
negative currency effects. Excluding the negative currency effects,
EBIT before special items was flat year on year. Compared with
2017, EBIT declined by €172 million to €1,338 million. In the previ-
ous year, we generated special income from the transfer of BASF's
leather chemicals business to the Stahl group; in 2018, special
charges arose from various individual items.
2018
2017
(3%)
1 To Our Shareholders
3,896
498
EBIT after cost of capital
Assets
Investments including acquisitions²
(131)
26
14,903
14,432
765
800
(4%)
Research and development expenses
394
395
(0%)
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
2 Additions to intangible assets and property, plant and equipment
BASF Report 2018
71
1,416
1,376
94
(38)
506
16,310
16,723
(2%)
(2%)
2,205
2,427
(9%)
EBITDA margin
0%
Depreciation and amortization¹
Special items
EBIT before special items
%
13.9
15.0
867
917
1,338
Income from operations (EBIT)
Diesel oxidation catalysts (DOC) reduce the emissions of heavy
duty diesel engines by removing hydrocarbons and carbon mon-
oxide from the exhaust. Furthermore, they provide the functionality
to facilitate the removal of soot and nitrogen oxides by the down-
stream soot filter and the selective catalytic reduction catalyst.
BASF has developed a novel DOC design to better utilize the
precious metals of such catalysts, while significantly improving
the catalysts' performance. Since its first introduction in 2015,
the technology has been continuously further developed and has
enabled business wins of more than €700 million.
1,510
For more information on the current status of the agreement with Solvay, see page 42
0%
Portfolio
1%
Prices
1%
Volumes
Coatings - Factors influencing sales
Performance Materials - Factors influencing sales
Currencies
Performance Materials
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Functional Materials & Solutions
1 To Our Shareholders
About This Report
78
sales in the surface treatments business. Higher sales volumes in all
regions compensated for negative currency effects.
BASF Report 2018
(5%)
(3%)
Prices
(2%)
Volumes
Sales to the construction industry declined slightly due to lower
volumes and currency effects. Although we achieved higher sales
prices overall in the polyurethane systems business, demand was
down from the prior-year level, especially in Europe. Scheduled
plant turnarounds in the first half of 2018 also reduced sales volumes
in the styrene foams business.
Sales in the consumer goods industry decreased slightly. As well as
currency effects, this was mainly attributable to lower demand for
polyurethane systems, particularly in Europe. This could not be
completely offset by higher volumes in our engineering plastics and
specialty businesses and higher prices.
Sales to the automotive industry rose slightly due to higher prices, in
particular for engineering plastics in Asia and Europe. Volumes
declined slightly overall. While higher volumes contributed to sales
growth in South America, demand in Europe, Asia and North America
remained below the prior-year level, especially for polyurethane
systems.
At €7,654 million, sales to third parties in the Performance Materials
division in 2018 were €52 million below the prior-year level. Price
increases due to significantly higher raw materials prices, parti-
cularly in the first half of 2018, were unable to completely offset the
negative currency effects in all regions and business areas, as well
as slightly lower volumes. Sales volumes declined, primarily as a
result of weaker demand from the construction and consumer
goods industries.
■ Considerable year-on-year decrease in EBIT before
special items, mainly as a result of lower margins
Sales
■ Sales of €7,654 million, down 1% from the previous year
due to currency effects and lower volumes
EBIT before special items declined considerably. This was mainly
due to higher fixed costs, largely as a result of higher personnel
costs and integration costs for the Chemetall business, as well as
lower margins from the increase in raw materials prices.
38% Europe
North America 22%
€3,856 million
Asia Pacific 26%
South America, Africa, Middle East 14%
Location of customer
Coatings - Sales by region
In September 2018, we opened a new laboratory for automotive
OEM coatings in Münster, Germany, with a focus on optimized,
digital and transparent processes as well as using resources effi-
ciently.
Despite slightly higher volumes, particularly in Asia and North
America, sales of automotive OEM coatings declined due to nega-
tive currency effects in all regions. We recorded sales growth in the
automotive refinish coatings business as negative currency effects
were more than offset by higher sales volumes in Asia, North America
and Europe, and higher prices. Sales in the decorative paints busi-
ness in Brazil were considerably below the prior-year figure, with
significantly higher sales prices unable to compensate for strongly
negative currency effects and slightly weaker demand. We increased
Sales to third parties in the Coatings division declined by €113 mil-
lion to €3,856 million in 2018. This was attributable to negative cur-
rency effects in all regions, especially in South America. Sales were
positively impacted by higher volumes and prices.
■ EBIT before special items considerably below prior-year
figure, mainly due to higher fixed costs and lower margins
■ EBIT before special items slightly lower, mainly from
softer margins
■ Sales 2% above previous year at €2,456 million, primarily
due to higher volumes
Construction Chemicals
EBIT before special items was slightly above the prior-year figure,
mainly owing to higher sales volumes. Fixed costs increased due
among other factors to the startup of new plants in the chemical
catalysts, automotive catalysts and battery materials businesses.
North America 33%
€7,469 million
Asia Pacific 26%
South America, Africa, Middle East 8%
In the Construction Chemicals division, we increased sales to third
parties by €44 million compared with the previous year to €2,456 mil-
lion. This was largely driven by higher sales volumes. The acquisition
of Grupo Thermotek, Monterrey, Mexico, in September 2017 and
higher prices also contributed to the increase in sales. By contrast,
currency effects had a negative impact in all regions.
Location of customer
12%
Sales
(4%)
Currencies
0%
Portfolio
11%
Prices
Catalysts - Sales by region
Higher volumes and prices led to sales growth in Europe, while in
North America, the increase was attributable to the Thermotek
acquisition and higher sales volumes. In Asia, higher volumes and
prices were unable to completely offset the negative currency
effects. Despite volumes growth, negative currency effects pushed
down sales in the region South America, Africa, Middle East.
Construction Chemicals - Factors influencing sales
Volumes
■ Sales decline 3% to €3,856 million as a result of negative
currency effects
Coatings
Although sales volumes rose and fixed costs declined, mainly as a
result of currency effects, EBIT before special items was slightly
below the 2017 figure. This was primarily attributable to lower mar-
gins.
North America 31%
€2,456 million
Asia Pacific 18%
39% Europe
Location of customer
South America, Africa, Middle East 12%
Construction Chemicals - Sales by region
2%
Sales
(4%)
Currencies
2%
Portfolio
33% Europe
1%
Prices
3%
4%
5%
Portfolio
Currencies
734
2018
Change:
-3%
11%
Million €
Income from operations before special items
Fungicides
€2,287 million
€5,696 million
2017
Percentage of sales:
1%
Change:
Change:
8%
€670 million
€6,156 million
Insecticides
5%
2018:
2017:
Percentage of sales:
1,033
37%
BASF Report 2018
On September 18, 2017, we signed an agreement with Solvay on
the acquisition of Solvay's integrated polyamide business.
Percentage of sales:
Change:
€2,436 million
Herbicides
40%
3%
Percentage of sales:
Optimization and development
of seeds and new traits
Biological crop protection, seed
treatment, polymers and colorants
Functional Crop Care
Combating insect pests in
agriculture and beyond
Insecticides
weeds for water and nutrients
Reducing competition from
Herbicides
Change: -€299 million
Seeds & Traits
8%
Sales
Change:
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Agricultural Solutions
1 To Our Shareholders
About This Report
79
BASF Report 2018
EBIT before special items was considerably below the prior-year
level. This was mainly attributable to lower margins. The increase in
raw materials prices could only be partly offset by higher sales
prices. Fixed costs rose slightly. Higher expenses, especially from
the startup of new plants for thermoplastic polyurethanes, UltraformⓇ
and UltrasonⓇ, were partly offset by insurance refunds, mainly for
production outages.
5 Supplementary Information Oil and Gas Business
€7,654 million
North America 21%
Asia Pacific 28%
South America, Africa, Middle East 3%
Location of customer
Performance Materials - Sales by region
Sales
(1%)
(3%)
48% Europe
6 Overviews
Agricultural Solutions
The Agricultural Solutions segment consists of the division of the same name. We develop and
produce innovative solutions to improve crop health and yields, and market them worldwide.
(7%)
Currencies
10%
Portfolio
Seeds & Traits
€300 million
4%
Prices
1%
Volumes
Percentage of sales:
7%
52%
€463 million
Functional
Crop Care
Factors influencing sales
Sales
harmful fungal diseases
Protecting crops against
Fungicides
Indications and sectors
0%
Volumes
Change:
We recorded considerable volumes growth in the chemical catalysts,
battery materials and refining catalysts businesses. By contrast,
sales volumes declined for automotive catalysts, especially in Europe.
In precious metal trading, sales rose considerably by €672 million to
€3,190 million, primarily due to higher prices and volumes.
2019
2018
2019
2019
Startup
BASF Report 2018
Construction: technical competence center for automotive coatings
Construction: plant for mobile emissions catalysts
Capacity expansion: plant for emissions catalysts
Capacity expansion: automotive coatings plant
Construction: plant for automotive emissions catalysts
2019
Construction: specialty zeolites plant for emissions catalysts.
Construction: modular laboratory for automotive OEM coatings
Construction: plant for functional film coatings.
Construction: laboratory building for automotive coatings
New surface treatment site
Capacity expansion: logistics for floor installation systems
Capacity expansion: resin plant
Capacity expansion: for CellastoⓇ
Construction: plant for Ultraform®
Capacity expansion: plant for sealants
Project
Tultitlán, Mexico
Środa Śląska, Poland
Shanghai, China
Construction: battery materials plant for the automotive market
Capacity expansion: for Naftoseal® aircraft sealants
Rayong, Thailand
2018
2019
Segment data - Functional Materials & Solutions
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Functional Materials & Solutions
1 To Our Shareholders
About This Report
2019
76
2020
2019
2018
2018
2021
2020
2019
2018
2019
Pinghu, China
Münster, Germany
Ludwigshafen, Germany
Catalysts
Division
Products, customers and applications
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Functional Materials & Solutions
Construction Chemicals
1 To Our Shareholders
75
BASF Report 2018
We are also evaluating strategic options for our construction chem-
icals business to ensure the successful and profitable development
of the business area in the long term, and to take advantage of
opportunities in the market. The outcome of this review is open. We
are considering the possibility of merging with a strong partner as
well as the option of a divestiture. We strive to sign an agreement in
2019.
The novel DOC design is used on-road in all major markets and
thus provides a significant benefit for air quality and fuel economy.
With our DOC catalyst in the front of the emission control system,
it is possible to meet the most stringent of current emission con-
trol regulations such as US HDD 2010 (United States), EUVI
(Europe), NSVI (China) and BSVI (India). The technology not only
reduces precious metal consumption by at least 25%, but also
significantly broadens the temperature region to implement
removal of soot and prevent build-up of back pressure on the
engine, thereby reducing fuel consumption.
≥25%
Catalysts - Factors influencing sales
Meets the latest emission regulations while reducing
precious metal consumption by
Value for our customers and the environment
About This Report
Coatings
Products
Automotive catalysts, process catalysts and technologies
Langelsheim, Germany
Harjavalta, Finland
Hamm, Germany
Greenville, Ohio
Gimcheon, South Korea
Dahej, India
Brighton, Colorado
Location
Investments
Automotive manufacture, electrical engineering, packaging, games, sports and leisure, household,
mechanical engineering, construction, medical technology, sanitation and water industry, solar thermal
energy and photovoltaics
Automotive industry, body shops, steel industry, aviation, aluminum applications in the architecture and
construction industries, household appliances, painting businesses and private consumers
Cement and concrete producers, construction companies, craftspeople, builders' merchants, solutions for
new building construction, maintenance, repair and renovation of commercial and residential buildings as
well as infrastructure
Customer industries and applications
Engineering plastics, biodegradable plastics, standard foams, foam specialties, polyurethanes
Performance Materials
Coatings solutions for automotive applications, technology and system solutions for surface treatments, decorative paints
Concrete admixtures, cement additives, underground construction solutions, flooring systems, sealants, solutions for the
protection and repair of concrete, high-performance mortars and grouts, tile-laying systems, exterior insulation and finishing
systems, expansion joints, wood protection
Precious and base metal services
Battery materials
Million €
+/-
Automotive and chemical industries, refineries, battery manufacturers, solutions for the protection of air
quality as well as the production of fuels, chemicals, plastics and battery materials
4%
17,364
17,654
Assets
(190)
(512)
(19%)
1,617
1,307
2%
EBIT after cost of capital
(72)
(72)
(20%)
1,545
1,235
(3%)
706
682
EBIT before special items
Investments including acquisitions²
872
1,056
■ EBIT before special items slightly higher, largely as a
result of volumes growth
■ Sales increase of 12% to €7,469 million mainly driven by
higher prices
(1%)
The Catalysts division increased sales to third parties by €811 million
to €7,469 million in 2018. This was largely attributable to higher sales
prices on the back of an increase in precious metal prices. Our sales
volumes also increased. This was dampened by currency effects.
Catalysts
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Functional Materials & Solutions
1 To Our Shareholders
About This Report
77
BASF Report 2018
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
2 Additions to intangible assets and property, plant and equipment
(4%)
431
Research and development expenses
(17%)
10.9
8.9
412
Special items
6,658
7,469
3%
20,745
21,435
Intersegment transfers
Performance Materials
Coatings
of which Catalysts
Sales to third parties
2017
2018
Income from operations (EBIT) before special items was €1,307 mil-
lion, down €310 million from the 2017 figure. This was mainly driven
by lower margins as a result of the increase in raw materials prices
and higher fixed costs. EBIT declined by €310 million to €1,235 mil-
lion in 2018. Overall, special items did not have a substantial impact.
Sales to third parties in the Functional Materials & Solutions segment
grew by €690 million to €21,435 million, especially in Catalysts. This
was mainly attributable to higher prices in all divisions. Volumes also
increased. Sales were reduced by currency effects (volumes 2%,
prices 5%, portfolio 0%, currencies -4%).
3%
%
■ EBIT before special items declines 19% to €1,307 million,
primarily due to lower margins and increase in fixed costs
■ Sales growth of 3% to €21,435 million from higher prices
and volumes
Functional Materials & Solutions segment
12%
2,456
Construction Chemicals
2%
(15%)
Depreciation and amortization¹
2,412
2,251
Income from operations (EBIT)
1,917
Income from operations before depreciation and amortization (EBITDA)
21,550
EBITDA margin
Sales including intersegment transfers
22,272
805
837
7,706
7,654
(3%)
3,969
3,856
Sales
4%
South America, Africa, Middle East 22%
Portfolio
10%
Currencies
8%
(7%)
Agricultural Solutions - Sales by region
Location of customer
Prices
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
Volumes
Income from operations (EBIT) before special items was €734 mil-
lion, down €299 million from the prior-year figure. This was attribut-
able to negative currency effects in all regions, as well as the
strongly negative contribution from the acquired businesses due to
the late, intrayear timing of the transaction, the seasonality of the
business as well as costs for integrating the businesses into the
BASF Group. EBIT decreased by €424 million to €591 million.
Special items primarily arose from the acquisition.
Agricultural Solutions - Factors influencing sales
In the region South America, Africa, Middle East, sales rose by
€195 million to €1,323 million. The increase was largely driven by a
higher price level and the contribution of the acquired businesses.
Especially for fungicides in Brazil, sales volumes increased consider-
ably. Negative currency effects had an offsetting impact.
6 Overviews
3 Corporate Governance
2 Management's Report
Agricultural Solutions
1 To Our Shareholders
At €645 million, sales in Asia exceeded the prior-year figure by
€63 million. We achieved volumes growth in all indications, particu-
larly fungicides. The acquired businesses and a higher price level
also contributed to the sales increase. Negative currency effects
reduced sales development considerably.
Asia Pacific 10%
83
About This Report
883
1%
€6,156 million
Income from operations before depreciation and amortization (EBITDA)
33% Europe
Assets³
Miscellaneous income and expenses
Investments including acquisitions4
We increased sales in North America by €163 million to €2,166 mil-
lion. The acquired businesses and a higher price level more than
compensated for the negative currency effects. Lower volumes,
especially for fungicides in Canada and the United States, also had
an offsetting effect.
Foreign currency results, hedging and other measurement effects
Other businesses
Costs of corporate headquarters
of which Costs for cross-divisional corporate research
EBIT before special items
Special items
Income from operations (EBIT)
Depreciation and amortization²
Sales
Million €
Financial data - Other¹
Other
Other
6 Overviews
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
=4
84
BASF Report 2018
North America 35%
Sales in Europe were €39 million higher than in the previous year, at
€2,022 million. This was attributable to the acquired businesses and
higher sales volumes in almost all indications, despite the extreme
weather conditions and long dry period. Sales development was
dampened by negative currency effects, particularly in eastern
Europe and Turkey.
6,214
■ EBIT before special items down 29% year on year at
€734 million as a result of negative currency effects and
the negative contribution from the acquired businesses
22.5
16.0
%
(23%)
1,282
985
5,732
61%
36
58
8%
5,696
6,156
Income from operations (EBIT)
Depreciation and amortization¹
EBITDA margin
Income from operations before depreciation and amortization (EBITDA)
Sales including intersegment transfers
Intersegment transfers
Sales to third parties
+/-
2017
2018
6 Overviews
Research and development expenses
5 Supplementary Information Oil and Gas Business
4 Consolidated Financial Statements
394
267
48%
591
■ Sales improve by 8% to €6,156 million due to portfolio
effects, higher prices and increased volumes
Agricultural Solutions segment
34%
110%
(29%)
(42%)
8%
BASF Report 2018
1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
2 Additions to intangible assets and property, plant and equipment
507
679
185
7,110
The Agricultural Solutions segment increased sales to third parties
by €460 million to €6,156 million in 2018. The addition of the busi-
nesses and assets acquired from Bayer in August 2018 made a
significant contribution. A higher price level and growth in sales vol-
umes also contributed to the positive year-on-year sales develop-
ment. In a continuing difficult market environment, strongly negative
currency effects dampened sales in all regions.
8,096
171
(562)
1,033
734
Research and development expenses
Investments including acquisitions²
Assets
EBIT after cost of capital
EBIT before special items
(18)
(143)
Special items
1,015
16,992
1 Information on the composition of Other can be found in the Notes to the Consolidated Financial Statements from page 212 onward.
(17)
3 Contains assets of businesses recognized under Other as well as reconciliation to assets of the BASF Group including the disposal group for the oil and gas business.
4 Additions to intangible assets and property, plant and equipment
829
Income after taxes from discontinued operations
Assets
(158)
(885)
Income taxes
(12%)
(19)
Financial result
155%
683
1,745
EBIT before special items²
252
(12)
Special items
85%
935
1,733
Income from operations (EBIT)²
and amortization (EBITDA)
20%
1,959
2,350
Income from operations before depreciation
26%
3,252
4,094
760
Sales to third parties
9%
11,967
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report 3 Corporate Governance
Discontinued Oil and Gas Business
1 To Our Shareholders
About This Report
98
86
BASF Report 2018
South America: Wintershall was awarded seven offshore explora-
tion licenses in Brazil's 15th oil and gas licensing round. The compa-
ny will hold the operatorship for four of these licenses. Initial explora-
tion activities in the allocated blocks will start in 2019. In Argentina,
Wintershall Energía celebrated its 40th anniversary in 2018 with total
production of around 26 million barrels of oil equivalent (BOE) per
year. Shares in the Aguada Pichana Este concession in Argentina
were sold on January 23, 2018.
Middle East: Wintershall will invest in oil and gas production in Abu
Dhabi. An agreement to this effect was signed by Wintershall and
the Abu Dhabi National Oil Company (ADNOC) in November 2018.
Wintershall's 10% interest in ADNOC's Ghasha concession marks
its entry into natural gas and condensate production in Abu Dhabi.
According to ADNOC's planning, the project will start producing
around the middle of the next decade, with initial daily production
volumes expected to exceed 40 million cubic meters of natural gas.
Russia: Achimgaz, a joint venture of Wintershall and Gazprom,
celebrated its 15th anniversary in 2018 and achieved a new mile-
stone, with total production reaching 30 billion cubic meters of
natural gas. We are drawing on the experience gained with Achimgaz
to drive forward the development of Blocks 4A and 5A of the
Achimov formation in the Urengoy field in western Siberia in a joint
venture, Achim Development.
Equinor, started in 2018. A Wintershall exploration well discovered
another gas field near Aasta Hansteen and we are now investigating
the possibilities of developing this find. In Germany, we successfully
completed a 3D seismic survey at the Emlichheim concession in
2018 with the aim of maintaining the crude oil production plateau at
the site, which has been in operation for over 70 years.
Europe: In March 2018, we started operation of the first develop-
ment project operated by Wintershall in Norway at the Maria oilfield
in the Norwegian Sea. In addition, the Norwegian Ministry of Petro-
leum and Energy approved the development and operation plan for
the Nova field (previously: Skarfjell) operated by Wintershall, which is
scheduled to start production in 2021. Production at the Aasta
Hansteen gas field in the Norwegian Sea, which is operated by
BASF's oil and gas activities are bundled in the Wintershall Group.
We focus on exploration and production in oil and gas-rich regions
in Europe, North Africa, Russia, South America and the Middle East
- core regions in which Wintershall has a high level of regional and
technological expertise. We are also active in the transportation of
natural gas in Europe with our Russian partner Gazprom.
Significant developments
The gain from the change from full consolidation to the equity meth-
od will be shown in income after taxes from discontinued operations
on closing. From closing, BASF will account for its share in the joint
venture Wintershall DEA using the equity method and include its
share of Wintershall DEA's net income in EBIT before special items
and EBIT for the BASF Group (reported under Other).
The signing of the agreement has an immediate effect on the report-
ing of BASF Group: The sales and EBIT of the oil and gas business
are no longer included in the respective figures for the BASF Group
- retroactively as of January 1, 2018, and with the prior-year figures
restated. Until closing, the Wintershall Group's income after taxes
will be presented in the income after taxes of the BASF Group as a
separate item (income after taxes from discontinued operations).
The assets and liabilities of the oil and gas business were reclassified
to a disposal group as of the end of the third quarter of 2018, and
have since been presented under Other. Depreciation and amortiza-
tion of its assets and accounting according to the equity method
were suspended from the signing date onward.
On September 27, 2018, BASF and LetterOne signed a definitive
agreement to merge their oil and gas businesses in a joint venture,
which will operate under the name Wintershall DEA. In 2017, the
combined business of Wintershall and DEA had pro forma sales of
€4.7 billion, income from operations before depreciation and amor-
tization (EBITDA) of €2.8 billion and net income of €740 million.
Closing of the transaction is expected in the first half of 2019, sub-
ject to the approvals of merger control and foreign investment
authorities as well as mining authorities and the German Federal
Network Agency. Until closing, Wintershall and DEA will continue to
operate as independent companies.
7%
Agreement with LetterOne
3 Additions to intangible assets and property, plant and equipment and to the corresponding positions in the
disposal group
2 2018 figure only includes depreciation and amortization for the first three quarters
1 For more information, see Note 2.5 to the Consolidated Financial Statements from page 209 onward and
Supplementary Information on the Oil and Gas Business from page 269 onward
988
1,062
Investments including acquisitions³
18%
14,088
2 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
+/-
2018
(9%)
(379)
(414)
31%
(654)
(450)
(11%)
(37)
(41)
29%
(691)
(491)
(3%)
122
118
34%
(569)
(373)
24%
2,234
2,771
+/-
2017
2018
largely attributable to valuation effects for our long-term incentive
program.
At minus €450 million, income from operations before special items
in Other was up €204 million from the prior-year figure. This was
Sales in Other rose by €537 million compared with 2017 to
€2,771 million, mainly as a result of higher sales volumes in the raw
materials trading business.
(249)
2017
(224)
43
Million €
Financial data¹
Discontinued Oil and Gas Business
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
2 Management's Report 3 Corporate Governance
Discontinued Oil and Gas Business
1 To Our Shareholders
About This Report
85
BASF Report 2018
8%
382
414
(44%)
1,174
663
(7%)
25,643
23,743
22%
(199)
(157)
267%
88
327
(28%)
60
(11%)
2 Management's Report
Agricultural Solutions
1 To Our Shareholders
About This Report
61,223
2%
6,033
7,587
(20%)
Europe
■ Sales up 2% compared with 2017 at €28,502 million
■ Investments strengthen businesses in growth industries
and markets
Sales at companies located in Europe rose by 2% year on year to
€28,502 million. Higher prices more than compensated for the nega-
tive currency effects and lower volumes.
Higher prices led to slight sales growth in the Chemicals segment.
Sales also rose slightly in the Agricultural Solutions segment as a
result of portfolio effects and volumes growth. In the Functional
Materials & Solutions segment, sales matched the prior-year level.
Slight price improvements were offset by lower volumes and negative
currency effects. By contrast, sales declined slightly in the Perfor-
mance Products segment. Lower volumes and negative portfolio and
currency effects could not be completely offset by higher prices.
Income from operations (EBIT) decreased by 22% compared with the
previous year to €3,210 million due to considerably lower contribu-
tions from all segments, but especially from the Chemicals segment.
The main drivers for the lower earnings in the Chemicals segment
were higher raw materials prices, temporary plant shutdowns as well
as the low water levels on the Rhine River. The lower contribution from
the Agricultural Solutions segment was mainly attributable to the
higher fixed costs from the acquisition of the Bayer businesses. Earn-
ings were also negatively impacted by the long dry period. Softer
margins had a significant influence on earnings development in the
Functional Materials & Solutions and Performance Products seg-
ments.
We aim to strengthen our position in the European market though
investments, for example in a production plant for battery materials in
Harjavalta, Finland. This investment supports the European Commis-
sion's goal of establishing a European value chain for battery pro-
duction.
■ Sales growth of 5% year on year to €16,659 million
■ Ongoing investments in production plants
287%
Sales at companies located in North America rose by 5% compared
with 2017 to €16,659 million. In local currency terms, sales grew by
9%. This was largely due to higher sales prices in all segments.
Sales were also positively impacted by portfolio effects, mainly from
the acquisition of significant businesses from Bayer, and higher
volumes, especially in the Functional Materials & Solutions segment.
Currency effects dampened sales in all segments.
We further strengthened our position in the region with the acqui-
sition of significant businesses from Bayer in the areas of seeds
and non-selective herbicides. We aim to invest continuously in our
production facilities. For example, we started up a new ammonia
plant in Freeport, Texas, together with Yara International ASA, Oslo,
Norway; are expanding production for ibuprofen in Bishop, Texas;
and started construction of a new MDI synthesis unit in Geismar,
Louisiana. We strengthened our global battery materials business
with the formation of BASF Toda America LLC (BTA), a cooperation
between BASF and Toda Kogyo Corp., Hiroshima, Japan. BTA
produces state-of-the-art high energy cathode active materials
close to our North American customers.
BASF Report 2018
88
About This Report
2 Management's Report
Regional Results
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Sales by region
Location of company
South America, Africa, Middle East 6%
Asia Pacific 22%
EBIT was down 35% from the 2017 figure, at €802 million. Earnings
declined in the Agricultural Solutions segment in particular.
52
201
6%
5%
16,143
15,357
5%
802
1,236
(38%)
(35%)
Asia Pacific
13,886
13,658
2%
14,646
14,343
2%
1,820
2,209
(18%)
South America, Africa, Middle East
3,628
3,583
1%
BASF Group
62,675
61,223
2%
5,340
62,675
5,016
€62,675 million
Income from operations by region
Location of company
South America, Africa, Middle East 4%
Responsible Conduct
Along the Value Chain
r
Supplier Management]
SUPPLIERS
BASF
CUSTOMERS
Our objective is to secure competitive advantages for BASF
through professional procurement structures. Our suppliers
are an important part of our value chain. Together with them,
we aim to create value and minimize risks.
Strategy
■ Sustainability-oriented supply chain management
■ New goal for sustainability evaluations of relevant spend
Our partnerships with suppliers are based on mutual value creation,
as well as a reliable supply of raw materials, technical goods and
services at competitive prices. We work together in an open and
transparent way to generate long-term benefits for both sides. In
doing so, we create added value that goes above and beyond
procurement alone, for example, by developing solutions to target
market-specific customer requirements together with our suppliers.
Our sustainability-oriented supply chain management contributes to
risk management by clarifying our expectations and standards for
our suppliers, and by supporting them in carrying out our require-
ments. We count on reliable supply relationships and want to make
our suppliers' contribution to sustainable development transparent
to us. That is why we have set ourselves the goal of evaluating the
sustainability performance of 70% of the BASF Group's relevant
suppliers and developing action plans for any necessary improve-
ments by 2020. The proportion of relevant suppliers evaluated by
the end of 2018 was 60%. Due to the size and scale of our supplier
portfolio, our suppliers are evaluated based on risk, including both
country and industry-specific risks.
As part of the updated corporate strategy, we resolved in 2018 to
step up our efforts to improve our sustainability performance along
the supply chain in the future. To this end, we have expanded our
sustainability evaluations of relevant suppliers and integrated these
into a new goal to improve our sustainability performance in procure-
ment: By 2025, we aim to have conducted sustainability evaluations
for 90% of the BASF Group's relevant spend² and will develop action
plans where improvement is necessary. We will work towards having
80% of suppliers improve their sustainability performance upon
re-evaluation.
Worldwide procurement
Our more than 70,000 Tier 1 suppliers play a significant role in value
creation at our company. We work in long-term partnership with
companies from different industries around the world. They supply
us with important raw materials, chemicals, investment goods and
consumables, perform a range of services and are innovation part-
ners. BASF acquired raw materials, goods and services for our own
production totaling approximately €38.5 billion in value in 2018.
There were no substantial changes to our supplier structure in 2018.
What we expect from our suppliers
■ Global Supplier Code of Conduct
New suppliers are selected and existing suppliers are evaluated not
only on the basis of economic criteria, but also environmental, social
and corporate governance standards. Our Supplier Code of Con-
duct is founded on internationally recognized guidelines, such as the
principles of the United Nations' Global Compact, the U.N. Guiding
Principles on Business and Human Rights, the International Labor
Organization (ILO) conventions and the topic areas of the
Responsible Care initiative. The Code of Conduct covers compli-
ance with human rights, labor and social standards, and antidis-
crimination and anticorruption policies in addition to protecting the
environment. We updated our Supplier Code of Conduct in 2018 in
response to stricter requirements and new developments relating to
the U.N. Guiding Principles on Business and Human Rights and the
ILO. Issues such as modern slavery and human trafficking were
incorporated, as well as our requirement that suppliers implement
grievance mechanisms for their employees and stakeholders. We
also added a reference to our own grievance mechanism - our
compliance hotline, which suppliers and their employees can con-
tact if they have questions or complaints. We are informing our
existing suppliers of the updated Code of Conduct.
In 2018, we started the step-by-step rollout of a new registration
portal for suppliers, in which our Code of Conduct is already inte-
grated. This requires suppliers to commit to these values on regis-
tration. 4,866 suppliers did this and registered via the portal in 2018.
A country-based risk analysis forms the basis of our selection pro-
cess for new suppliers. Based on the country-related risks identified,
we specifically asked suppliers in South America and Asia in particu-
lar to commit to the values of our Supplier Code of Conduct in 2018.
Only those companies that have committed to our Code of Conduct
actually became new suppliers.
Training and partnerships
In 2018, we continued our collaborations in relevant procurement
markets such as China to instruct suppliers on sustainability stan-
dards. 116 suppliers received training in 2018 as part of a local
partnership with the East China University of Science and Tech-
nology in Shanghai, for example. In addition, we instructed
962 BASF employees on sustainability-oriented supplier manage-
ment and responsible procurement. These are ways in which poten-
1
We define relevant suppliers as Tier 1 suppliers showing an elevated sustainability risk potential as identified by our risk matrices and our purchasers' assessments. We also use further sources of information to identify relevant suppliers such as evaluations from Together for Sustainability (TFS), a joint initiative of chemical companies
for sustainable supply chains.
2 We understand relevant spend as procurement volumes with relevant suppliers as defined above.
BASF Report 2018
06
90
5 Supplementary Information Oil and Gas Business
5 Supplementary Information Oil and Gas Business 6 Overviews
15,937
4 Consolidated Financial Statements
2 Management's Report
Supplier Management
Asia Pacific 30%
€6,033 million
North America 13%
Asia Pacific
45% Europe
27% North America
53% Europe
■ Sales 2% above prior-year level at €13,886 million
■ Local production footprint expanded with new plants,
including in South Korea and Malaysia
Sales at companies headquartered in the Asia Pacific region rose by
2% to €13,886 million in 2018. In local currency terms, sales rose
by 5% year on year. The positive development was mainly driven by
the Functional Materials & Solutions segment. We also increased
sales in the Agricultural Solutions segment.
All segments increased volumes; Functional Materials & Solutions
and Performance Products also achieved higher prices. By contrast,
sales were consistently weighed down by currency effects. Portfolio
measures had no effect on sales development in 2018. The trade
conflict between the United States and China dampened economic
sentiment across Asia, leading to lower prices and volumes year on
year in the fourth quarter of 2018.
EBIT in the region decreased by 18% year on year to €1,820 million.
This was primarily due to the lower contribution from the Chemicals
segment as a result of narrower margins in the isocyanates busi-
ness, as well as for steam cracker products at our joint venture.
Lower fixed costs were unable to compensate for these effects.
As part of our regional strategy, we aim to further increase the pro-
portion of sales from local production in Asia Pacific. We once again
made progress toward this goal: For instance, we started commer-
cial production of polyoxymethylene (POM) in Gimcheon, South
Korea, in October 2018. We started production of citral, citronellol
and menthol at our new aroma ingredients complex in Kuantan,
Malaysia.
Our investments in production facilities as well as in research and
development serve to bring products to market for our local and
global customers in this fast-growing region. We therefore plan
to build an integrated Verbund site in Zhanjiang in the southern
Chinese province of Guangdong and expand our existing joint ven-
ture with Sinopec in Nanjing, China.
South America, Africa, Middle East
■ Sales growth of 1% to €3,628 million
■ Successful integration of acquired businesses in
Agricultural Solutions segment
Sales at companies located in the region South America, Africa,
Middle East increased by 1% compared with 2017 to €3,628 mil-
lion. In local currency terms, sales exceeded the prior-year figure by
17%.
In South America, the year was characterized by a slight economic
recovery amid political uncertainty ahead of the presidential elec-
tions in Brazil. Weaker local currencies in Brazil and Argentina led to
strongly negative currency effects. Against this background, our
sales nevertheless rose as a result of higher prices, positive portfolio
effects from the acquisition of significant businesses from Bayer and
volumes growth. The Agricultural Solutions segment in particular
increased volumes thanks to stronger demand. Sales volumes also
rose in the Functional Materials & Solutions segment on the back of
the recovery in the automotive industry. Volumes in the Performance
Products segment were on a level with the prior year. By contrast,
we recorded lower sales volumes in the Chemicals segment due to
product shortages.
Companies in Africa and in the Middle East posted a considerable
sales decrease. Lower volumes and negative currency effects were
responsible for this development.
At €201 million, EBIT in the region South America, Africa, Middle
East exceeded the prior-year figure by 287%. This was driven by
improved earnings in the Agricultural Solutions segment as a result
of higher demand, especially in Brazil, as well as the contribution
from the acquired businesses.
Following the two-year recession in South America, which lasted
until the end of 2016, our focus in 2018 was on increasing sales
volumes and integrating the acquired businesses and assets in the
Agricultural Solutions segment. We also continued the expansion of
our sales channels to capture new customer segments, including
with investments in digital platforms.
BASF Report 2018
99
89
About This Report
1 To Our Shareholders
3 Corporate Governance
16,659
North America
1,838
Investments
increasing complexity to make the right cultivation decisions. BASF's
innovative digital applications help our customers to use this data to
their advantage, supporting better decision-making and ensuring
more efficient and sustainable resource allocation. The acquisition of
xarvioⓇ digital farming solutions complements our digital offering
with novel products with additional functionalities and access to
new technologies.
5 Supplementary Information Oil and Gas Business 6 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Agricultural Solutions
1 To Our Shareholders
About This Report
4
81
BASF Report 2018
The success of our customers depends on many factors such as
weather, plant health, soil conditions and prices for agricultural pro-
duce. Modern farmers have to analyze more and more data of
For more information on our R&D activities, see Research and development on page 82
businesses increases our innovation potential and strengthens our
market position and competitiveness in the long term.
The patented PSR technology in InVigor® hybrid canola
continues to revolutionize the way canola growers approach
their season. The PSR feature naturally strengthens the pod
seam and connective tissue, reducing premature seed losses
prior to harvest. It offers the flexibility to harvest canola by
straight cutting, therefore allowing the pod to fill for a longer
period of time and providing a yield increase of over 5%.
>5%
Value for customers
Yield improvement for growers of
xarvioⓇ digital farming solutions and other non-selective herbicide
and nematicide research projects. We are committed to ensuring
the responsible use of our products and the preservation of a healthy
environment. We also invest continuously in our development pipe-
line to provide our customers an increasingly wide range of integrat-
ed offers. The combination of our existing activities and the acquired
InVigorⓇ hybrids with pod shatter reduction (PSR) technology are
an innovative solution for minimizing lost yield due to seed pods
splitting open and seeds prematurely falling out. The first canola
hybrids with patented PSR technology from the newly acquired
seed business were launched on the Canadian market in 2014.
By 2019, more than half of BASF's InVigorⓇ product line-up in the
United States, Canada and Australia will contain the PSR feature.
The market share of the InVigorⓇ seed portfolio in its main mar-
kets of North America is greater than 55% and popularity in
Australia is increasing rapidly.
>55%
Market share of InVigorⓇ seed portfolio in main markets
of North America
Value for BASF
Patented pod shatter reduction technology for canola/oilseed rape seed pods enabling innovative yield protection and greater
harvesting flexibility for growers
InVigorⓇ
How we create value - an example
1 Reported under Other
In August 2018, we closed the acquisition of a range of businesses
and assets from Bayer to be able to provide farmers with an even
wider range of solutions in the future, and to better meet the growing
demand for high-quality seeds as well as chemical and biological
crop protection. The acquisition is a strategic complement to our
crop protection, biotechnology and digital farming activities. At the
same time, it marks our entry into the seed business for key field
crops and vegetables, as well as non-selective herbicides and
nematicide seed treatments. With the transaction, our portfolio now
also includes the global glufosinate-ammonium non-selective herbi-
cide business, which is marketed under the LibertyⓇ, BastaⓇ and
FinaleⓇ brands. The seed businesses comprise traits, research and
breeding capabilities as well as the corresponding brands for key
field crops in selected markets. These include canola hybrids in
North America under the InVigor® brand with LibertyLink® trait tech-
nology, as well as the oilseed rape business mainly in European
markets, cotton in the Americas and Europe, and soybean in the
Americas. We also acquired the R&D platform for hybrid wheat,' a
range of seed treatment products, certain glyphosate-based herbi-
cides in Europe used predominantly for industrial applications,
Capital expenditures (capex) amounted to €157 million in 2018.
Major projects included the startup of new production capacities for
our fungicide RevysolⓇ in Hannibal, Missouri, and our insecticide
InscalisⓇ in Elbeuf, France, as well as modernization measures at
plants in North America and Europe. A state-of-the-art global breed-
ing station for the vegetable seeds business was opened at the
Nunhem site in the Netherlands. We also invested in plant infrastruc-
ture in North America and research and development in Limburger-
hof, Germany. To meet the continuing high demand for our innova-
tive solutions in the future, we will invest around €1,270 million in
developing and expanding our infrastructure and in our production
and formulation capacities for active ingredients between 2019 and
2023. This increase in investment is driven by the expansion of
production capacities for the planned market launches of a large
number of products from our crop protection pipeline, as well as for
the acquired businesses.
Natural resources such as land and arable area are limited, while the
world's population and its demand for food continue to grow. This
means that farmers around the world face the challenge of increas-
ing their crop yields. We offer our customers innovative solutions
combined with practical, down-to-earth advice to support them in
the efficient and safe production of high-quality crops over the long
term.
Research and development
With the acquisition of the Bayer businesses in 2018, our team grew
by approximately 1,600 research and development employees at
17 locations worldwide. We expanded our biotechnology activities
and our research and development capabilities considerably - from
advanced breeding techniques, analytics, technology platforms and
trait validation to specific discovery expertise. These are closely
aligned with further activities in the field of biotechnology, which
remain part of BASF's Bioscience Research unit. Research and
development expenses, sales, earnings and all other data for
Million €
Segment data - Agricultural Solutions
62
82
BASF Report 2018
1 Peak sales describes the highest sales value to be expected in one year. For more information, see the Glossary on page 288
CredenzⓇ, FiberMax®, InVigor®, LibertyLink®, NunhemsⓇ, StonevilleⓇ
COPEO®, Flo Rite®, ILeVO®, IntegralⓇ, Limus®, Nodulator® PRO,
PONCHOⓇ, Serifel®, SystivaⓇ, VaultⓇ HP, VelondisⓇ, Vizura®, VOTIVO®
Alpha-cypermethrin, chlorfenapyr, fipronil, InscalisⓇ, Interceptor®,
Nealta, teflubenzuron, TermidorⓇ
Basta®, Clearfield®, dimethenamid-P, EngeniaⓇ, Finale®, imazamox,
Kixor, LibertyⓇ, pendimethalin, topramezone
AgCelenceⓇ (umbrella brand), boscalid, dimethomorph, F 500®,
Initium®, metiram, metrafenone, Xemium®
Example products
Seeds and traits for key field crops such as canola (oilseed
rape), cotton, soybean and wheat, as well as vegetable seeds
Products for plant health and increased yield potential that go
beyond traditional crop protection, such as biological crop
protection, seed treatments, polymers and colorants
Combating insect pests in agriculture and beyond, such as in
the fields of public health, professional pest control and land-
scape maintenance
Reducing competition from weeds for water and nutrients
Protecting crops from harmful fungal diseases; improving plant
health
Applications
Seeds & Traits
Functional Crop Care
Insecticides
Herbicides
Our combined, complementary seeds and traits research and
development activities across field crops and vegetables ensure
even better innovation capabilities and scale while positioning us to
seize future market opportunities and increase our competitiveness.
With our expanded network of research sites, new seed breeding
and production facilities, we help farmers meet the growing demand
for increased agricultural productivity and better nutrition. With a
pioneering platform for gene identification, we have specialized in
the development of plant characteristics, such as higher yield, herbi-
cide tolerance, disease resistance, drought tolerance and quality
traits. Our goal is to optimize crops so that farmers can achieve
greater and more secure yields. In this way, we make an important
contribution to securing a better food supply for a growing world
population. We also contribute to sustainable agriculture, as the
cultivation of these plants significantly reduces the amount of land,
water and energy required for food production.
BASF's Bioscience Research unit are not reported in the Agricul-
tural Solutions segment; they continue to be reported under Other.
Fungicides
Indications and sectors
Products, customers and applications
In 2018, we invested €679 million in research and development in
the Agricultural Solutions division, representing around 11% of sales
for the segment. Our well-stocked innovation pipeline comprises
products with a launch date between 2018 and 2028. With a peak
sales potential of more than €6 billion, the pipeline includes innova-
tions from all business areas. The expanded research and develop-
ment activities in the Agricultural Solutions division range from
seeds, including traits, research and breeding capacities, and solu-
tions to protect plants against fungal diseases, insect pests and
weeds, to improved soil management and plant health.
1 To Our Shareholders
■ Long-term innovation strategy ensures future growth
■ Development of solutions that go beyond conventional
crop protection
Strategy
Income from operations
by location of company
2018
2017
+/-
2018
2017
+/-
2018
2017
+/-
28,502
28,045
2%
26,546
26,507
0%
3,210
4,090
(22%)
of which Germany
18,113
18,663
(3%)
6,965
7,159
(3%)
1,140
by location of customer
■ Integrated provider of crop protection and biotechnology
products, seeds for selected field crops and vegetables,
and digital farming
Sales
Sales
6 Overviews
4 Consolidated Financial Statements 5 Supplementary Information Oil and Gas Business
3 Corporate Governance
2 Management's Report
Agricultural Solutions
1 To Our Shareholders
About This Report
Natural gas transportation: Pipe-laying work for the Nord Stream
2 pipeline project, which Wintershall is co-financing, started in 2018
and is progressing as planned. The European gas pipeline link
(EUGAL) project - the connecting pipeline for Nord Stream 2 - is
being implemented by GASCADE Gastransport GmbH as the lead
developer. All of the necessary planning approvals have been issued
and construction is on schedule.
Business development
Sales to third parties from our oil and gas activities were increased
by €842 million year on year to €4,094 million in 2018. This was
mainly due to higher prices. We also increased volumes, while cur-
rency effects had an offsetting effect.
The price of a barrel of Brent crude oil averaged $71 in 2018 (previ-
ous year: $54). Gas prices on the European spot markets rose by
32% compared with the previous year.
Income from operations (EBIT) before special items increased by
€1,062 million to €1,745 million. In addition to higher oil and gas
prices, we recorded volumes growth in Norway and Russia. EBIT
rose by €798 million to €1,733 million. Depreciation and amortiza-
tion of assets was suspended as of the end of the third quarter of
2018.
The tax expense rose following the improvement in income from
operations. At €829 million, income after taxes from discontinued
operations was €69 million above the prior-year figure.
For more information on the earnings contribution from the discontinued oil and gas business,
see Note 2.5 to the Consolidated Financial Statements from page 209 onward
BASF Report 2018
87
40
About This Report
1 To Our Shareholders
2 Management's Report
Regional Results
3 Corporate Governance
4 Consolidated Financial Statements
5 Supplementary Information Oil and Gas Business 6 Overviews
Regional Results
North America
Regions
Million €
Europe
by location of company
6 Overviews
1
BASF Report 2019
2019
8,389
Sales
2019
13,142
2018
9,120
2018
11,199
EBIT before special items
Sales
2019
EBIT before special items
2019
722
2018
668
2018
617
Page 74
Page 80
Nutrition & Care
820
Million €
Million €
Million €
Sales
2019
2018
9,532
11,694
Sales
2019
11,466
2018
13,270
EBIT before special items
Surface Technologies
2019
EBIT before special items
2019
1,003
2018
1,587
2018
2,400
Page 63
Page 69
Industrial Solutions
791
Agricultural Solutions
Million €
Sales
Business success tomorrow means creating value for the environ-
ment, society and business. Our innovations contribute to a sustain-
able future. We support our customers in being more sustainable
through our solutions and create new business opportunities that
reinforce our customer relationships and attract new customers. In
doing so, we want to contribute to achieving the U.N. Sustainable
Development Goals (SDGs). These were adopted by the United
Nations as globally recognized economic, environmental and social
objectives.
On the cover:
We want our customers to experience a new BASF - for example, in
our Creation Centers. At these spaces full of inspiration and the latest
technology, customers can discover BASF's high-performance plastics,
explore potential applications and work hand-in-hand with BASF experts
to create new products. This accelerates the process of transforming
conceptual ideas to creative solutions. The photo shows our Creation
Center in Shanghai, China, which we opened in August 2019. It is one
of four of its kind worldwide.
For more information on BASF's Creation Centers, see page 26
D-BASF
09
G-BASF
ASF
Contents
Detailed tables of contents can be found
on each colored chapter divider
Chemistry for a sustainable future
About This Report
4
Consolidated Financial Statements
185
Statement by the Board of Executive Directors
186
1
Independent Auditor's Report
187
To Our Shareholders
Statement of Income
5
sustainability reporting to inform
shareholders, employees and the
interested public about the 2019
business year.
Our integrated corporate report
combines financial and
to BASF
2019
6,075
Sales
2019
7,814
2018
5,940
2018
6,156
EBIT before special items
2019
793
EBIT before special items
2019
1,095
2018
736
2018
734
Page 85
Page 91
1 The segment data for 2018 has been restated to reflect the new segment structure. Figures do not include the construction chemicals activities presented as discontinued operations.
Welcome
Million €
Materials
Million €
Chemicals
Personnel expenses
million €
10,924
10,659
2.5%
EBITDAa
million €
8,036
8,970
(10.4%)
(11.4%)
Research and
1,994
8.2%
development expensesª
million €
EBIT before special itemsª
million €
4,536
6,281
(27.8%)
Greenhouse gas
2,158
9,271
8,217
million €
BASF Report 2019
Economic, environmental and
social performance
◉-BASF
We create chemistry
BASF
Group
2019
At a glance
Key data
2019
2018
+/-
2019
2018
+/-
Salesa
million €
59,316
60,220
(1.5%)
Employees at year-end
117,628
122,404
(3.9%)
EBITDA before special itemsa
million metric tons
194
EBITa
4,052
5.1%
Earnings per share
€
9.17
Assets
million €
86,950
5.12
86,556
79.1%
0.5%
14,284
Number of on-site sustainability
audits of raw material suppliers
100
(19.0%)
Investments including
acquisitionsb
4,097
10,735
(61.8%)
million €
a Restated figures; for more information, see the Notes to the Consolidated Financial Statements
from page 204 onward
b Additions to intangible assets and property, plant and equipment
c Excluding sale of energy to third parties
Segment data¹
81
15,017
million €
Accelerator sales
5,974
(32.2%)
20.1
21.9
emissionsc
(8.2%)
of CO2 equivalents
Net income
million €
8,421
4,707
78.9%
Energy efficiency in
kilograms of sales
598
626
ROCEa
production processes
(4.5%)
product/MWh
%
7.7
12.0
million €
7
Letter from the Chairman of the Board of Executive Directors
The Board of Executive Directors of BASF SE
BASF on the Capital Market
8
Forward-looking statements and forecasts
This report contains forward-looking statements. These statements
are based on current estimates and projections of the Board of
Executive Directors and currently available information. Forward-
looking statements are not guarantees of the future developments
and results outlined therein. These are dependent on a number of
factors; they involve various risks and uncertainties; and they are
based on assumptions that may not prove to be accurate. Such risk
factors include those discussed in Opportunities and Risks on
pages 139 to 147. We do not assume any obligation to update the
forward-looking statements contained in this report above and
beyond the legal requirements.
BASF Report 2019
6
Chapter 1 pages 7-14
To Our
Share-
holders
Letter from the Chairman of
the Board of Executive Directors
The Board of Executive Directors of BASF SE
A report on the substantive audit of the NFS can be found at basf.com/nfs-audit-2019
11
12
8
About This Report
1 To Our Shareholders
2 Management's Report
Letter from the Chairman of the Board of Executive Directors
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Dear shareholder,
BASF on the Capital Market
A report on the sustainability information in the BASF Report 2019 can be found at
basf.com/sustainability_information
The Independent Auditor's Report can be found on page 187
KPMG also conducted a substantive audit with limited assurance of
the nonfinancial statement (NFS).
4
Consolidated Financial Statements
5 Overviews
Material topics along the value chain, which we identified in internal
strategic discussion processes, ongoing global data analysis and
dialog with shareholders, form the focal points of reporting and
define the limits of this report.
For more information on our selection of sustainability topics, see page 36 onward and
basf.com/materiality
For a visualization of BASF's business model based on the IIRC framework, see
How We Create Value on page 23 and basf.com/how-we-create-value
For more information on our control and risk management system, see page 139 onward
The 2019 BASF Online Report can be found at basf.com/report
For more information on the Global Reporting Initiative, see globalreporting.org
For more information on the Global Compact, see globalcompact.org and
basf.com/en/global-compact
The GRI and Global Compact Index can be found at basf.com/en/gri-gc
Data
■ Relevant information included up to the editorial deadline
of February 24, 2020
■Report published each year in English and German
All information and bases for calculation in this report are founded
on national and international standards for financial and sustain-
ability reporting. The data and information for the reporting period
were sourced from the expert units responsible using representative
methods. The reporting period is the 2019 business year. Relevant
information is included up to the editorial deadline of February 24,
2020. The report is published each year in English and German.
BASF Group's scope of consolidation for its financial reporting
comprises BASF SE, with its headquarters in Ludwigshafen,
Germany, and all of its fully consolidated subsidiaries and propor-
tionally included joint operations. Shares in joint ventures and
associated companies are accounted for, if material, using the
equity method in the BASF Group Consolidated Financial State-
ments and are thus not included in the scope of consolidation.
The section "Employees" refers to employees active in a company
within the BASF Group scope of consolidation as of December 31,
2019. All disclosures in this chapter include the employees of the
discontinued construction chemicals business.
Our data collection methods for environmental protection and
occupational safety are based on the recommendations of the Inter-
national Council of Chemical Associations (ICCA) and the European
Chemical Industry Council (CEFIC). In the section "Environmental
Protection, Health and Safety," we report all data including informa-
tion on the emissions and waste of the worldwide production sites
of BASF SE, its fully consolidated subsidiaries, and proportionally
consolidated joint operations. BASF SE subsidiaries that are fully
consolidated in the Group financial statements in which BASF holds
an interest of less than 100% are included in full in environmental
reporting (previously: included on a pro rata basis). The emissions of
proportionally consolidated joint operations continue to be disclosed
pro rata according to our interest. Work-related accidents at all sites
of BASF SE and its subsidiaries as well as joint operations and joint
ventures in which we have sufficient authority in terms of safety
management, are compiled worldwide regardless of our interest and
reported in full. Unless otherwise indicated, further data on social
responsibility and transportation safety refers to BASF SE and its
consolidated subsidiaries.
For more information on companies accounted for in the Consolidated Financial Statements,
see the Notes from page 201 onward
The Consolidated Financial Statements begin on page 185
The list of shares held can be found at basf.com/en/corporate governance
External audit and evaluation
Our reporting is audited by a third party. KPMG AG Wirtschafts-
prüfungsgesellschaft has audited the BASF Group Consolidated
Financial Statements and the Management's Report and has
approved them free of qualification. The audit of the Consolidated
Financial Statements including the Notes is based on the likewise
audited financial statements of the BASF Group companies.
Statements and figures pertaining to sustainability in the Manage-
ment's Report are also audited by KPMG. The audit with limited
assurance was conducted in accordance with ISAE 3000 (Assur-
ance Engagements other than Audits or Reviews of Historical
Financial Information) and ISAE 3410 (Assurance Engagements
on Greenhouse Gas Statements), the relevant international auditing
standards for sustainability reporting. The links and additional con-
tent provided on the BASF internet sites indicated in this report are
not part of the information audited by KPMG.
2019 was not only a year of transition for BASF as we had expected, it also
turned out to be a very challenging year due to the market conditions. In this
adverse environment, the BASF team implemented our corporate strategy with
determination and passion. That is a great achievement! Many customers tell us
they are beginning to notice a new BASF.
3 Corporate Governance
Contrary to our expectations at the beginning of the year, the economic climate
weakened further in 2019. Trade conflicts, political uncertainties and considerably
lower demand from key customer industries - especially the automotive indus-
try weighed on our businesses. For the commodities in the Chemicals and
Materials segments, especially cracker products and isocyanates, the price
declines were significantly steeper than forecast. In July, we therefore had to
lower our earnings guidance. That was bitter. Overall, we were thus unable to
reach the financial targets we had communicated at the beginning of the year.
Consequently, we are not satisfied with our results.
6
About This Report
1 To Our Shareholders
2 Management's Report
Letter from the Chairman of the Board of Executive Directors
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
However, implementing these economically will require significant changes in the
policy framework. This is the only way industry will be able to remain competitive
during this transformation. In particular, we need better funding for future tech-
nologies and a more competitive and secure energy supply in Germany and
Europe. Moreover, we require large volumes of renewable electricity on an indus-
trial scale at internationally comparable prices.
BASF's successes are generated by our employees. For their skilled and
passionate contributions, I thank them wholeheartedly on behalf of the entire
Board of Executive Directors. It is our goal that more than 80% of our employees
say they feel that at BASF they can thrive and perform at their best. In our 2019
global employee survey, 79% of participants agreed with the statement. In light
of the ongoing change processes, this is a very pleasing result. Another positive
aspect is the development of women in leadership positions within the BASF
Group. Originally, we wanted to increase the share of women in such roles world-
wide to 22 to 24% by 2021. We achieved this goal at the end of 2019 with a rate
of 23%. We have therefore set ourselves a new target. By 2030, we want to
increase the proportion of women in leadership positions to 30%. We want to
engage more women in the leadership team at BASF and utilize their potential.
We stand by our dividend policy to increase the dividend per share each year.
In 2019, we again generated a strong free cash flow. We will therefore propose
to the Annual Shareholders' Meeting on April 30, 2020, that the dividend be
increased by 10 euro cents to €3.30 per share. The BASF share therefore once
more offers a high dividend yield of 4.9%. For many of you, the dividend is a key
criterion for your investment decision. This is true now more than ever in this time
of low interest rates, when shareholders are looking for reliable assets for long-
term investments. The BASF share is this kind of asset.
BASF Report 2019
BASF will have to continue to compete in a volatile economic environment. For
2020, we also expect a high level of economic uncertainty. The coronavirus is
contributing to this. Global economic growth will likely be even slower than in
2019. We expect growth in global chemical production to be significantly below
the 2019 level. We cannot influence global macroeconomic and geopolitical
developments, but one thing is clear: Our team will do everything it can to achieve
>>
Our team will do
€4.2 billion and €4.8 billion. Our return on capital everything it can to
achieve the best possible
employed (ROCE) will therefore be between 6.7% and
7.7%. Even in this environment, we will continue to
drive growth. We expect positive effects in particular
from our ongoing Excellence Program, which we will
accelerate compared to our original timeline.
results for 2020.
I am optimistic that BASF will gain in strength in 2020 despite the economic
headwinds. Because we have the passion and the expertise to be the partner
of choice for our customers. For us, it is about creating sustainable value.
I thank you for your trust and for accompanying us on this journey.
Yours,
Martin Bedenüller
Martin Brudermüller
the best possible results for 2020. We want to
increase our sales to a level between €60 billion and
€63 billion. We expect BASF Group's income from
operations before special items to be between
With its "Green Deal," the new European Commission is pursuing ambitious
climate targets. Everyone must join forces to realize these. To this end, we are
developing innovative technologies, such as the electrification of chemical plants.
Climate protection and the circular economy are important topics in politics and
society. We must all contribute to lowering CO2 emissions. BASF acknowledges
this, which is why we have also set ourselves a clear target in our strategy: We
want to grow CO2-neutrally until 2030. This is ambitious. This makes us a pioneer
in our industry and we are making good progress with measures and innovations
in our Carbon Management program. With novel technologies and alternative
feedstock sources, we want to shape a lower-emission future. Another contribu-
tor is our ChemCycling TM project. In the future, we want to use plastic waste as a
raw material in our production. Our own initiatives will thus strengthen the circular
economy. As a founding member of the Alliance to End Plastic Waste, we coop-
erate with more than 40 other companies throughout the value chain to put
plastic waste to good use. The Alliance will invest $1.5 billion within five years to
develop and implement solutions for this global problem.
and sustainability are
inextricably linked.
Nevertheless, in this challenging environment, we leveraged our strengths. In all
of our consumer-oriented segments - Industrial Solutions, Surface Technologies,
Nutrition & Care and Agricultural Solutions - we increased our results year on
year despite the difficult conditions.
We tackled the areas that are within our control. We continued to rapidly reshape
our portfolio and are making swift progress with the implementation of our excel-
lence program. We realigned our organization and streamlined our administration.
We have simplified processes and procedures and transformed ourselves into a
more agile and customer-centric company.
With our strategy we are on the right path: Our customers are experiencing a new
BASF. Together with them, we want to better exploit growth opportunities and
intensify collaboration. In doing so, we are guided by our purpose: "We create
chemistry for a sustainable future." For the major chal-
lenges facing society, such as climate change, the
circular economy and new mobility, we offer inno-
vative solutions.
We have further optimized our portfolio. In mid-2019,
we completed the integration of the businesses
acquired from Bayer. We can now offer farmers world-
>>>
With our strategy we
are on the right path:
Our customers are
experiencing a new BASF.
wide a combined portfolio of agricultural solutions
ranging from seeds, traits and crop protection to digi-
tal offerings. Our global polyamide business was
expanded with the acquisition of businesses from Solvay and strengthened
through backwards integration into the key raw material adipodinitrile (ADN). At
the beginning of 2019, following approval from all regulatory authorities, we
completed the transfer of our paper and water chemicals business to Solenis. At
the end of April, together with LetterOne we merged the oil and gas businesses
of Wintershall and DEA into the new company Wintershall Dea. We signed a
BASF Report 2019
8
About This Report
1 To Our Shareholders
2 Management's Report
Letter from the Chairman of the Board of Executive Directors
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
contract in August to divest our global pigments business to the Japanese
company DIC. At the end of the year, we reached an agreement with a subsidiary
of the global private equity firm Lone Star on the sale of our construction chemi-
cals business. We have therefore implemented or initiated all of our planned
portfolio measures in 2019.
We are already profitable
in China and growing
faster than the market.
We are setting a course for long-term profitable
growth. Our focus will be on investments in China
and on battery materials. By 2030, around two-
thirds of growth in global chemical production will
come from China. The country will then account for
approximately 50% of the global market. We are
already profitable in China and growing faster than
the market. Between 2015 and 2019, annual chemi-
cal production increased globally by 3% and in China
by 5%. We were able to increase our sales volumes in China by 7% per year. And
at the same time, we increased our EBITDA - earnings before interest, taxes,
depreciation and amortization - by 30% annually to more than €1 billion. With our
investment of around $10 billion in a fully integrated Verbund site in Zhanjiang in
Guangdong province, we will expand our leading position as a western chemical
company in the world's most important chemical market. Construction began in
2019 and the first plants are to start operations in 2022.
Our second growth focus is electromobility. E-mobility is creating a new major
market for battery materials, which is growing at a double-digit rate. Cathode
materials account for as much as 70% of the material costs of a battery cell.
BASF is already an established supplier. With our investments in Harjavalta,
Finland, and Schwarzheide, Germany, we are the first company to lay the founda-
tion for a European battery materials value chain. For these projects, we are
receiving government funding as part of the Important Project of Common
European Interest (IPCEI) relating to electromobility. With the startup of produc-
tion in Finland and Germany, BASF will be the only company producing battery
materials in Asia, North America and Europe. We want to achieve above-average
growth in this market.
To master global challenges, our society needs innovations based on chemistry
more than ever before. At BASF, innovation and sustainability are inextricably
linked. Many of our innovations contribute to achieving the United Nations Sus-
tainable Development Goals. These goals provide us with a framework for sus-
tainable development at the economic, environmental and social levels. We want
to continue to significantly increase our sales and earnings with new and improved
products especially with Accelerator products,
which make a particular contribution to sustainability
in the value chain compared to competing products.
By the year 2025, we want them to generate €22 billion
>>
in sales. In 2019, our sales of Accelerator products At BASF, innovation
rose by 5% to €15 billion. Prominent examples of
Accelerators are our battery materials for electro-
mobility, automotive catalysts and materials for thermal
insulation of buildings. They make a decisive contribu-
tion to reducing or avoiding CO2 emissions all the way
through to the end user.
-
10
2 Management's Report
About This Report
Glossary and Trademarks
295
42
Responsible Conduct Along the Value Chain
Forecast
102
133
3
Corporate Governance
148
Corporate Governance Report
24
149
157
Management and Supervisory Boards
159
Compensation Report.
162
Report of the Supervisory Board
176
Declaration of Conformity Pursuant to Section 161 AktG.
183
Declaration of Corporate Governance
Compliance
291
Ten-Year Summary
19
Statement of Income and Expense Recognized in Equity
195
Balance Sheet
11
197
12
Statement of Cash Flows.
199
Statement of Changes in Equity
200
Notes
201
2
5
Our Strategy
Management's Report
Overview
The BASF Group
The BASF Group's Business Year
15
16
Overviews
290
184
1 To Our Shareholders
BASF Report 2019
361
■ Financial reporting according to International Financial
Reporting Standards (IFRS), the German Commercial
Code and German Accounting Standards (GAS)
The BASF Report combines the major financial and sustainability-
related information necessary to thoroughly evaluate our perfor-
mance.
We select the report's topics based on the following reporting
principles: Materiality, sustainability context, completeness, balance
and stakeholder inclusion. In addition to our integrated report, we
publish further information online. Links to this supplementary infor-
mation are provided in each section.
Our sustainability reporting has been based on Global Reporting
Initiative (GRI) standards since 2003 and, since the BASF Report
2017, the "Comprehensive" option of the Global Reporting Initiative
standards.
We have been active in the International Integrated Reporting
Council (IIRC) since 2014 in order to discuss our experiences of
integrated reporting with other stakeholders and at the same time,
receive inspiration for enhancing our reporting. This report addresses
elements of the IIRC framework by, for example, providing an
illustrative overview of how we create value or demonstrating the
relationships between financial and sustainability-related perfor-
mance in the sections on the segments. The information in the
BASF Report 2019 also serves as a progress report on BASF's
implementation of the 10 principles of the United Nations' Global
Compact and takes into consideration the Blueprint for Corporate
Sustainability Leadership of the Global Compact LEAD platform.
WE SUPPORT
UN GLOBAL
COMPACT
UN GLOBAL
■ Sustainability reporting in accordance with Global
Reporting Initiative (GRI) standards
COMPACT
LEAD
PARTICIPANT
GRI
GRI Community
BASF SE
2019
The detailed GRI and Global Compact Index can be found in the
online report. It provides an overview of all relevant information to
fulfill the GRI indicators, as well as how we contribute to the United
Nations' Sustainable Development Goals (SDGs)1 and the principles
of the U.N. Global Compact. The results of the limited assurance
audit of this information can also be found here in the form of a
report issued by KPMG AG Wirtschaftsprüfungsgesellschaft.
The information on the financial position and performance of the
BASF Group comply with the requirements of International Financial
Reporting Standards (IFRS), and, where applicable, the German
Commercial Code, German Accounting Standards (GAS) and the
guidelines on alternative performance measures from the European
Securities and Markets Authority (ESMA). Internal control mecha-
nisms ensure the reliability of the information presented in this report.
BASF's management confirmed the effectiveness of the internal
control measures and compliance with the regulations for financial
reporting.
BASF Report 2019
5
Global Compact
■ Integrated BASF Report serves as U.N. Global Compact
progress report
Content and structure
1 Sustainable Development Goals (SDGs): SDG 1 - No poverty, SDG 2 - Zero hunger, SDG 3 - Good health
and well-being, SDG 4 - Quality education, SDG 5 - Gender equality, SDG 6 - Clean water and sanitation,
SDG 7- Affordable and clean energy, SDG 8 - Decent work and economic growth, SDG 9 - Industry,
innovation and infrastructure, SDG 10 - Reduced inequalities, SDG 11 - Sustainable cities and communities,
SDG 12-Responsible consumption and production, SDG 13 - Climate action, SDG 14 - Life below water,
SDG 15 - Life on land, SDG 16 - Peace, justice and strong institutions, SDG 17 - Partnerships for the goals
90
How we create value-an
overview of BASF's business
model based on the IIRC
framework
For more information, see page 23
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
[About This Report]
Integrated reporting
This integrated report documents BASF's economic, environmental
and social performance in 2019. We show how sustainability
contributes to BASF's long-term success and how we as a company
create value for our customers, employees, shareholders, business
partners, neighbors and the public.
Further information
The following symbols indicate important information:
☐ You can find more information in this report.
You can find more information online. The content of these
links are voluntary disclosures that were not audited by the
auditor.
( ) The content of this section is not part of the statutory audit but
has undergone a separate audit with limited assurance by our
auditor.
☐☐ The content of this section is voluntary, unaudited information,
which was critically read by the auditor.
The BASF Report online
HTML version with additional features: basf.com/report
PDF version for download: basf.com/basf_report_2019.pdf
6
3 Corporate Governance
of which costs for cross-divisional corporate research
BASF Report 2019
4
Consolidated Financial Statements
5 Overviews
Business review
Segment data - Agricultural Solutions
Million €
■ Sales improve by 27% to €7,814 million, mainly due to
portfolio effects
■ EBIT before special items 49% higher at €1,095 million,
primarily from sales growth
The Agricultural Solutions segment increased sales to third parties
considerably by €1,658 million to €7,814 million in 2019. This was
driven by the strongly positive contribution from the businesses and
assets acquired from Bayer in August 2018.1 A slightly higher price
level and currency effects also contributed to the positive year-on-
year sales development. In a continuing difficult market environment,
sales volumes in North America and Europe were lower than in the
previous year.
Factors influencing sales - Agricultural Solutions
Volumes
Prices
Sales to third parties
Intersegment transfers.
Sales including transfers
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Depreciation and amortizationa
Income from operations (EBIT)
Special items
EBIT before special items
Return on capital employed (ROCE)
Assets
2019
2018
+/-
7,814
6,156
27%
3 Corporate Governance
197
2 Management's Report
Agricultural Solutions
1
4
Consolidated Financial Statements
5 Overviews
Indications and sectors
Fungicides
Herbicides
Insecticides
Seed Treatment
Seeds & Traits
Applications
Protecting crops against harmful fungal diseases; improving plant health and securing yield and
harvest quality
Reducing competition from weeds for nutrients, water and sunlight to secure yield and harvest
quality
Combating insect pests in agriculture and beyond, such as in the fields of public health,
professional pest control and landscape maintenance
Biological and chemical crop protection, functional coatings and colorants
Seeds and traits for key field crops such as canola (oilseed rape), cotton, soybean and wheat,
as well as vegetable seeds
Selected products
Boscalid, dimethomorph, F500®, Initium®, metiram, metrafenone, Revysol®, Serifel®, XemiumⓇ
Basta®, Clearfield®, dimethenamid-p, EngeniaⓇ, Finale®, imazamox, Kixor®, LibertyⓇ, pendimethalin,
topramezone
Alpha-cypermethrin, chlorfenapyr, fipronil, InscalisⓇ, Interceptor®, NealtaⓇ, teflubenzuron, TermidorⓇ
Flo Rite®, ILEVO®, IntegralⓇ, Nodulator® PRO, PONCHOⓇ, Serifel®, SystivaⓇ, VaultⓇ HP, VelondisⓇ, VOTIVOⓇ
CredenzⓇ, FiberMax®, InVigor®, LibertyLink®, Nunhems®, Stoneville®
Products, customers and applications
BASF Report 2019
94
94
About This Report
To Our Shareholders
58
240%
6,214
320
7,110
3%
Research and development expenses
879
679
(95%)
29%
Portfolio
24%
a Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
b Additions to intangible assets and property, plant and equipment
1%
Currencies
Sales
27%
In Europe, we improved sales by €98 million to €2,120 million. This
I was largely attributable to portfolio effects from the acquired
businesses. In addition, we recorded a slightly higher price level.
Sales development was dampened by lower volumes, especially for
herbicides and fungicides, and negative currency effects, particularly
in Turkey.
We increased sales in North America by €942 million to €3, 108 million.
The sales increase was mainly the result of portfolio effects from the
acquired businesses. In addition, we recorded positive currency
effects and a higher price level. Sales volumes were significantly
lower than in the previous year, particularly for herbicides and fungi-
cides. This was attributable to distributor destocking and challenges
relating to weather conditions and the trade conflicts, especially in
the first half of 2019.
Sales in Asia rose by €140 million to €785 million. This was mainly
due to portfolio effects from the acquired businesses. Higher
volumes, especially for herbicides, and currency effects also contri-
buted to sales growth.
In the region South America, Africa, Middle East, sales rose by
€478 million to €1,801 million. This was primarily due to significantly
higher volumes, particularly for fungicides and herbicides. Sales
volumes rose significantly, particularly in Brazil. A higher price level
and portfolio effects from the acquired businesses also contributed
to the sales increase. Currency effects had an offsetting impact.
Agricultural Solutions - Sales by region
Location of customer
South America, Africa, Middle East 23%
Asia Pacific 10%
€7,814 million
North America 40%
27% Europe
Investments including acquisitionsb
(1%)
(3%)
16,992
29%
1,809
1,128
60%
1,647
985
67%
%
21.1
16.0
719
394
3 Corporate Governance
82%
591
57%
(167)
(143)
(17%)
1,095
734
49%
%
5.3
5.1
16,530
928
2 Management's Report
Agricultural Solutions
1 To Our Shareholders
About This Report
Insecticides
Reducing competition from weeds for nutrients, water and sunlight
Herbicides
Protecting crops against harmful fungal diseases
Fungicides
Indications and sectors
Percentage of sales: 19%
Seeds & Traits €1,454 million
Change: 385%
Sales
In the Agricultural Solutions segment, we aim to further
strengthen our market position as an integrated provider of
crop protection products, seeds and digital solutions. The
portfolio comprises fungicides, herbicides, insecticides and
biological crop protection products, as well as seeds and
seed treatment products. Our strategy is based on innovation-
driven organic growth, targeted portfolio expansion and
leveraging synergies from acquisitions. Customer needs,
societal expectations and regulatory requirements are our
innovation drivers for the segment.
Agricultural Solutions
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Agricultural Solutions
1 To Our Shareholders
About This Report
1%
Sales
27%
1 Functional Crop Care has been renamed Seed Treatment.
BASF Report 2019
1,095
734
Change: €361 million
Combating insect pests in agriculture and beyond
Seed Treatment¹
Biological and chemical crop protection, functional coatings and
colorants
Seeds & Traits
Currencies
24%
Portfolio
2018
3%
Prices
2019
(1%)
Volumes
Million €
Optimization and development of seeds and new traits
100
5
Factors influencing sales
Herbicides €2,616 million
Change: 7%
Percentage of sales: 33%
Percentage of sales: 30%
Fungicides €2,305 million
Change: 1%
€6,156 million
2018:
Change:
27%
€7,814 million
2019:
Percentage of sales: 10%
Insecticides €800 million
Change: 19%
Percentage of sales: 8%
Seed Treatment €639 million
Change: 38%
Income from operations before special items
1 Until August 2019, the sales contribution from the acquired businesses is still reported as a portfolio effect in our analysis of sales effects, as the acquisition of significant businesses and assets from Bayer was closed in August 2018. For the period thereafter, the sales contribution is included in the explanations of the volumes, price and currency
effects described here.
BASF Report 2019
95
91
1 To Our Shareholders
92
66
About This Report
1
To Our Shareholders
2 Management's Report
Agricultural Solutions
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Investments
Major projects included the expansion and modernization of produc-
tion and filling capacities for our fungicide RevysolⓇ in Europe and
the United States. We expanded breeding capacities for our
vegetable seeds business at the Nunhem site in the Netherlands.
We also invested in the modernization of site infrastructure and in
the digitalization of process control systems in the Americas and
Europe. To meet the continuing high demand for our innovative
solutions in the future, we will invest around €1,230 million in
developing and expanding our infrastructure and in our production
and formulation capacities for active ingredients between 2020
and 2024.
Research and development
In 2019, we invested €879 million in research and development
in the Agricultural Solutions division, representing around 11% of
sales for the segment. Our well-stocked innovation pipeline now
has an even stronger focus on sustainable solutions. It comprises
products to be launched between 2019 and 2029. With a peak
sales potential of more than €7.5 billion, our pipeline includes inno-
vations from all business areas. More than 30 pipeline products
will be launched worldwide by 2029. These will enable higher yields
and quality and even more sustainable production. The expanded
research and development activities in the Agricultural Solutions
division range from seeds, including traits, research and breeding
capacities, to solutions that protect plants against fungal diseases,
insect pests and weeds, and improve soil management and plant
health.
Our biotechnology activities and our research and development
capabilities comprise advanced breeding techniques, analytics,
technology platforms, trait validation and specific research exper-
tise. These are closely aligned with further activities in the field of
biotechnology, which are part of BASF's Bioscience Research unit.
Research and development expenses, sales, earnings and all other
data for BASF's Bioscience Research unit are not reported in the
Agricultural Solutions segment; they continue to be reported under
Other.
Our seeds and traits research and development activities in field
crops and vegetables enable us to leverage even greater innovation
potential, and position us to seize future market opportunities and
increase our competitiveness.
At BASF, we believe in finding the right balance for success. We
believe that with our connected offer, we can achieve this for the
environment, society and agriculture alike.
We have a strong, global network of research sites, an outstanding
research pipeline and a wide range of products and solutions. These
help farmers meet the demand for increased agricultural productivity
and better nutrition for a growing population on limited arable land.
Our aim is to improve crops and their cultivation, and to develop
products and digital solutions for safe, field-specific application.
From a sustainability perspective, this enables us to help farmers
use resources efficiently, optimize crop cultivation and protection,
and achieve greater and more secure yields in an increasingly
challenging environment. Reconciling the production of nutritious
food with environmental and climate demands requires a holistic
approach. In the future, agriculture must be able to respect and
balance the needs of nature and society, and take an open view in
evaluating all the available technologies. The work of our research
platform on gene identification focuses on the discovery and
development of plant characteristics that enable higher yields and
better quality, disease resistance, and tolerance of negative environ-
mental factors such as drought. We apply all recognized scientific
methods, including genetic engineering and selective genome
editing.
Our innovative products and services help farmers to use natural
resources more efficiently and promote biodiversity. We are involved
1 Peak sales describes the highest sales value to be expected in one year. For more information, see the Glossary on page 299.
with numerous scientific and public organizations and initiatives.
Together, we are working on solutions for sustainable agriculture
that meet long-term economic, ecological and social needs. For
instance, in 2013 we established the Farm Network in Europe
together with external conservation and environmental experts to
increase biodiversity across intensively farmed land. In Germany, for
example, there are currently 53 farms in the network. These show
on 63,000 hectares of land how modern agriculture and biodiversity
can go hand in hand.
BASF Report 2019
93
93
BASF Report 2019
2 Source: Food and Agriculture Organization of the United Nations (fao.org/3/a-i6583e.pdf)
1 Source: UN World Population Prospects 2019
business and portfolio decisions. Sustainability criteria are firmly
embedded in our entire research and development process. We
invest continually in our well-stocked innovation pipeline to identify
and further develop compounds that benefit both farmers and the
environment. We align our research approach and investments with
our strategic crop systems to support the success of our customers
with innovations.
2 Management's Report
Agricultural Solutions
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Strategy
■ Innovation-driven strategy for profitable future growth in
selected markets
■ Stronger customer orientation with a focus on strategic,
regional crop systems
■ A stronger portfolio with more sustainable solutions
The world's population is expected to increase by 25%¹ from 2020
to 2050. Its growing demand for food must be reconciled with
limited natural resources such as arable land and water. As a result,
farmers around the world face the challenge of increasing agricul-
tural productivity in a sustainable way by about 50%² by 2050
compared with baseline 2012 to meet the needs of a growing
population.
In mid-2019, we completed the integration of a range of businesses
and assets acquired from Bayer. With this, we achieved our goal of
ensuring business continuity from day one and created a solid
foundation for growth. This acquisition has transformed our position
in the agricultural industry: We now connect seeds and traits, crop
protection and digital solutions. This enables us to optimize farm
yields and profitability, and better address environmental and societal
demands.
About This Report
With our innovation-based strategy in agriculture, we put the
farmer's business at the center of everything we do. As one of the
world's leading agricultural solutions companies, we focus our
activities on four major strategic customer segments and selected
crop combinations, known as crop systems: soy, corn (maize) and
cotton in the Americas; wheat, canola (oilseed rape) and sunflowers
in North America and Europe; rice in Asia; and fruit and vegetables
globally. With a deep understanding of the way individual growers
manage their farms and crop systems, we can better serve them
with a connected offer based on our expanded portfolio and practi-
cal, down-to-earth advice.
e3Ⓡ Sustainability Cotton Program
Complete field-to-retail traceability of cotton in the fashion industry
Value for BASF
Expected share of the U.S.
cotton seed market by 2025
35%
e3Ⓡ is BASF's program for sustainable cotton in the United
States. e3Ⓡ helps to better manage the production of sustainable
cotton and to promote demand throughout the entire textiles
supply chain. Verification and certification through independent
audits increase the recognition of sustainably produced cotton
and enable further reductions in the environmental footprint.
Demand for our FiberMaxⓇ and StonevilleⓇ cotton seed brands,
which are part of the program, is high. We expect a steady
increase in U.S. market share for cotton seed through 2025, from
11% to 35%.
The success of our customers depends on many factors such as
weather, plant health, soil conditions and prices for agricultural
produce. Farmers today have to analyze more and more data of
increasing complexity to make the right agronomic decisions.
BASF's innovative digital products, marketed under the xarvioⓇ
Digital Farming Solutions brand, help our customers to use this data
to their advantage, supporting better decision-making and ensuring
more efficient and sustainable resource allocation.
We actively steer our offer for farmers and the agricultural industry
toward sustainable solutions by integrating sustainability into all
Value for customers
Higher market price for participating growers of
up to $159/acre
The e3Ⓡ Sustainability Cotton Program helps farmers meet down-
stream customer demand for more traceable and sustainable
supply chains in the fashion industry. They commit to growing
cotton more efficiently and to reducing the impact on the environ-
ment. e3Ⓡ cotton can be traced from the farmer to the retailer and
shows end consumers that their clothes have been produced in a
fair, economically viable and environmentally responsible way.
BASF is the only company providing this level of traceability. This
has increased demand for fiber meeting e3Ⓡ standards, creating a
higher market price for the grower of up to $159/acre.
How we create value - an example
About This Report
8,011
2 Management's Report
Agricultural Solutions
Regions
Million €
Europe
Sales
by location of company
Sales
by location of customer
Income from operations
by location of company
2019
2018
+/-
2019
2018
+/-
2019
2018
+/-
25,706
27,526
(7%)
23,827
25,589
(7%)
1,976
3,210
North America
Regional Results
5 Overviews
Consolidated Financial Statements
In September 2019, Wintershall Dea placed its inaugural bonds
worth €4 billion.
1 Includes companies accounted for by Wintershall Dea in full and using the equity method
BASF Report 2019
98
98
About This Report
1 To Our Shareholders
2 Management's Report
4
Consolidated Financial Statements
5 Overviews
Other
1 To Our Shareholders
Discontinued construction chemicals business
Sales in the construction chemicals business rose by €98 million
compared with 2018 to €2,553 million. The increase was attribut-
able to positive currency effects and higher prices, especially for
the former construction systems business. This was partly offset
by slightly lower sales volumes due to a decrease in the construc-
tion systems business.
In North America, sales rose considerably due to positive currency
effects and higher prices. Sales rose slightly in Europe, primarily as
a result of higher prices. We also improved sales slightly in Asia
Pacific. This was driven by favorable currency developments and
higher sales volumes. Sales in South America, Africa, Middle East
rose slightly. Higher prices and positive currency effects more than
offset the significant decline in volumes.
Income from operations (EBIT) before special items was €130 million,
€57 million above the 2018 figure. This was mainly attributable to
margin growth on the back of higher prices. EBIT declined by
€7 million to €52 million. Income after taxes of the discontinued
construction chemicals business decreased by around €10 million
to €24 million. The decrease was mainly driven by special items in
connection with the planned divestiture.
For more information on the earnings contribution from the discontinued construction chemicals
business, see Note 2.5 to the Consolidated Financial Statements from page 215 onward
BASF Report 2019
99
About This Report
1
To Our Shareholders
2 Management's Report
Regional Results
3 Corporate Governance
4
On December 21, 2019, BASF and an affiliate of Lone Star, a global
private equity firm, signed an agreement on the sale of BASF's
construction chemicals business. The signing of the agreement has
an immediate effect on the reporting of BASF Group. Retroactively
as of January 1, 2018, sales and earnings of the former Construc-
tion Chemicals division are no longer included in sales, EBITDA,
EBIT and EBIT before special items of the BASF Group. Until closing,
the income after taxes of the construction chemicals business will
be presented in the income after taxes of BASF Group as a separate
item ("Income after taxes from discontinued operations"). The assets
and liabilities of the construction chemicals business were reclassi-
fied to a disposal group as of the end of the fourth quarter of 2019,
and will be presented under Other until closing of the transaction,
which is expected in the third quarter of 2020, subject to the
approval of the relevant competition authorities.
Wintershall Dea is also active in gas transportation. This includes
interests in GASCADE Gastransport GmbH, OPAL Gastransport
GmbH & Co. KG, and Nord Stream AG. Wintershall Dea is involved
in the financing of the Nord Stream 2 pipeline project but does not
hold an interest in the company.
of which Germany
17,767
59,316
60,220
(2%)
5,338
59,316
5,033
60,220
6%
(2%)
302
177
(13%)
(40%)
71%
4,052
5,974
Europe
■ Sales down 7% compared with 2018 at €25,706 million
■ EBIT declines 38% to €1,976 million
Sales at companies located in Europe declined by 7% year on year
to €25,706 million. This was mainly due to considerably lower sales
in the Chemicals and Materials segments. The Industrial Solutions
segment also posted a considerable sales decrease, while Other
and the Nutrition & Care segment saw slight declines. By contrast,
sales rose considerably in the Surface Technologies and Agricultural
Solutions segments.
Sales developments were driven by lower volumes and prices. Sales
volumes declined in the Chemicals segment in particular due to the
scheduled turnarounds of our steam crackers. The Materials
segment also recorded lower volumes on the back of weaker
demand from key industries. Price levels softened, mainly in the
Chemicals segment due to lower raw materials prices for naphtha
and butane, and in the Materials segment as a result of lower
isocyanate prices. By contrast, prices in the Surface Technologies
(32%)
segment were well above the prior-year level. Sales were also
positively impacted by portfolio effects in the Agricultural Solutions
segment, while sales development in the Industrial Solutions seg-
ment was dampened by the transfer of BASF's paper and water
chemicals business to the Solenis group. Currency effects had a
positive impact.
EBIT declined by €1,234 million compared with the previous year to
€1,976 million. Almost all segments and Other recorded lower con-
tributions, but especially Materials and Chemicals. EBIT improved
considerably in the Industrial Solutions segment.
We further strengthened our position in the European market with
investments, including the replacement of the acetylene plant in
Ludwigshafen, Germany, with a modern, highly efficient plant and
the feedstock flexibilization of our steam cracker in Antwerp,
Belgium.
■ Sales growth of 3% to €16,420 million
■ EBIT declines 13% to €692 million
Sales at companies located in North America rose by 3% compared
with 2018 to €16,420 million. Growth was driven by the Agricultural
Solutions and Surface Technologies segments. In local currency
terms, sales declined by 2%.
The development was primarily attributable to portfolio effects in the
Agricultural Solutions segment and positive currency effects in all
segments. Prices were slightly higher overall: Price levels rose
significantly in the Surface Technologies segment but declined
markedly in the Chemicals and Materials segments in particular.
Sales were negatively impacted by significantly lower volumes,
especially in the Chemicals and Agricultural Solutions segments.
EBIT was down €102 million from the 2018 figure, at €692 million.
Considerable earnings growth in the Agricultural Solutions, Surface
Technologies and Industrial Solutions segments was unable to offset
the considerable decline in the Chemicals, Materials and Nutrition &
Care segments. EBIT includes a special charge from the impairment
of project costs for a planned methane-to-propylene plant on the
U.S. Gulf Coast.
We further strengthened our position in the region with the acquisi-
tion of significant businesses from Bayer in the areas of seeds and
non-selective herbicides. We invest strategically in our production
plants. For example, we are constructing a new MDI synthesis unit
in Geismar, Louisiana. We started up a new production plant for
engine coolants in Cincinnati, Ohio, and expanded our production
capacities for automotive coatings in Tultitlán, Mexico. We are also
expanding our capacities for ibuprofen in Bishop, Texas, and for
resins in Greenville, Ohio.
BASF Group
14%
3,340
3,806
(21%)
6,123
6,687
(8%)
418
1,146
(64%)
North America
16,420
15,900
3%
15,948
14,049
15,388
692
794
Asia Pacific
13,384
13,454
(1%)
14,203
14,210
(0%)
1,082
1,793
South America, Africa, Middle East
4%
Wintershall Dea drilled 18 exploration wells in the period from May
to December 2019. Of these, 121 were dry wells and were written
off.
(38%)
Investment projects that were already underway continued as
planned. These include, in particular, the Nova and Dvalin projects
operated by Wintershall Dea in Norway. The two fields are being
developed by means of a subsea tieback, with production facilities
on the seabed connected to existing platforms. The drilling phase
commenced for Dvalin and production is expected to start in 2020.
In Russia, the Achim Development joint venture operated with
Gazprom, in which Wintershall Dea holds a 25.01% interest, started
the field development of blocks 4A and 5A in the Achimov Forma-
tion. Another investment focus is Egypt, especially the Nile Delta.
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
Other
96
BASF Report 2019
96
See page 137 for the outlook for 2020
At €928 million, EBIT was €337 million higher than in the previous
year. Special charges primarily arose from the integration of the
acquired Bayer businesses. This was offset by special income from
divestitures in accordance with the conditions imposed by the
authorities in connection with the acquisition.
Income from operations (EBIT) before special items was
€1,095 million, €361 million above the 2018 figure. The increase was
largely attributable to considerably higher sales.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
21
(45)
(688)
(461)
(506)
(397)
(414)
4%
costs of corporate headquarters
Consolidated Financial Statements
(231)
5 Overviews
Sales in Other rose by €57 million compared with 2018 to
€2,898 million. This was mainly due to the remaining activities of
BASF's paper and water chemicals business, which were not part
of the transfer to Solenis and are reported under Other.
(667)
44%
128
184
(28%)
(378)
(483)
(56%)
(335)
(521)
Income from operations before depreciation and amortization and special items
Income from operations before depreciation and amortization (EBITDA)
2%
The Achimgaz joint venture with Gazprom drilled the last of a total
of 108 production wells. The company can now produce at a pla-
teau rate of 10 billion cubic meters of gas per year as planned.
2,841
2,898
Sales
+/-
2018
2019
EBIT before special items
Income from operations (EBIT)
Special items
Depreciation and amortization
Million €
Financial data - Othera
At minus €688 million, income from operations before special
items in Other was down €227 million from the prior-year figure.
This was largely attributable to valuation effects for our long-term
incentive program.
Other
(249)
(49%)
(1%)
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
To Our Shareholders
Other
1
40
97
BASF Report 2019
c Contains assets of businesses recognized under Other as well as reconciliation to assets of the BASF Group including the disposal groups for the oil and gas business and the construction chemicals business
d Additions to intangible assets and property, plant and equipment
b Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
a Information on the composition of Other can be found in the Notes to the Consolidated Financial Statements from page 220 onward.
About This Report
Oil and gas business
The price of a barrel of Brent crude oil averaged $64 in 2019
(previous year: $71). Gas prices on the European spot markets
declined significantly compared with the previous year.
Discontinued oil and gas business until April 30, 2019
Wintershall's earnings were presented in income after taxes from
discontinued operations until the merger of Wintershall and DEA on
May 1, 2019. This figure included the income after taxes of the
former Wintershall companies (€237 million) and the deconsolida-
tion gain of €5,684 million.
In the second quarter of 2019, Wintershall Dea sold its German oil
storage activities. In the fourth quarter of 2019, Wintershall Dea sold
shares in the Aguada Federal and Bandurria Norte blocks in Argen-
tina, as well as its shares in the Polarled pipeline and the Nyhamna
terminal in Norway.
Between the merger on May 1, 2019, and December 31, 2019,
Wintershall Dea produced 151 million BOE,1 of which around
109 million BOE of gas.1
- United Kingdom (production, development, exploration)
United Arab Emirates (development, exploration)
Norway (production, development, exploration)
Russia (production, development)
-
- Netherlands (production, exploration)
Mexico (production, development, exploration)
Germany (production, development, exploration)
Libya (production, exploration)
- Denmark (production, exploration)
- Argentina (production, development, exploration)
- Brazil (exploration)
Egypt (production, development, exploration)
Algeria (production, development)
Wintershall Dea conducts production, development and exploration
activities in the following countries:
Equity-accounted oil and gas business from May 1, 2019
Since May 1, 2019, BASF has reported its share of Winters-
hall Dea's adjusted net income in EBIT before special items and in
EBIT of the BASF Group, presented under Other. Adjustments
include, in particular, effects from the remeasurement of the assets
and liabilities of the former Wintershall. Adjustments will be made
for additional depreciation charges and the results of any asset
sales. The company contributed minus €86 million to the BASF
Group's EBIT in the period from May 1, 2019, to December 31,
2019.
Until April 30, 2019, Wintershall produced 19 million barrels of oil
equivalent (BOE) and condensate, and around 44 million BOE of
gas. Most of this was produced in Russia (around 36 million BOE)
and Norway (around 12 million BOE). In Norway, production was
expanded at the Aasta Hansteen gas field, which is operated by
Equinor. Wintershall was awarded new exploration licenses in
Norway and Argentina in early 2019. In the first four months of 2019,
one successful exploration well was drilled in Norway.
Research and development expenses
7%
(32%)
411
(44)
324
414
(89)
foreign currency results, hedging and other measurement effects
miscellaneous income and expenses
192%
25
73
(147)
other businesses
Assets
27,585
26,856
3%
Investments including acquisitionsd
299
759
(61%)
70%
Regular audits help ensure that standards are met for safety, secu-
rity, health and environmental protection. We conduct regular audits
every three to six years at all BASF sites and at companies in which
BASF is a majority shareholder. We use an audit database to ensure
that all sites and plants worldwide are audited. Sites and companies
acquired as part of acquisitions are audited in a timely manner to
bring these into line with our standards and directives as necessary.
After the integration phase is complete, they are generally audited
within one to two years, depending on complexity and size. We have
defined our regulations for Responsible Care audits in a global
Group requirement. During our audits, we create a safety and
environmental profile that shows if we are properly addressing the
existing hazard potential. If this is not the case, we agree on
measures and monitor their implementation, for example, with
follow-up audits.
■ 152 safety, security, health and environmental protection
audits performed
■ Global directives and standards for safety, security,
health and environmental protection
For more information on Responsible Care®, see basf.com/en/responsible-care
We set ourselves ambitious goals for safety and security, and health
and environmental protection. We regularly conduct audits to moni-
tor our performance and progress. We assess the potential risks
and weaknesses of all our activities – from research and production
to logistics and the effects of these on the safety and security of
our employees, the environment or our surroundings. In our data-
bases, we document accidents, near misses and safety-related
incidents at our sites as well as along our transportation routes to
learn from these; appropriate measures are derived according to
specific cause analyses.
BASF's Responsible Care Management System comprises the
global directives, standards and procedures for safety, security,
health and environmental protection for the various steps along
our value chain. Our regulations cover the transportation of raw
materials, activities at our sites and warehouses, and distribution
of our products as well as our customers' application of the
products. Specifications for implementing these measures are laid
out in binding directives that are introduced in consultation with
employee representatives. These describe the relevant responsibili-
ties, requirements and assessment methods. Our policies and
requirements are constantly updated. We also maintain a dialog
with government institutions, associations and other international
organizations.
■ Regular audits to monitor performance and progress
Responsible Care Management System
[The protection of people and the environment is our top
priority. Our core business - the development, production,
processing and transportation of chemicals demands a
responsible approach. We systematically address risks with
a comprehensive Responsible Care Management System,
which is continually being further developed. We expect our
employees and contractors to know the risks of working with
our products, substances and plants and handle these
responsibly.
-
CUSTOMERS
BASF
SUPPLIERS
Responsible Care Management System
Audits
Our Responsible Care audit system complies with the ISO 19011
standard and is certified according to ISO 9001. Worldwide, 183
BASF production sites are certified in accordance with ISO 14001
and EMAS (Eco-Management and Audit Scheme) (2018: 181).
In addition, 53 sites worldwide are certified in accordance with
OHSAS 18001 (2018: 53).
BASF Report 2019
5 Overviews
Sourcing mineral raw materials responsibly is important to BASF. We
procure a number of mineral raw materials, such as precious metals,
which we use to produce mobile and process emissions catalysts
and battery materials. We support our customers by tracking the
origins of minerals as defined in the Dodd-Frank Act - including tin,
tantalum, tungsten, their ores and gold - to see if they come from
mines in conflict regions in suspicious cases. We reserve the right to
have suppliers audited and, if necessary, terminate our business
relationship. Our suppliers have confirmed to us that they do not
source minerals matching this definition of conflict minerals from the
Democratic Republic of Congo or its neighboring countries. We
intend to implement the E.U. Conflict Minerals Regulation published
in 2017 by the 2021 deadline. The E.U. regulation defines supply
chain due diligence for importers and processors of certain mineral
raw materials originating from conflict regions and high-risk areas. In
addition to responsible procurement of "conflict minerals," BASF is
committed to a responsible and sustainable global supply chain for
cobalt and mica.
BASF does not purchase cobalt from artisanal mines in the
Democratic Republic of Congo and aims to avoid this in the supply
chain as well. In accordance with the OECD Due Diligence Guidance
for Responsible Supply Chains of Minerals from Conflict-Affected
and High-Risk Areas, we have analyzed our supply chains for cobalt
for battery materials and conduct audits based on a specific risk
assessment. BASF and Nornickel have signed a long-term supply
agreement for nickel and cobalt from Nornickel's metal refinery in
Finland. The agreement ensures locally sourced and secure supply
of raw materials for battery production in Europe.
BASF continues to be actively involved in the World Economic
Forum's Global Battery Alliance (GBA), which it co-founded in 2017.
The GBA has around 70 members, who are committed to creating
a socially responsible, ecological, economically sustainable and
innovative value chain for batteries.
The Responsible Cobalt Initiative (RCI) was re-established in 2019
with a focus on China. It remains an important partner for us. BASF
joined the Responsible Minerals Initiative in December 2019 to
systematically promote supply chain transparency for conflict
materials and cobalt. We also continue to be involved in Cobalt for
Development, a joint pilot project launched in 2018 with BMW,
Samsung SDI, Samsung Electronics and the German governmental
agency for international cooperation (Gesellschaft für Internationale
Zusammenarbeit, or GIZ). The companies tasked GIZ with setting
up a three-year pilot mining project to identify how to improve
working conditions in artisanal mines, as well as living conditions in
the surrounding communities in the Democratic Republic of Congo.
Together with authorities in the province of Lualaba, the project has
selected a legal artisanal mine site 20 kilometers south of Kolwezi to
pilot the approach. GIZ is working together with the international
nongovernmental organizations IMPACT and Good Shepherd Inter-
national Foundation/Bon Pasteur on the first activities in Lualaba.
BASF uses raw mica as well as mica-based effect pigments. Our
demand is largely met with mica from our own mine in Hartwell,
Georgia. Some of our businesses source exclusively from this mine.
We require our mica suppliers to comply with internationally
recognized standards, including the prohibition of child labor. As a
member of the Responsible Mica Initiative, BASF is actively working
to ban child labor in the mica business. The initiative aims to
eradicate child labor and unacceptable working conditions in the
mica supply chain in India.
Automotive catalytic converters contain valuable precious metals
like platinum, palladium and rhodium. They help to eliminate engine
emissions such as carbon monoxide. The recycling of spent auto-
motive catalysts is a complex process that enables the re-use of
their precious metals. BASF recycles the platinum group metals
(PGMs) contained in scrap automotive catalytic converters and
chemical catalysts. All of the metal we recover is used to supply our
mobile emissions catalysts and chemical and process catalysts
businesses.
For more information on BASF's agreement with Nornickel, see page 81
For more information on the Cobalt for Development project, see basf.com/cobalt-initiative
In the BASF Group in 2019, 137 environmental and safety audits
were conducted at 90 sites (2018: 126 audits at 84 sites). The focus
was on auditing sites based on the level of risk. For production
plants with a medium and high hazard potential, we additionally
conducted 42 short-notice audits at 33 sites (2018: 44 audits at
38 sites). We audited 15 sites with respect to occupational medicine
and health protection in 2019 (2018: 22). In addition, 15 health
performance control visits were conducted at sites with low to
medium health risks (2018: 34). The new sites from the businesses
acquired from Bayer in 2018 will be evaluated in 2020 using a sim-
plified audit process following a risk assessment.]
107
About This Report
1 To Our Shareholders
2 Management's Report
Responsible Care Management System
3 Corporate Governance
4
Consolidated Financial Statements
Environmental Protection, Health
and Safety
For more information on occupational safety and health protection, see page 109 onward
We stipulate mandatory global standards for safety, security, and
environmental and health protection. A worldwide network of
experts ensures these are implemented. As part of our continuous
improvement process, we regularly monitor progress toward our
goals.
2019
4
3 Corporate Governance
2 Management's Report
Safety in production
1 To Our Shareholders
About This Report
109
BASF Report 2019
1 Hours worked by BASF employees, temporary employees and contractors
Furthermore, our training center at the Ludwigshafen site in Germany
has offered continual further education on diverse safety and
security topics for employees and contractors since 2010. Some
11,800 participants received training there in 2019.
In addition to the legally required briefings, we also held training
courses on safe procedures in 2019 to strengthen risk awareness
among our employees and contractors and prevent work-related
accidents.
≤0.1
per 200,000 working hours
Reduction of worldwide
lost-time injury rate
2025 target
Our aim is to reduce the worldwide lost-time injury rate to no more
than 0.1 per 200,000 working hours¹ by 2025. To prevent work-
related accidents, we encourage and promote risk-conscious
behavior and safe working practices for every individual, learning
from incidents and regular exchange of experiences. We are
constantly refining and enhancing our requirements.
■ Employees and contractors worldwide instructed on safe
behavior
■ New tools to prevent work-related accidents
Consolidated Financial Statements
Occupational safety
5 Overviews
Improving health and safety with
digitalization
Mineral raw materials
110
BASF Report 2019
1 Hours worked by BASF employees, temporary employees and contractors
We are constantly working to increase the availability of our plants
and determine the right point in time for maintenance measures and
revamping/refurbishment. The aim is to further reduce unscheduled
shutdowns. To achieve this, we launched a digitalization project in
2017, which was first implemented in 2018 at a number of plants in
Ludwigshafen, Germany, and then extended in 2019 to further
plants in Ludwigshafen a well as in Schwarzheide, Germany, and
Antwerp, Belgium. We want to roll the project out worldwide in
2020.
We use the number of process safety incidents (PSI) per 200,000
working hours as a reporting indicator. We have set ourselves the
goal of reducing process safety incidents to a rate of no more than
0.1 per 200,000 working hours by 2025. In 2019, we recorded 0.3
process safety incidents per 200,000 working hours worldwide
(2018: 0.3). We pursue continual improvement by investigating
every incident in detail, analyzing causes and using the findings to
derive suitable measures. In addition, training methods are
continually refined and enhanced to increase risk awareness.
≤0.1
process safety incidents
per 200,000 working hours
Reduction of worldwide
2025 target
In order to maintain the highest level of safety at our plants across
their entire life cycles, we verify that our protection concepts, safety
reviews and resulting safety measures have been carried out in all
our plants at timely intervals based on risk potential. We regularly
update our plants' safety and security concepts in line with changing
technologies and as necessary.
Our global process safety standards provide the framework for the
safe construction and operation of our plants as well as the protec-
tion of people and the environment. Our experts have developed a
plant safety concept and implementation check for every plant that
considers the key aspects of safety, health and environmental
protection - from conception to startup - and stipulates specific
protection measures.
Process safety is a core part of safe, effective and thus sustainable
production. We meet high safety standards in the planning,
construction and operation of our plants around the world. These
meet and, in some cases, go beyond local legal requirements.
■ Regular review of plant safety concepts and performance
of implementation checks and safety-related measures
■ Global initiatives to reduce process safety incidents
■ Network of experts and global training methods foster
dialog
Process safety
In 2019, 0.3 work-related accidents per 200,000 working hours¹
occurred at BASF sites worldwide (2018: 0.3). The proportion
of chemical-related accidents rose slightly to 7% (2018: 6%).
Unfortunately, there was one fatal work-related accident in 2019
(2018: 3). In October, an employee of BASF Polska Sp. z o.0.
succumbed to injuries sustained from falling down the stairs during
a business event outside of company premises. BASF is supporting
the relevant authorities in their investigation into the circumstances
and cause of the accident. We use the findings to take appropriate
measures to prevent this from happening again. Such measures
include regular information and awareness campaigns.
For more information on occupational safety, see basf.com/occupational_safety
Digitalization and the associated innovative technologies open
up numerous new opportunities for us to improve occupational
safety, make safety training more realistic and effective, and
better link medical care around the world. In 2019, we therefore
held workshops to enable internal safety experts from various
disciplines to brainstorm ideas together and develop solutions.
The remarkable number of suggestions - around 300 - shows
the enormous potential of digitalization for health and safety.
Many of the ideas are feasible and we are working on their
implementation. Examples include projects to detect whether a
person is wearing personal protective equipment, to locate
missing persons in an emergency, virtual reality training for the
fire department or telemedicine applications. Since 2018,
Digital Lunch@EHS events have been held several times a year
to keep experts and employees from the business units up to
date with the latest developments, present progress made,
inspire new applications and strengthen dialog.
D-BASF
Costs and provisions for environmental protection in the BASF Group
Million €
For more information on the global safety initiative, see basf.com/global-safety-initiative
Our global safety initiative was established in 2008 and plays a key
role in the ongoing development of our safety culture. With around
1,000 events at 325 sites, the focus of our Global Safety Days in
2019 was "Safe choices become safe habits." Around the globe,
80,000 participants took the opportunity to learn about practical
examples and gain valuable insights around risk-aware behavior and
conscious decision-making. Around 7,500 employees and contrac-
tors registered to participate at the Ludwigshafen site alone. The
events offered centrally were therefore 90% booked out. This
2 Management's Report
Safety in production
1 To Our Shareholders
About This Report
108
BASF Report 2019
For more information, see the Notes to the Consolidated Financial Statements on pages 230 and 260
639
a Investments comprise end-of-pipe measures as well as integrated environmental protection measures.
b Values shown refer to December 31 of the respective year.
654
Provisions for environmental protection
measures and remediation
277
328
Investments in new and improved
environmental protection plants and
facilitiesa
Operating costs for environmental
protection
1,077
1,035
2018
3 Corporate Governance
involvement and lively discussion make a major contribution to the
safety culture.
4
5 Overviews
■ Focus of Global Safety Days: "Safe choices become
safe habits"
Global safety initiative
Based on our corporate values, leaders serve as safety role models
for our employees. Environmental protection, health, safety and
security are discussed with newly appointed senior executives.
Senior executives with a particular responsibility for such topics, for
example in production, also receive specific further training to be
able to meet their responsibilities.
By 2022, we will introduce digital solutions and applications at
more than 350 of our plants to further increase the safety, security,
planning capability and availability of our plants. For example,
augmented reality solutions will support daily operations by providing
direct, fast access to the required information with mobile end
devices and apps. Other digital solutions will enable us to perform
predictive maintenance or efficiently simulate maintenance and pro-
duction processes in digital plant models.
also promote regular dialog across different sites to strengthen risk
awareness among our employees and contractors, to learn from
examples of good practice and in this way, continually develop our
safety culture.
We analyze accidents, incidents and their causes in detail at a global
level to learn from these. Hazard analyses and the risk minimization
measures derived from them are an important prevention tool. We
We promote risk awareness for every individual with measures such
as systematic hazard assessments, specific and ongoing qualifica-
tion measures and global safety initiatives.
The safety of our employees, contractors and neighbors, and protec-
ting the environment is our top priority. This is why we have set
ourselves ambitious goals for occupational and process safety as
well as health protection.
■ Comprehensive incident analyses and global experience
and information exchange
■ Strengthening risk awareness
■ Global safety standards
Strategy
For occupational and process safety as well as health and
environmental protection and corporate security, we rely on
comprehensive preventive measures and expect the coopera-
tion of all employees and contractors. Our global safety and
security concepts serve to protect our employees, contrac-
tors and neighbors, to prevent property and environmental
damage, and to protect information and company assets.
CUSTOMERS
BASF
SUPPLIERS
Safety in production]
Consolidated Financial Statements
5 Overviews
In 2019, around 5.3% of the raw materials we purchased worldwide
were from renewable resources. To make the use of these materials
more competitive, we work on product innovations based on
renewable raw materials as well as on enhancing production pro-
cesses. We also further established our biomass balance approach
on the market in 2019. This approach aims to replace natural gas
and naphtha at the beginning of the value chain with biomethane
and bio-naphtha from certified sustainable production. Should a
customer select a biomass balanced product, the proportion of
3 Corporate Governance
Share of relevant spend covered
by sustainability evaluations
2025 target
Due to the size and scale of our supplier portfolio, our suppliers are
evaluated based on risk, including both country and industry-
specific risks. We actively promote sustainability in the supply chain
and have set ourselves ambitious targets for this: By 2025, we
aim to have conducted sustainability evaluations for 90% of the
BASF Group's relevant spend² and will develop action plans where
improvement is necessary. We will work towards having 80% of
suppliers improve their sustainability performance upon re-evalua-
tion. In 2019, 81% of the relevant spend had been evaluated. Of
the suppliers re-evaluated in 2019, 52% had improved. The global
targets are embedded in the personal goals of persons responsible
for procurement.
Our partnerships with suppliers are based on mutual value creation,
as well as a reliable supply of raw materials, technical goods and
services at competitive prices.1 We work together in an open and
transparent way to generate long-term benefits for both sides. In
doing so, we create value added that goes above and beyond
procurement alone. For example, we develop solutions to target
market-specific customer requirements together with our suppliers.
Our sustainability-oriented supply chain management contributes to
risk management by clarifying our expectations and standards for
our suppliers, and by supporting them in carrying out our require-
ments. We count on reliable supply relationships and want to make
our suppliers' contribution to sustainable development transparent
to us.
■ New goals for sustainability evaluations of relevant spend
■ Sustainability-oriented supply chain management
Strategy
2025 target
Our objective is to secure competitive advantages for BASF
through professional procurement structures. Our suppliers
are an important part of our value chain. Together with them,
we aim to create value and minimize risks.
BASF
SUPPLIERS
Supplier Management]
r
Responsible Conduct
Along the Value Chain
5 Overviews
Consolidated Financial Statements
CUSTOMERS
Percentage of suppliers with improved
sustainability performance upon
re-evaluation
90%
80%
Training and partnerships
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Supplier Management
1 To Our Shareholders
About This Report
102
BASF Report 2019
2 We understand relevant spend as procurement volumes with relevant suppliers. We define relevant suppliers as Tier 1 suppliers showing an elevated sustainability risk potential as identified by our risk matrices and our purchasers' assessments.
We also use further sources of information to identify relevant suppliers such as evaluations from Together for Sustainability (TFS), a joint initiative of chemical companies for sustainable supply chains.
1 BASF considers all direct suppliers of the BASF Group in the business year concerned as Tier 1 suppliers. These are suppliers that provide us with raw materials, investment goods, consumables and services.
Suppliers can be natural persons, companies or legal persons under public law.
A registration portal incorporating our Supplier Code of Conduct
was introduced in 2019 for all suppliers of technical goods, services
and investment goods. In 2019, 1,596 new suppliers committed
to our values via the portal. We specifically ask new raw materials
suppliers to commit to the values of our Supplier Code of Conduct.
Companies that do not accept our values are not taken on as new
suppliers.
New suppliers are selected and existing suppliers are evaluated
not only on the basis of economic criteria, but also environmental,
social and corporate governance standards. Our Supplier Code of
Conduct is founded on internationally recognized guidelines, such
as the principles of the United Nations' Global Compact, the U.N.
Guiding Principles on Business and Human Rights, the International
Labor Organization (ILO) conventions and the topic areas of the
Responsible Care initiative. The Code of Conduct covers compliance
with human rights, labor and social standards, and antidiscrimination
and anticorruption policies in addition to protecting the environment.
■ Global Supplier Code of Conduct
What we expect from our suppliers
Our more than 75,000 Tier 1 suppliers play a significant role in value
creation at our company. We work in long-term partnership with
companies from different industries around the world. They supply
us with raw materials, chemicals, investment goods and consum-
ables, perform a range of services and are innovation partners. We
acquired raw materials, goods and services for our own production
worth approximately €34.5 billion in 2019. There were no substantial
changes to our supplier structure.
Worldwide procurement
4
3 Corporate Governance
2 Management's Report
Supplier Management
To Our Shareholders
Location of company
Income from operations by region
North America 28%
€59,316 million
Asia Pacific 23%
South America, Africa, Middle East 6%
Location of company
Sales by region
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Regional Results
To Our Shareholders
1
About This Report
4 Consolidated Financial Statements
South America, Africa, Middle East 7%
In Brazil, we trained employees from 81 suppliers on topics such as
how the United Nations' Sustainable Development Goals (SDGs)
can be implemented. We trained employees from 49 suppliers in
2019 as part of a local partnership with the East China University of
Science and Technology in Shanghai.
Asia Pacific 27%
North America 17%
About This Report
101
BASF Report 2019
At €302 million, EBIT in the region South America, Africa, Middle
East exceeded the prior-year figure by €125 million. We consider-
ably improved earnings in almost all segments, especially in the
Agricultural Solutions segment as a result of higher sales volumes,
and in the Chemicals and Surface Technologies segments.
Companies in Africa and in the Middle East posted a slight sales
decrease overall. Higher volumes could not completely offset lower
prices and negative portfolio effects.
In South America, 2019 was a year dominated by economic and
political challenges. Nevertheless, BASF increased sales volumes
in all segments, especially in the Agricultural Solutions segment.
This was primarily attributable to the positive contribution from the
seed businesses acquired from Bayer. In the Nutrition & Care and
Materials segments, sales volumes were likewise considerably
above the prior-year level. A higher price level in all segments except
Materials and Chemicals, particularly in the Agricultural Solutions
segment, also contributed to sales growth. Portfolio effects had a
positive impact on sales. This more than offset negative currency
effects.
Sales at companies located in the region South America, Africa,
Middle East increased by 14% compared with 2018 to €3,806 million.
In local currency terms, sales exceeded the prior-year figure by
18%. This was mainly due to considerable sales growth in the
Agricultural Solutions segment. The Surface Technologies, Nutri-
tion & Care and Chemicals segments also posted higher sales.
Negative sales developments in the Industrial Solutions and Mate-
rials segments had an offsetting effect.
■ Sales growth of 14% to €3,806 million
■ EBIT 71% higher at €302 million
South America, Africa, Middle East
We aim to further increase the share of local production in Asia
Pacific. We again made progress toward this goal: In Nanjing,
China, for example, we expanded the production capacity for inter-
mediates. Our investments in production facilities as well as in
research and development serve to bring products to market for
our local and global customers in this fast-growing region. In late
November 2019, the official groundbreaking ceremony was held
for the first plants at the planned integrated Verbund chemical
production site in Zhanjiang in the southern Chinese province of
Guangdong. The first plants will produce engineering plastics and
thermoplastic polyurethane (TPU) to serve the growing demand in
various growth industries in Asia, including in the southern Chinese
market. We are also evaluating the construction of a chemical
complex in Mundra, India, in cooperation with ADNOC, Adani and
Borealis.
EBIT in the region declined by €711 million year on year to
€1,082 million. This was primarily due to the considerable decrease
in EBIT in the Materials segment. The contribution from the Chemi-
cals segment was also significantly lower, while EBIT in the Agricul-
tural Solutions segment was at the prior-year level. By contrast,
EBIT rose considerably in the Industrial Solutions, Surface Tech-
nologies and Nutrition & Care segments.
The decline in sales was due to lower prices in almost all segments,
but especially in the Materials segment. By contrast, prices in the
Surface Technologies segment were well above the prior-year level.
Currency effects had a positive impact across the board. We
increased volumes slightly with higher sales volumes in the Nutri-
tion & Care, Surface Technologies and Agricultural Solutions seg-
ments. Overall, portfolio measures did not have any impact. The
transfer of BASF's paper and water chemicals business to the
Solenis group dampened developments in the Industrial Solutions
segment, while the acquisition in the Agricultural Solutions segment
had a positive impact on sales.
Sales at companies headquartered in the Asia Pacific region
declined by 1% to €13,384 million in 2019. In local currency terms,
sales were down 3% from the prior-year level. This was mainly due
to lower sales in the Materials segment. Sales also decreased
considerably in the Industrial Solutions and Chemicals segments.
Considerable sales growth in the Surface Technologies, Nutrition &
Care and Agricultural Solutions segments was unable to compen-
sate for this.
49% Europe
43% Europe
■ Sales 1% below previous year at €13,384 million
■ EBIT declines 40% to €1,082 million
Asia Pacific
€4,052 million
BASF is one of 11 founding members of the econchain - German
Business Initiative for Sustainable Value Chains initiative coordinated
by the German sustainability network econsense. As part of this
initiative, we help suppliers to improve their sustainability perfor-
mance through training. Following successful pilot supplier training,
which we started in 2018 in China and Mexico and completed in
2019, the concept was enhanced and refined to roll out the training
further in 2020.
1
For more information on decent work in global supply chains, see page 40
For more information on supplier training from econsense, see econchain.de/en
4
3 Corporate Governance
2 Management's Report
Raw Materials
1 To Our Shareholders
About This Report
105
BASF Report 2019
Consolidated Financial Statements
■ Numerous projects and cooperative ventures to improve
sustainability along the value chain
☐ For more information, see basf.com/en/chemcycling
In the future, chemical recycling can help to reduce the amount
of plastic waste that is disposed of in landfill or burned to produce
energy. Chemical recycling complements mechanical recycling
and is particularly suited to recycling mixed plastics or plastics
with residues.
In 2019, BASF invested €20 million in Quantafuel AS, a start-up
based in Oslo, Norway, that specializes in the pyrolysis of mixed
plastic waste and the purification of the resulting oil. BASF is
providing technical support in the startup of Quantafuel's com-
mercial plant in Skive, Denmark. Together, the partners are also
developing further the chemical recycling technology used by
Quantafuel an integrated pyrolysis and purification process.
The aim is to optimize the products for use as raw materials in
the chemical industry.
At a workshop in Ludwigshafen, Germany, we discussed with more
than 90 recycling and standardization experts how the mass balance
approach can be standardized to drive forward circular economy
models. The starting point for discussions was a white paper from
the CE100 (Circular Economy 100) initiative of the Ellen MacArthur
Foundation, to which BASF sustainability experts had also contributed.
the raw material. We aim to minimize these raw material-specific
risks with measures, projects and targeted involvement in sustain-
ability initiatives in the relevant value chains.
In the pilot phase of the ChemCycling TM project, BASF presented
- together with customers from various industries – prototypes
made from chemically recycled materials, including mozzarella
packaging, transparent refrigerator elements and insulation boxes.
To do this, our partners use thermochemical processes to trans-
form plastic waste into secondary raw materials such as pyrolysis
oil. We can feed these into our production Verbund at the
beginning of the value chain, reducing the use of fossil raw
materials. The percentage of recycled materials can be allocated
to certain products manufactured in the Verbund using a mass
balance approach and we can offer our customers certified
products. These are indistinguishable from products manufactured
from fossil feedstock.
Renewable resources
renewable feedstock to be used is calculated based on the formula-
tion. The calculation model is certified by an independent third party
(TÜV Süd). In June 2019, BASF switched from TÜV Süd to the
chemical industry's REDcert2 standard for the certification of its
biomass balanced products.
Our Verbund production ensures that the characteristics and quality
of all end products remain unchanged and that our customers can
use them as usual. This method has already been applied to more
than 80 BASF products for example, for superabsorbents,
dispersions, plastics such as polyamides and polyurethanes, and for
intermediates available on the market as "drop-in products." These
can be used in place of previously employed products in the
production process without having to change the process itself.
Palm oil, palm kernel oil, and their derivatives are some of our most
important renewable raw materials. We aim to ensure that these raw
materials come from certified sustainable sources, and actively
support the Roundtable on Sustainable Palm Oil (RSPO). In 2019,
we published our third progress report - the BASF Palm Progress
Report for greater transparency in the value chain. Based on our
voluntary commitment to sustainably source palm oil products, we
purchased 140,400 metric tons of certified palm kernel oil in 2019.
This represents around 83.5% of our total volume of palm kernel oil.
2 Management's Report
Raw Materials
In addition, we instructed 229 BASF employees with procurement
responsibility on sustainability-oriented supplier management and
responsible procurement. This strengthens employee awareness to
identify and minimize potential risks in the supply chain.
1 To Our Shareholders
About This Report
106
BASF Report 2019
For more information on our voluntary commitment to palm oil products and the Palm Progress
Report, see basf.com/en/palm-dialog
For more information on renewable resources, see basf.com/renewables
There is a growing demand for sustainably produced castor oil, but
there are no standards defined and adopted across the globe that
can certify the same. Castor beans are mainly grown by Indian
smallholders and there are few incentives for the producers to
comply with the generally accepted quality standards. The Sustain-
able Castor Initiative - Pragati, a joint initiative established by BASF
together with Arkema, Jayant Agro and Solidaridad, made further
progress in 2019. With the initiative, the project members aim to
improve the economic situation of castor oil farmers and their
workers in India. Smallholders are trained and audited based on a
sustainability code to optimize their yields, reduce the impact on the
environment and be able to offer certified sustainable castor oil on
the global market. BASF can start procuring sustainably produced,
certified castor oil from 2020 onward. Based on the total volume
required, we want to increase the share of sustainably produced
castor oil over the long term. Since the project was initiated, more
than 3,000 smallholders and over 5,000 hectares of land have been
certified for sustainable castor cultivation. The smallholders certified
under the program have been able to increase their yields by at least
50% compared with the 2016 baseline. The project has been
extended for another three years, from 2019 to 2022.
improve the livelihood of coconut farmers in the Philippines and
Indonesia. Thanks to the initiative, the first certified sustainable
coconut oil was produced in the Philippines in 2018. Between
November 2015 and October 2019, more than 4,100 coconut
farmers were trained in Good Agricultural and Practices and farm
management. About 1,600 farmers received additional training and
were certified according to the Rainforest Alliance Sustainable
Agriculture Standard. Farmers who were trained and certified earn
47% more on average than farmers who did not participate in the
program.
BASF cooperates with Cargill, Procter & Gamble and the German
governmental agency for international cooperation (Deutsche
Gesellschaft für Internationale Zusammenarbeit GmbH) in a develop-
ment partnership under the develoPPP.de program commissioned
by the German Federal Ministry for Economic Cooperation and
Development to establish a certified coconut oil supply chain and
BASF, The Estée Lauder Companies and the RSPO have also
partnered with Solidaridad to promote sustainable palm oil and palm
derivatives production in the Indonesian province of Lampung. The
project supports around 1,000 independent smallholders to improve
their livelihoods and their sustainable production of palm oil and
palm kernel oil. The project's target is that a minimum of one-third of
the supported smallholder farmers become certified according to
the RSPO Smallholder Standard in three years.
BASF and Henkel have cooperated with the development organi-
zation Solidaridad since 2016 to more closely involve smallholder
farmers in Indonesia and improve their living conditions. Small-
holders complete farming and environmental training as part of the
Farmer Field School initiative, with a focus on efficient and sustain-
able growing practices and health and safety standards. Between
the start of the project in 2016 and June 2019, a total of more than
2,000 smallholders have completed a training program as part of
the Farmer Field School initiative.
In addition, our BASF Palm Sourcing Policy addresses the require-
ments for protecting and preserving forests and peatland, as well as
the involvement of local communities. At the same time, we are
stepping up our efforts to improve transparency and traceability in
the supply chain. We were most recently able to trace 90% of our
overall oil palm exposure.
commitment will be expanded to include the most important inter-
mediate products based on palm oil and palm kernel oil; these
include fractions and primary oleochemical derivatives as well as
edible oil esters.
Demand for certified products increased significantly again. As a
result, in 2019 we increased sales volumes of certified palm oil and
palm kernel oil-based products for the cosmetics and detergent and
cleaning industries by more than 40% compared with the previous
year. We are expanding our offering of certified sustainable products
in accordance with the RSPO's Mass Balance supply chain model.
This helps our customers to meet their obligations to customers,
consumers and stakeholders. BASF continues to drive forward the
RSPO supply chain certification of our sites for cosmetic ingredients.
In 2019, 24 production sites worldwide were RSPO certified. Our
goal is to only source RSPO certified palm oil and palm kernel oil by
2020, provided it is available on the market. By 2025, this voluntary
-
Recycling is becoming increasingly important due to the growing
sustainability requirements in the markets and regulatory devel-
opments. The ChemCycling TM project launched by BASF in 2018
aims to manufacture products from chemically recycled plastic
waste on an industrial scale.
The ChemCycling TM project
5 Overviews
We strive to procure responsibly and use raw materials efficiently.
That is why we take an interest in our suppliers, their products and
the entire supply chain. The Verbund system is an important
component of our resource efficiency concept: The by-products of
one plant often serve as feedstock elsewhere, helping us to use raw
materials more efficiently. We also contribute to the circular economy
with our ChemCycling TM project (see box on the right).
4
3 Corporate Governance
2 Management's Report
Supplier Management
1 To Our Shareholders
About This Report
103
1 In 2012, an extended strike at a mine formerly operated by Lonmin Plc, London, UK, in Marikana, South Africa, culminated in a violent confrontation between mine workers and armed South African police. Employees of the platinum supplier Lonmin were among the fatalities.
Ownership of the Marikana mine was transferred to Sibanye-Stillwater with its acquisition of Lonmin.
BASF reviewed and assessed the issues raised at the platinum
supplier Lonmin Plc,1 London, United Kingdom, in connection with
the events in Marikana, South Africa. Lonmin was acquired by
Sibanye-Stillwater on June 10, 2019. BASF initiated a dialog with
Sibanye-Stillwater at an early stage on the results of the two audits
Consolidated Financial Statements
The audits conducted over the past few years have identified some
deviations with respect to environmental, social and corporate
governance standards, for example in waste and wastewater
management, deviations in occupational safety measures and
standards under labor law. Follow-up assessments in 2019 found,
for example, that hazardous materials were stored correctly, waste-
water was treated properly, there were sufficient emergency exits
and trained emergency teams, and that labor laws were complied
with. In 2019, none of our audits identified any instances of child
labor or dangerous work and overtime performed by persons under
18. Further audits will be conducted at two suppliers due to lack of
documentation.
For more information on Together for Sustainability, see basf.com/en/together-for-sustainability
another review according to a defined timeframe based on the
sustainability risk measured. BASF reserves the right to discontinue
any business relationship for non-adherence to international princi-
ples, failure to correct violations, or for displaying patterns of non-
compliance with these standards. This did not occur in any case in
2019. We use this approach to evaluate suppliers with a potential
sustainability risk at least every five years. The approach itself is
regularly reviewed to identify possibilities for optimization.
For more information on raw materials, see page 105
Using TFS evaluations, we pursue a risk-oriented approach with
clearly defined, BASF-specific follow-up processes. A total of 81
raw material supplier sites were audited on sustainability standards
on our behalf in 2019. We also received sustainability assessments
for 537 suppliers from an external service provider. If we identify
potential for improvement, we support suppliers in developing
measures to fulfill our standards, such as providing training on
environmental, social and corporate governance topics. We conduct
BASF is a founding member of the Together for Sustainability (TFS)
initiative of leading chemical companies for the global standardiza-
tion of supplier evaluations and auditing. With the help of TfS, we
promote sustainability in the supply chain. The initiative aims to
develop and implement a global program for the responsible
supply of goods and services and improve suppliers' environ-
mental and social standards. The evaluation process is simplified
for both suppliers and TfS member companies by a globally
uniform questionnaire. The 22 members of the initiative conducted
a total of 4,197 sustainability assessments - including both initial
and follow-up assessments - and 309 audits in 2019. Tfs has
developed training for suppliers that already have a sustainability
rating but have potential for improvement in environmental, social
and corporate governance. In 2019, more than 200 participants
attended training on this topic in China.
■ Risk-based approach with clearly defined internal
follow-up processes
In 2019, BASF purchased a total of around 30,000 different raw
materials from more than 7,000 suppliers. Important raw materials
(based on volume) include naphtha, liquid gas, natural gas, benzene
and caustic soda. In addition to fossil resources, we also employ
renewable raw materials. We use these to manufacture products
that either cannot be made with fossil resources, or only at signifi-
cantly greater effort, for example. In addition, our biomass balance
approach enables us to allocate renewable raw materials to many of
the products in our portfolio. Independent certification confirms that
we have replaced the fossil feedstock needed for the sold biomass
balance product with renewable resources. Products manufactured
using this approach are indistinguishable from those produced
solely from fossil raw materials. As for fossil raw materials, we also
consider how renewable raw materials impact sustainability topics
along the value chain. As well as positive effects like saving green-
house gas emissions, these can also have negative effects on areas
such as biodiversity, land use or working conditions, depending on
■ Together for Sustainability initiative aims to harmonize
and standardize supplier assessments and audits
Evaluating our suppliers
Audit results
5 Overviews
BASF Report 2019
of Lonmin in 2015 and 2017 and the measures arising from these.
In January 2020, a full mining-specific re-audit was performed in
accordance with the standards of the chemical industry's "Together
for Sustainability" (TFS) initiative to re-evaluate the situation and
identify current need for action. Sibanye-Stillwater is a member and
supporter of the International Platinum Group Metals Association
(IPA) sustainability initiative that was co-founded by BASF. Under
this initiative, the most important platinum mines and fabricators in
South Africa and their customers - like BASF - are working to
improve local living and working conditions. Measures include
conducting comprehensive sustainability audits in the South African
platinum group metals sector and exchanging factors for success.
BASF continued its regular dialog with local stakeholder groups in
2019.
Strategy
CUSTOMERS
BASF
SUPPLIERS
Raw Materials
5 Overviews
Consolidated Financial Statements
4
Responsible resource management is an integral part of our
strategy. It is applied within the company through our Verbund
concept, our innovative products and the use of renewable
raw materials. In the search for alternative raw materials, we
employ solutions that contribute to sustainability.
2 Management's Report
Raw Materials
1 To Our Shareholders
About This Report
104
BASF Report 2019
see basf.com/en/marikana
3 Corporate Governance
For more information on the supplier relationship with the Sibanye-Stillwater mine,
Energy supply of the BASF Group 2019
Electricity supply
Internally generated 68%
Electricity
14.8 million
MWh
2018
baseline
-10 -8
-6 -4 -2
Purchased 32%
2019
Energy and climate protection
Greenhouse gas emissions from BASF operations (excluding sale of
energy to third parties) compared with baseline 2018
1 To Our Shareholders
5 Overviews
Consolidated Financial Statements
4
2 Management's Report
3 Corporate Governance
2
%
4
Total:
8 10
30.0 million MWh
About This Report
Natural gas
40.3 million
MWha
16.6%
Steam
2.2%
0.2%
6
81.0%
a Conversion factor: 0.75 MWh per metric ton of steam
Internally generated 48%
Waste heat 46%
0.574
Specific greenhouse gas emissions from BASF operations²
Metric tons of CO2 equivalents per metric ton of sales product¹
0.577
Specific greenhouse gas emissions in 2019 amounted to
0.574 metric tons of CO2 equivalents per metric ton of sales
product, 0.5% lower than in the previous year. Since 1990, we
have been able to lower our overall greenhouse gas emissions
from BASF operations by 49.9% and even reduce specific emis-
sions by 75.0%.
Purchased 6%
Steam supply
Fossil and residual fuels used for own generation in power
plants of the BASF Group
117
HFC (hydrofluorocarbons)
Scope 2d
e Includes sales to BASF Group companies; As a result, emissions reported under Scope 2 can be considered twice in some cases.
f Emissions are reported separately from Scope 1 and Scope 2 in accordance with the Greenhouse Gas Protocol.
0.025
0.677
0.598
17.025
15.855
2018
2019
Total
CO2
Sale of energy to third parties (Scope 1)e
Total after offsetting
Offsetting
CO2
Total
CH4 (methane)
N2O (nitrous oxide)
CO2 (carbon dioxide)
Scope 1c
Heating oil
0.1 million MWh
0.027
BASF Report 2019
0.082
3.519
C Emissions of N₂O, CH4 and HFC have been translated into CO2 emissions using the Global Warming Potential, or GWP, factor. GWP factors are based on the Intergovernmental Panel on Climate Change (IPCC) 2007, erratal
table 2012. HFC (hydrofluorocarbons) are calculated using the GWP factors of the individual components.
d Market-based approach. Under the location-based approach, Scope 2 emissions were 3.747 million metric tons of CO2 in 2018 and 3.552 million metric tons of CO2 in 2019.
a BASF reports separately on direct and indirect emissions from the purchase of energy. Scope 1 emissions encompass both direct emissions from production and generation of steam and electricity, as well as direct emissions
from the generation of steam and electricity for sale. Scope 2 emissions comprise indirect emissions from the purchase of energy for BASF's use.
b We have changed the method used to calculate the relevant environmental indicators compared with the previous year. Further information can be found on page 116. The figures for 2018 have been adjusted according to the
new method.
n/a
0.004
CO₂
Use of biomass
In 2019, the emissions reported under this target amounted to
20.1 million metric tons of CO2 equivalents, a decrease of 8.2%
compared with the previous year (2018: 21.9 million metric tons of
CO2 equivalents). This is primarily attributable to shutdowns of large-
scale plants for maintenance work, among other reasons. In addi-
tion, energy supply agreements were updated and measures to
increase energy efficiency and optimize processes were imple-
mented. We expect emissions for 2020 to increase to the 2018
level, due among other factors to fewer scheduled major shutdowns
and the acquisition of Solvay's polyamide business.
constant
22.660
20.842
0.773
0.763
21.887
20.079
0
0
21.887
20.079
4.067
0.091
Coal
4 Transport
Residual fuels
6.2 million MWh
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
119
BASF Report 2019
Examples of Accelerator solutions are our expandable polystyrene
granulates (EPS) StyroporⓇ and NeoporⓇ. Both products are used to
insulate buildings and help to save heating energy and reduce
carbon emissions. NeoporⓇ contains particles of graphite. This
-
Our climate protection products offer our customers solutions to
avoid greenhouse gas emissions over their entire lifecycle as
compared with reference products. The systematic analysis we
conduct on our portfolio Sustainable Solution Steering (see
page 38) - rates the use of these Accelerator solutions as particularly
good with respect to climate protection and energy.
The greenhouse gas emissions arising before and after BASF's
activities in the value chain (Scope 3 in accordance with the Green-
house Gas Protocol) amounted to around 100 million metric tons of
CO2 equivalents in 2019 (2018: 118 million metric tons of CO2
equivalents). The significant decrease compared with the previous
year is attributable to the deconsolidated oil and gas business,
which is no longer included in the carbon footprint as of 2019.
However, this decrease is partly offset by a new methodological
approach to calculate the emissions from the disposal of our
products. These emissions are estimated based on a closed carbon
cycle, taking into account regional disposal methods.
BASF has published a comprehensive corporate carbon footprint
since 2008. This reports on all greenhouse gas emissions along the
value chain. It also shows, on the basis of selected climate protec-
tion products, the emissions avoided through the use of these
products.
■ Customers' use of BASF climate protection products
avoids greenhouse gas emissions
■Reporting on greenhouse gas emissions along the entire
value chain
Carbon footprint and climate protection products
We also rely on locally available sources to supply our sites with
energy. We are increasingly incorporating the use of renewable
energies, especially purchasing electricity. Our research also
contributes to increasing the efficiency of technologies for the use of
renewable energy sources.
We further improved the resource and energy consumption of our
production in numerous projects around the world in 2019. At the
Verbund site in Ludwigshafen, Germany, for example, we were able
to save considerable amounts of steam and therefore primary
energy with predictive, model-based process control systems at
two production plants. Process improvements at many other sites
have also led to savings in steam, electricity and fuel.
The Verbund system is an important component of our energy
efficiency strategy: Waste heat from one plant's production process
is used as energy in other plants. In this way, the Verbund saved us
around 19.2 million MWh in 2019, which translates to 3.9 million
metric tons less CO2 released into the environment. With combined
power and steam generation as well as our optimized Energy
Verbund, we were thus able to prevent a total of 6.4 million metric
tons of carbon emissions in 2019.
31.6 million MWh
Energy saved in 2019 by the Verbund and
combined heat and power generation
4
Gas and steam turbines in combined heat and power plants enable
us to fulfill more than 70% of the electricity demand of the
BASF Group. Compared with separate methods of generating
steam and electricity, we saved 12.4 million MWh of fossil fuels and
prevented 2.5 million metric tons of carbon emissions in 2019. In
2019, internally generated power in the BASF Group had a carbon
footprint of around 0.26 metric tons of CO2 per MWh of electricity
and was below the national grid factor at most BASF Group
locations. The figure for purchased electricity in 2019 was around
0.46 metric tons of CO2 per MWh (market-based approach). As part
of our carbon management (see page 121), we therefore aim to
reduce the carbon footprint of purchased electricity.
Consolidated Financial Statements
Energy and climate protection
For more information on the sustainability analysis of our product portfolio, see pages 38 to 39
For more information on our emissions reporting, see basf.com/corporate_carbon_footprint
Other innovative climate protection products for thermal insulation
applications include BASF's new high-performance polyurethane-
based and mineral-based insulation materials, SLENTITE® and
SLENTEX®, which offer even more efficient insulation at lower thick-
nesses compared with conventional materials.
BASF also offers biomass balance (BMB) versions of StyroporⓇ,
NeoporⓇ and StyrodurⓇ. In accordance with an externally certified
mass balancing method, 100% of the fossil raw materials used in
the production of these BMB products are replaced by renewable
raw materials such as bio-naphtha or biogas. This saves carbon
emissions and fossil resources during the manufacturing process.
Together with the German EPS insulation material manufacturer
Bachl, we calculated in a lifecycle analysis that the use of renewable
raw materials reduces carbon emissions from the production of
NeoporⓇ BMB insulation boards by 66% compared with conven-
tionally produced NeoporⓇ boards (based on one cubic meter of
insulation board).
An analysis shows that the volumes of StyroporⓇ, NeoporⓇ and
StyrodurⓇ sold in 2019 help our customers to save 62 million metric
tons of CO2 emissions over the entire lifecycles of these products
when used to insulate existing buildings. This calculation is based
on a lifecycle analysis that takes into account the production and
disposal of the insulation materials and compares the energy
consumption of a renovated building with that of an unrenovated
building over a period of 50 years. The calculation of avoided green-
house gas emissions took into account the chemical industry
standards of the International Council of Chemical Associations
(ICCA) and the World Business Council for Sustainable Develop-
ment (WBCSD). All three products also help to reduce carbon
emissions in new buildings, where they have been used as standard
for decades.
enables the production of insulation boards with up to 20% better
insulation performance than conventional EPS. Another polystyrene-
based climate protection product is StyrodurⓇ, an extruded rigid
foam panel, which likewise offers optimum insulation performance
and a wide range of potential applications, especially under high
pressure.
6 Other
(C 3b, 3c, 5,
8, 13, 15)
a According to Greenhouse Gas Protocol; Scope 1, 2 and 3; categories within Scope 3 are shown in parentheses. For more information on Scope 3 emissions reporting, see basf.com/corporate_carbon_footprint
Transport of products,
employees' commuting and
business travel (C 4, 6, 7, 9)
BASF operationsb
26 Disposal
Incineration with energy
recovery, landfilling (C 12)
Emissions from the use of end
products (C 11)
tion of steam and electricity)
Production (including genera-
10 Customers
21 BASF
Purchased products, services and capital
goods (C 1, 2, 3a)
54 Suppliers
Million metric tons of CO2 equivalents
Greenhouse gas emissions along the BASF value chain in 2019ª
5 Overviews
0.8 million MWh
■ Internal supply and Verbund system as important
components of our energy efficiency strategy
d Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes
1 Sales product volumes include sales between BASF Group companies; merchandise is not taken into account.
2019
2018
2017
2016
2015
39.5
42.3
54.3
69.9
85.1
%
Certified energy management systems (ISO 50001) at BASF Group
sites worldwide, in terms of primary energy demand²
among other countries. At the end of 2019, 82 sites were certified
worldwide, representing 85% of our primary energy demand.
The introduction and implementation of certified energy manage-
ment systems is steered by a global working group. All energy
efficiency measures are recorded and analyzed in a global data-
base and made available to BASF sites as best practices. We are
currently pursuing more than 200 measures to reduce energy
consumption and increase competitiveness. Further sites across
all regions were certified in accordance with ISO 50001 in 2019.
These include the Verbund site in Kuantan, Malaysia, as well as
another 18 sites in the United States, Brazil, Chile, China, India,
Germany, France, the Netherlands, Belgium, Poland and Spain,
This is how we intend to identify and carry out improvements
in energy efficiency, reducing not only greenhouse gas emissions
and saving valuable energy resources, but also increasing our
competitiveness.
By 2020, we want to have introduced certified energy management
systems (DIN EN ISO 50001) at all relevant production sites.³
Together, these represent 90% of BASF's primary energy demand.
2018
37.1 million MWh
2 We have changed the method used to calculate the relevant environmental indicators compared with the previous year. Further information can be found on page 116. The figures for 2018 have been adjusted according to the new method.
3 The selection of relevant sites is determined by the amount of primary energy used and local energy prices.
Energy supply and efficiency
BASF Report 2019
About This Report
a We have changed the method used to calculate the relevant environmental indicators compared with the previous year. Further information can be found on page 116. The figures for 2018 have been adjusted according to the
new method.
b Scope 1 and Scope 2 (market-based) according to the GHG Protocol, excluding emissions from the generation of steam and electricity for sale to third parties, including offsetting
c Sales product volumes include sales between BASF Group companies; merchandise is not taken into account.
626
60.586
598
58.520
0.577
0.574
2018
2019
Energy efficiency (kilograms of sales product per MWh)
Specific greenhouse gas emissions (metric tons of CO2 equivalents per metric ton of sales product)
Primary energy demandd (million MWh)
Additional key indicators for energy and climate protection in BASF operationsa
Energy and climate protection
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
118
BASF Group's greenhouse gas emissions according to the Greenhouse Gas Protocola
Million metric tons of CO2 equivalents
BASF makes successful use of biotechnology. We produce a range
of established products with the help of biotechnological methods.
This provides us with extensive experience in the safe use of bio-
technological methods in research and development as well as in
production. When employing biotechnology, we adhere to all local
standards and legal regulations governing production and marketing.
We are also guided by the code of conduct set out by EuropaBio,
the European biotechnology association.
with baseline 2018
SUPPLIERS
[Product stewardship]
Product stewardship
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
BASF
1 To Our Shareholders
112
BASF Report 2019
For more information on emergency response, see basf.com/emergency_response
Aspects of human rights related to site security, such as the right to
liberty and security of person, are a component of the global quali-
fication requirements of our security personnel. Respect for human
rights is a mandatory element of any contract with service providers
of the BASF Group who are active in this area.
We inform business travelers and transferees about appropriate
protection measures prior to and during travel in countries with
elevated security risks. After any major incident, we can use a
standardized global travel system to locate and contact employees
in the affected regions.
Our worldwide network of information protection officers comprises
around 650 employees. They support the implementation of our
uniform requirements and hold events and seminars on secure
behaviors. We provided information protection instruction to more
than 96,000 participants in 2019. Our standardized Group-wide
recommendations for the protection of information and knowledge
were expanded to include additional guidance for employees and
updated in line with current developments.
Around the world, we work to sensitize employees about protecting
information and know-how. For example, we further strengthened
our employees' awareness of risks in 2019 with mandatory online
training for all employees and other offerings such as seminars, case
studies and interactive training. We have defined mandatory infor-
mation protection requirements to ensure compliance with our
processes for protecting sensitive information and perform audits to
monitor this.
ability to prevent, detect and react to cybersecurity incidents. By
establishing a global Cyber Security Defense Center, BASF signifi-
cantly expanded the availability of its cybersecurity experts to ensure
around-the-clock protection. We cooperate closely with a global
network of experts and partners to ensure that we can protect
ourselves against cyberattacks as far as possible. Our IT security
system is certified according to ISO 27001.
About This Report
CUSTOMERS
We review the safety of our products from research and
development through production and all the way to our
customers' application. We continuously work to ensure that
our products pose no risk to people or the environment when
they are used responsibly and in the manner intended.
Strategy
To Our Shareholders
1
About This Report
113
BASF Report 2019
For more information on alternative methods, see basf.com/alternative_methods
Since 2016, BASF SE's Experimental Toxicology and Ecotoxicology
department has been working together with a total of 39 partners on
one of the largest European collaborative projects for alternative
methods. The project, planned to run for six years, aims to develop
alternative methods to the point that chemical risk assessments can
be efficiently conducted largely without animal testing.
We adhere to the specifications laid down by the German Animal
Welfare Act as well as the requirements of the Association for
Assessment and Accreditation of Laboratory Animal Care - the
highest standard for laboratory animals in the world. We are
continually developing and optimizing alternative methods, and we
use them wherever it is possible and accepted by the authorities.
We use alternative methods in more than a third of our toxicological
tests. Currently, 33 alternative methods are being used in our labs
and another 22 are in the development stage. BASF spent €3.5 million
toward this purpose in 2019. The development of alternative
methods for testing the potential of substances to induce develop-
mental toxicity has been a focus area of our research since 2017.
Before launching products on the market, we subject them to a
variety of environmental and toxicological testing. We apply state-of-
the-art knowledge in the research and development phase of our
products. For instance, we only conduct animal studies when they
are required by law and approved by respective authorities. Animal
studies are at times stipulated by REACH and other national legis-
lation outside the European Union in order to obtain more informa-
tion on the properties and effects of chemical products.
■ Use of alternative methods for animal studies
Environmental and toxicological testing
We continue to see a rise in both regulatory requirements for agro-
chemicals and the number of additional studies required to obtain or
extend approval for crop protection products. Potential risks for
people and the environment are carefully assessed and minimized
throughout the research, development and registration process for
crop protection products. We perform a large number of scientific
studies every year to ensure that, as far as possible, our registration
dossiers leave no questions unanswered.
Based on the E.U. chemicals regulation, REACH, similar chemicals
regulations are being introduced around the world, for example in
South Korea and Turkey. We reached important milestones in both
countries in 2019. In South Korea, BASF successfully completed
the pre-registration phase by the end of June. In Turkey, we
submitted several thousand pre-registrations during the pre-
registration phase, which is still ongoing. In Europe, our REACH
activities continue to be determined by E.U. authorities' decisions
on dossier evaluations. We are also required to continually update
our registration dossiers. BASF is working together with the
European Chemicals Agency (ECHA) on a project to improve the
quality of REACH dossiers. BASF was one of the first companies to
join this industry-wide initiative.
Global chemicals regulations
For more information on GPS, see basf.com/en/gps
BASF supports the implementation of initiatives such as the Global
Product Strategy (GPS) of the ICCA. GPS is establishing worldwide
standards and best practices to improve the safety management of
chemical substances and to support governments in the introduc-
tion of local chemical regulations. We are also involved in initiatives
such as workshops and training seminars in developing countries
and emerging markets. In 2019, these included the ASEAN (Associa-
tion of Southeast Asian Nations) workshop on regulatory cooperation
in Vietnam and a Responsible Care workshop in Argentina.
We maintain and evaluate environmental, health and safety data for
our substances and products in a global database. This information
is updated continuously. The database forms the basis for our safety
data sheets, which we make available to our customers in around
40 languages. Our global emergency hotline network enables us to
provide information around the clock. We train and support our
customers in fulfilling their industry or application-specific product
requirements. In associations and together with other manufactur-
ers, BASF is pushing for the establishment of voluntary global
commitments to prevent the misuse of chemicals.
We are committed to continuously minimizing the negative effects of
our products on the environment, health and safety along the value
chain - from development to disposal. This commitment to product
stewardship is enshrined in our Responsible CareⓇ charter and the
initiatives of the International Council of Chemical Associations
(ICCA). We also ensure uniformly high standards for product
stewardship worldwide. In some cases, we have committed to
voluntary initiatives that go beyond the local legal requirements.
■ Global directives with uniformly high standards for
product stewardship
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
0.97
0.96
0.97
Target score
Development of the Health Performance Index (HPI)
We measure our performance in health protection using the Health
Performance Index (HPI). The HPI comprises five components:
recognized occupational diseases, medical emergency prepared-
ness, first aid, preventive medicine and health promotion. Each
component contributes a maximum of 0.2 to the total score,
meaning that the highest possible score is 1.0. We aim to reach a
value of more than 0.9 every year. With an HPI of 0.97, we once
again reached this ambitious goal in 2019 (2018: 0.96).1
Our global corporate health management serves to promote and
maintain the health and productivity of our employees. Our world-
wide standards for occupational health are specified in a directive
that is implemented by a global network of experts. This was once
again supported by numerous emergency drills and health promo-
tion measures in 2019.
■ Global standards for corporate health management
■ 2019 Global Health Campaign "moment_to_moment"
focuses on mindfulness
Health protection
For more information on process safety, see basf.com/process_safety
We play an active role in improving process safety around the world
in a global network of experts, through our involvement in organiza-
tions such as the International Council of Chemical Associations
(ICCA), and by fostering dialog with government institutions.
Around the world, we promote the reduction of process safety
incidents and improve risk awareness with a culture of dealing
openly with mistakes and initiatives to foster dialog around potential
safety risks. At the Ludwigshafen site in Germany, the PSI reduction
initiative was held for the fifth time in 2019. In the past, this initiative
mainly focused on the implementation of technical measures, such
as introducing a tool to visualize safety measures during mainte-
nance work and startup processes for production plants, for
example. In 2019, discussions centered for the first time on specific
events and their behavior-based causes. Another topic was the
competencies needed to prevent such events from happening
again. This new approach involves targeted training and is initially
being tested by three plants. Further plants will adopt the proven
concept on a step-by-step basis. Bolstered by a cultural shift in risk
awareness, North America again made avoiding and detecting all
leaks a key priority in 2019.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Safety in production
1 To Our Shareholders
About This Report
BASF Report 2019
0.96
2 Management's Report
Product stewardship
0.97
2016
2 Management's Report
Safety in production
1 To Our Shareholders
About This Report
111
BASF Report 2019
1 Our updated corporate strategy realigns our goals from 2019 onward. In this connection, the global Health Performance Index target was converted into a reporting indicator. For more information on our strategy and goals, see page 24 onward.
We protect our employees, sites, plants and company know-how
against third-party interference. This includes, for example, analyzing
potential security risks in the communities surrounding our produc-
tion sites and addressing in depth the issue of cybersecurity. BASF
has a comprehensive program in place to continually improve its
We analyze the potential safety and security risks associated with
investment projects and strategic plans, and define appropriate
safety and security concepts. Our guiding principle is to identify risks
for the company at an early stage, assess them properly and derive
appropriate safeguards.
We regularly check our emergency systems, crisis management
structures and drill procedures with employees, contractors, local
authorities and emergency rescue workers. For example, in 2019
we conducted 277 drills and simulations in Ludwigshafen, Germany,
to instruct participants on our emergency response measures.
We are well prepared for crisis situations thanks to our global crisis
management system. In the event of a crisis, our global, regional or
local emergency response plans and crisis management structures
are engaged, depending on the impact scope. We involve situation-
related partners and suppliers as well as cities, communities and
neighboring companies. A new IT system to support emergency
response was introduced in 2018/2019 to speed up communication
between the relevant actors in the event of a crisis and maintain the
best possible overview of the situation. The crisis management team
can now record and process events around the world better and in
more detail.
■ Comprehensive protection measures against third-party
interference
■ Regular review of emergency systems and crisis
management structures
Emergency response, corporate security and cybersecurity
For more information on occupational medicine, health campaigns and the HPI, see basf.com/health
We raise employee awareness of health topics through offers
tailored to specific target groups. The BASF health checks form the
foundation of our global health promotion program and are offered
to employees at regular intervals.
Our 2019 Global Health Campaign "moment_to_moment" focused
on mindfulness. The aim was to sensitize our employees to
conscious and safe behavior in their everyday working and personal
lives. Over 500 sites worldwide took part in the health campaign
with activities such as mindfulness workshops, courses, talks and
exercises.
2019
2018
2017
2015
(BASF operations excluding sale of energy to third parties, including offsetting)
3 Corporate Governance
Consolidated Financial Statements
1 The goal includes other greenhouse gases according to the Greenhouse Gas Protocol, which are converted into CO2 equivalents.
· The emissions of BASF SE subsidiaries that are fully consolidated
in the Group financial statements in which BASF holds an interest
of less than 100% are included in full in emissions reporting
(previously: emissions included on a pro rata basis). The emissions
of proportionally consolidated joint operations continue to be
disclosed pro rata according to our interest.
Our climate protection activities are based on a comprehensive
analysis of our emissions. We report on greenhouse gas emissions
in accordance with the Greenhouse Gas Protocol as well as the
sector-specific standard for the chemical industry. As part of the
implementation of BASF's strategy, we have made changes to how
greenhouse gas emissions and energy are reported from 2019
onward. For ease of comparison, the 2018 figures have been
adjusted according to the new method and target.
We offer our customers solutions that help prevent greenhouse gas
emissions and improve energy and resource efficiency. Around half²
of our annual research and development spending goes toward
developing these products and optimizing our processes.
Most of BASF's greenhouse gas emissions are attributable to the
consumption of energy. At sites with internal supply capabilities, we
primarily rely on highly efficient combined heat and power plants
with gas and steam turbines, and on the use of heat released by
production processes. Furthermore, we are committed to energy
management that helps us analyze and further improve the energy
efficiency of our plants on an ongoing basis. We continuously
analyze potential risks to our business operations arising in connec-
tion with the topics of energy and climate protection and derive
appropriate measures.
technical or economic environment does not permit a stabilization of
emissions at the 2018 level using the above approaches.
We want to reach our climate protection target and enable further
reductions with plant optimization measures, by purchasing low-
carbon energy, and with a research and development program to
reduce our greenhouse gas emissions over the long term. We have
bundled these measures in our carbon management program (see
page 121). In addition, we will also consider temporarily taking
external offsetting measures such as purchasing certificates if the
Climate protection is very important to us. As a leading chemical
company, we want to achieve CO2-neutral1 growth until 2030: We
aim to keep total greenhouse gas emissions from our production
sites and our energy purchases stable at the 2018 level while
growing production volumes. Sharp increases due to the startup of
large-scale plants will be progressively offset. When deciding on
investments and acquisitions, we systematically consider the effects
on greenhouse gas emissions.
2 Costs not relevant to the calculation of this share include research expenses in early innovation stages of the phase-gate process, patent costs and expenses for supporting services.
■ Carbon management bundles measures to reduce
greenhouse gas emissions
Strategy
As an energy-intensive company, we are committed to
energy efficiency and global climate protection. We want to
reduce emissions along the value chain. To achieve this, we
rely on efficient technologies for generating steam and
electricity, increased use of renewable energies, energy-
efficient production processes and comprehensive energy
management, among other things. Our climate protection
products make an important contribution toward helping
our customers avoid emissions.
CUSTOMERS
BASF
SUPPLIERS
[Energy and climate protection]
5 Overviews
Consolidated Financial Statements
■ New climate protection target: CO2-neutral growth
until 2030
-
We report on emissions and energy for BASF operations including
the businesses acquired from Bayer in 2018 and excluding the
deconsolidated oil and gas business. The businesses acquired
from Bayer are accounted for from January 1, 2018.
We use the market-based approach (previously: location-based
approach) to report on greenhouse gas emissions from purchased
energy (Scope 2) for the purpose of our climate protection target.
Both approaches continue to be presented in the overview of
greenhouse gas emissions in accordance with the Greenhouse
Gas Protocol.
Annual greenhouse gas emissions compared
CO2-neutral growth:
2030 target
We want to achieve CO2-neutral growth until 2030. In other words,
we aim to maintain total greenhouse gas emissions from our
production sites (excluding emissions from sale of energy to third
parties) and our energy purchases at the 2018 level (21.9 million
metric tons of CO2 equivalents) while increasing production.
Global goals and measures
For more information on carbon management, see basf.com/en/carbon-management
For more information on climate protection, see basf.com/climate_protection
overview showing the sections and subsections in which TCFD-
relevant information can be found (see page 18).
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Energy and climate protection
1 To Our Shareholders
About This Report
116
BASF Report 2019
Climate protection is a shared global task. We advocate climate
protection by supporting initiatives to this end. For instance, BASF
spearheaded the World Economic Forum's initiative on Collaborative
Innovation for Low-Carbon Emitting Technologies in the Chemical
Industry. In July 2019, BASF and the World Economic Forum invited
participants to a kick-off workshop in Ludwigshafen, Germany.
Representatives from 20 international chemical companies met with
the goal of accelerating CO2 reduction through future cooperation.
BASF also supports the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD). In 2019, we shared
learnings and best practices on the implementation of the TCFD
recommendations with four industry peers at a TCFD Preparer
Forum for Chemicals. For the first time, this report includes an
Since 2004, we have participated in the international non-profit
organization CDP's program for reporting on data relevant to climate
protection. BASF achieved a score of A- in CDP's rating for 2019,
thus attaining Leadership status again. Companies on the Leader-
ship level are distinguished by factors such as the completeness
and transparency of their reporting. They also pursue comprehen-
sive approaches in managing the opportunities and risks associated
with climate change as well as emissions reduction strategies to
achieve company-wide goals.
4
3 Corporate Governance
2 Management's Report
Energy and climate protection
To Our Shareholders
Transportation and storage]
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Transportation and storage
1 To Our Shareholders
About This Report
BASF Report 2019
114
For more information on nanotechnology and the Nanotechnology Code of Conduct,
see basf.com/nanotechnology
Together with partners from academia and government authorities,
we are working on E.U.-funded projects to validate alternative
testing methods for evaluating and grouping nanomaterials with a
view to regulatory acceptance. Many of the methods developed for
nanoparticles could, in our view, also be used to evaluate solid
particles in the future, an approach we bring up in regulatory
discussions.
OECD testing and implementation guidelines must be developed for
the new requirements for nanomaterials under REACH, the European
chemicals regulation. We support this process by contributing our
expertise in various working groups of the European Chemicals
Agency (ECHA) and the OECD's Business and Industry Advisory
Group (BIAC).
In 2018, we concluded laboratory and evaluation work on the
Nano-in-Vivo research project. The project was conducted in
cooperation with German governmental bodies over a period of
more than five years and examined the toxicological effects of long-
term exposure to nanoparticles. We communicated the first findings
at industry conferences in 2019. We will publish further data and
results together with the German governmental bodies in the final
report and in scientific papers. The insights delivered by the research
project complement our previous findings that toxicity is determined
not by the size of the particles but by the intrinsic properties of the
substance.
Safe handling of nanomaterials is stipulated in our Nanotechnology
Code of Conduct. In recent years, we have conducted over 250
scientific studies and participated in numerous Verbund projects
related to the safety of nanomaterials in Germany and around the
world. The results were published in more than 130 scientific articles.
Nanotechnology and biotechnology offer solutions for key societal
challenges - for example, in the areas of climate protection or health
and nutrition.
■ Continual safety research on nano- and biotechnology
Management of new technologies
5 Overviews
SUPPLIERS
4
BASF
Our regulations and measures for transportation and ware-
house safety cover the delivery of raw materials, the storage
and distribution of chemical products among BASF sites and
customers, and the transportation of waste from our sites to
the disposal facilities.
1
About This Report
115
BASF Report 2019
1 Hazardous goods are classified in accordance with national and international hazardous goods regulations.
For more information on transportation safety, see basf.com/distribution_safety
For more information on emergency response, see basf.com/emergency_response
We are actively involved in external networks, which quickly provide
information and assistance in emergencies. These include the Inter-
national Chemical Environmental (ICE) initiative and the German
Transport Accident Information and Emergency Response System
(TUIS), in which BASF plays a coordinating role. In 2019, we
provided assistance to other companies in 165 cases worldwide
(2018: 145). We apply the experience we have gathered to set up
similar systems in other countries. Since 2019, external experts
such as the public fire services or other emergency responders can
consult our systems for information on the detection of chemical
substances in the human body. This "human biomonitoring" can be
used to determine and evaluate whether and what amount of
chemical substances have been absorbed by the human body
during a rescue operation. It can be used to test and verify the
efficacy of safety measures taken and of safety equipment, which is
of particular importance for the health protection of emergency
responders. Our experts provide assistance in evaluating whether
human biomonitoring is feasible in a specific case, and in selecting
the target substances to be tested, as well as appropriate sampling
methods including transport and storage of samples.
Activities in external networks
At the Verbund site in Ludwigshafen, Germany, around 40% of
incoming volumes are transported to the site by ship under normal
conditions. In 2018, logistics were impacted by the low water levels
on the Rhine River caused by the hot and dry summer. We are
implementing various measures to make the site more resilient to
extended low water events. For instance, we are involved in creating
an early warning system for low water, have chartered ships that can
navigate low water levels, are investing in making loading stations
more flexible, and are additionally developing our own type of ship
together with partners. BASF is also a co-signatory of the German
Federal Ministry of Transport's "Low water on the Rhine" action plan,
which aims to improve shipping conditions on the Rhine over the
coming years with various measures. We recorded no extended low
water events in 2019.
We recorded three incidents in 2019 with spillage of more than 200
kilograms of dangerous goods¹ (2018: 3). None of these transporta-
tion incidents had a significant impact on the environment (2018: 0).
Securing raw materials supply via the Rhine River
We are systematically implementing our measures to improve trans-
portation safety. We report in particular on goods spillages that
could lead to significant environmental impacts such as dangerous
goods leaks of BASF products in excess of 200 kilograms on public
traffic routes, provided BASF arranged the transport.
Transportation incidents
We stipulate worldwide requirements for our logistics service
providers and assess them in terms of safety and quality. Our
experts use our own evaluation and monitoring tools as well as
internationally approved schemes.
We regularly assess the safety and environmental risks of trans-
porting and storing raw materials and sales products with high
hazard potential using our global guideline. This is based on the
guidelines of the European Chemical Industry Council (CEFIC). We
also have binding global standards for load safety.
■ Risk assessments for transportation and storage
Accident prevention and emergency response
We want our products to be safely loaded, transported, handled
and stored. This is why we depend on reliable logistics partners,
global standards and an effective organization. Our goal is to mini-
mize risks along the entire transportation chain - from loading and
transportation to unloading. Some of our guidelines for the transpor-
tation of dangerous goods go above and beyond national and inter-
national dangerous goods requirements. We have defined global
guidelines and requirements for the storage of our products and
regularly monitor compliance with these.
■ Risk minimization along the entire transportation chain
Strategy
CUSTOMERS
120
2019
Other examples from our Carbon Management R&D Program
include dry reforming methane to produce syngas as the basis for
the production of olefins with a significantly lower carbon footprint
(see page 33), the development of an electrical heating concept for
our steam crackers, or using CO₂ to produce sodium acrylate (see
page 34). We are optimistic that these climate-friendly production
processes can be implemented from 2030 onward.
7,486
Middle East
Africa,
South America,
29.3%
BASF Report 2019
1 At BASF, the apprenticeship program trains students for technical, scientific and business vocations as well as for trade and craft professions.
Our employees are key to the successful implementation of BASF's
strategy. We are convinced of the value of excellent employees,
leaders and working conditions, and strive to give our employees
the tools and skills necessary to be able to offer our customers
products and services with an even greater level of differentiation
and customization. Our new corporate strategy promotes a working
atmosphere based on mutual trust, in which employees are given
the space to optimally develop their individual talents and potential.
■ We are committed to valuing and treating people with
respect, and fostering an inspiring working environment
(= 6.4%)
Strategy
Europe¹
72,153
(€61.3%)
Of material significance to the decrease in the number of employees
were the merger of the oil and gas businesses of Wintershall and
As of December 31, 2019, the number of employees decreased to
117,628 employees compared with 122,404 employees as of
December 31, 2018. That includes 6,964 employees in the disposal
group for the construction chemicals business as of December 31,
2019 (December 31, 2018: 2,017 employees in the disposal group
for the oil and gas business). We employed 3,161 apprentices¹
(2018: 3,174). 2,606 employees were on temporary contracts (of
which 44.0% were women).
Number of employees
24.3%
74.3%
(€ 16.5%)
25.7%
19,355
75.7%
North America
Asia
Pacific
70.7%
What we expect from our leaders]
Our 2019 employee survey showed an engagement index of 79%.
Despite significant challenges associated with restructuring measures,
this score is already close to the target we set ourselves. We continue
to aim to increase this score to over 80%.
BASF can rely on the engagement of its employees. Employee
engagement is shown by, for example, a passion for the job, a
dedication to top performance and a commitment to BASF. Global
employee surveys and pulse checks are an established feedback
tool in the BASF Group, and are used to actively involve employees
in shaping their working environment. The results are communicated
to employees, the Board of Executive Directors and the Supervisory
Board. We have performed regular global employee surveys since
2008. We aim to keep the employee engagement determined by
these surveys at a high level and increase it even further as far as
possible. As part of the BASF strategy, we therefore set ourselves
the following goal in 2018: More than 80% of our employees feel
that at BASF, they can thrive and perform at their best. We regularly
calculate employee engagement level as an index score based on
five questions on set topics in our employee surveys. Overall, more
than 71,000 employees participated in this year's survey, representing
66% of survey recipients.1
■ Global employee survey conducted in 2019
■ Engagement index of 79%
[Employee engagement]
We support our leaders with a range of follow-up measures to
decentrally address the individual action areas and in this way, help
further strengthen employee engagement together with their
employees.
DEA in the joint venture Wintershall Dea, as well as the sale of the
paper and water chemicals business. As a result, the number of
employees decreased by more than 3,000 employees.
5 Overviews
Consolidated Financial Statements
18,634
(15.8%)
4
2 Management's Report
Employees
To Our Shareholders
1
About This Report
126
54,028 (#45.9%) 23.7% 176.3%
34,896 (#29.7%) 21.5% 78.5%
74.0%
1 Of which Germany
Of which BASF SE
26.0%
3 Corporate Governance
■ Leaders as role models
(Total: 117,628, of which 25.1% women, as of December 31, 2019)
This positions us to meet the challenges of an increasingly rapidly
changing environment, demographic change and the digital work-
place. In everything we do, we are committed to complying with
internationally recognized labor and social standards. We want our
working conditions to be a motor for innovation, and one way of
achieving this is through inclusion of diversity. Lifelong learning and
individual employee development lay the foundation for this. Com-
pensation and benefits as well as offerings to balance personal and
professional life complete our attractive total offer package. We
track our employer rankings so that we can continue to attract
talented people to the company in the future. Our employees play
an important role here as ambassadors for BASF.]
Emissions to water
working to optimize our energy consumption and the amount of
water we use, and to adapt to the needs of our business and the
environment.
a The difference between the volume of water drawn and the volume discharged is primarily attributable to evaporation losses during closed-circuit cooling and limited accuracy in measuring water discharge.
b Including rainwater (0.5 million cubic meters)
c Total from production processes, graywater, rinsing and cleaning in production
21
External treatment plant
236
Production
1
178
1
■ Emissions at prior-year level
1,309
1,336
once-through
Reusable wastewater
from third parties
5,216
of which recirculating
23
6,552
Cooling
68
Surface water / freshwater
Brackish water / seawater
Groundwater
BASF Group employees by region
A total of 1,509 million cubic meters of water were discharged from
BASF production sites in 2019,1 including 173 million cubic meters
of treated wastewater from production. Emissions of nitrogen to
water amounted to 3,000 metric tons (2018: 3,100). Around
12,100 metric tons of organic substances were emitted in waste-
water (2018: 12,600). Our wastewater contained 25 metric tons of
heavy metals (2018: 23). Phosphorus emissions amounted to
260 metric tons (2018: 220 metric tons). Our wastewater is treated
through different methods depending on the type and degree of
In order to avoid unanticipated emissions and the pollution of surface
or groundwater, we create water protection strategies for our pro-
duction sites. This is mandatory for all production plants as part of
the Responsible Care® initiative. The wastewater protection plans
involve evaluating wastewater in terms of risk and drawing up
suitable monitoring approaches. We use audits to check that these
measures are being implemented and complied with.
on center stage
Employee engagement and
leadership impact
employees around the world
117,628
[Our employees make a significant contribution to BASF's
long-term success. We want to attract and retain talented
people for our company and support them in their develop-
ment. To do so, we cultivate a working environment that
inspires and connects people. It is founded on inclusive
leadership based on mutual trust, respect and dedication to
top performance.
CUSTOMERS
BASF
SUPPLIERS
Employees
contamination - including biological processes, oxidation, mem-
brane technologies, precipitation or adsorption.
5 Overviews
4
3 Corporate Governance
2 Management's Report
Employees
1 To Our Shareholders
About This Report
125
BASF Report 2019
1 As part of the implementation of BASF's strategy, we have made changes to how environmental indicators are reported. For ease of comparison, the 2018 figures have been adjusted according to the new requirements (see page 6).
2 To determine the percentage figure for water abstraction and water consumption, sites in water stress areas are identified using Aqueduct 3.0.
For more information, see basf.com/water
Consolidated Financial Statements
Our leaders and their teams should make a sustainable contribution
to BASF's success and to safeguarding its future. This is why we
want to strengthen the impact of our leadership. We understand
impactful leadership as leaders that serve as role models by having
a positive influence on the engagement and development of their
employees and developing and implementing business strategies in
line with our corporate values. These expectations are part of the
standard global nomination criteria for leadership candidates. Our
leadership culture is founded on a global Competency Model, which
sets out specific behavioral standards based on our corporate
values. We offer our leaders a wide variety of learning and develop-
ment opportunities for each phase of their career, as well as various
formats that enable them to learn from one another and external
trainers. Global, regional and local offerings are optimally coordinated.
We aim to develop leaders who lead their teams with optimism,
empathy and trust, and in this way, create a competitive advantage
for BASF. Regular feedback plays an important role in the develop-
ment of leaders. That is why in 2019, we developed and imple-
mented FEEDback&forward, a comprehensive feedback program
for all senior executives.2 FEEDback&forward will be rolled out
Group-wide from 2020 as an annual tool for leaders to reflect on
their own leadership skills (see box on the right).
Dialog and self-reflection with
FEEDback&forward
Our new corporate strategy proactively addresses the challenges
of tomorrow. How effectively we develop our resources and
continually scrutinize existing practices is crucial to our success.
This includes our leadership culture. FEEDback&forward gives all
of our senior executives² direct, regular feedback from their
employees on their leadership skills. The questionnaire focuses
on behaviors like empathy or the ability to make difficult
decisions and approach change positively. Employees can
also report back to their leaders which leadership behaviors they
want in the future. In this way, FEEDback&forward promotes
regular and open dialog between employees and their leaders,
and encourages leaders to reflect on themselves and their own
leadership skills and drive forward change together with their
employees. This fosters a culture of continual self-reflection
and personal development.
Attracting and retaining the best employees is crucial to our success.
Having an attractive and compelling total offer package for employees
is becoming increasingly important given the strong global competi-
tion for the best qualified employees and leaders. This is why we are
constantly working on measures to increase BASF's appeal in the
global labor markets. Target group-specific campaigns focus on
sustainability, digital ways of working and innovation for the future -
reflecting our strategic action areas and key labor market trends.
■ Addressing specific target groups through social media
and online marketing
■ Positioning as an attractive employer
[Competition for talent ]
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Employees
We are increasingly using digital platforms such as our country-
specific career websites as well as global and regional social
networks to reach potential candidates. This enables us to address
specific target groups. In 2019, we expanded our social media
presence with a global career channel on Instagram to give younger
audiences in particular insights into employee stories and offer
another communication platform.
1 To Our Shareholders
128
BASF Report 2019
For more information, see basf.com/diversity
For more information on health protection, see page 111
For more information on diversity in the Board of Executive Directors and the Supervisory Board,
see page 150 onward
a Employees with disciplinary leadership responsibilities
b Specialists without disciplinary leadership responsibilities
30.7
23.0
9,522
40,290
About This Report
Of which women (%)
One focus is on the recruitment of digital talents. We have a
dedicated global career website for digital talents to strengthen our
position among this group. In addition, we launched a chatbot in
2019 to provide support on our career website and answer questions
about the application process at any time of day or night. BASF
introduced a digital talent network to help its employees actively
shape the digital transformation. This online platform aims to foster
dialog around digital projects and ideas across the company and
improve cross-team and cross-unit cooperation. Another focus of
our activities is attracting talented female recruits. In 2019, we held
the first X-Days event in Germany, for instance. We invited female
students and PhD candidates in the natural sciences to find out
female leaders.
8,026
38.3
567
32.3
1,376
29.5
26.5
1,665
4,418
more about BASF and digital career opportunities, and network with [Learning and development]
In regular development meetings, which are held as part of our
annual employee dialogs, employees outline ideas for their individual
development together with their leaders and determine specific
measures for further training and development, which focus on
personal and professional competencies. Our learning activities
follow the "70-20-10" philosophy: We apply the elements "learning
from experience" (70%), "learning from others" (20%) and "learning
December 31, 2019 Of which women (%) through courses and media" (10%). Our learning and development
offerings cover a range of learning goals: Starting a career, expanding
knowledge, personal growth and leadership development.
■ Focus on virtual learning and digitalization
■ Life-long learning concept
Total
South America, Africa, Middle East
North America
Asia Pacific
Europe
BASF Group new hires in 2019
The BASF Group hired 8,026 new employees in 2019. The percentage
of employees who resigned during their first three years of employ-
ment - the early turnover rate - was 1.4% worldwide in 2019. This
turnover rate was 0.7% in Europe, 2.1% in North America, 2.8% in
Asia Pacific and 2.0% in South America, Africa, Middle East. Our
early turnover rate is therefore at a desirable low level.
We once again achieved high scores in a number of employer
rankings in 2019. For example, in a study conducted by Universum,
BASF was again selected by engineering and IT students as one of
the 50 most attractive employers in the world. In North America,
DiversityInc named BASF as one of the top 50 companies for
diversity in recruiting for the seventh consecutive year. In Asia, Top
Employer recognized BASF China as one of the best employers for
the tenth time in succession. In South America, BASF was recog-
nized as one of the top employers in the Brazilian chemical industry
by local human resources magazine Você S/A.
Learning and development are essential success factors for a strong
company culture. The skills and competencies of our employees are
critical for profitable growth and lasting success. For this reason, we
want to further modernize our learning culture and step up our
efforts to promote lifelong, self-directed learning. Employee develop-
ment at BASF is guided by the belief that talent is in everyone. This
means that development opportunities and support are open to all
employees. In our understanding, there is more to development
than a promotion or a job change - it encompasses the develop-
ment of personal experience and abilities.
December 31, 2019
Professionalsb
(Senior) executivesa
(Total: 117,628, of which 25.1% women, as of December 31, 2019)
BASF Group employee age structure
Diversity also relates to the company's demographic profile, which
varies widely by region within the BASF Group. Our aim is to create
a suitable framework to help maintain the employability of our
personnel at all stages of life and ensure the availability of qualified
employees over the long term. Mixed-age teams also benefit from
the combination of different skills and perspectives, for example, by
bringing together knowledge of digital technologies with many years
of experience and process expertise.
Standards of Conduct for business and has done so since 2018.
The U.N. recommendations show the many opportunities companies
have to contribute to positive social change. As part of pride month,
employees promoted openness, acceptance and tolerance with
campaigns at various sites around the world.
BASF is one of approximately 150 companies that support the
United Nations Global LGBTI (lesbian, gay, bi, trans and intersex)
Our leaders play an important role in its implementation. We support
them by integrating topics such as inclusive leadership into our
leadership development courses. Special seminars and training
events are held to sensitize leaders to issues such as unconscious
bias. This enables them to remain as objective as possible when
making personnel decisions, for example, to avoid unconscious
biases in favor of or against candidates with certain characteristics
or views.
Promoting and valuing diversity across all hierarchical levels is an
integral part of our strategy and is also embedded in our corporate
values. BASF strives to foster a working environment based on
mutual respect, trust and appreciation. This is enshrined in our
global Competency Model, which provides a framework for our
employees and leaders. The inclusion of diversity is anchored in this
model as one of the behaviors expected of employees and leaders.
The global character of our markets translates into different customer
requirements and we want to reflect this diversity among our
employees, too. For us, diversity means, among other things, having
people from different backgrounds working at our company who
can draw on their individual perspectives and skills to grow our
business. This diversity is important to us because it enables our
employees to better meet our customers' needs. By valuing and
promoting employee diversity, we boost our teams' performance
and power of innovation, and increase creativity, motivation and
each and every individual's identification with the company.
■ Fostering diversity is part of our company culture
■ Target for proportion of women in leadership positions
increased
Men
[Inclusion of diversity]
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Employees
1 To Our Shareholders
About This Report
127
BASF Report 2019
1 Scope of employees surveyed goes beyond the scope of consolidation presented on page 6. However, there are exceptions for companies that represent joint ventures and joint operations, as well as companies held for sale.
2 The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive status by virtue of special expertise.
5 Overviews
Women
40,614
29.8%
We also promote diversity in leadership development. Since 2015,
BASF has set itself global quantitative goals for increasing the
percentage of women in leadership positions. Our target was to
increase this ratio to 22-24% worldwide by 2021. In the BASF
Group, the global proportion of female leaders with disciplinary
responsibility was 23.0% at the end of 2019 (2018: 21.7%). As such,
we met this target in 2019. To further strengthen diversity, BASF is
setting a new, more ambitious target. By 2030, we aim to increase
the proportion of women in leadership positions with disciplinary
73.4%
Up to and
including 25 years
Leaders and professionals in the BASF Group
55 years and up
40-54 years
26-39 years
26.6%
8,227
70.2%
BASF has been a member of the Chefsache initiative since 2016, a
network of leaders from industry, academia, the public sector and
media. The initiative aims to initiate social change such as increasing
the percentage of women in leadership positions in Germany.
For instance, BASF has a wide range of initiatives to support couples
with equal career potential. As part of overseas delegation, for
example, we provide comprehensive coaching and, since 2019, a
platform with offers for the partners of delegated employees. This
bundles offerings from several companies and makes it easier to
find a suitable position abroad. In addition, BASF supports future
leaders with individual mentoring and training programs tailored to
the needs of different phases of life.
30%
Proportion of women in
leadership positions with
disciplinary responsibility
2030 target
responsibility to 30%. We have thus once again set ourselves an
ambitious goal that we want to achieve through various measures.
75.4%
82.8%
17.2%
22,278
24.6%
46,509
192
28.9
1,433
Production
Reconciling climate protection and growth
Until 2030, we want to continue to grow our production without
adding further CO2 emissions.1 Global activities to reach this climate
protection target and reduce our greenhouse gas emissions over
the the long term are bundled in our carbon management. We have
adopted a three-pronged approach: We aim to increase production
and process efficiency, purchase electricity from renewable sources,
and develop completely new low-emission technologies and pro-
cesses. We want to use these to significantly reduce CO2 emissions
from 2030 onward.
Further improving process and energy efficiency
We aim to make our plants even more efficient and further optimize
resource use in our processes. That is why we have increased our
budget for operational excellence from €250 million to €400 million
annually, among other measures. Part of this goes toward initiatives
to reduce our greenhouse gas emissions. When constructing new
plants or developing new sites, we draw on our expertise and inno-
vative technologies to optimize the use of raw materials and in this
way, reduce CO2 emissions. For example, our new acetylene plant
in Ludwigshafen, Germany (annual capacity: 90,000 metric tons)
uses around 10% less natural gas per metric ton of end product
compared with the old plant (see page 64).
CO2 prevented by the
Verbund and combined
heat and power
generation in 2019
6.4
million metric tons
BASF's Verbund concept also plays a key role in increasing effi-
ciency. It helps us to realize synergies across all segments and to
efficiently steer value chains. Intelligently linking production and
energy demand enables us to use fewer resources and reduce our
emissions. Together, combined power and steam generation and
our continuously enhanced Energy Verbund prevented a total of
6.4 million metric tons of carbon emissions in 2019 (see page 119).
That is why we will continue to invest in the creation and optimization
of Verbund structures and drive forward the consolidation of pro-
duction at highly efficient sites.
Climate protection is firmly embedded in our
corporate purpose, "We create chemistry for a
sustainable future," and is a cornerstone of our
strategy. We are committed to the Paris Climate
Agreement and its goal of limiting global warm-
ing to below 2 degrees Celsius. Our innovative
climate protection products, such as insulation
materials for buildings or battery materials for
electromobility play a role here. We are also
continually working to reduce our own carbon
emissions. We have already almost halved our
carbon emissions since 1990 through improve-
ments to processes and methods - while simul-
taneously doubling sales product volumes.
1 The goal includes other greenhouse gas emissions according to the Greenhouse Gas Protocol, which are converted into CO₂ equivalents.
121
Increasing use of renewable energy
As part of carbon management, we aim to increase the proportion
of renewable energy in the electricity purchased for our production
sites. Twenty-three sites in Europe, North America and Asia already
source emission-free electricity from suppliers.
Number of sites partially or fully powered
by emission-free electricity in 2019
23
Together with our partners, we are also conducting a feasibility study
to evaluate a pioneering supply concept for our planned chemical
complex in Mundra, India. The aim is for the new site (scheduled
production startup: 2024) to be entirely supplied with renewable
energy, primarily from an attached wind and solar park. If realized, it
would, to our knowledge, be the world's first petrochemical site with
carbon-neutral energy supply (see page 65).
Pioneering research and development program
Most of our production processes and methods are already highly
optimized, making further improvements to existing plants an
increasingly difficult task. As a result, completely new technologies
are needed to avoid greenhouse gas emissions over the long term
and on a large scale. This is where our Carbon Management R&D
Program comes in. The focus here is on the production of basic
chemicals, which are used in many products and innovations and
account for around 70% of the chemical industry's greenhouse gas
emissions.
As part of this R&D program, we are developing an innovative,
climate-friendly production process for hydrogen (methane pyroly-
sis) together with partners from academia and industry in a joint
project sponsored by the German Federal Ministry of Education and
Research, to name one example. Hydrogen is used as a reactant in
many chemical processes, such as ammonia synthesis. However,
the processes currently used to produce hydrogen from natural gas,
such as steam reforming, are extremely CO2 emission-intensive. In
BASF Report 2019
methane pyrolysis, by contrast, natural gas is split directly into its
components hydrogen and carbon. The resulting ultra-pure solid
carbon could be used to produce aluminum, for example. Methane
pyrolysis requires less electricity than the alternative method of
producing hydrogen using water electrolysis. If this energy comes
from renewable sources, this could make the hydrogen production
process carbon-free.
- Fundamentally new technologies
developed in the Carbon
Management R&D Program
From 2030
1.39
Climate
protection
with carbon
management
Development of the BASF Group's CO2 emissions
Million metric tons of CO2 equivalents
40.1
21.9
2030 target:
CO2-neutral growth
Without active carbon management:
Reduce emissions through:
Estimated emissions from planned production growth
1990 to 2018
Sales product volumes doubled and
emissions almost halved through:
- Decomposition of nitrous oxide
-Increased process and energy efficiency
2018
2018 to 2030
2030
Expand production while keeping
emissions at the 2018 level,
primarily through:
- Higher process and energy efficiency
- Purchasing electricity from renewable sources
2050
1990
3,530 3,778
Methanol could also be produced without CO2 emissions in the
future. Methanol is a starting material for the production of products
such as formaldehyde or acetic acid and also serves as a source of
energy. In 2019, an international patent (PCT) was filed for a climate-
friendly production process for methanol that BASF developed as
part of the Carbon Management R&D Program. In this new process,
the waste gas streams from methanol synthesis are incinerated and
the resulting CO2 isolated and fed back into the process as feed-
stock. The syngas needed is also produced CO2-free, for example
through partial oxidation, and thus all of the carbon from the raw
material ends up in the methanol. Unlike in conventional methods,
this process does not produce any greenhouse gas emissions.
~70%
Regular monitoring of our emissions to air is a part of our environ-
mental management. Aside from greenhouse gases, we also mea-
sure emissions of other pollutants into the atmosphere. Our climate
protection activities are based on a comprehensive analysis of our
emissions.
28 metric tons in 2019 (2018: 19 metric tons). Emissions of heavy
metals² in 2019 amounted to 2 metric tons (2018: 2 metric tons).
Our product portfolio contains a variety of catalysts used in the auto-
motive sector and in industry to reduce the emission of air pollutants.
Emissions to air
Metric tons
Air pollutants from BASF operations
Waste generation in the BASF Group
Million metric tons
Total waste generation
Waste recovered
■ Professional disposal of hazardous waste
Recycled
2019
2018¹
2.34
2.19
0.99
0.80
0.45
0.28
0.54
Thermally recovered
Waste disposed of
Share of emissions produced by
the European chemical industry
attributable to the 10 most
energy-intensive basic chemicals
■Regular monitoring of emissions to air
We want to further reduce emissions to air from production,
prevent waste and protect the soil. We have set ourselves
standards for doing so in global directives. If no recovery
options are available for waste, we dispose of it in a proper
and environmentally responsible manner.
1.35
Creating the framework for
the transformation
24V DC
Swagelok
WASSERSTOFF
H2
H2
The transition toward a climate-friendly society
remains a fundamental challenge of the 21st cen-
tury. There are many ways in which the chemical
industry can be part of the solution. The political
and regulatory environment is also crucial to the
development and successful application of com-
pletely new production processes on an industrial
scale. Demand for electricity from renewable
sources will increase sharply with innovative, more
climate-friendly technologies. At the Ludwigshafen
site in Germany alone, we would need to roughly
triple or quadruple our current electricity use
(2019: 6.2 TWh) to fully implement new, low-carbon
electricity-based production processes like the
ones being developed in our Carbon Management
R&D Program. As well as its availability, the price of
green power is also a critical success factor.
Sectors like the chemical industry, which compete
in an international market, cannot pass on the addi-
tional costs caused by low-carbon technologies to
their customers until a comparable carbon pricing
mechanism exists globally - or at least at G20 level.
Until then, governments must implement measures
to ensure the competitiveness of climate-friendly
processes.
BASF Report 2019
Strategy
About This Report
2 Management's Report
Air and soil
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
[Air and soil]
SUPPLIERS
BASF
CUSTOMERS
1 To Our Shareholders
In underground landfills
0.19
0.17
1 To Our Shareholders
About This Report
124
BASF Report 2019
1 From 2019 onward, we have expanded our definition of water stress areas to regions in which more than 40% of available water is used by industry, household and agriculture. The definition is based on Aqueduct 3.0. In addition, our water target continues to take into account the sites that we identified as water stress sites in accordance with
Pfister et al. (2009) prior to 2019, as well as the Verbund sites. This significantly increases the number of sites included in the water target and reduces the previous implementation level of BASF's water target accordingly.
2 As part of the implementation of BASF's strategy, we have made changes to how environmental indicators are reported. For ease of comparison, the 2018 figures have been adjusted according to the new requirements (see page 6).
Introduction of sustainable water management at
all production sites in water stress areas and at all
Verbund sites
2030 target
Our goal is to introduce sustainable water management at all pro-
duction sites in water stress areas¹ and at our major Verbund sites
by 2030, covering 93% of BASF's total water abstraction.² We
achieved 35.8% of this target in 2019 (2018: 50.0%).1 In 2019,
BASF introduced sustainable water management at eight sites.
Global goal and measures
2 Management's Report
Areas in which ≥60% of
available water is used
(Pfister et al., 2009)
Areas in which ≥40% of
available water is used
(WRI Aqueduct, 2019)
• Verbund sites
In order to ensure transparency in our reporting on water, we once
again took part in CDP reporting in 2019. BASF achieved the top
grade of A and thus Leadership status for sustainable water
management. CDP's evaluation of sustainable water management
includes how transparently companies report on their water
management activities and what they do to reduce risks, such as
water scarcity. CDP also assesses the extent to which product
developments - even at the customers of the companies under
evaluation can contribute to sustainable water management.
For more information on the CDP water survey, see basf.com/en/cdp
We are introducing sustainable water management at all relevant
production sites. These include our major Verbund sites as well as
the sites in water stress areas. We have expanded our definition of
water stress areas to all areas in which more than 40% of available
water is used by industry, household and agriculture (previous
definition: more than 60% of available water). Sustainable water
management considers the quantitative, qualitative and social
aspects of water use. We want to identify where we can improve at
our sites, and use as little water as possible, especially in water
stress areas. We offer our customers solutions that help purify water
and use it more efficiently while minimizing pollution.
We aim to use water as sparingly as possible and further reduce
emissions to water. To do so, we have set out a Group directive with
globally applicable standards.
■ Sustainable water management
Strategy
Water is of fundamental importance in chemical production.
It is used as a coolant, solvent and cleaning agent, as well as
to make our products. We are committed to its responsible
use along the entire value chain and especially in our produc-
tion sites' water catchment areas. We have set ourselves a
global goal for sustainable water management.
CUSTOMERS
BASF
SUPPLIERS
Water stress areas around the world
[Water]
3 Corporate Governance
Consolidated Financial Statements
14%
1,509
6,788
1,717"
Discharge
Use
Cooling
-86%
Abstraction /
withdrawal
4
Water in the BASF Group 2019
Million cubic meters per year
In 2019, around 28% of our production sites were located in water
stress areas.2 These accounted for 1% of BASF's total water
abstraction. Water consumption in water stress areas (as defined by
Aqueduct 3.0) accounted for around 14% of our total water con-
sumption and was primarily attributable to evaporation in cooling
processes.
The water consumption of the BASF Group describes the amount of
water that is no longer available to other users. Consumption is
mainly attributable to the evaporation of water during closed-circuit
cooling. Water consumption in 2019 amounted to around 61 million
cubic meters (2018: 70).
We predominantly use water for cooling purposes (86%), after which
we recirculate it back to our supply sources. We reduce our water
use by recirculating as much water as possible. To do this, we use
recooling plants that allow water to be reused several times.
Our water usage totaled 1,717 million cubic meters in 2019 (2018:
1,743). This demand was covered for the most part by surface
water, such as rivers and lakes. At some sites, we use alternative
sources such as treated municipal wastewater, brackish water or
seawater.
■ Using water responsibly
Water balance
We pursue our goal by applying the European Water Stewardship
standard, which rests on four principles: sustainable water abstrac-
tion, maintaining good water quality, preserving conservation areas,
and ensuring continuous improvement processes. We are also a
member of the global organization Alliance for Water Stewardship.
Water
5 Overviews
The supply, treatment, transportation and recooling of water is
associated with a considerable energy demand. We are constantly
Water
5 Overviews
Consolidated Financial Statements
Transported hazardous waste
0.94
0.92
Hazardous waste
2,264
0.45
0.43
Nonhazardous waste
2,410 2,377
2,178
25,130 26,866
0.28
Classification of waste for disposal
0.76
0.78
Through incineration
4,496 5,391
NMVOC (nonmethane volatile organic compounds)
SOx (total sulfur oxides)
0.46
0.38
In surface landfills
10,534 11,130
1,982 1,926
0.28
CO (carbon monoxide)
NOx (total nitrogen oxides)
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
123
BASF Report 2019
For more information on provisions for environmental protection, see the Notes to the Consolidated
Financial Statements on pages 230 and 260
We set out global standards for managing contaminated sites. A
worldwide network of experts ensures their proper implementation.
We develop remediation solutions that balance nature conservation,
climate protection concerns, costs and social responsibility. This
means making customized decisions on a case-by-case basis,
founded on the legal framework and current technological possi-
bilities. Relevant sites are documented in a contaminated site
database. Ongoing remediation work around the world continued
on schedule and planning was concluded on future remediation
projects.
1 As part of the implementation of BASF's strategy, we have made changes to how environmental indicators are reported. For ease of comparison, the 2018 figures have been adjusted according to the new requirements (see page 6).
2 Heavy metals are included in the figure for dust (see the table "Emissions to air").
We aim to avoid waste as far as possible. If waste is unavoidable,
we review the options for recycling or energy recovery in terms of a
circular economy. BASF's Verbund structures are used for efficient
waste management. As of 2019, the BASF Group's waste footprint
also includes all materials from construction activities, which are
usually recycled. Until 2018, only hazardous waste from construc-
tion activities was reported. Accordingly, the total waste reported in
2019 is higher than in 2018.
■ Systematic management of contaminated sites
■ Total waste volume slightly higher
Management of waste and contaminated sites
Absolute emissions of air pollutants from our chemical plants
amounted to 25,130 metric tons in 2019.1 Emissions of ozone-
depleting substances as defined by the Montreal Protocol totaled
■ Emissions to air slightly lower
Emissions to air
Our Raw Material Verbund helps us prevent or reduce waste. We
regularly carry out audits to inspect external waste disposal com-
panies to ensure that waste is properly disposed of. In this way, we
also contribute to preventive soil protection and keep today's waste
from becoming tomorrow's contamination. If soil and groundwater
contamination occurs at active or former BASF sites, proper reme-
diation measures are reviewed based on prevailing legal and current
technical standards, and undertaken as necessary.
a The classification of waste into hazardous and nonhazardous waste is performed according to local
regulations.
NH3 (ammonia) and other inorganic substances
Total
Dust
Surface water / freshwaterb
Brackish water / seawater
Groundwater
Drinking water
0.52
As of December 31, 2019, the BASF Group was training 3,161
people in 15 countries and around 50 occupations. We spent a total
of around €113 million on vocational training in 2019.
For more information, see basf.com/apprenticeship
BASF Report 2019
8,825
8,470
4.2%
Social security contributions and
assistance expenses
Pension expenses
1,545
1,459
5.9%
554
+/-
730
Total personnel expenses
10,924
10,659
2.5%
1 In calculating ROCE, adjustments are made for negative and positive special items resulting from acquisitions and divestitures (e.g., integration costs in connection with acquisitions and gains or losses from the divestiture of businesses) when these exceed a corridor of plus or minus 1% of the average cost of capital basis. An adjustment of the
ROCE (in the first 12 months after closing) therefore only occurs in cases of exceptionally high special items resulting from acquisitions and divestitures.
BASF Report 2019
130
Digital learning formats are playing an ever-increasing role in our
development offerings. In 2019, we expanded our global digital
learning platform with the addition of an independent learning
module. This gives employees a wide range of personalized learning
recommendations and special learning paths on diverse topics. In
addition, all employees have access to a continuously growing
online library with professional resources on leadership, personal
development and business. These digital offerings enable employees
to take responsibility for their own professional development and
(24.1%)
2018
2019 2018¹
Wages and salaries
2019
129
About This Report
1 To Our Shareholders
2 Management's Report
Employees
3 Corporate Governance
Consolidated Financial Statements
5 Overviews
promote knowledge transfer across BASF as a whole. We launched
the #liveitleadit initiative in 2019 to harness the opportunities of
digital transformation for BASF. Ten modules on different aspects of
leadership in the digital age give leaders inspiration for their work,
including on agility or leading in a data-driven world.
4
[Compensation and benefits ]
BASF Group personnel expenses
Million €
In addition, more and more academies in the divisions and service
units, which teach specific professional content, offer virtual training.
We have offered virtual presence training since 2018, which gives all
employees the opportunity to attend professional development
courses via digital communication channels such as virtual meetings.
Personnel expenses
For more information, see the Notes to the Consolidated Financial Statements from page 284 onward
The BASF Group's expenses for wages and salaries, social security
contributions and pensions and assistance in 2019 totaled
€10,924 million (2018: €10,659 million). In 2019, this amount
included personnel expenses from the disposal group for the
construction chemicals business and proportionally for the oil and
gas business in the amount of €557 million. By contrast, the amount
in 2018 included personnel expenses from the disposal group for
the oil and gas business in the amount of €276 million. The increase
in personnel expenses was due primarily to higher expenses for the
long-term incentive program, a higher level of wages and salaries
and the higher average number of employees resulting from the
acquisition of significant parts of Bayer's business. Offsetting factors
were the merger of the oil and gas businesses of BASF and DEA in
the joint venture Wintershall Dea, as well as the decrease in expenses
for pension benefits due to plan curtailments.
We want to attract engaged and qualified employees, retain them
and motivate them to achieve top performance with an attractive
package including market-oriented compensation, individual develop-
ment opportunities and a good working environment so that they
contribute to the company's long-term success. Our employees'
compensation is based on global compensation principles according
to position, market and performance. As a rule, compensation com-
prises fixed and variable components as well as benefits that often
exceed legal requirements. In many countries, these benefits include
company pension benefits, supplementary health insurance and
share programs. We regularly review our compensation systems at
local and regional levels. We want our employees to contribute to
the company's long-term success. This is why the compensation
■ Compensation based on employee's position and
individual performance as well as company's success
■ ROCE determines variable compensation
granted to the vast majority of our employees includes variable
compensation components, with which they participate in the
success of the BASF Group as a whole and are recognized for their
individual performance. The same principles basically apply for all
employees worldwide. The amount of the variable component is
determined by economic success as well as the employee's
individual performance. We use the BASF Group's return on capital
employed (ROCE) to measure economic success for the purposes
of variable compensation. This links variable compensation to our
ROCE target.1 Individual performance is assessed as part of a
globally consistent performance management process. In numerous
Group companies, our “plus” share program ensures employees'
long-term participation in the company's success through incentive
shares. In 2019, for example, around 25,400 employees worldwide
(2018: 25,600) participated in the "plus" share program. BASF offers
senior executives the opportunity to participate in a share price-
based compensation program, the long-term incentive (LTI) pro-
gram. In 2019, 90% of the approximately 1,100 people eligible to
participate in the LTI program worldwide did so, investing up to 30%
of their variable compensation in BASF shares. From 2020 onward,
the previous LTI program for senior executives will be replaced by a
new program. The new program will incentivize the development of
the total shareholder return, as well as the achievement of strategic
growth, profitability and sustainability targets.
Antwerp, Belgium
Asia Pacific 41%
Project
Location
Capacity expansion: MDI plant
Capacity expansion: integrated ethylene oxide complex
Gradual capacity expansion: alkoxylates
€23.6 billion
5% Alternative sites currently
being investigated
Projects currently being planned or underway include:
Capex by region 2020-2024
Surface Technologies 12%
Agricultural Solutions 5%
Nutrition & Care 9%
Other 22%
(infrastructure, R&D)
Capex by segment 2020-2024
Capex: selected projects
Geismar, Louisiana
Harjavalta, Finland and
Schwarzheide, Germany
Ludwigshafen, Germany
Mundra, India.
We are planning capital expenditures (additions to property, plant
and equipment excluding acquisitions, IT investments, restoration
obligations and right-of-use assets arising from leases) of around
€3.4 billion for the BASF Group in 2020. For the period from 2020 to
2024, we have planned capital expenditures totaling €23.6 billion.
The investment volume in the coming years will thus exceed that
of the planning period 2019 to 2023. Of the planned capital
expenditures, €8.2 billion relate to our major investment projects in
Zhanjiang, China, and Mundra, India, to expand our businesses in
Asia and in battery materials.
South America, Africa, Middle East 1%
Investment: battery materials
Information on the proposed dividend can be found on page 13
a In cooperation with Adani Group
1 To Our Shareholders
About This Report
138
BASF Report 2019
On February 14/15, 2020, a jury in a U.S. Federal District Court
awarded $15 million in compensatory damages against defendants
Monsanto Company and BASF Corporation after a trial related to
alleged yield losses of a peach farmer in connection with the use of
the dicamba herbicide. The jury also found that Monsanto was liable
for $250 million in punitive damages. Finally, the jury found that the
defendants were acting in a joint venture and conspiracy. Following
the jury's decision, the court is considering whether BASF Corpora-
tion is also liable for the punitive damages award against Monsanto
because of the joint venture finding. BASF intends to use all legal
remedies available and will appeal the decision as to compensatory
damages and, if applicable, punitive damages.
We closed the acquisition of Solvay's global polyamide business on
January 31, 2020. The E.U. Commission had approved the acquisi-
tion of the polyamide business, subject to certain conditions, on
January 18, 2019. These conditions require the sale of parts of the
original transaction scope to a third party, specifically Solvay's pro-
duction plants in the engineering plastics field in Europe. Domo
Chemicals, Leuna, Germany, was approved by the E.U. Commission
as the buyer. The acquired polyamide business will be integrated into
the Performance Materials and Monomers divisions.
Events after the reporting period
Information on our financing policies can be found on page 55
In 2020, we expect cash outflows in the equivalent amount of
around €1.3 billion from the scheduled repayment of bonds. To refi-
nance maturing bonds and to optimize our maturity profile, we
continue to have medium to long-term corporate bonds and our
U.S. dollar commercial paper program at our disposal.
Financing
■ Capex of around €3.4 billion planned for 2020
We stand by our ambitious dividend policy and offer our share-
holders an attractive dividend yield. We aim to increase our dividend
each year.
19% North America
34% Europe
Dividend
Planned construction: integrated Verbund site
Construction: production plant for vitamin A
Investment: acrylics value chaina
Zhanjiang, China
Capital expenditures
1
34% Chemicals
at prior-year level
considerable increase
slight increase
7.7%
€4.2 billion-€4.8 billion
4,536
€60 billion-€63 billion
59,316
BASF Group
5.3%
considerable decline
6.8%
10.7%
12.5%
5.7%
10.0%
slight increase
slight increase
slight increase
considerable increase
(688)
at prior-year level
2,898
Other
1,095
considerable increase
6.7-7.7%
a For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight" means a change of 1-10%, while "considerable"
is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%). At a cost of capital percentage of 9% for 2020, we define a change in ROCE of 0.1 to 1.0 percentage points as "slight," a change of more
than 1.0 percentage points as "considerable" and no change (+/-0 percentage points) as "at prior-year level."
b The 2019 segment data for Surface Technologies excludes the construction chemicals activities presented as discontinued operations.
Sales and earnings forecast for the segments
We expect slight sales growth in the Chemicals segment in 2020,
mainly driven by higher volumes. We anticipate improved availability
of steam cracker products, as volumes development in 2019 was
negatively impacted by the scheduled turnarounds of our steam
crackers in Port Arthur, Texas; Antwerp, Belgium; and Ludwigshafen,
Germany. In addition, our planning assumes higher sales volumes of
oxo alcohols in the Petrochemicals division, and in almost all busi-
ness areas in the Intermediates division. Prices in both divisions will
however decline due to high product availability on the market.
Consequently, EBIT before special items will presumably be consid-
erably below the 2019 level as a result of lower margins.
€23.6 billion
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Outlook 2020
To Our Shareholders
2 Management's Report
Opportunities and Risks
13% Materials
5% Industrial Solutions
About This Report
BASF Report 2019
Sales in Other are expected to match the 2019 level in 2020. For
EBIT before special items, we are forecasting a figure considerably
above the previous year due to solid contributions from our equity-
accounted shareholdings. Lower corporate research costs should
also contribute here.
Despite the continuing challenging market environment, we antici-
pate considerable sales growth in the Agricultural Solutions seg-
ment. We aim to considerably increase our sales volumes, which
should more than offset negative currency effects. Overall, we
expect a slight increase in EBIT before special items. We will main-
tain our program to boost efficiency. We will also continue to invest
at a high level in research and development and digitalization in
2020.
For the Nutrition & Care segment, we expect considerably higher
sales than in 2019, largely from volumes growth in both divisions.
Our planning assumes a continued improvement in product avail-
ability, especially in the Nutrition & Health division. Lower prices in
both divisions will presumably have an offsetting effect. We expect
to see a slight year-on-year improvement in EBIT before special
items, mainly as a result of growth in sales volumes and despite
positive one-off effects in 2019.
In the Surface Technologies segment, we are forecasting slight
sales growth despite the expected decline in production in the auto-
motive industry. We anticipate higher prices, especially in precious
metal trading and for mobile emissions catalysts in the Catalysts
division. Overall, we aim to slightly increase EBIT before special
items, primarily with improved margins in precious metal trading. By
contrast, we anticipate a slight year-on-year decline in sales and
EBIT before special items in the Coatings division.
Sales in the Industrial Solutions segment will likely increase slightly
in 2020, mainly from higher volumes in both divisions. The sale of
the ultrafiltration membrane business to DuPont Safety & Construc-
tion (DuPont) on December 31, 2019, as well as the transfer of
BASF's paper and water chemicals business to the Solenis group
on January 31, 2019, will have an offsetting effect. Despite the
continued challenging market environment, we expect a consider-
able increase in EBIT before special items for the segment, primarily
as a result of higher volumes.
decline in EBIT before special items due to a considerably lower
contribution from the Monomers division on the back of lower
margins and higher fixed costs. The expected increase in fixed costs
will be from higher depreciation and amortization following the
acquisition of Solvay's integrated polyamide business, new plants
and one-off effects. The higher EBIT before special items forecast
for the Performance Materials division due to higher volumes and
margins will not be able to compensate for this.
In the Materials segment, we expect considerable year-on-year
sales growth in 2020, mainly driven by the positive contribution from
the acquisition of Solvay's integrated polyamide business. We also
anticipate higher volumes overall. Lower prices and currency effects
should dampen sales development. We expect a considerable
137
3 Corporate Governance
Events that can negatively impact the
achievement of our goals
Consolidated Financial Statements
Supervisory Board
Divisions
Chief Compliance Officer
Corporate Audit
Organization of BASF Group's risk management (until December 31, 2019)
The management of specific opportunities and risks is largely
delegated to the operating divisions, the functional units and the
regions, and is steered at a regional or local level. Risks relating to
exchange rates and raw materials prices are an exception. In this
case, there is an initial consolidation at a Group level before
derivative hedging instruments, for example, are used.
BASF's Chief Compliance Officer (CCO) manages the implemen-
tation of our Compliance Management System, supported by
- A network of risk managers in the business, functional and
corporate units as well as in the regions and at the Verbund sites
advances the implementation of appropriate risk management
practices in daily operations.
- The Board of Executive Directors is supported by the units
Finance, Corporate Development and Legal, Taxes, Insurance &
Intellectual Property, and the Chief Compliance Officer. These
units coordinate the risk management process at a Group level,
examine financial and sustainability-related opportunities and
risks, and provide the structure and appropriate methodology.
Opportunity and risk management is thus integrated into the
strategy, planning and budgeting processes.
Risk management is the responsibility of the Board of Executive
Directors, which also determines the processes for approving
investments, acquisitions and divestitures.
-
Organization and responsibilities
The BASF Group's risk management process is based on the
international risk management standard COSO II Enterprise Risk
Management - Integrated Framework (2004), and has the following
key features:
■ Aggregation at a Group level
risks
■ Decentralized management of specific opportunities and
■ Integrated process for identification, assessment and
reporting
Risk management process
↑
Board of Executive Directors
↑
Functional and corporate units
The sustainability-related topics relevant for BASF are addressed
by the responsible operating divisions, functional units and the
regions, which assess the risks identified as being relevant
according to impact and probability of occurrence. We also
systematically assess opportunities and risks with effects that
cannot yet be measured in monetary terms, such as reputational
- We use standardized evaluation and reporting methods for the
identification and assessment of risks. The aggregation of oppor-
tunities, risks and sensitivities at division and Group level using a
Monte Carlo simulation helps us to identify effects and trends
across the Group.
- A catalog of opportunity and risk categories helps to identify all
relevant financial and sustainability-related opportunities and risks
as comprehensively as possible.
The Risk Management Policy, applicable throughout the Group,
forms the framework for risk management and is implemented by
the operating divisions, the functional units and the regions
according to their specific conditions.
-
-
-
Instruments
5 Overviews
Functional units
External auditors
Legal, Taxes, Insurance &
Intellectual Property
· The processes will be transferred to the new organization, which
became effective as of January 1, 2020. This will not affect the
structure or effectiveness of the risk management process.
- The internal auditing unit (Corporate Audit) is responsible for
regularly auditing the risk management system established by the
Board of Executive Directors in accordance with section 91(2) of
the German Stock Corporation Act. Furthermore, as part of its
monitoring of the Board of Executive Directors, the Supervisory
Board considers the effectiveness of the risk management
system. The suitability of the early detection system we set up for
risks is evaluated by our external auditor.
additional compliance officers worldwide. He regularly reports to
the Board of Executive Directors on the status of implementation
as well as on any significant results. He also provides a status
report to the Supervisory Board's Audit Committee at least once a
year, including any major developments. In the event of significant
incidents, the Audit Committee is immediately informed by the
Board of Executive Directors.
Regions
Corporate
Development
Finance
Verbund sites
Consolidated Financial Statements
4
3 Corporate Governance
Market growth
Business environment and sector
Possible variations related to:
Potential short-term effects on EBIT of key opportunity and risk factors
subsequent to measures taken³
Ultimately, however, residual risks (net risks) remain in all entrepre-
neurial activities that cannot be ruled out, even by comprehensive
risk management.
According to our assessment, there are no significant individual risks
that pose a threat to the continued existence of the BASF Group.
The same applies to the sum of individual risks, even in the case of
a global economic crisis.
For 2020, we anticipate much slower global economic growth com-
pared with the previous year. We expect global economic uncer-
tainty to be extremely high and that growth will be significantly
depressed by the drop in demand and production outages in con-
nection with the coronavirus outbreak. Important opportunities and
risks for our earnings are associated with uncertainty regarding
market growth and the development of key customer industries, as
well as margin volatility. An escalation of the trade conflicts between
the United States and its trade partners and an even greater slow-
down of the Chinese economy also pose significant risks. Such a
development would have an even greater negative impact on
demand for intermediate and investment goods. This would impact
the emerging markets that export raw materials as well as the
advanced economies. This is especially true for Europe. Further
risks to the global economy arise from an escalation of geopolitical
conflicts.
■ No threat to continued existence of BASF
Margins
■ Significant opportunities and risks arise from overall
economic developments, margin and exchange rate
volatility
In order to effectively measure and manage identified opportunities
and risks, we quantify these where appropriate in terms of probability
and economic impact in the event they occur. Where possible, we
use statistical methods to aggregate opportunities and risks into risk
factors. This way, we achieve an overall view of opportunities and
risks at a portfolio level, allowing us to take effective measures for
risk management.
7,814
Risks
Potential successes that exceed our
defined goals
Opportunities
The goal of BASF's risk management is to identify and
evaluate opportunities and risks as early as possible and to
take appropriate measures in order to seize opportunities
and limit business losses. The aim is to avoid risks that pose
a threat to BASF's continued existence and to make improved
managerial decisions to create value. We define opportunities
as potential successes that exceed our defined goals. We
understand risk to be any event that can negatively impact
the achievement of our short-term operational or long-term
strategic goals.
Opportunities and Risks
5 Overviews
Overall assessment
4
Competition
Company-specific opportunities and risks
Purchasing/supply chain
Investments/production
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
139
BASF Report 2019
a Using a 95% confidence interval per risk factor based on planned values; summation is not permissible
- 2020 +
Outlook
Regulation/policy
≥ €1,000 million < €1,500 million
≥ €1,500 million ≤ €2,000 million
€100 million
≥
Other financial opportunities and risks
Exchange rate volatility
Financial
Law
Acquisitions/divestitures/cooperations
Information technology
Personnel
€100 million < €500 million
€500 million < €1,000 million
Agricultural Solutions
1,003
820
considerable increase
We anticipate slightly slower growth in the health and nutrition
sector. Growth in the food industry should weaken slightly in line
with the more subdued global economic environment. By contrast,
we expect stronger growth in the pharmaceutical industry compared
with the previous year as a result of the coronavirus outbreak.
dued overall due to the central role played by China in global value
chains.
Growth in the electronics industry will presumably be below the
prior-year figure. The rapid technological progress in this sector, the
resulting short product cycles and the advance of digitalization
should lead to additional consumer spending and investment. How-
ever, growth perspectives for the electronics industry remain sub-
According to our forecasts, growth in consumer goods production
will be more or less on a level with the previous year. We expect
slightly higher growth in care products, roughly in line with global
GDP growth.
We expect growth in the construction industry to be at the prior-
year level. Overall, construction activity should continue to outstrip
growth in the manufacturing industry, supported by low interest
rates, increasing urbanization and the demand for investment
in energy and transportation infrastructure. We anticipate slightly
slower construction growth in Europe. In the United States, we
expect the downturn in the housing market to bottom out, with
construction activity slightly below the previous year. For Asia, we
expect construction growth to be lower than in the previous year but
still considerably above the global average.
In the energy and raw materials sector, we expect a low growth
rate given the weak overall momentum in the economy and industry.
Production growth should be similar to the previous year in both the
advanced economies and the emerging markets.
Consequently, we are forecasting a decline in production in the
largest automotive market, China, as well as in Japan and India.
Automotive production will likely continue to decline markedly in the
E.U. as well: We anticipate a decrease in western Europe and a
slight decline in the eastern E.U. countries and Russia. We are also
forecasting a slight decrease in automotive production in North
America and a recovery in South America after the recession in the
previous year.
We anticipate a downturn in the transportation industry' as a
whole. We expect global automotive production to again decline,
driven in particular by the coronavirus and the resulting production
stoppages, as well as lower demand in China.
Overall, we expect global industrial growth to be weaker in 2020, at
1.2% (2019: +1.5%). In the advanced economies, we expect the
slight decline in production to continue overall. In the emerging
markets, we are forecasting significantly lower growth compared
with the previous year.
■ Slower growth expected in global industrial production
Outlook for key customer industries
2.4%
South America
0.5%
Japan
5.2%
Emerging markets of Asia
Under normal weather conditions, we expect slightly slower global
growth in agricultural production in 2020. For Europe, we antici-
pate a sideways movement, as in the previous year. In the United
States, agricultural production should increase slightly again follow-
ing the weather-related production losses and the decline in soy-
bean exports to China in the previous year. We also expect the trade
agreement with China to provide tailwinds. This should however
dampen agricultural production in South America. In any case, we
expect lower growth here after the drought recovery effects in the
previous year. The highest growth will presumably again be achieved
in the emerging markets of Asia.
1 The transportation industry includes the production of motor vehicles, motor vehicle parts and the construction of other vehicles (especially ships and boats, trains, air and spacecraft, and two-wheelers).
BASF Report 2019
134
World
Outlook for chemical production 2020 (excluding pharmaceuticals)
Real change compared with previous year
After declining in the previous year, we expect a stabilization in
demand for chemicals in South America, driven mainly by a slight
upturn in the Brazilian market.
In Japan, we are forecasting a further decline in the chemical market
amid a weak domestic economy and the slowing regional environ-
ment.
We expect a continued slight decline in chemical production in
the United States. Growth in customer industries will presumably
remain weak overall despite the slight recovery we anticipate in agri-
culture and the expected stabilization in the construction industry,
which should support demand for chemicals.
For the E.U., we again anticipate a decline in chemical production.
Due to the sharp drop in chemical production in the second half of
2019, production levels at the year-end were below the annual aver-
age. It is not likely that the recovery we are forecasting over the
course of the year will be strong enough to achieve full-year volumes
growth.
In China, the world's largest chemical market, we are forecasting a
significantly lower growth rate (2020: +3.0%, 2019: +4.7%). Weaker
final demand and production stoppages in customer industries will
likely have a significant negative impact on chemical growth in
China. We do not expect that the drop in demand caused by the
coronavirus outbreak will be able to be fully recouped over the
course of the year. We assume here that the trade conflict with the
United States does not intensify again.
Global chemical production (excluding pharmaceuticals) is expected
to grow by 1.2% in 2020, much slower than in 2019. We anticipate
a slight decline in the advanced economies (2020: -0.8%, 2019:
-0.9%) and growth below the prior-year level in the emerging mar-
kets (2020: +2.4%, 2019: +3.5%).
1.8%
■ Global growth in chemical industry remains below average
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Economic Environment in 2020
To Our Shareholders
1
About This Report
Outlook for the chemical industry
1.2%
United States
European Union
About This Report
133
BASF Report 2019
1 In the rest of this chapter, "E.U." refers to the E.U. 27 and the United Kingdom.
In South America, leading economic indicators point to ongoing
recovery in Brazil. By contrast, the recession in Argentina is likely to
continue. Overall, the forecast remains uncertain due to the social
conflicts that have intensified significantly in several countries in the
region. In addition, lower Chinese demand should have a negative
impact on raw materials exporters in the region. We therefore only
expect a weak recovery in macroeconomic activity.
October 2019. Exports and investment are not expected to provide
any strong stimulus in a weak overall economic environment. How-
ever, the government has approved a package of fiscal measures to
cushion the negative effects of the tax increase and avoid a slide into
recession.
We are forecasting flat GDP for Japan. Private consumption is likely
to remain subdued after the consumption tax rate was raised in
The emerging markets of Asia will presumably see much slower
growth. We expect growth in demand and production in China to
be much weaker than in the previous year due to the coronavirus
outbreak. The resulting decline in China's import demand will also
have a negative impact on the economies of its neighboring coun-
tries in Asia. Moreover, production restrictions in China may lead to
interruptions in neighboring countries, since value chains are par-
ticularly closely interconnected in Asia. Against this background, we
anticipate a marked growth deceleration in China to 4.5%. For India,
we expect an unchanged, comparatively weak growth rate of below
5% in this environment. The corporate tax cuts taken in response
should only start to take effect after a delay amid a challenging inter-
national environment.
We expect a gradual easing of growth in the United States. Private
consumption will presumably continue to be supported by solid
employment figures and rising incomes but employment growth will
trend downward. Industry investment dynamics should continue to
decline as the initial impetus from the tax reform levels off and
capacity utilization is often below average. The trade conflict with
China is also expected to further weigh on growth since it is not
currently expected that the additional tariffs introduced over the
course of 2019 will be widely rolled back. This makes U.S. imports
of intermediate inputs from China more expensive and reduces the
ability of U.S. exporters to compete on price in China. Exporters will
also have to contend with the effects of a continued strong
U.S. dollar.
remains high, which will dampen investment activity. As a result, we
expect a considerable slowdown in economic growth. Economic
momentum in the eastern E.U. countries is also likely to slow, but
should remain high compared with western Europe thanks to rising
real incomes.
We expect growth momentum in the E.U. to continue to slow over-
all. We anticipate lower growth rates in Germany, France and Spain.
For Italy, we are forecasting a slight decline in gross domestic prod-
uct (GDP). Besides cyclical economic weakness, lower demand for
European investment goods and vehicles in China will contribute to
this development. In the United Kingdom, the uncertainty surround-
ing the nature and consequences of its departure from the E.U.
■ Lower growth forecast for the E.U. and the United States
■ Growth deceleration in China expected to continue
■ Weak recovery in South America
Trends in the global economy in 2020
We expect economic uncertainty to be very high in 2020 and
that global growth will be significantly depressed by the drop
in demand and production outages in connection with the
coronavirus outbreak. The global economy is forecast to
grow by 2.0%, considerably slower than in 2019 (+2.6%). In
the European Union (E.U.),¹ economic growth in most mem-
ber states should continue to soften. We also expect momen-
tum to slow in the United States as the tax incentives expire
and employment growth levels off. Growth in the emerging
markets of Asia will presumably be much weaker due to a
considerable slowdown in China in the first half of the year.
We expect the South American economy to remain fragile
and anticipate at best a weak recovery. Global chemical pro-
duction is expected to grow by 1.2% in 2020, well below the
2019 level (+1.8%). For 2020, we expect an average oil price
of $60 per barrel for Brent crude and an exchange rate of
$1.15 per euro.
Economic Environment in 2020
Forecast
5 Overviews
1 To Our Shareholders
2 Management's Report
Economic Environment in 2020
3 Corporate Governance
4
2.6%
World
Trends in gross domestic product 2020-2022
Average annual real change
0.0%
0.9%
South America
Japan
4.2%
Emerging markets of Asia
1.2%
1.7%
0.9%
European Union
2.0%
World
Real change compared with previous year
Outlook for gross domestic product 2020
5 Overviews
Consolidated Financial Statements
United States
European Union
(1.0%)
United States
ROCE
EBIT before special items
Sales
considerable decline
slight increase
Forecast 2020
Million €
Forecast by segmenta
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Outlook 2020
1 To Our Shareholders
About This Report
136
BASF Report 2019
2019
Forecast 2020
2019
Forecast 2020
6,075
Nutrition & Care
722
slight increase
13,142
Surface Technologiesb
considerable decline
considerable increase
slight increase
1 For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight" means a change of 1-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%). At a cost of capital
percentage of 9% for 2020, we define a change in ROCE of 0.1 to 1.0 percentage points as "slight," a change of more than 1.0 percentage points as "considerable" and no change (+/-0 percentage points) as "at prior-year level."
8,389
considerable increase
11,466
Materials
considerable decline
791
slight increase
9,532
2019
Industrial Solutions
The significant risks and opportunities that could affect our forecast
are described under Opportunities and Risks on pages 139 to 147.
The average cost of capital basis will increase in 2020 due to the
inclusion of the assets acquired from Solvay. As a result, we expect
the BASF Group's ROCE to reach between 6.7% and 7.7% (2019:
7.7%). In both the Materials (2019: 10.7%) and Industrial Solutions
(2019: 12.5%) segments, we forecast a considerable decline in
ROCE compared with the previous year. We expect ROCE to be at
the prior-year level in the Surface Technologies segment (2019:
5.7%). By contrast, we anticipate a slight year-on-year increase for
the Agricultural Solutions (2019: 5.3%) and Chemicals (2019: 6.8%)
segments. In the Nutrition & Care segment (2019: 10.0%), we
expect a considerable increase in ROCE compared with 2019.
The BASF Group's EBIT before special items is expected to reach
between €4.2 billion and €4.8 billion (2019: €4,536 million). We
expect considerably higher contributions from the Industrial Solu-
tions segment and Other. Our planning assumes that EBIT before
special items will be slightly above the prior-year level in the Surface
Technologies, Nutrition & Care and Agricultural Solutions segments.
By contrast, we anticipate a considerable decline in EBIT before
special items in the Materials and Chemicals segments.
South America
Japan
1.2%
(0.5%)
4.0%
Emerging markets of Asia.
1.1%
United States
BASF Report 2019
0.4%
2.5%
Trends in chemical production 2020-2022 (excluding pharmaceuticals)
Real change compared with previous year
World
South America
0.1%
(2.0%)
2.7%
Emerging markets of Asia
Japan
(0.4%)
European Union
793
135
1 To Our Shareholders
slightly higher sales in the Chemicals, Surface Technologies and
Industrial Solutions segments, and sales at prior-year level in Other.
In 2020, we expect the BASF Group as a whole to increase sales to
between €60 billion and €63 billion (2019: €59,316 million). The
main drivers should be volumes growth and portfolio effects from
the acquisition of Solvay's integrated polyamide business, which
closed in January 2020. Lower prices will presumably have an off-
setting effect. We expect considerable sales growth in the Materials,
Agricultural Solutions and Nutrition & Care segments. We anticipate
This outlook also includes the acquisition of Solvay's integrated
polyamide business on January 31, 2020, which will be integrated
into the Performance Materials and Monomers divisions.
The agreement between BASF and DIC on the sale of BASF's global
pigments business is likewise reflected in this outlook. The trans-
action is expected to close in the fourth quarter of 2020, subject to
the approval of the relevant competition authorities. Until closing, the
assets and liabilities to be divested will be presented in a disposal
group in the Dispersions & Pigments division.
Our forecast for 2020 takes into account the agreement between
BASF and an affiliate of Lone Star on the sale of BASF's construction
chemicals business. The transaction is expected to close in the third
quarter of 2020, subject to the approval of the relevant competition
authorities. Until closing, the income after taxes of the construction
chemicals business will be presented in the income after taxes of
BASF Group as a separate item ("Income after taxes from discontin-
ued operations"); it will not be included in the sales or EBIT before
special items of the BASF Group.
■ ROCE of between 6.7% and 7.7%
■ Sales growth to between €60 billion and €63 billion
■ EBIT before special items of between €4.2 billion
and€4.8 billion
Sales, earnings and ROCE forecast for the BASF Group¹
About This Report
For more information on our opportunities and risks, see page 139 onward
We expect growth in most of our customer industries. For the
automotive industry, however, we anticipate a continued
decline in production. Our outlook assumes that the trade
conflict between the United States and its trading partners
does not intensify, and that Brexit will not have any larger
economic repercussions during the transition phase.
For 2020, we expect global economic uncertainty to be very
high and that growth will be significantly depressed by the
drop in demand and production outages in connection with
the coronavirus outbreak. Consequently, the global economy
is forecast to grow by 2.0%, considerably slower than in 2019
(+2.6%). Global chemical production is expected to expand
by 1.2%, well below the 2019 level (1.8%). We anticipate an
average oil price of $60 for a barrel of Brent crude and an
exchange rate of $1.15 per euro. Despite the challenging
environment characterized by a high level of uncertainty,
we aim to increase our sales to between €60 billion and
€63 billion (2019: €59,316 million). The BASF Group's income
from operations (EBIT) before special items is expected to
be between €4.2 billion and €4.8 billion (2019: €4,536 million).
The return on capital employed (ROCE) should reach between
6.7% and 7.7% (2019: 7.7%) and thus be below the cost of
capital percentage of 9%.
Outlook 2020
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Outlook 2020
For more information on our expectations for the economic environment in 2020,
see page 133 onward
Chemicals
131
Consolidated Financial Statements
■ Alignment with U.N. Guiding Principles on Business and
Human Rights
International labor and social standards
For more information, see basf.com/employeerepresentation
By focusing our discussions on the local and regional situations, we
aim to find tailored solutions to the different challenges and legal
considerations for each site. The BASF Europa Betriebsrat (European
Works Council) addresses cross-border matters in Europe. In South
America, we foster dialog with the Diálogo Social.
Trust-based cooperation with employee representatives is an impor-
tant component of our corporate culture. Our open and ongoing
dialog lays the foundation for balancing the interests of the company
and its employees, even in challenging situations. In the case of
organizational changes or if restructuring leads to staff downsizing,
for example, we involve employee representatives to develop socially
responsible implementation measures at an early stage. Our actions
are aligned with the respective legal regulations and the agreements
reached, as well as operational considerations. In 2019, this happened
in connection with the agreed sale of the pigments business and the
construction chemicals business, subject to the approval of the rele-
vant competition authorities. The early, detailed presentation and
explanation of the organizational changes in connection with the
implementation of the new corporate strategy in 2019 was also a
reflection of our trust-based cooperation.
[Dialog with employee representatives]
Regional initiatives specifically address the needs of our employees
at a local level. For example, we are expanding the number of flexible
co-working spaces in the Rhine-Neckar region in Germany. Our
Work-Life Management employee center in Ludwigshafen (LuMit)
offers a number of services under one roof: childcare, fitness and
health, social counseling and coaching. We provide employee
assistance programs at sites in Germany and around the world to
help employees overcome difficult life situations and restore and
maintain their employability.
Our identity as an employer includes our belief in supporting our
employees in balancing their personal and professional lives. We
want to strengthen their identification with the company and our
position in the global competition for qualified personnel. To achieve
this, we have a wide range of offerings aimed at employees in
different phases of life that accommodate the growing demand for
flexibility in when and where they work. BASF helps employees to
adapt working hours and location to their personal circumstances
with a wide range of options, including flexible working hours, part-
time employment and mobile working.
We act responsibly toward our employees. Part of this is our voluntary
commitment to respecting international labor and social standards,
which we have embedded in our global Code of Conduct. This
encompasses internationally recognized labor norms as stipulated
in the United Nations' Universal Declaration of Human Rights, the
OECD Guidelines for Multinational Enterprises, and the Tripartite
Declaration of Principles Concerning Multinational Enterprises and
Social Policy of the International Labour Organization (ILO). BASF is
committed to complying with these standards worldwide. We mainly
approach our adherence to international labor and social standards
using three elements: the Compliance Program (including external
compliance hotlines), close dialog with our stakeholders (such as
with employee representatives or international organizations) and
the BASF guideline on compliance with international labor norms,
which applies Group-wide. This guideline makes concrete what the
human rights issues and international labor standards in our global
Code of Conduct mean as these relate to our employees.
■ Wide range of offerings for different phases of life
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Employees
1 To Our Shareholders
About This Report
BASF Report 2019
[Balancing personal and professional life]
It forms the basis for our global management process: We monitor
and evaluate whether the national law of all the countries in which
BASF operates complies with international labor and social stan-
dards. If the national law contains no or lower requirements, actions
plans are drawn up to successively close these gaps in a reasonable
time frame. If conflicts with national law or practices arise, we strive
to act in accordance with our values and internationally recognized
principles without violating the law of the country concerned. As
part of the management process, we regularly follow up on and
document the results of the comparison between national law and
our guideline, as well as measures to implement the guideline. This
is our central due diligence system. Based on our guideline, our
management process has been able to improve maternity leave at
BASF companies with no statutory requirements or lower requirements
140
About This Report
BASF Report 2019
4
3 Corporate Governance
2 Management's Report
Economic Environment in 2020
To Our Shareholders
1
132
BASF Report 2019
For more information on labor and social standards, see basf.com/labor_social_standards
About This Report
For more information on our sustainability-related risk management, see page 36 onward
For more information on global standards, see page 29
than in the BASF guideline, for example. Our voluntary commitment
to respect international labor and social standards has been inte-
grated into the existing corporate audit process since 2019. For this
purpose, preparatory training was held for the auditors. As before,
individual elements of the guideline are also reviewed as part of
internal control processes such as Responsible Care audits in
BASF Group companies.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
For more information on compliance, see page 157 onward
2 Management's Report
Employees
1 To Our Shareholders
1 To Our Shareholders
2 Management's Report
Opportunities and Risks
5 Overviews
4
Consolidated Financial Statements
About This Report
3 Corporate Governance
145
We continuously improve our processes in order to remain competi-
tive through our operational excellence. Our strategic Excellence
Program serves the same purpose. This is expected to contribute
€2 billion to EBITDA annually from the end of 2021 onward compared
with baseline 2018.
Potential applications of digital technologies and solutions along the
entire value chain are investigated in both the operational and
functional divisions as well as by cross-divisional teams, and tested
in dedicated pilot projects. They are supported here by the Digitali-
zation & Information Services unit. We analyze the opportunities and
risks of digitalization in Production, Logistics, Research & Develop-
ment and for business models as well as in corporate functions such
as Finance, Human Resources, Procurement & Supply Chain
Services, Legal, Taxes, Insurance & Intellectual Property. The
opportunities and risks of digitalization are steered by the operational
and functional divisions.
We also address the risk of the technical or economic failure of
research and development projects by maintaining a balanced and
comprehensive project portfolio, as well as through professional,
milestone-based project management.
Research activities funded by the BASF Group promote the targeted
development and enhancement of key technologies as well as the
establishment of new business areas. Focus areas in research are
determined based on their strategic relevance for BASF, above and
beyond existing business areas.
The central research areas Process Research & Chemical Engi-
neering, Advanced Materials & Systems Research and Bioscience
Research serve as global platforms headquartered in our regions:
Europe, Asia Pacific and North America. Together with the develop-
ment units in our operating divisions, they form the core of the
global Know-How Verbund. Our strong regional presence opens up
opportunities to participate in local innovation processes and gain
access to local talent. We optimize the effectiveness and efficiency
of our research activities through our global Know-How Verbund.
Innovation
For more information on our Excellence Program, see page 20 onward
and business focus is on highly innovative business areas, some of
which we enter into through strategic cooperative partnerships.
In order to achieve lasting profitable growth, tap into new market
segments and make our customers more successful, our research
The trust of customers and consumers is essential for the successful
introduction of new technologies. That is why we enter into dialog
with our stakeholders at an early stage of development. The trend
toward increased sustainability requirements in our customer
industries continues. Our aim is to leverage the resulting opportunities
in a growing market even more effectively in the future with
innovations. This is why we applied the Sustainable Solution Steering
method, which is used to evaluate the sustainability of our product
portfolio, to assessments of innovation projects, and integrated it
into an early stage of our research and development processes as
well as the development of our business strategies. In this way, we
want to benefit from the higher profitability of our Accelerator
solutions compared with the rest of our evaluated portfolio. At the
same time, we reduce reputational and financial risks by phasing out
products for which we have identified substantial sustainability
concerns ("Challenged" products) within five years of initial
classification as such at the latest. We develop action plans for
these products at an early stage to minimize any potential financial
risks. These can include research projects, reformulations or even
replacing one product with another.
Development of competitive and customer landscape
We expect competitors from Asia and the Middle East in particular
to gain increasing significance in the years ahead. Furthermore, we
predict that many producers in countries rich in raw materials will
expand their value chains. We counter this risk through active
portfolio management.
BASF Report 2019
For more information on innovation and digitalization, see page 31 onward
Recruitment and long-term retention of qualified employees
BASF anticipates growing challenges in attracting qualified
employees in the medium and long term due to demographic
change, especially in North America and Europe. As a result, there
is an increased risk that job vacancies may not be filled with suit-
able applicants, or only after a delay. We address these risks with
measures to integrate diversity, employee and leadership develop-
ment, and intensified employer branding. At local level, demographic
management includes succession planning, knowledge manage-
ment and offerings to improve the balance between personal and
professional life and promote healthy living. This increases BASF's
appeal as an employer and retains our employees in the long term.
For more information on the individual initiatives and our goals, see page 126 onward
Our decisions on the type, scope and locations of our investment
projects are based on assumptions related to the long-term
development of markets, margins and costs, as well as raw material
availability and country, currency and technology risks. Opportuni-
ties and risks arise from potential deviations in actual developments
from our assumptions.
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
146
BASF Report 2019
Risk management in the area of sustainability also includes climate-
related risks and opportunities. We consider risks for companies in
connection with the transition to a low-carbon economy (transition
risks) as well as physical risks as defined by the Task Force on
Climate-related Financial Disclosures (TCFD). For BASF as an
energy-intensive company, climate-related risks arise particularly
from regulatory changes, such as in carbon prices through emissions
trading systems, taxes or energy legislation. In addition, BASF's
emissions footprint and intensity could lead to a negative perception
and reduced appeal among external stakeholders such as
customers or investors. We counter these risks with our carbon
management measures and by transparently disclosing our positions
on and contributions to climate protection (such as political demands,
progress in the implementation of our climate strategy and how our
products help to protect the environment) in publicly accessible
sources (such as this annual report or on the BASF website) and in
direct dialog with external stakeholders. Physical risks to our
production and our supply chain are addressed by our risk manage-
ment in production and in procurement. Our broad product portfolio
Portfolio development through investments
We verify compliance with these standards through internal
monitoring systems such as global surveys or audits. In 2019, for
example, suppliers were audited for sustainability at a number of
sites. All employees, managers and Board members are required to
adhere to our global Code of Conduct, which defines a binding
framework for our activities. The monitoring systems are comple-
mented by grievance mechanisms such as our compliance hotlines.
Opportunities and risks that could arise from material sustainability
topics can only rarely be measured in specific financial terms and
have an impact on business activities, especially in the medium to
long term.
Sustainability
For more information on the corporate strategy, see page 24 onward
For more information on our acquisitions, see page 43 onward
The evaluation of opportunities and risks plays a significant role
during the assessment of acquisition targets. A detailed analysis
and quantification is conducted as part of due diligence. Examples
of risks include increased staff turnover, delayed realization of
synergies, or the assumption of obligations that were not precisely
quantifiable in advance. If our expectations in this regard are not
fulfilled, risks could arise, such as the need to impair intangible
assets; however, there could also be opportunities, for example,
from additional synergies.
In the future, we will continue to expand and refine our portfolio
through acquisitions that promise above-average profitable growth
as part of the BASF Verbund, are innovation-driven or offer a techno-
logical differentiation, that help to reach a relevant market position,
and make new, sustainable business models possible.
Acquisitions
For more information on our investment plans, see page 138
We expect the increase in chemical production in emerging markets
in the coming years to remain above the global average. This will
create opportunities that we want to exploit by expanding our local
presence.
As part of our general risk management process, we also identify
and assess relevant risks arising from sustainability topics such as
climate change. Our sustainability management helps to minimize
risks and opens up new opportunities to market more sustainable
products. We reduce potential risks in the areas of environmental
protection, safety and security, health protection, product steward-
ship, compliance, supplier relationships and labor and social
standards by setting ourselves globally uniform requirements. These
often go beyond local legal requirements.
We assume that growth in chemical production (excluding pharma-
ceuticals) will roughly track global gross domestic product over the
next five years and be slightly below the previous five-year average.
Through our market-oriented and broad portfolio, which we will
continue to strengthen in the years ahead through investments in
new production capacities, research and development activities and
acquisitions, we aim to achieve volumes growth that slightly exceeds
this market growth. Should global economic growth see unexpected,
considerable deceleration, due for example to an ongoing weak
period in the emerging markets, protectionist tendencies or to
geopolitical crises, the expected growth rates could prove too
ambitious.
5 Overviews
Long-term opportunities and risks
In addition to market interest rates, BASF's financing costs are
determined by the credit risk premiums to be paid. These are mainly
influenced by our credit rating and the market conditions at the time
of issue. In the short to medium term, BASF is largely protected from
the possible effects on its interest result thanks to the balanced
maturity profile of its financial indebtedness.
Interest rate risks result from potential changes in prevailing market
interest rates. These can cause a change in the fair value of fixed-
rate instruments and fluctuations in the interest payments for
variable-rate financial instruments, which would positively or
negatively affect earnings. To hedge these risks, interest rate
swaps and combined interest rate and currency derivatives are
used in individual cases.
Financial currency risks result from the translation of receivables,
liabilities and other monetary items in accordance with IAS 21 at the
closing rate into the functional currency of the respective Group
company. In addition, we incorporate planned purchase and sales
transactions in foreign currencies in our financial foreign currency
risk management. These risks are hedged using derivative
instruments, if necessary.
Our competitiveness on global markets is influenced by fluctuations
in exchange rates. For BASF's sales, opportunities and risks arise in
particular when the U.S. dollar exchange rate fluctuates. A full-year
appreciation of the U.S. dollar against the euro by $0.01, which
could result from a macroeconomic slowdown, would increase the
BASF Group's EBIT by around €40 million, assuming other
conditions remain the same. On the production side, we counter
exchange rate risks by producing in the respective currency zones.
Exchange rate volatility
shareholders' equity and the business models of the operating units.
The chief aim is the reduction of counterparty, transfer and currency
risks for the BASF Group.
As a part of risk management, activities in countries with transfer
restrictions are continuously monitored. This includes, for example,
regular analysis of the macroeconomic and legal environment,
The management of liquidity, currency and interest rate risks is
conducted in the Treasury unit. The management of commodity
price risks takes place in the Procurement & Supply Chain Services
functional unit or in appropriately authorized Group companies.
Detailed guidelines and procedures exist for dealing with financial
risks. Among other things, they provide for the segregation of trading
and back office functions.
Financial opportunities and risks
Risks from metal and raw materials trading
We use our internal control system to limit risks from potential
infringements of rights or laws. For example, we try to avoid patent
and licensing disputes whenever possible through extensive
clearance research. As part of our Group-wide Compliance Program,
our employees receive regular training.
Legal disputes and proceedings
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Opportunities and Risks
To Our Shareholders
1
About This Report
We constantly monitor current and potential legal disputes and
proceedings, and regularly report on these to the Board of Executive
Directors and Supervisory Board. In order to assess the risks from
current legal disputes and proceedings and any potential need to
recognize provisions, we prepare our own analyses and assess-
ments of the circumstances and claims considered. In addition, in
individual cases, we consider the results of comparable proceedings
and, if needed, independent legal opinions. Risk assessment is
particularly based on estimates as to the probability of occurrence
and the range of possible claims. These estimates are the result of
close cooperation between the relevant operating and functional
units together with the Legal and Finance units. If sufficient proba-
bility of occurrence is identified, a provision is recognized accordingly
for each proceeding. Should a provision be unnecessary, general
risk management continues to assess whether these litigations
nevertheless represent a risk for the EBIT of the BASF Group.
Long-term demand development
In the catalysts business, BASF employs commodity derivatives for
precious metals and trades precious metals on behalf of third parties
and on its own account. Appropriate commodity derivatives are also
traded to optimize BASF's supply of refinery products, gas and
other petrochemical raw materials. To address specific risks associ-
ated with these non-operating trades, we set and continuously
monitor limits with regard to the type and scope of the deals con-
cluded.
Risks from fluctuating cash flows are recognized in a timely manner
as part of our liquidity planning. We have access to extensive liquidity
at any time thanks to our good ratings, our unrestricted access to
the commercial paper market and committed bank credit lines. In
the short to medium term, BASF is largely protected against potential
refinancing risks by the balanced maturity profile of its financial
indebtedness as well as through diversification in various financial
markets.
ment could make it necessary to recognize pension obligations and
plan assets for these plans as well.
Most employees are granted company pension benefits from either
defined contribution or defined benefit plans. We predominantly
finance company pension obligations externally through separate
plan assets. This particularly includes BASF Pensionskasse VVaG
and BASF Pensionstreuhand e.V. in Germany, in addition to the
large pension plans of our Group companies in North America, the
United Kingdom and Switzerland. To address the risk of under-
funding due to market-related fluctuations in plan assets, we have
investment strategies that align return and risk optimization to the
structure of the pension obligations. Stress scenarios are also
simulated regularly by means of portfolio analyses. An adjustment to
the interest rates used in discounting pension obligations leads
immediately to changes in equity. To limit the risks of changing
financial market conditions as well as demographic developments,
employees have, for a number of years now, been almost exclusively
offered defined contribution plans for future years of service. Some
of these contribution plans include minimum interest guarantees. If
the pension fund cannot generate this, it must be provided by the
employer. A permanent continuation of the low interest rate environ-
Risks from pension obligations
For more information on the long-term incentive program, see the Notes to the Consolidated
Financial Statements from page 284 onward
Our senior executives have the opportunity to participate in a share
price-based compensation program. The need for provisions for this
program varies according to the development of the BASF share
price and the MSCI World Chemicals Index; this leads to a
corresponding increase or decrease in personnel costs.
Long-term incentive program for senior executives
Asset impairment risk arises if the assumed interest rate in an impair-
ment test increases, the predicted cash flows decline, or investment
projects are suspended. Currently, we consider the impairment risk
for assets such as customer relationships, technologies and trade-
marks, goodwill, and equity-accounted investments to be immaterial.
Impairment risks
5 Overviews
Liquidity risks
Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Opportunities and Risks
To Our Shareholders
1
About This Report
BASF Report 2019
We limit country-specific risks with measures based on internally
determined country ratings, which are continuously updated to
reflect changing environment conditions. We selectively use invest-
ment guarantees to limit specific country-related risks. We lower
credit risks for our financial investments by engaging in transactions
only with banks with good credit ratings and by adhering to fixed
limits. Creditworthiness is continuously monitored and the limits are
adjusted accordingly. We reduce the risk of default on receivables
by continuously monitoring the creditworthiness and payment
behavior of our customers and by setting appropriate credit limits.
Risks are also limited through the use of credit insurance and bank
guarantees. Due to the global activities and diversified customer
structure of the BASF Group, there are no major concentrations of
credit default risk.
Risk of asset losses
For more information on the maturity profile of our financial indebtedness, see the explanations in
the Financial Position on page 55 and the Notes to the Consolidated Financial Statements from
page 261 onward
4
also includes solutions for the circular economy and climate
protection (such as insulation foams for buildings, materials for
electromobility and bio-based products). Increased social aware-
ness offers additional market opportunities for these products. We
are working with numerous scientific and public organizations and
initiatives on solutions for sustainable agriculture that meet
economic, ecological, and social demands over the long term.
Governance
For more information on sustainability management, see page 36 onward
Systematic development of leaders through the successful
assumption of tasks with increasing responsibility, where possible
in different business areas, regions and functions
-
- Early identification of suitable candidates of different professional
backgrounds, nationalities and genders
BASF's long-term succession planning is guided by the corporate
strategy. It is based on systematic management development
characterized by the following:
The Supervisory Board works hand in hand with the Board of
Executive Directors to ensure long-term succession planning for the
composition of the Board of Executive Directors. BASF aims to fill
most Board positions with candidates from within the company. It is
the task of the Board of Executive Directors to propose a sufficient
number of suitable candidates to the Supervisory Board.
Competence profile, diversity concept and succession
planning for the Board of Executive Directors
The members of the Board of Executive Directors, including their areas of responsibility and
memberships on the supervisory bodies of other companies, are listed from page 159 onward
Compensation of the Board of Executive Directors is described in detail in the Compensation Report
from page 169 onward
For more information on risk management, see the Forecast from page 133 onward
The Statutes of BASF SE and the Supervisory Board have defined
certain transactions that require the Board of Executive Directors to
obtain the Supervisory Board's approval prior to their conclusion.
Such cases include the acquisition and disposal of enterprises and
parts of enterprises, as well as the issue of bonds or comparable
financial instruments. However, this is only necessary if the acquisi-
tion or disposal price or the amount of the issue in an individual case
exceeds 3% of the equity reported in the last approved Consolidated
Financial Statements of the BASF Group.
Desire to shape strategic and operational decisions, and proven
success in doing so, as well as leadership skills, especially under
challenging business conditions
5 Overviews
3 Corporate Governance
Corporate Governance Report
2 Management's Report
To Our Shareholders
1
About This Report
149
BASF Report 2019
The Board of Executive Directors informs the Supervisory Board
regularly, without delay and comprehensively, of all issues impor-
tant to the company with regard to planning, business develop-
ment, risk situation, risk management and compliance. Further-
more, the Board of Executive Directors coordinates the company's
strategic orientation with the Supervisory Board.
The Board can set up Board committees to consult and decide on
individual issues such as proposed material acquisitions or divesti-
tures; these must include at least three members of the Board of
Executive Directors. For the preparation of important decisions,
such as those on acquisitions, divestitures, investments and personnel,
the Board has various commissions at the level below the Board
that carefully assess the planned measure and evaluate the associ-
ated opportunities and risks, and based on this information, report
and make recommendations to the Board - independently of the
affected business area.
4 Consolidated Financial Statements
Role model function in putting our corporate values into practice
Two-tier management system of BASF SE
Board of Executive Directors
150
BASF Report 2019
The current composition of the Board of Executive Directors meets
the competence profile and the requirements of the diversity concept
in full.
The number of Board members is based on the insights gained by
BASF as a company with an integrated leadership culture and is
determined by the needs arising from cooperation within the Board
of Executive Directors. In May 2018, this was reduced from eight to
seven members in the course of the changes to the composition of
the Board of Executive Directors, and again in January 2020 to six
members as part of ongoing efficiency measures. The standard age
limit for members of the Board of Executive Directors is 63.
elected by the Supervisory Board
Chairman
6 employee representatives
6 shareholder representatives elected by the
Annual Shareholders' Meeting and
12 members
Supervisory Board
- A balanced age distribution to ensure the continuity of the Board's
work and enable seamless succession planning
At least one female Board member
· International experience based on background and/or professional
experience
Many years of management experience in scientific, technical and
commercial fields
The aim is to enable the Supervisory Board to ensure a reasonable
level of diversity with respect to education and professional experience,
cultural background, international representation, gender and age
when appointing members of the Board of Executive Directors.
Independent of these individual criteria, the Supervisory Board is
convinced that ultimately, only a holistic approach can determine an
individual's suitability for appointment to the Board of Executive
Directors of BASF SE. The overall aim is to ensure that the Board of
Executive Directors as a whole has the following profile, which
serves as a diversity concept:
reports to Supervisory Board
advises the Board of Executive Directors
monitors the Board of Executive Directors
appoints the Board of Executive Directors
appointed by the Supervisory Board
6 members
appointed by the Supervisory Board
Chairman
Decisions that are reserved for the Board as a whole by law, through
the Board of Executive Directors' Rules of Procedure or through
resolutions adopted by the Board, are made at regularly held Board
meetings called by the Chairman of the Board of Executive Directors.
Board decisions are based on detailed information and analyzes
provided by the business areas and specialist units, and, if deemed
necessary, by external consultants. Board decisions can generally
be made via a simple majority. In the case of a tied vote, the casting
vote is given by the Chairman of the Board. However, the Chairman
of the Board does not have the right to veto the decisions of the
Board of Executive Directors. Members of the Board of Executive
Directors are authorized to make decisions individually in their
assigned areas of responsibility.
Our decentralized specialists use a central decision tree to document
reportable sustainability risks within the meaning of section 289b et
seq. of the German Commercial Code. No reportable residual net
risks within the meaning of section 289b et seq. of the German
Commercial Code were identified for 2019.
the establishment of appropriate systems for control, compliance
and risk management as well as establishing a company-wide
compliance culture with undisputed standards.
The Board of Executive Directors is responsible for the management
of the company, and represents BASF SE in business undertakings
with third parties. BASF's Board of Executive Directors is strictly
separated from the Supervisory Board, which monitors the Board of
Executive Directors' activities and decides on its composition. A
member of the Board of Executive Directors cannot simultaneously
be a member of the Supervisory Board. As the central duty of
company management, the Board of Executive Directors agrees on
the corporate goals and strategic direction of the BASF Group as
well as its individual business areas; determines the company's
internal organization; and decides on the composition of manage-
ment on the levels below the Board. It also manages and monitors
BASF Group business by planning and setting the corporate budget,
allocating resources and management capacities, monitoring and
making decisions on significant individual measures, and super-
vising operational management.
183
Declaration of Conformity Pursuant to
Section 161 AktG
159
Board of Executive Directors
Supervisory Board
159
Management and Supervisory Boards
176
157 Report of the Supervisory Board
Compliance
160
162
Corporate Governance Report
143
Corporate
3
Chapter 3 pages 148-184
147
BASF Report 2019
For more information on opportunities and risks from energy policies, see page 142
For more information on our positions on and contributions to climate protection,
see basf.com/climate_protection
For more information on energy and climate protection, see page 116 onward
149 Compensation Report
Declaration of Corporate Governance
184
About This Report
■ Sets corporate goals and strategic direction
■ Responsible for company management
■ Board of Executive Directors strictly separate from the
Supervisory Board
Direction and management by the Board of Executive
Directors
tion and supervision at the Annual Shareholders' Meeting.
The fundamental elements of BASF SE's corporate governance
system are: its two-tier system, with a transparent and effective
separation of company management and supervision between
BASF's Board of Executive Directors and the Supervisory Board;
the equal representation of shareholders and employees on the
exercise rights of co-administration and supervision at
Annual Shareholders' Meeting
Shareholders
appoints, monitors and advises Board of Executive
Directors
Supervisory Board
Board of Executive Directors
manages company and represents BASF SE in business
with third parties
Corporate governance refers to the entire system for
managing and supervising a company. This includes its
organization, values, corporate principles and guidelines
as well as internal and external control and monitoring
mechanisms. Effective and transparent corporate gover-
nance ensures that BASF is managed and supervised
responsibly with a focus on value creation. It fosters the
confidence of our investors, the financial markets, our
customers and other business partners, employees, and the
public in BASF.
Report
Corporate Governance Supervisory Board; and the shareholders' rights of co-administra-
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Corporate Governance Report
2 Management's Report
To Our Shareholders
1
The Board's actions and decisions are geared toward the company's
best interests. It is committed to the goal of sustainably increasing
the company's value. Among the Board's responsibilities is the
preparation of the Consolidated and Separate Financial Statements
of BASF SE and reporting on the company's financial and nonfinan-
cial performance. Furthermore, it must ensure that the company's
activities comply with the applicable legislation and regulatory
requirements, as well as internal corporate directives. This includes
BASF Report 2019
144
Regulation and political risks
142
BASF Report 2019
Around the world, the frequency and intensity of extreme weather
conditions (such as high/low water levels on rivers or hurricanes) are
subject to change as a result of climate change. We address the risk
of supply interruptions on the procurement and sales side caused
by extreme weather conditions by switching to unaffected logistics
carriers and the possibility of falling back on unaffected sites within
our global Verbund. We can no longer rule out the effects of extreme
low-water situations caused by climate change at our Verbund site
in Ludwigshafen, Germany. In 2019, we therefore implemented a
package of measures including the development of an early warning
We minimize procurement risks through our broad portfolio, global
purchasing activities and the purchase of raw materials on spot
markets. If possible, we avoid procuring raw materials from a single
supplier. When this cannot be avoided, we try to foster competition
or we knowingly enter into this relationship and assess the conse-
quences of potential nondelivery. We continuously monitor the
credit risk of important business partners.
Purchasing and supply chain
Political measures could also give rise to opportunities. For example,
we view measures around the world to increase energy efficiency as
an opportunity for increased demand for our products, such as our
insulation foams for buildings, battery materials for electromobility,
or our solutions for wind turbines. Our broad product portfolio
enables us to offer alternatives if chemicals have to be substituted
as a result of restrictions in connection with the REACH chemicals
regulation or new standards in our customers' industries.
react to political decisions. Together with our operating units,
suppliers, customers and logistics partners, we have identified
problems and steps to avoid supply chain disruptions, especially in
the event of a hard Brexit. Alternative logistics concepts include, for
example, leasing additional warehouse space, establishing consign-
ment warehouses or technical expansions in our ERP systems to be
able to react to additional customs requirements on the systems
side as well.
Brexit has given rise to economic and political uncertainties. At this
point in time, it is not yet clear what the future relationship between
the European Union and the United Kingdom will look like after the
transition phase and what specific consequences this will have for
our sites, our supply chains and the regulatory environment. A
cross-divisional Brexit team has been established to prepare the
BASF organization for various scenarios and enable it to promptly
About This Report
Risks for us can arise from intensified geopolitical tensions, new
trade sanctions, stricter emissions limits for plants or energy, and
climate laws. In addition, risks to the BASF Group can be posed by
further regulations in key customer industries or on the use or
registration of agricultural and other chemicals.
Competition
Since the merger of the oil and gas businesses of Wintershall and
DEA, the contribution attributable to BASF is included in income
from operations (EBIT) through income from companies accounted
for using the equity method. This has a compensating effect on
margin pressure in the chemicals business if oil and gas prices rise.
The year's average oil price for Brent crude was $64 per barrel in
2019, compared with $71 per barrel in the previous year. For 2020,
we anticipate an average oil price of $60 per barrel. We therefore
expect price levels for the raw materials and petrochemical basic
products that are important to our business to remain constant.
capacities or raw materials shortages could also increase margin
pressure on a number of products and value chains. This would
have a negative effect on our EBIT.
Margin risks for the BASF Group primarily result from a further
decline in margins in the Chemicals and Materials segments. New
Margin volatility
Weather-related influences can result in positive or negative effects
on our business, particularly in the Agricultural Solutions segment.
We also consider risks from deviations in assumptions. A significant
macroeconomic risk arises from the possibility that measures to
contain the coronavirus are kept in place for a longer period of time
or expanded, and that Chinese and global economic growth con-
tinues to slow as a result. A further escalation of the trade conflicts
between the United States and its trade partners pose additional
macroeconomic risks. Both can have a considerable impact on
demand for intermediate goods for industrial production and
demand for investment goods. This would have an effect on emerg-
ing markets that export raw materials as well as on advanced
economies that specialize in technological goods. Risks to the
global economy would also be posed by the possible escalation of
geopolitical conflicts.
The development of our sales markets is one of the strongest
sources of opportunities and risks. More details on our assumptions
regarding short-term growth rates for the global economy, regions
and key customer industries, such as the chemicals, automotive
and construction sectors, can be found under Economic Environ-
ment in 2020 on pages 133 to 135.
We continuously enhance our products and solutions in order to
maintain competitive ability. We monitor the market and the compe-
tition, and try to take targeted advantage of opportunities and
counter emerging risks with suitable measures. Aside from inno-
vation, key components of our competitiveness are our ongoing
cost management and continuous process optimization.
1 To Our Shareholders
2 Management's Report
Opportunities and Risks
3 Corporate Governance
BASF relies on a large number of IT systems. Their nonavailability,
violation of confidentiality or the manipulation of data in critical IT
systems and applications can all have a direct impact on production
and logistics processes. The threat environment has changed in
recent years, as attackers have become better organized, use more
sophisticated technology, and have far more resources available. If
data are lost or manipulated, this can, for example, negatively affect
plant availability, delivery quality or the accuracy of our financial
reporting. Unauthorized access to sensitive data, such as personnel
records or customer data, competition-related information or
research results, can result in legal consequences or jeopardize our
competitive position. This would also be accompanied by the
associated loss of reputation.
Information technology risks
For more information on risks from pension obligations, see page 145
For more information on our compensation system, see page 130
Due to BASF's worldwide compensation principles, the develop-
ment of personnel expenses is partly dependent on the amount of
variable compensation, which is linked to the company's success,
among other factors. The correlation between variable compensa-
tion and the success of the company has the effect of minimizing
risk. Another factor is the development of interest rates for dis-
counting pension obligations. Furthermore, changes to the legal
environment of a particular country can have an impact on the
development of personnel expenses for the BASF Group. For
countries in which BASF is active, relevant developments are
therefore constantly monitored in order to recognize risks at an early
stage and enable BASF to carry out suitable measures.
Personnel
For more information on opportunities and risks from acquisitions and divestitures in 2019,
see page 43
Opportunities and risks arise in connection with acquisitions and
divestitures from the conclusion of a transaction, or it being completed
earlier or later than expected. They relate to the regular earnings
contributions gained or lost as well as the realization of gains or
losses from divestitures if these deviate from our planning assump-
tions.
We constantly monitor the market in order to identify possible acqui-
sition targets and develop our portfolio appropriately. In addition, we
work together in collaborations with customers and partners to
jointly develop new, competitive products and applications.
Acquisitions, divestitures and cooperations
Short-term risks from investments can result from, for example,
technical malfunctions or schedule and budget breaches. We
counter these risks with highly experienced project management
and controlling.
Crisis management also includes dealing with extreme weather
conditions such as hurricanes (for example, at the sites on the Gulf
of Mexico in Freeport, Texas, and Geismar, Louisiana) or significantly
elevated water temperatures in rivers due to extended heat waves,
which limit the available cooling capacity (for example, at the
Ludwigshafen site in Germany). Appropriate precautions are taken
at the sites in the case of a potential change in risk in connection
with climate change. For example, the Verbund site in Ludwigs-
hafen, Germany, implemented a package of measures in 2019 to
increase cooling capacity, including expanding and optimizing the
central recooling plants and optimizing cooling water flows. These
are capable of avoiding production outages due to extreme
heatwaves like the one in 2018.
In the event of a production outage - caused by an accident, for
example - our global, regional or local emergency response plans
and crisis management structures are engaged, depending on the
impact scope. Every region has crisis management teams on a local
and regional level. They not only coordinate the necessary
emergency response measures, they also initiate the immediate
measures for damage control and resumption of normal operations
as quickly as possible.
We try to prevent unscheduled plant shutdowns by adhering to high
technical standards and by continuously improving our plants. We
reduce the effects of an unscheduled shutdown on the supply of
intermediate and end products through diversification within our
global production Verbund.
Production and investments
system for low water levels, making loading stations more flexible
and time chartering ships with high load capacities in the case of low
water. These measures can be deployed immediately and make
extremely long periods of low water on the Rhine River, like the one
in 2018, more manageable.
5 Overviews
Consolidated Financial Statements
4
Development of demand
Short-term opportunities and risks
Internal confirmation of the internal control system
All managing directors and chief financial officers of each consoli-
dated Group company must confirm to the Board of Executive
Directors of BASF SE every half-year and at the end of the annual
cycle, in writing, that the internal control system is effective with
regard to accounting and reporting.
5 Overviews
Significant features of the internal control and risk
management system with regard to the Group financial
reporting process
For more information on our Group-wide Compliance Program, see page 157 onward
Our Group-wide Compliance Program aims to ensure adherence
to legal regulations and the company's internal guidelines. Our
global employee Code of Conduct firmly embeds these manda-
tory standards into everyday business. Members of the Board of
Executive Directors are also expressly obligated to follow these
principles.
For more information on our sustainability management processes, see page 36 onward
As part of strategy development, the Corporate Development unit
conducts strategic opportunity/risk analyses with a 10-year
assessment period. These analyses are annually reviewed as part
of strategic controlling and are adapted if necessary.
The BASF Group's management is informed about operational
opportunities and risks (observation period of up to one year) in
the monthly management report produced by the Finance depart-
ment. In addition, Finance provides information twice a year on
the aggregated opportunity/risk exposure of the BASF Group.
Furthermore, if a new individual risk is identified which has a more
than €10 million impact on earnings or bears reputational risks, it
must be immediately reported.
As part of our analysis of sustainability-related opportunities and
risks, we also consider the physical risks associated with climate
change (such as damage to plants caused by external weather
events) and transition risks (such as impairment due to emission
levels of plants) as defined by the Task Force on Climate-related
Financial Disclosures (TCFD).
risks. We minimize sustainability risks with our sustainability
management tools. For instance, we have established global
monitoring systems to verify compliance with laws and our
voluntary commitments in this area. These also incorporate our
suppliers.
-
-
-
-
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
■ Conducted in accordance with standardized Group
guidelines
To minimize such risks, BASF uses globally uniform processes and
systems to ensure IT availability and IT security, such as stable and
redundantly designed IT systems, backup processes, virus and
access protection, encryption systems as well as integrated, Group-
wide standardized IT infrastructure and applications. The systems
used for information security are constantly tested, continuously
updated, and expanded if necessary. In addition, our employees
receive regular training on information and data protection. IT-related
risk management is conducted using Group-wide regulations for
organization and application, as well as an internal control system
based on these regulations.
Segregation of duties, principle of dual control and clearly
regulated access rights
The consolidated financial statements are prepared by a unit in the
Finance department. BASF Group's accounting process is based
on a uniform accounting guideline that sets out accounting policies
and the significant processes and deadlines on a Group-wide
basis. There are binding directives for the internal reconciliations
and other accounting operations within the Group. Standard soft-
ware is used to carry out the accounting processes for the prepa-
ration of the individual financial statements as well as for the con-
solidated financial statements. There are clear rules for the access
rights of each participant in these processes.
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
141
BASF Report 2019
The managers responsible receive reports on any control
weaknesses identified and their resolution, and an interdisciplinary
committee investigates their relevance for the BASF Group. The
Board of Executive Directors and the Audit Committee are
informed if control weaknesses with a considerable impact on
financial reporting are identified. Only after material control weak-
nesses have been resolved does the company's managing
director confirm the effectiveness of the internal control system.
After documentation, a review is performed to verify whether the
described controls are capable of adequately covering the risks.
In the subsequent test phase, samples are taken to test whether,
in practice, the controls were executed as described and effective.
Monitoring of control weaknesses
Assessment of control activities
In order to mitigate the risks to the financial reporting processes
listed in our central risk catalog, critical processes and control
activities are documented.
Identification and documentation of control activities
Adherence to internal and external guidelines that are relevant for
the maintenance of a reliable control environment is checked by
means of a standardized questionnaire.
In these companies, the process comprises the following steps:
Evaluation of the control environment
Moreover, a centralized selection process identifies companies that
are exposed to particular risks, that are material to the Consolidated
Financial Statements of the BASF Group, or that provide service
processes. The selection process is conducted annually. In the
relevant companies, one person is given the responsibility of
monitoring the execution of the requirements for an effective control
system in financial reporting.
The significant risks for the BASF Group regarding a reliable control
environment for proper financial reporting are reviewed and updated
on an annual basis. Risks are compiled into a central risk catalog.
An internal control system for financial reporting continuously
monitors these principles. To this end, methods are provided to
ensure that evaluation of the internal control system in financial
reporting is structured and uniform across the BASF Group.
Employees involved in the accounting and reporting process meet
the qualitative requirements and participate in training on a regular
basis. There is a clear assignment of responsibilities between the
specialist units, companies and regional service units involved. We
strictly adhere to the principles of segregation of duties and dual
control, or the "four-eyes principle." Complex actuarial reports and
evaluations are produced by specialized service providers or
specially qualified employees.
■ Annual evaluation of the control environment and relevant
processes at significant companies
BASF also established the Cyber Defense Center in 2015, is a
member of Cyber Security Sharing and Analytics e.V. (CSSA), and a
founding member of the German Cybersecurity Organization
(DCSO) together with Allianz SE, Bayer AG and Volkswagen AG.
BASF has also established an information security management
system and is certified according to ISO/IEC 27001:2013.
Interest rate risks
At least one member with in-depth experience in innovation,
research & development and technology
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Supervisory Board
4 Consolidated Financial Statements
5 Overviews
Supervisory Board
In accordance with the Statutes, the Supervisory Board of
BASF SE comprises 12 members
159
The term of office of the Supervisory Board commenced following
the Annual Shareholders' Meeting on May 3, 2019, in which the
shareholder representatives on the Supervisory Board were elected.
It terminates upon conclusion of the Annual Shareholders' Meet-
ing that resolves on the discharge of members of the Supervisory
Board for the fourth complete business year after the term of office
commenced; this is the Annual Shareholders' Meeting on
April 25, 2024. The Supervisory Board comprises the following
members:
Franz Fehrenbach, Stuttgart, Germany'
Vice Chairman of the Supervisory Board of BASF SE
Chairman of the Supervisory Board of Robert Bosch GmbH
Member of the Supervisory Board since: January 14, 2008
Memberships of statutory supervisory boards in Germany:
Robert Bosch GmbH4 (chairman)
Stihl AG³ (vice chairman)
Linde AG³ (second deputy chairman until April 8, 2019)
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises:
Stihl Holding AG & Co. KG4 (member of the Advisory Board)
Linde plc³ (member of the Board of Directors)
Sinischa Horvat, Limburgerhof, Germany*2
Vice Chairman of the Supervisory Board of BASF SE
Chairman of the Works Council of BASF SE, Ludwigshafen Site;
Chairman of BASF's Joint Works Council and of the BASF Works
Council Europe
Member of the Supervisory Board since: May 12, 2017
Former Chairman of the Board of Executive Directors of BASF SE Memberships of statutory supervisory boards in Germany:
(until May 2011)
Member of the Supervisory Board since: May 2, 2014
Memberships of statutory supervisory boards in Germany:
Fuchs Petrolub SE³ (chairman until May 7, 2019)
Dr. Jürgen Hambrecht, Neustadt an der Weinstraße, Germany*1
Chairman of the Supervisory Board of BASF SE
Trumpf GmbH & Co. KG4 (chairman)
BASF Report 2019
Responsibilities since January 1, 2020: Monomers; Perfor-
mance Materials; Petrochemicals; Intermediates; Process Research
& Chemical Engineering; Market & Business Development, Site &
Verbund Management North America; Country Platforms North
America
Saori Dubourg
Degree: Business, 48 years old, 23 years at BASF
Responsibilities until December 31, 2019: Agricultural Solu-
tions; Construction Chemicals; Bioscience Research; Europe
Responsibilities since January 1, 2020: Agricultural Solutions;
Care Chemicals; Nutrition & Health; Construction Chemicals; Bio-
science Research; Europe
First appointed: 2017, term expires: 2025
Internal memberships within the meaning of section 100(2) of
the German Stock Corporation Act:
Wintershall Dea GmbH (member of the Supervisory Board since
May 1, 2019)
Sanjeev Gandhi (until December 31, 2019)
Degrees: Chemical Engineering, MBA, 53 years old, 26 years
at BASF
Responsibilities until December 31, 2019: Intermediates;
Petrochemicals; Greater China & Functions Asia Pacific; South &
East Asia, ASEAN & Australia/New Zealand
First appointed: 2014, term expires: December 31, 2019
First appointed: 2012, term expires: 2022
Michael Heinz
Dr. Markus Kamieth
Degree: Chemistry, 49 years old, 21 years at BASF
Responsibilities until December 31, 2019: Care Chemicals; Dis-
persions & Pigments; Nutrition & Health; Performance Chemicals;
Advanced Materials & Systems Research; BASF New Business;
South America
Responsibilities since January 1, 2020: Catalysts; Coatings;
Dispersions & Pigments; Performance Chemicals; Advanced
Materials & Systems Research; BASF New Business; Greater
China; South & East Asia, ASEAN & Australia/New Zealand;
Mega Projects Asia
First appointed: 2017, term expires: 2025
Comparable German and non-German supervisory bodies:
Solenis UK International Ltd. (member of the Board of Directors
since February 1, 2019)
Wayne T. Smith
Degrees: Chemical Engineering, MBA, 59 years old, 16 years at
BASF
Responsibilities until December 31, 2019: Monomers; Perfor-
mance Materials; Process Research & Chemical Engineering;
Market & Business Development, Site & Verbund Management
North America; Regional Functions & Country Platforms North
America
Degree: MBA, 55 years old, 36 years at BASF
Responsibilities until December 31, 2019: Engineering & Tech-
nical Expertise; Environmental Protection, Health & Safety; Euro-
pean Site & Verbund Management; Human Resources
Responsibilities since January 1, 2020: Corporate Environ-
mental Protection, Health & Safety; European Site & Verbund
Management; Global Engineering Services; South America
First appointed: 2011, term expires: 2024
First appointed: 2008, term expires: 2023
Daimler AG³ (member)
none
Member of the Supervisory Board since: April 29, 2016
Memberships of statutory supervisory boards in Germany:
none
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 153 for the criteria used to determine independence)
1 Shareholder representative
2 Employee representative
3 Publicly listed
4 Not publicly listed
Deputy Chairman of the Works Council of BASF SE, Ludwigshafen
Site
BASF Report 2019
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At least 50% of members have different educational backgrounds
and professional experience
At least 30% under the age of 60
Further composition objectives
Character and integrity: All members of the Supervisory Board
must be personally reliable and have the knowledge and experience
required to diligently and independently perform the work of a
supervisory board member.
Availability: Each member of the Supervisory Board ensures that
they invest the time needed to properly perform their role as a
member of the Supervisory Board of BASF SE. The statutory
limits on appointments to governing bodies and the recommen-
dations of the German Corporate Governance Code must be
complied with when accepting further appointments.
- Age limit and period of membership: Persons who have
reached the age of 72 on the day of election by the Annual
Shareholders' Meeting should generally not be nominated for
election. Membership on the Supervisory Board should generally
not exceed three regular statutory periods in office; this currently
corresponds to 15 years.
160
Daimler Truck AG³ (member since September 24, 2019)
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
Waldemar Helber, Otterbach, Germany*2
none
Memberships of comparable domestic and foreign super-
visory bodies of commercial enterprises: none
Prof. Dr. Thomas Carell, Munich, Germany*1
Dame Alison Carnwath DBE, Exeter, England*1
Senior Advisor Evercore Partners
Member of the Supervisory Board since: May 2, 2014
Memberships of statutory supervisory boards in Germany:
none
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises:
Zurich Insurance Group AG³ (independent, non-executive mem-
ber of the Board of Directors)
Zürich Versicherungs-Gesellschaft AG (subsidiary of Zurich
Insurance Group AG)4 (independent, non-executive member of
the Board of Directors)
Memberships of comparable domestic and foreign
supervisory bodies of commercial enterprises: none
BP plc³ (non-executive director)
Broadwell Capital Limited 4 (non-executive member of the Board of
Directors)
Tatjana Diether, Limburgerhof, Germany*2
Member of the Works Council of BASF SE, Ludwigshafen Site,
and of the BASF Works Council Europe
Member of the Supervisory Board since: May 4, 2018
Memberships of statutory supervisory boards in Germany:
none
Memberships of comparable domestic and foreign super-
Professor for Organic Chemistry at Ludwig Maximilian University visory bodies of commercial enterprises: none
Munich
Member of the Supervisory Board since: May 3, 2019
Memberships of statutory supervisory boards in Germany:
PACCAR Inc.³ (independent member of the Board of Directors)
Coller Capital Ltd.4 (non-executive member of the Board of
Directors)
Responsibilities since January 1, 2020: Corporate Finance;
Corporate Audit; Global Business Services; Global Digital Ser-
vices; Global Procurement
Responsibilities until December 31, 2019: Corporate Con-
trolling; Corporate Audit; Finance; Catalysts; Coatings; Oil & Gas;
Procurement & Supply Chain Services; Digitalization & Information
Services
Vice Chairman of the Board of Executive Directors
Degree: Law, 60 years old, 32 years at BASF
Protection of Company Property and
Property of Business Partners
Gifts and Entertainment
Antitrust Legislation
Protection of Data Privacy
Protection of Environment, Health
and Safety
Human Rights, Labor
and Social Standards
Conflicts of Interest
Money Laundering
BASF's
BASF's Code of Conduct
Code of Conduct
stipulates how these
topics are handled
conducted at divisional, regional and country levels. The regular
compliance audits performed by the Corporate Audit department
are another source for the systematic identification of risks. These
risks are documented in the relevant risk or audit report. The same
applies to specific risk minimization measures as well as the time
frame for their implementation.
One key element in the prevention of compliance violations is
compulsory training and workshops held as classroom or online
courses. All employees are required within a prescribed time frame
to take part in basic compliance training, refresher courses and
special tutorials dealing with, for example, antitrust legislation, taxes
or trade control regulations. Training senior executives is a parti-
cular focus. For instance, all newly appointed senior executives
attend mandatory classroom training. Course materials and
formats are constantly updated, taking into account the specific
risks of individual target groups and business areas. In total, more
than 55,000 participants worldwide received around 64,000 hours
of compliance training in 2019.
For more information on the BASF Code of Conduct, see basf.com/code_of_conduct
Corruption
Information Protection
and Insider Trading Laws
Code of Conduct
forms core of our Compliance Program
More than 55,000
Imports and Exports
Participants in compliance training
86 internal audits
conducted on compliance
Our efforts are principally aimed at preventing violations from the
outset. We perform systematic risk assessments to identify the risk
of compliance violations, including corruption risks. These are
BASF's Compliance Program is based on our corporate values
and voluntary commitments, as well as international standards. It
describes our commitment to responsible conduct and expecta-
tions around how all BASF employees interact with business
partners, officials, colleagues and the community. At the core of
our Compliance Program is the global, standardized Code of
Conduct received by every employee. All employees and manag-
ers are obligated to adhere to its guidelines, which cover topics
ranging from corruption and antitrust laws to human rights, labor
and social standards, conflicts of interest and trade control, and
protection of data privacy.
For more information on securities transactions reported in 2019, see basf.com/en/directorsdealings
An overview of the BASF shares held by individual members of the Board of Executive Directors
can be found at basf.com/shares-held
Information on the auditor
The Annual Shareholders' Meeting of May 3, 2019, once again
elected KPMG AG Wirtschaftsprüfungsgesellschaft as the auditor of
the BASF Group Consolidated Financial Statements and Separate
Financial Statements of BASF SE for the 2019 business year, as well
as the corresponding management's reports. KPMG member firms
also audit the majority of companies included in the Consolidated
Financial Statements. KPMG has been the continuous auditor of
BASF SE since the 2006 Financial Statements. For this reason, a
public call to tender was issued in 2015 to all auditors for the audit
of the 2016 Consolidated and Separate Financial Statements, in
line with the E.U. Regulation 537/2014 of April 16, 2014. Based on
the results of the tendering process, the Audit Committee recom-
mended to the Supervisory Board that it once again propose
KPMG for election. After completing the tendering process, KPMG
can now be proposed for election at the Annual Shareholders'
Meeting as BASF's auditor without further tendering processes up
to and including the 2025 business year. Alexander Bock has been
the auditor responsible for the Consolidated Financial Statements
since auditing the 2017 Financial Statements. Since the 2017 Finan-
cial Statements, the auditor responsible for the Separate Financial
Statements has been Dr. Stephanie Dietz. The total fee paid to
KPMG and auditing firms of the KPMG group by BASF SE and
other BASF Group companies for non-audit services, in addition to
the auditing fee, was €0.9 million in 2019. This represents around
4.6% of the fees for auditing the financial statements.
For more information, see Note 33 to the Consolidated Financial Statements on page 288
BASF Report 2019
156
About This Report
1
Abiding by compliance standards is the foundation of responsible
leadership. This has also been embedded in our values. We are
convinced that compliance with these standards will not only
prevent the disadvantages associated with violations, such as
penalties and fines; we also view compliance as the right path
toward securing our company's long-term success.
To Our Shareholders
3 Corporate Governance
Compliance
4 Consolidated Financial Statements
5 Overviews
Compliance
Our Group-wide Compliance Program aims to ensure adher-
ence to legal regulations and the company's internal guide-
lines. Our employee Code of Conduct firmly embeds these
mandatory standards into day-to-day business. Members of
the Board of Executive Directors are also expressly obligated
to follow these principles.
Compliance Program and Code of Conduct
■ Integrated into corporate values
■ Regular compliance training for employees
2 Management's Report
BASF Report 2019
157
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Board of Executive Directors
4 Consolidated Financial Statements
5 Overviews
Management and
Supervisory Boards
Board of Executive Directors
Internal memberships within the meaning of section 100(2) of
the German Stock Corporation Act:
About This Report
Wintershall Dea GmbH, until April 30, 2019 Wintershall Holding
GmbH (Chairman of the Supervisory Board)
Wintershall AG (Chairman of the Supervisory Board)
Comparable German and non-German supervisory bodies:
Nord Stream AG (member of the Shareholders' Committee)
Wintershall Dea GmbH (member of the Supervisory Board since
May 1, 2019)
Comparable German and non-German supervisory bodies:
BASF Antwerpen N.V. (Chairman of the Administrative Council)
There were seven members on the Board of Executive
Directors of BASF SE as of December 31, 2019. As of
January 1, 2020, the Board of Executive Directors comprises
six members. The responsibilities within the Board have
been reallocated.
Dr. Martin Brudermüller
Chairman of the Board of Executive Directors
Degree: Chemistry, 58 years old, 32 years at BASF
Responsibilities until December 31, 2019: Legal, Taxes, Insur-
ance & Intellectual Property; Corporate Development; Corpo-
rate Communications & Government Relations; Senior Executive
Human Resources; Investor Relations; Compliance; Corporate
Technology & Operational Excellence; Innovation Management
Responsibilities since January 1, 2020: Corporate Legal,
Compliance, Tax & Insurance; Corporate Development; Corporate
Communications & Government Relations; Corporate Human
Resources; Corporate Investor Relations
First appointed: 2006, term expires: 2023
Dr. Hans-Ulrich Engel
Internal memberships within the meaning of section 100(2) of
the German Stock Corporation Act:
158
BASF Report 2019
For more information on human rights and labor and social standards, see basf.com/human_rights
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Compliance
4 Consolidated Financial Statements
5 Overviews
Compliance culture at BASF
We firmly believe that for corporate responsibility to be a success,
there must be an active culture of living these guidelines within the
company. Thanks to the early introduction of our compliance stan-
dards, which were consolidated in our global Code of Conduct in
2013, these are firmly established and recognized. We expect all
employees to act in line with these compliance principles. Managers
place a key role here – they serve as an example of and communicate
our values and culture both internally and externally.
Monitoring adherence to our compliance principles
BASF's Chief Compliance Officer (CCO) reports directly to the Chair-
man of the Board of Executive Directors and manages the further
development of our global compliance organization and our Compliance
Management System. The CCO is supported in this task by more
than 100 compliance officers worldwide in the regions and countries
as well as in the divisions. Material compliance topics are regularly
discussed in the compliance committees established at global and
regional level. The CCO reports to the Supervisory Board's Audit
Committee in at least one of its meetings each year on the status of
the Compliance Program as well as any major developments. In the
event of significant incidents, the Audit Committee is immediately
informed by the Board of Executive Directors.
-
We particularly encourage our employees to actively and promptly seek
guidance if in doubt. They can consult their managers, dedicated
specialist departments, such as the Legal department, and company
compliance officers. We have also set up more than 50 external
hotlines worldwide that our employees can use including
anonymously to report potential violations of laws or company
guidelines. All hotlines are also open to the public. Each concern is
documented according to specific criteria, properly investigated in
line with standard internal procedures and answered as quickly as
-
possible. The outcome of the investigation as well as any measures
taken are documented accordingly and included in internal reports.
In 2019, 408 calls and emails were received by our external hotlines
(2018: 397). The information received related to all categories of our
Code of Conduct, including environmental and human rights issues,
corruption and handling of company property. We carefully investi-
gated all cases of suspected misconduct that came to our attention
and took countermeasures on a case-by-case basis. These included,
for example, improved control mechanisms, additional informational
and training measures, clarification and expansion of the relevant
internal regulations, as well as disciplinary measures as appropriate.
Most of the justified cases related to personal misconduct in
connection with the protection of company property, inappropriate
handling of conflicts of interests or gifts and invitations. In such
isolated cases, we took disciplinary measures in accordance with
uniform internal standards and also pursued claims for damages
where there were sufficient prospects of success. In 2019, violations
of our Code of Conduct led to termination of employment in a total
of 52 cases (2018: 48) across all employee groups including senior
executives.
BASF's Corporate Audit department monitors adherence to compli-
ance principles, covering all areas in which compliance violations
could occur. They check that employees uphold regulations and
make sure that the established processes, procedures and
monitoring tools are appropriate and sufficient to minimize potential
risks or preclude violations in the first place. In 2019, 86 Group-wide
audits of this kind were performed (2018: 84). Our compliance
management system itself is also regularly audited by the internal
Corporate Audit department, most recently in November 2018.
Overall, the audits confirmed the effectiveness of the compliance
management system.
We monitor our business partners in sales for potential compliance
risks based on the global Guideline on Business Partner Due
Diligence using a checklist, a questionnaire and an internet-based
analysis. The results are then documented. If business partners are
not prepared to answer the questionnaire, we do not enter into a
business relationship with them. A dedicated global Supplier Code
of Conduct applies to our suppliers, which covers compliance with
environmental, social and corporate governance standards, among
other requirements. As part of our trade control processes, we also
check whether persons, companies or organizations appear on
sanction lists due to suspicious or illegal activities, and whether
there are business processes with business partners from or in
countries under embargo.
We support the United Nations' Guiding Principles on Business and
Human Rights and are constantly working to enhance our internal
guidelines and processes in keeping with these principles. For
example, there is an internal guideline to respect international labor
and social standards that is applicable throughout the Group.
Outside of our company, too, we support respect for human rights
and the fight against corruption. We are a founding member of the
United Nations Global Compact. As a member of Transparency
International Deutschland and the Partnering Against Corruption
Initiative (PACI) of the World Economic Forum, we assist in the
implementation of these organizations' objectives.
For more information on the Supplier Code of Conduct and supplier assessments,
see page 102 onward
Independence: To ensure the independent monitoring and con-
sultation of the Board of Executive Directors, the Supervisory Board
should have an appropriate number of independent members on
the board as a whole, and an appropriate number of independent
shareholder representatives. The Supervisory Board deems this
to be the case if more than half of the shareholder representatives
and at least eight members of the Supervisory Board as a whole
can be considered independent. Effective immediately, the Super-
visory Board's assessment of independence is based on the
criteria in the new version of the German Corporate Governance
Code, which was revised in 2019 (2020 Code). Among other
things, this means that a member of the Supervisory Board is no
longer considered independent if they have been a member of the
board for 12 years or longer. The previous threshold was a member-
ship duration of 15 years. The Supervisory Board has additionally
defined the following principles to clarify the meaning of indepen-
dence: The independence of employee representatives is not
compromised by their role as an employee representative or
employment by BASF SE or a Group company. Prior membership
of the Board of Executive Directors does not preclude indepen-
dence following the expiry of the statutory cooling-off period of
two years. Material transactions between a Supervisory Board
member or a related party or undertaking of the Supervisory
Board member on the one hand, and BASF SE or a BASF Group
company on the other, exclude a member of the Supervisory
At least one member with in-depth experience in digitalization,
information technology, business models and start-ups
Board from being qualified as independent. A material transaction
is defined as one or more transactions in a single calendar year
with a total volume of 1% or more of the sales of the companies
involved in each case. In the same way, if a Supervisory Board
member or a related party of a Supervisory Board member has a
personal service or consulting agreement with BASF SE or one of
its Group companies with an annual compensation of over 50%
of the Supervisory Board compensation, or a Supervisory Board
member or a related party of a Supervisory Board member holds
more than 20% of the shares in a company in which BASF SE is
indirectly or directly the majority shareholder, they likewise do not
qualify as independent.
According to the Supervisory Board's own assessment, its current
composition meets all of the requirements of the competence pro-
file. With the election of the new Supervisory Board member
Alexander C. Karp at the Annual Shareholders' Meeting 2019, the
competence area of digitalization - which is key to the future viability
of BASF - is now also fully covered.
BASF Report 2019
151
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Corporate Governance Report
4
Consolidated Financial Statements
Deals with monitoring the financial reporting process, the annual
audit, the effectiveness of the internal control system, the risk
5 Overviews
-
-
management system, and the internal auditing system as well as
compliance issues
Duties
· Identifies suitable candidates for the Supervisory Board based on
objectives for the composition decided on by the Supervisory
Board
Prepares the recommendations made by the Supervisory Board
for the election of Supervisory Board members for the Annual
Shareholders' Meeting
Is responsible for business relations with the company's external
auditor: prepares the Supervisory Board's proposal to the Annual
Shareholders' Meeting regarding the selection of an auditor,
monitors the auditor's independence, defines the focus areas of
the audit together with the auditor, negotiates auditing fees, evalu-
ates the quality of the audit, and establishes the conditions for the
provision of the auditor's nonaudit services; the chairman of the Strategy Committee
Audit Committee regularly discusses this with the auditor outside
of meetings as well
Deals with follow-up assessments of acquisition and investment
projects
-
Is authorized to request any information that it deems necessary
from the auditor or Board of Executive Directors; can also view all
of BASF's business documents and examine these and all other
assets belonging to BASF. The Audit Committee can also engage
experts such as auditors or lawyers to carry out these inspections
Prepares the negotiations and resolutions of the Supervisory
Board for the approval of the Financial Statements, the Consoli-
dated Financial Statements and the Management's Reports
including the Nonfinancial Statements and discusses the quarterly
statements and the half-year financial report with the Board of
Executive Directors prior to their publication
Dame Alison Carnwath DBE (chairman), Tatjana Diether, Franz
Fehrenbach (until February 29, 2020), Anke Schäferkordt (since
March 1, 2020), Michael Vassiliadis
The Supervisory Board appoints the members of the Board of
Executive Directors and supervises and advises the Board of
Executive Directors on management issues. As members of the
Supervisory Board cannot simultaneously be on the Board of
Executive Directors, a high level of autonomy is already structurally
ensured with regard to the supervision of the Board of Executive
Directors.
In addition to the SE Council Regulation, the relevant legal basis for
the size and composition of the Supervisory Board is provided by
the Statutes of BASF SE and the Agreement Concerning the
Involvement of Employees in BASF SE (Employee Participation
Agreement), which also includes the regulations applicable to BASF
for implementing the statutory gender quota for the Supervisory
Board. The German Codetermination Act does not apply to BASF
as a European stock corporation (Societas Europaea, SE).
The Supervisory Board of BASF SE comprises 12 members. Six
members are elected by the shareholders at the Annual Share-
holders' Meeting. The remaining six members are elected by the
BASF Europa Betriebsrat (BASF Works Council Europe), the
European employee representation body of the BASF Group. It is
planned to reduce the period of appointment for the members of the
Supervisory Board from five to four years. The aim is to ensure that
the maximum membership duration up to which a Supervisory
Board member can be classified as independent continues to
correspond to a total of three election terms. The Supervisory Board
reduced this duration from 15 to 12 years in accordance with the
new version of the German Corporate Governance Code, which
was revised in 2019 (2020 Code). A change to the Statutes to this
effect will be proposed to the Annual Shareholders' Meeting 2020.
The meetings of the Supervisory Board and its committees are
called by their chairpersons and, independently, at the request of
one of their members or the Board of Executive Directors. The
shareholder and employee representatives of the Supervisory Board
prepare for Supervisory Board meetings in separate preliminary
discussions in each case. Resolutions of the Supervisory Board are
passed by a simple majority vote of the participating members. In
the event of a tie, the vote of the Chairman of the Supervisory Board,
who must always be a shareholder representative, shall be the
casting vote. This resolution process is also applicable for the
appointment and dismissal of members of the Board of Executive
Directors by the Supervisory Board. Resolutions can, as needed,
also be made in writing or through other means of communication
outside of the meetings, as long as no member objects to this form
of passing a resolution.
The Board of Executive Directors regularly informs the Supervisory
Board about matters such as the course of business and expected
developments, the financial position and results of operations,
corporate planning, the implementation of the corporate strategy,
business opportunities and risks, and risk and compliance manage-
ment. The Supervisory Board has embedded the main reporting
requirements in an information policy. The Chairman of the Super-
visory Board is in regular contact with the Board of Executive
Directors, especially with its chairman, outside of meetings as well.
BASF SE's Supervisory Board has established a total of four Super-
visory Board Committees: the Personnel Committee, the Audit
Committee, the Nomination Committee and the Strategy Committee.
A list of the members of the Supervisory Board of BASF SE indicating which members are
shareholder or employee representatives and their appointments to the supervisory bodies of
other companies can be found from page 160 onward
The compensation of the Supervisory Board is presented in the Compensation Report
from page 174 onward
The Statutes of BASF SE and the Employee Participation Agreement can be found at
basf.com/statutes and basf.com/en/corporate governance
Duties
Personnel Committee
Dr. Jürgen Hambrecht (chairman), Michael Diekmann (until May 3,
2019), Franz Fehrenbach (since May 3, 2019), Sinischa Horvat,
Michael Vassiliadis
Duties
_
Prepares the appointment of members to the Board of Executive
Directors by the Supervisory Board as well as the employment
contracts to be entered into with members of the Board of
Executive Directors
When making recommendations for appointments to the Board
of Executive Directors, considers professional qualifications,
international experience and leadership skills as well as long-
term succession planning, diversity, and especially the appro-
priate consideration of women
Prepares the resolutions made by the Supervisory Board with
regard to the system and amount of compensation paid to
members of the Board of Executive Directors
Audit Committee
Members
Members
■ Four Supervisory Board committees
Financial experts
Nomination Committee
BASF Report 2019
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To Our Shareholders
2 Management's Report
3 Corporate Governance
Corporate Governance Report
4
The following requirements and objectives are considered essential
to the composition of the Supervisory Board as a collective body:
Consolidated Financial Statements
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-
-
-
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- Leadership experience in managing companies, associations and
networks
Members' collective knowledge of the chemical sector and the
related value chains
- Appropriate knowledge within the body as a whole of finance,
accounting, financial reporting, law and compliance as well as
one independent member with accounting and auditing expertise
("financial expert") within the meaning of section 100(5) of the
German Stock Corporation Act (AktG)
5 Overviews
Dame Alison Carnwath DBE and Franz Fehrenbach are members
with special knowledge of, and experience in, applying accounting
and reporting standards and internal control methods pursuant to
the German Corporate Governance Code.
Competence profile
■ Composition criteria: professional and personal
qualifications, diversity, and independence
Members
Dr. Jürgen Hambrecht (chairman), Prof. Dr. François Diederich (until
May 3, 2019), Prof. Dr. Thomas Carell (since May 3, 2019), Dame
Alison Carnwath DBE, Michael Diekmann (until May 3, 2019),
Dr. Alexander C. Karp (since May 3, 2019), Franz Fehrenbach, Anke
Schäferkordt
Members
Dr. Jürgen Hambrecht (chairman), Dame Alison Carnwath DBE,
Michael Diekmann (until May 3, 2019), Franz Fehrenbach (since
May 3, 2019), Waldemar Helber, Sinischa Horvat, Michael Vassiliadis
Duties
- Handles the further development of the company's strategy
- Prepares resolutions of the Supervisory Board on the company's
major acquisitions and divestitures
Meetings and meeting attendance
In the 2019 business year, meetings were held as follows:
The Supervisory Board met six times.
One important concern of good corporate governance is to ensure
that seats on the responsible corporate bodies, the Board of
Executive Directors and the Supervisory Board, are appropriately
filled. On December 21, 2017, the Supervisory Board therefore
agreed on objectives for the composition, the competence profile
and the diversity concept of the Supervisory Board in accordance
with section 5.4.1 of the German Corporate Governance Code in
the version dated February 7, 2017, and section 289f(2) no. 6 of
the German Commercial Code (HGB). These were expanded on
December 19, 2019, in particular with respect to the criteria for
assessing independence, based on the new recommendations of
the German Corporate Governance Code, which was revised and
amended in 2019 (2020 Code). The guiding principle for the com-
position of the Supervisory Board is to ensure qualified supervision
and guidance for the Board of Executive Directors of BASF SE.
Candidates shall be proposed to the Annual Shareholders' Meeting
for election to the Supervisory Board who can, based on their pro-
fessional expertise and experience, integrity, commitment, inde-
pendence and character, successfully perform the work of a super-
visory board member at an international chemical company.
-
- The Audit Committee met five times.
· The Nomination Committee met once.
- The Strategy Committee met once.
With the exception of one meeting, at which one member was
absent, all respective members attended all meetings of the Super-
visory Board. With the exception of the meeting of the Nomination
Committee, at which one member was absent, all respective
members attended all meetings of the Supervisory Board's
committees.
For more information on the Supervisory Board's activities and resolutions in the 2019 business year,
see the Report of the Supervisory Board from page 176 onward
For an individual overview of meeting attendance, see basf.com/supervisoryboard/meetings
The Supervisory Board's Rules of Procedure and its committees can be found at
basf.com/supervisoryboard
Competence profile, diversity concept and objectives for the
composition of the Supervisory Board
- The Personnel Committee met four times.
■ Supervisory Board appoints, monitors and advises Board
of Executive Directors
Supervision of company management by the Supervisory
Board
5 Overviews
■ Shareholders' rights of co-administration and supervision
at the Annual Shareholders' Meeting
■ One share, one vote
appointed proxies until the end of the agenda discussion during the
Annual Shareholders' Meeting. There are neither voting caps to
limit the number of votes a shareholder may cast nor special voting
rights. BASF has fully implemented the principle of "one share, one
vote." All shareholders entered in the share register are entitled to
participate in the Annual Shareholders' Meetings, to have their say
concerning any item on the agenda and to request information
about company issues insofar as this is necessary to make an
informed judgment about the item on the agenda under discussion.
Registered shareholders are also entitled to file motions pertaining to
proposals for resolutions made by the Board of Executive Directors
and Supervisory Board at the Annual Shareholders' Meeting and to
contest resolutions of the Meeting and have them evaluated for their
lawfulness in court. Shareholders who hold at least €500,000 of the
company's share capital, a quota corresponding to 390,625 shares,
are furthermore entitled to request that additional items be added to
the agenda of the Annual Shareholders' Meeting.
Shareholders exercise their rights of co-administration and super-
vision at the Annual Shareholders' Meeting, which usually takes
place within the first five months of the business year. The Annual
Shareholders' Meeting elects half of the members of the Super-
visory Board and, in particular, resolves on the formal discharge of
the Board of Executive Directors and the Supervisory Board, the Implementation of the German Corporate Governance Code
distribution of profits, capital measures, the authorization of share
buybacks, changes to the Statutes and the selection of the auditor.
Each BASF SE share represents one vote. All of BASF SE's shares
are registered shares. Shareholders are obliged to have themselves
entered with their shares into the company share register and to
provide the information necessary for registration in the share
register according to the German Stock Corporation Act. There are
no registration restrictions and there is no limit to the number of
shares that can be registered to one shareholder. Only the persons
listed in the share register are entitled to vote as shareholders. Listed
shareholders may exercise their voting rights at the Annual Share-
holders' Meeting either personally, through a representative of their
choice or through a company-appointed proxy authorized by the
shareholders to vote according to their instructions. Individual
instructions are only forwarded to the company on the morning of
the day of the Annual Shareholders' Meeting. Voting rights can be
exercised according to shareholders' instructions by company-
■ BASF SE follows all recommendations of German
Corporate Governance Code
BASF advocates responsible corporate governance that focuses on
sustainably increasing the value of the company. BASF SE follows
all of the recommendations of the German Corporate Governance
Code in the version dated February 7, 2017, the version in force
on submission of the Declaration of Conformity. The additional
recommendations of the new German Corporate Governance
Code, which was revised in 2019 and is still to be published in the
Federal Gazette (Bundesanzeiger) (2020 Code), are likewise largely
already met. The remaining necessary implementation measures
have already been initiated. In the same manner, BASF follows
nearly all of the nonobligatory suggestions of both of the above
versions of the German Corporate Governance Code. We have not
implemented the suggestion to enable shareholders to follow the
proceedings of the entire Annual Shareholders' Meeting online.
BASF Report 2019
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1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Corporate Governance Report
4
Consolidated Financial Statements
5 Overviews
The Annual Shareholders' Meeting is publicly accessible via online
broadcast until the end of the speech by the Chairman of the Board
of Executive Directors. The subsequent discussion of items on the
agenda is not accessible online in order to preserve the character of
the Annual Shareholders' Meeting as a meeting attended by our
shareholders on-site.
The joint Declaration of Conformity 2019 by the Board of Executive Directors and Supervisory Board
of BASF SE is rendered on page 183
About This Report
For more information on the Declaration of Conformity 2019, the implementation of the Code's
suggestions and the German Corporate Governance Code, see basf.com/en/corporate governance
The November 2015 Employee Participation Agreement relevant to the composition of the
Supervisory Board is available at basf.com/en/corporate governance
of women in its leadership team. The company is carrying out, and
constantly enhancing, worldwide measures to this effect.
According to the Supervisory Board's assessment, 11 of the 12
current members are considered independent based on the above
criteria. Only one Supervisory Board member is no longer classified
as independent: Franz Fehrenbach has been a member of the
Supervisory Board since January 2008 and thus no longer meets
the newly applied criterion of a membership duration of less than
12 years as of January 2020. To continue to ensure the full indepen-
dence of the Audit Committee, the Supervisory Board therefore
resolved to appoint Anke Schäferkordt to the Audit Committee as
the second shareholder representative in place of Franz Fehren-
bach, effective March 1, 2020.
For more information on the statutory minimum quotas for the number of women and men on the
Supervisory Board, see the following section
The independent Supervisory Board members are named under Management and Supervisory
Boards from page 159 onward
BASF Report 2019
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1
To Our Shareholders
For more information on women in leadership positions in the BASF Group worldwide, see page 27
For more information on the inclusion of diversity, including promotion of women, see the chapter on
Employees in the Management's Report on page 128
2 Management's Report
4
Consolidated Financial Statements
5 Overviews
Commitments to promote the participation of women in
leadership positions at BASF SE
■ Minimum quota on Supervisory Board, target figures for
Board of Executive Directors and top management
The supervisory board of a publicly listed European stock corporation
(SE) that is composed of the same number of shareholder and
employee representatives must, according to section 17(2) of the
SE Implementation Act, consist of at least 30% women and 30%
men. Since the 2018 Annual Shareholders' Meeting, the Super-
visory Board of BASF SE comprises four women, of whom two are
shareholder representatives and two are employee representatives,
and eight men; its composition meets the statutory requirements.
As a target figure for the Board of Executive Directors, the Super-
visory Board determined that, in accordance with section 111(5)
AktG for the second target-attainment period after the law's entry
into force, which began on January 1, 2017, the Board of Executive
Directors should continue to have at least one female member. This
represented 12.5% on the date the target was set (based on eight
members of the Board of Executive Directors), and represents
16.7% as of January 1, 2020 (based on six Board members). The
Board of Executive Directors also decided on target figures for the
proportion of women in the two management levels below the
Board of Executive Directors of BASF SE: Women are to make up
12.1% of the leadership level directly below the Board, and the level
below that is to comprise 7.3% women. This corresponds to the
status at the time these target figures were determined. The
deadline for achieving the goals for the second target-attainment
period was set for December 31, 2021.
BASF views the further development and promotion of women as a
global duty independent of individual Group companies. We set
ourselves ambitious global goals for this and made further progress
in 2019. BASF will continue working on expanding the percentage
3 Corporate Governance
Corporate Governance Report
Disclosures according to section 315a(1) of the German
Commercial Code (HGB) and explanatory report of the
Board of Executive Directors according to section 176(1)
sentence 1 of the German Stock Corporation Act (AktG)
As of December 31, 2019, the subscribed capital of BASF SE was
€1,175,652,728.32, divided into 918,478,694 registered shares
with no par value. Each share entitles the holder to one vote at the
Annual Shareholders' Meeting. Restrictions on the right to vote or
transfer shares do not exist. The same rights and duties apply to all
shares. According to the Statutes, shareholders are not entitled to
receive share certificates. There are neither different classes of
shares nor shares with preferential voting rights (golden shares).
At least 30% women and 30% men
BASF SE has taken out liability insurance that covers the activities of
members of the Board of Executive Directors and the Supervisory
Board (directors' and officers' liability insurance). This policy provides
for the level of deductibles for the Board of Executive Directors as
prescribed by section 93(2) sentence 3 AktG and for the level of
deductibles for the Supervisory Board as recommended in
section 3.8(3) of the German Corporate Governance Code in the
version dated February 7, 2017 (10% of damages up to one-and-a-
half times the fixed annual compensation).
Share ownership by members of the Board of Executive
Directors and the Supervisory Board
No member of the Board of Executive Directors or the Supervisory
Board owns shares in BASF SE and related options or other
derivatives that account for 1% or more of the share capital.
Furthermore, the total volume of BASF SE shares and related
financial instruments held by members of the Board of Executive
Directors and the Supervisory Board accounts for less than 1% of
the shares issued by the company.
Share dealings of the Board of Executive Directors and
Supervisory Board'
As legally stipulated by Article 19(1) MAR, all members of the Board
of Executive Directors and the Supervisory Board as well as certain
members of their families are required to disclose the purchase or
sale of financial instruments of BASF SE (e.g., shares, bonds,
options, forward contracts, swaps) to the Federal Financial Super-
visory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht)
and to the company if transactions within the calendar year exceed
the threshold of €5,000. In 2019, a total of 26 purchases by
members of the Board of Executive Directors and the Supervisory
Board and members of their families subject to disclosure were
reported as directors' dealings, involving between three and 10,000
-
The Supervisory Board strives to achieve a reasonable level of
diversity with respect to character, gender, international represen-
tation, professional background, specialist knowledge and experi-
ence as well as age distribution, and takes the following composition
criteria into account:
Diversity concept
Directors' and officers' liability insurance
For more information on the Supervisory Board's competence profile, see basf.com/supervisoryboard
At least one member with in-depth experience in human resources,
society, communications and the media
About This Report
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To Our Shareholders
2 Management's Report
3 Corporate Governance
Corporate Governance Report
4
Consolidated Financial Statements
Specialist knowledge and experience in sectors outside of the
chemical industry
For more information on bonds issued by BASF SE, see basf.com/bonds
Employees of BASF SE and its subsidiaries who are classed as
senior executives will receive a severance payment if their contract
of employment is terminated by BASF within 18 months of a change
of control event, provided the employee has not given cause for the
termination. The employee whose service contract has been
terminated in such a case will receive a maximum severance payment
of 1.5 times the annual salary (fixed component) depending on the
number of months that have passed since the change of control
event. The remaining specifications stipulated in section 315a(1) HGB
refer to situations that are not applicable to BASF SE.
In the event of a change of control, members of the Board of Execu-
tive Directors shall, under certain additional conditions, receive
compensation (details of which are listed in the Compensation
Report on page 172). A change of control is assumed when a share-
holder informs BASF of a shareholding of at least 25% or the
increase of such a holding. This change of control compensation will
no longer be awarded to outgoing members of the Board of Execu-
tive Directors effective January 1, 2020, with the introduction of the
amended compensation system for the Board of Executive Directors,
which will be submitted for approval to the Annual Shareholders'
Meeting on April 30, 2020.
The appointment and dismissal of members of the Board of Execu-
tive Directors is legally governed by the regulations in Article 39 of
the SE Council Regulation, section 16 of the SE Implementation Act
and sections 84 and 85 AktG as well as Article 7 of the Statutes of
BASF SE. Accordingly, the Supervisory Board determines the
number of members of the Board of Executive Directors (at least
two), appoints the members of the Board of Executive Directors,
and can nominate a chairperson, as well as one or more vice chair-
persons. The members of the Board of Executive Directors are
appointed for a maximum of five years. As a general rule, the initial
term of appointment for Board members at BASF is three years.
Reappointments are permissible. The Supervisory Board can dis-
miss a member of the Board of Executive Directors if there is serious
cause to do so. Serious cause includes, in particular, a gross
breach of the duties pertaining to the Board of Executive Directors
and a vote of no confidence by the Annual Shareholders' Meeting.
The Supervisory Board decides on appointments and dismissals
according to its own best judgment.
According to Article 59(1) of the SE Council Regulation, amend-
ments to the Statutes of BASF SE require a resolution of the Annual
Shareholders' Meeting adopted with at least a two-thirds majority of
the votes cast, provided that the legal provisions applicable to
German stock corporations under the German Stock Corporation
Act do not stipulate or allow for larger majority requirements. In the
case of amendments to the Statutes, section 179(2) of the German
Stock Corporation Act requires a majority of at least three-quarters
of the subscribed capital represented. Pursuant to Article 12(6) of
the Statutes of BASF SE, the Supervisory Board is authorized to
resolve on amendments to the Statutes that merely concern their
wording. This applies in particular to the adjustment of the share
capital and the number of shares after the redemption of repur-
chased BASF shares and after a new issue of shares from autho-
rized capital.
By way of a resolution of the Annual Shareholders' Meeting on
May 3, 2019, the Board of Executive Directors is authorized, with
the consent of the Supervisory Board, to increase, until May 2,
2024, on a one-off basis or in portions on a number of occasions,
the company's share capital by a total of up to €470 million by
issuing new shares against contributions in cash or in kind (authorized
capital). A right to subscribe to the new shares shall be granted to
shareholders. This can also be achieved by a credit institution
acquiring the new shares with the obligation to offer these to share-
holders (indirect subscription right). The Board of Executive Directors
is authorized to exclude the statutory subscription right of share-
holders to a maximum amount of a total of 10% of share capital in
certain exceptional cases that are defined in Article 5(8) of the
BASF SE Statutes. This applies in particular if, for capital increases
in return for cash contributions, the issue price of the new shares is
not substantially lower than the stock market price of BASF shares
and the total number of shares issued under this authorization does
not exceed 10% of the shares currently in issue or, in eligible individual
cases, to acquire companies or shares in companies in exchange for
surrendering BASF shares.
By way of a resolution of the Annual Shareholders' Meeting on
May 12, 2017, the share capital was increased conditionally by up
to €117,565,184 by issuing up to 91,847,800 new shares. The
contingent capital increase serves to grant shares to the holders of
convertible bonds or warrants attached to bonds with warrants of
BASF SE or a subsidiary, which the Board of Executive Directors is
authorized to issue up to May 11, 2022, by way of a resolution of the
Annual Shareholders' Meeting on May 12, 2017. A right to sub-
scribe to the bonds shall be granted to shareholders. The Board of
Executive Directors is authorized to exclude the subscription right in
certain exceptional cases that are defined in Article 5(9) of the
BASF SE Statutes.
At the Annual Shareholders' Meeting on May 12, 2017, the Board of
Executive Directors was authorized to purchase up to 10% of the
shares in issue at the time of the resolution (10% of the company's
share capital) until May 11, 2022. At the discretion of the Board of
Executive Directors, the purchase can take place on the stock
exchange or by way of a public purchase offer directed to all share-
holders. The Board of Executive Directors is authorized to sell the
repurchased company shares (a) through a stock exchange, (b)
through a public offer directed to all shareholders and - with the
approval of the Supervisory Board - to third parties, (c) for a cash
payment that is not significantly lower than the stock exchange price
at the time of sale and (d) for contributions in kind, particularly in
connection with the acquisition of companies, parts of companies or
shares in companies or in connection with mergers. In the cases
specified under (c) and (d), the shareholders' subscription right is
excluded. The Board of Executive Directors is furthermore authorized
to retire the shares bought back and to reduce the share capital by
BASF Report 2019
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To Our Shareholders
2 Management's Report
3 Corporate Governance
Corporate Governance Report
4
Consolidated Financial Statements
5 Overviews
the proportion of the share capital accounted for by the retired
shares.
Bonds issued by BASF SE grant the bearer the right to request early
repayment of the bonds at nominal value if, after the date of issue of
the bond, one person - or several persons acting together - hold or
acquire a volume of BASF SE shares that corresponds to more than
50% of the voting rights (change of control), and one of the rating
agencies named in the bond's terms and conditions withdraws its
rating of BASF SE or the bond, or reduces it to a noninvestment
grade rating within 120 days of the change of control event.
Status of implementation
- At least 30% of members have international experience based on
their background or professional experience
1 Obligatory reportable and publishable directors' dealings under Article 19(1) of the E.U. Market Abuse Regulation 596/2014 (MAR)
BASF shares or BASF ADRs. The price per share was between
€56.85 and €68.21. The volume of the individual trades was between
€188.31 and €585.500. The disclosed share transactions are pub-
lished on BASF SE's website.
BASF Report 2019
About This Report
167
BASF Report 2019
The variable component of the pension unit is the result of multiplying
the fixed pension component with a performance factor based on
the relevant ROCE in the reporting year concerned, as well as the
performance factors relevant to the performance bonus (variable
pension component).
As part of the pension benefits granted to the Board of Executive
Directors (Board Performance Pension), company pension benefits
are intended to accrue annual pension units, the amount of which
depends on the company's success and the performance of the
Board of Executive Directors as a whole in the business year
concerned. The method used to determine the amount of the
pension benefits generally corresponds to that used for all other
senior executives of the BASF Group in Germany. The annual
pension benefits accruing to Board members in a given reporting
year (pension unit) are composed of a fixed and a variable compo-
nent. The fixed component is calculated by multiplying the annual
fixed salary above the social security contribution ceiling by 32%
(fixed pension component).
Pension benefits due: On reaching the retirement age of 60
(63 for members first appointed to the Board of Executive
Directors since 2017) or on account of disability or death
- Pension entitlement: retirement, disability and surviving
dependents' pensions
Accrual of annual pension units, the amount of which depend
on the company's success and the performance of the Board
of Executive Directors as a whole
Board Performance Pension
5. Company pension benefits
The members of the Board of Executive Directors are covered by a
directors' and officers' liability insurance (D&O insurance) concluded
by the company. This policy provides for the level of deductibles for
the Board of Executive Directors as prescribed by section 93(2)
sentence 3 of the German Stock Corporation Act.
Members of the Board of Executive Directors receive various fringe
benefits in addition to the abovementioned cash compensation.
Fringe benefits include delegation allowances, accident insurance
premiums, transportation and benefits from the provision of security
measures by the company. The fringe benefits granted by the
company are subject to specific provisions and thereby also limited
in its amount.
4. Nonmonetary compensation and other additional
compensation (fringe benefits)
For more information on the LTI program, see page 130 and from page 284 onward
For more information on share ownership by members of the Board of Executive Directors,
see page 156
Due to the multiple-year exercise period, it can occur that exercise
gains from several LTI program years accumulate inside of one year;
there can also be years without any exercise gains.
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements
To Our Shareholders
1
About This Report
168
BASF Report 2019
Furthermore, a reconciliation statement for total compensation to be
reported is provided below the table "Compensation granted in
accordance with the German Corporate Governance Code (GCGC)"
due to the disclosures required by section 314(1) no. 6a of the
German Commercial Code (HGB) in connection with the German
Accounting Standard 17 (GAS 17).
The table "Compensation granted in accordance with the German
Corporate Governance Code (GCGC)" shows: fixed salary, fringe
benefits, performance bonus, LTI program measured at fair value as
of the grant date and service cost. The individual compensation
components are supplemented by individually attainable minimum
and maximum compensation.
Compensation granted in accordance with the German
Corporate Governance Code (GCGC)
In total, the maximum exercise gain (cap) is limited to five times the
individual investment and can amount to a maximum of €3,750,000
for an ordinary member of the Board of Executive Directors. The
maximum amount for the chairman of the Board of Executive
Directors is two times the maximum value for an ordinary Board
member, and 1.33 times this value for the vice chairman.
The tables on pages 169 to 171 show the granted and allocated
compensation as well as service cost of each member of the Board
of Executive Directors in accordance with section 4.2.5(3) of the
German Corporate Governance Code (GCGC) in the version dated
February 7, 2017.
A withholding and clawback clause was introduced as of January 1,
2018, for the performance bonus and the LTI program for all
members of the Board of Executive Directors. In the event that a
Board member commits a serious infringement of the Code of
Conduct of BASF Group or of the duty of care as a member of the
management of the company, this provision allows for a reduction
or cancellation of not yet paid variable compensation as well as the
clawback of variable compensation paid out since January 1, 2018.
Withholding and clawback clause
Board members are members of the BASF Pensionskasse WaG, as
are generally all employees of BASF SE. Contributions and benefits
are determined by the Statutes of the BASF Pensionskasse VVaG
and the General Conditions of Insurance.
The pension units also include survivor benefits. Upon the death of
an active or former member of the Board of Executive Directors, the
surviving spouse receives a survivor pension amounting to 60% of
the Board member's pension entitlement. The orphan pension
amounts to 10% for each half-orphan, 33% for an orphan, 25%
each for two orphans and 20% each for three or more orphans of
the pension entitlement of the deceased (former) Board member.
Total survivor benefits may not exceed 75% of the Board member's
pension entitlement. If the survivor pensions exceed the upper limit,
they will be proportionately reduced.
This is the amount that is payable on retirement, disability or death.
Pension benefits fall due at the end of service on reaching the age of
60 (for members first appointed to the Board of Executive Directors
after January 1, 2017: on reaching the age of 63), or on account of
disability or death. Pension payments are reviewed on a regular
basis and adjusted by at least 1% each year. Members of the Board
of Executive Directors have the option to choose between payment
of their pension entitlements in the form of a lifelong pension or a
lump sum. The amount of the lump-sum payment is calculated by
capitalizing the annual pension entitlement accrued as of the end of
the service period as a member of the Board of Executive Directors.
The sum of the pension units accumulated over the reporting years
determines the respective Board member's pension benefit in the
event of a claim.
The amount resulting from the fixed and the variable pension
component is converted into a pension unit (lifelong pension) using
actuarial factors (annuity conversion factor). The currently applied
annuity conversion factor is based on an actuarial interest rate of
5%, the probability of death, invalidity and bereavement according
to Heubeck Richttafeln, 2005G (modified) and an assumed pension
increase (at least 1% each year).
5 Overviews
Amount of total compensation
Performance threshold, right A: BASF share price increases at
least 30% compared with the base price on the option grant date
for the LTI program concerned. The value of right A is calculated
as the difference between the market price of BASF shares on
the exercise date and the base price on the option grant date. It
is limited to 100% of the base price (cap). The base price for an
LTI program is the volume-weighted average share price in
Deutsche Börse AG's electronic trading system (Xetra) on the first
trading day after the Annual Shareholders' Meeting of BASF SE
in the year in which the LTI program is granted. The base price for
the LTI program granted in 2019 was €68.21 (2018: €85.45).
Performance threshold, right B: The cumulative percentage
performance of the BASF share exceeds that of the MSCI World
Chemicals Index (outperformance) and the price of the BASF
share on the exercise date equals at least the base price. The
value of right B is calculated as the base price of the option
multiplied by twice the outperformance of BASF shares on the
exercise date. It is limited to the closing price on the date of
exercise minus the computed nominal value of BASF shares.
-
Each option consists of right A (absolute performance threshold)
and right B (relative performance threshold), whose value is deter-
mined by different performance targets. At least one of the two
conditions must be met in order for the option to be exercised:
- Absolute performance threshold: BASF share price gains at
least 30% compared with the base price for the LTI program
concerned
-
LTI program
3. Long-term, share price-based incentive program
(LTI program)
0.6375
ROCE factor 2019:
€1,600,000
Target amount
2019 performance bonus
(2019-2022):
Relative performance threshold: BASF shares outperform the
MSCI World Chemicals Index and no share price loss
compared with the base price on the option grant date
Performance bonus (gross) for a full-year ordinary member of the Board of Executive Directors
ROCE factor 2019:
For the 2018 performance bonus period (2018-2021), a strategic
performance factor of 1.1 was determined in 2019 for the deferral
component based on the targets agreed in 2018.
The targets on the share of investment in emerging markets,
portfolio restructuring, leveraging synergies, and CO2 equivalent
emissions were exceeded.
The volumes growth and Accelerator sales targets were not met.
The employee engagement target was met despite comprehen-
sive restructuring and portfolio measures.
-
Overall, the strategic targets were reached in 2019, resulting in a
strategic performance factor (SPF 2019) of 1.0:
Strategic performance factor (SPF 2019):
5 Overviews
The BASF Group's ROCE, which is used to determine compensa-
tion, was 7.7% in 2019. The target ROCE for 2019 was 11%, with
the average cost of capital unchanged at 10%. Accordingly, the
ROCE factor for 2019 was 0.6375.
2 Management's Report
- Share ownership obligation: Mandatory individual investment
in BASF shares with a holding obligation of 10% of the actual
performance bonus (gross), plus up to an additional 20% of
the actual performance bonus (gross)
- Term: eight years
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Compensation Report
2 Management's Report
1 To Our Shareholders
About This Report
166
(2,832)
-
Four options are granted for each BASF share brought into the LTI
program as an individual investment. After a four-year vesting
period, there is a four-year exercise period during which the
members of the Board of Executive Directors can exercise these
options if performance thresholds are met. During the exercise
period, the exercising of options is prohibited during certain periods
(closed periods). Each member of the Board of Executive Directors
can individually decide on the timing and extent of the exercising
of options. Once the options are exercised, the computed value
of the options is paid out in cash (cash settlement).
€969,000
Actual amount
2019 performance bonus
(gross) (2019-2022):
2
0.9 + 1.0
2
OPF 2019 + SPF 2019
- Maximum exercise gain (cap): five times the individual
investment
- Exercise first possible: four years after the grant date (vesting
period)
An LTI program exists for members of the Board of Executive
Directors. It is also offered to all other senior executives of the
BASF Group, with a small number of modifications. To take part in
the program, each participant must prove an individual investment
in BASF shares and hold the shares for this purpose for a defined
period of time (holding period). The individual investment can
amount to a maximum of 30% of the participant's performance
bonus (gross) for the previous year. The members of the Board of
Executive Directors are obligated to invest at least 10% of their indi-
vidual performance bonus (gross) for the previous year in the LTI
program each year (share ownership obligation). This mandatory
investment is subject to a holding period of four years. For any
further additional voluntary investment of up to 20% of the perfor-
mance bonus (gross) for the previous year, the general holding
period of two years applies.
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements
5 Overviews
3,252
1,140
5,761
661
387
387
387
1,023
699
699
699
709
491
491
491
3,762
3,244
3,449
5,467
846
2,867
1,250
667
492
796
421
0
2,121
421
1,223
0
512
0
2,121
3,101
2,857
836
5,457
2,933
2,121
4 Consolidated Financial Statements
5,844
3,566
2019
2019
2019
2019
2019
2019
2019
2019
(Member of the Board of Executive Directors
until December 31, 2019)
Sanjeev Gandhi
Executive Directors
(since May 4, 2018)
Vice Chairman of the Board of
Saori Dubourg
Dr. Hans-Ulrich Engel
Dr. Martin Brudermüller
Chairman of the Board of Executive Directors
(since May 4, 2018)
Thousand €
Compensation granted in accordance with the German Corporate Governance Code (GCGC)
2018
2019
(min)
(max)
1,545
6,166
4,158
3,743
1,631
6,252
800
0
3,956
2019
(max)
(min)
2019
2018
(max)
(min)
2019
2018
2018
0
3 Corporate Governance
Compensation Report
1 To Our Shareholders
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
163
BASF Report 2019
a Amounts apply to an ordinary member of the Board of Executive Directors. The amount for the chairman of the Board of Executive Directors is two times this value, and 1.33 times this value for the vice chairman.
b To reach the cap, a Board member must make the maximum individual investment based on the maximum performance bonus and the set limit on the gain from exercising the options granted must be reached.
The annual service cost is the accounting figure for the pension entitlements accrued in the relevant business year
The annual amount corresponds to the value of nonmonetary compensation
5. Company pension benefits
4. Fringe benefits
In a period of 4 to 8 years after the grant date,
depending on individual exercise date
€3,750,000a,b
Payment
Сар
5 Overviews
Compensation Report
Target agreement and evaluation
Schematic overview: performance bonus, part 1
+ SPF
+ SPF
SPF
(50% of the performance bonus (gross))
Deferral component
Schematic overview: performance bonus, part 2
50%
Performance bonus
(gross)
The annual amount granted is dependent on the fair value of the options as of the grant date and the scope of the
individual investment
2
✗
Year 1
Year 1
Target bonus
+ SPF
OPF
Performance
bonus, part 1
50%
ROCE factor
Year 1
Performance bonus, part 2: after the end of the four-year performance period
€2,500,000ª
b Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
a Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
(387)
1,742
(661)
2,208
Total compensation
Less service cost
485
707
Plus allocated actual annual variable compensation
(performance bonus, part 1)
Less granted 2019 performance bonus (2019-2022),
(one-year component and deferral component)
Less granted 2018 performance bonus (2018-2021),
(one-year component and deferral component)
(1,600)
(1,600)
(1,600)
(1,600)
(1,600)
(1,600)
c Fringe benefits include the payment of additional taxes for 2018 and/or 2019 and tax back payments for previous years arising in connection with transfers.
d From the 2019 reporting year onward, the fixed salary is presented on the basis f the fixed salary (gross) in accordance with the Board member's contract.
707
485
707
€1,600,000ª
In equal installments
€800,000ª
Payment
Cap
Annual target
Payment
170
Performance bonus, part 1: after the Annual Shareholders' Meeting for the past
business year
BASF Report 2019
2,556
1,752
2,040
(491)
(709)
(699)
(1,023)
485
2,137
Year 2
Year 3
+ SPF
+2 pp
+1 pp
Target ROCE
-1 pp
-2 pp
-4 pp
-3 pp
-6 pp
-5 pp
above the target
■ROCE, the ROCE
factor is increased
by 0.05 for each full
percentage point.
percentage points
If the actual ROCE
is more than 6
17.0%
13.0%
11.0%
5.0%
A ROCE factor is assigned to each relevant ROCE value. If the
ROCE is two percentage points or more below the target ROCE, the
ROCE factor will decline at a faster rate. The ROCE factor will
increase at a slower rate if the ROCE is two percentage points or
more above the target ROCE.
For more information on operating assets, see Value-Based Management on page 30
The ROCE of the particular fiscal year serves as the key performance
indicator for the success of the company when determining the
performance bonus. ROCE is the ratio of income from operations
(EBIT) of the segments in relation to the average operating assets
of the segments, plus the customer and supplier financing not
included there.
+3 pp
+4 pp
+5 pp
+6 pp
About This Report
165
BASF Report 2019
In determining the operational performance factor, the Supervisory
Board took into account the fact that only 50% of its expectations
for the economic environment at the time the 2019 budget was
adopted (see page 117 onward of the BASF Report 2018) were
fulfilled.
The target of generating a strong free cash flow as a basis for
increasing the dividend was met.
The target for EBIT before special items (slight increase) was not
met.
Sales did not meet the target of slight growth, mainly from higher
sales volumes and portfolio effects.
-
Determination of the ROCE factor
-
The comparison of operational targets (see page 120 onward of the
BASF Report 2018) with target achievement, taking into account the
economic environment forecast at the beginning of the year and
actual economic conditions, resulted in an operational performance
factor (OPF 2019) of 0.9:
Operational performance factor (OPF 2019):
The performance bonus (gross) for 2019 was determined on the
basis of target achievement as ascertained by the Supervisory
Board and ROCE for the 2019 business year.
Target agreement and target achievement in 2019
The Supervisory Board sets a maximum amount for the performance
bonus (cap). The current total cap is €2,500,000 for an ordinary
member of the Board of Executive Directors (performance bonus,
part 1 and performance bonus, part 2). The maximum amount for
the chairman of the Board of Executive Directors is two times this
value, and 1.33 times this value for the vice chairman.
If the target ROCE is met and the target achievement is 100%, the
performance bonus is double the fixed salary (target amount).
The ROCE factor is 1.0 if the ROCE achieved in the fiscal year is one
percentage point above the weighted cost of capital percentage
(based on the weighted average cost of capital, WACC, in accor-
dance with the Capital Asset Pricing Model) for that year, meaning
an appropriate premium on the cost of capital was earned. In
calculating ROCE, adjustments are made for negative and positive
special items resulting from acquisitions and divestitures (for
example, integration costs in connection with acquisitions and gains
or losses from the divestiture of businesses) when these exceed a
corridor of plus or minus 1% of the average cost of capital basis. An
adjustment of the ROCE (in the first 12 months after closing)
therefore only occurs in cases of exceptionally high special items
resulting from acquisitions and divestitures.
>6 pp
-
Values between these figures are interpolated
1.5
1.0
3 Corporate Governance
Compensation Report
2 Management's Report
1 To Our Shareholders
About This Report
164
BASF Report 2019
The achievement of operational and strategic targets is evaluated
separately. The amount of the performance bonus thus takes into
account the Board of Executive Directors' performance for both the
short-term and long-term success of the company.
The Board of Executive Directors' target agreement contains opera-
tional and strategic objectives. The operational targets (primarily
earnings, financial, investment and operational excellence targets)
cover the company's short-term financial performance. The strategic
targets relate to BASF's medium and long-term development on the
basis of the corporate strategy. They comprise targets for growth,
portfolio optimization, investment and R&D strategy, digitalization,
sustainability and the BASF corporate values.
4 Consolidated Financial Statements
Performance bonus,
part 2
investment and operational excellence targets such as EBITDA
before special items and sales
One-year operational targets, primarily earnings, financial,
-
In order to assess the sustainable performance of the Board of
Executive Directors, each year the Supervisory Board sets a
target agreement with the Board of Executive Directors as a
whole. The target agreement contains:
Target agreement
Deferral
Components
4
Year 4
Multiple-year strategic targets relating to the further
development of BASF, primarily targets for growth, portfolio
optimization, investment and R&D strategy, digitalization,
sustainability and BASF corporate values
2 Management's Report
5 Overviews
An operational performance factor and a strategic performance
factor, each with a value between 0 and 1.5, are determined on the
basis of the target achievement ascertained by the Supervisory
Board. A target achievement rate of 100% equates to a value of 1.0
for the performance factor. The maximum performance factor of 1.5
applies for a target achievement rate of 125% and over; a target
achievement rate of 50% or less represents a performance factor
of 0.
0.5
0
Performance factor
0.3
100% ≥125%
75%
≤50%
Target achievement
Determination of performance factors
if the actual ROCE is more
than 6 percentage points
below the target ROCE.
0.8
9.0%
1.0
1.2
1.5
ROCE
factor
ROCE factor
Target achievement and performance factor
A special resolution by the
Supervisory Board is required
Reconciliation reporting of total compensation pursuant to
section 314(1) no. 6a HGB in connection with GAS 17
800
0
800
1,250
0
800
1,663
0
1,064
-
2,500
0
(1,600)
(3,200)
(2,128)
(1,600)
-
(1,600)
-
0
1,250
2,303
2,346
800
973
1,416
50% of the 2018 performance bonus (2018-2021),
deferral component
3,371
0
1,221
1,467
(1,600)
2,263
1,001
1,130
4,244
0
1,577
1,640
6,253
0
0
800
Plus allocated actual annual variable compensation
(performance bonus, part 1)
969
a Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
b Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
c Fringe benefits include the payment of additional taxes for 2018 and/or 2019 and tax back payments for previous years arising in connection with transfers.
d From the 2019 reporting year onward, the fixed salary is presented on the basis of the fixed salary (gross) in accordance with the Board member's contract.
BASF Report 2019
169
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4 Consolidated Financial Statements
5 Overviews
Compensation granted in accordance with the German Corporate Governance Code (GCGC)
Thousand €
Michael Heinz
Dr. Markus Kamieth
Wayne T. Smith
2019
3,433
3,772
1,842
1,895
860
644
707
485
707
485
Less service cost
Total compensation
1,251
(1,111)
3,690
(626)
(366)
(1,029)
(704)
(789)
(510)
2,612
2,290
(573)
3,375
50% of the 2019 performance bonus (2019-2022),
deferral component
1
1,064
2,233
6,179
6,382
510
510
510
789
704
704
704
1,029
366
366
366
626
573
573
10,986
4,324
4,140
1,499
Less granted 2019 performance bonus (2019-2022),
(one-year component and deferral component)
Less granted 2018 performance bonus (2018-2021),
(one-year component and deferral component)
Reconciliation reporting of total compensation pursuant to
section 314(1) no. 6a HGB in connection with GAS 17
1,250
0
800
1,250
о
573
800
3,037
5,058
5,454
5,373
1,860
3,661
3,817
7,406
7,658
1,111
7,148
2,527
513
3,753
0
746
667
330
667
887
0
2,500
1,600
Total compensation in accordance with GCGC
Service cost
Total
LTI program 2019 (2019-2027)
LTI program 2018 (2018-2026)
1,663
о
0
2018
2,581
0
4,548
4,665
4,669
1,156
2,957
2,788
7,040
1,133
201
3,774
10,413
1,660
5,606
5,271
2,121
0
421
1,013
3,698
1,250
2019
2019
(max)
836
836
836
841
846
846
846
1,053
1,140
1,140
1,140
800
800
0
1,250
800
800
834
340b
340b
340b
800
800
800
800
1,064
1,064
1,064
973
0
1,600
1,600
1,416
One-year variable target compensation
Total
Fringe benefits
Fixed salary
46
165
1,600
761a
1,250
800
3,371
1,596
1,312
0
3,371
50% of the 2018 performance bonus (2018-2021),
deferral component
800
800
800
50% of the 2019 performance bonus (2019-2022),
deferral component
I
LTI program 2018 (2018-2026)
LTI program 2019 (2019-2027)
Total
Service cost
Total compensation in accordance with GCGC
800
0
1,221
1,292
3,371
0
1,250
50% of the 2018 performance bonus (2018-2021)
50% of the 2019 performance bonus (2019-2022)
Multiple-year variable compensation
800
800
800
800
0
800
1,250
0
1,250
800
0
1,250
1,467
1,221
0
800
136
60
60
800
800
888
800a, d
800a, d
800a, d
34
36
36
36
41
46
46
46
1,600
-
800
800
800
800
800
2019
2019
2019
2019
2018
2019
(min)
(max)
800
2018
(min)
(max)
Fixed salary
Fringe benefits
Total
One-year variable target compensation
800
800
2019
973
1,416
50% of the 2018 performance bonus (2018-2021)
50% of the 2019 performance bonus (2019-2022)
Multiple-year variable compensation
858
1,133
1,133
1,133
1,085
1,660
1,660
1,660
1,156
1,552
356
356
58
69
69
69
112
60
356
(min)
1,156
1,416
1,250
0
2,527
2,527
(min) (max)
800a,d 800a,d 800a, d
1,637b,c 1,727b,c 1,727b.c 1,727b,c
2,398
2,527
800
800
1,250
1,156
0
800
1,663
0
1,064
973
2,500
0
1,600
800
1,250
(1,946)
Member of the Supervisory Board since: May 3, 2019
Memberships of statutory supervisory boards in Germany:
Axel Springer SE³ (member until December 31, 2019)
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises:
bodies of commercial enterprises:
Wayfair Inc.3 (non-executive director since September 17, 2019)
Denise Schellemans, Brecht, Belgium*2
Full-time trade union delegate
none
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
Henkel AG & Co. KGaA³ (member)
Vivawest GmbH4 (member)
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
Allianz SE3 (chairman)
RAG Deutsche Steinkohle Aktiengesellschaft, 4 merged with RAG
Fresenius Management SE4 (member)
Fresenius SE & Co. KGaA³ (vice chairman)
Siemens AG³ (member)
Prof. Dr. François Diederich, Dietikon, Switzerland¹
Professor at the Swiss Federal Institute of Technology, Zurich,
Switzerland
Member of the Supervisory Board since: May 19, 1998
Memberships of statutory supervisory boards in Germany:
none
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 153 for the criteria used to determine independence)
1 Shareholder representative
2 Employee representative
3 Publicly listed
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
Memberships of comparable domestic and foreign supervisory Aktiengesellschaft on April 23, 2019 (vice chairman)
RAG Aktiengesellschaft³ (vice chairman)
Chairman of the Mining, Chemical and Energy Industries Union
Member of the Supervisory Board since: August 1, 2004
Memberships of statutory supervisory boards in Germany:
Steag GmbH4 (member)
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Supervisory Board
4 Consolidated Financial Statements
5 Overviews
Dr. Alexander C. Karp, Palo Alto, California*1
CEO Palantir Technologies Inc.
The Economist Newspaper Limited 4 (non-executive director until
November 28, 2019)
Anke Schäferkordt, Cologne, Germany*1
Member of the Supervisory Board
Member of the Supervisory Board since: December 17, 2010
Memberships of statutory supervisory boards in Germany:
Serviceplan Group Management SE,4 partner with unlimited liabil-
ity of Serviceplan Group SE & Co. KG (member since July 1, 2019)
Roland Strasser, Riedstadt, Germany*2
Regional Manager of the Rhineland-Palatinate/Saarland branch of
IG BCE
Member of the Supervisory Board since: May 4, 2018
Memberships of statutory supervisory boards in Germany:
AbbVie Komplementär GmbH4 (member)
V & B Fliesen GmbH4 (member)
The following members left the Supervisory Board on
May 3, 2019
Michael Diekmann, Munich, Germany¹
Vice Chairman of the Supervisory Board of BASF SE
Chairman of the Supervisory Board of Allianz SE
Member of the Supervisory Board since: May 6, 2003
Memberships of comparable domestic and foreign supervisory Memberships of statutory supervisory boards in Germany:
bodies of commercial enterprises: none
Michael Vassiliadis, Hannover, Germany*2
4 Not publicly listed
BASF Report 2019
Member of the Supervisory Board since: January 14, 2008
Memberships of statutory supervisory boards in Germany:
About This Report
For each fiscal year, a member of the Board of Executive Directors
is entitled to a performance bonus with a four-year performance
period. After the first year of this four-year performance period, the
performance bonus (gross) is determined based on the achieve-
ment of operational targets (operational performance factor, OPF)
and strategic targets (strategic performance factor, SPF) as well as
the ROCE (ROCE factor). 50% of the amount is paid out after the
Annual Shareholders' Meeting in the following year (performance
bonus, part 1).
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Compensation Report
2 Management's Report
1 To Our Shareholders
About This Report
162
BASF Report 2019
The compensation of the Board of Executive Directors is determined
by the company's size, complexity and financial position, as well as
the performance of the Board of Executive Directors as a whole. It is
designed to promote sustainable corporate development and
ensure a pronounced variability in relation to the performance of the
Board of Executive Directors and the BASF Group's success. The
1 The European peer group for the 2019 appropriateness review comprised the following companies: ABB, Air Liquide, Akzo Nobel, BAE Systems, Bayer, BHP, BMW, BP, Continental, Daimler, DSM, E.ON, EDF, Henkel, Linde, Rolls Royce, Royal Dutch Shell, Siemens, Solvay, Thyssenkrupp, Total, Volkswagen
For more information on the determination of the cost of capital percentage,
see Value-Based Management on page 30
The performance bonus is based on the performance of the Board
of Executive Directors as a whole and the return on capital employed
(ROCE) of the BASF Group. ROCE is also the key performance
indicator for the variable compensation of all employees. The target
ROCE for the variable compensation is one percentage point above
the cost of capital percentage for the fiscal year, which is determined
using the weighted average cost of capital (WACC) approach in
accordance with the Capital Asset Pricing Model. This target
reflects the strategic goal of achieving a ROCE considerably above
the cost of capital percentage every year, even if the capital struc-
ture and interest rate level change over time. The target value is
thus directly linked to the return expected by investors, which also
serves as orientation for the BASF Group's value-based manage-
ment as a whole.
If the target ROCE is met and the target achievement is 100%,
the performance bonus is double the fixed salary (target
amount).
50% of the performance bonus calculated after the first year is
deferred for another three years and paid out after the end of
the four-year performance period based on the achievement of
strategic targets.
The amount of the performance bonus is based on the
achievement of set operational targets and strategic medium-
term objectives, as well as the BASF Group's ROCE.
161
-
-
-
-
Performance bonus
The remaining 50% is deferred for another three years and is not
immediately payable (deferral component). The final amount of the
deferral component is determined depending on the degree to
which the strategic targets were achieved within the four-year
performance period (strategic performance factor, SPF) and is paid
out after the Annual Shareholders' Meeting in the year following the
end of this four-year performance period (performance bonus,
part 2).
Overview of compensation components
Four-year, forward-looking performance period
2. Performance bonus
1. Fixed salary
1
To Our Shareholders
2 Management's Report
4 Consolidated Financial Statements
5 Overviews
Compensation Report
This report outlines the main principles of the compensation
for the Board of Executive Directors and discloses the
amount and structure of the compensation of each Board
member. Furthermore, it provides information on end-of-
service undertakings with respect to members of the Board
of Executive Directors, as well as information on the
compensation of Supervisory Board members.
This report meets the disclosure requirements of the German
Commercial Code, supplemented by the additional requirements
based on the German Act on the Disclosure of Management Board
Remuneration (VorstOG) as well as the German Act on the Appropri-
ateness of Management Board Remuneration (VorstAG), and is
aligned with the recommendations of the German Corporate Gover-
nance Code (GCGC) in the version dated February 7, 2017. At its
meeting on December 19, 2019, the Supervisory Board resolved to
amend the existing compensation system for the Board of Executive
Directors. The amendments also meet the changed requirements
from the 2020 fiscal year onward arising from the German Act
Implementing the Second E.U. Shareholder Rights Directive
(ARUG II), which entered into force on January 1, 2020, and from
the German Corporate Governance Code (GCGC) in the version
dated December 16, 2019, which was submitted to the German
Federal Ministry of Justice on January 23, 2020, for review and
publication in the Federal Gazette (Bundesanzeiger).
Principles and structure
3 Corporate Governance
Compensation Report
Based on a proposal by the Personnel Committee, the Supervisory
Board determines the structure and amount of compensation of
members of the Board of Executive Directors.
external and internal appropriateness of the Board's compensation
is reviewed by an independent external auditor on a regular basis.
DAX companies in Germany and globally operating companies in
the rest of Europe¹ serve as an external reference. For internal
comparison, the compensation of senior executives and employees
of BASF SE is considered in total as well as over time.
Annual amount
2. Performance bonus
The annual fixed salary for an ordinary member of the Board of
Executive Directors has been €800,000 since January 1, 2017. The
fixed salary for the chairman of the Board of Executive Directors is
two times the value for an ordinary Board member, and 1.33 times
this value for the vice chairman.
3. Long-term, share price-based
incentive program
1. Fixed salary
Individual compensation components
In 2019, the Supervisory Board engaged an independent external
compensation consultant with an appropriateness review. The
results of the appropriateness review revealed that the compensa-
tion granted to BASF's Board of Executive Directors was within
market range for the peer group (horizontal comparison). An assess-
ment of the compensation of an ordinary member of the Board of
Executive Directors in relation to the compensation paid to the
company's employees and senior executives (vertical comparison)
did not provide any indications of inappropriate compensation, nor
did an assessment of its development over time.
For more information on the Supervisory Board and its committees,
see page 160 and from page 178 onward
The fixed salary is a set amount of yearly compensation paid out in
equal installments. It is regularly reviewed by the Supervisory Board
and adjusted, when appropriate.
programs, while taking into account the terms and conditions of the
program.
25,484
The outstanding option rights held by the members of the Board
of Executive Directors resulted in the following expenses in 2019:
Dr. Martin Brudermüller: expense of €464 thousand (2018: income
of €4,170 thousand); Dr. Hans-Ulrich Engel: expense of €339 thou-
sand (2018: income of €3,821 thousand); Saori Dubourg: expense
of €66 thousand (2018: expense of €12 thousand); Sanjeev
Gandhi: expense of €790 thousand (2018: income of €185 thou-
sand); Michael Heinz: expense of €334 thousand (2018: income of
€2,636 thousand); Dr. Markus Kamieth: expense of €124 thousand
(2018: expense of €13 thousand); Wayne T. Smith: expense of
€298 thousand (2018: income of €1,602 thousand).
In 2019, the option rights granted resulted in an expense. This
expense refers to the total of all option rights from the LTI programs
2011 to 2019 and is calculated as the difference in the fair value of
the option rights on December 31, 2019, compared with the fair
value on December 31, 2018, considering the option rights exer-
cised and granted in 2019. The fair value of the option rights is
based primarily on the development of the BASF share price and its
relative performance compared with the benchmark index, the
MSCI World Chemicals Index.
167,220
185,692
The expenses reported below are purely accounting figures that do
not equate with the actual gains should options be exercised. Each
member of the Board of Executive Directors may decide individually
on the timing and scope of the exercise of options of the LTI
24,880
18,792
24,880
25,484
Accounting valuation of multiple-year
variable compensation (LTI programs)
Total
Dr. Markus Kamieth
For more information on the LTI program, see page 130 and from page 284 onward
Wayne T. Smith
24,880
Pension benefits
5,067
The present value of pension benefits (defined benefit obligation) is
an accounting figure for the entitlements that the Board members
have accumulated in their years of service at BASF. The table below
shows the defined benefit obligations for the pension entitlements
accrued until the end of 2019 (as of December 31 in each case).
Michael Heinz
4,586
Michael Heinz
4,824
(Member of the Board of Executive Directors
until December 31, 2019)
Sanjeev Gandhi
Dr. Hans-Ulrich Engel
11,985
14,081
6,983
19,993
18,171
2018
2019
Saori Dubourg
Dr. Martin Brudermüller
Thousand €
The values for service cost incurred in 2019 contain service cost for
BASF Pensionskasse WaG and for the Board Performance Pension.
Service cost for the members of the Board of Executive Directors is
shown individually in the tables "Compensation granted in accor-
dance with the German Corporate Governance Code (GCGC)" and
"Compensation allocated in accordance with the German Corporate
Governance Code (GCGC)."
until December 31, 2019)
The merger and further development of the oil and gas businesses of BASF and
LetterOne in a joint venture, Wintershall Dea
24,880
BASF Report 2019
f From the 2019 reporting year onward, the fixed salary is presented on the basis of the fixed salary (gross) in accordance with the Board member's contract.
e Fringe benefits include the payment of additional taxes and tax back payments for previous years arising in connection with transfers.
d Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.
b In 2018, at the end of the regular term of the LTI program 2010, exercise gains that were realized in 2017 and 2018 were allocated to Dr. Hans-Ulrich Engel in accordance with the special conditions of the U.S. LTI program.
c Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
a The basis for the performance bonus, part 1, is the ROCE factor and the average of the operating performance factor (OPF) and the strategic performance factor (SPF) in the year the performance bonus was granted. This includes contributions made to the deferred compensation program. 50% of the actual performance bonus is paid out; the
remaining 50% of the actual performance bonus is not paid out for another three years (deferral component).
2,116
2,469
2,030
2,571
1,708
2,202
3,522
3,894
2,345
Dr. Markus Kamieth
2,594
171
25,484
About This Report
2 Management's Report
(Member of the Board of Executive Directors
Sanjeev Gandhi
Dr. Hans-Ulrich Engel
Saori Dubourg
Dr. Martin Brudermüller
12,600
25,484
30,268
11,880
33,892
44,024
2019
2018
Number of options granted
The table below shows the options granted to the Board of Executive
Directors on July 1 of both reporting years.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Compensation Report
1 To Our Shareholders
Wayne T. Smith
2018
End-of-service benefits
Compensation of Supervisory Board members
Pension provisions for previous Board members and their surviving
dependents amounted to €198.2 million (2018: €159.5 million).
Option rights that have not yet been exercised on retirement are to
be continued under the conditions of the program including the
associated holding period to emphasize that the compensation for
the Board of Executive Directors is geared to sustainability.
(5.5)
11.5
(16.1)
Total
Compensation of Supervisory Board members
Fixed salary: €200,000ª
0.6
10.9
Retirement and surviving dependents' pensions
Income/expense from the fair value measurement of
option rights
2,143
2019
Million €
Total compensation of former members of the Board of Executive
Directors and their surviving dependents
Total compensation for previous Board members and their surviv-
ing dependents amounted to €11.5 million in 2019 (2018: minus
€5.5 million). This figure also contains payments that previous
Board members have themselves financed through the deferred
compensation program, as well as the expense for 2019 relating to
option rights that previous members of the Board still hold from the
time of their active service period. The increase in total compensa-
tion was due to the fair value measurement of these option rights,
which generated total expenses of €0.6 million in 2019. This gen-
erated income of €16.1 million in 2018, mainly due to the lower
accounting valuation of the option rights due to the lower share
price.
10.6
Share purchase and share holding component:
25% of the fixed compensation must be used to purchase
shares in BASF; these shares must be held for the duration
of membership on the Supervisory Board
Compensation for committee memberships: €12,500b;
Audit Committee: €50,000
No additional compensation is paid for the Nomination
Committee
a The amount for the chairman of the Supervisory Board is 2.5 times this value, and 1.5 times this value
for the vice chairman compared with the compensation of an ordinary member.
b The amount for the chairman of a committee is two times this value, and 1.5 times this value for the vice
chairman.
2018
Thousand €
Compensation of the Supervisory Board of BASF SE
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Compensation Report
2 Management's Report
1 To Our Shareholders
About This Report
174
BASF Report 2019
Total compensation of the Supervisory Board in 2019 was around
€3.3 million (2018: around €3.3 million). The compensation of the
individual Supervisory Board members was as follows.
The company reimburses members of the Supervisory Board for
out-of-pocket expenses and value-added tax to be paid with
regard to their activities as members of the Supervisory Board or
of a committee. The directors' and officers' liability insurance (D&O
insurance) concluded by the company covers the duties performed
by the members of the Supervisory Board. This policy provides for
the level of deductibles for the Supervisory Board as recommended
in section 3.8(3) of the German Corporate Governance Code
(GCGC).
Each member of the Supervisory Board is required to use 25% of
their fixed compensation to acquire shares in BASF SE, and to hold
these shares for the duration of membership on the Supervisory
Board. This does not apply to the amount of compensation that the
member of the Supervisory Board transfers to a third party on a pro
rata basis as a result of an obligation entered into before their
appointment to the Supervisory Board. In this case, the utilization
and holding obligation applies to 25% of the remaining compensa-
tion after deducting the amount transferred.
Members of the Supervisory Board who are members of a
committee, except for the Nomination Committee, receive an
additional fixed compensation of €12,500. The additional fixed
compensation for members of the Audit Committee is €50,000. The
amount of additional fixed compensation for the chairman of a
committee is two times this value, and 1.5 times this value for the
vice chairman.
Each member of the Supervisory Board receives an annual fixed
compensation of €200,000. The amount for the chairman of the
Supervisory Board is 2.5 times this value, and 1.5 times this value
for the vice chairman compared with the compensation of an
ordinary member.
The disclosure of compensation of the Supervisory Board is based
on the German Commercial Code and is aligned with the recommen-
dations of the German Corporate Governance Code (GCGC). The
compensation of the Supervisory Board is regulated by the Statutes
of BASF SE passed by the Annual Shareholders' Meeting.
Former members of the Board of Executive Directors
Total
5 Overviews
3 Corporate Governance
Compensation Report
3 Corporate Governance
Compensation Report
2 Management's Report
1 To Our Shareholders
About This Report
172
BASF Report 2019
The following applies to end of service due to a change of control
event: A change of control event, in terms of this provision, occurs
when a shareholder informs BASF of a shareholding of at least 25%,
or the increase of such a holding. If a Board member's appointment
is revoked within one year of a change of control event, the Board
member will receive the contractually agreed payments for the
remaining contractual term of office as a one-off payment (fixed
salary and annual variable target compensation). The Board member
may also receive the fair value of the option rights acquired in
connection with the LTI program within a period of three months or
4 Consolidated Financial Statements
In the event that a member of the Board of Executive Directors
appointed before 2017 retires from employment before the age of
60, either because their appointment was not extended or was
revoked for an important reason, they are entitled to pension benefits
if they have served on the Board for at least 10 years or if the period
until they reach legal retirement age is less than 10 years. The
company is entitled to offset compensation received for any other
employment against pension benefits until the legal retirement age is
reached.
71,308
5,098
6,251
4,049
5,797
12,735
15,201
63,513
5 Overviews
may continue to hold the existing rights under the terms of the
program. For the determination of the accrued pension benefits
from the Board Performance Pension, the time up to the regular
expiry of office is taken into consideration.
There is a general limit on severance pay (severance payment cap)
for all Board members. Accordingly, payments made to a Board
member upon premature termination of their contract, without
serious cause, may not exceed the value of two years' compensa-
tion, including fringe benefits, nor compensate more than the
remaining term of the contract. The severance payment cap is to be
calculated on the basis of the total compensation for the past
business year and, if appropriate, also the expected total compen-
sation for the current business year. If the appointment to the Board
of Executive Directors is prematurely terminated as the result of a
change of control event, the payments may not exceed 150% of the
severance compensation cap.
2 Management's Report
To Our Shareholders
1
About This Report
173
BASF Report 2019
A comprehensive explanation of the amendments to the compensa-
tion system for the Board of Executive Directors will be published
with the invitation to the 2020 Annual Shareholders' Meeting.
The previous withholding and clawback clause for the STI and LTI
programs remains unchanged.
An overview of the BASF shares held by individual members of the Board of Executive Directors
can be found at basf.com/shares-held
Share ownership obligation (share ownership guideline): The
individual investment in BASF shares required under the previous
LTI program will be discontinued. In the future, members of the
Board of Executive Directors will have an individual share owner-
ship obligation that requires them to hold a given number of BASF
shares during the term of their Board membership and for a
limited period of time thereafter. The current members of the
Board of Excecutive Directors already held a large number of
shares prior to the date the share ownership obligation came
into force.
Company pension benefits: The previous performance pension,
which was structured as a defined benefit plan, will be replaced
by a new pension model. The members of the Board of Executive
Directors can choose between a defined contribution plan with
fixed annual contributions or a pension allowance of the same
amount.
-
One-year variable compensation/short-term incentive (STI):
The previous one-year component of the performance bonus
program (performance bonus, part 1) will be continued in the form
of an STI. Like the performance bonus, part 1, it will be based on
the achievement of operational and strategic targets as well as
the return on capital employed (ROCE) for the fiscal year, which is
also relevant for the compensation of all employees.
Multiple-year variable compensation/long-term incentive
(LTI): The previous performance bonus, part 2, which was granted
for multiple years (three-year deferral component), and the long-
term share price-based compensation program will be replaced
by a new LTI in the form of a performance share plan with growth,
profitability and sustainability targets taken directly from the
corporate strategy. An LTI plan with a term of four years will be
granted for each fiscal year. The amount paid out depends on the
achievement of strategic targets and the development of the total
shareholder return (share price and dividends) over the four-year
performance period.
The amendments to the compensation system for the Board of
Executive Directors relate to the following components:
Against the background of the new BASF corporate strategy and
the changed regulatory requirements under the German Act Imple-
menting the Second E.U. Shareholder Rights Directive (ARUG II),
which entered into force on January 1, 2020, and the new version of
the GCGC, the Supervisory Board resolved in its meeting on
December 19, 2019, to amend the existing compensation system
for the Board of Executive Directors. The changes to the compensa-
tion system are to become effective as of January 1, 2020, for all
current members of the Board of Executive Directors and will be
submitted for approval to the Annual Shareholders' Meeting on
April 30, 2020, in accordance with section 120a(1) of the German
Stock Corporation Act (AktG).
Amendment of the compensation system for the Board
of Executive Directors as of January 1, 2020
Sanjeev Gandhi stepped down from the Board of Executive
Directors effective the end of December 31, 2019. Based on the
termination agreement, non-compete compensation of €164,583
per month was agreed for a two-year, post-contractual non-
compete obligation. Sanjeev Gandhi must have any other earnings
deducted from this amount if the non-compete compensation and
other earnings exceed €320,000 gross per month. The same also
applies if the non-compete compensation and the other earnings
together exceed a total of €7,680,000 gross within 24 months.
4 Consolidated Financial Statements
3,972
707
3,914
761°
800
800
1,064
973
1,600
1,416
800c,f
Total
Fixed salary
2019
2018
2019
2018
2019
2018
Fringe benefits
800
800
800
340d
165d
46
41
36
34
1,727d, e
1,637d, e
356
58
69
112
60
136
800c, f
888°
800
2019
1,552
2018
2018
Consolidated Financial Statements
5 Overviews
the second E.U. Shareholder Rights Directive into German law. In addition, the com-
petence profiles and diversity concepts adopted in 2017 for the Supervisory Board
and the Board of Executive Directors were reviewed and confirmed.
For more information on the competence profiles, diversity concepts and composition goals,
see the Corporate Governance Report on page 150 and from page 152 onward
In accordance with the recommendations of the German Corporate Governance
Code and the Guiding principles for the dialog between investors and German super-
visory boards, the Chairman of the Supervisory Board again sought dialog with inves-
tors where appropriate in 2019. In view of the 2020 Annual Shareholders' Meeting, the
main topics were the changes to the compensation system for the Board of Executive
Directors, as well as the successor to Dr. Jürgen Hambrecht, who will retire as Chair-
man of the Supervisory Board.
At its meeting of December 19, 2019, the Supervisory Board approved the joint
Declaration of Conformity by the Supervisory Board and the Board of Executive
Directors in accordance with section 161 of the German Stock Corporation Act (AktG).
BASF complies with the recommendations of the German Corporate Governance
Code in the version dated February 7, 2017, without exception. The Supervisory
Board also resolved that, following its publication, the recommendations of the revised
German Corporate Governance Code (2020 Code) are also to be complied with in the
future. The Corporate Governance Report provides extensive information on the
BASF Group's corporate governance.
The full Declaration of Conformity is rendered on page 183 and is available to shareholders on the company website
at basf.com/en/corporate governance
About This Report
Independence and efficiency review
page 153. In cases where Supervisory Board members hold supervisory or manage-
ment positions at companies with which BASF has business relations, we see no
impairment of their independence. The scope of these businesses is relatively marginal
and furthermore takes place under conditions similar to those of a third party.
Contrary to previous practice, going forward, the Supervisory Board considers
membership on the Supervisory Board for more than 12 years as a factor that
precludes independence. Franz Fehrenbach reached this membership duration in
January 2020, meaning that the Supervisory Board no longer considers him to be
independent from this date onward. Beyond this limitation, however, the Supervisory
Board does not see any indications that the Supervisory Board role is not performed
completely independently. As a consequence of this change in assessed indepen-
dence, the Supervisory Board resolved that Anke Schäferkordt is to replace Franz
Fehrenbach on the Audit Committee as of March 1, 2020, to ensure that the share-
holder representatives on the Audit Committee continue to solely be independent
Supervisory Board members in the future.
The Supervisory Board reviews the efficiency of its activities every year in the form of
a self-assessment. This was again conducted in 2019, with the Chairman of the
Supervisory Board holding individual dialogs with each Supervisory Board member
using a structured questionnaire. Topics centered in particular on Supervisory Board
meeting agendas; cooperation with the Board of Executive Directors; the quality of the
information supplied by the Supervisory Board; the tasks, composition and work of
the committees, and cooperation between shareholder and employee representa-
tives. The results of these dialogs, including suggestions to further improve the Super-
visory Board's work, were presented and thoroughly discussed at the Supervisory
Board meeting on December 19, 2019. Overall, its members rated the Supervisory
Board's activity as efficient.
Independent of the efficiency review of the Supervisory Board, the Audit Committee
also conducted a self-assessment of its activities in 2019 based on a written survey of
the Committee members, which was conducted by the chairman of the Audit
Committee using a detailed questionnaire. Material topic areas were the organization
and content of the meetings, the quality of discussions, and the supply of information
as the basis of the Committees' work. The Audit Committee discussed the results of
the questionnaire at its meeting on December 18, 2019. It did not identify any need for
change.
BASF Report 2019
180
- The sale of the global pigments business
An important aspect of good corporate governance is the independence of Super-
visory Board members and their freedom from conflicts of interest. The Supervisory
Board based the assessment of the independence of its members on the recommenda-
tions of the German Corporate Governance Code and the additional criteria for
assessing the independence of Supervisory Board members contained in the Rules of
Procedure of the Supervisory Board, which were revised in the Supervisory Board
meeting on December 19, 2019. According to the Supervisory Board's assessment,
all twelve members of the Supervisory Board are considered to be independent. The
criteria used for this evaluation can be found in the Corporate Governance Report on
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
2019
2018
2019
2018
Wayne T. Smith
Dr. Markus Kamieth
Michael Heinz
Sanjeev Gandhi
(Member of the Board of
Executive Directors
until December 31, 2019)
Saori Dubourg
Dr. Hans-Ulrich Engel
Vice Chairman of the
Board of Executive
Directors
(since May 4, 2018)
Dr. Martin Brudermüller
Chairman of the Board of
Executive Directors
(since May 4, 2018)
Thousand €
Compensation allocated in accordance with the German Corporate Governance Code (GCGC)
The "Compensation allocated in accordance with the German Corporate Governance Code (GCGC)" presented comprises the fixed and variable compensation components actually allocated, plus the service
cost calculated for each member of the Board of Executive Directors in the reporting years even though this does not actually represent payment in the narrower sense.
Compensation allocated in accordance with the German Corporate Governance Code (GCGC)
5 Overviews
4 Consolidated Financial Statements
2019
3,202
1,660
1,133
3,105
1,641
1,565
1,777
3,346
2,629
2,803
3,012
485
485
485
644
1,401b
1,401
969
Total compensation in accordance with GCGC
485
1,541
1,321
1,548
491
709
699
1,023
387
661
510
789
704
1,029
366
626
573
1,111
1,625
1,760
1,331
Service cost
1,085
LTI program 2014 (2014-2022)
LTI program 2012 (2012-2020)
707
644
860
969
1,251
One-year variable compensation
1,140
485
1,053
841
836
834
2,527
2,398
1,156
858
846
707
485
707
Total
Multiple-year variable compensation
LTI program 2010 (2010-2018)
LTI program 2011 (2011-2019)
2019 performance bonus
(2019-2022), part 1a
(2018-2021), part 1a
Compensation for Supervisory Board membership and member-
ship of Supervisory Board committees is payable after the Annual
Shareholders' Meeting, which takes delivery of the Consolidated
Financial Statements for the business year. Accordingly, compensa-
tion relating to the year 2019 will be paid following the Annual
Shareholders' Meeting on April 30, 2020, taking into account and
applying the share purchase obligation.
707
707
707
707
860
1,251
2018 performance bonus
485
707
485
707
485
LTI program 2013 (2013-2021)
In 2019, as in 2018, the company paid Prof. Dr. François Diederich,
who retired from the Supervisory Board as of May 3, 2019, a total of
CHF 38,400 (2019: approximately €34,500; 2018: approximately
€33,200) for consulting work in the area of chemical research based
on a consulting contract approved by the Supervisory Board.
Beyond this, no other Supervisory Board members received any
compensation in 2019 for services rendered personally, in particular,
the rendering of advisory and agency services.
485
Compensation for
112.5
200.0
200.0
Dame Alison Carnwath DBE⁹.i
133.3
133.3
Prof. Dr. Thomas Carell, Supervisory Board member since May 3, 2019
109.3
26.0
83.3
Ralf-Gerd Bastian, Supervisory Board member until May 4, 2018h
325.0
325.0
25.0
25.0
300.0
300.0
112.5
Sinischa Horvat, Vice Chairman.g
312.5
Prof. Dr. François Diederich, Supervisory Board member until May 3, 2019
Consolidated Financial Statements
5 Overviews
Supervisory Board meetings
The Supervisory Board held six meetings in the 2019 business year. With the exception
of the constitutive meeting following the election of the Supervisory Board members at
the Annual Shareholders' Meeting on May 3, 2019, which one member of the Super-
visory Board was unable to attend, all members attended all Supervisory Board
meetings in 2019. The members of the Supervisory Board elected by shareholders and
those elected by the employees prepared for the meetings in separate preliminary
discussions in each case, which were also attended by members of the Board of
Executive Directors.
-
All members of the Board of Executive Directors attended the Supervisory Board
meetings unless it was deemed appropriate that the Supervisory Board discuss
individual topics such as personnel matters relating to the Board of Executive
Directors - without them being present. In addition, each Supervisory Board meeting
includes an agenda item that provides an opportunity for discussion without the Board
of Executive Directors (executive session).
An individual overview of attendance at meetings of the Supervisory Board and its committees will be made available on the
company website at basf.com/supervisoryboard/meetings
For more information on share ownership by members of the Supervisory Board, see page 156
A significant component of all Supervisory Board meetings was the Board of Executive
Directors' reports on the current business situation with detailed information on sales
and earnings development, as well as on opportunities and risks for business develop-
ment, the status of important current and planned investment projects, operational
excellence and sustainability, developments on the capital markets, significant
managerial measures taken by the Board of Executive Directors and innovation
projects.
50.0
133.3
200.0
Tatjana Diether, Supervisory Board member since May 4, 2018
200.0
83.3
200.0
83.3
312.5
4
250.0
50.0
At its meeting on December 19, 2019, the Supervisory Board discussed and approved
the Board of Executive Directors' operational and financial planning including the
investment budget for 2020, and as usual authorized the Board of Executive Directors
to procure the necessary financing in 2020.
BASF Report 2019
177
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Report of the Supervisory Board
4
Consolidated Financial Statements
5 Overviews
Composition and compensation of the Board of Executive Directors
In several meetings over the 2019 business year, the Supervisory Board discussed
and passed resolutions on the composition of the Board of Executive Directors and its
compensation.
Based on the preparations of the Personnel Committee, it discussed and agreed on
the 2019 targets for the Board of Executive Directors at its meeting on February 21,
2019. At its meeting on December 19, 2019, the Supervisory Board evaluated, based
on the discussions and recommendations of the Personnel Committee, the Board of
Executive Directors' performance in 2019 and the degree of target achievement.
The focus of the Supervisory Board meeting on July 23, 2019, was the composition
of the Board of Executive Directors and longer-term succession planning. In this
meeting, the Supervisory Board extended Wayne T. Smith's appointment to the Board
of Executive Directors, which ends on conclusion of the 2020 Annual Shareholders'
Meeting, until the conclusion of the 2022 Annual Shareholders' Meeting, and extended
the appointments of Saori Dubourg and Dr. Markus Kamieth to the conclusion of the
2025 Annual Shareholders' Meeting. Sanjeev Gandhi stepped down from the Board
of Executive Directors early at his own request as of the end of December 31, 2019.
In its meeting on October 21/22, 2019, the Supervisory Board addressed at length
Sanjeev Gandhi's offer to resign his seat on the Board of Executive Directors early and
the modalities of his departure and termination agreement, and agreed to his early
retirement without severance pay. As part of the termination agreement, the Super-
visory Board agreed with Sanjeev Gandhi on a post-contractual non-compete obliga-
tion with a term of two years and non-compete compensation. At the same time, the
Supervisory Board reduced the number of members of the Board of Executive
Directors from seven to six. Taking into account the company's new organization as of
January 2020, the proposed changes to the distribution of responsibilities within the
Board of Executive Directors were agreed to.
For more information on the division of responsibilities within the Board of Executive Directors, see the Corporate Governance
Report from page 159 onward
To Our Shareholders
Other consultation topics at the strategy meeting on October 21/22, 2019, were the
status and development of the automotive strategy and the strategy for and opportu-
nities and risks associated with battery materials.
333.3
- Capital allocation, steering and portfolio development
- Digitalization
66.6
200.0
266.7
-
-
The expansion of the battery materials business by establishing battery materials
production including backward integration in Europe
The progress of the investment project to establish a new Verbund site in southern
China
The investment in an acrylics value chain in India
At its meeting on February 21, 2019, the Supervisory Board reviewed and approved
the Consolidated Financial Statements, Management's Report and the proposal for
the appropriation of profit for the 2018 business year as presented by the Board of
Executive Directors. The Supervisory Board met prior to the Annual Shareholders'
Meeting on May 3, 2019, primarily to prepare for the Annual Shareholders' Meeting.
The main agenda items at the meeting on July 23, 2019, were BASF's digitalization
strategy and the carbon management program, including the challenges, perspectives
and opportunities associated with these important future issues for BASF.
At the strategy meeting on October 21/22, 2019, the Board of Executive Directors and
the Supervisory Board discussed the further development and implementation of
BASF's corporate strategy at length. Key topics were:
-
-
Opportunities and risks for BASF
Competitiveness
Customer focus
Sustainability and innovation
- Employees, organization and corporate culture
In all meetings, the Supervisory Board discussed the further development of the BASF
Group's business activities through acquisitions, divestitures, transfers to joint ventures
and investment projects. Discussions focused on:
3 Corporate Governance
Report of the Supervisory Board
1 To Our Shareholders
Total
275.0
275.0
75.0
75.0
200.0
200.0
133.3
200.0
133.3
200.0
Roland Strasser, Supervisory Board member since May 4, 2018
Michael Vassiliadisd,f,g
200.0
200.0
200.0
200.0
Denise Schellemans
2,941.6
200.0
2,933.2
411.4
1
About This Report
175
BASF Report 2019
k Member of the Strategy Committee since May 4, 2018
j Member of the Audit Committee since May 4, 2018
i Chairman of the Audit Committee
h Member of the Audit and Strategy Committees until May 4, 2018
g Member of the Strategy Committee
f Member of the Personnel Committee
e Member of the Personnel and Strategy Committees since May 3, 2019
d Member of the Audit Committee
C Member of the Personnel Committee and Vice Chairman of the Strategy Committee until May 3, 2019
b Chairman of the Strategy Committee
a Chairman of the Personnel Committee
3,344.6
3,346.2
404.6
2 Management's Report
200.0
200.0
Report of the Supervisory Board
Report of the
Supervisory Board
Dear Shareholds,
Amid a difficult macroeconomic environment and a slowing global economy, the
Supervisory Board addressed the following focus areas in 2019:
-
The updated BASF corporate strategy and the target of CO2-neutral growth
Portfolio measures, in particular the sale of the global pigments and construction
chemicals businesses
The expansion of the global manufacturing footprint with the establishment of a
new Verbund site in southern China, a C3 value chain in India and battery
materials production in Europe
- Efficiency gains and the restructuring of the company's organization
The simplification of the compensation system for the Board of Executive Directors
The Supervisory Board addressed its task of creating the best possible foundation for
BASF's successful and sustainable growth with a sense of responsibility.
Monitoring and consultation in an ongoing dialog with the Board of
Executive Directors
In 2019, the Supervisory Board of BASF SE exercised its duties as required by law and
the Statutes with the utmost care. It regularly monitored the management of the Board
of Executive Directors and provided advice on the company's strategic development
and important individual measures, about which the Supervisory Board was regularly
and thoroughly informed by the Board of Executive Directors. This occurred both
during and outside of the meetings of the Supervisory Board and its committees in the
form of written and oral reports on, for example, all of the major financial key perfor-
mance indicators (KPIs) of the BASF Group and its segments, the economic situation
in the main sales and procurement markets, and on deviations in business develop-
ments from original plans. Furthermore, the Supervisory Board tackled fundamental
questions of corporate planning, including financial, investment, sales volumes and
personnel planning, as well as measures for designing the future of research and
development. The Supervisory Board discussed in detail the reports from the Board of
Executive Directors, and also deliberated on prospects for the company and its
individual business areas with the Board of Executive Directors. It was convinced of
the lawfulness, expediency and propriety of the Board of Executive Director's company
leadership.
The Chairman of the Supervisory Board and the Chairman of the Board of Executive
Directors were also in regular contact outside of Supervisory Board meetings. The
Chairman of the Supervisory Board was always promptly and comprehensively
informed of current developments and significant individual issues. The Supervisory
Board was involved at an early stage in decisions of major importance. The Super-
visory Board passed resolutions on all of those individual measures taken by the
Board of Executive Directors which by law or the Statutes required the approval of the
Supervisory Board. In the 2019 business year, these included authorizing:
- The divestiture of the global pigments business to the Japanese company DIC
- The sale of the construction chemicals business bundled in the Construction
Chemicals division to Lone Star Funds
BASF Report 2019
176
About This Report
5 Overviews
200.0
Consolidated Financial Statements
3 Corporate Governance
Anke Schäferkordt
133.3
133.3
Dr. Alexander C. Karp, Supervisory Board member since May 3, 2019
208.3
212.5
8.3
12.5
200.0
200.0
Waldemar Helber*
83.3
83.3
Francesco Grioli, Supervisory Board member until May 4, 2018
166.6
250.0
33.3
4
The sale of the global construction chemicals business bundled in the
Construction Chemicals division
2 Management's Report
Committees
The Supervisory Board places great value on ensuring good corporate governance: In
2019, it was therefore once again intensely occupied with the corporate governance
standards practiced in the company and the implementation of the recommendations
and suggestions of the German Corporate Governance Code. An important topic of
discussion here was the widely revised and restructured German Corporate Governance
Code resolved by the German government in December 2019, and the translation of
Corporate governance and Declaration of Conformity
The Strategy Committee met once in 2019. The Committee was established to con-
sult on strategic options for the further development of the BASF Group. All committee
members attended the meeting. In the meeting, the Committee discussed the status
of negotiations on the divestiture of the construction chemicals business and were
informed of all material acquisition and divestiture projects.
The Nomination Committee is responsible for preparing candidate proposals for the
Supervisory Board members to be elected by the Annual Shareholders' Meeting. The
Nomination Committee is guided by the objectives for the composition of the Super-
visory Board adopted by the Supervisory Board as well as the competence profile and
diversity concept for the Supervisory Board resolved at the meeting on December 21,
2017. The Nomination Committee met once in 2019. All but one committee member
attended the meeting. Items discussed at the meeting were the existing competence
profile and diversity concept for the Supervisory Board, potential candidates for
election to the Supervisory Board in general and in the case of an unforeseen
departure, as well as the assessment of the independence of the shareholder
representatives on the Supervisory Board. A particular focus was the review and
confirmation of the proposal to elect Dr. Kurt Bock in the Annual Shareholders'
Meeting on April 30, 2020, to replace the current Chairman of the Supervisory Board
Dr. Jürgen Hambrecht, who had announced on his election in 2019 his intention to
leave the Supervisory Board after one year. Following this further review, the Nomination
Committee continues to view Dr. Kurt Bock as the most suitable candidate to succeed
Dr. Jürgen Hambrecht.
Group on December 18, 2019. In these meetings, the head of the Corporate Audit
department and the Chief Compliance Officer reported to the Audit Committee and
answered its questions. In all meetings, the Audit Committee also received information
on the development of risks from litigation.
Other important activities included advising the Board of Executive Directors on
accounting issues and the internal control system, and conducting follow-up assess-
ments of acquisition and investment projects. The Audit Committee focused on the
internal auditing system at the meeting on July 22, 2019, and compliance in the BASF
At the meeting on July 22, 2019, the Audit Committee engaged KPMG AG Wirtschafts-
prüfungsgesellschaft - the auditor elected by the Annual Shareholders' Meeting - with
the audit for the 2019 reporting year and auditing fees were agreed upon. The focus
areas for the annual audit were discussed and defined together with the auditor. The
Audit Committee excluded in principle the engagement of the auditor to perform any
services outside of the audit of the annual financial statements, including beyond
prevailing legal limitations. For certain nonaudit services, the Audit Committee
authorized the Board of Executive Directors to engage KPMG for such services to a
very limited extent, or granted approval in individual cases. At the meeting on
December 18, 2019, the auditors responsible reported on the status of the annual
audit, as well as the focus areas of the audit and the most important individual items.
At the meeting on February 25, 2020, the auditor reported in detail on its audits of
BASF SE's Separate and Consolidated Financial Statements for the 2019 business
year, including the corresponding management's reports, and discussed the results of
its audit with the Audit Committee. The committee's audit also included the nonfinancial
statements of BASF SE and the BASF Group. In preparation for this audit, the Audit
Committee had, following a corresponding resolution by the Supervisory Board,
additionally engaged KPMG to perform a substantive audit with limited assurance of
the Nonfinancial Statements and to issue an assurance report on it. KPMG also
reported in detail on the focus, the procedure and the key findings of this audit.
The Audit Committee met five times during the reporting period. All committee
members attended all meetings. The Audit Committee is responsible for all the tasks
listed in section 107(3) sentence 2 of the German Stock Corporation Act (AktG) and
the recommendations of the German Corporate Governance Code.
5 Overviews
Consolidated Financial Statements
4
BASF Report 2019
3 Corporate Governance
Report of the Supervisory Board
To Our Shareholders
1
About This Report
178
BASF Report 2019
The Personnel Committee met four times during the reporting period. All committee
members attended all meetings. At its meeting on February 21, 2019, the Personnel
Committee discussed the targets for the Board of Executive Directors for the 2019
business year and the 2018 Compensation Report. A key topic at the meetings on
July 23, October 21 and December 19, 2019, was the restructuring of the compen-
sation system for the Board of Executive Directors. The counsel and recommenda-
tions of the Committee formed the basis for the resolution by the Supervisory Board
on the compensation of the Board of Executive Directors and the amendments to the
employment contracts. At its meeting on July 23, 2019, the Personnel Committee
For information on the composition of the committees and the tasks assigned to them by the Supervisory Board, see the
Corporate Governance Report on pages 151 to 152
The Supervisory Board of BASF SE has four committees: 1. the committee for
personnel matters of the Board of Executive Directors and the granting of loans in
accordance with section 89(4) of the German Stock Corporation Act (Personnel
Committee); 2. the Audit Committee; 3. the Nomination Committee; and 4. the Strategy
Committee. Following each Committee meeting, the chairpersons of the Committees
reported in detail about the meetings and the activities of the Committees at the
subsequent meeting of the Supervisory Board.
For more information on the compensation of the Board of Executive Directors, see the Compensation Report on pages 162 to
174 and the notice convening the Annual Shareholders' Meeting on April 30, 2020, which will be published on March 19, 2020
Directors and Board members' pension benefits. The aim of the new system is to
simplify the compensation of the Board of Executive Directors and further strengthen
the focus on long-term business success. All of the requirements arising from the
German Act Implementing the Shareholder Rights Directive and the new version of the
German Corporate Governance Code are met. At its meeting on December 19, 2019,
the Supervisory Board resolved the new compensation system for the members of the
Board of Executive Directors and amended the provisions on compensation in the
Board members' employment contracts accordingly. All members of the Board of
Executive Directors agreed to the change to their employment contracts effective
January 1, 2020. The Supervisory Board also resolved to submit the new compensa-
tion system to the Annual Shareholders' Meeting on April 30, 2020, for approval, and
to have the compensation system for the Supervisory Board confirmed in unchanged
form.
In 2019, the Supervisory Board addressed at length the structure of the Board of
Executive Directors' compensation going forward, based on the extensive preparatory
work of the Personnel Committee. Discussions focused on the restructuring of both
the short-term and the long-term variable compensation of the Board of Executive
The acquisition of Solvay's global polyamide business
2 Management's Report
179
addressed in particular the development of leadership at the top levels of management
below the Board of Executive Directors and long-term succession planning for the
Board of Executive Directors. In the meeting on December 19, 2019, it evaluated the
performance of the Board of Executive Directors in the 2019 business year on the
basis of the agreed targets.
1
Fixed salary
committee memberships
Total compensation
About This Report
2018
2019
2018
2019
Dr. Jürgen Hambrecht, Chairmana, b
Michael Diekmann, Vice Chairman until May 3, 2019c
Franz Fehrenbach, Vice Chairman since May 3, 2019d,e
500.0
500.0
50.0
2019
550.0
50.0
To Our Shareholders
2 Management's Report
4
331.3
138.0
3 Corporate Governance
Report of the Supervisory Board
13.0
300.0
125.0
550.0
31.3
5 Earnings per share
184
dated
Financial
Consoli-
4
Notes to the Balance Sheet
6 Sales revenue
186
Statement by the Board of Executive Directors
Chapter 4 pages 185-289
BASF Report 2019
5 Overviews
The Declaration of Corporate Governance, pursuant to section
315d HGB in connection with section 289f HGB, comprises the
subchapters Corporate Governance Report including the descrip-
tion of the diversity concept for the composition of the Board of
Executive Directors and the Supervisory Board (except for the
disclosures pursuant to section 315a(1) HGB), Compliance and
Declaration of Conformity as per section 161 of the German Stock
Corporation Act (AktG) in the Corporate Governance chapter. It is
a component of the Management's Report.
Declaration of Corporate Governance in accordance with
section 315d HGB in connection with section 289f HGB
Corporate Governance
Declaration of
4 Consolidated Financial Statements
3 Corporate Governance
Declaration of Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
183
7 Functional costs
Pursuant to section 317(2) sentence 6 HGB, the auditor checked
that the disclosures according to section 315d HGB were made.
8 Other operating income / other operating expenses
About This Report
Independent Auditor's Report
BASF Report 2019
21 Noncontrolling interests
252
20 Other comprehensive income
197
Balance Sheet
251
19 Capital, reserves and retained earnings
195
Expense Recognized in Equity.
249
14 Intangible assets
18 Receivables and miscellaneous assets
248
247
equity method and other financial assets
17 Inventories
194
Statement of Income
16 Investments accounted for using the
243
239
239
15 Property, plant and equipment
187
Statement of Income and
The Board of Executive Directors
of BASF SE
Accounting treatment of the pigments business
Ludwigshafen, December 2019
253
For information on the accounting principles applied, please refer to
Note 1.4 to the Consolidated Financial Statements on pages 204 to
205. Information on the disposal group can be found in Note 2.5 to
the Consolidated Financial Statements from page 217 onward.
Financial statement risk
On August 28, 2019, BASF signed an agreement with DIC on the
sale of the pigments business. The pigments business is part of the
Dispersions & Pigments division in the Industrial Solutions segment.
The pigments business has been classified as a disposal group in
accordance with IFRS 5 since signing of the agreement. The trans-
action is expected to be concluded in the fourth quarter of 2020.
The measurement of the disposal group at fair value less costs to
sell in accordance with IFRS 5 led to an impairment charge of
€73 million.
The measurement of the disposal group for the pigments business
in accordance with IFRS 5 is complex and based on discretionary
assumptions. These include valuation assumptions such as
expected future cash inflows and risk-equivalent discount rates,
which market participants would be able to use to determine the
price for the disposal group. In addition, the explanatory disclosures
on the disposal group in the Notes to the Consolidated Financial
Statements are complex.
There is the risk for the financial statements that the measurement
of the disposal group is not appropriate. There is a risk that the
explanatory disclosures on the disposal group in the Notes to the
Consolidated Financial Statements are not sufficiently detailed and
appropriate.
Our audit approach
In a first step, we gained an understanding of the approach used by
BASF to measure the fair values less costs to sell of the pigments
business. To this end, we analyzed whether the approach underlying
the measurement is consistent with IFRS.
We examined the calculation of fair value less costs to sell, in par-
ticular with respect to whether the transaction price used can be
derived from the underlying agreement, and whether the other input
factors are appropriate, such as future cash inflows until the
completion of the transaction and risk-equivalent discount rates.
Furthermore, we evaluated whether the explanations on the dis-
posal group in the Notes to the Consolidated Financial Statements
are sufficiently detailed and appropriate.
Our observations
The assumptions and parameters underlying the measurement
of the disposal group for the pigments business are appropriate.
The explanations relating to the disposal group in the Notes to
the Consolidated Financial Statements are sufficiently detailed and
appropriate.
Initial application of the new IFRS 16 - Leases accounting
standard
For information on the accounting principles applied, please refer to
Note 28 to the Consolidated Financial Statements on page 279.
Disclosures on the effects of initial application and reconciliations
can be found in Note 28 on pages 280 to 281 of the Notes to the
Consolidated Financial Statements.
Financial statement risk
As of December 31, 2019, right-of-use assets in the amount of
€1,655 million and lease liabilities in the amount of €1,420 million
were recognized in BASF's Consolidated Financial Statements.
Lease liabilities account for 1.6% of total assets and thus have a
material impact on the company's net assets and financial position.
The initial application of the new IFRS 16 - Leases accounting
standard led to material effects on the opening balance for the fiscal
year and their development as of the balance sheet date. BASF SE
applies the new standard in accordance with the modified
retrospective method.
The calculation of the lease term and the incremental borrowing
rates used as discount rates can be discretionary and based on
estimates. In addition, extensive data from the leases must be
recorded to calculate the initial effects of IFRS 16 and the develop-
ment of lease liabilities and right-of-use assets in accordance with
the standard. This data is the basis for the measurement and recog-
nition of the lease liabilities and right-of-use assets.
There is a risk for the Consolidated Financial Statements that the
lease liabilities and right-of-use assets are not recognized in full in
the balance sheet. Furthermore, there is a risk than the lease
liabilities and right-of-use assets have not been measured correctly.
Our audit approach
In a first step, we gained an understanding of the process used by
BASF SE to implement the new IFRS 16 accounting standard. We
then analyzed the accounting instructions underlying the implemen-
tation for completeness and conformity with IFRS 16.
For selected leases, chosen in part on a representative and in part
on a risk-oriented basis, we reviewed whether the relevant data was
recorded correctly and in full. To the extent that discretionary
decisions were made regarding the lease term, we reviewed
whether, in light of the market conditions and risks in the industry,
the underlying assumptions are plausible and consistent with other
assumptions made in the Consolidated Financial Statements.
5 Overviews
The Supervisory Board
of BASF SE
4 Consolidated Financial Statements
Independent Auditor's Report
2 Management's Report
In addition, we evaluated whether the explanations on the discontin-
ued operation contained in the Notes to the Consolidated Financial
Statements are sufficiently detailed and appropriate.
The recommendations of the Government Commission on the
German Corporate Governance Code as amended on February 7,
2017, published by the Federal Ministry of Justice on April 24,
2017, in the official section of the electronic Federal Gazette are
complied with and have been complied with since the submission
of the last Declaration of Conformity in December 2018.
The Board of Executive Directors and the Supervisory
Board of BASF SE hereby declare pursuant to section 161
of the German Stock Corporation Act (AktG)
Declaration of Conformity 2019 of the Board of Executive
Directors and the Supervisory Board of BASF SE
Conformity Pursuant to
Section 161 AktG
Declaration of
5 Overviews
3 Corporate Governance
4 Consolidated Financial Statements
Declaration of Conformity Pursuant to Section 161 AktG
2 Management's Report
1 To Our Shareholders
About This Report
182
BASF Report 2019
Chairman of the Supervisory Board
Jürgen Hambrecht
Jungen Hambrech
Our observations
The Supervisory Board
The allocation of the assets and liabilities, as well as the expenses
and income of the Construction Chemicals division to discontinued
operations is appropriate and consistent with IFRS 5. The corre-
sponding explanations in the Notes to the Consolidated Financial
Statements are sufficiently detailed and appropriate.
BASF Report 2019
189
About This Report
1 To Our Shareholders
3 Corporate Governance
1
Statement of Cash Flows
22 Provisions for pensions and similar obligations
23 Other provisions
226
31 Compensation of the Board of Executive Directors
226
and Supervisory Board
286
227
32 Related party transactions
Notes to the Statement of Income
286
229
33 Services provided by the external auditor
34 Declaration of Conformity with the German
288
9 Income from companies accounted for using the
equity method
Corporate Governance Code
289
2 Management's Report
229
284
and BASF incentive share program
30 Share price-based compensation program
Policies and Scope of Consolidation
1 Summary of accounting policies.
201
28 Leases
279
201
2 Scope of consolidation .
206
Other Notes
282
3 BASF Group list of shares held pursuant to
section 313(2) of the German Commercial Code (HGB).
219
29 Statement of cash flows and capital structure
management
282
4 Reporting by segment and region
219
To Our Shareholders
231
35 Non-adjusting post-balance sheet date events
289
Ludwigshafen am Rhein, February 25, 2020
Rudenille
Dr. Martin Brudermüller
Chairman and Chief Technology Officer
Мине
Dr. Hans-Ulrich Engel
Vice Chairman and Chief Financial Officer
Jie boug
Saori Dubourg
Heilz
Michael Heinz
12:6
Dr. Markus Kamieth
Wayne T. Smith
BASF Report 2019
5 Overviews
186
To the best of our knowledge, and in accordance with the applicable reporting
rules, the Consolidated Financial Statements of the BASF Group give a true and fair
view of the net assets, financial position and results of operations of the Group, and
the Management's Report of the BASF Group includes a fair review of the development
and performance of the business as well as position of the BASF Group, together with
a description of the principal opportunities and risks associated with the expected
development of the BASF Group.
266
The risk management system we have set up is designed such that the Board of
Executive Directors can identify material risks early on and take appropriate defensive
measures as necessary. The reliability and effectiveness of the internal control and risk
management system are continually audited throughout the Group by our internal
audit department.
The BASF Group Consolidated Financial Statements for 2019 were prepared
according to the International Financial Reporting Standards (IFRS), which are
published by the International Accounting Standards Board (IASB), London, and have
been endorsed by the European Union.
10 Financial result
232
Statements
11 Income taxes
233
12 Noncontrolling interests
237
13 Personnel expenses and employees
.237
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Statement by the Board of Executive Directors
Statement by the Board of
Executive Directors
and assurance pursuant to sections 297(2)
and 315(1) of the German Commercial Code
(HGB)
The Board of Executive Directors of BASF SE is responsible for preparing the
Consolidated Financial Statements and Management's Report of the BASF Group.
We have established effective internal control and steering systems in order to ensure
that the BASF Group's Management's Report and Consolidated Financial Statements
comply with applicable accounting rules and to ensure proper corporate reporting.
27 Supplementary information on financial instruments
3 Corporate Governance
Notes
4 Consolidated Financial Statements
Independent Auditor's Report
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
188
BASF Report 2019
We consulted our valuation specialists in order to assess, among
other things, whether the calculation of the fair value of the interest
in the Wintershall Dea joint venture is consistent with the relevant
accounting principles, and whether the key assumptions made in
this calculation are appropriate. In doing so, we assessed the com-
petence, abilities and objectivity of the internal experts used by
BASF to measure the interest in the Wintershall Dea joint venture.
We also evaluated whether the underlying process used to identify
Wintershall Dea's assets and liabilities is appropriate based on our
knowledge of BASF's business model.
We started by assessing whether the assets, liabilities and noncon-
trolling interests to be derecognized in connection with the loss of
control were properly identified. In addition, we evaluated whether
the equity components were properly reclassified to profit or loss for
the year or recognized directly in retained earnings.
Our audit approach
There is a risk for the Consolidated Financial Statements that the fair
value of the interest in the Wintershall Dea joint venture is not
calculated properly, and that the assets, liabilities and equity
components allocated to BASF's oil and gas business have not
been properly identified. Furthermore, there is a risk that the
disclosures on the divestiture of the oil and gas business and on the
interest in the Wintershall Dea joint venture in the Notes to the
Consolidated Financial Statements are not sufficiently detailed and
appropriate.
to be derecognized on initial recognition of the interest in the joint
venture is a complex process.
The fair value of the interest in the Wintershall Dea joint venture was
calculated internally by BASF on closing of the transaction; this
calculation is complex and based on discretionary assumptions.
These include, in particular, BASF's forecasts on production volumes
of the joint venture's oil and gas fields based on expected license
terms and production profiles, the development of oil and gas
prices, and the cost of capital. In addition, the identification of the
assets, liabilities and equity components of the oil and gas activities
BASF and LetterOne completed the merger of their oil and gas
businesses on May 1, 2019. BASF's oil and gas activities, which had
been accounted for as a discontinued operation until this date, were
contributed to the joint venture Wintershall Dea. The share retained
in Wintershall Dea in connection with the loss of control over the oil
and gas activities is recognized at fair value on the date of the
transaction in accordance with IFRS 10. The resulting gain of
€5,684 million is included in income after taxes from discontinued
operations. Since the transaction was completed, BASF has
accounted for the interest according to the equity method.
Financial statement risk
For information on the accounting principles applied and on BASF's
oil and gas price scenario, please refer to Note 1.4 to the
Consolidated Financial Statements on pages 205 to 206. The
underlying assumptions used in the calculation can be found in
Note 2.5 to the Consolidated Financial Statements from page 216
onward.
Accounting for the interest in Wintershall Dea
5 Overviews
The assumptions underlying the calculations of the Board of
Executive Directors are balanced overall. The disclosures in the
Notes on the key assumptions are appropriate.
We discussed the projected development of production volumes
and oil and gas prices with the persons responsible for planning.
We evaluated the production profiles used in the measurement of
the exploration and production business's assets on the basis of
discussions with the client's experts, taking into account the
assessments submitted. In order to assess its suitability as a basis
for calculation, we had the oil and gas price scenario used by the
company explained to us. To assess its appropriateness, we com-
pared the oil and gas price scenario used by BASF with the pub-
lished forecasts of industry associations, analysts, international insti-
tutions and other market participants. We compared the assump-
tions and parameters underlying the cost of capital, in particular the
risk-free rate, the market risk premium and the beta factor, with our
own assumptions and publicly available data.
In addition, we satisfied ourselves of the correct presentation of the
transaction in the Consolidated Financial Statements of BASF SE.
In doing so, we also assessed whether the disclosures on the
divestiture of the oil and gas business and on the interest in the
Wintershall Dea joint venture contained in the Notes to the
Consolidated Financial Statements are sufficiently detailed and
appropriate.
253
259
Statement of Changes in Equity
200
24 Liabilities
261
25 Other financial obligations.
In a first step, we gained an understanding of the process used by
BASF to identify the activities of the discontinued operation. To this
end, we analyzed, among other things, the underlying allocation
concept with respect to completeness and conformity with IFRS 5.
The risk-based focus of our audit procedures on the allocation of
assets and liabilities, and expenses and income, was on Group
companies that have activities in several divisions. In doing so, we
examined whether the allocation is consistent with BASF's internal
reporting systems and the provisions of the purchase agreement
signed with Lone Star Funds.
Our audit approach
There is a risk for the Consolidated Financial Statements that the
expenses and income, and the assets and liabilities allocated to
discontinued operation have not been properly identified and thus
that the presentation of discontinued operations in the consolidated
statement of income and in the balance sheet is not correct. With
respect to the explanatory disclosures on discontinued operations in
the Notes to the Consolidated Financial Statements, there is a risk
that the explanations are not sufficiently detailed and appropriate.
The accounting treatment of the Construction Chemicals division as
a discontinued operation in accordance with IFRS 5 is complex. This
applies in particular to the identification of the assets and
liabilities allocated to discontinued operations in Group companies
that have activities in several divisions. In addition, the explanatory
disclosures on the discontinued operation in the Notes to the
Consolidated Financial Statements are complex.
On December 21, 2019, BASF signed an agreement with Lone Star
Funds on the sale of the construction chemicals business. The
construction chemicals business represents a separate, material
business area of BASF. Until conclusion of the agreement, it was
accounted for as the Construction Chemicals division in the Surface
Technologies segment. Since signing of the agreement, the
Construction Chemicals division has been classified as a
discontinued operation in accordance with IFRS 5. The transaction
is expected to be concluded in the third quarter of 2020. The income
after tax of the construction chemicals business (€24 million; previ-
ous year: €34 million) is included in income after taxes from
discontinued operations.
Financial statement risk
For information on the accounting principles applied, please refer to
Note 1.4 to the Consolidated Financial Statements on pages 204 to
205. Information on the discontinued construction chemicals
business can be found in Note 2.5 to the Consolidated Financial
Statements from page 215 onward.
Accounting treatment of the construction chemicals
business
The assumptions and parameters underlying the calculation of the
fair value of the interest in the Wintershall Dea joint venture are
appropriate. The assets, liabilities and equity components allocated
to the oil and gas activities of BASF for the calculation of the disposal
gain have been properly identified. The disclosures in the Notes to
the Consolidated Financial Statements on the divestiture of the oil
and gas business, as well as on the interest in the Wintershall Dea
joint venture, are sufficiently detailed and appropriate.
Our observations
In order to assess the accuracy of the measurement of the interest
in the Wintershall Dea joint venture, we reproduced selected
calculations taking into account risk-based considerations.
199
Our observations
We assessed the appropriateness of the assumed growth rate for
the period following the detailed planning period on the basis of
industry and macroeconomic studies. We satisfied ourselves of the
methodological appropriateness of the calculation and the
appropriateness of the weighted cost of capital rates. To this end,
we calculated our own expected values for the assumptions and
parameters underlying the weighted cost of capital rates and
compared these with the assumptions and parameters used. The
audit team was supported by our company valuation specialists.
Basis for the Opinions
Pursuant to Section 322 (3) sentence 1 HGB, we declare that our
audit has not led to any reservations relating to the legal compliance
of the Consolidated Financial Statements and of the Group
Management Report.
- the accompanying Group Management Report as a whole
provides an appropriate view of the Group's position. In all material
respects, this Group Management Report is consistent with the
Consolidated Financial Statements, complies with German legal
requirements and appropriately presents the opportunities and
risks of future development. Our opinion on the Group Manage-
ment Report does not cover the content of those parts of the
Group Management Report which are described in section "Other
Information" of our auditor's report. The Group Management
Report contains cross-references which are not legally required
and are identified as unaudited. Our opinion does not cover those
cross-references and the related referenced information.
Section 315e (1) of the German Commercial Code (HGB) and full
IFRS, and in compliance with these requirements, give a true and
fair view of the assets, liabilities, and financial position of the
Group as at December 31, 2019, and of its financial performance
for the financial year from January 1, 2019 to December 31, 2019,
and
In our opinion, on the basis of the knowledge obtained in the audit,
the accompanying Consolidated Financial Statements comply, in
all material respects, with the IFRSS as adopted by the EU, the
additional requirements of German commercial law pursuant to
This is a translation of the German original. Solely the original text in German language is authoritative.
The Group Management Report contains cross-references which
are not intended to use by law and are identified as unaudited.
In accordance with the German legal requirements we have not
audited the content of those cross-references and the related refer-
enced information.
1
We have audited the Consolidated Financial Statements of BASF SE
and its subsidiaries (the Group), which comprise the balance sheet
as at December 31, 2019, statement of income, statement of
income and expense recognized in equity, statement of cash flows,
statement of equity for the financial year from January 1, 2019 to
December 31, 2019 and Notes to the Consolidated Financial
Statements, including a summary of significant accounting policies.
In addition, we have audited the Group Management Report of
BASF SE for the financial year from January 1, 2019 to Decem-
ber 31, 2019. In addition, we have been instructed to express an
opinion as to whether the Consolidated Financial Statements
comply with full IFRS. In accordance with the German legal require-
ments we have not audited those parts of the Group Management
Report which are described in section "Other Information" of our
auditor's report.
Opinions
Report on the Audit of the Consolidated Financial
Statements and of the Group Management Report
TO BASF SE, Ludwigshafen am Rhein
Independent Auditor's
Report¹
5 Overviews
4 Consolidated Financial Statements
Independent Auditor's Report
265
26 Risks from litigation and claims
265
We conducted our audit of the Consolidated Financial Statements
and of the Group Management Report in accordance with Sec-
tion 317 HGB and the EU Audit Regulation No. 537/2014 (referred
to subsequently as "EU Audit Regulation") and in compliance with
German Generally Accepted Standards for Financial Statement
Audits promulgated by the Institute of Public Auditors in Germany
(Institut der Wirtschaftsprüfer, IDW). Our responsibilities under those
requirements and principles are further described in the "Auditor's
Responsibilities for the Audit of the Consolidated Financial
Statements and of the Group Management Report" section of our
auditor's report. We are independent of the group entities in accor-
dance with the requirements of European law and German commer-
Finally, we assessed whether the disclosures in the Notes on the key
assumptions are appropriate.
cial and profession-al law, and we have fulfilled our other German
professional responsibilities in accordance with these requirements.
In addition, in accordance with Article 10 (2) point (f) of the EU Audit
Regulation, we declare that we have not provided non-audit services
prohibited under Article 5 (1) of the EU Audit Regulation. We believe
that the evidence we have obtained is sufficient and appropriate to
provide a basis for our opinions on the Consolidated Financial
Statements and on the Group Management Report.
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the Consolidated
Financial Statements for the financial year from January 1, 2019 to
December 31, 2019. These matters were addressed in the context
of our audit of the Consolidated Financial Statements as a whole,
and in forming our opinion thereon, we do not provide a separate
opinion on these matters.
We examined the forecast for future cash inflows in the detailed
planning period, in particular with respect to whether the expected
development of the relevant sales markets were given appropriate
consideration and are consistent with the current budget adopted
by the Board of Executive Directors and the Supervisory Board. We
compared internal growth forecasts with industry expectations and
those of significant competitors. We also reviewed whether the
assumptions in the budget adopted by the Board of Executive
Directors and the Supervisory Board about the future development
of margins and the amount of investments are appropriate. Our
review of the appropriateness of the budget adopted by the Board
of Executive Directors and the Supervisory Board also included a
comparison of planning in past business years with the results
actually achieved. For selected units, we examined whether reasons
for not reaching planned values in the past were given appropriate
consideration in current planning, to the extent that this was relevant.
Our audit approach
There is the risk for the financial statements that impairment has not
been identified. In addition, there is also a risk that the disclosures in
the Notes on the key assumptions are not appropriate.
assumptions have a material impact on the recoverability of good-
will. The growth forecasts of the Board of Executive Directors are
associated with risks and can be revised in light of volatile raw
materials prices and an instable macroeconomic environment.
5 Overviews
4 Consolidated Financial Statements
Independent Auditor's Report
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
187
BASF Report 2019
Goodwill impairment testing is complex and based on a range of
discretionary assumptions. These include the forecasts for future
cash inflows in the detailed planning period, the assumed growth
rate for subsequent periods, as well as the cost of capital. These
Intangible assets in the Consolidated Financial Statements of
BASF SE include goodwill in the amount of €8,105 million. Goodwill
must be tested for impairment annually and whenever there is an
indication that goodwill may be impaired.
Financial statement risk
For information on the accounting principles applied, please refer to
Note 1.4 to the Consolidated Financial Statements on page 205.
The underlying assumptions used in the calculation and the disclo-
sures on the impairment tests performed are included in Note 14 to
the Consolidated Financial Statements from page 239 onward.
Recoverability of goodwill
Key Audit Matters in the Audit of the Consolidated Financial
Statements
201
190
The Supervisory Board wishes to thank all employees of the BASF Group worldwide
and the management for their personal contribution in the 2019 business year.
Beyond the statutory audit of the Financial Statements, KPMG also conducted, on
behalf of the Supervisory Board, a substantive audit with limited assurance of the
Nonfinancial Statements (NFSs) for BASF SE and the BASF Group, which are integral
parts of the respective management's reports. On the basis of its audit, KPMG did not
raise any objections to the nonfinancial reporting and the satisfaction of the relevant
statutory requirements.
For more information on the auditor, see the Corporate Governance Report on page 156
The Auditor's Report is rendered from page 187 onward
KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected by the Annual Share-
holders' Meeting for the 2019 reporting year, has audited the Financial Statements of
BASF SE and the BASF Group Consolidated Financial Statements, which were
prepared in accordance with the International Financial Reporting Standards (IFRS) as
adopted by the European Union, and the additional requirements that must be applied
in accordance with section 315e(1) of the German Commercial Code (HGB), including
the Management's Report and the accounting records from which they were prepared,
and have approved them free of qualification. Furthermore, the auditor certified that
the Board of Executive Directors had taken the measures incumbent on it under
section 91(2) of the German Stock Corporation Act (AktG) in an appropriate manner.
In particular, it had instituted an appropriate information and monitoring system that
fulfilled the requirements of the company and is applicable for the early identification of
developments that could pose a risk to the continued existence of the BASF Group.
The results of the audit as well as the procedure and material findings of the audit of
the financial statements are presented in the Auditor's Report.
Separate and Consolidated Financial Statements
5 Overviews
The assurance report issued by KPMG on the substantive audit of the NFS can be found at basf.com/nfs-audit-2019
Consolidated Financial Statements
3 Corporate Governance
Report of the Supervisory Board
2 Management's Report
To Our Shareholders
1
About This Report
Ludwigshafen, February 26, 2020
4
The auditor's reports were sent in a timely manner to every member of the Supervisory
Board. The auditor attended the accounts review meeting of the Audit Committee on
February 25, 2020, as well as the accounts meeting of the Supervisory Board on
February 26, 2020, and reported on the procedure and material findings of its audit,
including the key audit matters described in the Auditor's Report. The auditor also
provided detailed explanations of the reports on the day before the accounts meeting
of the Supervisory Board.
BASF Report 2019
At its accounts meeting on February 26, 2020, the Supervisory Board approved the
Financial Statements of BASF SE and the Consolidated Financial Statements of the
BASF Group prepared by the Board of Executive Directors, making the 2019 Financial
Statements final. The Supervisory Board concurs with the proposal of the Board of
Executive Directors regarding the appropriation of profit and the payment of a dividend
of €3.30 per share.
Thanks
For more information on changes within the Supervisory Board, see the Corporate Governance Report on page 153
According to the Supervisory Board's assessment, the current members meet in full
the objectives for the composition of the Supervisory Board with respect to the
competence profile and the diversity concept.
5 Overviews
The Audit Committee reviewed the Financial Statements and Management's Report at
its meeting on February 25, 2020, including the reports prepared by the auditor and
the key audit matters specified in the Auditor's Report, and discussed them in detail
with the auditor. The chairman gave a detailed account of the preliminary review at the
Supervisory Board meeting on February 26, 2020. On this basis, the Supervisory
Board has examined the Financial Statements and Management's Report of BASF SE
for 2019, the proposal by the Board of Executive Directors for the appropriation of
profit, and the Consolidated Financial Statements and Management's Report for
2019. The results of the preliminary review by the Audit Committee and the results of
the Supervisory Board's own examination fully concur with those of the audit. The
Supervisory Board sees no grounds for objection to the management or the reports
submitted.
3 Corporate Governance
Report of the Supervisory Board
2 Management's Report
4 Consolidated Financial Statements
1
About This Report
181
BASF Report 2019
The Supervisory Board's election term ended on conclusion of the Annual Share-
holders' Meeting on May 3, 2019. The long-serving shareholder representatives
Prof. Dr. François Diederich and Michael Diekmann did not stand for re-election. As
shareholder representatives, the Annual Shareholders' Meeting elected Prof. Dr.
Thomas Carell and Dr. Alexander C. Karp, who were nominated for election for the first
time, and the incumbent Supervisory Board members Dame Alison Carnwath DBE,
Franz Fehrenbach, Dr. Jürgen Hambrecht and Anke Schäferkordt. The six employee
representative were already elected without any changes to the current composition
by the BASF Works Council Europe on November 21, 2018, in accordance with the
Employee Participation Agreement. We would like to thank the now retired members
of the Supervisory Board, Prof. Dr. François Diederich and Michael Diekmann, for
many years of constructive and trust-based cooperation, and their considerable
contributions to the success and further development of the company.
Composition of the Supervisory Board
To Our Shareholders
Market capitalization December 31
billion €
65.0
81.1
84.3
Dividend per share
61.9
055262505
DE000BASF111
Earnings per share
Adjusted earnings per share
BASF11
BAS
55.5
918.5
2.9
918.5
918.5
918.5
million shares
Number of shares December 31
2.9
2.1
2.9
3.3
million shares
187.6
229.6
185.7
Dividend yieldb
918.5
BASFY (ADR)
6.44
BAS GY
%
4.90
5.30
3.38
3.40
4.10
%
3.30
3.20
3.10
3.00
2.90
€
4.00
Payout ratio
5.87
4.83
5.00
€
9.17
5.12
6.62
4.42
4.34
€
BASF Report 2019
b Based on year-end share price
a Average, Xetra trading
BASFn.DE
Price-earnings ratio (P/E ratio)
201.9
264.5
79.28
Reuters (Xetra trading)
2016
2015
Register for the newsletter with current topics and dates at basf.com/share/newsletter
Contact the Investor Relations team by phone at +49 621 60-48230 or email ir@basf.com
For more information about BASF stock, see basf.com/share
communications - international." In the annual survey conducted
by Britain's IR Magazine, we were named the best company for IR
in the materials sector and took first place in the "Best IR website"
category. Germany's Manager Magazin recognized BASF at the
presentation of its Investors' Darling awards with first place in the
digital communications category. Institutional Investor magazine
also honored BASF with first place in the category "Best IR Team"
and "Best IR Program" in the chemicals sector.
Daily trade in sharesa
Year average
Year low
Year-end price
Year high
Key BASF share data
Analysts and investors have confirmed the quality of our financial
market communications. The IR Society recognized BASF with the
Best Practice Award 2019 in the category "Most effective overall
For more information on our credit ratings, see the Financial Position on page 55
In 2019, we offered special events aimed at investors who base
their investment decisions on sustainability criteria. We outlined in
particular our measures for climate protection, energy efficiency,
and health and safety. In addition, we provided credit analysts and
creditors with more information about our business and financing
strategy at several creditor relations roadshows.
In September 2019, we informed analysts and investors about the
Agricultural Solutions division's new strategy at our Capital Markets
Day in Ghent, Belgium. Following the integration of the businesses
acquired from Bayer, which was completed in mid-2019, BASF can
offer farmers a connected portfolio of agricultural solutions - from
seeds, traits and crop protection products to digital solutions. This
strategy is based on innovation-driven growth in selected markets
with a focus on sustainable solutions.
Our corporate strategy aims to create long-term value. We support
this strategy through regular and open communication with all
capital market participants. We engage with institutional investors
and rating agencies in numerous one-on-one meetings, as well as
at roadshows and conferences worldwide, and give private inves-
tors an insight into BASF at informational events.
■ Capital Markets Day Agricultural Solutions
■ Dialog with institutional investors and rating agencies
■ Informational events for private investors
Analysts' recommendations
Around 30 financial analysts regularly publish studies on BASF.
The latest analyst recommendations for our shares as well as the
average target share price ascribed to BASF by analysts can be
found online at basf.com/analystestimates.
BASF Report 2019
13
About This Report
1
2017
To Our Shareholders
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
BASF on the Capital Market
Close dialog with the capital market
2 Management's Report
2018
2019
€
67
70.96
88.16
80.38
64.77
Further information on BASF share
€
Securities code numbers
United States (CUSIP number)
ISIN International Securities Identification Number
International ticker symbols
Deutsche Börse
Pink Sheets / OTCQX
Bloomberg (Xetra trading)
Germany
million €
56.20
79.64
70.72
88.31
91.74
60.40
67.35
€
58.40
96.72
97.46
97.67
74.49
€
65.74
56.70
88.31
68
Manage-
ment's
Report
63
MSCI World Chemicals.
BASF Report 2019
5.9%
2.3%
6.5%
12
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
BASF on the Capital Market
Proposed dividend of €3.30 per share
At the Annual Shareholders' Meeting, the Board of Executive
Directors and the Supervisory Board will propose a dividend
payment of €3.30 per share. We stand by our ambitious dividend
policy of increasing our per-share dividend each year and plan to
pay out €3.0 billion to our shareholders.
O
United Kingdom/Ireland 9%
Rest of Europe 15%
By region, rounded
Rest of world 4%
Not identified 6%
Shareholder structure
15% of capital. Approximately 33% of the company's share capital
is held by private investors, nearly all of whom reside in Germany.
BASF is therefore one of the DAX 30 companies with the largest
percentage of private shareholders.
MSCI World Chemicals 21.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2.80
2.70
2.60
2.50
3.30
3.20
3.10
3.00
2.90
€ per share
Dividend per share
Based on the year-end share price for 2019, BASF shares offer a
high dividend yield of around 4.9%. BASF is part of the DivDAX
share index, which contains the 15 companies with the highest
dividend yield in the DAX 30.
2.20
Employees becoming shareholders
EURO STOXX 50 29.0%
BASF share 16.7%
3.2%
6.2%
6.3%
120
7.2%
2009-2019
8.4%
110
8.3%
5.4%
100
9.5%
■BASF share ■ DAX 30 ■ EURO STOXX 50 ■ MSCI World Chemicals
90
Weighting of BASF shares in important indexes as of December 31, 2019
80
80
EURO STOXX 50
DAX 30
Dec
Nov
Oct
Sep
DAX 30 25.5%
Aug
Jun
May
Apr
Mar
Feb
Jan
Jul
47
21% United States/Canada
In many countries, we offer share purchase programs that turn our
employees into BASF shareholders. In 2019, for example, around
25,400 employees (2018: around 25,600) purchased employee
shares worth €70.5 million (2018: €79 million).
105
Raw Materials
18
TCFD Recommendations Index.
102
Supplier Management
17
Nonfinancial Statement Disclosures
Regional Results
Other
Nutrition & Care
Agricultural Solutions
Surface Technologies
Industrial Solutions
Materials
Actual Development Compared with Outlook for 2019
Business Review by Segment
Our Strategy
Corporate Strategy
How We Create Value
36
16.3
20.0
13.9
11.8
7.3
Environmental Protection, Health and Safety.
14
Overview
16
Responsible Conduct Along the Value Chain
102
2
The BASF Group
Chapter 2 pages 15-147
45% Germany
108
19
For more information on employee share purchase programs, see page 130
BASF - a sustainable investment
In the scoring framework used by CDP in 2019, BASF is ranked
among the best 20% of the participating chemical companies. In
their assessment of the company's climate protection efforts and
disclosure, the analysts identified, for instance, some potential for
further development in the area of power supply from renewable
energy sources. In the context of BASF's strategic goal of CO2-
neutral growth until 2030, such options are currently being explored.
In the CDP assessment for sustainable water management, BASF
achieved the top grade of A and thus Leadership status. The
assessment takes into account how transparently companies
report on their water management activities and how they reduce
risks such as water scarcity. CDP also evaluates the extent to
which product developments can contribute to sustainable water
management for customers of the companies assessed.
BASF continued to be included in the MSCI ESG Ratings in 2019
with a score of AA. The analysts highlighted BASF's Verbund
system as a key competitive advantage for resource-efficient
processes. BASF's emissions intensity for greenhouse gases and
air pollutants - one of the lowest compared with competitors in the
chemical industry - was also assessed positively.
For more information on the key sustainability indexes, see basf.com/sustainabilityindexes
For more information on energy and climate protection, see page 116 onward
For more information on air and soil, see page 123
Broad base of international shareholders
With over 600,000 shareholders, BASF is one of the largest pub-
licly owned companies with a high free float. An analysis of the
shareholder structure carried out at the end of 2019 showed that,
at around 21% of share capital, the United States and Canada
made up the largest regional group of institutional investors.
Institutional investors from Germany accounted for around 12%.
Shareholders from the United Kingdom and Ireland hold 9% of
BASF shares, while investors from the rest of Europe hold a further
■ CDP again awards BASF Leadership status
■ BASF continues to be included in MSCI ESG Ratings with
score of AA
BASF has participated in CDP's program for reporting on data
relevant to climate protection since 2004. CDP is an international
organization representing more than 525 investors with over
$96 trillion in assets and more than 125 major purchasing
organizations with $3.5 trillion in purchasing power. In 2019, BASF
achieved a score of A-, thus attaining Leadership status again.
30
Value-Based Management
27
Our Targets and Status of Target Achievement in 2019
139
136
Employees
126
23
Forecast
Customer Orientation
22
125
24
24
25
Outlook 2020
Opportunities and Risks
133
133
Economic Environment in 2020
31
Innovation
We have bundled all measures that will help us reach our climate target and enable further
reductions in the long term in our global carbon management.
☐☐
The Consolidated Declaration of Corporate Governance in accor-
dance with section 315d HGB in connection with section 289f HGB
can be found in the Corporate Governance chapter from page 148.
onward and is a component of the Management's Report. It comprises
the Corporate Governance Report including the description of the
diversity concept for the composition of the Board of Executive
Directors and the Supervisory Board (excluding the disclosures
required by takeover law in accordance with section 315a(1) HGB),
compliance reporting and the Declaration of Conformity pursuant
to section 161 of the German Stock Corporation Act. Pursuant to
The content of this section is voluntary, unaudited information,
which was critically read by the auditor.
BASF Report 2019
About This Report
1
To Our Shareholders
2 Management's Report
[ ] The content of this section is not part of the statutory audit but
has undergone a separate audit with limited assurance by our
auditor.
3 Corporate Governance
Consolidated Financial Statements
5 Overviews
Overview
Nonfinancial Statement (NFS) disclosures in the relevant chapters of the integrated report
NFS disclosure
Business model
Environmental matters
Employee-related matters
4
Social matters
You can find more information online. The content of these
links are voluntary disclosures that were not audited by the
auditor.
The following symbols indicate important information:
The NFS disclosures can be found in the relevant sections of the
Management's Report and have been prepared in accordance with
the appropriate frameworks: the Global Reporting Initiative Standards
("Comprehensive" application option) and the reporting require-
ments of the U.N. Global Compact.
The table on the following page shows the sections and subsections
in which the individual disclosures can be found. In addition to a
description of the business model, the NFS includes disclosures on
the following matters, to the extent that they are required to under-
stand the development and performance of the business, the
Group's position and the impact of business development on the
following matters:
-
―
Environmental matters
- Employee-related matters
Social matters
Respect for human rights
You can find more information in this report.
- Anti-corruption and bribery matters
Compensation Report and disclosures in accordance with
section 315a HGB
The Compensation Report including the description of the principles
of the compensation system in accordance with section 315a(2)
HGB can be found in the Corporate Governance chapter from page
162 onward, and the disclosures in accordance with section 315a(1)
HGB (takeover-related disclosures) from page 155 onward. They
form part of the Management's Report, which is audited as part of
the annual audit.
Consolidated Declaration of Corporate Governance in
accordance with section 315d HGB in connection with
section 289f HGB
section 317(2) sentence 6 HGB, the auditor checked that the dis-
closures according to section 315d HGB were made.
Recommendations of the Task Force on Climate-related
Financial Disclosures
BASF supports the recommendations of the Task Force on Climate-
related Financial Disclosures (TCFD). Disclosures recommended by
the TCFD are presented in a number of places throughout this
report. The table on page 18 shows the sections and subsections in
which the relevant information can be found. The table is divided
into four key areas in line with the TCFD recommendations: gover-
nance, strategy, risk management, and metrics and targets.
Further information
Within the scope of the annual audit, the external auditor KPMG
checked pursuant to section 317(2) sentence 4 HGB that the NFS
was presented in accordance with the statutory requirements.
KPMG also conducted a substantive audit with limited assurance
of the NFS. A report on this substantive audit can be found online
at basf.com/nfs-audit-2019. The audit was conducted in accor-
dance with ISAE 3000 (Assurance Engagements other than Audits
or Reviews of Historical Financial Information) and ISAE 3410
(Assurance Engagements on Greenhouse Gas Statements), the rele-
vant international auditing standards for sustainability reporting.
Respect for human rights
Anti-corruption and bribery matters
Topics
Concepts and results
Pages 19-22
20
20
BASF Report 2019
1 Excluding the construction chemicals activities presented as discontinued operations
The ongoing Excellence Program is expected to contribute €2 billion
to EBITDA annually from the end of 2021 onward compared with
baseline 2018. BASF expects a reduction of a total of around 6,000
positions worldwide until the end of 2021. This decrease results
from the organizational simplification and from efficiency gains in
The role of regions and countries is being sharpened. Going forward,
they will primarily represent BASF locally and even better support
the growth of business units with local proximity to customers.
Compliance
Supplier management
In addition, four global service units were established: Global
Engineering Services and Global Digital Services offer services for
individual sites, globally for the divisions or other units of the
BASF Group. Global Procurement makes purchasing even more
effective. The newly established Global Business Services unit will
be a global, flexible and demand-driven service unit that strengthens
the competitiveness of the divisions and provides services in areas
such as finance, human resources, environmental protection, health
and safety, intellectual property, communications, supply chain and
consulting.
BASF has created the conditions for greater customer proximity,
increased competitiveness and profitable growth with an organiza-
tional realignment as part of the implementation of its strategy. We
are streamlining our administration, sharpening the roles of services
and regions, and simplifying procedures and processes as part
of our ongoing Excellence Program. Customer-focused operating
divisions, cross-functional service units and regions as well as a lean
Corporate Center are the cornerstones of the new organization.
Organizational realignment as of January 1, 2020
For more information on the new segment structure as of January 1, 2019, see the Notes to the
Consolidated Financial Statements from page 219 onward
For more information on the products and services offered by the segments, see from pages 63, 69,
74, 80, 85 and 91 onward
Business processes such as the procurement of raw materials and
services, production and transport to customers were the shared
responsibility of the divisions and the functional units in 2019. Seven
functional units and eight corporate units supported the BASF
Group's business activities. The functional and corporate units
provided services in the areas of finance, human resources, tax and
legal, engineering, site management, purchasing and logistics, environ-
mental protection, health and safety, investor relations, and com-
munications. As part of the further development of the corporate
strategy, in 2019 BASF embedded business-critical parts of its
functional units into the divisions, such as engineering services,
procurement and logistics. This increased customer proximity and
improved customer-specific agility. We have also created leaner
structures in our functional units, research and development and in
governance functions.
Together with our divisions, the three global research divisions
Process Research & Chemical Engineering, Advanced Materials &
Systems Research and Bioscience Research safeguard our
innovative capacity and competitiveness.
Our regional and country organizations help to leverage market
potential. For financial reporting purposes, we organize the regional
divisions into four regions: Europe; North America; Asia Pacific;
South America, Africa, Middle East.
Our divisions bear operational responsibility here and are organized
according to sectors or products. They manage our 54 global and
regional business units and develop strategies for the 76 strategic
business units.1
The Corporate Center units support the Board of Executive Directors
in steering the company as a whole. These include central tasks from
the following areas: strategy; finance; law, compliance and tax; environ-
mental protection, health and safety; human resources; communi-
cations; investor relations and internal audit.
Responsibility for human rights
Global labor and social standards
Supplier management
Social commitment
The BASF Group
Process safety
Biodiversity
Energy and climate protection
Emergency response and corporate security
Supplier management
Emissions to air
Steering of product portfolio
Product stewardship
Transportation and storage
Management of waste and contaminated sites
Water
Occupational safety
Dialog with employee representatives
Inclusion of diversity
What we expect from our leaders
Health protection
Global labor and social standards
Learning and development
Supplier management
Employee engagement
Competition for talent
Compensation and benefits
Nonfinancial Statement (NFS) in accordance with sections
315b and 315c of the German Commercial Code (HGB)
The Management's Report comprises the chapter of the
same name on pages 15 to 147, as well as the disclosures
required by takeover law, the Compensation Report and the
Declaration of Corporate Governance, which are presented
in the Corporate Governance chapter. The Nonfinancial State-
ment (NFS) is integrated into the Management's Report.
Overview
5 Overviews
1
To Our Shareholders
2 Management's Report
The Board of Executive Directors of BASF SE
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Dr. Martin Brudermüller, Chairman of the Board of Executive Directors
About This Report
Dr. Hans-Ulrich Engel, Vice Chairman of the Board of Executive Directors
Michael Heinz
Dr. Markus Kamieth
BASF Report 2019
Wayne T. Smith
11
About This Report
1
To Our Shareholders
Saori Dubourg
Climate
80
74
Integration of Sustainability.
36
The BASF Group's Business Year
42
Material Investments and Portfolio Measures
42
Economic Environment
44
Results of Operations
47
Net Assets
52
Financial Position
54
58
60
Chemicals
63
69
2 Management's Report
BASF's new segment structure allows for a more differentiated
steering of our businesses according to their market-specific
competitive environment. It increases transparency regarding the
results of our segments and divisions and highlights the importance
of the Verbund and value chains to our business success. BASF
aims to clearly position its businesses against their relevant
competitors and establish a high-performance organization to
enable BASF to be successful in an increasingly competitive market
environment.
3 Corporate Governance
Consolidated Financial Statements
130
protection
with carbon
23
management
91
97
100
2014-2019
6.4
For more information, see pages 121 and 122
About This Report
1
To Our Shareholders
2 Management's Report
Overview
3 Corporate Governance
4
Consolidated Financial Statements
-70%
90
90
100
5 Overviews
BASF on the Capital Market
BASF on the Capital
Market
85
In 2019, the stock markets were again characterized by long
periods of uncertainty as a result of the trade conflicts,
especially between the United States and China. Geopoliti-
cal tensions also contributed to a volatile stock market
environment.
We stand by our ambitious dividend policy and will propose
a dividend of €3.30 per share at the Annual Shareholders'
Meeting - an increase of 10 euro cents compared with the
previous year. Based on the year-end share price for 2019,
BASF shares offer a high dividend yield of around 4.9%.
Change in value of an investment in BASF shares in 2019
With dividends reinvested; indexed
BASF share performance
■ BASF share gains 11.5% in 2019
■ Assuming that dividends were reinvested, BASF's share
performance rose by 16.7%
The BASF share closed the 2019 stock market year with a closing
price of €67.35, an increase of 11.5% compared with the previous
year's closing price. Alongside the general brightening in market
sentiment at the end of the year, the increase in BASF's share price
was attributable to better earnings developments in BASF's down-
stream segments.
Assuming that dividends were reinvested, BASF's share performance
rose by 16.7% in 2019. The benchmark indexes of the German and
European stock markets - the DAX 30 and the EURO STOXX 50 -
rose by 25.5% and 29.0% over the same period, respectively. The
global industry index MSCI World Chemicals gained 21.0%.
Viewed over a 10-year period, the long-term performance of BASF
shares surpasses the German and European benchmark indexes.
The assets of an investor who invested €1,000 in BASF shares at
the end of 2009 and reinvested the dividends in additional BASF
shares would have increased to €2,250 by the end of 2019. This
represents an annual yield of 8.4%, placing BASF shares above
the returns for the DAX 30 (8.3%) and the EURO STOXX 50 (5.4%).
Long-term performance of BASF shares compared with indexes
Average annual increase with dividends reinvested
130
120
110
4
In addition to the segment structure, the composition of a number of
divisions also changed as of January 1, 2019. The propylene oxide
and propylene glycol business was transferred from the Petro-
chemicals division to the Monomers division. The superabsorbents
business is now allocated to the Petrochemicals division rather than
the Care Chemicals division. The styrene, polystyrene and styrene-
based foams business, which previously mainly fell under the Perfor-
mance Materials division and a small part under Other, is now bun-
dled in the Petrochemicals division.
16
BASF has reported its share of Wintershall Dea's net income in EBIT
before special items and in EBIT of the BASF Group, presented
under Other. BASF and LetterOne intend to list Wintershall Dea on
the stock exchange by way of an initial public offering (IPO) in the
second half of 2020, provided market conditions are suitable.
Page 142-144
Page 38-39
Page 124-125
Page 121-122
Page 145-147
Page 142-144
Integration of Sustainability - Steering of product portfolio based on sustainability performance
Opportunities and Risks - Short-term opportunities and risks
Opportunities and Risks - Long-term opportunities and risks
Carbon management as a climate protection tool
Water
The disclosures and indicators in the Management's Report on
sustainability in 2019 no longer include data on Wintershall. The
construction chemicals business is included in the disclosures on
environmental protection, health and safety, employees and
compliance, but has already been removed from the sales-related
sustainability figures. The business acquired from Bayer in 2018 is
included in the indicators. Exceptions are explained in the corre-
sponding sections in the chapters concerned.
Opportunities and Risks - Long-term opportunities and risks
Describe the impact of climate-related risks and opportunities on
the organization's businesses, strategy, and financial planning.
Describe the climate-related risks and opportunities the organization has Opportunities and Risks - Short-term opportunities and risks
identified over the short, medium, and long term.c
Disclose the actual and potential impacts of
climate-related risks and opportunities on the
organization's businesses, strategy, and financial
planning where such information is material.
Strategy
Page 36-37
Page 149-150
Page 177
Page
Corporate Governance Report - Direction and management by the Board of Executive Directors
Report of the Supervisory Board - Supervisory Board meetings
Integration of Sustainability - Strategy
Describe the resilience of the organization's strategy, taking into
consideration different climate-related scenarios, including a 2°C or lower
scenario.d
Risk management
Disclose how the organization identifies,
assesses, and manages climate-related
risks.
Describe the organization's processes for identifying and assessing
climate-related risks.
Energy and climate protection - Global goals and measures
Page 116-117
Page 117-119
Page 38-39
Page 124-125
Page 117-119
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas Energy and climate protection - Strategy
(GHG) emissions, and the related risks.
Integration of Sustainability - Steering of product portfolio based on sustainability performance
Energy and climate protection - Global goals and measures
Water Global goal and measures
Disclose the metrics used by the organization to assess climate-related
risks and opportunities in line with its strategy and risk management
process.
Disclose the metrics and targets used to
assess and manage relevant climate-related risks
and opportunities where such information is
material.
Metrics and targets
Page 140-142
Page 145-147
Page 140-142
Opportunities and Risks - Long-term opportunities and risks
Opportunities and Risks - Risk management process
Page 140-142
Page 103
Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organization's overall risk
management.
Describe the organization's processes for managing climate-related risks. Opportunities and Risks - Risk management process
Opportunities and Risks - Risk management process
Supplier Management - Training and partnerships
Describe management's role in assessing and managing
climate-related risks and opportunities.
Describe the targets used by the organization to manage climate-related
risks and opportunities and performance against targets.
Section
Recommended disclosures
Page 27 (targets)
Pages 108 and 109-110 (targets, measures, results)
Page 131 (targets, measures, results)
Page 27 (targets)
Pages 108 and 124-125 (targets, measures, results)
Page 27 (targets)
Pages 108 and 123 (targets, measures, results)
Pages 108 and 115 (targets, measures, results)
Pages 108 and 113-114 (targets, measures, results)
Page 128-129 (targets, measures, results)
Page 127 (targets, measures, results)
Page 27 (targets)
Pages 108 and 123 (targets, measures, results)
Page 27 (targets)
Pages 102-104 (targets, measures, results)
Page 27 (targets)
Pages 108 and 116-122 (targets, measures, results)
Pages 108 and 111-112 (targets, measures, results)
Page 27 (targets)
Page 105-107 (targets, measures, results)
Pages 108 and 110-111 (targets, measures, results)
Page 27 (targets)
Pages 38-39 (targets, measures, results)
Pages 108 and 111 (targets, measures, results)
Page 131-132 (targets, measures, results)
Pages 129-130 (targets, measures, results)
Page 27 (targets)
Pages 102-104 (targets, measures, results)
Page 127 (targets, measures, results)
Page 129 (targets, measures, results)
Page 130 (targets, measures, results)
Disclose the organization's governance around
climate-related risks and opportunities.
Governance
Topic
Recommendations of the Task Force on Climate-related Financial Disclosures in the relevant chapters of the integrated report
Overview
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
17
BASF Report 2019
Pages 102-104 (targets, measures, results)
Pages 157-158 (targets, measures, results)
Page 27 (targets)
Pages 102-104 (targets, measures, results)
Page 40-41 (targets, measures, results)
Page 131-132 (targets, measures, results)
Page 27 (targets)
Page 41 (targets, measures, results)
Describe the board's oversight of climate-related
risks and opportunities.
Strategy
Page 145-147
Page 116-117
7
As of January 1, 2019, we have 11 divisions grouped into six
segments as follows:
Other
7
Organization of the BASF Group in 2019
13%
Agricultural Solutions - Agricultural Solutions
6
- Nutrition & Health
10%
Nutrition & Care
5
Care Chemicals
-Coatings
22%
- Catalysts
Surface Technologies
4
5
- Performance Chemicals
14%
Industrial Solutions
3
- Dispersions & Pigments
20%
- Performance Materials
- Monomers
Materials
1
2
5%
3
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
The BASF Group
1 To Our Shareholders
About This Report
19
BASF Report 2019
September 2018, BASF and LetterOne had signed a transaction
agreement to merge their respective oil and gas businesses in a joint
venture. Shareholder loans were replaced by bank loans in the
course of the merger. Since May 1, 2019, BASF's participating
interest in Wintershall Dea has been reported in the Consolidated
Financial Statements of the BASF Group according to the equity
method, with an initial valuation at fair value. The gain from the
transition from full consolidation to the equity method is shown in
income after taxes from discontinued operations. Since May 1, 2019,
for greater customer proximity, increased competitiveness
and profitable growth
Organizational realignment
New segment structure
since January 1, 2019
Following the approval of all relevant authorities, BASF and LetterOne
completed the merger of Wintershall and DEA on May 1, 2019. In
sales and earnings of the Construction Chemicals division are no
longer included in sales, EBITDA, EBIT and EBIT before special
items of the BASF Group. Until closing, the income after taxes of
the construction chemicals business will be presented in the
income after taxes of BASF Group as a separate item ("Income
after taxes from discontinued operations").
employees contribute to our success
and that of our customers
Production, technology, market, digitalization
In 90+ countries
Intelligent Verbund concept
Energy and climate protection - Strategy
Water
The segment data for 2018 presented in this report has been restated
to reflect the new segment structure.
- Agricultural Solutions: Agricultural Solutions
Nutrition & Care: Care Chemicals, Nutrition & Health
Surface Technologies: Catalysts, Coatings
Chemicals: Petrochemicals, Intermediates
Materials: Performance Materials, Monomers
Industrial Solutions: Dispersions & Pigments,
Performance Chemicals
-
-
2
4
6
On December 21, 2019, BASF and an affiliate of Lone Star, a global
private equity firm, signed an agreement on the sale of BASF's
construction chemicals business. The purchase price on a cash
and debt-free basis is €3.17 billion. The transaction is expected to
close in the third quarter of 2020, subject to the approval of the
relevant competition authorities. The Construction Chemicals divi-
sion was previously reported under the Surface Technologies seg-
ment. The signing of the agreement had an immediate effect on the
reporting of BASF Group. Retroactively as of January 1, 2018,
16%
- Intermediates
Integration of Sustainability - Steering of product portfolio based on sustainability performance
Page 124
Page 38-39
a Refers to the Supervisory Board
BASF Report 2019
b Refers to the Board of Executive Directors and senior executives
c We report comprehensively on climate-related opportunities and risks in reporting to CDP on data relevant to climate protection.
d To steer our greenhouse gas emissions, in 2019 we launched a project to derive and evaluate long-term strategic scenarios, taking into account different levels of global warming.
e Climate-related risks are identified, assessed and managed as part of the general risk management process.
About This Report
1 To Our Shareholders
2 Management's Report
The BASF Group
18
4
Chemicals
1
3 Corporate Governance
Percentage of total sales in 2019
Structure of BASF
- Petrochemicals
The BASF Group
5 Overviews
Consolidated Financial Statements
At BASF, we create chemistry for a sustainable future. We
combine economic success with environmental protection
and social responsibility. The approximately 118,000 employees
in the BASF Group work on contributing to the success of our
customers in nearly all sectors and almost every country in
the world. Our portfolio is divided into the Chemicals, Materials,
Industrial Solutions, Surface Technologies, Nutrition & Care
and Agricultural Solutions segments.
86,556
1,034
198
86,950
23,329
16,604
5,753
[2]
756
3,427
[24]
5,509
3,362
[24]
695
About This Report
[11]
3,252
2,938
[23]
5,122
5,087
27,118
2,998
1 To Our Shareholders
Million €
3 Corporate Governance
(66)
(634)
78
(5,941)
1,113
906
(394)
25
(1,249)
479
3,750
4,218
4,707
8,421
2018
2019
Payments made for acquisitions
4 Consolidated Financial Statements
Statement of Cash Flows
5 Overviews
Statement of Cash Flows
BASF Group
Statement of cash flowsa
27,996
2 Management's Report
Net income
Changes in inventories
Changes in receivables
Changes in operating liabilities and other provisions
Changes in pension provisions, defined benefit assets and other items
Gains (-)/ losses (+) from the disposal of noncurrent assets and securities
Cash flows from operating activities
Payments made for intangible assets and property, plant and equipment
Payments made for financial assets and securities
Depreciation and amortization of intangible assets and property, plant and equipment
705
7,683
[24]
Provisions for pensions and similar obligations
Tax provisions and deferred tax liabilities
Other provisions
Financial indebtedness
Other liabilities
Noncurrent liabilities
Accounts payable, trade
Provisions
Tax liabilities
Financial indebtedness
Other liabilities
Liabilities of disposal groups
Current liabilities
Total equity and liabilities
Explanations in Note
December 31, 2019
December 31, 2018
[19]
1,176
1,176
[19]
3,115
3,118
[19]
42,056
36,699
7,474
Equity
Equity attributable to shareholders of BASF SE
Noncontrolling interests
Other comprehensive income
Retained earnings
15,332
15,015
[24]
1,301
1,340
[23]
2,346
2,280
[11]
7,434
[22]
BASF Report 2019
36,109
1,678
42,350
853
[21]
35,054
41,497
(5,939)
(4,850)
[20]
5 Overviews
Balance Sheet
Equity and liabilities
Million €
Subscribed capital
Capital reserves
1,055
7,939
1,176
Payments received from the disposal of noncurrent assets and securities
70
8,491
949
949
15
964
(3)d
(125)
140
12
(162)
(150)
918,478,694
4 Consolidated Financial Statements
3,115
8,421
8,421
(3,064)
(125)c
Retained
earnings
comprehensive
incomeb
3,118
36,699
(5,939)
Equity attributable
to shareholders
42,056
of BASF SE
Noncontrolling
interests
Equity
1,055
36,109
(2,939)
(2,939)
35,054
(4,850)
41,497
853
(586)
1d
(8)
(7)
18
11
918,478,694
22
1,176
36,699
(5,939)
35,054
1,055
36,109
BASF Report 2019
200
3,118
Capital reserves
(608)
4,979
42,350
918,478,694
1,176
3,117
34,847
(5,331)
33,809
(608)
917
(2,847)
(2,847)
(174)
(3,021)
4,707
4,707
272
34,726
Subscribed
capital
1,176
918,478,694
Number of shares
outstanding
107
1,399
(1,190)
555
(11,804)
1
3
10,357
(13,699)
2,600
6,355
(2,939)
(2,847)
(125)
(174)
(6,405)
(52)
(121)
(3,389)
(3,917)
(7,362)
(1,210)
Cash flows from investing activities
Capital increases/repayments and other equity transactions
Additions to financial and similar liabilities
Repayment of financial and similar liabilities
Dividends paid
To shareholders of BASF SE
noncontrolling interests
Cash flows from financing activities
(239)
Net changes in cash and cash equivalents
From foreign exchange rates
changes in the scope of consolidation
Cash and cash equivalents at the beginning of the yearb
Cash and cash equivalents at the end of the yearb
(3,824)
(3,894)
(1,126)
Changes in cash and cash equivalents
Payments received for divestitures
37
2,519
Income after taxes
Changes to income and expense recognized directly in equity
Changes in scope of consolidation and other changes
As of December 31, 2019
As of January 1, 2018
Effects of acquisitions achieved in stages
Dividends paid
Dividends paid
Income after taxes
Changes in scope of consolidation and other changes
As of December 31, 2018
a For more information on the items relating to equity, see Notes 19 and 20 from page 251 onward.
b Details are provided in the Statement of Income and Expense Recognized in Equity on page 195.
c Including profit and loss transfers
d Granting of BASF shares under BASF's "plus" share program
Other
Changes to income and expense recognized directly in equity
20
Effects of acquisitions achieved in stages
Million €
2,455
(59)
6,495
2,519
a More information on the statement of cash flows can be found in the Management's Report (Financial Position) on page 54. Other information on cash flows can be found in Note 29 from page 282 onward.
b In 2019 and 2018, cash and cash equivalents presented in the statement of cash flows deviate from the figures in the balance sheet due to the reclassification of cash and cash equivalents to disposal groups: for the construction chemicals business (€21 million) and the pigments business (€7 million) in 2019, and for the oil and gas business
(€219 million) in 2018.
BASF Report 2019
199
As of January 1, 2019
About This Report
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Statement of Changes in Equity
5 Overviews
Statement of Changes in Equity
BASF Group
Statement of changes in equitya
1 To Our Shareholders
3 Corporate Governance
269
6,033
1 To Our Shareholders
15
(586)
(608)
22
9,455
9,370
85
4,393
4,099
294
BASF Report 2019
195
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Remeasurement of
defined benefit plans
Other comprehensive income
5 Overviews
Transfers
Changes
As of January 1, 2018
949
As of December 31, 2019
Transfers
Changes
As of January 1, 2019
Million €
Development of income and expense recognized in equity attributable to shareholders of BASF SE
4 Consolidated Financial Statements
Statement of Income and Expense Recognized in Equity
Deferred taxes
Unrealized gains/losses
from currency translation
964
C FVOCI: fair value through other comprehensive income
Unrealized gains/losses from currency translation
481
466
15
194
172
22
Reclassification of realized gains/losses from currency translation recognized in the statement of income
834
834
Deferred taxes on reclassifiable gains/losses
(28)
(28)
9
9
Reclassifiable gains/losses after taxes from equity-accounted investments
(9)
b For more information, see Note 22 from page 253 onward.
a For more information on other comprehensive income, see Note 20 on page 252 of the Notes.
Comprehensive income
Other comprehensive income after taxes
22
137
d For more information, see Note 27 from page 266 onward.
159
1,342
1,357
Reclassifiable gains/losses
(20)
(20)
(9)
15
(25)
Measurement of
securities at fair value
Total income and expense
recognized in equity
11
(466)
5
(113)
244
(5,939)
BASF Report 2019
196
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Balance Sheet
Balance Sheet
BASF Group
Cash and cash equivalentsa
Marketable securities
Other receivables and miscellaneous assets
Accounts receivable, trade
Inventories
Noncurrent assets
(2)
Other receivables and miscellaneous assets
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Million €
Assets
Deferred tax assets
Cash flow hedges
(5,365)
235
(5,365)
(466)
5
(113)
(5,939)
(752)
1,279
91
618
140
140
359
(15)
(13)
331
(5,618)
798
Deferred taxes
(852)
(14)
1
141
(980)
As of December 31, 2018
(5,331)
4
(605)
(4,620)
(4,850)
(35)
5
(110)
Assets of disposal groups
(25)
79
(756)
(1,117)
(1,138)
2,546
4,116
4,150
[2]
5,945
863
829
8,491
4,979
4,979
[12]
(70)
(272)
(272)
5.12
9.17
[5]
0.83
0.86
6.45
[11]
[5]
4.26
2.72
[5]
4,707
4,707
8,421
4.29
5.12
5,288
3,302
33
35
36
(78)
(78)
(78)
(45)
(43)
(42)
183
174
174
(648)
(537)
(540)
(465)
(363)
(745)
(741)
(750)
[10]
(337)
(335)
5,233
(240)
(368)
(275)
32
33
35
(366)
(369)
79
[5]
(0.01)
5 Overviews
2018
Noncontrolling
interests
70
BASF Group
4,979
Shareholders
of BASF SE
Noncontrolling
interests
4,707
272
(977)
(977)
235
235
(3)
(3)
(745)
(745)
Fair value changes in options designated as cash flow hedges, netd
(44)
(44)
54
54
Reclassification of realized gains/losses recognized in the statement of income
(393)
19
25
25
Fair value changes in securities measured through other comprehensive income, netd
Unrealized gains/losses in connection with cash flow hedges.
1
1
Unrealized gains/losses from fair value changes in securities measured at FVOCIC
Reclassification of realized gains/losses recognized in the statement of income
19
(0.02)
(393)
(46)
(0.01)
Diluted earnings per share (€)
[5]
9.15
5.11
5.11
a Figures for 2018 were restated with the presentation of the construction chemicals activities as discontinued operations. For more information, see Note 1.4 on page 204 of these Notes.
BASF Report 2019
194
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Statement of Income and Expense Recognized in Equity
Statement of Income and Expense Recognized in Equity
BASF Group
Statement of comprehensive incomea
359
359
(706)
(706)
8,421
of BASF SE
(46)
Shareholders
BASF Group
8,491
Nonreclassifiable gains/losses after taxes from equity-accounted investments
Nonreclassifiable gains/losses
Deferred taxes on nonreclassifiable gains/losses
Remeasurement of defined benefit plansb
Income after taxes
Million €
2019
Current assets
Total assets
a For a reconciliation of the amounts in the statement of cash flows with the balance sheet item cash and cash equivalents, see page 199.
We declare that the opinions expressed in this auditor's report are
consistent with the additional report to the audit committee pursuant
to Article 11 of the EU Audit Regulation (long-form audit report).
We were elected as group auditor by the annual general meeting on
May 3, 2019. We were engaged by the Chairwoman of the audit
committee on July 18, 2019. We have been the group auditor of
BASF SE without interruption since the financial year 2006.
Further Information pursuant to Article 10 of the EU Audit
Regulation
Other Legal and Regulatory Requirements
From the matters communicated with the audit committee, we
determine those matters that were of most significance in the audit of
the Consolidated Financial Statements of the current period and are
therefore the key audit matters. We describe these matters in our
auditor's report unless law or regulation precludes public disclosure
about the matter.
We also provide the audit committee with a statement that we have
complied with the relevant independence requirements, and com-
municate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where
applicable, the related safeguards.
5 Overviews
4 Consolidated Financial Statements
Independent Auditor's Report
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
192
BASF Report 2019
We communicate with the audit committee regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control
that we identify during our audit.
- Perform audit procedures on the prospective information pre-
sented by the Board of Executive Directors in the Group Manage-
ment Report. On the basis of sufficient appropriate audit evidence
we evaluate, in particular, the significant assumptions used by the
Board of Executive Directors as a basis for the prospective infor-
Imation, and evaluate the proper derivation of the prospective
information from these assumptions. We do not express a sepa-
rate opinion on the prospective information and on the assump-
tions used as a basis. There is a substantial unavoidable risk that
future events will differ materially from the prospective information.
-
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Overviews
The Supervisory Board is responsible for overseeing the Group's
financial reporting process for the preparation of the Consolidated
Financial Statements and of the Group Management Report.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements and of the Group Management Report
Our objectives are to obtain reasonable assurance about whether
the Consolidated Financial Statements as a whole are free from
material misstatement, whether due to fraud or error, and whether
the Group Management Report as a whole provides an appropriate
view of the Group's position and, in all material respects, is consis-
tent with the Consolidated Financial Statements and the knowledge
obtained in the audit, complies with the German legal requirements
and appropriately presents the opportunities and risks of future
development, as well as to issue an auditor's report that includes our
opinions on the Consolidated Financial Statements and on the
Group Management Report.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Section 317
HGB and the EU Audit Regulation and in compliance with German
Generally Accepted Standards for Financial Statement Audits pro-
mulgated by the Institut der Wirtschaftsprüfer (IDW) will always
detect a material misstatement. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggre-
gate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these Consolidated Finan-
cial Statements and this Group Management Report.
German Public Auditor Responsible for the Engagement
We exercise professional judgment and maintain professional skep-
ticism throughout the audit. We also:
-
Obtain an understanding of internal control relevant to the audit of
the Consolidated Financial Statements and of arrangements and
measures (systems) relevant to the audit of the Group Manage-
ment Report in order to design audit procedures that are appro-
priate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of these systems.
- Evaluate the appropriateness of accounting policies used by the
Board of Executive Directors and the reasonableness of estimates
made by the Board of Executive Directors and related disclosures.
Conclude on the appropriateness of the Board of Executive Direc-
tors' use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on
the Group's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw atten-
tion in the auditor's report to the related disclosures in the Consoli-
dated Financial Statements and in the Group Management Report
or, if such disclosures are inadequate, to modify our respective
opinions. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future
events or conditions may cause the Group to cease to be able to
continue as a going concern.
Evaluate the overall presentation, structure and content of the
Consolidated Financial Statements, including the disclosures, and
whether the Consolidated Financial Statements present the
underlying transactions and events in a manner that the Consoli-
dated Financial Statements give a true and fair view of the assets,
liabilities, financial position and financial performance of the Group
in compliance with IFRSS as adopted by the EU, the additional
requirements of German commercial law pursuant to Section
315e (1) HGB and full IFRS.
Obtain sufficient appropriate audit evidence regarding the finan-
cial information of the entities or business activities within the
Group to express opinions on the Consolidated Financial State-
ments and on the Group Management Report. We are responsible
for the direction, supervision and performance of the group audit.
We remain solely responsible for our opinions.
- Evaluate the consistency of the Group Management Report with
the Consolidated Financial Statements, its conformity with law,
and the view of the Group's position it provides.
- Identify and assess the risks of material misstatement of the Con-
solidated Financial Statements and of the Group Management
Report, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opin-
ions. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresenta-
tions, or the override of internal control.
2 Management's Report
The German Public Auditor responsible for the engagement is
Alexander Bock.
KPMG AG
Income from other shareholdings
Income from operations
Income from companies accounted for using the equity method
Other operating expenses
Other operating income
Research and development expenses
General administrative expenses
Selling expenses
Gross profit on sales
Cost of sales
Sales revenue
Million €
Statement of income
BASF Group
Statement of Income
5 Overviews
4 Consolidated Financial Statements
Statement of Income
Wirtschaftsprüfungsgesellschaft
[Original German version signed by:]
Sailer
Wirtschaftsprüfer
[German Public Auditor]
Bock
Frankfurt am Main, February 25, 2020
Wirtschaftsprüfer
BASF Report 2019
193
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
[German Public Auditor]
Expenses from other shareholdings
To Our Shareholders
About This Report
[11]
2,887
2,342
[18]
1,112
886
55,960
43,335
BASF Report 2019
[17]
11,223
12,166
[18]
9,093
10,665
[18]
3,790
About This Report
197
86,556
86,950
43,221
30,990
570
14,607
[2]
2,300
2,427
344
444
3,139
4,013
1
636
2,203
191
BASF Report 2019
Furthermore, the Board of Executive Directors is responsible for the
preparation of the Group Management Report that, as a whole,
provides an appropriate view of the Group's position and is, in all
material respects, consistent with the Consolidated Financial
Statements, complies with German legal requirements, and appro-
priately presents the opportunities and risks of future development.
In addition, the Board of Executive Directors is responsible for such
arrangements and measures (systems) as they have considered
necessary to enable the preparation of a Group Management Report
that is in accordance with the applicable German legal requirements,
and to be able to provide sufficient appropriate evidence for the
assertions in the Group Management Report.
In preparing the Consolidated Financial Statements, the Board of
Executive Directors is responsible for assessing the Group's ability
to continue as a going concern. They also have the responsibility for
disclosing, as applicable, matters related to going concern. In
addition, they are responsible for financial reporting based on the
going concern basis of accounting unless there is an intention to
liquidate the Group or to cease operations, or there is no realistic
alternative but to do so.
Group. In addition, the Board of Executive Directors is responsible
for such internal control as they have determined necessary to
enable the preparation of Consolidated Financial Statements that
are free from material misstatement, whether due to fraud or error.
- otherwise appears to be materially misstated.
- is materially inconsistent with the Consolidated Financial State-
ments, with the Group Management Report or our knowledge
obtained in the audit, or
In connection with our audit, our responsibility is to read the
other information and, in so doing, to consider whether the other
information
Our opinions on the Consolidated Financial Statements and on the
Group Management Report do not cover the other information, and
consequently we do not express an opinion or any other form of
assurance conclusion thereon.
The other information does not comprise the Consolidated Financial
Statements, the audited parts of the Group Management Report
and our auditor's report.
Additionally the other information comprises the remaining parts of
the BASF Report 2019.
the disclosures which are not normally part of the Group Manage- assets, liabilities, financial position, and financial performance of the
ment Report and which are identified as unaudited.
Responsibilities of the Board of Executive Directors and
the Supervisory Board for the Consolidated Financial
Statements and the Group Management Report
Board of Executive Directors is responsible for the preparation of the
Consolidated Financial Statements that comply, in all material
respects, with IFRSS as adopted by the EU, the additional require-
ments of German commercial law pursuant to Section 315e (1) HGB
and full IFRS and that the Consolidated Financial Statements, in
compliance with these requirements, give a true and fair view of the
the corporate governance statement in the section Corporate
Governance of the Group Management Report, and
the information of the integrated non-financial statement which is
identified as unaudited
The Board of Executive Directors and the Supervisory Board are
responsible for the other information. The other information com-
prises:
Other information
15,008
5,974
About This Report
1
To Our Shareholders
2 Management's Report
[16]
3 Corporate Governance
5 Overviews
In consultation with our valuation specialists, we compared the
assumptions and parameters underlying the incremental borrowing
rates with our own assumptions and publicly available data. In
addition, we evaluated the appropriateness of the model used to
calculate the interest rate and reproduced the calculation of the
incremental borrowing rates on a risk-oriented basis.
We reproduced BASF's calculations of the carrying amounts of the
lease liabilities and right-of-use assets. To this end, we evaluated the
measurement and recognition of lease liabilities and right-of-use
assets performed by the IT system for selected leases, chosen in
part on a representative and in part on a risk-oriented basis. The
risk-based assessment included an evaluation of proper measure-
ment in the case of changes to or reassessments of the underlying
contract.
To the extent that IT processing systems were used to calculate and
consolidate the relevant data, in consultation with our IT specialists,
we tested the effectiveness of the rules and processes in the
underlying accounting-relevant IT system.
Our observations
BASF SE has established an appropriate process to recognize
leases in accordance with IFRS 16. The assumptions and parame-
ters underlying the measurement of lease liabilities and right-of-use
assets are appropriate overall.
4 Consolidated Financial Statements
Independent Auditor's Report
Net income from shareholdings
Interest income
Interest expenses
(2,028)
(1,994)
(2,158)
[7]
(1,426)
(1,310)
[7]
(8,588)
(7,715)
(7,912)
[7]
18,356
17,306
16,255
(44,319)
(42,914)
(43,061)
[6]
2018
previous
62,675
[8]
60,220
2,095
1,815
Explanations in Note
December 31, 2019
December 31, 2018
[14]
14,525
16,554
[15]
21,792
20,780
[16]
4,052
[4]
269
116
[9]
(2,365)
(2,348)
(3,034)
[8]
1,812
2 Management's Report
(1,356)
Dilution effect (€)
59,316
[6]
2018
restateda
2019
Explanations in Note
Earnings per share (€)
Earnings per share from discontinued operations (€)
Earnings per share from continuing operations (€)
Noncontrolling interests.
Net income
Income after taxes from discontinued operations
Income after taxes from continuing operations
Income taxes
Income before income taxes
Financial result
Other financial result
Other financial expenses
Other financial income
Interest result
Income after taxes
2 Management's Report
About This Report
1
To Our Shareholders
3 Corporate Governance
In IAS 23 - Borrowing Costs, it was determined that when entities
borrow funds in general for the acquisition of qualifying assets that
those costs for capital borrowed specifically for the acquisition of
qualifying assets should not be considered in the determination of
the financing rate until their completion.
5 Overviews
Notes
In IFRS 3 - Business Combinations, it was clarified that when a
party to a joint arrangement obtains control of a business that is a
joint operation and had rights to the assets and obligations for the
liabilities relating to that joint operation immediately before the
acquisition date, the transaction is a business combination achieved
in stages. The acquirer shall therefore apply the requirements for a
business combination achieved in stages, including remeasuring its
previously held interest in the joint operation.
201
4 Consolidated Financial Statements
BASF Report 2019
IFRS 16 - Leases was endorsed by the European Union on
October 31, 2017, and applied by BASF for the first time as of
January 1, 2019. IFRS 16 requires an accounting model for a lessee
that recognizes all right-of-use assets and liabilities from lease
agreements in the balance sheet. As for the lessor, the new standard
substantially carries forward the accounting requirements of
IAS 17 - Leases because lessors must continue to classify leases as
either finance or operating leases.
Annual Improvements to IFRS 2015-2017
On October 12, 2017, the IASB published amendments with respect
to the accounting treatment of long-term interests in associated
companies and joint ventures. These amendments were endorsed
by the European Union on February 8, 2019. They clarify that IFRS 9
is to be applied to long-term interests in associated companies or
joint ventures that are not accounted for using the equity method.
The amendments have no material effect on BASF.
Amendments to IAS 28 - Long-Term Interests in Associates
and Joint Ventures
IFRIC 23 expands on the requirements in IAS 12 on how to account
for uncertainties surrounding the income tax treatment of circum-
stances and transactions with respect to both actual and deferred
taxes. The amendments were endorsed by the European Union on
October 23, 2018. They have no material effect on BASF.
IFRIC 23 - Uncertainty over Income Tax Treatments
The amendments pertain to the relevant criteria for the classification
of financial assets and were endorsed by the European Union on
March 22, 2018. Financial assets with a prepayment feature with
negative compensation may be recognized under certain conditions
at amortized cost or at fair value through other comprehensive
income instead of at fair value through profit and loss. The amend-
ments have no effect on BASF.
Amendments to IFRS 9 - Financial Assets with a
Prepayment Feature with Negative Compensation
For more information on leases, see Note 28 from page 279 onward
The effects of first-time application of IFRS 16 on BASF are pre-
sented in Note 28.
Notes
Four standards were amended in the Annual Improvements to
IFRSS (2015-2017). The amendments were endorsed by the
European Union on March 14, 2019. They have no material effect on
BASF.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
202
BASF Report 2019
The IASB issued further amendments to standards and interpreta-
tions which are still subject to E.U. endorsement and whose
application is not yet mandatory. These amendments are unlikely to
have a material impact on the reporting of BASF. BASF does not
plan on early adoption of these amendments.
Notes
IFRSS and IFRICS not yet to be considered and not yet
endorsed by the E.U.
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate
Benchmark Reform
The amendments issued by the IASB on October 31, 2018 provide
a uniform and more precise definition of the materiality of information
provided in the financial statements, together with accompanying
examples. In this connection, the definitions in the Conceptual
Framework, IAS 1, IAS 8 and the IFRS Practice Statement 2 (Making
Materiality Judgements) were harmonized. The amendments were
endorsed by the E.U. on November 29, 2019 and are to be applied
for the first time on or after January 1, 2020.
Amendments to IAS 1 - Financial Statement Presentation
and IAS 8 - Accounting Policies, Changes in Accounting
Estimates and Errors
The amendments update references to and quotes from the
Conceptual Framework. The amendments were endorsed by the
E.U. on November 29, 2019. The revised Conceptual Framework
issued on March 29, 2018 replaces the previous Conceptual Frame-
work from 2010. The main changes primarily relate to the definition,
recognition and measurement of assets and liabilities, as well as the
differentiation between income and expense and other comprehen-
sive income. The amendments are to be applied for the first time in
the first reporting period of the fiscal year beginning on or after
January 1, 2020.
Amendments to References to the Conceptual Framework
in IFRS Standards
The effects on the BASF Group financial statements of the IFRSS
and IFRICS not yet in force in 2019 but already endorsed by the
European Union were reviewed and are explained below. BASF
currently assumes that they will have no material effect on the
Consolidated Financial Statements.
IFRSS and IFRICS not yet to be considered but already
endorsed by the E.U.
The amendments relate to the measurement of pension obligations
based on updated assumptions if plan amendment, curtailment or
settlement occurs. After such an event, the past service cost as well
as any gains or losses on the basis of current actuarial assumptions
and a comparison of the resulting pension benefits must be calcu-
lated before and after the change. The periods before and after the
plan amendment, curtailment or settlement are treated separately in
subsequent measurement. The improvements were endorsed by
the European Union on March 13, 2019. Only minor effects resulted
from the improvements to IAS 19 for BASF in 2019.
Improvements to IAS 19 – Plan Amendment, Curtailment or
Settlement
The IASB issued amendments to IFRS 9, IAS 39 and IFRS 7 on
September 26, 2019. They are based on existing uncertainties with
regard to the IBOR reform. According to current hedge accounting
policies, pending adjustments to benchmark interest rates would, in
many cases, result in an end to hedging relationships. It is now
possible to continue accounting for existing hedge accounting
relationships during the transition period. The amendments stipulate
specific mandatory exceptions to the previous hedge accounting
rules, for example, the assessment of highly probable criteria for
expected cash flow hedging transactions. The amendments were
endorsed by the E.U. on January 15, 2020 and are to be applied for
the first time on or after January 1, 2020.
IAS 12 Income Taxes was amended to the extent that all income
tax effects of dividend payments must be considered in the same
Iway as the income on which the dividends are based.
Amendments to IFRS 10 and IAS 28 - Sale or Contribution of
Assets between an Investor and its Associate or Joint
Venture
IASB has postponed the effective date of the changes indefinitely.
2 Management's Report
1 To Our Shareholders
About This Report
203
BASF Report 2019
Transactions between consolidated companies as well as intercom-
pany profits resulting from trade between consolidated companies
are eliminated in full; for joint operations, they are proportionally
eliminated. Material intercompany profits related to companies
accounted for using the equity method are eliminated.
Consolidation methods: Assets and liabilities of consolidated
companies are uniformly recognized and measured in accordance
with the principles described herein. For companies accounted for
using the equity method, material deviations in measurement
resulting from the application of other accounting principles are
adjusted for.
Joint ventures and associated companies are accounted for using
the equity method in the Consolidated Financial Statements.
Associated companies are entities that are not subsidiaries, joint
ventures or joint operations, and over whose operating and financial
policies significant influence can be exercised. In general, this
applies to companies in which BASF has an investment of between
20% and 50%. Equity-accounted income is reported as part of
income from operations (EBIT).
In addition to BASF SE, the Consolidated Financial Statements
include all material subsidiaries on a fully consolidated and all
material joint operations on a proportionally consolidated basis.
Companies whose business is dormant or of low volume, and are of
minor importance for the presentation of a true and fair view of the
net assets, financial position and results of operations, are not
consolidated, but rather are reported under other shareholdings.
These companies are carried at amortized cost and are written
down in the case of an impairment. The aggregate assets and equity
of these companies amount to less than 1% of the corresponding
value at Group level.
In IFRS 11 Joint Arrangements, it was clarified that if an entity
obtains joint control of a business that is a joint operation and had
rights to the assets and obligations for the liabilities relating to that
joint operation immediately before the acquisition date, the pre-
viously held interest in that business is not remeasured.
Companies whose corporate governance structures classify them
as joint arrangements are analyzed to determine if they meet the
criteria for joint ventures or joint operations in accordance with
IFRS 11. Should the arrangement be structured through a separate
vehicle, its legal form, contractual arrangements and all other facts
and circumstances are reviewed.
Based on corporate governance and any additional agreements,
companies are analyzed for their relevant activities and variable
returns, and the link between the variable returns and the extent to
which their relevant activities could be influenced.
· The parent company can use its decision-making power to affect
the variable returns
- The parent company has rights to variable returns from the
investee
-
According to IFRS 10, a group consists of a parent entity and the
subsidiaries controlled by the parent. "Control" of an investee
assumes the simultaneous fulfillment of the following three criteria:
· The parent company holds decision-making power over the
relevant activities of the investee
Scope of consolidation: The scope of consolidation is based on
the application of the standards IFRS 10 and 11.
1.3 Group accounting principles
The amendments issued on October 22, 2018, clarify that a
business is a set of activities and assets with at least one input and
one substantive process that together significantly contribute to the
ability to create outputs. Outputs are defined as the provision of
goods and services to customers. The existing reference to cost
reduction was removed. In addition, the new provisions also contain
an optional concentration test designed to simplify identification of a
business. Subject to adoption by EU legislation, the modified
definition is to be applied to business combinations with an acquisi-
tion date on or after January 1, 2020.
Amendments to IFRS 3 - Business Combinations
According to IFRS 11, which regulates the accounting of joint
arrangements, a distinction must be made between joint ventures
and joint operations. In the case of a joint venture, the parties that
have joint control of a legally independent company have rights to
the net assets of that arrangement. In joint operations, the parties
that have joint control have direct rights to the assets and obligations
for the liabilities relating to the arrangement. This requirement is
particularly fulfilled if the production output of the joint arrangement
is almost entirely transferred to the partners, through which the
partners guarantee the joint arrangements' ongoing financing.
The IASB issued amendments to IFRS 10 and IAS 28 on Septem-
ber 11, 2014. The amendments address a known inconsistency
between the requirements of IFRS 10 and IAS 28 (2011) in the case
of the sale of an asset to an associated company or a joint venture
or the contribution of an asset to an associated company or a joint
venture. Pursuant to IFRS 10, a parent company must recognize the
total amount of any gains or losses in profit or loss from the sale of
a subsidiary when control ceases to exist. By contrast, IAS 28.28
requires that profits from a disposal from a transaction between an
investor and an associated company or joint venture must only be
recognized in the amount of the others' share in this company.
Capital consolidation is conducted at the acquisition date according
to the purchase method. Initially, all assets, liabilities and additional
intangible assets that are to be capitalized are measured at fair
value. Finally, the cost is compared with the proportional share of
the net assets acquired at fair value. The resulting positive differences
are capitalized as goodwill. Negative differences are reviewed once
more, then recognized directly in the income statement.
4.44
8
8
4
2
3
7
42
of which proportionally consolidated
Deconsolidations
22
11
6
2
4
5
of which proportionally consolidated
1
1
As of December 31
152
50
46
74
30
302
331
36
of which proportionally consolidated
6
331
One acquired company with headquarters in Europe
- One newly established company with headquarters in Asia Pacific
· Five companies with headquarters in Europe (three, two of those
are in Germany) and in Asia Pacific (two) that had not been
consolidated at the time of initial inclusion in the Consolidated
Financial Statements.
Scope of consolidation
First-time consolidations in 2018 comprised:
-
-
-
22 acquired companies with headquarters in Europe (11; one of
those is in Germany), North America (two), Asia Pacific (three) and
South America, Africa, Middle East (six)
Three newly established companies with headquarters in Europe
(two; none of those is in Germany) and Asia Pacific (one)
17 companies that had not been consolidated at the time of initial
inclusion in the Consolidated Financial Statements in Europe (five;
two of those are in Germany), North America (eight), Asia Pacific
(two), South America, Africa, Middle East (two).
Of the 42 companies that were consolidated in the Consolidated
Financial Statements for the first time in 2018, 35 companies were
included for the first time due to the acquisition of significant parts of
Bayer's seed and non-selective herbicide business (13) and its
vegetable seeds business (22) as acquired, new or previously non-
consolidated entities. As a result of the the integration of the seed
and non-selective herbicide business in 2019, 11 new entities from
2018 were deconsolidated due to mergers with BASF companies or
reduced materiality.
As of January 1
of which proportionally consolidated
294
First-time consolidations
Europe
Of which
Germany
North
America
Asia Pacific
Middle East
2019
2018
170
59
52
75
34
South
America,
5
2
7
Million €
%
Million €
%
11
0.0
2
0.0
44
0.1
2
0.0
2018
13
79
0.4
(1)
0.0
(8)
0.0
21
0.9
43
0.0
(6)
0.0
0.1
2019
Notes
BASF Report 2019
8
BASF Report 2019
206
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Although BASF does not hold the majority of shares in ZAO Gazprom
YRGM Trading, BASF was entitled to the earnings of the company
due to profit distribution arrangements. As a result, the company
was fully consolidated in the Consolidated Financial Statements
until April 30, 2019. 18 companies including ZAO Gazprom YRGM
Trading were deconsolidated due to the merger of Wintershall and
DEA for the Wintershall Dea joint venture.
A list of the companies included in the Consolidated Financial
Statements and a list of all companies in which BASF SE has a
shareholding as required by section 313(2) of the German Commer-
cial Code (HGB) is provided in the list of shares held.
For more information, see Note 3 on page 219
For more information, see basf.com/en/corporate governance
Overview of impact of changes to the scope of consolidation (excluding acquisitions and divestitures)
Sales
Noncurrent assets
of which property, plant and equipment
Current assets
of which cash and cash equivalents
Assets
Equity
Noncurrent liabilities
of which financial indebtedness
Current liabilities
of which financial indebtedness
Total equity and liabilities
Other financial obligations
First-time consolidations in 2019 comprised:
20
In 2019, a total of 302 companies were included, either proportion-
ally or fully, in the scope of consolidation for the Consolidated
Financial Statements (2018: 331). Of these, seven companies were
first-time consolidations (2018: 42). Since the beginning of 2019, a
total of 36 companies (2018: five) were deconsolidated due to
divestiture, merger, liquidation or immateriality.
2 Scope of consolidation
2019
2018
2019
2018
4.52
4.41
4.31
China (CNY)
7.82
7.88
7.74
7.81
Dec. 31,
United Kingdom (GBP)
Japan (JPY)
0.89
0.88
0.88
121.94
125.85
122.01
130.40
Malaysia (MYR)
Mexico (MXN)
4.60
4.73
4.64
4.76
0.85
21.22
Dec. 31,
Closing rates
The incidental acquisition costs of a business combination are
recognized in the income statement under other operating expenses.
IFRS 16 - Leases
Accounting policies applied for the first time in 2019
1.2 Changes in accounting principles
On February 24, 2020, the Board of Executive Directors prepared
the Consolidated Financial Statements, submitted them to the
Supervisory Board for review and approval, and released them for
publication.
The individual financial statements of the consolidated companies
are prepared as of the balance sheet date of the Consolidated
Financial Statements. The accounting policies applied are largely the
same as those used in 2018, with the exception of any changes
arising from the application of new or revised accounting standards.
The Consolidated Financial Statements are presented in euros. All
amounts, including the figures for previous years, are given in million
euros unless otherwise indicated.
The Consolidated Financial Statements of BASF SE as of Decem-
ber 31, 2019, have been prepared in accordance with the Inter-
national Financial Reporting Standards (IFRS) of the International
Accounting Standards Board (IASB), and section 315a (1) of the
German Commercial Code (HGB). IFRSS are generally only applied
after they have been endorsed by the European Union. For the 2019
fiscal year, all of the binding IFRSS and pronouncements of the
International Financial Reporting Interpretations Committee (IFRIC)
were applied.
BASF SE (registered at the district trade register, or Amtsgericht, for
Ludwigshafen am Rhein, number HRB 6000) is a publicly listed
corporation headquartered in Ludwigshafen am Rhein, Germany. Its
official address is Carl-Bosch-Str. 38, 67056 Ludwigshafen am
Rhein, Germany.
1.1 General information
1 Summary of accounting policies
Policies and Scope of Consolidation
Average rates
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
Foreign currency translation: The cost of assets acquired in
foreign currencies and revenue from sales in foreign currencies are
determined by the exchange rate on the date the transaction is
recognized. Foreign currency receivables and liabilities are valued at
the exchange rates on the balance sheet date. Changes in assets
and liabilities arising from foreign currency translation are recognized
in the income statement, and reported under other operating
expenses or income, other financial result, and in the case of finan-
cial assets measured at fair value through other comprehensive
income, in other comprehensive income.
Translation of foreign currency financial statements: The
translation of foreign currency financial statements depends on the
functional currency of the consolidated companies. For companies
whose functional currency is not the euro, translation into the
reporting currency is based on the closing rate method: Balance
sheet items are translated into euros using closing rates on the
balance sheet date; expenses and income are translated into euros
at monthly average rates and accumulated for the year. The
difference between a company's translated equity at historical rates
at the time of acquisition or retention and its equity at closing rates
on the balance sheet date is reported separately in equity under
other comprehensive income (translation adjustments) and is
recognized in profit or loss only upon the company's disposal.
For certain companies outside the eurozone or U.S. dollar zone, the
euro or U.S. dollar is the functional currency. In such cases, financial
statements prepared in the local currency are translated into the
functional currency using the temporal method: All nonmonetary
assets and related depreciation and amortization as well as equity
are translated at the exchange rate applying to the respective
transactions. All other balance sheet items are translated using
closing rates on the balance sheet date; other expenses and income
are translated at monthly average rates. The resulting translation
differences are recognized in the income statement under other
operating income or expenses. If necessary, financial statements in
the functional currency are translated into the presentation currency
according to the closing rate method.
Selected exchange rates
EUR 1 equals
Brazil (BRL)
Notes
22.49
21.56
22.71
4 Consolidated Financial Statements
5 Overviews
Notes
assets and the use of the equity method are suspended as of the
date when the disposal group is initially presented. The statement
of cash flows is not restated. The activities of discontinued operations
are not allocated to any reportable segment in financial reporting.
For more information, see Note 2.5 from page 215 onward and Note 4 from page 219 onward
Exploration and development expenditures in the oil and gas
business, now accounted for using the equity method, are
accounted for using the successful efforts method. Under this
method, costs of successful exploratory drilling as well as
successful and dry development wells are capitalized.
Use of estimates and assumptions in preparing the
Consolidated Financial Statements
The carrying amount of assets, liabilities and provisions, contingent
liabilities and other financial obligations reported in the Consolidated
Financial Statements depends on the use of estimates, assumptions
and discretionary scope. Specific estimates or assumptions used in
individual accounting or valuation methods are disclosed in their
respective sections of the Notes to the Consolidated Financial
Statements. They are based on the circumstances and estimates on
the balance sheet date and thus affect the amounts of income and
expenses shown for the reporting periods presented. These
assumptions primarily relate to the determination of discounted
cash flows in the context of impairment tests and purchase price
allocations; the useful lives of property, plant and equipment and
intangible assets; the carrying amount of shareholdings; and the
measurement of provisions for items such as employee benefits,
warranties, trade discounts, environmental protection and taxes.
Although uncertainty is appropriately incorporated in the valuation
factors, actual results can differ from these estimates.
Impairment tests on assets are carried out whenever certain
triggering events indicate potential impairment. External triggering
events include, for example, changes in customer industries,
technologies used and economic downturns. Internal triggering
events for an impairment test include lower product profitability,
planned restructuring measures or physical damage to assets.
Impairment tests are based on a comparison of the carrying amount
and the recoverable amount. The recoverable amount is the higher
of fair value less costs to sell and the value in use. As a rule, value in
use is determined using the discounted cash flow method. The
estimation of cash flows and the assumptions used consider all
information available on the respective balance sheet date on the
future development of the operating business. Actual future
developments may vary. Impairment testing relies upon the
cash-generating unit's long-term earnings forecasts, which are
based on macroeconomic trends. The weighted average cost of
capital (WACC) based on the capital asset pricing model plays an
important role in impairment testing. It comprises a risk-free interest
rate, the market risk premium and the industry-specific spread for
the credit risk. Additional important assumptions are the forecasts
for the detailed planning period and the terminal growth rates used.
Fair value less costs to sell must be determined for the impairment
test of the disposal groups; specific assumptions relating to the
respective transaction must be made for this determination.
For more information, see Note 2.5 from page 215 onward and Note 14 from page 239 onward
An impairment is recognized if the recoverable amount of the asset
is lower than the carrying amount. The impaired asset (excluding
goodwill) is written down by the amount of the difference between
these amounts.
The goodwill impairment test is based on cash-generating units. At
BASF, these largely correspond to the business units, or in individual
cases the divisions. If there is a need for impairment, the existing
goodwill is, if necessary, completely written off as a first step. If there
is further need for impairment, this is allocated to the remaining
assets of the cash-generating unit. Goodwill impairments are
reported under other operating expenses.
3 Corporate Governance
The assumptions regarding the long-term development of oil and
gas prices were significant for impairment tests in the discontinued
oil and gas business in 2018. Internal company projections were
based on an empirical analysis of global oil and gas supply and
demand. Short-term estimates up to three years also considered
the current prices on active markets or forward transactions. In
long-term estimates, assumptions were made regarding factors
such as inflation, production quantities and costs as well as energy
efficiency and the substitution of energy sources. Using external
sources and reports, the oil and gas price estimates were regularly
checked for plausibility.
205
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
A valuation model based on a field-related valuation approach was
used for the impairment test for the Exploration & Production unit in
the discontinued oil and gas business when the disposal group was
set up in 2018. It took into account the expected cash flows as well
as the tax payments in the individual countries. The period under
consideration included the planned license terms and the produc-
tion profiles of the included oil and gas fields. Furthermore, instead
of using a single weighted average cost of capital rate, the country
risk and the specific tax rate were considered in each case; this led
to a more precise calculation of the recoverable amount. Allowing
for these parameters, the cost of capital rate after taxes in 2018
varied from 6.56% to 10.63% and before taxes from 9.62% to
30.37%.
The determination of fair value for the initial recognition of Wintershall
Dea GmbH, which is accounted for using the equity method, was
based on assumptions, particularly for production profiles of oil and
gas fields, oil and/or gas prices, and discount factors.
For planning purposes, BASF assumes an oil price of $60/bbl
(Brent) and for gas of approximately €18/MWh (roughly $6/mmBtu)
in 2020.
Further accounting policies are included in the respective notes to
the balance sheet and to the statement of income.
BASF Report 2019
2 Management's Report
1 To Our Shareholders
About This Report
Norway (NOK)
Russia (RUB)
Switzerland (CHF)
South Korea (KRW)
United States (USD)
9.86
9.95
9.85
9.60
69.96
79.72
72.46
74.04
1.09
1.13
1.11
1,296.28
1,277.93
1,305.32
1,299.07
1.12
1.15
1.12
1.15
1.18
1.4 Accounting policies
Business combinations: In business combinations, the acquired
assets and liabilities are recognized at fair value on the date the
acquirer effectively obtains control. The fair value of acquired assets
and assumed liabilities at the date of acquisition, as well as the
useful lives of the acquired assets, are determined on the basis of
assumptions. Measurement is largely based on projected cash
flows. Actual cash flows can deviate significantly from those.
Independent external appraisals are typically used for the purchase
price allocation of material business combinations. Valuations in the
course of business combinations are based on existing information
as of the acquisition date.
Groups of assets and liabilities held for sale (disposal groups):
These comprise those assets and directly associated liabilities
shown separately on the balance sheet whose sale in the context of
a single transaction is highly probable. A transaction is assumed to
be highly probable if there are no significant risks of completion of
the transaction, which usually requires the conclusion of binding
contracts. The assets and liabilities of disposal groups are recog-
nized at the lower of the sum of their carrying amounts or fair value
less costs to sell; this does not apply to assets that do not fall under
the valuation principles of IFRS 5. Depreciation of noncurrent assets
and the use of the equity method are suspended.
Discontinued operations: These are classified as held for sale and
are presented as discontinued operations in BASF's Consolidated
Financial Statements in accordance with IFRS 5. Until closing, the
income after taxes of discontinued operations is shown in income
after taxes of the BASF Group as a separate item (income after
taxes from discontinued operations). The BASF Group's sales and
earnings are retroactively adjusted for the consolidated figures for
discontinued operations as of the beginning of the fiscal year. The
prior-year figures are restated. In addition, the assets and liabilities of
the discontinued operations are reclassified to a disposal group
(assets or liabilities of disposal groups). Depreciation of noncurrent
BASF Report 2019
204
2.1 Changes in scope of consolidation
0.0
Africa,
0.0
-
-
Non-material associated companies accounted for using the equity
method include, in particular:
b In 2018, the amount of €939 million was transferred to the assets of the oil and gas disposal group.
537
553
(24)
(21)
(1,054)
(94)
16
1
803
56
method as of the end of the year
Carrying amount according to the equity
Other adjustments to income and expensesa
consolidation/other adjustmentsb
Capital measures/dividends/changes in the scope of
122
99
Total comprehensive income
Proportional change of other comprehensive
income Equity
1,298
Carrying amount according to the equity
method as of the beginning of the year
106
a This item includes accumulated effects from the discontinued oil and gas business in the amount of
€12 million in 2018.
a This item includes effects from the discontinued oil and gas business in the amount of €87 million in 2018.
b In 2019, the shareholding in Solenis UK International Ltd. was recognized for the first time, in the amount of
€590 million. The amount of €65 million was transferred to the assets of the disposal group for the pigments
business. In 2018, the amount of €1,613 million was transferred to the assets of the disposal group for the oil
and gas business.
As of August 31, 2019, 70% of the carrying amount of CIMO
Compagnie industrielle de Monthey S.A., Monthey, Switzerland
(BASF interest: 50%), was reclassified to assets of the disposal
group for the pigments business. This represents the 35% interest
of BASF Colors & Effects Switzerland AG in the company.
2.4 Acquisitions and divestitures
255
322
28
92
1,800
2,042
2,536
2,764
209
206
5
4
6
71
112
212
343
Carrying amount according to the equity method as of the beginning of the year
Proportional income after taxes
210
BASF Report 2019
- On August 1, 2018, BASF closed the acquisition of a range of
businesses and assets from Bayer to complement its own
activities in crop protection, biotechnology and digital farming. At
the same time, the transaction marked BASF's entry into the
seeds, non-selective herbicides and nematicide seed treatments
businesses. The assets acquired included Bayer's global glufos-
inate-ammonium business, commercialized under the LibertyⓇ,
BastaⓇ and Finale® trademarks, as well as its seed businesses for
key field crops in selected markets. The transaction also covered
Bayer's trait research and breeding capabilities for these crops.
BASF acquired the sites for glufosinate-ammonium production
and formulation in Germany, the United States and Canada, seed
breeding facilities in the Americas and Europe as well as trait
research facilities in the United States and Europe. BASF also
closed the acquisition of Bayer's global vegetable seeds business,
which mainly operates under the trademark NunhemsⓇ, on
August 16, 2018. The acquired vegetable seeds business com-
prised 24 crops and about 2,600 varieties. It also included R&D
breeding systems with more than 100 breeding programs in over
15 crops. This strengthened BASF's Agricultural Solutions divi-
sion. The purchase price totaled €7.5 billion. The preliminary pur-
chase price allocation for the acquisition of these Bayer busi-
nesses was reviewed at the conclusion of the 12-month valuation
period in accordance with IFRS 3 and restated due to more
detailed information and purchase price adjustments. This adjust-
ment of the purchase price allocation gave rise to the effects
presented in the following table.
In 2018, BASF acquired the following activities:
On March 7, 2018, BASF closed the agreement to form
BASF TODA America LLC (BTA), Iselin, New Jersey, for battery
materials. BTA is a cooperative venture between BASF and
TODA. BASF holds the majority share in and control over BTA.
With the Battle Creek site in Michigan and the site contributed by
BASF in Elyria, Ohio, the new company took over production of
high energy cathode active materials for e-mobility applications.
The transaction strengthened the Catalysts division's battery ma-
terials business.
- BASF acquired 100% of shares in Isobionics B.V., Geleen,
Netherlands, on September 26, 2019. The company develops
and produces a wide range of natural flavors and fragrances with
a focus on citrus oil components. The acquisition affects the
Nutrition & Health division.
Yara Freeport LLC, Wilmington, Delaware (BASF interest: 32%)
BASF Huntsman Shanghai Isocyanate Investment B.V., Arnhem,
Netherlands (BASF interest: 50%)
Stahl Lux 2 S.A., Luxembourg (BASF interest: 16.32%) is classi-
fied as an associated company as BASF can exercise significant
influence over the company due to the fact that its approval is
required for certain relevant board resolutions
Solenis UK International Ltd., London, United Kingdom (BASF In 2019, BASF acquired the following activity:
interest: 49%)
Acquisitions
98
28
Proportional income after taxesa
553
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
209
(1)
847
772
Carrying amount according to the equity method as of the end of the year
Other adjustments to income and expenses
5 Overviews
(197)
(197)
(181)
Capital measures / dividends / changes in the scope of consolidation / other adjustments
of which dividends
Total comprehensive income
165
106
(6)
Proportional change of other comprehensive income
171
106
879
847
(200)
Notes
Non-material joint ventures accounted for using the equity method
include, in particular:
-
(3)
Other adjustments to income and expenses
Carrying amount according to the equity
method as of the beginning of the year
(1,650)
492
Capital measures/dividends/changes in the scope of
consolidation/other adjustmentsb
2018
2019
126
6
Total comprehensive income
Proportional change of other comprehensive
income Equity
Proportional income after taxesa
2,327
803
Carrying amount according to the equity
method as of the beginning of the year
2018
2019
11
(16)
115
22
Million €
Non-material associated companies accounted for using the equity
method (BASF interest)
Million €
Non-material joint ventures accounted for using the equity method
(BASF interest)
- Heesung Catalysts Corporation, Seoul, South Korea, which is
jointly operated with the partner, Heesung (BASF interest: 50%)
N.E. Chemcat Corporation, Tokyo, Japan, which is jointly
operated with the partner, Sumitomo Metal Mining Co. Ltd.
(BASF interest: 50%)
1,509
0
BASF Report 2019
3
Noncurrent assets
of which goodwill from fair value adjustments
Current assets
of which marketable securities, cash and cash equivalents
Assets
Equity
Noncurrent liabilities
of which financial indebtedness
Current liabilities
of which financial indebtedness
Total equity and liabilities
Statement of income from May 1, 2019 to December 31, 2019
Sales revenue
Balance sheet
Depreciation and amortization
Interest expenses
Income taxes
Total comprehensive income
2019
31,920
2,688
2,589
814
34,509
17,058
15,273
6,028
Interest income
Financial information on the Wintershall Dea group, Kassel/Hamburg, Germany (100%)
Million €
The following table shows values for the Wintershall Dea group,
Kassel/Hamburg, Germany, including adjustments for fair value
made at initial recognition and the resulting effects on earnings.
Wintershall Dea GmbH, Kassel/Hamburg, Germany, is jointly oper-
ated by BASF and LetterOne. BASF holds a 72.7% share in the
company's equity. The joint venture became effective on May 1,
2019 and is accounted for using the equity method. The company
is considered a joint venture because BASF and LetterOne defined
the decision-making processes in the governing bodies as such that
neither party alone can control the relevant activities of Winters-
hall Dea.
29
(1)
0.0
0.0
24
0.1
(6)
0.0
43
0.0
0.0
207
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
2.2 Joint operations
Proportionally consolidated joint operations include, in particular:
Ellba C.V., Rotterdam, Netherlands, which is jointly operated with
Shell for the production of propylene oxide and styrene monomer
BASF DOW HPPO Production B.V.B.A., Antwerp, Belgium, which
is jointly operated with Dow for the production of propylene oxide
-
BASF holds a 50% share in each of these companies and controls
them jointly with the respective partner. The companies sell their
products directly to the partners. The partners ensure ongoing
financing of the companies by purchasing the production. The
companies were therefore classified as joint operations in accor-
dance with IFRS 11.
AO Achimgaz, Novy Urengoy, Russia, which was jointly operated
with Gazprom for the production of natural gas and condensate,
was derecognized in connection with the deconsolidation of the oil
and gas business.
2.3 Joint ventures and associated companies
BASF has shareholdings in two material joint ventures.
2,178
576
(6)
3,272
Assets
Equity
Noncurrent liabilities
of which financial indebtedness
Current liabilities
of which financial indebtedness
Total equity and liabilities
Statement of income
Sales revenue
Depreciation and amortization
Interest income
Interest expenses
of which marketable securities, cash and cash equivalents
Income taxes
2019
2018
1,032
1,110
768
148
201
1,800
2,042
1,542
34,509
1,691
Income after taxes
Current assets
932
Balance sheet
Noncurrent assets
(1,544)
(68)
(286)
(187)
75
14,078
(136)
of which proportional net income
(86)
(1,541)
Capital measures/dividends/changes in the scope of consolidation/other adjustments
of which dividends
Carrying amount according to the equity method as of December 31, 2019
Carrying amount according to the equity method as of May 1, 2019 (initial recognition at fair value)
Proportional comprehensive income
BASF Report 2019
12,401
BASF-YPC Company Ltd., Nanjing, China, in which BASF and
Sinopec each has a 50% share, operates the Verbund site in
Nanjing.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Financial information on BASF-YPC Company Ltd., Nanjing, China (100%)
Million €
2 Management's Report
1 To Our Shareholders
About This Report
208
1,733
-
(144)
Income from companies accounted
for using the equity method.
EBIT
99
5,828
5,684
6,339
The oil and gas business has been presented as a discontinued
operation since the signing of the binding agreement between
BASF and LetterOne to merge their respective activities on
September 27, 2018. The disposal group was derecognized on
closing of the transaction on April 30, 2019.
Income taxes
6,302
(37)
(19)
Income before income taxes
1,714
The discontinued oil and gas business accounted for the following
amounts in BASF's statement of cash flows:
Income taxes
5,921
(381)
(885)
Income after income taxes
Financial result
160
Research and development expenses
Gain on the disposal before income
taxes
6,447
Cash flows from investing activities
(107)
829
(74)
General administrative expenses
(33)
(68)
Reinstated liabilities
(636)
Cash flows from financing activities
(18)
1
(8)
(26)
Total
94
55
Other operating income and expenses
(273)
(248)
Recycling of income and expenses previously recognized directly in
equity (recognized in income on disposal)
(870)
Noncontrolling interests
Cash flows from the discontinued oil and gas business
(excluding effects from the divestiture)
216
18
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
The shares held in Wintershall Dea GmbH were initially measured at
fair value as of the date of deconsolidation on April 30, 2019, using
the discounted cash flow method on the basis of the income
approach according to IFRS 13.62. Fair value is calculated as the
present value of future cash inflows and outflows on the basis of
unobservable inputs (Level 3). Significant inputs are assumptions on
the long-term development of oil and gas prices, which were based,
among other things, on market values and expert assessments. The
valuation of Wintershall Dea GmbH as of April 30, 2019, assumes an
oil price of $66 per bbl (Brent) and a gas price of approximately
€16 per MWh (roughly $6 per mmBtu) for 2020 that increases
moderately in the medium to long term.
The estimation of cash flows and the assumptions are based on
relevant information on the future development of the operating
business on the measurement date.
A model based on a field-related valuation approach was used for
the exploration and production business. This took into account the
expected cash flows as well as the tax payments in the individual
countries. The period under consideration includes the planned
license terms and the production profiles of the included oil and gas
fields. A significant factor here is the cost of capital rate, which takes
into consideration the country risk for the country concerned and
the applicable tax rate. Other components are a risk-free interest
rate, a market risk premium and a spread for credit risk based on the
respective industry-specific peer group. Taking into account these
parameters, a cost of capital rate after tax of between 6.17% and
11.49% was used.
The valuation also took into account expected synergy effects from
the merger due to lower ongoing operating costs or from the
optimization of investment measures.
About This Report
Initial recognition at fair value (€14.1 billion) uncovered hidden
reserves and liabilities. In line with the purchase price allocation, the
hidden reserves and liabilities were mainly attributable to exploration
and production assets.
Groups of assets and liabilities held for sale
(disposal groups)
-
- On January 31, 2019, following the approval of all relevant
authorities, BASF and Solenis concluded the transfer of BASF's
paper and water chemicals business to Solenis. The disposal
group was derecognized on divestiture of the paper and water
chemicals business, and a shareholding accounted for using the
equity method in the amount of €590 million was added and
accounted for in the sales price. The calculation of the disposal
gain is presented in the following table:
Calculation of disposal gain on the paper and
water chemicals business
Million €
Sales price
Liabilities of the disposal group
Assets of the disposal group
Disposed net assets
Of other comprehensive income after taxes attributable to BASF SE
shareholders totaling €949 million (2018: minus €608 million), minus
€8 million (2018: €10 million) related to the discontinued construc-
tion chemicals business, €1,034 million (2018: minus €102 million)
to the discontinued oil and gas business, and minus €77 million
(2018: minus €516 million) to continuing operations.
of which attributable to
noncontrolling interests
BASF Report 2019
143
61
Million €
January 1-
Income after noncontrolling
interests
April 30, 2019
2018
5,903
768
Earnings per share from
6.43
197
0.83
456
1,554
(263)
(1,011)
discontinued operations
€
Cash flows from financing activities
(50)
(346)
Total
Cash flows from operating activities
Cash flows from investing activities
(94)
11
Selling expenses
52
59
Financial result
(4)
(4)
Income before income taxes
48
55
Income taxes
(24)
EBIT
(21)
24
34
of which attributable to
noncontrolling interests
135
34
5
19
23
Income after noncontrolling
interests
Earnings per share from
Income after income taxes
0.02
0
Income from companies accounted
for using the equity method
Reinstated assets
Liabilities of the disposal group
Reinstated liabilities
Disposal gain before taxes
Cost of sales
Gross profit on sales
Selling expenses
2019
2018
2,553
2,455
(1,412)
(1,405)
0
1,141
(866)
(873)
General administrative expenses
(66)
(70)
(36)
(34)
Other operating income and expenses
(121)
(14)
1,050
(60)
0.03
€
14,078
Cash flows from the discontinued construction chemicals business
Million €
Sales revenue
1,318
4,094
Disposed net assets
(7,540)
Cost of sales
(433)
(2,024)
Fair value 72.7% Wintershall Dea GmbH
Assets of the disposal group
2019
2018
Gross profit on sales
885
2,070
Reinstated receivables
2,246
Cash flows from operating activities
219
128
(15,597)
discontinued operations
2018
January 1-
April 30, 2019
Depreciation and amortization of
property, plant and equipment and
intangible assets
(162)
(137)
BASF Report 2019
of which impairments and
reversals of impairments
(1)
(1)
215
About This Report
1
April 30, 2019
To Our Shareholders
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Statement of income from the discontinued oil and gas business
Million €
The carrying amounts of the balance sheet items of the discontinued
operations are presented in the following table "Disposal groups as
of December 31, 2019" on page 218.
The discontinued construction chemicals business accounted for
the following amounts in BASF's statement of cash flows:
Earnings from the discontinued oil and gas business until April 2019
were as follows:
The effects of the disposal of the discontinued oil and gas business
are presented in the following table:
Calculation of disposal gain on the discontinued oil and gas business
Million €
2 Management's Report
Tax expense
Disposal gain after taxes
-
(448)
358
676
1,034
920
2,059
2,979
BASF Report 2019
218
About This Report
(344)
1 To Our Shareholders
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
3
BASF Group list of shares held pursuant to
section 313(2) of the German Commercial Code
(HGB)
The list of consolidated companies and the complete list of all
companies in which BASF SE holds shares as required by section
313(2) HGB and information on the exemption of subsidiaries from
accounting and disclosure obligations are an integral component of
the audited Consolidated Financial Statements submitted to the
electronic Federal Gazette (Bundesanzeiger). The list of shares held
is also published online.
For more information, see basf.com/en/corporate governance
4 Reporting by segment and region
As of January 1, 2019, we have 11 divisions grouped into six
segments as follows:
2 Management's Report
Chemicals: Petrochemicals, Intermediates
(104)
(48)
Provisions
Tax liabilities
Financial indebtedness
Other liabilities
Current liabilities
Liabilities of the disposal group
Net assets
(254)
(332)
(586)
(75)
(51)
(242)
(20)
(82)
(102)
(6)
(13)
(19)
(10)
(10)
(27)
(191)
Accounts payable, trade
Materials: Performance Materials, Monomers
- Surface Technologies: Catalysts, Coatings
Nutrition & Care: Care Chemicals, Nutrition & Health
Costs for cross-divisional corporate research
Costs of corporate headquarters
2019
2018
(397)
(414)
(231)
(249)
15
17
Other businesses
Income from operations (EBIT) of Other
Million €
Foreign currency results, hedging and other measurement
effects
324
35
(184)
(667)
(506)
Miscellaneous income and expenses
Income from operations of Other
Income from operations of Other declined by €161 million year on
year, from minus €506 million to minus €667 million. The costs for
cross-divisional corporate research decreased by €17 million to
minus €397 million, and the costs of corporate headquarters
were €18 million lower at minus €231 million. Income from other
businesses declined by €2 million to €15 million. The line item
foreign currency results, hedging and other measurement
effects decreased by €413 million to minus €89 million. This was
due to expenses resulting from the addition to provisions for the LTI
program in 2019, compared with income from the release of
provisions in the previous year, as well as negative currency effects.
The line item miscellaneous income and expenses rose by
€219 million to €35 million and includes the gain on the sale of our
share of the Klybeck site in Basel, Switzerland.
BASF Report 2019
220
Sales revenue
(89)
- Industrial Solutions: Dispersions & Pigments, Performance
Chemicals
Miscellaneous income and expenses include expenses and
income in connection with contaminated sites, project costs that
are not allocated to the segments and, since the beginning of
2019, remanent fixed costs resulting from organizational changes
or restructuring, function and region-related restructuring costs
not allocated to a division, and idle capacity costs from internal
human resource platforms.
The following activities are also presented under Other:
• The steering of the BASF Group by corporate headquarters.
Cross-divisional corporate research, which includes plant bio-
technology research, works on long-term topics of strategic
importance to the BASF Group. Furthermore, it focuses on the
development of specific key technologies, which are of central
importance for the divisions.
- Agricultural Solutions: Agricultural Solutions
The Construction Chemicals division was part of the Surface
Technologies segment until December 21, 2019. The division was
reclassified to Other as a discontinued operation with the agreement
on the sale of BASF's construction chemicals business to an affiliate
of Lone Star. The prior-year figures have been restated accordingly.
The composition of a number of divisions also changed at the
beginning of 2019. The propylene oxide and propylene glycol
business was transferred from the Petrochemicals division to the
Monomers division. The superabsorbents business was reallocated
from the Care Chemicals division to the Petrochemicals division. The
styrene, polystyrene and styrene-based foams business, which
previously mainly fell under the Performance Materials division and a
small part under Other, is bundled in the Petrochemicals division.
The divisions are allocated to the segments based on their business
models and according to their focal points, customer groups, the
focus of their innovations, their investment relevance and sustain-
ability aspects.
The Chemicals segment comprises the Petrochemicals and
Intermediates divisions and is the cornerstone of BASF's Verbund
structure. It supplies the other segments with basic chemicals and
intermediates, contributing to the organic growth of our key value
chains. Alongside internal transfers, customers include the chemical
and plastics industries. The segment's competitiveness is strength-
ened by technological leadership and operational excellence.
The Materials segment is composed of the Performance Materials
division and the Monomers division. The segment offers advanced
materials and their precursors for new applications and systems. Its
product portfolio includes isocyanates and polyamides as well as
inorganic basic products and specialties for plastics and plastics
processing.
The Industrial Solutions segment consists of the Dispersions &
Pigments and the Performance Chemicals divisions. The segment
develops and markets ingredients and additives for industrial
applications, such as polymer dispersions, pigments, resins,
electronic materials, antioxidants and additives. Its customers come
from key industries such as automotive, plastics and electronics.
The Surface Technologies segment bundles chemical solutions for
surfaces with the Catalysts and Coatings divisions. Its product
spectrum includes catalysts and battery materials for the automotive
and chemical industries, surface treatments, colors and coatings.
The Nutrition & Care segment comprises the Care Chemicals
division and the Nutrition & Health division. The segment produces
ingredients and solutions for consumer applications in the areas of
nutrition, home and personal care. Its customers include food and
feed producers as well as the pharmaceutical, cosmetics, detergent
and cleaner industries.
BASF Report 2019
· Results from currency translation that are not allocated to the
segments; earnings from the hedging of raw materials prices and
foreign currency exchange risks; and gains and losses from the
long-term incentive (LTI) program.
219
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
The Agricultural Solutions segment consists of the division of the
same name. As an integrated provider, its portfolio comprises
fungicides, herbicides, insecticides and biological crop protection
products, as well as seeds and seed treatment products. Further-
more, Agricultural Solutions offers farmers innovative solutions,
including those based on digital technologies, combined with
practical advice.
Activities that are not allocated to any of the segments are recorded
under Other. These include other businesses, which comprise
commodity trading, engineering and other services, as well as rental
income and leases. Discontinued operations and all remaining
activities after divestitures not previously reported under Other have
also been reported here since January 1, 2019. These remaining
activities include, for example, equity-accounted participating
interests assumed in the context of divestitures or supply obliga-
tions. The remaining activities for the leather and textile chemicals
business, previously recorded in the Performance Products seg-
ment, and the remaining activities for the industrial coatings busi-
ness, previously recorded in the Functional Materials & Solutions
segment, were reclassified to Other. Discontinued operations include
the business of the former Construction Chemicals division and the
oil and gas business. Following the merger of the oil and gas
businesses of Wintershall and DEA, the equity-accounted interest in
Wintershall Dea GmbH, Kassel/Hamburg, Germany, and the
resulting contribution to earnings have also been reported under
other businesses since May 1, 2019. The assets and liabilities of the
oil and gas business were already presented under Other following
the signing of the binding agreement between BASF and LetterOne
to merge their oil and gas activities in the third quarter of 2018 until
closing of the transaction.
-
About This Report
Disposal gain after taxes
Noncurrent liabilities
(32)
Property, plant and equipment
Investments accounted for using the equity method
Other financial assets
Deferred tax assets
Pigments business
Construction
chemicals business
Total
(336)
(772)
(1,108)
Other intangible assets
(22)
(559)
(266)
(503)
(769)
(65)
(65)
(8)
(28)
(36)
(58)
(537)
(22)
Goodwill
Disposal groups as of December 31, 2019
Million €
January 31, 2019
768
(611)
(504)
43
(150)
157
(44)
113
With the agreement on the acquisition of the global pigments
business by the fine chemical company DIC, the affected assets
and liabilities were reclassified to a disposal group. The business
is allocated to the Dispersions & Pigments division. An impairment
test was conducted for the disposal group for the pigments
business on December 31, 2019. In accordance with IFRS 5, the
fair value less costs to sell must be used as the recoverable
amount and compared with the carrying amount. The recoverable
amount was determined as of December 31, 2019 by discounting
expected cash flows until closing, including income from the sale,
at a WACC of 7.98%. This resulted in an impairment in the amount
of €73 million, which reduced the goodwill of the disposal group
for the pigments business accordingly.
Balance sheet
The values for the disposal groups are presented in the following
table.
BASF Report 2019
217
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Other comprehensive income included minus €61 million for the
construction chemicals business disposal group and minus
€79 million for the pigments business as of December 31, 2019.
For the transportation business, regulated gas transportation rates
and specific average cost of capital rates were used where relevant.
The cost of capital rate after tax was between 5.52% and 5.91%.
(47)
(80)
(2)
(1,393)
Assets of the disposal group
1,278
2,735
4,013
Provisions for pensions and similar obligations
(213)
(154)
(367)
Other provisions
(872)
(9)
(32)
Deferred tax liabilities
(17)
(118)
(135)
Financial indebtedness
(5)
(5)
Other liabilities
(15)
(23)
Other receivables and miscellaneous assets
(521)
(28)
(1)
(3)
Noncurrent assets
Inventories
(757)
(1,863)
(2,620)
(383)
(299)
(682)
Current assets
Accounts receivable, trade
(522)
(631)
Other receivables and miscellaneous assets
(22)
(30)
(52)
Marketable securities
Cash and cash equivalents
(7)
(21)
(109)
Million €
Research and development expenses
Earnings from the discontinued construction chemicals business
are as follows:
5
57
(21)
36
138
(21)
117
774
(53)
721
7,421
54
7,475
211
About This Report
5
1
58
18
Accounts payable, trade
Provisions
Tax liabilities
Financial indebtedness
Other liabilities
Current liabilities
Total liabilities
Total purchase price
BASF Report 2019
9
9
636
(32)
604
18
58
Noncurrent liabilities
To Our Shareholders
3 Corporate Governance
6.9
The purchase prices for businesses acquired in 2019 and the
purchase price adjustments for acquisitions from 2018 totaled
€104 million. Related payments amounted to €239 million in 2019.
Purchase price allocations were carried out in accordance with
IFRS 3. This resulted in a total decrease in goodwill of €47 million.
The following overview shows the effects of acquisitions in 2019 and
2018 on the Consolidated Financial Statements. When acquisitions
resulted in the transfer of assets or the assumption of additional
liabilities, these are shown as a net impact.
Effects of acquisitions and changes in the preliminary purchase price allocations
Goodwill
Other intangible assets
Property, plant and equipment
Financial assets
Other noncurrent assets
-
2
0.1
67
2.1
Noncurrent assets
(32)
(0.1)
1,425
2 Management's Report
0.0
58.3
4 Consolidated Financial Statements
5 Overviews
Notes
2019
2018
Million €
Million €
%a
(47)
(0.6)
1,261
13.7
10
0.2
4,279
3
Other liabilities
Financial indebtedness
Deferred taxes
1,404
Adjustments
As of August 16, 2019
(65)
1,188
(24)
4,261
2
1,406
Deferred taxes
Other receivables and miscellaneous assets
65
65
2
2
4,285
Noncurrent assets
1,253
Other financial assets
Statement of income from the discontinued construction chemicals
business
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
-
Wintershall Middle East GmbH acquired a 10% share in Abu
Dhabi National Oil Company's (ADNOC) Ghasha concession in
the United Arab Emirates (UAE) on November 25, 2018. The Hail,
Ghasha, Dalma and other ultra-sour gas and condensate fields
are located in the Al Dhafra region off the coast of the Gulf
Emirate. The acquisition in the discontinued oil and gas business
marked Wintershall's entry into natural gas and condensate
production in Abu Dhabi.
Adjustment of the preliminary purchase price allocation for the acquisition of assets and liabilities from Bayer
Million €
Goodwill
Other intangible assets
Property, plant and equipment
Investments accounted for using the equity method
Fair values as of date of
acquisition
Inventories
7,009
(87)
88
1,274
8,195
1
8,196
34
34
Provisions for pensions and similar obligations
240
13
253
Other provisions
353
(45)
308
1,186
70
1
69
6,922
887
61
948
Accounts receivable, trade
61
61
7,032
Other receivables and miscellaneous assets
26
195
-
Marketable securities
Cash and cash equivalents
Current assets
Total assets
169
16.2
%a
0.3
of which cash and cash equivalentsb
(802)
(33.0)
Assets
809
0.9
(60)
(0.1)
Equity
Noncurrent liabilities
of which financial indebtedness
Current liabilities
of which financial indebtedness
Total equity and liabilities
Further effects in connection with divestitures©
(0.1)
Payments received from divestitures
(39)
(13,877)
%a
Million €
94
(0.7)
(157)
%a
(0.3)
14,686
26.2
(21)
of which property, plant and equipment
(19)
(0.1)
(15)
(0.1)
Current assets
(44.8)
a Proportional share in relation to the BASF Group
6,562
15.5
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Agreed transactions
-
-
On September 18, 2017, BASF had signed an agreement with
the Solvay group on the acquisition of Solvay's global polyamide
business, subject to the approval of the relevant antitrust
authorities. The E.U. Commission granted conditional clearance
for BASF to acquire the polyamide business on January 18, 2019.
They required divesting parts of the original transaction scope to
a third-party buyer. These include manufacturing assets of Solvay
for engineering plastics in Europe. Domo Chemicals was approved
by the E.U. Commission as the buyer of the European polyamide
business. The transaction closed on January 31, 2020.
For more information, see Note 35 on page 289
On August 29, 2019, BASF and the fine chemicals company
DIC, Tokyo, Japan, reached an agreement to transfer the global
pigments business. The purchase price on a cash and debt-free
basis is €1.15 billion. The transaction is expected to close in the
fourth quarter of 2020. The sale is subject to approval by the
relevant antitrust authorities. The transaction affects the Disper-
sions & Pigments division and approximately 2,600 employees.
On December 21, 2019, BASF and a subsidiary of Lone Star,
Dallas, Texas, a global private equity firm, signed an agreement for
the sale of BASF's construction chemicals business. The purchase
price on a cash and debt-free basis is €3.17 billion. The transaction
is expected to close in the third quarter of 2020, subject to the
approval of the relevant antitrust authorities. The planned sale
affects more than 7,000 employees as well as production sites
and sales offices in more than 60 countries in the former
Construction Chemicals division.
2.5 Discontinued operations / disposal groups
Discontinued operations
With the binding agreement on the sale of BASF's construction
chemicals business to a subsidiary of Lone Star, this business is
presented as a discontinued operation. Through the agreed sale
of the business, BASF experts, recognized across the industry for
their know-how and competence in construction chemicals, will
be prepared for further growth with the industry-specific approach
of Lone Star. Impairments were not recorded for the discontinued
construction chemicals business on the date of reclassification to
discontinued operations or at the end of the reporting period.
The amounts in the following tables illustrate the consolidated
contribution of discontinued operations.
1 To Our Shareholders
About This Report
214
BASF Report 2019
48
0.1
235
0.8
(1)
(5,779)
(34.8)
Million €
1,018
47
0.1
2,391
107
2,600
b Includes €800 million from the discontinued oil and gas business
c Payments received from capital repayments, settlement of receivables and derecognition of cash and cash equivalents
1.2
2018
(414)
Noncurrent assets
1.2
of which financial indebtedness
Total equity and liabilities
Payments made for acquisitions
2019
BASF Report 2019
(177)
(0.2)
925
1.1
239
7,431
212
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
281
Divestitures
(0.9)
Current liabilities
1,324
3.1
Current assets
of which cash and cash equivalents
1
0.0
69
3.0
62
0.1
8,356
9.7
Assets
Equity
Noncurrent liabilities
10
2.3
634
(0.1)
(23)
of which financial indebtedness
(154)
In 2019, BASF sold the following activities:
a Proportional share in relation to the BASF Group
On January 31, 2019, following the approval of all relevant
authorities, BASF and Solenis concluded the transfer of BASF's
paper and water chemicals business to Solenis. Since Febru-
Iary 1, 2019, the combined company has operated under the
name Solenis UK International Ltd., London, United Kingdom,
and offers bundled sales, service and production capabilities
across the globe. BASF holds a 49% share in the combined
entity; 51% of the shares are held by funds managed by Clayton,
Dubilier & Rice, and by Solenis management. The transaction
included production sites and plants of BASF's paper and water
chemicals business in Bradford and Grimsby, England; Suffolk,
Virginia; Altamira, Mexico; Ankleshwar, India; and Kwinana,
Australia. BASF reports its share of Solenis' income after taxes
using the equity method in income from operations of the BASF
Group. The divestiture affected the Performance Chemicals
division and the equity-accounted interest assumed in the trans-
action is reported under Other.
-
Sales
Effects of divestitures
The following overview shows the effects of the divestitures con-
ducted in 2019 and 2018 on the Consolidated Financial Statements.
The sales line item shows the year-on-year decline resulting from
divestitures. Noncurrent assets primarily include the addition of
investments accounted for using the equity method, while current
assets and current liabilities have until now shown the assets and
liabilities of the disposal groups. The impact on equity related mainly
to gains and losses from divestitures.
Notes
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
5 Overviews
BASF Report 2019
the sites in Ludwigshafen and Hamina, Finland, to strengthen the
Dispersions & Pigments division.
- On January 31, 2018, BASF's production site for styrene
butadiene-based paper dispersions in Pischelsdorf, Austria was
sold to Synthomer Austria GmbH, a subsidiary of the British
specialty chemicals manufacturer Synthomer plc. The styrene
acrylic dispersions that were produced in Pischelsdorf were not
included in the sale. They were bundled with the businesses in
Ludwigshafen, Germany. The sale was made in connection with
the concentration of paper dispersions production in Europe at
Shares in the Aguada Pichana Este concession in Argentina were
sold on January 23, 2018. The sale pertained to the discontinued
oil and gas business.
In 2018, BASF sold the following activities:
On December 6, 2019, BASF India Limited sold its stilbene-based
optical brightening agents (OBA) business for paper and powder
detergent applications to Archroma India Private Limited, Mumbai,
India. The transaction includes the stilbene-based OBA product
portfolio and the production plant in Ankleshwar, India. The
production plant was part of the Performance Chemicals division
and the stilbene-based OBA product portfolio was allocated to
the Performance Chemicals and Care Chemicals divisions.
· BASF sold its ultrafiltration membrane business to DuPont
Safety & Construction (DuPont) on December 31, 2019. The
divestiture includes the shares of inge GmbH, the business'
headquarters and production site in Greifenberg, Germany,
including all employees, its international sales force, and certain
intellectual property rights which were previously owned by
BASF SE. The ultrafiltration membrane business had been part of
the Performance Chemicals division.
The effects of the disposal are disclosed in the Notes under "Discontinued operations"
Dea GmbH has been accounted for using the equity method. The
gain from the transition from full consolidation to the equity
method is reported in income after taxes from discontinued
operations. Since May 1, 2019, BASF has reported its share of
Wintershall Dea GmbH's net income in income from operations of
Other.
BASF and LetterOne completed the merger of Wintershall and
DEA on April 30, 2019. On September 27, 2018, BASF and
LetterOne had signed a transaction agreement to merge their
respective oil and gas businesses in a joint venture, creating a
leading independent European exploration and production
company with international operations in core regions. LetterOne
contributed all shares in DEA Deutsche Erdöl AG to Wintershall
Holding GmbH and received new shares in the latter. The
company was renamed Wintershall Dea GmbH. Including prefer-
ence shares, BASF has a shareholding of 72.7% in Wintershall
Dea GmbH. No later than 36 months after closing but in all cases
before an IPO, these preference shares will be converted into
ordinary shares in Wintershall Dea GmbH. From the signing of the
agreement in September 2018 until the closing of the merger,
BASF's oil and gas business was reported as a discontinued
operation. Since the merger, BASF's interest in Wintershall
213
The effects of the disposal are disclosed in the Notes under "Groups of assets and liabilities held
for sale"
8,491
4,979
million €
6 Sales revenue
70
1,000
million €
8,421
4,707
918,479
million €
272
791
million €
million €
72
24
million €
863
5,945
million €
3,916
2,500
918,479
200
46
million €
4,116
5,921
4.26
1 To Our Shareholders
ww
2,546
€
€
6.45
0.86
€
6.45
0.86
€
€
In accordance with IAS 33, a potential dilutive effect must be
considered in the diluted earnings per share for those BASF
shares that will be granted in the future as part of BASF's "plus"
share program. This applies regardless of the fact that the neces-
sary shares are acquired on the market by third parties on behalf of
BASF and that there are no plans to issue new shares. The dilutive
effect of the issue of "plus" shares amounted to €0.02 in 2019
(2018: €0.01).
BASF Report 2019
2.72
9.17
Sales revenue from contracts with customers is recognized in the
amount of the consideration BASF expects to receive in exchange
for the goods or services when control of the goods or services is
transferred to the customer.
9.15
5.11
226
About This Report
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
2.70
4.25
€
5.12
million €
Notes
2019
(506)
(667)
6,480
4,719
(307)
(484)
(45)
21
(262)
(505)
6,281
4,536
(461)
(688)
4,052
6,742
2019
BASF Report 2019
Income from operations (EBIT) before special items is used for the
internal steering of the segments and complements the key
management indicator, ROCE. EBIT is calculated from gross profit
on sales, selling expenses, general administrative expenses,
research and development expenses, other operating income and
expenses, and income from companies accounted for using the
equity method. To calculate EBIT before special items, this figure is
then adjusted for special items. Special items arise from the
integration of acquired businesses, restructuring costs, certain
impairments, gains or losses resulting from divestitures and sales of
shareholdings accounted for using the equity method, and other
expenses and income that arise outside of ordinary business
activities. EBIT and EBIT before special items are alternative
performance measures that are not defined under IFRS and are to
be considered as being complementary to the indicators defined
by IFRS.
The same accounting rules are used for segment reporting as those
used for the Group, which are presented in these Notes. Transfers
between the segments are generally executed at adjusted
market-based prices, taking into account the higher cost efficiency
and lower risk of intragroup transactions. Assets, as well as their
depreciation and amortization, are allocated to the segments based
on economic control. Assets used by more than one segment are
allocated based on the percentage of usage. Assets not used by the
segments are reported under Other.
2018
26,856
86,556
2,720
12,570
1,518
1,901
63
27,585
86,950
74
2,661
2,429
5,224
123
5,974
(741)
59,316
2,898
7,814
6,075
13,142
8,389
11,466
9,532
Intersegment transfers
Sales
BASF Group
Othera
Agricultural
Solutions
Nutrition &
Care
(750)
Surface
Technologies
Materials
Chemicals
Million €
Segments 2019
BASF primarily generates income from the sale of goods. It is
recognized as sales revenue at the point in time when control of the
product is transferred from BASF to the customer; this is generally
the case on delivery. If products are delivered to a consignment
warehouse, BASF normally retains control. Revenue is recognized
when the customer consumes the goods. Long-term supply
agreements usually contain variable prices dependent on the
development of raw materials prices and variable volumes.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
221
5,233
3,302
Industrial
Solutions
2018
2,644
2,887
Million €
Reconciliation of the assets of Other to the assets of the BASF Group
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
5 Overviews
Notes
Notes to the Statement of Income
5 Earnings per share
Earnings per share
Segment assets
Income after taxes from continuing operations
Net income from continuing operations
Income after taxes from discontinued operations
of which noncontrolling interests
Net income from discontinued operations
Income after taxes
of which noncontrolling interests
Net income
Weighted average number of outstanding shares
Earnings per share
From continuing operations
Diluted
From discontinued operations
Diluted
From continuing and discontinued operations
Diluted
of which noncontrolling interests
2,871
Assets of businesses included in Other
Deferred tax assets
636
15,904
2,528
570
2,342
59,700
December 31, 2018
59,365
December 31, 2019
Income before income taxes
Financial result
EBIT
EBIT of Other
EBIT of the segments
Special items
Special items of Other
Financial assets
Special items of the segments
EBIT before special items of Other
EBIT before special items of the segments
Reconciliation of segment income to income before income taxes
Million €
For more information, see Note 2.5 from page 215 onward.
a
Assets of the BASF Group
Assets of Other
Other assets of the construction chemicals business disposal group (2019)a
Operating assets of the former Construction Chemicals division (2018)
and of the construction chemicals business disposal group (2019) a
Other assets of the oil and gas business disposal group
Operating assets of the oil and gas business disposal group
Other receivables/prepaid expenses
Defined benefit assets
Cash and cash equivalents / marketable securities
EBIT before special items
Sales revenue from the sale or licensing of technologies or technical
expertise is recognized according to the contractually agreed-upon
transfer of the rights and obligations associated with these
technologies. Recognition of revenue from granting licenses for
technology and intellectual property depends on whether they are
based on usage rights or access rights. Revenue from usage-based
rights is recognized at the point in time when the license is granted.
Revenue from access-based rights is recognized over the term of
the contract with the customer. Sales revenue from sales and
usage-based licenses is recognized in accordance with the
underlying settlement agreements.
229
Services rendered to customers are invoiced according to work
completed and recognized as revenue accordingly.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
228
Sales revenue for the 2019 fiscal year includes €279 million from
performance obligations fulfilled in prior periods in connection with
sales and usage-based licenses.
Sales revenue of €44 million, that was included in contract liabilities
as of January 1, 2019, was recognized in 2019.
BASF Report 2019
60,220
59,316
2,841
2,898
6,156
7,814
Dispersions & Pigments
Performance Chemicals
Industrial Solutions
Catalysts
Coatings
Notes
Surface Technologies
7 Functional costs
For more information on other operating expenses, see Note 8 from page 229 onward
Income from foreign currency and hedging transactions as well
as from the measurement of LTI options pertained to the foreign
currency translation of receivables and payables as well as of
currency derivatives and other hedging transactions. Of material
significance to the decline was income arising from the release of
provisions for the long-term incentive (LTI) program in the amount of
Revenue from miscellaneous activities primarily included income
from rentals, catering operations, cultural events and logistics
services.
Income from the adjustment and release of provisions recog-
nized in other operating expenses was largely related to risks
from lawsuits and damage claims, closures and restructuring
measures, employee obligations, and various other individual items
as part of the normal course of business. Provisions were reversed
or adjusted if, based on the circumstances on the balance sheet
date, utilization was no longer expected, or expected to a lesser
extent.
Other operating income
Other
Income from the reversal of valuation allowances for business-related receivables
Reversals of impairment losses on noncurrent assets
Gains on divestitures and the disposal of noncurrent assets
Income from foreign currency and hedging transactions as well as from the measurement of LTI options
Income from the translation of financial statements in foreign currencies
Income from the adjustment and release of provisions recognized in other operating expenses
Revenue from miscellaneous activities
Other operating income
Million €
8 Other operating income / other operating expenses
For more information on research and development expenses by segment, see Note 4 from page 219
onward
Research and development expenses include the costs resulting
from research projects as well as the necessary license fees for
research activities.
Research and development expenses
General and administrative expenses primarily include the costs of
the central units, the costs of managing business units and divisions,
and costs of general management, the Board of Executive Directors
and the Supervisory Board.
General administrative expenses
Selling expenses primarily include marketing and advertising costs,
freight costs, packaging costs, distribution management costs,
commissions and licensing costs.
Selling expenses
Cost of sales includes all production and purchase costs of the
company's own products as well as merchandise that has been sold
in the period, particularly plant, energy and personnel costs.
Cost of sales
Under the cost of sales method, functional costs incurred by the
operating functions are determined on the basis of cost center
accounting. The functional costs particularly contain the personnel
costs, depreciation and amortization accumulated on the underlying
final cost centers as well as allocated costs within the cost
accounting cycle. Operating expenses that cannot be allocated to
the functional costs are reported as other operating expenses.
2019
6,670
2,862
1,957
1,696
Nutrition & Care
6,075
5,940
Fungicides
2,305
2,287
Herbicides
Insecticides
Seed Treatment
Seeds & Traits
Agricultural Solutions
Other
BASF Group
2,616
2,436
800
670
639
463
Nutrition & Health
8,561
4,244
Care Chemicals
3,133
9,532
11,694
6,064
6,517
5,402
6,753
11,466
13,270
5,178
5,292
3,211
3,828
8,389
9,120
9,396
7,469
3,746
3,730
13,142
11,199
4,118
2018
111
81
Materials
230
BASF Report 2019
Expenses from integration measures amounted to €43 million in
2019 and related to the integration of significant parts of Bayer's
seed and non-selective herbicide business as well as its vegetable
seeds business, which were acquired in 2018. These expenses
totaled €99 million in the previous year. In both years, expenses also
Environmental protection and safety measures, costs of demo-
lition and removal, and project costs were expensed if they were
not subject to mandatory capitalization pursuant to IFRS. Expenses
for demolition, removal and project planning totaled €243 million in
2019 and €245 million in 2018. In both years, these mainly related
to the Ludwigshafen site in Germany. Further expenses of €77 million
in 2019 and €97 million in 2018 arose from the addition to
environmental provisions. In both years, these concerned several
discontinued sites in North America.
arose in connection with the preparation of the acquisition of
Solvay's global polyamide business.
In 2019, expenses from restructuring and integration measures
in the amount of €481 million were mainly attributable to the imple-
mentation of the new BASF strategy and, to a lesser extent, to site
closures in North America and Asia. In 2018, expenses resulting
from site closures in North America amounted to €13 million and
from outsourcing computer centers in the amount of €11 million as
well as from restructuring measures in the Care Chemicals division
in the amount of €20 million. In 2018, expenses also arose from
global restructuring measures in the Coatings division in the amount
of €17 million and in the Catalysts division in the amount of €16 million
due primarily to the restructuring of the global emissions catalysts
business and the restructuring of the licensed battery materials
business.
Other operating expenses
Other
Expenses from the addition of valuation allowances on business-related receivables
Expenses for derecognition of obsolete inventory
Losses from divestitures and the disposal of noncurrent assets
Expenses from foreign currency and hedging transactions as well as from the measurement of LTI options
Losses from the translation of financial statements in foreign currencies
2,348
3,034
801
782
242
286
62
67
75
Monomers
16
Performance Materials
Intermediates
For more information on the allocation of sales revenue, see the Management's Report from page 47
onward
If the consideration promised in a contract includes variable
components, BASF estimates the amount of consideration to which
it will be entitled in exchange for transferring the promised goods to
the customer. Variable components are only recognized as revenue
when it is highly unlikely that a reversal of sales revenue will occur.
Expected rebates and other trade discounts are accrued in
accordance with the principle of individual measurement to cover
probable risks related to the return of goods, future warranty
obligations and other claims.
BASF grants customers rebates if the goods purchased by the
customer exceed a contractually defined threshold within the period
specified. Rebates are usually deducted from the amounts payable
by the customer. Depending on the terms of the underlying contract,
BASF uses either the expected value or the most likely amount to
estimate the variable consideration for expected future rebates. The
method that is the best predictor of variable consideration is primarily
determined by the number of volume thresholds contained in the
contract. All available historical, current and forecast information is
taken into account when calculating rebates. Customers generally
have a right of return if the supplied goods do not meet the agreed
specifications. Furthermore, certain contracts grant the customer
the right to return the goods within a defined period of time. BASF
uses the expected value method to estimate the goods that will be
returned, as this method is the best predictor of the amount of
variable consideration to which BASF will be entitled.
BASF applies the practical expedient in IFRS 15, which means that
it does not adjust the promised amount of consideration for the
effects of a significant financing component if, at contract inception,
it is expected that the period between the transfer of the promised
goods or services to a customer and payment for these goods or
services by the customer will be one year or less.
Pursuant to IFRS 15, no information on remaining performance
obligations as of December 31, 2019 that have an expected original
term of one year or less was reported.
BASF Report 2019
227
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Sales by division and by indication and sector
Million €
2019
2018
Petrochemicals
Chemicals
39
18
160
3,428
BASF Report 2019
Gains on divestitures and the disposal of noncurrent assets
amounting to €390 million in 2019 related mainly to earnings from
the transfer of BASF's paper and water chemicals business to the
Solenis group and the sale of businesses in the Agricultural
Solutions segment in accordance with the conditions imposed by
antitrust authorities in connection with the acquisition of the Bayer
businesses. In 2018, this line item included earnings in the amount
of €21 million for the sale of the Austrian production site for styrene
butadiene-based paper dispersions in Pischelsdorf. Furthermore,
income of €421 million resulted from real estate divestitures in
several countries in 2019 (2018: €14 million). Of material significance
Income from the translation of financial statements in foreign
currencies included gains from the translation of companies'
financial statements whose local currency is different from the
functional currency.
€262 million in the previous year, while only a low amount was
released in 2019.
1,812
2,095
994
882
40
19
3
6
118
822
7
11
411
55
158
189
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
249
151
173
72
426
342
320
Environmental protection and safety measures, costs of demolition and removal, and project costs not subject to mandatory capitalization
Depreciation, amortization and impairments of noncurrent assets
404
697
Sales revenue from the sale of precious metals to industrial
customers is recognized on delivery and the corresponding
purchase prices are recorded as cost of sales. In the trading of
precious metals and their derivatives with traders, where there is
usually no physical delivery, revenues are netted against the
associated costs.
2018
Costs from miscellaneous revenue-generating activities
Restructuring and integration measures
Other operating expenses
Million €
Further income resulted from refunds and compensation payments
in the amount of €232 million in 2019 and €569 million in 2018. In
2019, these included insurance refunds in the amount of €44 million
for damage at the citral plant in Ludwigshafen, Germany, in 2017,
for which insurance refunds were also made in 2018, and earnings
from a contractually agreed compensation payment in the amount
of €46 million. Insurance refunds in the previous year also related to
income for fire damages at the North Harbor in Ludwigshafen,
Germany. Additional income resulted in 2019 from plan adjustments
for pension benefits and similar obligations in the amount of
€137 million. Moreover, income in both years was related to gains
from precious metal trading, refunds of consumption taxes and a
number of additional items.
Other income included government grants and government
assistance from several countries amounting to €27 million in 2019
and €43 million in 2018. These were primarily due to grants for
research projects, regional business development subsidies in
China and electricity price compensation in the 2019 fiscal year.
Income from the reversal of valuation allowances for business-
related receivables resulted both from the reversal of impairments
for settled customer receivables for which impairments had been
recorded previously as well as from adjusted expectations regarding
default on individual customer receivables.
here was the sale of a building complex in Switzerland in the amount
of €400 million.
Notes
5 Overviews
4 Consolidated Financial Statements
2019
849
9
212
23.9
9.0
100.0
25,706
14,049
16,420
13,384
3,806
59,316
(45)
(18)
2
159
116
1,976
418
692
1,082
302
4,052
47,347
34,412
21,345
13,912
4,346
26.9
10.3
40.2
%
Regions 2019
Million €
Location of customer
Sales
Share
Location of company
Sales
Income from companies accounted for using the equity method
Income from operations
Assets
of which intangible assets
property, plant and equipment
86,950
investments accounted for using the equity method
South America,
Europe
Of which Germany
North America
Asia Pacific Africa, Middle East
BASF Group
23,827
6,123
15,948
14,203
5,338
59,316
Additions to intangible assets and property, plant and equipment (including acquisitions)
Amortization of intangible assets and depreciation of property, plant and equipment including impairments and reversals of
impairments
Notes
6,652
6,152
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Regions 2018
Million €
Location of customer
Sales
Share
South America,
Europe
Of which Germany
North America
Asia Pacific Africa, Middle East
BASF Group
25,589
6,687
15,388
14,210
5,033
60,220
%
224
BASF Report 2019
In China, sales to third parties in 2019 amounted to €7,216 million
(2018: €7,501 million) according to location of companies and
€6,734 million (2018: €6,644 million) according to location of
customers. In China, intangible assets, property, plant and equip-
ment, and investments accounted for using the equity method
amounted to €4,299 million on December 31, 2019, compared with
€4,162 million in the previous year.
In the United States, sales to third parties in 2019 amounted to
€14,211 million (2018: €14,202 million) according to location of
companies and €13,506 million (2018: €13,496 million) according to
location of customers. In the United States, intangible assets,
property, plant and equipment, and investments accounted for
using the equity method amounted to €12,115 million on Decem-
ber 31, 2019, compared with €12,958 million in the previous year.
1,353
368
14,525
9,857
6,928
6,467
4,644
824
21,792
13,516
12,761
125
3,588
1,367
2,135
1,459
1,310
581
71
4,097
1,896
1,235
1,501
599
150
4,146
15,008
42.4
5 Overviews
3 Corporate Governance
197
170
1,060
2,881
846
3,236
821
9,211
other intangible assets
55
99
343
1,231
548
4,441
626
7,343
property, plant and equipment
investments accounted for using the equity method
4,700
4,789
2,345
2,723
2,133
2,660
of which goodwill
86,556
26,856
16,992
300
2,856
66,053
Income from companies accounted for using the equity method
200
11
(3)
38
4
19
269
Income from operations
1,430
1,573
653
574
715
591
(506)
5,974
Assets
8,947
9,005
7,464
11,062
6,230
2,374
4 Consolidated Financial Statements
20,780
235
759
10,735
661
619
423
379
392
394
882
3,750
of which impairments and reversals of impairments
26
4
5
4
5
7
2
53
a Other includes assets and liabilities as well as amortization of intangible assets and depreciation of property, plant and equipment of the discontinued construction chemicals business. For more information, see Note 2.5 from page 215 onward. Additions to intangible assets and property, plant and equipment (including acquisitions) of the
discontinued construction chemicals business, also included in Other, amounted to €87 million in 2018. Other also includes assets and liabilities as well as amortization of intangible assets and depreciation of property, plant and equipment of the discontinued oil and gas business until the assets were reclassified to the disposal group at the end
of the third quarter of 2018. Until reclassification to the disposal group, additions to intangible assets and property, plant and equipment (including acquisitions) of the discontinued oil and gas business, also included in Other, amounted to €468 million.
BASF Report 2019
223
About This Report
1 To Our Shareholders
2 Management's Report
7,110
298
531
436
57
384
48
625
2,203
Liabilities
Research and development expenses
2,953
2,952
2,712
2,232
2,431
854
3,080
50,447
114
194
224
217
152
679
414
1,994
Additions to intangible assets and property, plant and equipment (including acquisitions)
Depreciation and amortization of intangible assets and property, plant and equipment
962
639
34,087
11.1
25.6
23.6
25,304
3,251
2,897
3,152
2,886
3,603
3,507
of which impairments and reversals of impairments
Additions to intangible assets and property, plant and equipment (including acquisitions)
Depreciation and amortization of intangible assets and property, plant and equipment
Research and development expenses
Liabilities
15,008
13,542
43
388
37
235
763
investments accounted for using the equity method
21,792
1,087
2,938
2,347
3,078
2,226
44,600
108
193
192
12
124
19
8
146
4,146
346
719
545
457
438
718
4,999
923
299
320
595
565
426
784
1,108
2,158
411
879
161
214
4,097
6
5,117
6,420
663
889
973
622
Income from operations
116
(36)
5
26
22
99
Income from companies accounted for using the equity method
65,093
2,975
8,011
6,565
13,354
8,913
12,315
12,960
Sales including transfers
5,777
77
197
490
644
928
(667)
4,052
57
4,224
558
1,158
256
102
65
other intangible assets
8,105
68
3,219
884
property, plant and equipment
2,912
172
201
of which goodwill
86,950
27,585
16,530
6,399
11,773
6,903
8,782
8,978
Assets
649
324
a Other includes assets and liabilities as well as amortization of intangible assets and depreciation of property, plant and equipment of the discontinued construction chemicals business. For more information, see Note 2.5 from page 215 onward. Until reclassification to the disposal group, additions to intangible assets and property, plant and
equipment (including acquisitions) of the discontinued construction chemicals business, also included in Other, amounted to €176 million. The assets of Other also include the equity-accounted interest in Wintershall Dea GmbH.
BASF Report 2019
13,576
5,339
86,556
7,281
3,874
7,308
1,499
466
16,554
9,231
6,357
6,286
4,416
847
20,780
637
289
122
1,444
2,203
Additions to intangible assets and property, plant and equipment (including acquisitions)
5,317
3,674
4,461
585
22,079
23,739
45,562
5,974
8.4
100.0
Location of company
Sales
Income from companies accounted for using the equity method
Income from operations
Assets
of which intangible assets
property, plant and equipment
investments accounted for using the equity method
27,526
17,767
372
15,900
3,340
60,220
36
10
0
233
269
3,210
1,146
794
1,793
177
13,454
10,735
Amortization of intangible assets and depreciation of property, plant and equipment including impairments and reversals of
impairments
2,031
6,156
5,940
11,199
9,120
13,270
11,694
Intersegment transfers
Sales
BASF Group
Othera
Agricultural
Solutions
Nutrition &
Care
2,841
Surface
Technologies
Materials
Chemicals
Million €
Segments 2018
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
222
Industrial
Solutions
524
60,220
962
1,180
990
479
250
3,750
BASF Report 2019
225
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
3,611
4 Consolidated Financial Statements
6,410
11,391
9,645
14,232
15,305
Sales including transfers
5,833
15
58
470
192
525
6,214
1,454
Europe
1 To Our Shareholders
(68)
Deferred tax assets (liabilities) before netting
Netting
555
297
259
44
(34)
About This Report
1.123
4.956
(3.833)
(2.069)
2.069
Deferred tax assets (liabilities) after netting
555
297
259
44
(34)
1.123
2.887
(1.764)
BASF Report 2019
235
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
83
15
33
(4)
261
(460)
Provisions for pensions and similar obligations
2,149
(48)
354
(31)
2.424
3.153
(729)
Other provisions and liabilities
633
222
(23)
5 Overviews
9
942
(101)
Tax loss carryforwards
205
13
1
5
(31)
193
193
Other
0
(9)
(5)
841
(199)
Notes
Million €
Inventories and accounts receivable
(69)
(62)
38
(40)
(70)
(203)
272
(475)
Provisions for pensions and similar obligations
1,986
2
122
13
26
2,149
2,657
(508)
Other provisions and liabilities
975
148
(1)
6
(495)
633
738
(105)
Tax loss carryforwards
222
(48)
60
12
(1)
January 1, 2018, Effects recognized Effects recognized
net
in income
in equity (OCI)
Business
combinations
Other
Recognized in December 31, 2018,
equity
net
Deferred tax
assets
Deferred tax
liabilities
Intangible assets
Property, plant and equipment
Financial assets
(1,184)
34
(5)
Deferred tax assets and liabilities 2018
(272)
(1,265)
94
(1,359)
(2,464)
(127)
(1)
6
1,610
(976)
115
(1,091)
(39)
52
0
162
17
(14)
(47)
5,233
495
15.0
783
15.0
2
0.1
12
0.2
12
0.4
154
2.9
257
7.8
432
8.2
(41)
Asia Pacific
(24)
(0.5)
61
1.8
62
1.2
(17)
(0.5)
(40)
(0.8)
3,302
%
Million €
%
BASF Report 2019
2019
2018
1,053
1,229
114
394
929
1,094
10
(259)
(297)
(112)
(298)
10
(67)
(35)
(26)
(18)
4
8
756
1,117
224
229
980
1,346
2019
2018
Million €
23
0.3
(259)
(4.9)
Recognized in December 31, 2019,
Other
equity
net
Deferred tax
assets
Deferred tax
liabilities
149
59
125
(934)
148
(1.082)
(976)
(113)
Business
combinations
(16)
26
(1.081)
122
(1.203)
12
35
(1)
(182)
(136)
54
(190)
Inventories and accounts receivable
(203)
48
(2)
(11)
January 1, 2019, Effects recognized Effects recognized
net
in income in equity (OCI)
(4)
Financial assets
(6)
(0.2)
(5)
(0.1)
(26)
(0.8)
(18)
(0.3)
9
0.2
20
0.4
756
22.9
(1,265)
1,117
234
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Deferred taxes result from temporary differences between tax
balances and the measurement of assets and liabilities according to
IFRS as well as from tax loss carryforwards and unused tax credits.
The remeasurement of all the assets and liabilities associated with
acquisitions according to IFRS 3 has resulted in significant deviations
between fair values and the values in the tax accounts. This primarily
leads to deferred tax liabilities.
Deferred taxes
Deferred tax assets and liabilities 2019
Million €
Intangible assets
Property, plant and equipment
21.3
Income taxes/effective tax rate
0
(6)
Goodwill
Goodwill is only written down in the case of an impairment.
Impairment testing is performed once a year and whenever there is
an indication of impairment. Goodwill impairments are not reversed.
Emission rights: Emission certificates, which are granted free of
charge by the German Emissions Trading Authority (Deutsche
Emissionshandelsstelle) or a similar authority in other countries, are
recognized in the balance sheet with a value of zero. Certificates
purchased on the market are capitalized at cost as intangible assets.
Emissions generated create an obligation to surrender the emission
certificates. Emission certificates purchased on the market are
subsequently measured at fair value, up to a maximum of the
amount of the acquisition costs. If the fair value is lower than the
carrying amount on the balance sheet date, the emission rights are
impaired.
4
4
15
5
4
15
19
19
15
2018
2019
15
Product rights, licenses and trademarks
Know-how, patents and production technologies
Internally generated intangible assets
Other rights and values
Distribution, supply and similar rights
Average weighted amortization in years
The expected useful lives and amortization methods of intangible
assets are based on historical values, plans and estimates. The
weighted average amortization periods of intangible assets were as
follows:
Internally generated intangible assets primarily comprise
internally developed software. Such software and other internally
generated intangible assets are measured at cost and amortized
over their estimated useful lives. Impairments are recognized if the
carrying amount of an asset exceeds the recoverable amount. In
addition to those costs directly attributable to the asset, costs of
internally generated intangible assets also include an appropriate
portion of overhead costs.
Intangible assets with indefinite useful lives are trade names and
trademarks that have been acquired as part of acquisitions. These
are measured at cost and tested for impairment annually, or if there
is an indication that their value has declined.
Impairments are recognized if the recoverable amount of the asset
is lower than the carrying amount. The recoverable amount is the
higher of either fair value less costs to sell or the value in use. The
value in use is determined on the basis of future cash inflows and
outflows, and the weighted average cost of capital after taxes,
depending on tax rates and country-related risks. If the reasons for
an impairment no longer exist, the write-downs are reversed up to
the value of the asset, had an impairment not been recognized.
Depending on the type of intangible asset, amortization is reported
under cost of sales, selling expenses, research and development
expenses or other operating expenses.
Acquired intangible assets (excluding goodwill) with defined
useful lives are generally measured at cost less straight-line
amortization. The useful life is determined using the period of the
underlying contract or the period of time over which the intangible
asset can be expected to be used.
Accounting policies
14 Intangible assets
Notes to the Balance Sheet
Notes
5 Overviews
4 Consolidated Financial Statements
BASF's goodwill is allocated to 22 cash-generating units (2018: 23),
which are defined either on the basis of business units or at a higher
level. Goodwill for two of these cash-generating units, Pigments and
Construction Chemicals, was reclassified to the disposal groups in
2019.
Annual impairment testing was performed in the fourth quarter of
2019 on the basis of the cash-generating units with the exception of
the goodwill of the two units affected by the reclassification.
Recoverable amounts were determined using the value in use. This
was based on plans approved by company management and their
respective cash flows, generally for the next five years. For the
period thereafter, a terminal value was calculated using a forward
projection from the last detailed planning year as a perpetual annuity.
Planning is based on experience, current performance and
management's best possible estimates on the future development
of individual parameters, such as raw materials prices and profit
margins. Oil and gas prices are also among the main input
parameters that provide the basis for the forecast of cash flows in
the current financial plans. Market assumptions regarding, for
example, economic development and market growth are included
based on external macroeconomic and industry-specific sources.
BASF Report 2019
239
1,512
1.5%
403
2.0%
518
2.0%
515
2.0%
753
2.0%
1,298
2.0%
1,315
2.0%
3 Corporate Governance
3,236
3,219
Growth ratea
Goodwill
Growth ratea
Goodwill
2018
2019
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
2.0%
2.0%
2 Management's Report
1
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
237
Employees from joint operations are included in the number of
employees as of the year-end relative to BASF's share in the com-
pany. These had a total of 96 employees (2018: 526 employees). Of
material significance to the decrease in the number of employees in
BASF Report 2019
3,226
2,606
temporary staff
3,174
3,161
of which apprentices and trainees
10,659
10,924
Personnel expenses
122,404
117,628
BASF Group
730
554
Pension expenses
7,844
7,486
South America, Africa, Middle East
assistance expenses
19,303
18,634
5 Overviews
Notes
joint operations was the merger of the oil and gas businesses of
Wintershall and DEA in the joint venture, Wintershall Dea.
The average number of employees was distributed over the regions
as follows:
About This Report
238
BASF Report 2019
BASF Group's average number of employees for 2019 includes
6,801 employees from the disposal group for the construction
chemicals business and for 2018 2,021 employees from the
disposal group for the oil and gas business.
Employees from joint operations are included in the average number
of employees relative to BASF's share in the company. On average,
these had a total of 206 employees (2018: 492 employees).
3,120
2,922
2,819
2,811
of which apprentices and trainees
temporary staff
118,371
119,200
BASF Group
7,540
To Our Shareholders
7,607
18,713
18,843
Asia Pacific
19,051
19,624
North America
54,749
54,722
of which Germany
73,067
73,126
2018
2019
Average number of employees
South America, Africa, Middle East
1,500
2.0%
1,544
Tax loss carryforwards
Million €
2018
Tax loss
carryforwards
Deferred
tax assets
2019
2018
2019
Germany
Foreign
0
0
950
1,143
195
205
Total
950
1,143
195
205
Tax loss carryforwards exist in all regions. Tax losses in Germany
may be carried forward indefinitely. In some foreign countries, tax
loss carryforwards are only possible for a limited period of time.
Overall, just under half of the tax loss carryforwards will expire. The
bulk of the expirable tax loss carryforwards will expire in Asia by
2023 and in Europe and North America after 2024. No deferred tax
assets were recognized for tax loss carryforwards of €205 million in
2019 (2018: €370 million).
Tax liabilities
Tax liabilities primarily include assessed income taxes and other
taxes as well as estimated income taxes not yet assessed for the
current year. BASF began reporting tax provisions, previously
included in other provisions, with effective and deferred tax liabilities
in 2019. The prior-year figures have been restated accordingly. Tax
liabilities amounted to €3,036 million as of December 31, 2019
(December 31, 2018: €3,041 million).
BASF Report 2019
236
About This Report
1
To Our Shareholders
2 Management's Report
The regional distribution of tax loss carryforwards is as follows:
Tax loss carryforwards
Changes in valuation allowances on deferred tax assets amounted
to €98 million in 2019, compared with €87 million in 2018. Of this
figure, €65 million pertained to tax loss carryforwards in 2019 (2018:
€23 million).
Undistributed earnings of subsidiaries resulted in temporary
differences of €13,335 million in 2019 (2018: €14,088 million) for
which deferred tax liabilities were not recognized, as they are either
not subject to taxation on payout or they are expected to be
reinvested for an indefinite period of time.
205
205
Other
(40)
76
0
0
(36)
0
83
(83)
Deferred tax assets (liabilities) before netting
Netting
(613)
112
3 Corporate Governance
153
1,190
555
4,224
(3,669)
(1,882)
Deferred tax assets (liabilities) after netting
(613)
112
153
(287)
1,190
555
2,342
1,882
(1,787)
(287)
4 Consolidated Financial Statements
5 Overviews
Notes
54,028
55,839
Wages and salaries
8,825
8,470
North America
19,355
20,069
Social security contributions and
1,545
240
BASF Report 2019
a Growth rates used in impairment tests to determine terminal values in accordance with IAS 36
b Reclassification of goodwill from the construction chemicals business to the disposal group in the amount of €772 million as of December 21, 2019
c Reclassification of goodwill from the pigments business to the disposal group in the amount of €414 million as of August 29, 2019
Goodwill as of December 31
of which Germany
Other cash-generating units
Catalysts division (excluding battery materials)
Construction Chemicals divisionb
Agricultural Solutions division
Cash-generating unit
Million €
Goodwill of cash-generating units
After determining the recoverable amount for the cash-generating
units, the conclusion was that reasonable possible deviations from
the key assumptions would not lead to the carrying amounts of the
22 units exceeding their respective recoverable amounts.
The recoverable amount for the two cash-generating units was
calculated using fair value less expected costs to sell or the value in
use. The weighted average cost of capital rates on the respective
dates of impairment testing were 5.32% for construction chemicals
and 7.03% for pigments.
The impairment tests for the construction chemicals and pigments
cash-generating units were conducted before reclassification of
goodwill to the disposal groups.
The required discounting of cash flows for impairment testing is
calculated using the weighted average cost of capital rate after tax,
which is determined using the capital asset pricing model. It
comprises a risk-free interest rate, a market risk premium, and a
spread for credit risk based on the respective industry-specific peer
group. The calculation also takes into account capital structure and
the beta factor of the respective peer group as well as the average
tax rate of each cash-generating unit. Impairment tests of the units
were conducted assuming a weighted average cost of capital rate
after taxes of between 5.16% and 7.73% (2018: between 5.83%
and 6.90%). This corresponds to a weighted average cost of capital
rate before taxes of between 6.38% and 10.00% (2018: between
7.00% and 8.50%).
9,211
8,105
0.0-2.0%
1,503
0.0-2.0%
Personal Care Ingredients in the Care Chemicals division
Pigments in the Dispersions & Pigments division
Surface Treatment in the Coatings division
0
2018
75,188
12 Noncontrolling interests
Noncontrolling interests
Million €
Noncontrolling interests in profits
Noncontrolling interests in losses
Total
2018
292
2019
98
(28)
(20)
70
272
Noncontrolling interests in profits declined year on year in 2019,
especially at Shanghai BASF Polyurethane Company Ltd., Shang-
hai, China, primarily due to lower TDI and MDI sales prices and
margins, and at BASF TOTAL Petrochemicals LLC, Port Arthur,
Texas, mainly due to the scheduled turnaround of the steam cracker
and lower propylene sales prices.
2019
Noncontrolling interests in profits were only recognized for Winters-
hall companies until April 30, 2019.
13 Personnel expenses and employees
Personnel expenses
The BASF Group's expenses for wages and salaries, social security
contributions and pensions and assistance in 2019 totaled
€10,924 million (2018: €10,659 million). In 2019, this amount
included personnel expenses from the disposal group for the
construction chemicals business and proportionally for the oil and
gas business in the amount of €557 million. By contrast, the amount
in 2018 included personnel expenses from the disposal group for
the oil and gas business in the amount of €276 million. The increase
in personnel expenses was due primarily to higher expenses for the
long-term incentive program, a higher level of wages and salaries
and the higher average number of employees resulting from the
acquisition of significant businesses from Bayer. Offsetting factors
were the merger of the oil and gas businesses of Wintershall and
DEA in the joint venture Wintershall Dea, as well as the decrease in
expenses for pension benefits due to plan curtailments.
Personnel expenses
Million €
Number of employees
As of December 31, 2019, the number of employees decreased to
117,628 employees compared with 122,404 employees as of
December 31, 2018. This number includes 6,964 employees in the
disposal group for the construction chemicals business as of
December 31, 2019 (December 31, 2018: 2,017 employees in the
disposal group for the oil and gas business).
Of material significance to the decrease in the number of employees
were the merger of the oil and gas businesses of Wintershall and
DEA in the joint venture Wintershall Dea, as well as the sale of the
paper and water chemicals business. As a result, the number of
employees decreased by more than 3,000 employees.
The number of employees in the BASF Group was distributed over
the regions as follows:
Number of employees as of December 31
2019
2018
Europe
72,153
For more information on noncontrolling interests in consolidated companies, see Note 21 on
page 253
Other
(1.2)
1,459
Other financial result
(11)
(5)
(96)
(210)
(275)
(368)
(240)
(335)
Financial result
BASF Report 2019
(750)
(741)
232
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Other financial expenses
Miscellaneous financial expenses
Unwinding the discount on other noncurrent liabilities
(5)
15
14
183
174
(648)
(537)
(465)
(363)
2
5 Overviews
35
35
33
Write-downs on / losses from securities and loans
(8)
(22)
Net interest expense from underfunded pension plans and similar obligations
(155)
(131)
Net interest expense from other long-term personnel obligations
31
Notes
11
Income taxes
Foreign income tax
Taxes for prior years
Deferred tax expense (+) / income (-)
From changes in tax loss carryforwards/unused tax credits
From changes in the tax rate
From valuation allowances on deferred tax assets
Income taxes
Other taxes as well as sales and consumption taxes
Tax expense
Corporate income tax, solidarity surcharge and trade taxes (Germany)
Reconciliation of income taxes and the effective tax rate
Expected tax based on German corporate income tax rate (15%)
Solidarity surcharge
German trade tax
Foreign tax rate differential
Tax-exempt income
Nondeductible expenses
Income of companies accounted for using the equity method (Income after taxes)
Taxes for prior years
Deferred tax liabilities for the future reversal of temporary differences associated with shares in participating interests
Changes in the tax rate
Income before income taxes
168
Current tax expense
Tax expense
Accounting policies
In Germany, a uniform corporate income tax rate of 15.0% as well
as a solidarity surcharge of 5.5% thereon are levied on all distributed
and retained earnings. In addition to corporate income tax, income
generated in Germany is subject to a trade tax that varies depending
on the municipality in which the company is represented. Due to a
higher rate of assessment for Ludwigshafen, Germany, in 2019, the
weighted average trade tax rate was 14.5% (2018: 14.1%). The
30% rate used to calculate deferred taxes for German Group
companies remained unchanged in 2019. The income of foreign
Group companies is assessed using the tax rates applicable in their
respective countries. These are also generally used to calculate
deferred taxes to the extent that tax rate adjustments for the future
have not yet been enacted.
Deferred taxes are recorded for temporary differences between the
carrying amount of assets and liabilities in the financial statements
according to IFRS and the carrying amounts for tax purposes as
well as for tax loss carryforwards and unused tax credits. These also
comprise temporary differences arising from business combinations,
with the exception of goodwill. Deferred tax assets and liabilities are
calculated using the respective country-specific tax rates applicable
for the period in which the asset or liability is realized or settled. Tax
rate changes enacted or substantively enacted on or before the
balance sheet date are taken into consideration.
The current tax expense for corporate income tax, solidarity sur-
charge and trade taxes (Germany) declined due to lower income
from tax group companies in Germany.
Deferred tax assets are offset against deferred tax liabilities provided Tax expense and tax rate
they are related to the same taxation authority and have the same
maturities. Surpluses of deferred tax assets are only recognized
provided that the tax benefits are likely to be realized. The valuation
of deferred tax assets is based on the probability of a reversal of the
differences and the assessment of the ability to utilize tax loss
carryforwards and unused tax credits. This depends on whether
future taxable profits will exist during the period in which temporary
differences are reversed and in which tax loss carryforwards and
unused tax credits can be claimed. The valuation of deferred tax
assets is based on internal projections of the future earnings of the
particular Group company.
Changes in deferred taxes in the balance sheet are recorded as
deferred tax expense or income if the underlying transaction is not
to be recognized directly in equity or in income and expenses
recognized in equity. For those effects which have been recognized
in equity, changes to deferred tax assets and tax liabilities are also
recognized directly in equity.
Deferred tax liabilities are recognized for differences between the
proportional IFRS equity and the tax base of the investment in a
consolidated subsidiary if a reversal of these differences is expected
in the foreseeable future. Deferred tax liabilities are recognized for
dividend distributions planned for the following year if these
distributions lead to a reversal of temporary differences.
Provisions for German trade income tax, corporate income tax and
similar income taxes are calculated and recognized based on the
expected taxable income of the consolidated companies less any
prepayments that have been made. Provisions are set up for interest
accrued. Other taxes to be assessed are considered accordingly.
As in the previous year, changes in valuation allowances on deferred
tax assets for tax loss carryforwards resulted in an expense of
€1 million in 2019. Other taxes included real estate taxes and other
comparable taxes totaling €101 million in 2019 and €103 million in
2018.
Million €
The BASF Group tax rate amounted to 22.9% in 2019, after 21.3%
in 2018. The increase was mainly attributable to taxes for prior
years, especially in Germany and the United States. In Germany,
income from the release of tax provisions in 2018 contrasted with
expenses for additions to tax provisions in 2019. In the United
States, tax-exempt income for prior years was lower than in 2018.
The main offsetting effect was lower trade tax expenses as a result
of the lower taxable income of the German companies.
233
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
BASF Report 2019
against interest and currency risk.
From changes in temporary differences
The net interest expense from underfunded pension plans and
similar obligations increased in comparison with the previous year
as a result of the increase in net defined benefit liability as of
December 31, 2018. Net interest expense of the respective fiscal
year is based on the discount rate and the defined benefit obligation
at the beginning of the year.
(317)
(10)
(314)
(9)
(3)
(1)
Income from companies accounted for using the
equity method
116
269
of which joint ventures
associated companies
Income from companies accounted for using the equity method
decreased by a total of €153 million in 2019 primarily due to lower
earnings at BASF-YPC Company Ltd., Nanjing, China. Wintershall
Dea GmbH, Kassel/Hamburg, Germany, which was recognized as
a joint venture for the first time, accounted for a loss in earnings due
in part to additional impairments from the purchase price allocation.
Moreover, adjustments were made for Wintershall Dea GmbH's
earnings contributions, which had already been recognized at BASF
Group level as part of initial measurement of the shareholding at fair
value.
BASF Report 2019
231
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
29
21
250
412
The decline in other financial expenses was primarily due to lower
expenses for hedging bonds and U.S. dollar commercial paper
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Depreciation, amortization and impairments of noncurrent
assets amounting to €426 million in 2019 related primarily to the
impairment of project costs for a planned methane-based propylene
production plant on the U.S. Gulf Coast, as well as to the optimiza-
tion of production sites within the Nutrition & Health division in
Europe. In 2018, amortization, depreciation and impairments of
noncurrent assets amounted to €72 million. The impairments
resulted primarily from discontinued investment projects.
Costs from miscellaneous revenue-generating activities relate
to the items presented in other operating income.
Expenses from foreign currency and hedging transactions as
well as from the measurement of LTI options related to foreign
currency translation of receivables and payables as well as changes
in the fair value of currency derivatives and other hedging
transactions. Expenses resulting from the measurement of LTI
options amounted to €39 million in 2019. Higher currency hedging
costs also arose in 2019 due to a changed position with respect to
the U.S. dollar after the acquisition of Bayer's seed and non-
selective herbicide business.
5 Overviews
Losses from divestitures and the disposal of noncurrent assets
resulted in 2019 in connection with the planned divestiture of the
global pigments business. Expenses totaling €26 million in 2018
were related to the merger of the paper and water chemicals
business with Solenis.
9 Income from companies accounted for using the
equity method
Income from companies accounted for using the equity method
Million €
Proportional income after taxes
of which joint ventures
associated companies
Other adjustments to income and expenses
2019
433
279
In both years, other expenses included expenses for litigation, for
REACH, for the provision of services, for activities related to the
BASF 4.0 project and for planning the new Verbund site in Guang-
dong, China.
Notes
2018
Financial result
17
2
1
(1)
Income from tax allocation to shareholdings
33
35
Income from other shareholdings
(55)
(54)
Write-downs on / losses from the sale of shareholdings
(23)
(24)
(78)
Expenses from other shareholdings
(45)
(78)
(43)
Net income from shareholdings
Interest income from cash and cash equivalents
Interest and dividend income from securities and loans
Interest income
Interest expenses
Interest result
Net interest income from overfunded pension plans and similar obligations
Income from the capitalization of borrowing costs
Miscellaneous financial income
Other financial income
10
160
15
57
Expenses from loss transfer agreements
13
Million €
Income from profit transfer agreements
Income from the disposal of shareholdings
Dividends and similar income
The interest result declined by €102 million year on year, from
minus €363 million to minus €465 million, as a result of higher
interest expenses. The increase in interest expenses was mainly due
to the higher financial debt, particularly commercial paper and
interest on lease liabilities.
Write-downs on / losses from securities and loans decreased
due to lower impairments on loans and to lower losses from fair
value measurement of securities.
Net income from shareholdings was at prior-year level at minus
€45 million.
Financial result
21
2018
2019
3
1
40
of which stage 1
0
3
0
0
4
stage 2
0
0
0
0
0
0
stage 3
24
12
2
3
(45)
281
(3)
(1)
85
104
311
stage 3
43
(2)
0
0
61
1
Other receivables
27
64
42
of which stage 2
324
(47)
(3)
(1)
15
1
BASF Report 2019
36
152
4,575
1,839
4,038
Changes in the scope of consolidation
As of January 1, 2019
In 2019, additions to accumulated amortization contained impair-
ments of €15 million, which pertained primarily to patents that were
not allocated to an operational segment and were revalued due to a
planned sale.
Transfers to disposal groups were attributable to intangible assets
in connection with the construction chemicals business in Decem-
ber 2019 and the pigments business in August 2019.
Disposals of intangible assets amounting to €281 million primarily
concerned the derecognition of fully amortized assets for distribu-
tion and supply rights in the Agricultural Solutions segment and of
software licenses.
146
Additions from acquisitions resulted from the acquisition of
Isobionics B.V., Geleen, Netherlands, a startup company that
develops and produces natural flavors and fragrances. This
increased goodwill by €16 million and capitalized know-how by
€31 million. By contrast, there was a decrease of goodwill in the
amount of €65 million due to a retroactive purchase price allocation
and purchase price adjustment to assets from the acquisition
of significant parts of Bayer's seed and non-selective herbicide
businesses and its vegetable seeds business in the previous year.
37
(1,303)
15
3,814
241
20
0
20,368
Total
Additions related primarily to the acquisition of technologies and
patents amounting to €49 million from Grillo-Werke AG, Duisburg,
Germany, in the Nutrition & Care segment. Additions also included
newly acquired software licenses and rights of use.
553
9,211
0
Total
380
183
149
0
(3)
(47)
364
High/medium credit rating
from AAA to BBB-
from BB-to D
Low credit rating
a Standard & Poor's rating
5,880
3,201
BASF generally monitors the credit risk associated with counterpar-
ties with which receivables exist in the form of financial instruments.
In accordance with IFRS 9, impairments for expected credit losses
on receivables are recognized based on this.
At BASF, a comprehensive, global credit insurance program covers
accounts receivable, trade. Under a global excess of loss policy,
future bad debts are insured for essentially all BASF Group
companies excluding joint ventures. The program has no impact on
the calculation of valuation allowances in accordance with IFRS 9.
No compensation claims were incurred in either 2019 or 2018.
Payment terms are generally agreed upon individually with custom-
ers and, as a rule, are within 90 days. In 2019, valuation allowances
of €168 million were added for trade accounts receivable, and
valuation allowances of €146 million were reversed. In the previous
year, valuation allowances of €128 million were added for trade
accounts receivable, and valuation allowances of €117 million were
reversed.
In 2019, valuation allowances of €15 million were recognized for
other receivables representing financial instruments, and valuation
allowances of €3 million were reversed. In the previous year, valua-
tion allowances of €11 million were recognized for all other receiv-
ables, and valuation allowances of €9 million were reversed.
Additions included valuation allowances of €9 million due to a
change in valuation parameters.
250
(413)
0
168
Other receivables and miscellaneous assets
Accounts receivable,
trade
Defined benefit assets
123
63
Tax refund claims
132
967
107
891
Employee receivables
251
0
0
16
Precious metal trading items
977
780
Other
59
320
48
15
57
310
103
Receivables from finance leases
Receivables from capital equipment of nonconsolidated subsidiaries
20
3
23
123
Receivables from bank acceptance drafts
188
163
Other
306
217
243
169
Other receivables and assets that qualify as financial instruments
695
1,201
611
927
Prepaid expenses
Goodwill
274
353
Other receivables and assets that do not qualify as financial instruments
2,589
Valuation allowances on receivables (financial instruments) 2019
Precious metal trading items primarily comprise physical items,
precious metal accounts as well as long positions in precious
metals, which are largely hedged through sales or derivatives.
Expected losses on trade accounts receivable at BASF are
calculated primarily on the basis of internal or external customer
ratings and the associated probability of default.
The following table presents the gross values and credit risks for
trade accounts receivable measured at amortized cost as of
December 31, 2019.
Million €
Accounts receivable, trade
Million €
Creditworthiness as of
December 31, 2019
Equivalence to
Notes
external ratingª Gross carrying amounts
Reclassification
January 1, 2019
Additions
Reversals
between stages Translation effect
Reclassification
to assets of
disposal groups
As of
December 31,
2019
As of
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
275
2,212
1,112
3,790
886
BASF Report 2019
Current
271
2
98
3,139
The decline in noncurrent loans and interest receivables was
predominantly due to changes in loans to nonconsolidated
subsidiaries.
The increase in noncurrent derivatives with positive fair values
primarily affected the market valuation of combined interest rate and
currency swaps. The change in current derivatives with positive fair
market values was largely attributable to the increase in fair values of
commodity derivatives for precious metals.
Bank acceptance drafts are used as an alternative form of pay-
ment in China. Bank acceptance drafts are issued at a discount
from their par value. They can be held to maturity, traded or
redeemed prematurely at a discount. If BASF discounts a bank
acceptance draft with recourse, a liability toward the credit institu-
tion is recognized in the amount of the payment received.
Current prepaid expenses in 2019 mainly included prepayments of
€30 million related to operating activities compared with €22 million
in 2018, as well as €79 million in prepayments for insurance in 2019
compared with €83 million in 2018. Prepayments for license costs
increased from €38 million in 2018 to €74 million in 2019. Non-
current prepaid expenses in 2019 included higher advance
payments for received precious metal catalysts to be refurbished.
The change in current tax refund claims is largely attributable to the
rise in open income tax receivables.
The rise in current other receivables and assets, which represent
financial instruments, was due to deposits on commodity deriva-
tives, which were traded through clearing houses.
249
About This Report
1 To Our Shareholders
2 Management's Report
417
and valuesa
1,323
intangible
assets
376
2,043
As of January 1, 2019
Accumulated amortization
17,555
8,105
611
196
4,319
1,046
1,433
As of December 31, 2019
130
6
1
46
11
47
Currency effects
(3,048)
2,891
(1,186)
94
Changes in the scope of consolidation
(265)
(190)
(845)
Transfers to disposal groups
15
Transfers
(271)
(82)
(2)
255
(22)
(157)
Disposals
738
113
20
287
59
259
Additions
(8)
(5)
(409)
(410)
production
technologies
licenses and
trademarks
supply and
similar rights
generated
patents and
Product rights,
Distribution,
Internally
Know-how,
(2)
Cost
Development of intangible assets
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
0
Development of intangible assets 2019
Million €
0
86
45
(1,038)
Transfers to disposal groups
26
(6)
Transfers
(281)
(3)
(86)
(25)
(8)
(157)
Disposals
(37)
(47)
(46)
52
1
3
Additions from acquisitions
292
163
(3)
Currency effects
23
1
35
1
Additions
Additions from acquisitions amounted to €5,540 million in 2018.
The acquisition of significant parts of Bayer's seed and non-selective
herbicide businesses and vegetable seeds business, as well as the
acquisition of Toda America LLC's battery materials business led to
a €1,257 million increase in goodwill. A further addition to goodwill
amounting to €4 million arose from an additional purchase price
payment for the acquisition in 2017 of GRUPO Thermotek based in
Monterrey, Mexico. Further additions to intangible assets in connec-
tion with the key acquisitions mentioned above amounted to
€4,279 million. These related predominantly to know-how, patents
and production technologies in the amount of €2,725 million;
product rights, licenses and trademarks in the amount of
€1,054 million, as well as distribution, supply and similar rights in the
amount of €364 million.
Additions referred primarily to software licenses purchased or
internally developed software applications. Additions also included
concessions for the search and production of oil and gas in Brazil.
In 2018, intangible assets included rights of the Oil & Gas segment,
which were amortized using the unit of production method, until the
date of reclassification to the disposal group.
595
4,161
20,368
36
264
5,540
155
17,755
Total
9,477
411
116
1,879
1,150
(5)
(3,047)
36
47
Additions from acquisitions
(862)
Transfers to disposal groups
21
21
1
(29)
2
Transfers
(294)
(6)
(32)
(1)
(73)
(8)
(174)
Disposals
1,261
136
2,725
1,054
364
4,722
Other rights
Goodwill
Other rights
BASF Report 2019
a Including licenses to such rights and values
December 31, 2019
14,525
8,105
326
84
3,247
1,195
241
1,568
3,030
285
112
1,072
238
224
As of December 31, 2019
2
11
Net carrying amount as of
About This Report
1
To Our Shareholders
intangible
assets
production
technologies
licenses and
trademarks
similar rights
supply and
generated
patents and
Product rights,
Distribution,
Internally
Know-how,
Changes in the scope of consolidation
As of January 1, 2018
Cost
Million €
Development of intangible assets 2018
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
and valuesa
3,839
3
204
77
64
3,615
2,528
66
634
1,425
650
216
109
679
192
85
1
Additions from acquisitions
2
Disposals
(407)
(108)
(8,170)
(10,899)
(245)
Transfers to disposal groups
Currency effects
(8)
(71)
(1,657)
1,159
300
Transfers
(701)
(52)
(171)
190
(1,883)
5
Changes in the scope of consolidation
Additions
Transfers to disposal groups included property, plant and
equipment, which had been reclassified to the disposal groups for
the pigments business and the construction chemicals business.
For more information on divestitures, see Note 2.4 from page 210 onward
Transfers related mainly to the reclassification of operation-ready
assets from construction in progress to other asset categories.
Transfers also included reclassification of existing finance leases as
of December 31, 2018 to right-of-use assets due to the initial
application of IFRS 16.
Disposals of property, plant and equipment included the sale of a
building complex in Switzerland.
In 2019, impairments of €315 million and reversals of impairments
of €6 million were included in accumulated depreciation. The
impairments were primarily attributable to construction in progress
resulting from discontinued investment projects in North America
within the Petrochemicals segment. Furthermore, impairments on
buildings and technical equipment at one production site in Europe
were also included in accumulated depreciation.
Additions to property, plant and equipment arising from investment
projects (excluding leases) amounted to €3,390 million in 2019.
Investments were made at the following sites in particular:
Ludwigshafen, Germany; Antwerp, Belgium; Shanghai, China;
Geismar, Louisiana; and Freeport, Texas. Material investments
included the acetylene plant as well as the expansion of the vitamin
A plant in Ludwigshafen, Germany. Furthermore, additions included
renovations and major repairs to the steam cracker and the
construction of a new propane tank in Antwerp, Belgium. Invest-
ments also included the upgrade and capacity expansion of the MDI
synthesis unit in Geismar, Louisiana. Government grants for funding
investment measures reduced asset additions by €9 million.
Notes
Currency effects raised property, plant and equipment by
€190 million and resulted mainly from the appreciation of the
U.S. dollar against the euro.
5 Overviews
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
245
4 Consolidated Financial Statements
77
Development of property, plant and equipment 2018
Million €
As of January 1, 2018
70,913
4,799
4,387
7,940
50,558
11,169
Cost
Total
equipment and Construction in
fixtures
Miscellaneous
Of which
depreciation
according to
the unit of pro-
technical
equipment duction method
Machinery and
Land, land
rights and
buildings
progress
BASF Report 2019
(13,135)
602
1
5
4
5
15
Additions
Changes in the scope of consolidation
13
214
100
1,206
109
190
210
24
1,767
64,326
274
Advance
payments and
construction
in progress
Right-of-use
advance
payments and
construction in
progressa
Total
Cost
3,905
As of January 1, 2019
154
10,807
700
42,331
190
4,616
1,349
84
(633)
(164)
459
Disposals
As of January 1, 2018
Accumulated depreciation
63,008
3,905
6,065
4,616
12,156
As of December 31, 2018
814
92
36
121
42,331
(52)
36,110
3,264
(372)
(45)
3,155
34
358
498
4,329
2,409
6
2
4
Changes in the scope of consolidation
Additions
45,655
216
354
and fixturesa
a Right-of-use assets of €1,318 million were capitalized as of January 1, 2019, following the initial application of IFRS 16 and the values were restated accordingly.
6
440
950
As of December 31, 2019.
439
33
1
10,757
31
285
4
70
(3)
17
Currency effects
1
(2,053)
808
399
1
(2)
Changes in the scope of consolidation
42,228
3,400
32,480
43,783
6,238
As of January 1, 2019
Accumulated depreciation
65,508
3,006
551
4,808
104
3
13
(172)
(1,065)
(15)
(28)
(182)
(8)
(605)
Transfers
(33)
(4)
(76)
Disposals
1
2
Additions from acquisitions
(114)
(35)
(266)
207
0
(1,281)
(55)
(429)
(7)
(87)
275
Transfers to disposal groups
(2,702)
129
321
107
1,841
92
4
21,792
2
(3)
65
53
As of December 31, 2019
249
1
19
6,374
198
(1)
1
Currency effects
(1,297)
(11)
(123)
31
0
144
144
2,848
355
1,336
255
10,673
664
33,110
4,383
897
Net carrying amount as of December 31, 2019
43,716
158
196
3,472
375
Additions
(928)
(225)
(5)
(576)
(2)
(81)
Disposals
3,408
(166)
170
384
80
2,022
142
433
18
162
(8)
(25)
(872)
(1)
(1)
Transfers to disposal groups
(2)
(2)
70
(17)
(45)
(87)
12
(20)
49
(48)
Transfers
69
395
fixtures
Miscellaneous
equipment and
In addition to the net income of investments accounted for using the
equity method, dividend distributions and other comprehensive
income of the companies, transfers included €65 million from the
reclassification of investments accounted for using the equity
method to assets of the disposal group for the pigments business.
Transfers in 2018 included €2,552 million from the reclassification of
investments accounted for using the equity method to assets of the
disposal group for the oil and gas business.
Disposals in 2019 included primarily a capital decrease in the
amount of €1,541 million at Wintershall Dea GmbH, Kassel/
Hamburg, Germany.
Additions in 2019 related mainly to the share in Wintershall
Dea GmbH, Kassel/Hamburg, Germany, in the amount of
€14,078 million and in Solenis UK International Ltd., London, United
Kingdom, in the amount of €590 million.
The carrying amounts of shareholdings accounted for using the
equity method are adjusted annually based on the pro rata share of
net income, dividends and other changes in equity. Should there be
indications of a reduction in the value of an investment, an impair-
ment test is conducted and, if necessary, an impairment is recog-
nized in the income statement. Furthermore, earnings and the
carrying amount were adjusted due to deviating accounting policies
or purchase price allocations, primarily with respect to Wintershall
Dea GmbH, Kassel/Hamburg, Germany.
Currency effects raised property, plant and equipment by Accounting policies
€277 million and resulted mainly from the appreciation of the
U.S. dollar against the euro.
Transfers related mainly to the reclassification of operation-ready 16 Investments accounted for using the equity
assets from construction in progress to other asset categories.
method and other financial assets
For a detailed overview of income from companies accounted for using the equity method, see
Note 9 on page 231
For more information on divestitures, see Note 2.4 from page 210 onward
In 2018, impairments of €52 million and reversals of impairments of
€1 million were included in accumulated depreciation. The impair-
ments were primarily attributable to construction in progress
resulting from discontinued investment projects in North America.
Acquisitions led to an increase in property, plant and equipment in
the amount of €1,425 million, primarily from the acquisition of
significant parts of Bayer's seed and non-selective herbicide busi-
nesses and its vegetable seeds business.
Government grants for funding investment measures reduced asset
additions by €26 million.
Additions to property, plant and equipment arising from investment
projects amounted to €3,615 million in 2018. Investments were
primarily made at the sites in Ludwigshafen, Germany, Antwerp,
Belgium, Shanghai, China, Geismar, Louisiana and Freeport, Texas.
Material investments included the acetylene plant as well as plants
for the production of catalysts in Ludwigshafen, Germany. Further-
more, additions included renovations to the steam cracker and the
construction of a new propane tank in Antwerp, Belgium. Other
investments included the construction of oil and gas facilities and
wells in Europe and South America.
In 2018, machinery and technical equipment contained oil and
gas deposits, including related wells, production facilities and further
infrastructure, which were depreciated according to the unit of
production method. The table presents the development of pro-
perty, plant and equipment including these assets until the oil and
gas business was transferred to the disposal group.
Notes
Disposals of property, plant and equipment included the sale of
production plants for oleochemical surfactants in Mexico and the
production site for styrene butadiene-based paper dispersions in
Pischelsdorf, Austria.
5 Overviews
BASF Report 2019
About This Report
4,715
2,203
Accounting policies
2018
2019
17 Inventories
247
Million €
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
Investments accounted for using the equity method
As of January 1
4 Consolidated Financial Statements
2 Management's Report
As of December 31, 2018
537
4
27
96
458
6,342
48
(196)
(87)
(4,923)
(6,118)
(81)
(10)
(6,482)
3 Corporate Governance
32,480
6
To Our Shareholders
1
About This Report
246
BASF Report 2019
Currency effects
3,400
Transfers to disposal groups
42,228
20,780
3,899
1,216
9,851
5,814
Net carrying amount as of December 31, 2018
Transfers
10
Changes in the scope of consolidation
14,678
2 Management's Report
1 To Our Shareholders
About This Report
248
BASF Report 2019
Of total inventories, €1,240 million was measured at net realizable
value in 2019 and €1,120 million in 2018.
3 Corporate Governance
Write-downs on inventory were recognized in the amount of
€111 million in 2019 and in the amount of €73 million in 2018.
Work in progress, finished goods and merchandise are com-
bined into one item due to production conditions in the chemical
industry. Services in progress mainly relate to services not invoiced
as of the balance sheet date.
12,166
11,223
Inventories
118
102
Cost of sales included inventories recognized as an expense
amounting to €29,643 million in 2019, and €30,176 million in
2018. The amount of €1,122 million was recognized in profit or
loss for the discontinued construction chemicals business in 2019,
and €1,109 million in 2018.
Advance payments and services in
progress
4 Consolidated Financial Statements
Notes
Derivatives with positive fair values
224
275
165
Loans and interest receivables
Noncurrent
5 Overviews
Current
December 31, 2018
December 31, 2019
Million €
Other receivables and miscellaneous assets
Receivables and miscellaneous assets
18
Noncurrent
Additions
8,507
3,541
Long-term securities
Other shareholdings
Million €
Other financial assets
a This item also includes effects on earnings from the discontinued oil and gas business in the amount of
€99 million until reclassification to the disposal group as of September 30, 2018.
Net carrying amount as of December 31
Other financial assets
Currency effects
14
(10)
(2,571)
(1,573)
(282)
(18)
15,008
Transfersa
Disposals
55
2,203
7,742
December 31, 2019
501
3,379
December 31, 2019 December 31, 2018
Raw materials and factory supplies
Work in progress, finished goods and
merchandise
Million €
Inventories
The exception made by IAS 2 for traders is applied to the measure-
ment of precious metals. Accordingly, inventories held exclusively
for trading purposes are measured at fair value less costs to sell and
recognized in the precious metal trading item (carrying amount as
of December 31, 2019: €977 million; as of December 31, 2018:
€780 million) under miscellaneous current assets. All changes in
value are immediately recognized in the statement of income.
December 31, 2018
Inventories may be written down if the prices for the sales products
decline, or in cases of a high rate of days sales of inventory (DSI).
Write-downs on inventories are reversed if the reasons for them no
longer apply.
Inventories are measured at acquisition cost or cost of conversion
based on the weighted average method. If the market price or the
fair value of the sales products, which are based on the net realiz-
able values, is lower, then the sales products are written down to
this lower value. The net realizable value is the estimated price in the
ordinary course of business less the estimated costs of completion
and the estimated selling costs.
570
636
117
135
453
In addition to direct costs, cost of conversion includes an appro-
priate allocation of production overhead costs based on normal
utilization rates of the production plants, provided that they are
related to the production process. Pensions, social services and
voluntary social benefits are also included, as well as allocations for
administrative costs, provided they relate to the production.
Borrowing costs are not included in cost of conversion.
Right-of-use
miscellaneous
equipment
(7)
(15)
Both movable and immovable fixed assets are principally depre-
ciated using the straight-line method. The estimated useful lives and
depreciation methods of property, plant and equipment are based
on historical values, plans and estimates. The depreciation methods,
useful lives and residual values are reviewed at each balance sheet
date.
BASF began applying the new standard IFRS 16 - Leases as of
January 1, 2019. As lessee, BASF generally recognizes for all leases
right-of-use assets and lease liabilities in the balance sheet at the
present value of financial commitments entered.
For more information on first-time application of IFRS 16, see Note 1.2 IFRS 16 - Leases on
page 201 and for more information on leases, see Note 28 from page 279 onward
Impairments to property, plant and equipment are recognized if the
recoverable amount of the asset is lower than the carrying amount.
The measurement is based on fair value less costs to sell or the
value in use. The value in use is determined on the basis of future
cash inflows and outflows, and the weighted average cost of capital
after taxes, depending on tax rates and country-related risks. An
impairment is recognized for the difference between the carrying
amount and the recoverable amount. If the reasons for an impair-
ment no longer exist, the write-downs are reversed up to the value
of the asset, had an impairment not been recognized.
Investment properties held to realize capital gains or rental income
are immaterial. They are valued at the lower of fair value or cost less
depreciation.
The weighted average depreciation periods of continuing operations
were as follows:
Expenditures related to the scheduled maintenance of large-scale
plants are capitalized separately and depreciated using the straight-
line method over the period until the next planned turnaround. Costs
for the replacement of components are recognized as assets if an
additional future benefit is expected. The carrying amount of the
replaced components is derecognized. Costs for maintenance and
repair as part of normal business operations are recognized as an
expense.
Weighted average depreciation in years
Miscellaneous equipment and fixtures
a Including capitalized rights of use through application of IFRS 16
2019a
2018
17
22
Buildings and structural installations
Machinery and technical equipment
11
The cost of self-constructed plants includes direct costs, appropriate
allocations of material and production overhead costs, and a share
of the general administrative costs of the divisions involved in the
construction of the plants.
Accounting policies
BASF Report 2019
(688)
Disposals of intangible assets amounting to €294 million were
largely attributable to the derecognition of fully amortized assets.
The sale of shares in the Aguada Pichana Este concession in
Argentina and the divestiture of the production site for styrene
butadiene-based paper dispersions in Pischelsdorf, Austria led to a
€6 million disposal of goodwill.
242
About This Report
1 To Our Shareholders
Property, plant and equipment are measured at cost less
depreciation and impairment over their useful lives. The revaluation
method is not applied. Low-value assets are fully expensed in the
year of acquisition.
2 Management's Report
4 Consolidated Financial Statements
5 Overviews
Notes
Transfers to disposal groups related mainly to the reclassification
of intangible assets from the oil and gas business as of Septem-
ber 30, 2018 and, to a lesser extent, from the paper and water
chemicals business to the disposal groups.
In 2018, additions to accumulated amortization contained
impairments of €4 million. This mainly pertained to impairments of
non-strategic know-how, patents and production technologies in
the Functional Materials & Solutions segment and, to a lesser extent,
to the amortization of unused software licenses and discontinued IT
projects. Reversals of impairments of €2 million included in additions
to accumulated amortization had a countereffect. These related
primarily to distribution rights in the Functional Materials & Solutions
segment and to a higher valuation of emissions rights due to
increased fair market values. Until September 30, 2018, they also
included amortization of rights belonging to the Oil & Gas segment
in the amount of €29 million, which were amortized in accordance
with the unit of production method.
15 Property, plant and equipment
3 Corporate Governance
a Including licenses to such rights and values
11
7
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Development of property, plant and equipment including right-of-use assets arising from leases in 2019
Million €
Machinery and
2 Management's Report
Right-of-use
machinery and
Land
landa
Buildings
Right-of-use
buildingsa
technical
equipment
technical
equipmentª
Right-of-use
6
To Our Shareholders
About This Report
The decrease in weighted average depreciation periods for buildings
and structural installations resulted primarily from the addition of
lease assets in accordance with IFRS 16.
BASF Report 2019
243
About This Report
1 To Our Shareholders
2 Management's Report
1
3 Corporate Governance
5 Overviews
Notes
Borrowing costs: If directly incurred as part of the acquisition,
construction or production of a qualifying asset are capitalized as
part of the acquisition or production cost of that asset. A qualifying
asset is an asset for which the process necessary to make it ready
for its intended use or sale is longer than one year. Borrowing costs
are capitalized up to the date the asset is ready for its intended use.
The borrowing costs were calculated based on a rate of 1.5%
(previous year: 1.5%) and adjusted on a country-specific basis, if
necessary. All other borrowing costs are recognized as an expense
in the period in which they are incurred.
Government grants: Government grants related to the acquisition
or construction of property, plant and equipment reduce the
acquisition or construction cost of the respective assets. Other
government grants or government assistance are recognized
immediately as other operating income or treated as deferred
income and released over the underlying period.
244
BASF Report 2019
4 Consolidated Financial Statements
(3)
December 31, 2018
9,211
479
954
81
222
124
Changes in the scope of consolidation
2,301
Additions
49
168
14
85
Disposals
(173)
279
(5)
As of January 1, 2018
9,211
(35)
(1,722)
Currency effects
(15)
21
52
Accumulated amortization
5
As of December 31, 2018
4,038
1,839
4,575
152
553
201
16,554
(72)
(26)
As of December 31, 2018
2,043
376
1,046
94
255
24
0
Net carrying amount as of
1,995
1,463
3,529
58
298
3,814
(1)
4
9
Transfers
0
(1)
(277)
(1)
Transfers to disposal groups
1
(370)
(13)
(26)
(128)
Currency effects
6
4
(151)
121
Additions
2019
Net defined benefit liability as of December 31
of which defined benefit assets
(7,560)
(66)
(7,371)
123
63
provisions for pensions and similar obligations
7,683
7,434
The target asset allocation has been defined by using asset liability
studies and is reviewed regularly. Accordingly, plan assets are
aligned with the long-term development of the obligations, taking
into consideration the risks associated with the specific asset
classes and the regulations relating to the investment of plan assets.
The existing portfolio structure is based on the target asset
allocation. In addition, current market assessments are taken into
consideration. In order to mitigate risks and maximize returns, a
widely spread global portfolio of individual assets is held.
Liability-driven investment (LDI) techniques, such as hedging the risk
of changes in interest rates and inflation, are used in some pension
plans, especially for U.K. and U.S. plans.
BASF Report 2019
257
About This Report
1
To Our Shareholders
2 Management's Report
BASF's employer contributions in 2019 totaled €463 million,
including a special contribution to BASF Pensionstreuhand e.V. in
the amount of €300 million. Through continuous monitoring of
financing requirements of its pension plans, BASF always strives to
achieve the necessary yields to fill financing gaps over the course of
time. Company contributions for 2020 are currently expected to be
around €250 million.
Effects from plan settlements resulted in 2019 primarily from the
transfer of small benefit entitlements and the corresponding assets
from the pension plan in the United States to an external insurer.
The standardized return on plan assets is calculated by multiply-
ing plan assets at the beginning of the year with the discount rate
used for existing defined benefit obligations at the beginning of the
year, taking into account benefit and contribution payments to be
made during the year.
(30)
Currency effects
Plan assets as of December 31
10
(16)
(135)
Employer contributions
463
175
3 Corporate Governance
227
Effects from acquisitions and divestitures
360
282
20,863 19,280
Other changes
(5)
(136)
Currency effects
171
4 Consolidated Financial Statements
5 Overviews
Notes
2
100
Cash and cash equivalents
Total
2
100
exceptions, there is no active market for plan assets in real estate
and alternative investments.
Plan assets as of the balance sheet date contained securities issued
by BASF Group companies with a market value of €2 million in 2019
and €9 million in 2018. The market value of the properties of legally
independent pension funds rented to BASF Group companies
amounted to €112 million on December 31, 2019 and €112 million
on December 31, 2018.
16
Since 2010, there has been an agreement between BASF SE and
BASF Pensionskasse WaG on the granting of profit participation
capital with a nominal value of €80 million, which is used to
strengthen the financing of the BASF Pensionskasse WaG. Beyond
this, there were no material transactions between the legally
independent pension funds and BASF Group companies in 2019
or 2018.
Current funding situation of the pension plans as of December 31
Million €
2019
2018
Defined
benefit
obligation
Pension
assets
Pension
assets
Unfunded pension plans
Funded pension plans
2,373
The asset class debt instruments comprises promissory notes and
debentures (Pfandbriefe) as well as corporate and government
bonds. Government bonds primarily relate to bonds from countries
with the highest credit ratings, such as the United States, the United
Kingdom, Germany and Switzerland. Corporate bonds mainly The funding of the plans was as follows:
comprise bonds from creditworthy debtors, although particular
high-yield bonds are also held to a limited extent. In connection with
the continuous monitoring of default risk based on a given risk bud-
get and on the observation of the development of the creditworthi-
ness of issuers, the plan asset allocation may be adjusted in the
case of a revised market assessment. Alternative investments
largely comprise investments in private equity, absolute return funds
and senior secured loans.
Other changes
18
4
Structure of plan assets
%
Equities
2019
2018
29
25
Debt instruments
Alternative investments
47
of which for government debtors
17
16
for other debtors
30
37
Real estate
4
53
2,575
Explanations regarding plan assets
73
assets
United States
3,777
3,745
2,483
2,448
(1,294)
(1,297)
Plan settlements
21
Employer contributions
463
175
Switzerland
1,845
1,953
1,792
(1,043)
2,128
(32)
137
Net defined benefit liability as of January 1
(7,371) (6,223)
2019
2018
2019
2018
2018
Standardized return on plan assets
1,838
389
Current service cost
(380)
(384)
Germany
19,995 18,406 13,879 12,621
(6,116) (5,785)
Deviation between actual and standardized return on plan
Past service cost
422
(53)
(115)
Interest cost
640
(172) (166)
Effects from acquisitions and divestitures
(442)
(92)
Deviation between actual and standardized return on plan
assets
2,128
(1,043)
723
Total
(7,371)
Past service cost
Actuarial gains/losses of the defined benefit obligation
(2,803)
63
Plan settlements
(198)
Benefits paid by unfunded plans
28,423 26,651 20,863 19,280 (7,560)
124
806
Other
(542)
(553)
Employee contributions
45
47
United Kingdom
1,911
1,741
895
1,986
75
(8)
Standardized return on plan assets
389
422
Benefits paid
(1,013)
(913)
1,733
20,648
26,050
28,423
24,076
126
74
140
85
Obligations from sales and purchase contracts
1,261
1,330
(1,280)
(131)
(15)
1,165
obligations
Restructuring measures
121
103
0
(56)
warranties and similar
Litigation, damage claims,
1,653
(64)
3
(72)
(19)
30
654
remediation costs
Restructuring measures
141
(16)
116
98
|
Employee obligations
1,817
1,374
3
(1,422)
(55)
121
(11)
141
Other
(163)
(71)
(1)
462
The decrease in provisions for employee obligations was mainly
attributable to lower accruals for variable compensation compo-
nents.
Total
4,553
1
3,120
(3,020)
(301)
(82)
4,278
The decrease in provisions for obligations from sales and pur-
chase contracts resulted from lower accruals for rebate pro-
grams.
Other includes interest on noncurrent tax provisions.
BASF Report 2019
260
8
74
206
Other
462
220
490
222
Litigation, damage claims, warranties and
Total
4,278
2,938
490
4,553
140
18
0
(23)
(9)
0
126
similar obligations
3,252
20,863
638
purchase contracts
In addition, other provisions also cover expected costs for restora-
tion obligations for dismantling existing plants and buildings,
rehabilitating contaminated sites, recultivating landfills, removal of
environmental contamination from existing production or storage
sites and similar measures. If BASF is the only responsible party that
can be identified, the provision covers the entire expected obliga-
tion. At sites operated together with one or more partners, the pro-
vision generally covers only BASF's share of the expected obligation.
The amount of the provision is determined based on the available
technical information on the site, the technology used, legal regula-
tions, and official requirements. The calculation accounts for
expected significant changes in obligations.
Provisions for restructuring measures include severance payments
to departing employees or similar personnel expenses as well as
expected costs for site closures, including the costs for demolition
and similar measures. Provisions are recognized for these expenses
when the relevant measures have been planned and announced by
management.
Provisions for employee obligations primarily include variable
compensation including associated social security contributions, as
well as obligations for granting long-service bonuses and anniver-
sary payments. Provisions for long-service and anniversary bonuses
are predominantly calculated based on actuarial principles.
Provisions for obligations from sales and purchase contracts
largely comprise obligations arising from rebates granted and other
price discounts in the Agricultural Solutions segment, warranties
and product liabilities, sales commissions and expected losses on
contracts.
Other provisions also cover risks from litigation and claims, provided
the criteria for recognizing a provision are fulfilled. In order to deter-
mine the amount of the provisions, the company takes into consid-
eration the facts related to each case, the size of the claim, claims
awarded in similar cases and independent expert advice as well
as assumptions regarding the probability of a successful claim and
the range of possible claims. Actual costs can deviate from these
estimates.
For more information, see Note 26 from page 265 onward
Provisions for litigation, damage claims, warranties and similar
obligations contain anticipated expenses from lawsuits in which
BASF is the defendant party, as well as obligations under damage
claims against BASF and fines.
The probable amount required to settle noncurrent provisions is
discounted if the effect of discounting is material. In this case, the
provision is recognized at present value. Assumptions must be
made in determining the discount rate (2019: 1.5%; 2018: 1.5%)
used for calculating noncurrent provisions. Financing costs related
to unwinding the discount of provisions in subsequent periods are
shown in other financial result.
259
BASF Report 2019
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Provisions for environmental protection and remediation costs
are recognized for expected costs for rehabilitating contaminated
sites, recultivating landfills, removal of environmental contamination
at existing production or storage sites and similar measures.
Other provisions are recognized when there is a present obligation
as a result of a past event and when there is a probable outflow of
resources whose amount can be reliably estimated. Provisions are
recognized at the probable settlement value.
Accounting policies
23 Other provisions
19,280
20,863
26,651
19,280
Defined contribution plans and government pensions
The contributions to defined contribution plans recognized in income
from operations amounted to €332 million in 2019 and €314 million
in 2018.
Contributions to government pension plans were €627 million in
2019 and €634 million in 2018.
Almost all of the equities are priced on active markets. The category
debt instruments includes promissory notes and debentures
(Pfandbriefe) acquired through private placements with a market
value in the amount of €193 million as of December 31, 2019, and
€394 million as of December 31, 2018. For such securities,
especially those held by domestic pension plans, there is no active
market. The capital market compensates for this lack of fungibility
with yield premiums depending on the maturity. With only a few
Other provisions
Total
258
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
BASF Report 2019
Million €
Of which
current
The following table shows the development of other provisions by
category. Other changes include reclassifications to disposal groups,
changes in the scope of consolidation, divestitures, currency effects
January 1,
2019
Additions
86
15
Unwinding of
discount
Utilization
Releases
Other
changes
Restoration obligations
December 31,
2019
(4)
(21)
77
Obligations from sales and
1,165
1,161
1,261
1,253
1
Environmental protection and
1,467
1,257
and the reclassification of obligations to liabilities when the amount
and timing of these obligations become known.
December 31, 2019
December 31, 2018
Of which
current
77
86
Restoration obligations
1,817
Development of other provisions in 2019
Million €
654
110
638
127
remediation costs
Employee obligations
1,653
Environmental protection and
19,280
Defined
benefit
obligation
Net defined benefit
liability
37
34.00
35
Shanghai Huayi Fine Chemical Co., Ltd, Shanghai, China
40.00
65
40.00
59
103
105
853
a Partners' equity interest in W & G Transport Holding GmbH and OPAL Gastransport GmbH & Co. KG: 50.03%; voting rights and share of earnings: 49.98%
1,055
22
Provisions for pensions and similar obligations
Accounting policies
In addition to state pension plans, most employees are granted
company pension benefits from either defined contribution or
defined benefit plans. Benefits generally depend on years of service,
contributions or compensation, and take into consideration the legal
framework of labor, tax and social security laws of the countries
where the companies are located. To limit the risks of changing
financial market conditions as well as demographic developments,
employees have, for a number of years now, been almost exclusively
offered defined contribution plans for future years of service.
34.00
178
30.00
99
49.98a
141
Free float
26.67
42
26.67
42
PETRONAS Chemicals Group Berhad,
Kuala Lumpur, Malaysia
The accounting policies presented in the following relate to defined
benefit pension obligations.
40.00
40.00
193
Total Petrochemicals & Refining USA, Inc., Houston, Texas
Shanghai Hua Yi (Group) Company, Shanghai, China, and
SINOPEC Assets Management Corporation, Bejing, China
TODA KOGYO CORP., Hiroshima, Japan
40.00
335
40.00
302
30.00
172
Provisions for pensions are calculated on an actuarial basis in
accordance with the projected unit credit method using assump-
tions relating to the following valuation parameters, among others:
future developments in compensation, pensions and inflation,
employee turnover and the life expectancy of beneficiaries.
Obligations are discounted based on the market yields on high-
quality corporate fixed-rate bonds.
Similar obligations, especially those arising from commitments by
North American Group companies to pay the healthcare costs and
life insurance premiums of retired staff and their dependents, are
reported under provisions for similar obligations.
Actuarial reports are used to calculate the amount of pension
provisions.
Employees are granted benefits based on defined contribution
plans.
Effective 2010, the existing defined benefit plans were closed to
further increases in benefits based on future years of service, and
benefits earned in the past were frozen. There is no entitlement to
pension adjustments to compensate for cost-of-living increases.
The legal and regulatory frameworks governing the plans are based
on the U.S. Employee Retirement Income Security Act (ERISA),
which requires the plan sponsor to ensure a minimum funding level.
Any employer contributions necessary to meet the minimum funding
level are based on the results of an actuarial valuation. Furthermore,
there are unfunded pension plans that are not subject to ERISA
requirements.
Additional similar obligations arise from plans that assume the
healthcare costs and life insurance premiums of retired employees
and their dependents. Such plans have been closed to new entrants
since 2007. In addition, the amount of the benefits for such plans
has been frozen.
BASF Report 2019
254
About This Report
1 To Our Shareholders
United States
2 Management's Report
4 Consolidated Financial Statements
5 Overviews
Notes
Switzerland
The employees of the BASF Group in Switzerland receive a company
pension, which is financed through a pension fund by employer and
employee contributions as well as the return on plan assets. The
pension plans are accounted for as defined benefit plans, as the
obligatory minimum pension guaranteed by law under the Swiss
Pension Fund Act (BVG) is included in the scheme. All benefits vest
immediately. According to government regulations, the employer is
obligated to make contributions, so that the pension funds are able
to grant the minimum benefits guaranteed by law. The pension
funds are managed by boards, where employer and employees are
equally represented, which steer and monitor the benefit plans and
asset allocation.
United Kingdom
Employees are granted benefits based on a defined contribution
plan.
The BASF Group also maintains defined benefit plans in the United
Kingdom, which have been closed for further increases based on
future years of service. Adjustments to compensate for increases in
the cost of living until the beginning of retirement are legally required
for beneficiaries of defined benefit plans.
3 Corporate Governance
Million €
German BASF companies and replaced by a defined contribution
plan. At BASF SE, occupational pension promises that exceed the
basic level of benefits are financed under a contractual trust
arrangement by BASF Pensionstreuhand e.V.; at German Group
companies, these benefits are financed primarily via pension
provisions. The benefits are largely based on cash balance plans.
Furthermore, employees are given the option of participating in
various deferred compensation schemes.
Germany
BASF Report 2019
253
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
For BASF SE and German Group companies, a basic level of
benefits is provided by BASF Pensionskasse WaG, a legally
independent plan, which is financed by employer and employee
contributions as well as the return on plan assets. BASF SE ensures
the necessary contributions to adequately finance the benefits
promised by BASF Pensionskasse WaG. Some of the benefits
financed via BASF Pensionskasse VVaG are subject to adjustments
that must be borne by its member companies to the extent that
these cannot be borne by BASF Pensionskasse WaG due to the
regulations imposed by the German supervisory authority. In 2004,
the basic benefit plan was closed for newly hired employees at
Notes
The Group Pension Committee monitors the risks of all pension
plans of the Group. In this context, it issues guidelines regarding the
governance and risk management of pension plans, particularly with
regard to the financing of pension commitments and the portfolio
structure of existing plan assets. The organization, responsibilities,
strategy, implementation and reporting requirements are docu-
mented for the units involved.
Economic and legal environment of the plans
employees led to a reduction in risk with regard to future benefit
levels.
The strategy of the BASF Group with regard to financing pension
commitments takes into account country-specific supervisory and
tax regulations.
In some countries, pension benefits were granted for which the
employer has a subsidiary liability. Pension benefits in a number of
countries include minimum interest guarantees to a limited extent. If
the pension fund cannot generate the income needed to provide the
minimum guarantee, this must be provided by the employer under
the subsidiary liability. To the extent that recourse to the employer is
unlikely based on the structure and execution of the pension benefits
as well as the asset situation of the pension fund, these plans are
treated as defined contribution plans.
In some countries - especially in Germany, in the United States, in
the United Kingdom and in Switzerland – there are pension obliga- Description of the defined benefit plans
tions subject to government supervision or similar legal restrictions.
For example, there are minimum funding requirements to cover
pension obligations, which are based on actuarial assumptions that
differ from those pursuant to IAS 19. Furthermore, there are qualita-
tive and quantitative restrictions on allocating plan assets to certain
asset categories. This could result in annual fluctuations in employer
contributions, financing measures and the assumption of obligations
in favor of the pension funds to comply with regulatory requirements.
The obligations and the plan assets used to fund the obligations are
exposed to demographic, legal and economic risks. Economic risks
are primarily due to unforeseen developments on commodity and
capital markets. They affect, for example, pension adjustments
based on the level of inflation in Germany and in the United Kingdom,
as well as the impact of discount rates on the amount of the defined
benefit obligation. In previous years, measures taken to close plans
with defined benefits for future service, especially benefits based on
final pay promises and the assumption of healthcare costs for former
The following section describes the typical plan structure in the
individual countries. Different arrangements may exist, in particular
due to the assumption of plans as part of acquisitions; however,
these do not have any material impact on the description of plans in
the individual countries.
Actuarial gains and losses from changes in estimates relating to the
actuarial assumptions used to calculate defined benefit obligations,
the difference between standardized and actual returns on plan
assets, as well as the effects of the asset ceiling are recognized
directly in equity as other comprehensive income.
The financing of the pension plans is determined by the provisions
of the regulatory authority for pensions and the relevant social and
labor law requirements. The defined benefit plans are administered
by a trust company, whose Board of Trustees, according to the
trustee agreement and law, represents the interests of the
beneficiaries and ensures that the benefits can be paid in the future.
The required funding is determined using technical valuations
according to local regulations every three years.
%
%
December 31, 2019 December 31, 2018
767
41,226
35,932
42,056
36,699
Transfers from other retained earnings increased legal reserves
by €66 million in 2019 (2018: €81 million).
BASF and LetterOne completed the merger of Wintershall and DEA
on April 30, 2019. In this connection, €140 million from the
remeasurement of defined benefit plans was reclassified from other
comprehensive income to retained earnings.
The acquisition of shares in companies that BASF already controls
or that are included in the Consolidated Financial Statements as a
joint arrangement is treated as a transaction between shareholders,
as long as this does not lead to a change in the consolidation
method. There were no material transactions of this type in 2019, as
in the previous year.
By way of a resolution of the Annual Shareholders' Meeting of
May 12, 2017, the Board of Executive Directors was authorized to
buy back shares until May 11, 2022, in accordance with sec-
tion 71(1) no. 8 of the German Stock Corporation Act (AktG). The
buyback cannot exceed 10% of the company's share capital at the Payment of dividends
time the resolution was passed and can take place via the stock
exchange, a public purchase offer addressed to all shareholders, or
a public invitation to the shareholders to submit sales offers. This
authorization has not been exercised to date.
Reserves and retained earnings
Capital reserves include effects from BASF's share program,
premiums from capital increases and consideration for warrants and
negative goodwill from the capital consolidation resulting from
acquisitions of subsidiaries in exchange for the issue of BASF SE
shares at par value.
In accordance with the resolution of the Annual Shareholders'
Meeting on May 3, 2019, BASF SE paid a dividend of €3.20 per
share from the retained profit of the 2018 fiscal year. With
918,478,694 qualifying shares, this represented total dividends of
€2,939,131,820.80. The remaining €43,303,300.12 in retained
profits was allocated to retained earnings.
BASF Report 2019
251
About This Report
1
To Our Shareholders
830
Legal reserves
Other retained earnings
Retained earnings
Million €
Reserves and retained earnings
About This Report
1
To Our Shareholders
Plan assets as of January 1
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
2 Management's Report
19
Authorized capital
BASF SE has only issued fully paid-up registered shares with no par
value. There are no preferential voting rights or other restrictions.
BASF SE does not hold any treasury shares.
with the approval of the Supervisory Board, to issue, on a one-off
basis or in portions on more than one occasion, bearer or registered
convertible bonds and/or bonds with warrants, or combinations of
these instruments, with or without maturity limitations up to a
nominal value of €10 billion until May 11, 2022. The notional interest
in the share capital attributable to the BASF shares to be issued in
connection with the debt instruments issued under this authoriza-
tion may not exceed 10% of the share capital.
In accordance with the resolution of the Annual Shareholders'
Meeting on May 3, 2019, the Board of Executive Directors was
authorized, with the consent of the Supervisory Board, to increase,
until May 2, 2024, on a one-off basis or in portions on a number of
occasions, the company's share capital by a total of up to
€470 million by issuing new shares against contributions in cash or
in kind. In principle, shareholders are entitled to a subscription right.
However, the Board of Executive Directors is authorized, with the
approval of the Supervisory Board, to exclude shareholders' statu-
tory subscription rights in the cases specified in the authorizing Authorization of share buybacks
resolution. The Board of Executive Directors is authorized, with the
consent of the Supervisory Board, to lay down the further contents
of the share rights and the details of the execution of the capital
increase. The total shares issued on the basis of the above authori-
zation with the exclusion of the shareholders' subscription right in
the case of capital increases in return for contributions in cash or in
kind must not exceed 10% of the share capital at the time that this
authorization comes into effect or - if this value is lower - at the time
In this connection, the share capital was increased conditionally by
up to €117,565,184 by issuing a maximum of 91,847,800 new
registered BASF shares. The conditional capital increase will only be
carried out to the extent to which holders of convertible bonds, or
warrants attached to bonds with warrants issued, exercise their
conversion or option rights. This authorization has not been exer-
cised to date.
of its exercise. The proportionate amount of the share capital of
those shares that are to be issued on the basis of conversion or
option bonds granted during the term of this authorization under the
exclusion of the subscription right, must be credited against the
aforementioned ceiling of 10%. This authorization has not been
exercised to date.
Conditional capital
By way of a resolution of the Annual Shareholders' Meeting of
May 12, 2017, the Board of Executive Directors was authorized,
Capital, reserves and retained earnings
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
5 Overviews
Notes
21 Noncontrolling interests
Noncontrolling interests
Group company
WIGA Transport Beteiligungs-GmbH & Co. KG
W & G Transport Holding GmbHª,
Partner
4 Consolidated Financial Statements
Gazprom Germania GmbH, Berlin, Germany
BASF India Limited, Mumbai, India
BASF PETRONAS Chemicals Sdn. Bhd.,
Shah Alam, Malaysia
BASF TOTAL Petrochemicals LLC, Port Arthur, Texas
Shanghai BASF Polyurethane Company Ltd.,
Shanghai, China
BASF TODA Battery Materials, LLC, Tokyo, Japan
BASF Shanghai Coatings Co. Ltd., Shanghai, China
Other
Total
December 31, 2019
Equity interest
December 31, 2018
Equity interest
OPAL Gastransport GmbH & Co. KGa
Million €
3 Corporate Governance
To Our Shareholders
20 Other comprehensive income
Accounting policies
The expenses and income shown in other comprehensive income
are divided into two categories: Items that will be recognized in the
income statement in the future (known as "recycling") and items that
will not be reclassified to the income statement in the future. The first
category includes translation adjustments, the measurement of
certain securities classified as debt instruments, and changes in the
fair value of derivatives held to hedge future cash flows. Items in
other comprehensive income that will not be reclassified to the
income statement at a future date include effects from the
remeasurement of defined benefit plans.
Remeasurement of defined benefit plans
Changes in the value of plan assets reduced other comprehensive
income by €393 million in 2019, and by €745 million in the previous
year (after taxes).
BASF and LetterOne completed the merger of Wintershall and DEA
on April 30, 2019. In this connection, €140 million from the
remeasurement of defined benefit plans was reclassified from other
comprehensive income to retained earnings.
For more information on the remeasurement of defined benefit plans, see Note 22 from page 253
onward
Unrealized gains/losses from currency translation
2 Management's Report
Translation adjustments decreased by €1,264 million year on year.
Of that amount, €834 million after taxes related to reclassification of
realized gains/losses from divestiture to the income statement
(recycling associated with deconsolidation of Wintershall compa-
nies). The remaining change resulted primarily from the appreciation
of the Russian ruble and the U.S. dollar relative to the euro.
Net losses previously recognized in equity were reclassified to the
income statement (recycling) in the amount of €36 million due to
divestiture.
Hedging future cash flows at shareholdings accounted for using the
equity method led to unrealized losses of minus €12 million in 2019
and minus €11 million in 2018.
For more information on cash flow hedge accounting, see Note 27.4 from page 272 onward
Notes
BASF Report 2019
252
About This Report
1
Cash flow hedges
Other countries
2 Management's Report
Actuarial assumptions
experience adjustments
(7)
(139)
(recognized in the financial result)
Increase by
Decrease by
Effects from acquisitions and divestitures
(802)
(374)
0.5 percentage points
0.5 percentage points
Other changes
(11)
1
2019
2018
2019
131
155
Expenses for pension benefits
Sensitivity of the defined benefit obligation as of December 31
Million €
Benefits paid
(1,086)
(1,037)
Employee contributions
45
47
Net interest expense from underfunded pension plans and
similar obligations
Actuarial gains/losses
2018
157
Net interest income from overfunded pension plans
(2)
(2)
for adjustments relating to financial assumptions
adjustments relating to demographic assumptions
2,777
239
33
(163)
133
Discount rate
(2,214)
(1,880)
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Development of plan assets
Million €
1
Development of net defined benefit liability
Million €
Million €
2019
2018
2019
Pension
obligations
Plan assets
For subsidiaries in other countries, defined benefits are covered in
some cases by pension provisions, but mainly by external insurance
companies or pension funds.
Regional allocation of defined benefit plans as of December 31
730
About This Report
BASF Report 2019
2,544
2,140
Projected pension
increase
1,584
1,190
(1,328)
(1,080)
An alternative valuation of the defined benefit obligation was
performed to determine how changes in the underlying assumptions
influence the amount of the defined benefit obligation. A linear
extrapolation of these amounts based on alternative changes in the
assumptions as well as an addition of combined changes in the
individual assumptions is not possible.
256
The interest on the net defined benefit liability at the beginning of the
year is recognized in the financial result. This is the difference
between the interest cost of the defined benefit obligation and the
standardized return on plan assets as well as the interest cost for
the asset ceiling. The expected contribution payments and benefits
paid over the course of the fiscal year are taken into account when
determining net interest.
Currency effects
Defined benefit obligation as of December 31
As of December 31, 2019, the weighted average duration of the
defined benefit obligation amounted to 16.7 years (previous year:
15.4 years).
257
237
28,423
26,651
Net interest expense of the respective fiscal year is based on the
discount rate and the defined benefit obligation at the beginning of
the year.
554
2018
542
2019 2018 2019 2018
2019 2018 2019 2018
Discount rate
1.70 1.90 4.10 3.60
0.90 0.50
2.90 2.60
Projected pension
increase
1.50
1.50
3.10 3.10
issue volume of more than 100 million units of the respective
currency with a minimum rating of AA- to AA+ from at least one of
the following three rating agencies: Fitch, Moody's, or Standard &
Poor's.
The valuation of the defined benefit obligation is generally performed
using the most recent actuarial mortality tables as of December 31
of the respective business year, which in Germany and the United
States are derived from the BASF Group population and were last
updated in 2019 for the pension obligations in Germany and in 2018
for the pension obligations in the United States.
BASF Report 2019
255
About This Report
1
To Our Shareholders
United
Kingdom
Switzerland
United States
Germany
553
A Group-wide, uniform procedure is used to determine the discount
rates applied for valuation of material pension obligations of the
BASF Group. Accordingly, the discount rates were derived from the
Assumptions used to determine the defined benefit obligation as of
December 31
Germany
United States
Switzerland
United
Kingdom
2019 2018 2019 2018
2 Management's Report
2019 2018
Discount rate
Projected pension
increase
1.10 1.70 3.10 4.10 0.20 0.90
2.20
2.90
1.50 1.50
3.00
3.10
Assumptions used to determine expenses for pension benefits
in the respective business year
2019 2018
3 Corporate Governance
The valuation of the defined benefit obligation is based on the yields on corporate bonds in the respective currency zones with an
following key assumptions:
5 Overviews
Defined benefit obligation as of January 1
Current service cost
26,651
26,871
380
384
2019
2018
Past service cost
2018
(137)
222
416
Plan settlements
(219)
332
314
4 Consolidated Financial Statements
Interest cost
32
2019
The assumptions used to ascertain the defined benefit obligation as
of December 31 are used in the following year to determine the
expenses for pension plans.
(recognized in income from operations)
Notes
Development of defined benefit obligations
Million €
Sensitivity analysis
Actuarial mortality tables (significant countries) as of December 31, 2019
A change in the material actuarial assumptions would have the
following effects on the defined benefit obligation:
Germany
United States
RP-2018 (modified) with MP-2018 generational projection
Switzerland
Heubeck Richttafeln 2018G (modified)
Explanation of the amounts in the statement of income and
balance sheet
Composition of expenses for pension benefits
Million €
United Kingdom
S1PxA (standard actuarial mortality tables for
self-administered plans (SAPS))
Expenses for defined benefit plans
Expenses for defined contribution plans
Expenses for pension benefits
BVG 2015 generational
Bond 2018/2048
79
82
1.03%
10,000
JPY
1.025%
3.25%
199
3.27%
200
EUR
Bond 2013/2043
737
738
199
3.89%
USD
USD
BASF Finance Europe N.V.
261
266
4.45%
300
USD
U.S. private placement series C 2013/2034
4.43%
U.S. private placement series A 2013/2025
610
4.11%
700
U.S. private placement series B 2013/2028
4.09%
218
222
3.92%
250
622
1.73%
Bond 2018/2033
EUR
December 31, 2019
Effective interest rate
currency of issue)
Currency
Nominal value (million,
Carrying amounts based on
effective interest method
Million €
Financial indebtedness
Continued from previous page
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
0.0%
1 To Our Shareholders
About This Report
December 31, 2018
3%
Bond 2013/2033
EUR
Bond 2017/2037
1.625%
96
98
4.24%
160
AUD
4%
750
198
2.96%
200
EUR
Bond 2013/2033
2.875%
492
492
500
198
3.15%
Breakdown of financial indebtedness by currency
3.625%
2,157
Following year 3
888
935
1,078
Following year 2
6,160
4,558
December 31, 2018
5,509
3,362
Following year 1
12,358
11,283
Pound sterling
U.S. dollar
Euro
December 31, 2019
1,335
1,178
Norwegian krone
309
306
Japanese yen
261
this year
9,559
9,247
Following year 6 and maturities beyond
145
149
December 31, 2019 December 31, 2018
Hong Kong dollar
1,310
Following year 5
163
253
Chinese renminbi
2,105
1,223
Following year 4
1,155
Bond 2016/2020
Million €
Million €
174
177
3.69%
200
USD
997
999
0.14%
1,000
EUR
Financial indebtedness
Liabilities to credit institutions
Bonds and other liabilities to the capital market
Other bonds
Bond 2016/2026
0.75%
Bond 2018/2025
EUR
500
0.88%
496
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
262
Maturities of financial indebtedness
BASF Report 2019
18,377
2,397
3,240
18,444
15,137
588
608
495
20,841
Continued on next page
0.875%
Bond 2017/2032
250
GBP
Bond 2017/2022
2.5%
435
444
2.65%
500
USD
Bond 2013/2021
1.875%
1,008
1,004
1.47%
1,000
EUR
Bond 2013/2020
1.52%
variable
293
1.375%
250
GBP
703
726
0.83%
850
USD
1,254
1,253
1.93%
1,250
EUR
Bond 2017/2023
Bond 2012/2022
Bond 2018/2022
0.925%
2%
278
300
300
variable
Effective interest rate
currency of issue)
Currency
Nominal value (million,
Carrying amounts based on
effective interest method
Million €
Financial indebtedness
Liabilities
24
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
138
December 31, 2019
December 31, 2018
BASF SE
USD
300
EUR
Bond 2017/2019
variable
1,252
variable
1,250
EUR
1.06%
Bond 2014/2019
750
1.44%
750
EUR
Commercial paper
2,549
861
968
1.375%
292
277
Bond 2016/2023
198
198
1.58%
200
EUR
Bond 2018/2030
1.5%
494
494
1.625%
500
EUR
Bond 2019/2029
0.875%
247
1.01%
250
1.5%
Bond 2016/2031
EUR
500
1.450%
296
296
1.57%
300
EUR
Bond 2016/2031
2.37%
EUR
145
2.37%
1,300
HKD
Bond 2016/2031
0.875%
492
493
1.01%
149
BASF Report 2019
Bond 2017/2029
161
0.97%
750
EUR
Bond 2017/2025
1.750%
333
350
1.87%
300
GBP
Bond 2014/2024
2.5%
498
498
2.60%
500
EUR
746
745
0.875%
Bond 2018/2025
162
2.69%
1,600
NOK
Bond 2017/2027
0.875%
986
987
2.670%
1.04%
EUR
Bond 2013/2025
3.675%
146
147
3.70%
1,450
NOK
1,000
139
Million €
18,377
December 31, 2019
taxes by €6 million as of December 31, 2019. An increase in all
relevant interest rates by one percentage point would have lowered
income before income taxes by €43 million as of December 31, 2018.
If the relevant interest rates had changed by one half of a percentage
point, the before-tax effect from items designated under hedge
accounting would have been an immaterial increase in shareholders'
equity as of December 31, 2019 (increase of €1 million applying a
1% change in interest rates). An increase of one percentage point in
relevant interest rates in 2018 would have increased shareholders'
equity by €5 million.
December 31, 2018
Sensitivity
Exposure and sensitivity by currency
Million €
currency as of December 31, 2019 (2018: increase of €33 million
applying a 10% increase to the functional currency). This only refers
to transactions in U.S. dollars. The foreign currency risk exposure
amounted to €3,014 million as of December 31, 2019, and
€3,185 million as of December 31, 2018.
The sensitivity analysis as of December 31, 2019, was conducted
by simulating a 5% and 10% appreciation of the respective functional
currency against the other currencies. A 5% appreciation of the
respective functional currency would have reduced BASF's income
before income taxes by €187 million as of December 31, 2019. A
10% appreciation of the respective functional currency would have
resulted in an effect on BASF's income in the amount of minus
€356 million. The sensitivity analysis as of December 31, 2018, was
conducted using a 10% appreciation of the respective functional
currency. It resulted in an effect of minus €373 million as of Decem-
ber 31, 2018. The effect from the items designated under hedge
accounting would have increased shareholders' equity before
income taxes by €19 million applying a 5% increase to the functional
currency and by €40 million applying a 10% increase to the functional
The foreign currency risk exposure corresponds to the net amount
of the nominal volume of the primary and the derivative financial
instruments that are exposed to currency risks. In addition, planned
purchase and sales transactions of the respective following year are
included if they fall under the currency risk management system.
Long and short positions in the same currency are offset against
each other.
Foreign currency risks: Changes in exchange rates could lead to
losses in the value of financial instruments and adverse changes in
future cash flows from planned transactions. Foreign currency risks
from financial instruments result from the translation at the closing
rate of financial receivables, loans, securities, cash and financial
liabilities into the functional currency of the respective Group
company. Foreign currency contracts in various currencies are used
to hedge foreign exchange risks from nonderivative financial
instruments and planned transactions.
Market risks
27.2 Financial risks
Exposure
Notes
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
268
BASF Report 2019
When fair value hedge accounting is used, the asset or liability
recognized is hedged against the risk of a change in fair value. The
hedging instruments used, which often take the form of a derivative,
are measured at fair value and changes in fair value are recognized
in the statement of income. The carrying amounts of the assets or
liabilities designated as the underlying transaction are also measured
at fair value through the statement of income.
In cash flow hedges, future cash flows and the related income and
expenses are hedged against the risk of changes in fair value. To this
end, future underlying transactions and the corresponding hedging
instruments are designated to a cash flow hedge accounting
relationship for accounting purposes. The effective portion of the
change in fair value of the hedging instrument, which often meets
the definition of a derivative, and the cost of hedging are recognized
directly in equity under other comprehensive income over the term
of the hedge, taking deferred taxes into account. The ineffective
portion is recognized immediately in the income statement. In the
case of future transactions that lead to recognition of a nonfinancial
asset or a nonfinancial liability, the cumulative fair value changes of
the hedge in equity are generally charged against the cost of the
hedged item on its initial recognition. For hedges based on financial
assets, financial liabilities or future transactions, cumulative fair value
changes of the hedges are transferred from equity to the income
statement in the reporting period in which the hedged item is
recognized in the income statement. The maturity of the hedging
instrument is aligned with the effective date of the future transaction.
Financial guarantees of the BASF Group are contracts that require
compensation payments to be made to the guarantee holder if a
debtor fails to make payment when due under the terms of a
transaction entered into with the holder of the guarantee. Financial
guarantees issued by BASF are measured at fair value upon initial
recognition. In subsequent periods, these financial guarantees are
carried at the higher of amortized cost or the best estimate of the
present obligation as of the reporting date.
5 Overviews
Financial liabilities at fair value through profit or loss contain
derivative financial liabilities. These are likewise measured at the
value of the consideration received as the fair value of the liability
on the date of initial recognition. Fair value is also applied as a
measurement basis for these liabilities in subsequent measure-
ment. The option to subsequently measure financial liabilities at
fair value is not exercised. Derivative financial instruments can be
embedded within other contracts, creating a hybrid financial
instrument. If IFRS requires separation, the embedded derivative
is accounted for separately from its host contract and measured
at fair value. If IFRS 9 does not provide for separation, the hybrid
instrument is accounted for at fair value in its entirety.
Sensitivity
+5%
Due to the use of options to hedge currency risks, the sensitivity
analysis is not a linear function of the assumed changes in exchange
rates.
(340)
3,185
(315)
(167)
3,014
Total
(104)
1,066
(106)
Exposure
(56)
Other
Million €
(236)
2,119
(209)
(111)
1,977
USD
+10%
+10%
1,037
Interest rate risks: Interest rate risks arise from changes in prevail-
ing market interest rates, which can lead to changes in the fair value
of fixed-rate instruments and in interest payments for variable-rate
instruments. Interest rate swaps and combined interest rate and
currency derivatives are used to hedge these risks. The derivatives
are presented in Note 27.5. Interest rate risks are relevant to BASF's
financing activities but are not of material significance for BASF's
operating activities.
Financial liabilities measured at amortized cost generally
include all financial liabilities, provided these do not represent
derivatives. They are generally measured at fair value at the time
of initial recognition, which usually corresponds to the value of the
consideration received. Subsequent measurement is recognized
in profit or loss at amortized cost using the effective interest
method. At BASF, for example, bonds and liabilities to banks
reported under financial indebtedness are measured at amortized
cost.
-
266
BASF Report 2019
Financial assets measured at amortized cost include all assets
with contractual terms that give rise to cash flows on specific
dates, provided that these cash flows are solely payments of
principal and interest on the principal amount outstanding in
accordance with the cash flow condition in IFRS 9, to the extent
that the asset is held with the intention of collecting the expected
contractual cash flows over its term. At BASF, this measurement
Financial assets at fair value through profit or loss include all
financial assets whose cash flows are not solely payments of
principal and interest in accordance with the cash flow condition
established in IFRS 9. At BASF, derivatives, for example, are
allocated to this measurement category. In general, BASF does
not exercise the fair value option in IFRS 9, which permits the
allocation of financial instruments not to be measured at fair value
through profit or loss on the basis of the cash flow condition or the
business model criterion to the above category under certain
circumstances.
_
-
The classification and measurement of financial assets is based on
the one hand on the cash flow condition (the "solely payments of
principle and interest" criterion), that is, the contractual cash flow
characteristics of an individual financial asset. On the other hand, it
also depends on the business model used for managing financial
asset portfolios. Based on these two criteria, BASF uses the
following measurement categories for financial assets:
Except for financial assets measured at fair value through profit or
loss, IFRS 9 requires the recognition of impairments for expected
credit losses, independent of the existence of any actual default
events and individual impairments if evidence of a permanent need
for impairment exists. If this evidence no longer exists, the impair-
ment is reversed in the statement of income up to the carrying
amount of the asset had the default event not occurred. Impairments
are generally recognized in separate accounts.
availability of observable market parameters for identical or similar
items changes.
The fair value of a financial instrument is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
If pricing on an active market is available, for example in the form of
exchange prices, these are used as the basis for the measurement.
Otherwise, the measurement is based on either internal measure-
ment models using current market parameters or external measure-
ments, for example, from banks. These internal measurements
predominantly use the net present value method and option pricing
models. These models incorporate, for example, expected future
cash flows as well as discount factors adjusted for term and,
potentially, risk. Depending on the availability of market parameters,
BASF assigns financial instruments' market values one of the three
levels of the fair value hierarchy pursuant to IFRS 13. Reassignment
to a different level during a fiscal year is only carried out if the
About This Report
Financial assets and financial liabilities are recognized in the
consolidated balance sheet when the BASF Group becomes a
party to a financial instrument. Financial assets are derecognized
when BASF no longer has a contractual right to the cash flows from
the financial asset or when the financial asset is transferred together
with all material risks and rewards of ownership and BASF does not
have control of the financial asset after it has been transferred. For
example, receivables are derecognized when they are definitively
found to be uncollectible. Financial liabilities are derecognized when
the contractual obligations expire, are discharged or cancelled.
Regular-way purchases and sales of financial instruments are
accounted for using the settlement date; in precious metals trading,
the trade date is used.
27.1 Accounting policies
27 Supplementary information on financial
instruments
Furthermore, BASF SE and its affiliated companies are defendants
in or parties to a variety of judicial, arbitrational or regulatory
proceedings on a recurring basis. To our current knowledge, none of
these proceedings will have a material effect on the economic
situation of BASF.
the Second Consolidated Amended Class Action Complaint was
ultimately dismissed as of November 18, 2019.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
Financial instruments
-
1 To Our Shareholders
3 Corporate Governance
The following measurement categories are used for financial
liabilities:
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
267
BASF Report 2019
2 Management's Report
Impairments on financial assets measured at fair value through
other comprehensive income are calculated in the same way as
impairments on financial assets measured at amortized cost and
recognized in profit or loss.
Financial assets at fair value through other comprehensive
income include all assets with contractual terms that give rise to
cash flows on specified dates that are solely payments of principal
and interest on the principal amount outstanding, in accordance
with the cash flow condition in IFRS 9. Furthermore, the assets in
this measurement category may not just be held with the intention
of collecting the expected contractual cash flows over their term,
but also generating cash flows from their sale. At BASF, certain
securities that are classified as debt instruments are allocated
to this category. BASF does not exercise the option to subse-
quently measure equity instruments through other comprehensive
income.
A decrease in impairment due, for example, to a reduction in the
credit risk of a counterparty or an objective event occurring after
the impairment is recorded in profit or loss. Reversals of impair-
ments may not exceed amortized cost, less any expected future
credit losses.
Regional and, in certain circumstances, industry-specific factors
and expectations are taken into account when assessing the
extent of impairment as part of the calculation of expected credit
losses and individual impairments. In addition, BASF uses internal
and external ratings and the assessments of debt collection
agencies and credit insurers, when available. Individual impair-
ments are also based on experience relating to customer solvency
and customer-specific risks. Factors such as credit insurance,
which covers a portion of receivables measured at amortized
cost, are likewise considered when calculating impairments. Bank
guarantees and letters of credit are used to an immaterial extent.
Expected credit losses and individual impairments are only
calculated for those receivables that are not covered by insurance
or other collateral. Impairments on receivables whose insurance
includes a deductible are not recognized in excess of the amount
of the deductible.
At BASF, the credit risk of a financial asset is assessed using both
internal information and external rating information on the respec-
tive counterparty. A significant increase in the counterparty's
credit risk is assumed if its rating is lowered by a certain number
of notches. The significance of the increase in the credit risk is not
reviewed for trade accounts receivable or lease receivables.
Furthermore, it is generally assumed that the credit risk for a
counterparty with a high credit rating will not have increased
significantly.
The extent of expected credit losses is determined based on the
credit risk of a financial asset, as well as any changes to this
credit risk: If the credit risk of a financial asset has increased
significantly since initial recognition, expected credit losses are
generally recognized over the lifetime of the asset. If, however, the
credit risk has not increased significantly in this period, impair-
ments are generally only recognized as 12-month expected
credit losses. By contrast, under the simplified approach for
determining expected credit losses permitted by IFRS 9, impair-
ments for receivables such as lease receivables and trade
accounts receivable always cover the lifetime expected credit
losses of the receivable concerned.
Initial measurement of these assets is generally at fair value, which
usually corresponds to the transaction price at the time of
acquisition. Subsequent measurement effects are recognized in
income using the effective interest method.
Impairments are recognized for expected credit losses in both
initial and subsequent measurement, even before the occurrence
of any default event. If the counterparty is considered as having
defaulted, individual impairments are generally recognized for the
financial assets measured at amortized cost. In addition, an
impairment must be recognized when the contractual conditions
that form the basis for the receivable are changed through rene-
gotiation in such a way that the present value of the future cash
flows decreases.
category includes trade accounts receivable, as well as receiv-
ables reported under other receivables and miscellaneous assets
and certain securities.
Notes
5 Overviews
4 Consolidated Financial Statements
Assets measured at fair value through other comprehensive
income are initially measured at fair value, which usually
corresponds to the nominal value of the securities allocated to this
category at the time of acquisition. Subsequent measurement is
likewise at fair value. Changes in the fair value are recognized in
other comprehensive income and reclassified to the statement of
income when the asset is disposed of.
About This Report
The variable interest risk exposure, which also includes fixed rate
bonds maturing in the following year, amounted to minus €1,414 mil-
lion as of December 31, 2019 (2018: minus €4,802 million). An
increase in all relevant interest rates by one half of a percentage
point would have lowered income before income taxes by €3 million
as of December 31, 2019. An increase in all relevant interest rates
by one percentage point would have lowered income before income
December 31, 2019
8
(12)
3
87
By holding commodity derivatives and precious metal trading
positions, BASF is exposed to price risks. The valuation of com-
modity derivatives and precious metal trading positions at fair value
means that adverse changes in market prices could negatively affect
the earnings and equity of BASF.
In addition, BASF holds limited unhedged precious metal and oil
product positions, which can also include derivatives, for trading on
its own account. The value of these positions is exposed to market
price volatility and is subject to constant monitoring.
- In the Agricultural Solutions division, the sales prices of products
are sometimes pegged to the price of certain agricultural
commodities. To hedge the resulting risks, derivatives on agricul- products and
tural commodities are concluded.
Crude oil, oil
Value at risk
Exposure
natural gas
Value at risk
December 31, 2019
Exposure
Exposure to commodity derivatives
Million €
BASF uses value at risk in conjunction with other risk management
tools. Besides value at risk, BASF sets volume-based limits as well
as exposure and stop-loss limits.
BASF performs value-at-risk analyses for all commodity derivatives
and precious metals trading positions. Using the value-at-risk
analysis enables continual quantification of market risk and fore-
casting of the maximum possible loss within a given confidence
interval over a defined period. The value-at-risk calculation is based
on a confidence interval of 95% and a holding period of one day.
The value-at-risk calculation for precious metals is based on a
confidence interval of 99%. BASF uses the variance-covariance
approach.
The Catalysts division enters into both short-term and long-term
purchase contracts with precious metal producers. It also buys
precious metals on spot markets from various business partners.
The price risk from precious metals purchased to be sold on to
third parties, or for use in the production of catalysts, is hedged
using derivative instruments. This is mainly performed using
forward contracts, which are settled by either entering into offset-
ting contracts or by delivering the precious metal.
BASF uses commodity derivatives to hedge risks from the vola-
tility of raw materials prices. These are primarily options on crude
oil, oil products and natural gas.
-
Commodity price risks: Some of BASF's divisions are exposed to
strong fluctuations in raw materials prices. These result primarily
from raw materials (for example naphtha, benzene, natural gas, LPG
condensate) as well as from precious metals. BASF takes the
following measures to reduce price risks associated with the
purchase of raw materials:
Notes
5 Overviews
December 31, 2018
4 Consolidated Financial Statements
Precious metals
2
Total
270
BASF Report 2019
BASF promptly recognizes any risks from cash flow fluctuations as
part of liquidity planning. BASF has ready access to ample liquid
funds from the ongoing commercial paper program and confirmed
lines of credit from banks.
Liquidity risks
For more information on credit risks, see Note 18 from page 249 onward
Default and credit risks arise when customers and debtors do not
fulfill their contractual obligations. BASF regularly analyzes the
creditworthiness of the counterparties and grants credit limits on the
basis of this analysis. Due to the global activities and diversified
customer structure of the BASF Group, there is no significant
concentration of default risk. The carrying amount of all receivables,
loans and interest-bearing securities plus the nominal value of
financial obligations stemming from contingent liabilities not to be
recognized represents the maximum default risk for BASF.
Default and credit risk
For more information on BASF's financial risks and risk management, see Opportunities and Risks
from page 139 onward
The exposure corresponds to the net amount of all long and short
positions of the respective commodity category.
112
10
5
362
1
50
0
163
Total
Agricultural
commodities
1
112
150
Carrying amount of nonderivative interest-bearing financial instruments
3 Corporate Governance
1 To Our Shareholders
of which payer swaps
Combined interest rate and
currency swaps
Interest rate swaps
Million €
Nominal and fair values of interest rate swaps and combined interest
rate and currency swaps
5,244
15,597
2,529
15,848
Financial
indebtedness
372
of which fixed rate
90
89
Securities
179
Variable
interest rate
Fixed
interest rate
Variable
interest rate
255
156
Loans
Fixed
interest rate
December 31, 2018
490
2 Management's Report
December 31, 2019 December 31, 2018
Nominal
Fair
About This Report
269
BASF Report 2019
(103)
4,183
60
4,183
(103)
60 4,183
4,183
Fair Nominal
(7)
(4)
300
(7)
300
(4)
300
value
value
value
value
300
265
311
BASF Report 2019
6
5
Accounts payable, trade
308
230
493
188
Loan and interest liabilities
Liabilities from leases
Derivatives with negative fair values
1,039
18
Liabilities to credit institutions
Current
Noncurrent
Current
Noncurrent
December 31, 2019 December 31, 2018
December 31, 2018
December 31, 2019
Million €
Secured liabilities
15
Million €
381
43
437
2,343
1,316
Other liabilities that qualify as financial instruments
565
41
398
39
Miscellaneous liabilities
903
91
537
190
136
Secured liabilities
387
75
534
50
166
116
Other liabilities
Advances received on orders
2,206
Other liabilities
5 Overviews
South African rand
48
69
Indian rupee
44
75
Argentinian peso
89
83
Ukrainian hryvnia
65
54
Brazilian real
Other bonds
99
98
Australian dollar
127
123
Turkish lira
Between November 2014 and March 2015, a putative class action
lawsuit and several additional lawsuits were filed in the United States
District Court of the Southern District of New York against BASF
Metals Limited (BML), based in the United Kingdom, along with
other defendants, alleging violations of antitrust and commodities
laws stemming from the price discovery process for platinum and
palladium. The lawsuits were consolidated, and a Second Con-
solidated Amended Class Action Complaint naming, among others,
BASF Corporation, was eventually filed in July 2015 and dismissed
on jurisdictional grounds on March 28, 2017. On May 15, 2017, the
plaintiffs filed an amended Complaint that renews allegations against
defendants and BML, while BASF Corporation is not named as a
defendant. The defendants filed a renewed Joint Motion to Dismiss
and BML filed a renewed Motion to Dismiss. In 2018 and 2019, no
further developments in this proceeding occurred. A pro se
complaint filed in September 2015 that was not consolidated into
20,841
88
Notes
74
53
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
263
BASF SE had committed and unused credit lines with variable
interest rates amounting to €6,000 million both as of Decem-
ber 31, 2019 and as of December 31, 2018. In addition, BASF SE
had an unused credit line of €380 million (2018: €400 million) for
the financing of specific research and development activities as of
December 31, 2019.
Unused credit lines
BASF Report 2019
Liabilities to credit institutions rose from €2,397 million as of Decem-
ber 31, 2018 to €3,240 million as of December 31, 2019. The
weighted average interest rate on loans amounted to 3.8% in 2019
compared with 5.6% in 2018.
Kazakhstani tenge
Liabilities to credit institutions
20,841
18,377
Total
62
52
Other currencies
43
46
Indonesian rupiah
42
Other bonds consist primarily of industrial revenue and pollution
control bonds issued by the BASF Corporation group that were
used to finance investments in the United States. Both the weighted
average interest rate of these bonds and their weighted effective
interest rate amounted to 2.9% in 2019 and 3.0% in 2018. The
average weighted residual term amounted to 158 months as of
December 31, 2019 (December 31, 2018: 168 months).
Liabilities related to social security
4 Consolidated Financial Statements
84
1
1
Collateral granted on behalf of third-party liabilities
2021
50
65
Warranties
2020
75
447
Initiated investment projects
Guarantees
6
Bills of exchange
2018
Obligations arising from purchase contracts
December 31, December 31,
2019
Obligations arising from purchase contracts resulted primarily from
long-term purchase obligations for raw materials. Firm purchase
obligations as of December 31, 2019, were as follows:
Obligations arising from purchase contracts
Million €
Other financial obligations
The figures listed below are stated at nominal value:
7
Other financial obligations
4,331
2023
Of the initiated investment projects and guarantees, companies
allocated to the disposal groups accounted for €130 million as of
December 31, 2019, and €3,649 million as of December 31, 2018.
The decline in initiated investment projects is mainly attributable
to the disposal of the oil and gas business in 2019.
63
Since the formation of the Wintershall Dea joint venture, BASF SE
has continued to provide a guarantee to Abu Dhabi National Oil
Corporation covering all obligations of Wintershall Dea Middle
East GmbH related to the Ghasha concession in the United Arab
Emirates. The guarantee does not stipulate a maximum amount.
The risk of a claim being exercised against the guarantee is currently
classified as low.
BASF Corporation has potential liability under the Comprehensive
Response, Compensation and Liability Act of 1980, as amended,
and related state laws for investigation and cleanup at certain sites.
The Lower Passaic River Study Area (LPRSA) is one such site
comprising the lower 17 miles of the Passaic River in New Jersey.
BASF Corporation and more than 60 other companies (collectively,
the Lower Passaic River Study Area Cooperating Parties Group or
CPG) agreed to complete a remedial investigation / feasibility study
(RI/FS) of the LPRSA. In 2016, the United States Environmental
Protection Agency (USEPA) selected a final remedy for the lower
eight miles of the LPRSA. In late 2018, USEPA indicated being
amenable to the CPG's approach for remediation work in the upper
portion of the LPRSA. Completion of the RI/FS occurred in August
2019 and a formal decision from USEPA on a targeted approach for
the upper portion of the LPRSA is expected for 2020. BASF Corpo-
ration established a provision covering BASF's currently estimated
share of the remediation costs.
26 Risks from litigation and claims
68
80
26,462
Total
7,094
Payment and loan commitments and other financial
obligations
2025 and maturities beyond this year
19
25
for the purchase of intangible assets
1,318
2024
1,249
1,093
of which purchase commitments
8,280
5,148
4,062
2,681
4,973
25
2022
5 Overviews
35
23
33
13
Other liabilities that do not qualify as financial instruments
Other liabilities
Miscellaneous liabilities
Deferred income
31
53
259
34
462
Contract liabilities
Liabilities from precious metal trading positions
262
28
244
25
Employee liabilities
Notes
Liabilities to credit institutions were secured primarily with
registered land charges. Other liabilities include collateral for
derivative instruments with negative fair values. As in the previous
year, there were no secured contingent liabilities in 2019.
85
58
2
208
155
4
To Our Shareholders
1
About This Report
264
BASF Report 2019
For more information on liabilities arising from leases, see Note 28 from page 279 onward
3 Corporate Governance
For more information on financial risks and derivative instruments, see Note 27 from page 266
onward
2 Management's Report
The increase in liabilities from leases was mainly attributable to
the initial application of IFRS 16. Liabilities from precious metal
trading positions rose due to higher market prices for precious
metals. Contract liabilities include mainly customer payments enti-
tling them to access to licenses over an agreed period of time. The
majority of existing contracts have terms of up to seven years. Of the
contract liabilities reported as of December 31, 2019, €53 million are
expected to be recognized as revenue in 2020.
2,998
705
3,427
1,678
792
268
1,084
362
345
Other liabilities
4 Consolidated Financial Statements
10
Other
ness amount statement item
Income
a In general, only significant shareholdings are measured at fair value. All insignificant shareholdings are measured at cost (carrying amount: €419 million). Fair value level is applied to publicly listed shareholdings. Level 2 is
applied to shareholdings for which valuation is based on parameters observable in the market to the greatest extent possible. These may be adjusted to reflect valuation-relevant characteristics of the respective shareholding in
the fair value.
Hedged
transaction
b AC: amortized cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in Note 27.1 from page 266 onward.
c Fair value was determined based on quoted, unadjusted prices on active markets.
16,883
6
Ineffective-
7
Interest
operating
10
10
10
(1)
n/a
income
Other liabilities
Interest risks
4
300
29,062
0
1,971
Accounts payable, trade
1,971
28,606
134
134
(1)
Liabilities from finance leases
n/a
134
5,122
5,122
AC
5,122
Derivatives no hedge accounting
531
531
FVTPL
531
Derivatives hedge accounting
7
7
n/a
7
525
7
Other liabilities*
Total liabilities
3,031
29,666
AC
4
Foreign currency risks
4
(26)
68
(17)
BASF Report 2019
154
165
277
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Hedge accounting effects in 2018
Million €
Interest risks
Carrying amount of hedging instruments
Accumulated
amounts for
continuing
Cash flow hedge reserve
Hedging effects
recognized
income
2,397
in other
comprehensive
2,076
4
162
Total
n/a
income
Combined interest/
138
foreign currency risks
Other receivables and
miscellaneous assets
Other financial
920
(37)
58
(21)
138
4
149
income
Commodity price risks
6
0
Other receivables and
miscellaneous assets /
other liabilities
123
2
4
n/a
2
n/a
2
n/a
AC
Million €
2,397
22
12
Receivables from finance leases
25
25
n/a
25
Accounts receivable, trade
10,665
10,665
AC
10,665
Accounts receivable, trade.
FVTPL
Derivatives no hedge accounting
Derivatives hedge accounting
252
252
FVTPL
252
251
93
93
n/a
93
92
34
Other receivables and miscellaneous assets
FVTPL
453
d Fair value was determined based on parameters for which directly or indirectly quoted prices on active markets were available.
Amounts
reclassified to
profit or loss for
realized hedging
e Fair value was determined based on parameters for which there was no observable market data.
f Does not include separately shown derivatives or receivables and liabilities from finance leases. If miscellaneous receivables are valued at fair value through profit or loss, their valuation is generally based on parameters
observable on the market. These are adjusted to reflect valuation-relevant characteristics of the respective assets in the fair value.
BASF Report 2019
272
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Carrying amounts and fair values of financial instruments as of December 31, 2018
Total carrying
amount within
scope of
Carrying
amount
application of
IFRS 7
Valuation
category in
accordance
with IFRS 9b
Fair value
Of which
fair value
level 1°
Of which
fair value
level 2d
Of which
fair value
level 3°
Shareholdingsa
453
3,570
1,083
AC
63
Cash and cash equivalents
2,237
2,237
AC
2,237
2,237
Total assets
17,905
15,418
14,999
2,773
440
Bonds
15,895
15,895
AC
16,351
16,351
Commercial paper
2,549
2,549
AC
2,549
Liabilities to credit institutions
63
FVTPL
63
63
1,083
Other receivables and miscellaneous assets
85
85
55
FVTPL
85
85
Securities
13
13
AC
2,397
13
4
4
FVTOCI
4
4
Securities
445
445
FVTPL
445
445
Cash equivalents
Securities
transactions
20,780
item for
recognition
Following year 1
381
30
411
187
Following year 2
269
27
296
Right-of-use machinery and
190
38
228
technical equipment
+/- Other adjustments that increase/decrease lease liabilities
137
Following year 3
180
21
201
Right-of-use miscellaneous
274
59
333
equipment and fixtures.
+ Adjustments due to the lease extension option under IFRS 16
(not yet included in operating lease commitments as of
December 31, 2018)
Gross lease liabilities as of January 1, 2019
excluding finance leases
780
80
Operating lease commitments as December 31, 2018ª
1,338
Million €
Dec. 31,
2018
Addition
Reclassifi-
cation
Jan. 1,
2019
- Practical expedients for short-term leases
(78)
December 31, 2019
- Practical expedients for leases for low-value assets
(5)
Total assets
- Payments for service components of operating lease commitments
(124)
Lease
liabilities
Future
Interest portion
lease payments
Right-of-use land
154
228
382
Right-of-use buildings
700
80
Following year 4
118
18
22,098
Total present value of lease liabilities as of
January 1, 2019
Total equity and liabilities
a Adjusted for the discontinued oil and gas business
Equity
36,109
36,109
Lease liabilities
134
1,287
1,421
Total
36,243
1,287
37,530
Lease liabilities as of December 31, 2018, included liabilities from
finance leases in accordance with IAS 17, which did not change as
of January 1, 2019. Assets previously capitalized through finance
leases were reclassified to the new balance sheet items for right-of-
use assets.
Based on the operating lease commitments as of Decem-
ber 31, 2018, the reconciliation to the opening balance for lease
liabilities as of January 1, 2019, was as follows:
The weighted average incremental borrowing rate used to discount
gross lease liabilities was 3.0% as of January 1, 2019.
Other effects on the depreciation expense, the interest result, the
statement of cash flows and other indicators such as earnings per
share are explained in the relevant notes, provided the effects are
material.
BASF presents the interest component of lease payments in cash
flows from operating activities and the repayment portion in cash
flows from financing activities. Lease payments under short-term
agreements, agreements with low-value assets or variable payments
are presented in cash flows from operating activities.
Future lease payments as of December 31, 2019 included payments
for individual lease contracts from the discontinued construction
chemicals business for which associated lease liabilities were trans-
ferred to liabilities of the disposal groups in the amount of €3 million.
134
1,421
BASF Report 2019
280
1,318
b AC: amortized cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in Note 27.1 from page 266 onward.
c Fair value was determined based on quoted, unadjusted prices on active markets.
Total
Present value of liabilities from finance leases as of
December 31, 2018
136
1,455
Following year 5
84
14
98
Right-of-use advanced
- Discounting
(168)
More than 5 years
390
122
IFRS 16
512
|
in progress
Present value of lease liabilities as of January 1, 2019
excluding finance leases
1,287
Total
1,422
232
1,654
Other property, plant and
equipment
20,780
(405)
20,375
payments and construction
Income
statement
Lease liabilities
Million €
(3)
0
4
7
7
n/a
income
Other receivables and
miscellaneous assets
920
(64)
42
(49)
Other financial
income
80
96
n/a
Other receivables and
miscellaneous assets/
other liabilities
88
1
5
n/a
1
1
n/a
92
300
7
Other liabilities
Interest
of reclassi-
Change in fair values for assessing
ineffectiveness
Recognized ineffectiveness
Financial
assets
Financial
liabilities
Nominal
Balance sheet item
value
hedging
relationships
11
Other receivables and
miscellaneous assets
743
5
fication
Hedging
instrument
Hedged
transaction
Ineffective-
ness amount
Income
statement item
Other
8
(31)
operating
income
5
5
n/a
7
2,051
(61)
55
- Lease liabilities are measured at the present value of the remaining
lease payments, taking into account the incremental borrowing
rate.
· As a general rule, BASF separates non-lease components, such
as services, from lease payments.
- A right-of-use asset is generally recognized at the same amount
as the lease liability. Differences may arise from the lease pay-
ments made prior to the provision of the leased asset, less any
lease incentives received.
-
· After capitalization at commencement date, whereby the right-of-
use asset is measured at cost, the right-of-use asset is generally
depreciated over the lease term using the straight-line method.
· A number of leases, particularly for real estate and barges, include
extension and termination options. Extension and termination
options are taken into account on recognition of the lease liability
only if BASF is reasonably certain that these options will be exer-
cised in the future. When contract terms are being determined,
consideration is given to all facts and circumstances that offer an
economic incentive for exercising extension options or not exer-
cising termination options. Changes in lease terms arising from
the exercise of an extension option or non-exercise of a termina-
tion option are only considered when determining lease terms if
sufficient certainty exists. Estimates and expectations which are
asserted at the commencement date of the lease liability and the
right-of-use asset and pertain to future payments not yet deter-
mined on the date of provision are assessed continuously during
-
the lease term. If subsequently improved or changed knowledge
influences the expected payment profile over time, the lease lia-
bility is remeasured.
If an existing lease contract is modified, the lease liability and
right-of-use asset must be remeasured, provided the modification
changes the payment profile (pursuant to the interest and princi-
pal plan) or the scope (either quantitatively or time-related) of use
of the asset.
The first-time adoption of IFRS 16 at BASF as of January 1, 2019,
follows the modified retrospective method, meaning that prior-
period information was not restated; this continued to be presented
in accordance with IAS 17.
First-time adoption did not have any effect on equity. Lease agree-
ments that were already in place as of December 31, 2018, were not
re-assessed. Existing finance leases were not affected.
The application of IFRS 16 increased total assets by around
€1.3 billion as of January 1, 2019, due to the addition of right-of-
use assets and lease liabilities.
BASF Report 2019
279
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Adjusted opening balances as of January 1, 2019
Reconciliation of lease liabilities
BASF as lessee
Million €
- BASF exercises the exemption for lease agreements with a maxi-
mum term of 12 months from the date of provision and low-value
assets. Low-value assets are generally defined as leased assets
worth a maximum of €5,000.
With the adoption of IFRS 16, the lessee is no longer required to
differentiate between operating and finance leases. As lessee, BASF
now accounts for nearly all leases, recognizing right-of-use assets
for leased assets and liabilities for lease agreements. The following
principles are considered:
Lease accounting since January 1, 2019
Assets subject to operating leases were not capitalized. Lease
payments were recognized in the income statement in the period
they were incurred.
(76)
93
109
Combined interest/
80
foreign currency risks
Commodity price risks
1
Total
The occurrence of all forecasted transactions was considered to be
highly probably at all times during fiscal years 2018 and 2019.
Amounts accumulated in the cash flow hedge reserve for com-
modity price risks are derecognized against the carrying amount
of acquired assets once the hedged transaction occurs. Thus, an
immediate reclassification of the amounts recognized in the cash
flow hedge reserve to profit or loss does not occur in these cases.
BASF Report 2019
278
Adjustments due to
About This Report
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
28
Leases
Leases in which BASF is a lessee mainly relate to real estate and
transportation and technical equipment.
Leases can be embedded within other contracts. If separation is
required under IFRS, the embedded lease is recorded separately
from its host contract and each component of the contract is carried
and measured in accordance with the applicable regulations.
Lease accounting until December 31, 2018
Lease contracts were classified as either operating or finance leases
until December 31, 2018.
A lease is classified as a finance lease if it transfers all substantial
risks and rewards related to the leased asset. Assets subject to a
finance lease were capitalized at the lower of the fair value of the
leased assets or the present value of the minimum lease payments.
A lease liability was recorded in the same amount. The periodic
lease payments were divided into principal and interest components.
The principal component reduced the lease liability and did not have
an effect on earnings. The interest component was reported as an
interest expense and increased the lease liability through the
unwinding of the discount. Depreciation was recognized over the
shorter of the useful life of the asset or the period of the lease.
1 To Our Shareholders
a In general, only significant shareholdings are measured at fair value. All insignificant shareholdings are measured at cost (carrying amount: €467 million). Fair value level is applied to publicly listed shareholdings. Level 2 is
applied to shareholdings for which valuation is based on parameters observable in the market to the greatest extent possible. These may be adjusted to reflect valuation-relevant characteristics of the respective shareholding in
the fair value.
A lease is an agreement that conveys the right to control the use an
identified asset for a defined period of time in return for a payment.
33
2024 and thereafter
9,922
979
111
2223
30
1,482
2,400
1,470
11,045
Total
20,990
2,394
5,122
399
830
29,735
BASF Report 2019
271
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
65
Notes
175
2023
from derivative
financial
instruments
Miscellaneous
liabilities
Total
2019
4,860
902
5,122
138
669
11,691
2020
1,557
18
22
50
1,647
2021
1,249
181
22
2022
2,195
139
41
1,207
27.4 Classes and categories of financial instruments
For trade accounts receivable, other receivables and miscellaneous
assets, cash and cash equivalents, as well as trade accounts
payable and other liabilities, the carrying amount approximates the
fair value.
The fair value of financial indebtedness is determined on the basis of
interbank interest rates. The difference between carrying amounts
and fair values results primarily from changes in market interest
rates.
437
437
FVTPL
437
436
162
162
n/a
162
162
Other receivables and miscellaneous assets
4,192
1,186
AC
1,186
Other receivables and miscellaneous assets
88
88
FVTPL
88
88
Securities
11
11
AC
338
338
FVTPL
338
Carrying amounts and fair values of financial instruments as of December 31, 2019
Million €
Shareholdingsa
Receivables from finance leases
Accounts receivable, trade
Accounts receivable, trade
Derivatives no hedge accounting
Derivatives hedge accounting
Total carrying
amount within
scope of
Carrying application of
amount
IFRS 7
Valuation
category in
accordance
with IFRS 9b
Fair value
Of which
fair value
level 1°
Of which
fair value
level 2d
Of which
fair value
level 3°
501
trade
501
34
22
12
23
23
n/a
23
8,755
8,755
AC
8,755
338
FVTPL
Accounts payable,
Liabilities to credit
institutions
liabilities to the
capital market
in the options' time value component, and €36 million was reclassi-
fied to profit or loss.
BASF is exposed to foreign currency risks due to planned sales in
U.S. dollars. To some extent, cash flow hedge accounting is applied
using currency options. The average hedging rate in 2019 was
$1.1105 per euro and in 2018 $1.1563 per euro. The impact on
earnings from designated transactions in 2019 will be recognized in
the following year. The decrease in the options' time value compo-
nent arising in the amount of €38 million in 2019 was recognized
separately in equity as the cost of hedging and resulted in a reduc-
tion in equity. The reclassification of the accumulated changes in the
time value of options to profit or loss due to the maturity of hedged
items had a countering effect in the amount of €35 million. In 2018,
minus €33 million was recognized separately in equity as a change
are designated as cash flow hedging relationships. Cash flows from
these futures and the hedged expected future transactions are
generally recognized in profit or loss for the following year.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
276
BASF Report 2019
BASF's planned soy bean procurement is also exposed to
commodity price risks. These commodity price risks are hedged
with soy bean futures. The contractual conditions for these hedging
transactions correspond to the respective hedged item, and some
The change in the options' time value is separately recognized in
equity and recognized in profit or loss in the year during which the
hedged items mature. In 2019, a decrease in fair value of minus
€3 million was recognized in equity attributable to shareholders of
BASF SE, and €2 million was derecognized, reducing earnings. In
2018, a decrease in fair value of minus €2 million was recognized in
equity attributable to shareholders of BASF SE, and €1 million was
derecognized, reducing earnings.
the risks of the hedged item. Cash flows from the hedging trans-
action and hedged item are generally recognized in profit or loss for
the following year.
(193)
(82)
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
The interest rate risk of the variable-rate bonds issued by BASF SE
in 2013 was hedged using interest rate swaps, which converted the
bonds into fixed-interest rate bonds with a rate of 1.45%. The key
terms of the interest rate swap contracts used as hedging instru-
ments generally correspond to the contractual elements of the
hedged item. The bond and the interest rate swaps were designated
as hedge accounting.
Furthermore, BASF SE's fixed-rate U.S. private placement of
$1.25 billion, issued in 2013, was converted to euros using
cross-currency swaps, as the private placement exposes BASF to
a combined interest/currency risk. The hedged interest rate was
4.13% in the fiscal years 2019 and 2018. The hedged foreign
exchange rate in both years was $1.3589 per euro. This hedge was
designated as a cash flow hedge.
The effects of the hedging relationships on the balance sheet, the
cash flow hedge reserve, hedged nominal value and ineffectiveness
to be determined are presented in the following tables by fiscal year.
16,109
Hedging
instrument
Recognized ineffectiveness
Change in fair values for assessing
ineffectiveness
of reclassi-
fication
item for
recognition
Income
statement
transactions
reclassified to
profit or loss for
realized hedging
Amounts
income
recognized
in other
comprehensive
Notes
Hedging effects
Accumulated
amounts for
continuing
hedging
relationships
733
Other receivables and
miscellaneous assets
18
Nominal
value
Balance sheet item
Financial
liabilities
Financial
assets
Foreign currency risks
Carrying amount of hedging instruments
Million €
Hedge accounting effects in 2019
Cash flow hedge reserve
11
27.3 Maturity analysis
Derivatives are included using their net cash flows, provided they
have negative fair values and therefore represent a liability. Derivatives
with positive fair values are assets and are therefore not taken into
account.
2,717
1,239
221
31
139
1,630
683
776
101
1,560
9,541
888
101
493
11,023
17,442
3,335
5,087
734
2,245
28,843
Maturities of contractual cash flows from financial liabilities as of December 31, 2018
Million €
Liabilities resulting
Bonds and other
209
52
212
2,244
Maturities of contractual cash flows from financial liabilities as of December 31, 2019
Million €
2020
2021
2022
2023
2024
2025 and thereafter
Total
Liabilities resulting
Bonds and other
liabilities to the
capital market
Liabilities to credit Accounts payable,
institutions
trade
from derivative
financial
instruments
The interest and principal payments as well as other payments for
derivative financial instruments are relevant for the presentation of
the maturities of the contractual cash flows from financial liabilities.
Future cash flows are not discounted here.
Miscellaneous
Total
2,483
1,149
5,087
404
969
10,092
1,252
89
146
334
1,821
liabilities
Securities
d Fair value was determined based on parameters for which directly or indirectly quoted prices on active markets were available.
4
463
33
(48)
(163)
244
(20)
(20)
Potential net amount
collateral
Relating to financial
Due to global netting
agreements
Net amount
Amount offset
Offset amounts
Amounts that cannot be offset
134
103
(116)
(57)
Potential net amount
collateral
Relating to financial
(163)
(163)
Due to global netting
agreements
Amounts that cannot be offset
354
(70)
(163)
382
(150)
The table "Offsetting of derivative assets and liabilities" shows the
extent to which assets and liabilities were offset in the balance sheet,
as well as potential effects from the offsetting of derivatives subject
to a legally enforceable global netting agreement (primarily in the
form of an ISDA agreement) or similar agreement. For positive fair
values of combined interest rate and currency swaps, the respective
counterparties provided cash collaterals in an amount comparable
to the outstanding fair values.
of which interest result
Financial assets measured at amortized cost
Net gains and losses from financial instruments 2018
Million €
of which interest result
Financial liabilities measured at amortized cost
Financial assets at fair value through other comprehensive income
of which interest result
of which interest result
Financial instruments at fair value through profit or loss
of which interest result
Financial assets measured at amortized cost
Million €
Net gains and losses from financial instruments 2019
Gains and losses from the valuation of securities recognized in equity are shown in development of
income and expense recognized in equity attributable to shareholders of BASF SE on page 195
The net gains and losses from financial instruments shown in the
following table comprise the results of valuations, the amortization of
discounts, the recognition and reversal of impairments, results from
the translation of foreign currencies as well as interest, dividends
and all other effects on the earnings resulting from financial instru-
ments. The line item financial instruments at fair value through profit
or loss contains only gains and losses from instruments that are not
designated as hedging instruments in accordance with IFRS 9.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
274
BASF Report 2019
In addition to the offsetting of derivatives presented in the table
above, trade accounts receivable were offset against advance
payments received on orders that were subject to specific netting
agreements with customers, which were included in current other
liabilities in 2019. As a result, both balance sheet items were reduced
by €647 million. This results in a net amount for trade accounts
receivable of €9,093 million (gross amount before offsetting:
€9,740 million). The resulting net amount for advance payments on
orders is €537 million (gross amount before offsetting: €1,184 million).
In 2018, neither trade accounts receivable nor advance payments
received were netted.
Deviations from the derivatives with positive fair values and
derivatives with negative fair values reported in other receivables
and other liabilities at the end of 2019 and 2018 arose from
derivatives not subject to any netting agreements as well as from
embedded derivatives. These are therefore not included in the table
above.
150
(70)
Net amount
Amount offset
AC
5,087
Derivatives no hedge accounting
677
677
FVTPL
677
33
644
Derivatives hedge accounting
4
4
n/a
4
0
4
Other liabilities*
3,004
Total liabilities
28,569
1,558
27,123
AC
1,558
28,308
4
5,087
5,087
Accounts payable, trade.
1,420
Offset amounts
483
264
Gross amount
Derivatives with negative fair values
Derivatives with positive fair values
Offsetting of derivative assets and liabilities as of December 31, 2018
Million €
424
452
Gross amount
Derivatives with negative fair values
Derivatives with positive fair values
Financial instruments at fair value through profit or loss
Million €
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
273
BASF Report 2019
f Does not include separately shown derivatives or receivables and liabilities from finance leases. If miscellaneous receivables are valued at fair value through profit or loss, their valuation is generally based on parameters
observable on the market. These are adjusted to reflect valuation-relevant characteristics of the respective assets in the fair value.
1,420
n/a
Notes
of which interest result
Offsetting of derivative assets and liabilities as of December 31, 2019
of which interest result
e Fair value was determined based on parameters for which there was no observable market data.
1,040
15,461
Commercial paper
861
861
AC
861
Liabilities to credit institutions
3,240
3,240
AC
3,240
Liabilities from leases
1,420
1
6
(39)
(186)
(110)
56
80
138
(103)
60
(7)
15,461
AC
14,276
14,276
FVTOCI
Financial assets at fair value through other comprehensive income
4
Securities
563
563
FVTPL
563
563
Cash equivalents
198
198
(4)
FVTPL
198
Cash and cash equivalents
2,229
2,229
AC
2,229
2,229
Total assets
17,501
14,028
3,013
Bonds
198
(7)
14,495
11
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
275
BASF Report 2019
(450)
(599)
4
(4)
57
(45)
4 Consolidated Financial Statements
58
(512)
(724)
4
4
68
(37)
48
256
(4)
Total
of which interest result
Financial liabilities measured at amortized cost
Total
5 Overviews
33
27.5 Derivative financial instruments and hedge accounting
48
13
Notes
18
22
(57)
26
December 31, 2019
Furthermore, cash flow hedge accounting is employed to a minor
extent for procuring natural gas, which is likewise exposed to com-
modity price risks. Commodity price-based options serve as
hedging instruments, for which contract terms are defined to reflect
BASF is exposed to commodity price risks in the context of pro-
curing naphtha. Some of the planned purchases of naphtha are
hedged using swaps and options on oil and oil products. The main
contractual elements of these items are aligned with the charac-
teristics of the hedged item. Cash flow hedge accounting was
employed for a portion of these hedging relationships in 2019.
These transactions were not presented using cash flow hedge
accounting in 2018. Cash flows from designated hedging instru-
ments and hedged transactions occur in the following year and are
also recognized in profit or loss for that year.
Cash flow hedge accounting
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Derivative financial instruments
December 31, 2018
(44)
BASF is exposed to foreign currency, interest rate and commodity
price risks during the normal course of business. These risks are
hedged using derivative instruments as necessary in accordance
with a centrally determined strategy. Hedging is only employed for
existing underlying transactions from the product business, cash
investments and financing as well as for planned sales, raw material
purchases and capital measures. The risks from the hedged items
and the derivatives are continually monitored. Where derivatives
have a positive market value, BASF is exposed to credit risks from
derivative transactions in the event of nonperformance of the other
party. To minimize the default risk on derivatives with positive market
values, transactions are exclusively conducted with creditworthy
banks and partners and are subject to predefined credit limits.
Commodity derivatives
The use of derivative financial instruments
The fair values of derivative financial instruments are calculated
using valuation models that use input parameters observable on the
market. Exceptions to this are some commodity derivatives, whose
valuation is based directly on market prices.
Fair value of derivative instruments
To ensure effective risk management, risk positions are centralized
at BASF SE and certain Group companies. The contracting and
execution of derivative financial instruments for hedging purposes
are conducted according to internal guidelines, and subject to strict
control mechanisms.
Million €
Foreign currency derivatives
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Interest rate swaps
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Combined interest rate and currency swaps
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Interest derivatives
Foreign currency forward contracts
Foreign currency options
2018
2,927,843
758,255
2019
2,811,447
693,125
Personnel expenses for BASF's "plus" incentive share program
totaled €33 million in 2019 and €32 million in 2018.
(477,395)
(133,466)
BASF Report 2019
2,927,843
The free shares to be provided by the company are measured at the
fair value on the grant date. Fair value is determined on the basis of
the BASF share price, taking into account the present value of
dividends, which are not paid during the term of the program. The
weighted-average fair value on the grant date amounted to €68.21
for the 2019 program, and €85.45 for the 2018 program.
As of December 31
The fair value of the free shares to be granted is recognized as an
expense with a corresponding increase in capital reserves over the
term of the program.
(527,170)
3,025,462
The exercisable options had no intrinsic value as of Decem-
ber 31, 2019.
Newly acquired entitlements.
Bonus shares issued
75.18
75.69
285
The stated fair values and the valuation parameters relate to the
2019 and 2018 LTI programs. The fair value calculation was based
on the assumption that options will be exercised in a manner
dependent on their potential gains. For the programs from preced-
ing years, corresponding fair values and valuation parameters were
determined/used.
Volatility was determined on the basis of the monthly closing prices
over a historical period corresponding to the remaining term of the
options.
The number of options granted amounted to 2,099,028 in 2019
(2018: 2,010,720).
As a result of a resolution by the Board of Executive Directors in
2002 to settle option rights in cash, all outstanding option rights
under the 2012 to 2019 LTI programs were valued at fair value as of
December 31, 2019. A proportionate provision is recognized for
programs in the vesting period. The LTI provision increased from
€56 million as of December 31, 2018, to €90 million as of Decem-
ber 31, 2019, due to higher fair values of the outstanding option
rights. No utilization of provisions was recognized in 2019, whereas
in 2018 the utilization of provisions in 2018 amounted to €22 million.
Expenses resulting from the addition of provisions amounted to
€34 million in 2019, while income from the release of provisions was
recognized in the amount of €268 million in 2018. Of this amount,
€1 million was attributable to the disposal group for the discontinued
construction chemicals business in 2019 and €6 million for the
discontinued oil and gas business in 2018.
BASF incentive share program
The "plus" incentive share program was introduced in 1999 and is
currently available to employees in Germany, other European
countries and Mexico. Simultaneous participation in both the "plus"
program and the LTI program is not permitted.
Employees who participate in BASF's "plus" incentive share program
acquire shares in BASF from their variable compensation. For every
10 BASF shares purchased in the program, a participant receives
one BASF share at no cost after one, three, five, seven and 10 years
of holding these shares. As a rule, the first and second block of
10 shares entitles the participant to receive one BASF share at no
extra cost in each of the next 10 years.
The right to receive free BASF shares lapses if a participant sells the
individual investment in BASF shares, if the participant stops working
for a Group company or one year after retirement. The number of
free shares to be granted has developed as follows:
Number of free shares to be granted
Shares
As of January 1
Lapsed entitlements
About This Report
198.2
To Our Shareholders
Total compensation of the Board of Executive Directors
Service costs for members of the Board of Executive Directors
3.3
11.5
Compensation of the Supervisory Board
Total compensation of former members of the Board of Executive Directors and their surviving dependentsa
Pension provisions for former members of the Board of Executive Directors and their surviving dependents
Guarantees assumed for members of the Board of Executive Directors and the Supervisory Board
a Total compensation of former members of the Board of Executive Directors for 2018 includes compensation for Dr. Kurt Bock before pension benefits in the amount of approximately €1.1 million.
The performance bonus is based on the performance of the Board
of Executive Directors as a whole and the return on capital employed
(ROCE) of the BASF Group. Subject to certain conditions, ROCE is
adjusted for special items from acquisitions and divestitures. The
conditions for the adjustment of ROCE were not met in 2019.
The members of the Board of Executive Directors were granted
185,692 option rights under the long-term incentive (LTI) program in
2019.
Market valuation of the option rights of active and former members
of the Board of Executive Directors resulted in an expense totaling
18.8
6.3
3.3
%
(4.4)
Fair value of options granted to the Board of Executive Directors in the fiscal year as of grant date
1
3.7
4.5
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
31
Compensation of the Board of Executive Directors and Supervisory Board
Compensation of the Board of Executive Directors and Supervisory Board
Million €
14.3
2019
2018
Non-performance-related and performance-related cash compensation of the Board of Executive Directors
13.3
3.2
16.5
Correlation BASF share price: MSCI Chemicals
Standard & Poor's
14.19
stable
cial indebtedness
Noncurrent finan- Current financial
indebtedness
A1
P-1
A
A-1
stable
A
S-1
stable
BASF strives to maintain a solid A rating, which ensures unrestricted
access to financial and capital markets.
For more information on BASF's financing policy, see the Management's Report from page 55
onward
30 Share price-based compensation program and
BASF incentive share program
Share price-based compensation program
Outlook
The BASF Group continued its share price-based compensation
program (the long-term incentive (LTI) program) in 2019. The
program has been in place since 1999 and approximately
1,100 people, in particular the Board of Executive Directors and
senior executives, are currently eligible to participate. It provides for
the granting of virtual option rights, which are settled in cash when
exercised.
Scope
Ratings as of December 31, 2018
159.5
Ratings as of December 31, 2019
Moody's
Standard & Poor's
Noncurrent finan-
cial indebtedness
Current financial
indebtedness
Outlook
A2
P-1
stable
A
A-1
stable
The contract with Scope Ratings expired at the beginning of Sep-
tember 2019 and was not extended by BASF.
Moody's
14.44
Participation in the LTI program is voluntary. In order to take part in
the program, a participant must make a personal investment: A
participant must, for a two-year period from the granting of the
option (holding period), hold BASF shares amounting to 10% to
30% of his or her individual variable compensation for the previous
year. The number of shares to be held is determined by the amount
of variable compensation and the volume-weighted average market
price for BASF shares on the first trading day after the Annual Share-
holders' Meeting, which was €68.21 on May 6, 2019.
exercise less the nominal value of the BASF share. From the 2013
LTI program onward, right B may only be exercised if the price of
the BASF share equals at least the base price. The options granted
as of July 1, 2019 may be exercised between July 1, 2021, and
June 30, 2027, following a two-year vesting period. During the
exercise period, there are certain times (closed periods) during
which the options may not be exercised. Each option can only be
exercised in full. This means that one of the thresholds must be
exceeded. If the other threshold is not exceeded and the option is
exercised, the other option right lapses. A participant's maximum
gain from exercising an option is limited to five times the original
individual investment starting with the 2013 LTI program. The maxi-
mum gain from exercising an option is limited to 10 times the original
individual investment for programs from previous years. Option
rights are nontransferable and are forfeited if the option holders no
longer work for the BASF Group or have sold part of their individual
investment before the expiry of the two-year vesting period. They
remain valid in the case of retirement. For the members of the Board
of Executive Directors, the long-term orientation of the program is
significantly strengthened compared with the conditions applying
to the other participants. The members of the Board of Executive
Directors are required to participate in the LTI program with at
least 10% of their actual annual variable compensation. In view of
this binding personal investment (in the form of BASF shares), an
extended holding period of four years applies. Members of the
Board of Executive Directors may only exercise their option rights
four years after they have been granted at the earliest (vesting
period).
10.84
Dividend yield
%
4.75
4.75
Risk-free interest rate
%
(0.34)
(0.41)
Volatility BASF share
%
23.43
23.52
Volatility MSCI Chemicals
%
20.46
The participant receives four option rights per invested share. Each
option consists of two parts, right A and right B, which may be
exercised if defined thresholds have been met: The threshold of right
A is met if the price of the BASF share has increased by more than
30% in comparison with the base price on the option grant date
(absolute threshold). The value of right A is the difference between
the market price of BASF shares on the exercise date and the base
price; it is limited to 100% of the base price. If the cumulative
percentage performance of BASF shares exceeds the percentage
performance of the MSCI World Chemicals IndexSM (MSCI Chemi-
cals), right B may be exercised (relative threshold). The value of right
B is the base price of the option multiplied by twice the percentage
by which the BASF share outperforms the MSCI Chemicals Index on
the exercise date. It is limited to the closing price on the date of
€
2018
The 2012 to 2018 programs were structured in a similar way to the
2019 LTI program.
The models used in the valuation of the option plans are based
on the arbitrage-free valuation model according to Black-Scholes.
The fair values of the options are determined using the binomial
model.
BASF Report 2019
284
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Fair value of options and parameters used as of December 31, 2019
LTI program of the year
2019
Fair value
€3.0 million in 2019. In 2018, option rights led to income in the
amount of €28.5 million.
6.8
For more information on the members of the Supervisory Board and Board of Executive Directors,
including their memberships on other boards, see page 159 onward
Services provided by the external auditor
Million €
Annual audit
of which domestic
Audit-related services
of which domestic
Tax consultation services
of which domestic
Other services
Total
of which domestic
The services provided by the external auditor mainly include services
for the annual audit and, to a lesser extent, confirmation services,
tax consultation services and other services.
The line item annual audit relates to expenses for the audit of the
Consolidated Financial Statements of the BASF Group, the legally
required financial statements of BASF SE and of the subsidiaries
and joint operations included in the Consolidated Financial
Statements as well as the voluntary audit of subgroups. Fees for
other services primarily include project-related audits in connection
with regulatory demands as well as other confirmation services.
BASF Report 2019
2019
2018
BASF Group companies used the following services from KPMG:
19.7
33 Services provided by the external auditor
For more information about defined benefit plants, the division of risk between Group companies,
see Provisions for pensions and similar obligations from page 253 onward
BASF had obligations from guarantees and other financial obliga-
tions in favor of nonconsolidated subsidiaries in the amount of
€10 million as of December 31, 2019 (December 31, 2018:
€6 million), and in favor of associated companies in the amount of
€36 million as of December 31, 2019 (December 31, 2018:
€17 million).
For more information on off-balance sheet financial obligations in connection with joint ventures,
see Note 25 on page 265
Obligations arising from purchase contracts with joint ventures
amounted to €4 million as of December 31, 2019, and €3 million as
of December 31, 2018.
As of December 31, 2019, the present value of outstanding minimum
rental payments for an office building including a parking area
payable by BASF SE to BASF Pensionskasse WaG for the
nonterminable basic rental period to 2029 amounted to €86 million.
BASF Report 2019
287
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
There were no reportable related party transactions with members
of the Board of Executive Directors or the Supervisory Board and
their related parties in 2019.
For more information on subsidiaries, joint ventures and associated companies, see the 2019 BASF
Group list of shares held on page 219
For more information on the members of the Board of Executive Directors and the Supervisory
Board, see Management and Supervisory Boards and Compensation Report from page 159 onward
By contrast, the balance of valuation allowances on trade accounts
receivable from associated companies increased by €1 million as of
December 31, 2019. Of this amount, €1 million was also recognized
as an expense.
21.1
8.2
The annual Declaration of Conformity with the German Corporate
Governance Code according to section 161 AktG was submitted by
the Board of Executive Directors and the Supervisory Board of
BASF SE in December 2019 and is published online.
For more information, see basf.com/en/corporate governance
35 Non-adjusting post-balance sheet date events
On January 31, 2020, BASF acquired Solvay's polyamide business.
As a result of antitrust legal requirements, Domo Chemicals acquired
parts of Solvay's polyamide business, including production plants
and innovation competencies in the engineering plastics field in
Europe. Following these adjustments to the scope of the transac-
tion, the purchase price on a cash and debt-free basis and excluding
other adjustments totaled approximately €1.3 billion. The acquisition
includes eight production sites in Germany, France, China, India,
South Korea, Brazil and Mexico, as well as research and develop-
ment and technical consultation centers in Asia and the Americas.
BASF plans to integrate the acquired polyamide business from
Solvay into the Performance Materials and Monomers divisions.
BASF acquired seven Solvay companies, which are fully consoli-
dated as subsidiaries in BASF's Consolidated Financial Statements
as of the closing date of the transaction. From the closing date of
the transaction, BASF has included two companies in its Consoli-
dated Financial Statements as joint operations. Furthermore, BASF
acquired Solvay's assets associated with each business in four
countries directly through local BASF companies. At present, it is
not yet possible to provide exact data on the transferred assets or
debt or on the goodwill resulting from the transaction. As part of the
transaction, Solvay's property, plant and equipment totaling
approximately €400 million in value as well as intangible assets,
primarily technologies, other rights and customer relationships
totaling between €600 million and €700 million were transferred to
BASF. The receivables and liabilities considered each amount to
approximately €225 million and should more or less offset each
other. Debt consists primarily of pension obligations in the mid-
double-digit million euro range. Based on pending valuations and
analyses, goodwill resulting from the transaction is expected in the
low triple-digit million euro range. BASF is financing the acquisition
within the scope of its usual financing.
On February 14/15, 2020, a jury in a U.S. Federal District Court
awarded $15 million in compensatory damages against defendants
Monsanto Company and BASF Corporation after a trial related to
alleged yield losses of a peach farmer in connection with the use of
the dicamba herbicide. The jury also found that Monsanto was liable
for $250 million in punitive damages. Finally, the jury found that the
defendants were acting in a joint venture and conspiracy. Following
the jury's decision, the court is considering whether BASF Corpora-
tion is also liable for the punitive damages award against Monsanto
because of the joint venture finding. BASF intends to use all legal
remedies available and will appeal the decision as to compensatory
damages and, if applicable, punitive damages.
BASF Report 2019
289
Chapter 5 pages 290-300
5
Overviews
Ten-Year Summary
Glossary and Trademarks
295
291
Declaration pursuant to section 161 of the German Stock
Corporation Act (AktG)
Notes
34 Declaration of Conformity with the German
Corporate Governance Code
5 Overviews
0.7
0.7
0.5
0.5
0.2
0.3
0.1
20.6
22.1
288
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Notes
For more information on the compensation of members of the Board of Executive Directors, see the
Compensation Report from page 162 onward
The balance of valuation allowances on other receivables from
nonconsolidated subsidiaries decreased from €76 million as of
December 31, 2018, to €23 million as of December 31, 2019.
The decrease in both other receivables and other liabilities to joint
ventures was due mainly to other finance-related receivables and/or
liabilities to Wintershall companies.
Associated companies
Trade accounts receivable from / trade accounts payable to related parties
Million €
Nonconsolidated subsidiaries
Joint ventures
Associated companies
Other receivables from liabilities to related parties
Million €
Nonconsolidated subsidiaries
Joint ventures
Associated companies
2019
2018
636
530
617
583
Joint ventures
380
Nonconsolidated subsidiaries
Sales to related parties
32 Related party transactions
A related party is a natural person or legal entity that can exert
influence on the BASF Group or over which the BASF Group
exercises control, joint control or a significant influence. In particular,
related parties include nonconsolidated subsidiaries, joint ventures
and associated companies.
The following tables show the volume of business with related
parties that are included in the Consolidated Financial Statements at
amortized cost or accounted for using the equity method. The
values include sales, receivables, other receivables, liabilities and
other liabilities with respect to the disposal groups and/or dis-
continued operations.
Since February 1, 2019, following the merger of the paper and water
chemicals business with Solenis, the resulting sales, receivables and
trade accounts payable as well as other liabilities to the Solenis
group have been included in associated companies in the following
table.
Since May 1, 2019, following the merger of the oil and gas
businesses of Wintershall and DEA, the resulting sales as well as
receivables and trade accounts payable to Wintershall Dea have
been included in joint ventures in the following table.
Sales and trade accounts receivable from and trade accounts
payable to related parties mainly included business with own
products and merchandise, agency and licensing businesses, and
other operating businesses.
BASF Report 2019
286
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Million €
The outstanding balances toward related parties were generally not
secured and settled in cash.
583
December 31, 2019
December 31, 2018
285
247
219
190
80
284
92
432
57
70
345
271
Sales from subsidiaries to BASF Group companies amounted to
€233 million in 2019, and €191 million in 2018. Sales from joint
ventures to BASF Group companies amounted to €785 million in
2019, and €543 million in 2018. Sales from associated companies
to companies in the BASF Group amounted to €811 million in 2019,
and €626 million in 2018.
Other receivables and liabilities primarily arose from financing
activities, from accounts used for cash pooling, outstanding dividend
payments, profit and loss transfer agreements, and other finance-
related and operating activities and transactions.
December 31, 2019
Accounts
receivable, trade
December 31, 2018
Other liabilities
December 31, 2018
193
175
Accounts
payable, trade
December 31, 2019
136
December 31, 2018
101
80
91
122
75
129
78
54
42
Other receivables
December 31, 2019
5 Overviews
(99,334)
3 Corporate Governance
134
BASF acts as a lessor for finance leases to a minor extent only.
Receivables on finance leases were €23 million in 2019 (2018:
€25 million). The leased assets pertained primarily to buildings and
production facilities.
Income from leases for BASF as lessor
Million €
Income from finance leases
of which gains and losses from sales
2019
1
1
financial income from net investment
in the lease
0
income from variable lease payments not included
in measurement of net investment
Income from operating leases
19
of which income from variable lease payments not
dependent upon an index or interest rate
18
Total
152
23
24
3
21
BASF as lessor
Following year 4
17
2
15
Following year 5
8
1
7
More than 5 years
28
5
Total
Following year 3
20
281
1,981
480
393
315
427
the amount of €800 million, as well as the repayment of BASF SE's
open finance-related receivables by the Wintershall Dea group and
capital decreases at Wintershall Dea GmbH in the total amount of
€3.2 billion. In connection with the transfer of the paper and water
chemicals business to the Solenis group in the first quarter of 2019,
the majority of the purchase price was settled with the contribution
of the interest in Solenis UK International Limited (€590 million). The
rest of the purchase price (€178 million) was recognized in cash.
Payments made for intangible assets and property, plant and
equipment amounted to €3,824 million, €70 million lower than in the
previous year.
Cash and cash equivalents consist primarily of cash on hand and
bank balances with maturities of less than three months.
Cash and cash equivalents in the amount of €2,455 million reported
in the statement of cash flows as of December 31, 2019, consisted
of the balance sheet value (€2,427 million) and the values reclas-
sified to the disposal groups for the construction chemicals business
(€21 million) and the pigments business (€7 million). Cash and cash
equivalents in the amount of €2,519 million reported in the state-
ment of cash flows as of December 31, 2018, consisted of the
balance sheet value (€2,300 million) and the value reclassified to the
oil and gas business disposal group (€219 million). As in the previous
year, cash and cash equivalents were not subject to any utilization
restrictions.
For more information on cash flows from acquisitions and divestitures, see Note 2.4 from page 210
onward
For more information on the contribution of discontinued operations on BASF's statement of cash
flows, see Note 2.5 from page 215 onward
In 2019, interest payments comprised interest payments received of
€175 million (2018: €162 million) and interest paid of €655 million
(2018: €555 million).
In the first quarter of 2019, BASF SE transferred securities in the
amount of €300 million to BASF Pensionstreuhand e.V.,
Ludwigshafen am Rhein, Germany. This transfer was not cash
effective and therefore had no effect on the statement of cash flows.
Cash flows from investing activities included €239 million in
payments made for acquisitions (2018: €7,362 million).
Payments of €2,600 million were received for divestitures in 2019
(2018: €107 million). Of material significance was the merger of the
oil and gas businesses of Wintershall and DEA in the second quarter
of 2019. The effects of the deconsolidation of the Wintershall
companies and the simultaneous recognition of the equity-
accounted interest in Wintershall Dea GmbH offset each other. The
only effect on cash was the outflow of cash and cash equivalents in
1,280
BASF Report 2019
2018
Dividends received
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Other Notes
29 Statement of cash flows and capital structure
management
Statement of cash flows
Cash flows from operating activities contained the following
payments:
Statement of cash flows
Million €
Income tax payments
Interest payments
2019
Reconciliation according to IAS 7 for 2019
Million €
25
28
(13)
2
Income from sublease agreements
Expenses for short-term leases
(189)
Less than 1 year
Expenses for leases for low-value assets
(7)
Gains and losses from sale and leaseback transactions
30
1-5 years
More than 5 years
Total
(216)
Total
Future minimum payments from operating lease contracts
Million €
Nominal value of future
minimum lease payments
Expenses for variable lease payments not included in the
measurement of lease liabilities
Interest expenses for lease liabilities
4 Consolidated Financial Statements
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Expenses and income in the statement of income
from leases for BASF as lessee
Million €
BASF was also a lessee under operating lease contracts in 2018.
The resulting lease commitments totaled €1,482 million in 2018 and
became due in the following years:
Claims arising from operating leases amounted to €174 million in
2019 (2018: €166 million). There are no material operating leases for
property, plant and equipment.
Future lease payments to BASF from operating lease contracts
Million €
2019
(39)
3
Future
Nominal value of future
minimum lease payments
Liabilities from finance leases
Million €
Future minimum payments from operating lease contracts included
€144 million for companies in the oil and gas disposal group as of
December 31, 2018.
Future minimum lease payments from subleases based on existing
agreements amounted to €10 million in 2018.
In 2018, minimum lease payments in the amount of €494 million
were included in income from operations. In 2018, conditional lease
payments in the amount of €1 million were also included in income
from operations. Furthermore, sublease payments in the amount of
€4 million were included in income from operations in 2018.
December 31, 2018
Minimum
lease payments
Interest portion
Lease liability
Following year 1
47
4
43
Following year 2
BASF Schweiz AG entered a five-year rental contract for a building
and various parking lots with the sale of the Klybeck site in 2019.
Lease liabilities from this sale and leaseback transaction totaled
€8 million as of December 31, 2019 and earnings from the trans-
action totaled €29 million in 2019.
lease payments
(as per IFRS 16)
166
Total
December 31, 2018
December 31, 2019
(as per IAS 17)
December 31, 2018
403
720
Less than 1 year
1-5 years
22
30
120
75
359
More than 5 years
32
61
1,482
174
Financial indebtedness
2,966
Dec. 31,
2018a
Financial indebtedness
Loan liabilities
Lease liabilities
18,032
3,252
56
11
21,351
376
150
7
8
541
BASF currently has the following ratings, which were most recently
confirmed by Moody's on November 4, 2019 and by Standard &
124
fair value
(35)
Changes in
Currency effects
Dec. 31,
2017
The assets/liabilities from hedging transactions form part of the
balance sheet item derivatives with positive or negative fair values
and include only those transactions which hedge risks arising from
financial indebtedness and financing-related liabilities secured by
micro hedges.
For more information on receivables and miscellaneous assets, see Note 18 from page 249 onward
For more information on liabilities, see Note 24 from page 261 onward
For more information on the statement of cash flows, see the Management's Report from page 56
onward
Acquisitions/
Non-cash-effective changes
Dec. 31,
2018a
Capital structure management
The aim of capital structure management is to maintain the financial
flexibility needed to further develop BASF's business portfolio and
take advantage of strategic opportunities. The objectives of the
company's financing policy are to ensure solvency, limit financial
risks and optimize the cost of capital.
Capital structure management focuses on meeting the require-
ments needed to ensure unrestricted access to the capital market
and a solid A rating. The capital structure is managed using selected
financial ratios, such as dynamic debt ratios, as part of the com-
pany's financial planning.
The equity of the BASF Group as reported in the balance sheet
amounted to €42,350 million as of December 31, 2019 (Decem-
ber 31, 2018: €36,109 million); the equity ratio was 48.7% on
December 31, 2019 (December 31, 2018: 41.7%).
BASF prefers to access external financing on the capital markets. A
commercial paper program is used for short-term financing, while
corporate bonds are used for financing in the medium and long
term. These are issued in euros and other currencies with different
maturities. The goal is to create a balanced maturity profile, achieve
a diverse range of investors and optimize our debt capital financing
conditions.
Cash effective in
cash flows from
financing
activities
divestitures/
Changes in the
scope of
consolidation
Other
effects
Reconciliation according to IAS 7 for 2018
Million €
9
35b
65
Total
19,472
131
58
50
303
22,980
a Balances as of December 31, 2018 include contributions reclassified to the disposal group and therefore deviate from balance sheet values.
b Includes additions from lease contracts
BASF Report 2019
283
About This Report
1 To Our Shareholders
2 Management's Report
Loan liabilities
303
1
(120)
Assets/liabilities from hedging transactions
134
Poor's on November 13, 2019.
Other financing-related liabilities
1,058
(281)
115
(7)
4
889
Financial and similar liabilities
19,590
3,086
131
50
22,915
(118)
Other financing-related liabilities primarily comprise liabilities from
accounts used for cash pooling with BASF companies not included
in the Consolidated Financial Statements. They are reported in
miscellaneous liabilities within the balance sheet item other liabilities
that qualify as financial instruments.
58
Loan liabilities do not contain any interest components.
18,392
541
122
(140)
2
1
526
134
(399)b
(107)
7
452
1,391c
1,478
889
fair value
(57)
effects
157
(524)
Acquisitions/
Cash effective
in cash flows
from financing
activities
Only the principal component of lease liabilities is shown in cash
flows from financing activities. BASF presents the interest compo-
nent of lease payments in cash flows from operating activities.
divestitures/
changes in the
Non-cash-effective changes
effects contracts
Dec. 31,
2019a
Additions
Changes
scope of
consolidation
Currency from lease
in
21,351
(2,633)
41
(455)
Other
22,915
Lease liabilities
Other financing-related liabilities
Financial and similar liabilities
(1,226)
a Balances as of December 31, 2019 and 2018 also include contributions reclassified to the disposal group and therefore deviate from balance sheet values.
b Lease payments totaled €441 million in 2019. The principal component in the amount of €399 million is presented in cash flows from financing activities. BASF reports interest payments in cash flows from operating activities;
this amounted to €42 million.
C This included the effect from the initial application of IFRS 16 in the amount of €1,400 million.
BASF Report 2019
282
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
1
The reconciliation according to IAS 7 breaks down the changes in
financial and similar liabilities and their hedging transactions into
cash-effective and non-cash-effective changes. The cash-effective
changes presented above correspond to the figures in cash flows
from financing activities.
Notes
5 Overviews
20,631
261
About This Report
452
51
(1,226)
1,455
(2,967)
(94)
1,455
284
452
Assets/liabilities from hedging transactions
20,680
Total
22,980
(375)
(3,342)
261
(49)
51
65
Consolidated Financial Statements
5 Overviews
4
3 Corporate Governance
2 Management's Report
Our Targets
Our Targets
1 To Our Shareholders
About This Report
26
Creation Center: From inspiration
to solution in one place
1 ISO 9001 is a standard published by the International Organization for Standardization (ISO) and sets out the requirements for a quality management system.
For more information on BASF's Creation Centers, see basf.com/en/creation-center
Discover, understand, create this is what we offer our
customers with the new Creation Centers. These creative
centers bring together our comprehensive materials, design,
and - in particular our development expertise in high-
performance plastics using the latest visualization technolo-
gies. This enables us to address the specific individual needs
of our customers and partners, and together transform ideas
into tailored products and applications even more quickly. The
first Creation Center opened in Mumbai, India, in May 2019.
Yokohama, Japan, and Shanghai, China, followed in August
2019. Our fourth Creation Center worldwide opened in
Ludwigshafen, Germany, in early 2020.
-
-
success.
In July 2019, Jaguar Land Rover (JLR) recognized BASF for the first
time with the Customer First Recognition Award in gold for
outstanding customer focus. An interdisciplinary team at BASF has
supported JLR for many years now with innovative solutions for
automotive OEM coatings, including the CathoGuard® 800 RE
technology and basecoats to realize the individual color preferences
of JLR customers in the premium segment. The award honors
partners that demonstrate JLR's principles - personalized, trans-
parent, easy to do business with, dependable and make one
feel special I which are crucial to the automotive manufacturer's
In March 2019, Airbus presented us with our fifth Supply Chain &
Quality Improvement award. Airbus highlighted in particular the
consistently high delivery reliability and quality of the products
NaftosealⓇ and ArdroxⓇ, which we market under the Chemetall
brand.
Business success tomorrow means creating value for the environ-
ment, society and business. We have set ourselves ambitious
global targets along our entire value chain. We report transparently
on our target achievement so that our customers, investors,
employees and other stakeholders can track our progress.
The Haier industrial group presented the Golden Magic Cube award
to BASF-YPC Company Limited, a 50-50 joint venture between
BASF and Sinopec, for the third time in a row in March 2019. The
award recognizes, among other things, high product quality, service
reliability and a strong customer focus.
We again received awards from a number of satisfied customers in
2019. For example, in May 2019 we were named a 2018 General
Motors (GM) Supplier of the Year for the fourteenth time since 2002.
The award is presented to suppliers who distinguish themselves by
meeting performance metrics for quality, execution, innovation and
total enterprise cost. GM also recognized us in June with the
Sustainability Partner award, the first to be given to a supplier.
BASF Report 2019
We want to grow faster than the market and thus be economically
successful and profitable. Furthermore, we want to provide
answers to the most pressing challenges of our time. To combat
climate change and global warming, we have resolved to limit total
greenhouse gas emissions from our production sites and our
energy purchases to the 2018 level while growing production
volumes. In other words, we want to decouple greenhouse gas
emissions from organic growth. We have also defined targets for
safety for people and the environment, a sustainable product
portfolio, responsible procurement, sustainable water manage-
ment, engaged employees, and inclusion of diversity.
For more information,
Status of Target Achievement in 2019
AFFORDABLE AND
Customer awards
Achieve €22 billion in Accelerator sales4
by 2025
-8.2%
ECONOMIC GROWTH
GENT WORK AND
For more information,
see page 49
Increase the dividend per share every year
based on a strong free cash flow
-11%
AND INFRASTRUCTURE
see page 47
The objective of these targets is to steer our business into a
sustainable future and, at the same time, contribute to the
implementation of the United Nations' Sustainable Development
Goals (SDGs). We are focusing on issues where we as a company
I can make a significant contribution, such as climate protection,
sustainable consumption and production, and fighting hunger.
8DECENT WORK AND
percentage every year
Achieve a return on capital employed (ROCE)²
considerably above the cost of capital
(Global chemical
production: 1.8%)
-3%
Grow CO2-neutrally until 2030
(Development of carbon emissions compared
with baseline 2018)
QUSTRY JEWE
ECONOMIC GROWTH
DECENT NERK AND
Increase EBITDA before special items by
3-5% per year
DECENT MERKAND
Grow sales volumes faster than global
chemical production every year
Q
Our customers' satisfaction is the basis for our business success,
which is why quality management is of vital significance for BASF.
We strive to continually improve processes and products. This is
also reflected in our Global Quality Policy. The majority of our
production sites and business units are certified according to
ISO 9001. In addition, we also meet industry and customer-specific
quality requirements that go beyond the ISO standard.
Customer Orientation
For more information on the organizational structure of the BASF Group, see page 19 onward
For more information on the segments and their divisions, see page 60 onward
Flexible
Innovations and tailored solutions
in close partnership with our customers
customers from almost all sectors and countries in the
world
Around 100,000
Our customers are our number one priority. We want to view
everything we do through the lens of customer relevance. BASF
supplies products and services to around 100,000 customers¹ from
various sectors in almost every country in the world. Our customer
portfolio ranges from major global customers and medium-sized
businesses to end consumers.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Customer Orientation
1 To Our Shareholders
thanks to in-depth expertise and wide range of resources
About This Report
24
BASF Report 2019
For more information on our strategy, see basf.com/strategy
dynamic market, we plan to build an integrated Verbund site in
Zhanjiang in the southern Chinese province of Guangdong. We also
want to expand our existing joint venture with Sinopec at the
Verbund site in Nanjing. ]
Sources: UN, IEA, UBS Foresight, BASF
per year
+20-25%
Growing demand
for battery materials
until 2030
Electromobility:
by 2050
8 DECENT WERK AND
24
Quality management
Customer focus and customer industry orientation
■ Closer dialog with our customers to increase customer
satisfaction
We are also pursuing a series of measures that will increase
transparency for our customers, enhance customer service and
explore joint growth potential. Our comprehensive understanding of
value chains and value creation networks as well as our global setup
and market knowledge remain key success factors.
In 2019, we also worked on an expanded IT-based customer
relationship management system. We want to roll out this state-of-
the-art, even more user-friendly application in 2020 to help sales
employees deliver customer support.
To even better understand our customers' needs, we regularly ask
them for feedback on our performance. In 2019, we rolled out the
Net Promoter SystemⓇ worldwide to establish ongoing, closer
dialog with customers and further increase customer satisfaction
and customer loyalty. This digital platform creates a framework to
learn from feedback and respond quickly.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Customer Orientation
1 To Our Shareholders
About This Report
25
■ BASF puts customers at the center of its decisions and
activities
25
BASF Report 2019
1
For more information on the collaboration with HYMER and the BASF materials used in the
VisionVenture, see basf.com/en/vision-venture
The VisionVenture concept vehicle is a good example of how we
create innovations for the future in close partnership with our
customers. BASF and HYMER GmbH & Co. KG, Bad Waldsee,
Germany, the European market leader for motor homes and
campers, show what a campervan could look like in 2025. More
than 20 BASF solutions open up entirely new design options
and functionalities, including various high-performance plastics,
over 100 3D-printed components, a tailored package of mea-
sures for preventing noises and vibrations, and a new coating
technology. In less than twelve months, HYMER and BASF
together turned their ideas and expertise into a near-production
concept campervan. The VisionVenture was unveiled to the
public in August 2019.
BASF and HYMER: Creating
innovation together
EHYMER
D-BASF
We aim to put the customer at the center of our decisions and
everything we do. Our ability to optimally combine our in-depth
expertise with our wide range of resources reflects our ambition to
be more than just a supplier. We position ourselves as a solution-
oriented system provider. We want to work closely with our partners
to develop custom solutions that are both profitable and sustainable.
We contribute our expertise to optimize processes and applications
together with our customers.
We are continually refining our organization to even better meet the
different needs of our customers. In 2019, we embedded significant
parts of our functional services - including parts of research and
development, IT, procurement, human resources and communi-
cations into the operating divisions. This makes the operating
divisions more agile, enabling them to target specific market
demands and differentiate themselves from the competition. We
also simplified processes to make the way we work more effective,
more efficient and more agile. The objective is to satisfy customer
requests in a more focused and targeted way and improve our reac-
tion times so that our customers experience a new BASF.
-
Our diverse portfolio - from basic chemicals to high value-added
products and system solutions - means that we are active in many
value chains and value creation networks. As a result, we use
various business strategies, which we flexibly adapt to the needs of
individual industries. These range from cost leadership to tailored,
customer-specific solutions for downstream products. This industry
orientation is primarily driven forward and enhanced by the divisions.
Around half of our business units are oriented toward specific
industries.
To be the world's leading chemical company for our customers, we
want to further strengthen our customer focus throughout the entire
organization. This is why we are aligning our business even closer
with the needs of our customers.
The number of customers refers to all external companies (sold-to parties) that had contracts with the BASF Group in the business year concerned under which sales were generated.
ONOUSTRY OWN
see pages 128 to 129
13 MATE
16
M CO
12 RESPONSIBLE
CONSUMPTION
AND PRODUCTION
8FOWIC GROWTH
DECENT WORK AND
Have 80% of our suppliers improve their
sustainability performance upon re-evaluation
Cover 90% of our relevant spend with
sustainability evaluations by 2025
-70%
For more information,
23%
see pages 124 to 125
For more information,
ECONOMIC GROWTH
EDUCATION
DECENT WORK AND
4 QUALITY
BASF Report 2019
INSTITUTIONS
16 PEACE JUSTICE
16 AND STRONG
EQUALITY
GENDER
5
PEACE JUSTICE
struts
17 PARTNER
FOR THE GOALS
People
Digitalization
Portfolio
Operations
Innovation
Sustainability
Action areas sharpen customer focus
To reach our goals and be the leading company in the chemical
industry for our customers, we are strengthening our performance in
innovation and in operations as the leading chemical producer and
plant operator. We leverage digital technologies and data to create
additional value added for us and our customers. We are embedding
sustainability even more deeply into the steering of our business. We
want to foster a passion for our customers in all employees. We are
expanding our portfolio and refining our organization to better meet
customer needs using the power of our Verbund integration. To this
end, we have defined six strategic action areas on which will
continue to base our activities.
[Our strategic action areas]
5 Overviews
Consolidated Financial Statements
New target for 2030: 30%
4
2 Management's Report
Our strategic action areas
1 To Our Shareholders
About This Report
27
27
see pages 102 to 104
For more information,
52%
81%
see page 127
For more information,
3 Corporate Governance
Increase the proportion of women in leadership
positions with disciplinary responsibility to
22-24% by 2021
4 Accelerator products are products that make a substantial sustainability contribution in the value chain.
5 We understand relevant spend as procurement volumes with suppliers defined as "relevant." For more
information, see page 102
2 Return on capital employed (ROCE) is a measure of the profitability of our operations. We calculate this
indicator as the EBIT generated by the segments as a percentage of the average cost of capital basis.
3 Dividend proposed by the Board of Executive Directors
7.7%
ECONOMIC GROWTH
AND WELL-BEING
DECENT WORK AND
HEALTH
Reduce the worldwide lost-time injury rate
per 200,000 working hours to ≤0.1 by 2025
GO
CONSUMPT
12 RESPONSIBLE 13 CLIMATE
ECONOMIC GROWTH AND BASTRUCTURE
AND WELL-BEING
(Cost of capital: 10%)
DECENT WORK AND
15
QO
AND PRODUCTION
AND WELL-BENC
12 RESPONSIBLE
3 GOOD HEALTH
Reduce worldwide process safety incidents
per 200,000 working hours to ≤0.1 by 2025
0.3
see pages 116 to 122
For more information,
14 ON WER 15
Introduce sustainable water management at all
production sites in water stress areas and at
all Verbund sites by 2030
12 RESPONSIBLE
CONSIN
For more information,
see page 48
(2018: €3.20)
1 For more information on the Sustainable Development Goals (SDGs), see About This Report on page 5
and online at sustainable development.un.org
GO
W❤
AND PRODUCTION
15
BELOW WATER
CON
AND SANITATION
AND WELL-BEING
14 FE
10 RESPONSIBLE
€3.303
CLEAN WATER
79%
see pages 109 to 110
For more information,
More than 80% of our employees feel that
at BASF, they can thrive and perform at
their best
35.8%
see pages 110 to 111
For more information,
0.3
For more information,
see pages 38 to 39
€15.0
billion
For more information,
see page 13
3 GOOD HEALTH
Required reduction of
greenhouse gas emissions
to achieve the 2°C goal
BASF Group companies
zettabytes in 2030
Operations
Employees
Partnerships
Financial
Innovation
22
22
1 The number of customers refers to all external companies (sold-to parties) that had contracts with the BASF Group in the business year concerned under which sales were generated.
2 BASF considers all direct suppliers of the BASF Group in the business year concerned as Tier 1 suppliers. These are suppliers that provide us with raw materials, investment goods, consumables and services.
Suppliers can be natural persons, companies or legal persons under public law.
For more information, see the Notes to the Consolidated Financial Statements from page 206 onward
As the publicly traded parent company of the BASF Group, BASF SE
takes a central position: Directly or indirectly, it holds the shares in
the companies belonging to the BASF Group, and is also one of the
largest operating companies. The majority of Group companies
cover a broad spectrum of our business. In the BASF Group Con-
solidated Financial Statements, 295 companies including BASF SE
are fully consolidated. We consolidate seven joint operations on a
proportional basis, and account for 25 companies using the equity
method.
Corporate legal structure
BASF holds one of the top three market positions in around 70%
of the business areas in which it is active. Our most important
global competitors include Arkema, Bayer, Clariant, Corteva,
Covestro, Dow, Dupont, DSM, Evonik, Formosa Plastics, Hunts-
man, Lanxess, SABIC, Sinopec, Solvay, Syngenta, Wanhua and
many hundreds of local and regional competitors. We expect com-
petitors from Asia and the Middle East in particular to gain increasing
significance in the years ahead.
· Social aspects (such as the U.N. Universal Declaration of Human
Rights)
Environmental agreements (such as the E.U. Emissions Trading
System)
- Industry standards
- International trade agreements
- Legal and political requirements (such as European Union
regulations)
Global economic environment
BASF's global presence means that it operates in the context of
local, regional and global developments and a wide range of
conditions. These include:
Business and competitive environment
Agriculture | Consumer goods | Transportation (in each case)
Construction | Electronics | Energy and resources | Health and
nutrition (in each case)
For more information on customers, see page 25; for more information on suppliers,
see page 102 onward
We work with over 75,000 Tier 1 suppliers² from different sectors
worldwide. They supply us with important raw materials, chemicals,
investment goods and consumables, and perform a range of
services. Important raw materials (based on volume) include
naphtha, liquid gas, natural gas, benzene and caustic soda.
Environment
About This Report
1 To Our Shareholders
2 Management's Report
How We Create Value
40.3 million
of electricity
demand
MWh
14.8 million
help us to sharpen our
customer focus
6 strategic action areas
customers innovative solutions
for a sustainable future
100,000
We offer our approximately
Research and
development
expenses of
€2.2 billion
employees in
research and
development
BASF supplies products and services to around 100,000 customers¹
from various sectors in almost every country in the world. Our
customer portfolio ranges from major global customers and
medium-sized businesses to end consumers.
Around 11,000
We create chemistry
in equity
€42.4 billion
Total assets of
€87.0 billion
Our outputs
The overview provides examples of how we create value for our company, the environment and society. It is modeled on the framework of the International Integrated Reporting Council (IIRC).1
Our inputs
Our business model
How We Create Value
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
for a sustainable future
MWh
■ Around 100,000 customers; broad customer portfolio
■ More than 75,000 suppliers
<10%
Florham Ludwigshafen
Antwerp
Freeport
Selected research and
development sites
Planned Verbund site
Verbund sites
Selected sites
Regional centers
BASF sites
We also make use of the intelligent Verbund principle for more than
production, applying it for technologies, the market and digitalization
as well. Expert knowledge is pooled in our global research divisions.
For more information on the Verbund concept, see basf.com/en/verbund
elsewhere. This not only saves us raw materials and energy, it also
avoids emissions, lowers logistics costs and leverages synergies.
The Verbund system is one of BASF's great strengths. We add value
by using our resources efficiently. The Production Verbund intelli-
gently links production units and their energy supply so that, for
example, the waste heat of one plant provides energy to others.
Furthermore, one facility's by-products can serve as feedstock
chemical complex owned by a single company that was developed
as an integrated network. This was where the Verbund principle
was originally established and continuously optimized before being
implemented at additional sites.
BASF has companies in more than 90 countries. We operate six
Verbund sites and 361 additional production sites worldwide. Our
Verbund site in Ludwigshafen, Germany, is the world's largest
Sites and Verbund
administration, the service units and the operating divisions. In
addition, central, functional and regional structures are being
streamlined in the context of the announced portfolio changes.
For more information on portfolio changes, see page 42
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
The BASF Group
1 To Our Shareholders
About This Report
Park
Geismar
São Paulo
BASF Report 2019
10-20%
Chemicals and plastics
>20%
40% Europe
Direct customers
BASF sales by industry 2019
Procurement and sales markets
€59,316 million
Asia Pacific 24%
South America, Africa, Middle East 9%
Location of customer
27% North America
BASF sales by region 2019
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
The BASF Group
1 To Our Shareholders
About This Report
24
21
Zhanjiang
Nanjing
-Hong Kong
Kuantan
5 Overviews
of steam demand
€328
million
invested in
environmental
protection
3 Corporate Governance
2 Management's Report
Corporate Strategy
1 To Our Shareholders
About This Report
23
23
bundle partnerships
with university
research groups
8 Academic
Research Alliances
since 2000
Involved in
U.N. Global
Compact
Early turnover
rate of
1.4%
women in
leadership
positions
23.0%
Proportion of
transportation
incidents with
significant impact
on the environment
0
Number of
lost-time injuries
per 200,000
working hours:
0.3
€15.0 billion
sales of
Accelerator
of CO2 prevented by the
Verbund and combined heat
and power generation
6.4 million
metric tons
and combined heat and
power generation
saved by the Verbund
4
Consolidated Financial Statements
5 Overviews
Our Strategy
Rapid growth in
volume of data
456
Digitalization:
-
Our aspiration is to be the world's leading chemical company and
achieve profitable growth. We aim to primarily grow organically and
thus are strengthening our customer focus. Our growth strategy is
based on investment in strategic growth markets and innovation-
driven sectors. The Asian market continues to play a key role here.
With a share of more than 40%, China is already the world's largest
chemical market and drives the growth of global chemical
production. By 2030, China's share will increase to nearly 50%
and we want to participate in this growth. To further our growth in this
make the best use of available resources and help to overcome
challenges.
by 2030
~50%
2020 to 2050
+25%
2020 to 2050
31.6 million
MWh energy
+100%
Driven by the
emerging markets
Population growth:
Share of population
aged 60 and over
worldwide
Demographic
change:
Global trends provide opportunities for growth in the chemical industry
We create chemistry for a sustainable future
Corporate purpose
Our purpose reflects what we do and why we do it: We create
chemistry for a sustainable future. We want to contribute to a world
that provides a viable future with enhanced quality of life for everyone.
This is why we offer products and solutions that are designed to
Today, the world is changing more rapidly than ever before, driven
by demographic change and new digital technologies. Our customers
in different industries and regions face diverse social and environ-
mental challenges due to limited natural resources, climate change
and the increasing demands of a growing global population. Chem-
istry is key to solving many of these challenges. By combining our
unique expertise with our customers' competence, we can jointly
develop profitable, innovative and sustainable solutions for these
global challenges.
[At BASF, we are passionate about chemistry and our
customers. To be the world's leading chemical company for
our customers, we will grow profitably and create value for
society. Thanks to our expertise, our innovative and entrepre-
neurial spirit, and the power of our Verbund integration, we
make a decisive contribution to changing the world we live in
for the better. This is our goal. This is what drives us and what
we do best: We create chemistry for a sustainable future.
Corporate Strategy
China the largest market:
Share of global
chemical market
new patents
filed worldwide
1,000
Around
sites audited on
raw material supplier
81
on leadership skills
program
feedback
Comprehensive
apprentices
employees
worldwide,
of which 3,161
117,628
compliance
hotlines
sustainability
standards
>50 external
75,000
suppliers
11
Over
152 safety,
security, health
and environmental
protection audits
intangible assets
equipment and
property, plant and
invested in
€4.1 billion
segments
6
operating
divisions
Climate change:
6
1 The figures in this graphic have been audited within the scope of the relevant sections of the Management's Report in which they appear.
from innovations launched
in the past five years
€10 billion
Sales of around
in income taxes
€0.8 billion
€59.3 billion Net income of
in sales €8.4 billion
Financial
Innovation
Environment
Operations
Employees
Verbund sites
Partnerships
countries
06
90
in more than
sites worldwide
additional production
361
units
strategic
business
76
Intelligent Verbund system
BASF Report 2019
BASF Report 2019
4
For more information on digitalization, see pages 64, 110, 129 and 146
Consolidated Financial Statements
Our
Customers
3 Corporate Governance
2 Management's Report
Value-Based Management
1 To Our Shareholders
About This Report
29
29
5 Overviews
BASF Report 2019
Wherever our stakeholders encounter our brand, we want to
convince them that BASF stands for connectedness, innovation and
intelligent solutions, value-adding partnerships, an attractive working
environment and sustainability. This contributes to our customers'
confidence and to our company value.
Our business partners are expected to comply with prevailing laws
and regulations and to align their actions with internationally
We stipulate rules for our employees with standards that apply
throughout the Group. We set ourselves ambitious goals with
voluntary commitments and monitor our performance in terms of
environmental protection, health and safety using our Responsible
Care Management System. In terms of labor and social standards,
this takes place using three elements: the Compliance Program
(including the compliance hotlines, which can be used for internal
and external questions or complaints), close dialog with our stake-
holders (such as with employee representatives or international
organizations), and the global management process to respect
international labor norms.
- The German Corporate Governance Code
- The Responsible Care® Global Charter
The OECD Guidelines for Multinational Enterprises
-
- The Universal Declaration of Human Rights and the two U.N. having a strong brand. Our brand and mission are manifested in our
Human Rights Covenants
strategy and our corporate purpose "We create chemistry for a
sustainable future" - as well as our values. "Connected" describes
the essence of the BASF brand. Connectedness is one of BASF's
great strengths. Our Verbund concept - realized in production,
technologies, the market and digitalization - enables innovative
solutions for a sustainable future. The claim "We create chemistry,"
as stated in the BASF logo, helps us embed this solution-oriented
strategy in the public perception. Our brand creates value by helping
communicate its benefits for our stakeholders and our values.
We are constantly developing our brand image. We regularly measure
awareness of and trust in our brand and our company. A global study
commissioned by us and conducted worldwide every two years by
an independent market research institution again showed in 2018
that, in terms of awareness and trust, BASF is above the industry
average in numerous countries. Our goal is to continue increasing
awareness of BASF in all of our relevant markets.
-
Value-Based Management
The BASF Group's steering concept
Digitalization is an integral part of our business. This creates value
added for our customers, grows our business and improves efficiency.
We are extensively promoting digital skills among our employees to
ensure that the necessary resources are always available to leverage
the opportunities of digitalization to the benefit of our customers.
30
30
BASF Report 2019
For more information on the development of these indicators, see Results of Operations from
page 47 onward
BASF's sustainability targets are generally focused more on the
long term. Moreover, as part of the implementation of our strategy,
we have decided to also establish short-term steering mechanisms
from January 1, 2020, such as incentives within the compensation
system to steer the targets "CO2-neutral growth until 2030" and
"Achieve €22 billion in Accelerator sales by 2025."
Furthermore, we comment on and forecast sales at Group and
segment level in our financial reporting as a significant driver for
EBIT before special items and thus ROCE.
- Capital expenditures (capex) comprise additions to property,
plant and equipment excluding additions from acquisitions, IT
investments, restoration obligations and right-of-use assets
arising from leases. It is used to manage capital employed in the
BASF Group. Capex is not just relevant to ROCE management,
but also supports our long-term goal to increase our dividend
each year based on a strong free cash flow.
A company can only create value in the long term if it
generates earnings that exceed the cost of the capital
employed. This is why we encourage and support all
employees in thinking and acting entrepreneurially in line
with our value-based management concept. As of 2019, the
return on capital employed (ROCE) replaces EBIT after cost
of capital as the most important key performance indicator
for steering the BASF Group.
EBIT before special items is used to steer profitability at Group
and segment level. This is calculated by adjusting the EBIT
reported in the Consolidated Financial Statements for special
items, making it especially suitable for assessing economic
development over time. Special items arise from the integration
of acquired businesses, restructuring measures, certain impair-
ments, gains or losses resulting from divestitures and sales of
shareholdings, and other expenses and income that arise outside
of ordinary business activities.
An important part of our value management is the target agreement
process, which aligns individual employee targets with BASF's
targets. As of 2019, the most important financial performance
indicator in the operating units is ROCE. The other units' contribution
to value is also assessed according to effectiveness and efficiency
on the basis of quality and cost targets.
Value-based management throughout the company
The cost of capital percentage, which we have integrated into our
ROCE target as a comparative figure, is determined using the
weighted cost of capital from equity and borrowing costs (weighted
average cost of capital, WACC). To calculate a pre-tax figure similar
to EBIT, it is adjusted using the projected tax rate for the BASF Group
for the business year. In addition, the projected net expense of
Other is already provided for by an adjustment to the cost of capital
percentage. The cost of equity is ascertained using the capital
asset pricing model. Borrowing costs are determined based on the
financing costs of the BASF Group. The cost of capital percentage
for 2020 is 9% (2019: 10%).
The cost of capital basis consists of the operating assets of the
segments and is calculated using the month-end figures. Operating
assets comprise the current and noncurrent asset items of the
segments. These include tangible and intangible fixed assets,
investments accounted for using the equity method, inventories,
trade accounts receivable, other receivables and other assets
generated by core business activities and, where appropriate, the
assets of disposal groups. The cost of capital basis also includes
customer and supplier financing.
To calculate the EBIT of the segments, we take the BASF Group's
EBIT and deduct the EBIT of activities recognized under Other,
which are not allocated to the divisions.
ROCE is calculated as the EBIT of the segments as a percentage
of the average cost of capital basis at each month-end.
Calculating ROCE and cost of capital
We follow a value-oriented steering concept with our financial
targets. As of 2019, we use the return on capital employed (ROCE)
instead of EBIT after cost of capital for operational steering as a key
target and management indicator for the BASF Group, its operating
divisions and business units. As stated in our strategic goals, we
aim to achieve a ROCE considerably above the cost of capital
percentage every year. The change to ROCE means that the same
logic and data is now used for internal management, external
communication with the capital markets and variable compensa-
tion. This improves the consistency of the indicators used for
BASF's value-based management with variable compensation and
pension systems, and our shareholders' objectives.
We use ROCE as the BASF Group's most important key perfor-
mance indicator for measuring economic success as well as for
steering the BASF Group and its operating units. EBIT before
special items and capex (capital expenditure) are key performance
indicators for BASF that have a direct impact on ROCE and as
such, support its management.
BASF's success as an integrated global chemical company relies on
Digitalization
For more information on corporate governance and compliance, see page 149 onward
About This Report
28
BASF Report 2019
For more information on employees, see page 126 onward
We aim to clearly position each business against its relevant
competitors and establish a high-performance organization to enable
us to be successful in an increasingly competitive market environ-
ment. Our people are what will make the implementation of our
strategy successful. We rely on the engagement of our employees
and give them the tools and skills necessary to be able to offer our
customers differentiated and customized products, services and
solutions. Our tailored business models and organizational struc-
tures ensure that each business unit can optimally serve its market
segment.
Employees
For more information on operations, see page 109 onward
We produce safely, efficiently and reliably so that we can deliver
products to our customers on spec and on time. We strive to
continually improve the reliability and availability of our plants, as well
as our agility. Above and beyond this, continuous process improve-
ments and effective debottlenecking of our existing asset base are
paramount to ensure our competitiveness.
1 To Our Shareholders
Operations
We are successful in the long term when our products, solutions
and technologies add value to the environment, society and the
economy. We want to be a thought leader in sustainability, which is
why we are increasing the relevance of sustainability in our steering
processes and business models. This secures the long-term suc-
cess of our company, creates business opportunities and establishes
us as a key partner supporting our customers.
Sustainability
For more information on innovation, see page 31 onward
Our ambition is to be the most attractive partner for our customers
whenever they are confronted with challenges that can be
approached with chemistry. Our research and development compe-
tences are industry-leading. We aim to build on and leverage this
strength to develop innovations together with our customers. We
want to continuously improve our innovation processes so that we
can bring products to the market more quickly.
Innovation
For more information on our organization and the Verbund, see page 19 onward
We will sharpen our portfolio and focus our capital allocation toward
growth areas. We will focus primarily on organic growth through
capital expenditures and innovation. We also make targeted
acquisitions where this makes strategic sense and creates value
and divest businesses that are no longer a strategic match. Our
segment structure creates a high level of transparency regarding the
steering of our businesses, the importance of value chains and the
role of our Verbund. The physical, technological, market and digital
integration of the Verbund is at the core of our portfolio and our
strengths.
The BASF brand |
For more information on the integration of sustainability, see page 36 onward
2 Management's Report
Portfolio
4 Consolidated Financial Statements
For more information on supplier standards, see page 102 onward
3 Corporate Governance
For more information on the Responsible Care Management System, see page 108
For more information on labor and social standards, see page 131
of Principles Concerning Multinational Enterprises and Social
Policy (MNE Declaration)
The core labor standards of the ILO and the Tripartite Declaration
The 10 principles of the U.N. Global Compact
Our standards fulfill or exceed existing laws and regulations and take
internationally recognized principles into account. We respect and
promote:
■ We act according to our values and internationally
recognized standards of conduct and review our
performance with audits
recognized principles. We have established appropriate monitoring
systems to ensure this.
Entrepreneurial: We focus on our customers, as individuals and
as a company. We seize opportunities and think ahead. We take
ownership and embrace personal accountability.
Responsible: We value the health and safety of people above all
else. We make sustainability part of every decision. We are committed
to strict compliance and environmental standards.
Open: We value diversity, in people, opinions and experience. This is
why we foster feedback based on honesty, respect and mutual trust.
We learn from our setbacks.
Creative: We make great products and solutions for our customers.
This is why we embrace bold ideas and give them space to grow.
We act with optimism and inspire one another.
How we act is critical for the successful implementation of our
strategy: This is what our four core values represent – creative, open,
responsible, entrepreneurial. They guide our actions and define how
we want to work together - as a team, with our customers and our
partners.
guide our conduct and actions
Corporate values
5 Overviews
[Global standards
Our strategic action areas
918.5
918.5
918.5
918.5
c Figures for 2017 were restated with the presentation of the oil and gas activities as discontinued operations. For more information, see the Notes to the Consolidated Financial Statements from page 204 onward.
d Figures for 2018 were restated with the presentation of the construction chemicals activities as discontinued operations. For more information, see the Notes to the Consolidated Financial Statements from page 204 onward.
e Calculated in accordance with German GAAP
918.5
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
BASF Report 2019
292
918.5
918.5
918.5
2.80
918.5
million
3.30
3.20
3.10
3.00
2.90
About This Report
2.70
2.60
2.50
2.20
€
918.5
1 To Our Shareholders
2012a
3 Corporate Governance
17,241
Property, plant and equipment
14,525
16,554
13,594
15,162
12,537
12,967
12,324
3,030
11,919
12,245
Intangible assets
2019
2018
2017°
2016
2015
2014
2013b
2011
2010
Million €
Balance sheet (IFRS)
5 Overviews
Ten-Year Summary
Consolidated Financial Statements
4
2 Management's Report
12,193
Dividend per share
2,847
19.7
19.2
19.9
27.5
24.6
%
Return on equity after tax
4.5
7.1
9.5
8.2
8.7
11.7
11.5
11.0
16.1
14.7
%
Return on assets
13.5
14.9d
17.6
18.3
15.1
14.9
14.1
13.9
14.4
13.3
18.9
14.1
2,755
2,664
2,572
2,480
2,388
2,296
2,021
3,899
2,982
3,130
2,808
2,158
5,853
2,939
2,826
3,506
3,737
Number of shares as of December 31
17,966
Dividend
Net income of BASF SE
Appropriation of profits
7.7
12.0d
15.4
%
Return on capital employed (ROCE)
21.6
2,880
16,610
613
23,496
3,078
3,095
4,032
3,714
3,455
3,781
3,883
Other receivables and miscellaneous assets
9,093
10,665
10,801
10,952
9,516
10,385
10,233
9,506
10,886
10,167
Accounts receivable, trade
11,223
12,166
10,303
10,005
9,693
11,266
10,160
9,581
3,494
10,059
3,139
Marketable securities
4,013
14,607
3,264
295
614
Assets of disposal groups
2,427
2,300
6,495
1,375
2,241
1,718
1,827
1,647
2,048
1,493
Cash and cash equivalents
444
344
52
536
21
19
17
14
19
16
3,790
8,688
Inventories
55,960
636
570
606
605
526
540
643
16.3
848
1,953
Other financial assets
15,008
2,203
4,715
4,647
4,436
3,245
4,174
3,459
1,852
1,328
Investments accounted for using the equity method
21,792
20,780
25,258
26,413
25,260
Deferred taxes
1,112
941
1,473
43,335
47,623
50,550
46,270
43,939
38,253
35,259
34,087
34,532
Noncurrent assets
1,112
886
1,332
19,229
1,210
1,498
877
911
561
653
Other receivables and miscellaneous assets
2,887
2,342
2,118
2,513
1,791
2,193
1,006
1,720
17.4
5.64
EBITDA margin
10,526
10,649
11,043
10,432
10,009
11,993
11,131
Income from operations before depreciation and amortization (EBITDA)
8,421
4,707
6,078
4,056
3,987
5,155
4,792
4,819
6,188
4,557
Net income
8,491
4,979
6,352
4,255
4,301
5,492
5,113
5,067
10,765
6,603
8,970d
EBIT before special items
6,428
4,084
3,199
3,294
of which property, plant and equipment
4,097
10,735
4,364
7,258
6,013
7,285
7,726
5,263
3,646
5,304
Additions to property, plant and equipment and intangible assets
Capital expenditures, depreciation and amortization
4,536
6,281d
7,645
6,309
6,739
7,357
7,077
6,647
8,447
8,138
8,036
6,369
5,074
5,945
70,449
74,326
73,973
72,129
73,497
63,873
Income before income taxes
Income from operations (EBIT)
Sales
Statement of income
2019
2018
2017c
2016
2015
2014
2013b
2012a
2011
2010
5 Overviews
Ten-Year Summary
Million €
Ten-Year Summary
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
57,550
Income after taxes
61,223
59,316
863d
760
Income after taxes from discontinued operations
2,546
4,116d
5,592
Income after taxes from continuing operations
3,302
5,233d
6,882
5,395
5,548
7,203
6,600
5,977
8,970
7,373
4,052
5,974d
7,587
6,275
6,248
7,626
7,160
6,742
8,586
7,761
60,220d
5,742
4,377
4,028
6.74
4.96
€
Earnings per share
2019
2018
2017°
2016
2015
2014
2013b
2012a
2011
2010
Key data
Million €
5 Overviews
Ten-Year Summary
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
291
BASF Report 2019
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
c Figures for 2017 were restated with the presentation of the oil and gas activities as discontinued operations. For more information, see the Notes to the Consolidated Financial Statements from page 204 onward.
d Figures for 2018 were restated with the presentation of the construction chemicals activities as discontinued operations. For more information, see the Notes to the Consolidated Financial Statements from page 204 onward.
5.25
2,158
5.22
4.34
7,474
7,939
8,785
7,717
9,446
6,958
8,100
6,602
7,105
6,460
Cash flows from operating activities
4.00
5.87
6.44
4.83
5.00
5.44
5.31
Current assets
6.26
5.73
€
Adjusted earnings per share
9.17
5.12
6.62
4.42
5.61
1,994d
1,843
1,863
Personnel expenses
Annual average
At year-end
Number of employees
3,408
3,155d
3,586
3,691
3,600
2,770
2,631
2,594
2,618
2,667
4,146
3,750d
4,202
4,251
4,401
3,417
3,272
3,267
3,407
3,370
Depreciation and amortization of property, plant and equipment and intangible assets
of which property, plant and equipment
3,842
5,040
109,140
104,043
111,141
110,403
110,782
109,969
1,953
1,884
1,849
1,732
1,605
1,492
Research and development expenses
10,924
10,659
10,610
10,165
9,982
9,224
%
9,285
8,576
8,228
117,628
119,200
122,404
118,371
114,333
115,490
113,830
111,975
113,249
112,644
111,844
112,435
113,292
112,206
8,963
24,861
BASF Report 2019
27,467
Global Product Strategy (GPS)
In the United Nations Global Compact network, nongovernmental
organizations, companies, international business and employee
representatives, scientists and politicians work on aligning global
business with the principles of sustainable development.
Global Compact
Genome editing refers to a series of new molecular biological
methods to make specific changes in the genome. Naturally occur-
ring processes are used to make small changes to an organism's
genes to modify a specific characteristic. Such techniques have
great potential for innovative solutions in healthcare, agriculture and
industrial applications, for example.
Genome editing
G
Free cash flow is the cash flows from operating activities less
payments made for property, plant and equipment and intangible
assets.
Free cash flow
Formulation describes the combination of one or more active sub-
stances with excipients like emulsifiers, stabilizers and other inactive
components in order to improve the applicability and effectiveness
of various products, such as cosmetics, pharmaceuticals, agricul-
tural chemicals, paints and coatings.
Formulation
F
Exploration refers to the search for mineral resources, such as crude
oil or natural gas, in the Earth's crust. The exploration process
involves using suitable geophysical methods to find structures that
may contain oil and gas, then proving a possible discovery by means
of exploratory drilling.
Exploration
The European Water Stewardship (EWS) Standard enables busi-
nesses and agriculture to assess the sustainability of their water
management practices. The criteria are sustainable water abstrac-
tion, maintaining good water quality, preserving conservation areas,
and ensuring continuous improvement processes. The EWS stan-
dard came into force at the end of 2011 and was developed by
nongovernmental organizations, governments and businesses
under the direction of the independent organization European Water
Partnership (EWP).
European Water Stewardship (EWS) Standard
The equity method is used to account for shareholdings in joint
ventures and associated companies. Based on the acquisition costs
of the shareholding as of the acquisition date, the carrying amount
is continuously adjusted to the changes in equity of the company in
which the share is held.
Equity method
We define the emerging markets as Greater China, the ASEAN
countries (Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos,
the Philippines, Singapore, Thailand, Vietnam), India, Pakistan and
Bangladesh; Central and South America; eastern Europe; the
Middle East, Turkey and Africa.
Emerging markets
The Eco-Efficiency Analysis is a method developed by BASF for
assessing the economic and environmental aspects of products
and processes. The aim is to compare products with regard to
profitability and environmental compatibility.
Eco-Efficiency Analysis
The EBITDA margin is the margin that we earn on sales from our
operating activities before depreciation and amortization as a per-
centage of EBITDA. It is calculated as income from operations
before depreciation, amortization, impairments and reversals of
impairments as a percentage of sales.
EBITDA margin
Earnings before interest, taxes, depreciation and amortization
(EBITDA): At BASF, EBITDA corresponds to income from operations
before depreciation and amortization (impairments and reversals of
impairments).
EBITDA
Earnings before interest and taxes (EBIT): At BASF, EBIT corre-
sponds to income from operations.
EBIT
The Global Product Strategy aims to establish global product
stewardship standards and practices for companies. The program
aims to improve the safety management of chemical substances
and to support governments in the introduction of local chemical
regulations.
E
Global Reporting Initiative (GRI)
BASF Report 2019
ISO 27001
ISO 19011 is an international standard developed by the Inter-
national Organization for Standardization (ISO) that also serves as a
guide for auditing management systems, for example for occupa-
tional health and safety, energy, quality and environmental manage-
ment.
ISO 19011
ISO 14001 is an international standard developed by the Inter-
national Organization for Standardization (ISO) that determines the
general requirements for an environmental management system for
voluntary certification.
ISO 14001
ISO 9001 is an international standard developed by the International
Organization for Standardization (ISO) that determines minimum
requirements for a quality management system for voluntary certifi-
cation.
ISO 9001
The ILO Core Labor Standards are set out in a declaration of the
International Labor Organization (ILO), comprising eight conventions
that set minimum requirements for decent working conditions.
ILO Core Labor Standards
The International Financial Reporting Standards (until 2001: Inter-
national Accounting Standards, IAS) are developed and published
by the International Accounting Standards Board, headquartered in
London, United Kingdom. The "IAS Regulation" made the applica-
tion of IFRSS mandatory for listed companies headquartered in the
European Union starting in 2005.
IFRS
IAS stands for International Accounting Standards.
IAS
The Health Performance Index is an indicator developed by BASF to
provide more detailed insight into our approach to health manage-
ment. It comprises five components: confirmed occupational
diseases, medical emergency drills, first aid, preventive medicine
and health promotion.
Health Performance Index (HPI)
H
ment.
The Greenhouse Gas Protocol, used by many companies in different
sectors as well as nongovernmental organizations and govern-
ments, is a globally recognized standard to quantify and manage
greenhouse gas emissions. The reporting standards and recom-
mendations for implementing projects to reduce emissions are
jointly developed by companies, nongovernmental organizations
and governments under the guidance of the World Resources
Institute and the World Business Council for Sustainable Develop-
Greenhouse Gas Protocol (GHG Protocol)
5 Overviews
Glossary and Trademarks
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
296
The Global Reporting Initiative is a multistakeholder organization. It
was established in 1997 with the aim of developing a guideline for
companies' and organizations' voluntary reporting on their eco-
nomic, environmental and social activities.
ISO 27001 is an international standard developed by the Inter-
national Organization for Standardization (ISO) that determines the
general requirements for an information security management
system for voluntary certification.
5 Overviews
Glossary and Trademarks
4
Breakthrough innovations are radically new products, applications,
processes, services or business models that have a significant
potential competitive advantage and a disruptive effect on the
market. They can also be achieved by combining individual innova-
tions and existing technologies to create a new, complex system.
Breakthrough innovations open up new high-tech fields, markets or
industries, generating value added and benefits for society.
Breakthrough innovations
Biotechnology includes all processes and products that make use of
living organisms, such as bacteria and yeasts, or their cellular
constituents.
Biotechnology
A barrel of oil equivalent (BOE) is an international unit of measure-
ment for comparing the energy content of different fuels. It is equal
to one barrel of crude oil, or 6,000 cubic feet (169 cubic meters) of
natural gas.
Barrel of oil equivalent (BOE)
B
Associated companies are entities in which significant influence can
be exercised over their operating and financial policies and which
are not subsidiaries, joint ventures or joint operations. In general, this
applies to companies in which BASF has an investment of between
20% and 50%.
Associated companies
A
Glossary and
Trademarks
5 Overviews
Glossary and Trademarks
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
294
BASF Report 2019
c As of January 1, 2019, tax provisions are no longer reported under other provisions, but under tax provisions and deferred tax liabilities. Figures for 2018 have been restated; no restatement was made for 2017 and earlier.
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
86,950
86,556
78,768
76,496
70,836
C
Consolidated Financial Statements
Capital expenditures (capex)
Carbon management
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
295
BASF Report 2019
An ongoing risk management process to identify and avoid negative
impacts on and by a company (for example, through human rights
violations in the supply chain).
Due diligence
The Dodd-Frank Act issued in 2010 comprises accounting and
disclosure obligations for publicly listed U.S. companies regarding
the use of certain raw materials that come from the Democratic
Republic of the Congo or its bordering countries. The companies
must prove that the materials they use do not come from mines in
these conflict areas. The definition of conflict minerals as per the
Dodd-Frank Act includes the following materials and their deriva-
tives: columbite-tantalite (coltan), cassiterite, wolframite and gold.
Dodd-Frank Act
D
We understand customers as all external companies (sold-to
parties) that had contracts with the BASF Group in the business
year concerned under which sales were generated.
Customers
Compliance is an important element of corporate governance. It
refers to the company's behavior in accordance with laws, guide-
lines and voluntary codices.
Compliance
BASF's Competency Model is derived from our corporate strategy
and our values and translates these into specific day-to-day
behavioral standards. It is applicable worldwide, creating a common
framework for the conduct of all BASF employees and leaders to
enable us to reach our shared goals. The eight competencies are:
Drive Innovation, Collaborate for Achievement, Embrace Diversity,
Communicate Effectively, Drive Sustainable Solutions, Develop Self
and Others, Act with Entrepreneurial Drive, Demonstrate Customer
Focus.
Competency Model
The commercial paper program is a framework agreement between
BASF and banks regarding the issuing of debt obligations on the
financial market (commercial paper). The commercial paper is
issued under a rolling program for which the terms can be deter-
mined individually. This requires a good rating.
Commercial paper program
CO2 equivalents are units for measuring the impact of greenhouse
gas emissions on the greenhouse effect. A factor known as the
global warming potential (GWP) shows the impact of the individual
gases compared with CO2 as the reference value.
CO₂ equivalents
The circular economy concept describes the transition away from a
linear model of "take-make-dispose" to a system of closed loops
powered by renewable energy. Core elements include re-using
resources, avoiding waste, using products efficiently, and recycling
products at the end of their service life.
Circular economy
The international nonprofit organization CDP (formerly the Carbon
Disclosure Project) analyzes environmental data of companies. The
CDP's indexes serve as assessment tools for investors.
CDP
Carbon management bundles our global activities and a long-term
research and development program to reduce our greenhouse gas
emissions. The objective is to achieve our climate protection target
and set the course for low-carbon chemical production.
We define capex as additions to property, plant and equipment
excluding additions from acquisitions, IT investments, restoration
obligations and right-of-use assets arising from leases.
ISO 50001
ISO 50001 is an international standard developed by the Inter-
national Organization for Standardization (ISO) that determines the
general requirements for an energy management system for volun-
tary certification.
Joint arrangement
BASF Report 2019
A value chain describes the successive steps in a production
process: from raw materials through various intermediate steps,
such as transportation and production, to the finished product.
Value chain
V
TUIS is a German transport accident information and emergency
response system jointly operated by around 130 company fire
departments within the chemical industry and specialists. The
member companies can be reached by the public authorities at any
time and provide assistance over the telephone, expert on-site
advice or special technical equipment.
TUIS
Traits are commercial plant characteristics, such as an inherent
resistance to certain herbicides or an inherent defense against
certain insects.
Traits
Global initiative of various companies from the chemical industry for
the global standardization of supplier evaluations to improve sus-
tainability in the supply chain.
BASF considers all direct suppliers of the BASF Group in the
business year concerned as Tier 1 suppliers. These are suppliers
that provide us with raw materials, investment goods, consumables
and services. Suppliers can be natural persons, companies or legal
persons under public law. Suppliers usually work together with other
suppliers, which are categorized as Tier 2, Tier 3, etc. based on their
role in the value chain.
Tier 1 suppliers
TDI stands for toluene diisocyanate and is a raw material for the
production of polyurethane. It is used primarily in the automotive
industry (for example, in seat cushions and interiors) and the furniture
industry (for example, for flexible foams for mattresses or cushioning,
or in wood coating).
TDI
The Task Force on Climate-related Disclosures (TCFD) established
by the G20 Financial Stability Board promotes the disclosure of
information and data relevant to climate change by companies, and
develops corresponding recommendations. The objective is to
improve market participants' understanding of material climate-
relevant risks and enable them to better assess the opportunities
and risks of climate change. BASF supports the recommendations
and is involved in the work of the Task Force.
TCFD
T
We use Sustainable Solution Steering to review and guide our
product portfolio in terms of sustainability. The four categories -
Accelerators, Performers, Transitioners and Challenged - indicate
how our products and solutions already comply with sustainability
requirements and how we can increase their contribution.
Sustainable Solution Steering
A steam cracker is a plant in which steam is used to "crack" naphtha
(petroleum) or natural gas. The resulting petrochemicals are the raw
materials used to produce most of BASF's products.
Steam cracker
A spot market is a market where an agreed-upon deal, including
delivery, acceptance and payment, occurs immediately, as opposed
to forward contracts, where the delivery, acceptance and payment
occurs at a point in time after the conclusion of the deal.
Spot market (cash market)
Special items arise from the integration of acquired businesses,
restructuring measures, impairments, gains or losses resulting from
divestitures and sales of shareholdings, and other expenses and
income that arise outside of ordinary business activities.
Special items
SEEbalance is the SocioEcoEfficiency analysis developed by BASF.
It can be used to evaluate and compare the environmental impact,
costs and social aspects of products and manufacturing processes.
SEEbalanceⓇ makes sustainable development measurable and
manageable for companies by combining the three dimensions of
sustainability - economy, environment and society - in an integrated
product assessment tool.
SEEbalance®
S
299
Return on capital employed (ROCE) is a measure of the profitability
of our operations. This is calculated as the EBIT generated by the
segments as a percentage of the average cost of capital basis. The
average cost of capital basis corresponds to the operating assets of
the segments plus the customer and supplier financing not included
there and is calculated using the month-end figures.
About This Report
To Our Shareholders
300
BASF Report 2019
a Trademarks are not registered/used in all countries.
The most important factors leading to water scarcity are low precipi-
tation and high water abstraction rates. We previously defined water
stress areas as areas in which 60% or more of the water available is
used by industry, household and agriculture. From 2019 onward,
we will expand our definition of water stress areas in accordance
with the new Global Reporting Initiative (GRI) standards. In the
future, we will report on water stress areas as regions in which 40%
or more of available water is used. Our assessment is based on
Aqueduct 3.0 (WRI, 2019). Our sustainable water management goal
also takes into account all sites that we defined prior to 2019 as
sites in water stress areas in accordance with Pfister et al. (2009), as
well as the Verbund sites.
Water stress areas
We calculate the water consumption of the BASF Group as the sum
of evaporation in cooling processes, water content in sales products,
and other water use at the sites.
Water consumption
All other trademarks referred to in the BASF Report are registered
trademarks of the BASF Group (identified with the Ⓡ symbol),
trademarks pending (identified with the TM symbol), or trademarks
used by the BASF Group.
Registered trademark of the European Chemical Industry Council
Responsible CareⓇ
Registered trademark of Bain & Company, Inc.
Net Promoter System®
Trademark pending of MS Technologies LLC, West Point, Iowa
GT27™M
Trademarksa
-
W
In the BASF Verbund, production facilities and technologies are
intelligently networked, with high-output chemical processes that
use energy and resources efficiently. The by-products of one plant
serve as feedstock elsewhere, creating efficient value chains - from
basic chemicals to high value-added solutions such as coatings or
crop protection products. Our Verbund concept realized in
production, technologies, the market and digitalization - enables
innovative solutions for a sustainable future.
Verbund
The Value to Society approach was developed by BASF in coopera-
tion with external experts to measure and assess in monetary terms
the economic, ecological, and social impacts of its business activi-
ties along the entire value chain.
Value to Society
Glossary and Trademarks
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1
ROCE
Profits generated can be used in two ways: distribution to share-
holders or retention within the company.
Responsible CareⓇ refers to a worldwide initiative by the chemical
industry to continuously improve its performance in the areas of
environmental protection, health and safety.
The British thermal unit (Btu) is a unit of energy observed in the
Anglo-American measuring system. It is used for indicating values
such as the energy content of gas. One mmBtu (million British
thermal units) is equal to approximately 1,003 cubic feet of gas or 28
cubic meters of gas.
Million British thermal unit (mmBtu)
MDI stands for diphenylmethane diisocyanate and is one of the
most important raw materials for the production of polyurethane.
This plastic is used for applications ranging from the soles of high-
tech running shoes and shock absorbers for vehicle engines to
insulation for refrigerators and buildings.
MDI
BASF uses a materiality analysis to identify and assess sustainability
topics. This takes into account the expectations and demands of
external stakeholders, as well as the expertise of members of the
Stakeholder Advisory Council and the assessments of our employ-
ees from various units. An analysis of various data sources expands
on and verifies these findings.
Materiality analysis
P
N
M
5 Overviews
Glossary and Trademarks
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
297
BASF Report 2019
The long-term incentive program is a share price-based compensa-
tion program primarily for senior executives of the BASF Group and
members of the Board of Executive Directors. The program aims to
tie a portion of the participants' annual variable compensation to the
long-term, absolute and relative performance of BASF shares by
making an individual investment in the company's stock.
Long-term incentive program (LTI)
L
A joint venture is a joint arrangement in which the parties that have joint
control of a legally independent entity have rights to the net assets of
that arrangement. Joint ventures are accounted for using the equity
method in the BASF Group Consolidated Financial Statements.
Joint venture
A joint operation is a joint arrangement in which the parties that share
control have direct rights to the assets and liabilities relating to the
arrangement. For joint operations, the proportional share of assets,
liabilities, income and expenses are reported in the BASF Group
Consolidated Financial Statements.
Joint operation
A joint arrangement refers to joint ventures and joint operations, and
describes a jointly controlled arrangement of two or more parties. This
arrangement exists if decisions about relevant activities require the
unanimous consent of all parties sharing control.
Monitoring system
Monitoring systems and tools serve to measure and ensure the
adherence to standards. One area that is monitored is our voluntary
commitments, such as the adherence to human rights and inter-
nationally recognized labor standards.
MSCI World Chemicals Index
The MSCI World Chemicals Index is a stock index that includes the
world's biggest chemical companies. It measures the performance
of the companies in the index in their respective national currencies,
thus considerably reducing currency effects.
Responsible CareⓇ
5 Overviews
Glossary and Trademarks
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
298
BASF Report 2019
Renewable raw materials are products made from biomass such as
sugars, starches and vegetable oils that are not used as food or
feed, but as feedstock or to generate warmth, electricity or fuels.
Renewable resources
REACH is a European Union regulatory framework for the registra-
tion, evaluation, authorization and restriction of chemicals, and was
implemented gradually by 2018. Companies are obligated to collect
data on the properties and uses of produced and imported sub-
stances and to assess any risks.
71,359
REACH
Propylene oxide (PO), a very reactive compound, is generated by
the oxidation of propylene and is used as basic chemical for further
processing in the chemical industry.
Propylene oxide (PO)
Process safety incidents (PSI) is a worldwide harmonized industry
metric used to report events involving the release of a substance or
energy where this exceeds defined thresholds. BASF has used the
criteria and reporting thresholds developed by the International
Council of Chemical Associations (ICCA) since 2018.
Process safety incidents (PSI)
The peak sales potential of the Agricultural Solutions pipeline
describes the total peak sales generated for individual products in
the research and development pipeline. Peak sales are the highest
sales value to be expected from one year. The pipeline comprises
innovative products that have been on the market since 2019 or will
be launched on the market by 2029.
Peak sales potential
The Occupational Health and Safety Assessment Series (OHSAS)
includes the standard OHSAS 18001, which contains a framework
for an occupational safety management system. This system can be
integrated into an existing quality and environmental protection
management system and certified accordingly.
OHSAS 18001
NMVOC (nonmethane volatile organic compounds)
VOCS (volatile organic compounds) are organic substances that are
present in the air as gas at low temperatures. These include some
hydrocarbons, alcohols, aldehydes and organic acids. NMVOCs are
VOCs from which methane is excluded.
Naphtha is petroleum that is produced during oil refining. Heavy
naphtha is the starting point for gasoline production. Light naphtha
is the most important feedstock for steam crackers.
Naphtha
The International Organization for Standardization defines nano-
materials as materials with one or more external dimensions on a
nanoscale or with internal structure or surface structure on a
nanoscale. For regulatory purposes, there are additional definitions
for nanomaterials worldwide.
Nanomaterials
R
64,204
62,726
61,175
630
1,010
1,246
1,253
(4,850)
(5,939)
(5,282)
(4,014)
(3,521)
(5,482)
(3,400)
(3,461)
314
1,195
42,056
36,699
34,826
31,515
30,120
28,777
26,102
23,708
19,446
15,817
3,115
3,118
3,117
581
3,130
629
919
2,234
2,628
2,467
Tax provisions and deferred tax liabilities
7,683
7,434
6,293
8,209
6,313
7,313
3,727
5,421
3,189
2,778
Provisions for pensions and similar obligations
42,350
36,109
34,756
32,568
31,545
28,195
27,673
25,621
25,385
22,657
853
1,055
761
3,141
3,143
3,165
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
293
1 To Our Shareholders
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
c As of January 1, 2018, receivables from bank acceptance drafts are no longer reported under trade accounts receivable, but under the item other receivables and other assets. The 2017 figures have been restated accordingly.
86,950
86,556
78,768
76,496
70,836
71,359
64,204
62,726
61,175
59,393
Assets
30,990
43,221
31,145
25,946
24,566
27,420
25,951
5 Overviews
Ten-Year Summary
Balance sheet (IFRS)
Million €
Subscribed capital
3,188
3,203
3,216
1,176
1,176
1,176
1,176
1,176
1,176
1,176
1,176
1,176
1,176
2,894
2019
2017
2016
2015
2014
2013b
2012a
2011
2010
Equity
Noncontrolling interests
Other comprehensive income
Retained earnings
Capital reserves
2018
27,088
3,420
3,317
4,074
3,545
3,256
4,094
3,985
3,369
756
695
1,119
1,288
1,082
1,079
968
870
1,038
1,140
2,938
3,252
3,229
2,802
2,540
2,844
2,670
2,628
3,210
3,324
5,087
3,767
5,122
2,497
3,362
59,393
Equity and liabilities
16,604
23,329
14,880
15,317
14,236
15,893
14,339
16,710
16,477
15,568
1,034
5,753
1,993
87
195
3,427
2,998
3,064
2,850
2,520
3,564
2,292
2,623
3,036
2,802
5,509
4,971
4,610
4,020
15,015
15,332
15,535
12,545
11,123
11,839
11,151
8,704
9,019
11,670
Noncurrent liabilities
Other liabilities
Financial indebtedness
1,340
1,301
3,478
3,667
3,369
3,502
3,226
2,925
3,335
3,352
Other provisions
2,280
2,346
2,731
901
1,142
1,111
1,194
4,861
5,153
4,502
5,121
4,738
Current liabilities
Liabilities of disposal groups
Other liabilities
Financial indebtedness
Tax liabilities
Provisions
Accounts payable, trade
27,996
3,381
27,118
28,611
25,055
27,271
22,192
20,395
19,313
21,168
1,678
705
1,095
873
869
1,197
29,132
About This Report
Together for Sustainability (TFS)
Retention
Papler aus verantwor-
tungsvollen Quellen
FSC® C021366
MIX
FSC
www.fsc.org
BASF supports the chemical industry's global Responsible Care initiative.
OUR COMMITMENT TO SUSTAINABILITY
Responsible Care*
basf.com
Internet
Dr. Stefanie Wettberg, phone: +49 621 60-48002
Investor Relations
Thorsten Pinkepank, phone: +49 621 60-41976
Sustainability Relations
Jens Fey, phone: +49 621 60-99123
COMC 2002 E
Media Relations
General inquiries
Contact
You can find this and other BASF publications
online at basf.com
Published on February 28, 2020
Further information
April 29, 2021
Quarterly Statement Q1 2021 / Annual Shareholders' Meeting 2021
February 26, 2021
BASF Report 2020
October 28, 2020
Quarterly Statement Q3 2020
July 29, 2020
Half-Year Financial Report 2020
Phone: +49 621 60-0, email: global.info@basf.com
April 30, 2020
Quarterly Statement Q1 2020 / Annual Shareholders' Meeting 2020
strengthen our portfolio with creative new projects and in this way,
reach our growth goals.
Classification of relevant portfolio 1, 2 according to the Sustainable Solution Steering method
If, during re-assessment of our portfolio, we identify products
with substantial sustainability concerns, we classify these as
"Challenged." We develop and implement action plans for all
products in this category. These action plans include research
projects and reformulations to optimize products, or even replacing
the product with an alternative.
Accelerator products make a substantial sustainability contribution
in the value chain. Based on our corporate strategy, we have
therefore set ourselves a global target: We aim to make sustain-
ability an even greater part of our innovation power and achieve
€22 billion in Accelerator sales by 2025. In 2019, we achieved sales
of €15.0 billion with Accelerator products (2018: €14.3 billion).² The
construction chemicals activities, which are presented as discon-
tinued operations, are no longer taken into account. The resulting
decline in sales of Accelerator products was however offset by the
first-time assessment of the strategically relevant trading business
portfolio. At the same time, this first-time segmentation increased
sales of Transitioner products.
Transparently classifying our products on the basis of their contribu-
tion to sustainability enables us to systematically improve them.
A significant steering tool for our product portfolio, based on the
sustainability performance of our products, is the Sustainable
Solution Steering method. By the end of the 2019 business year, we
had conducted sustainability analyses and assessments for 96.3%
of our relevant portfolio¹ of more than 50,000 specific product
applications, accounting for €51.9 billion in sales.2 These consider
the products' application in various markets and sectors. New
market requirements arise as a result of the continuous develop-
ment of new product solutions in the industry or changing regulatory
frameworks. This has an effect on comparative assessments,
which is why we regularly re-assess our product portfolio.
■ Increase sales from Accelerator products
Steering of product portfolio based on sustainability
performance
For more information on value balancing alliance e.V., see value-balancing.com
For more information on our sustainability tools, see basf.com/en/measurement-methods
see basf.com/en/value-to-society
For more information on this method and the results of Value to Society,
We contribute our approach and expertise to debates on assessing
the monetary value of the economic, ecological and social impact of
business decisions on an ongoing basis. We share our experiences
in networks and initiatives such as the Impact Valuation Roundtable.
We are also involved in the corresponding standardization processes
within the International Organization for Standardization (ISO).
In 2019, we founded the value balancing alliance e.V. together with
other international companies. With the support of major auditing
firms, the Organisation for Economic Co-operation and Develop-
ment (OECD), leading universities and other partners, the cross-
industry alliance aims to develop an accounting and reporting
standard within the next three years that makes the value companies
provide to society transparent and comparable. The aim is to
present the financial, ecological, and social impacts of business
activities in monetary terms on the basis of a standardized, uniform
framework.
on society and show interdependencies. The results of these assess-
ments are helpful in our discussions with stakeholders.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
28.9%
2 Management's Report
Integration of Sustainability
(2018: 27.4%)
(2018: 67.1%)
1 To Our Shareholders
About This Report
38
BASF Report 2019
2 Excluding the construction chemicals activities presented as discontinued operations; the figures for 2018 have been adjusted accordingly
1 The relevant portfolio is defined in the Sustainable Solution Steering Manual at basf.com/en/sustainable-solution-steering
Significant sustainability concern identified and
action plan in development or implementation
Specific sustainability issues which are being
actively addressed
Meets basic sustainability standards on the market
Substantial sustainability contribution in the value chain
9.1% 0.1%
(2018: 5.5%) (2018: 0.1%)
IpaSuejeyo
Transitioner
Performer
Solution
Steering
Sustainable
Accelerator
61.9%
2 Management's Report
Integration of Sustainability
To Our Shareholders
About This Report
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Integration of Sustainability
To Our Shareholders
1
About This Report
36
36
BASF Report 2019
For more information on our Value to Society approach, see basf.com/en/value-to-society
For more information on the metastudy on sustainability trends, see
basf.com/sustainability-trends
The societal challenges that we have identified as having an impact
on our business, and which we also have impact on, are therefore
material within the meaning of the Nonfinancial Statement.
We also validate the impacts of our business activities along the
value chain with our Value to Society approach. This enables us to
quantify positive and negative impacts along the value chain in
monetary terms (see page 37). Topics with impacts that cannot be
expressed in monetary terms, or only with difficulty (for example,
human rights), are included based on expert assessments. Our
stakeholders also confirmed the materiality of the nonfinancial
topics that the Value to Society approach identified as having an
impact along the value chain.
Societal challenges
Corporate measures to tackle
societal challenges
extremely high
Business units were surveyed to determine the impacts of sustain-
ability topics on BASF. The evaluation also took into account the
result of an analysis where business units assessed the positive and
negative impacts of individual sustainability trends on their business.
This analysis was based on a metastudy on sustainability trends.
The relevance of these topics for our stakeholders was assessed
using a big data analysis, based on external publications. The
results were complemented and confirmed by surveys and inter-
views with external experts.
5 Overviews
1
In addition to the two climate protection and Accelerator sales
targets, we have also set ourselves further sustainability targets on
responsible procurement, engaged employees, women in leader-
ship positions, occupational health and safety, process safety and
water management.
Our products, solutions and technologies help to achieve the
United Nations' Sustainable Development Goals (SDGs), for example
through climate protection measures. We also contribute to other
goals, such as No poverty (SDG 1) and Zero hunger (SDG 2),
Good health and well-being (SDG 3), and Clean water and sanita-
tion (SDG 6).
332
37
BASF Report 2019
We also developed a method together with external experts to
perform a monetary assessment of the economic, ecological, and
social impacts of our business activities along the value chain - the
Value to Society approach. This allows us to compare the signifi-
cance of financial and nonfinancial effects of our business activities
To achieve this, we need to even better understand how our actions
impact society and the environment. We already have many years
of experience of this from evaluating our products and processes
using methods such as Eco-Efficiency Analysis, the Sustainable
Solution Steering portfolio analysis, or BASF's corporate carbon
footprint. The methodology of the SEEbalanceⓇ analysis to evaluate
the sustainability of different product and process alternatives was
enhanced and refined in 2019. The social analysis component now
contains two modules, which we use to assess social risks along
the value chain and identify negative impacts on the United Nations'
Sustainable Development Goals.
We want to measure the value proposition of our actions along the
entire value chain. We are aware that our business activities have
an impact on the environment and society, and so we strive to
increase our positive contribution and minimize the negative effects
of our business activities.
We take advantage of business opportunities by offering our
customers innovative products and solutions that contribute to
sustainability. We ensure that our business units automatically
evaluate and take into account relevant sustainability criteria when
they develop and implement strategies, research projects and
innovation processes.
■ Cross-industry initiative established to standardize how
companies' value contributions are assessed
Harnessing business opportunities and measuring value
added by sustainability
For more information on our material topics, see basf.com/materiality
For more information on the organization of our sustainability management,
see basf.com/sustainabilitymanagement
For more information on our risk management, see pages 139 to 147
For more information on our financial and sustainability targets, see page 27
For more information on compensation structures, see the Compensation Report
on page 162 onward
We systematically evaluate sustainability criteria as an integral part
of decisions on acquisitions and investments in property, plant and
equipment or financial assets. In this way, we not only assess economic
dimensions, but also the potential impacts on areas such as the
environment, human rights or the local community.
We also established an external, independent Stakeholder Advisory
Council in 2013. Here, international experts from academia and society
contribute their perspectives to discussions with BASF's Board of
Executive Directors, helping us expand our strengths and address
potential for improvement.
2020 (see page 20). From 2020 onward, we will also bundle the
global steering of climate-related matters in this unit, such as the
coordination of measures to reach our climate protection target.
The Board of Executive Directors is regularly informed of the cur-
rent status of individual sustainability topics as well as of sustain-
ability assessments as part of other business processes (such as
investment plans), makes decisions on these with strategic rele-
vance for the Group, and monitors the implementation of strategic
plans and target achievement. The Corporate Sustainability Board,
which is composed of the heads of business, corporate and func-
tional units, and regions, supports the Board of Executive Directors
on sustainability topics and discusses operational matters. A mem-
ber of the Board of Executive Directors serves as chair.
We are constantly working to broaden our positive impact on key
sustainability topics and reduce the negative impact of our busi-
ness activities. The integration of sustainability into core business
activities and decision-making processes is steered by the Corpo-
rate Development unit, which is part of the Corporate Center as of
In 2019, we updated our materiality analysis, which is used to
identify and evaluate sustainability topics. Based on this analysis,
our material topics include climate and energy, health and safety/
product stewardship, and human rights (see box on page 36). We
integrate these material topics into our long-term steering and
operational management processes. They are also reflected in the
focus areas for our reporting. We continuously monitor and assess
emerging sustainability topics so that we can adapt steering and
management processes as needed.
We help our customers to be more sustainable and develop
sustainable solutions to grow our customer relationships and
attract new customers. One example of this is the ChemCycling TM
project to drive forward chemical recycling of plastic waste and in
this way, strengthen the circular economy for plastics (see page
105). We want to promote societal acceptance of our business
activities by acting in a responsible, resource-conserving, respect-
ful, safe and efficient way.
We present the relevance of sustainability topics for our stake-
holders and the impact of these topics on our business in a
materiality matrix. We selected and clustered key sustainability
topics from a list of around 100 potentially relevant topics identified
using tools such as the Value to Society approach.
3 Corporate Governance
Consolidated Financial Statements
A growing need for food, energy and clean water for a booming
world population, limited resources and protecting the
climate reconciling all these factors is the greatest
challenge of our time. Innovations based on chemistry play a
key role here, as they contribute decisively to new solutions.
Effective and efficient research and development is a pre-
requisite for innovation as well as an important growth
engine for BASF. We develop innovative processes, technolo-
gies and products for a sustainable future and drive forward
digitalization in research worldwide. This is how we ensure
our long-term business success with chemistry-based
solutions for our customers in almost all industry sectors.
-
Innovation
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Innovation
1 To Our Shareholders
About This Report
40
40
BASF Report 2019
Employees and third parties can report potential violations of laws
or company guidelines to our compliance hotlines. In 2019, 228
human rights-related complaints were received by phone as well
as by post and e-mail. All complaints received were reviewed and
forwarded to the relevant departments for in-depth investigation. If
justified, appropriate measures were taken.
As an internationally operating company, we are embedded in
many societies and engage with partners around the world. We
rely on our partners (joint venture partners, contractors, suppliers,
and customers), expect them to comply with internationally recog-
nized human rights standards and to replicate them further along
the value chain with their subsequent partners. For instance, we
contractually agreed with our two joint venture partners in the
Chinese region of Xinjiang that the basis for joint activities is the
BASF Code of Conduct and the requirements embedded in it to
respect human rights and relevant labor and social standards
(such as the exclusion of forced labor and discrimination in hiring,
promotion and dismissal practices). We review this on a regular
basis with audits. We support our partners in their efforts to meet
their respective responsibilities. Together, we strive to avoid harm
to human rights along our value chain. We have defined our expec-
tations in a binding Supplier Code of Conduct.
Our measures and criteria for monitoring and complying with human
rights are integrated into the supplier evaluation processes; our
global monitoring systems for environmental protection, safety and
security, health protection and product stewardship; the evaluation
of investment, acquisition and divestiture projects; assessments
along the product lifecycle; training for security personnel at our
sites; and systems to monitor labor and social standards.
We want to ensure that our actions do not have a negative impact
on humans rights. We have long used monitoring and management
systems such as health, safety, product stewardship or labor and
social standards to identify potential and actual negative impacts.
Evaluating potential human rights impacts is an integral part of risks
analyses, for example for investment projects or product assess-
ments. In 2019, we additionally conducted a comprehensive human
rights compliance assessment, developed by the Danish Institute for
Human Rights. This assessment covers international human rights
standards as well as potential impacts on our stakeholders. We
perform due diligence processes on the basis of this.
From 2020 onward, our Compliance organization will steer the
topic of human rights and develop binding policies. A group of
internal experts from different specialist units will also meet regu-
larly to coordinate relevant topics across units. This group will
serve an advisory function for issues such as conflicting goals, will
develop and implement specific training, and ensure that due dili-
gence structures and processes are in place. To systematically
incorporate external expertise, we decided to establish a Human
Rights Advisory Council with independent, international human
rights experts in 2020. Our Stakeholder Advisory Council also brings
external perspectives to discussions with the Board of Executive
Directors. We see assuming our human rights responsibilities as a
continuous process. This is why we continuously review our poli-
cies and processes and update them if necessary.
Innovation has always been the key to BASF's success, especially in
a challenging market environment. Our innovative strength is based
on a global team of highly qualified employees with various speciali-
zations. We had approximately 11,000 employees involved in
research and development in 2019. Our three global research
divisions are run from our key regions - Europe, Asia Pacific and
North America: Process Research & Chemical Engineering (Ludwigs-
hafen, Germany), Advanced Materials & Systems Research (Shang-
hai, China) and Bioscience Research (Research Triangle Park,
North Carolina). Together with the development units in our operat-
ing divisions, they form the core of our global Know-How Verbund.
BASF New Business GmbH and BASF Venture Capital GmbH
supplement this network with the task of using new technologies to
tap into attractive markets and new business models for BASF.
BASF acknowledges its responsibility to respect internationally
recognized human rights. We have embedded this into our Code
of Conduct and our human rights position. In 2019, we updated
our human rights position based on the U.N. Guiding Principles on
Business and Human Rights. All employees and members of
management bodies are responsible for ensuring that we act in
accordance with our Code of Conduct and our human rights
position. We uphold our standards worldwide, even where they
exceed local legal requirements. We avoid causing or contributing
to adverse human rights impacts through our own operations.
[In 2019, we generated sales of around €10 billion with products
launched on the market in the past five years that stemmed from
research and development activities. ] In the long term, we aim to
continue significantly increasing sales and earnings with new and
improved products - especially with Accelerator products, which
make a substantial sustainability contribution in the value chain.
■ Close cooperation with universities, research institutes
and companies
JONAS
BELLA
Catalysis Research Laboratory
Heidelberg University
Heidelberg, Germany
Harvard University
Cambridge, Massachusetts
Massachusetts Institute of
Technology
Cambridge, Massachusetts
University of Massachusetts
Amherst, Massachusetts
Northeast Research Alliance
NORA
CaRLa
Pasadena, California
UC Riverside
Riverside, California
UC San Diego
San Diego, California
UC Santa Barbara
Santa Barbara, California
Caltech
Stanford University
Stanford, California
Davis, California
UC Berkeley
Berkeley, California
UC Davis
California Research
Alliance
CARA
Global network: eight Academic Research Alliances
Our global network of outstanding universities, research institutes
and companies forms an important part of our Know-How Verbund.
It gives us direct access to external scientific expertise, talented
minds from various disciplines as well as new technologies, and
helps us to quickly develop targeted, marketable innovations,
■ Academic Research Alliances bundle partnerships by
topic and region
Global network
4
■ New human rights position resolved by Board of Executive
Directors and published
For more information on the Industry Associations Review, see basf.com/corporate governance
-BAS
S
C-BASE
BASF Report 2019
Our political advocacy is conducted in accordance with trans-
parent guidelines and our publicly stated positions. The same
applies to our activities in associations. For instance, in 2019 we
published an Industry Associations Review comparing the energy
and climate protection positions of BASF and the most important
In 2019, we once again met with the Stakeholder Advisory Council
to discuss important aspects of sustainability. The main topics were
identifying our material topics, the materiality analysis, impact
valuation, and the issues of climate protection and human rights.
We received valuable recommendations. For example, the Stake-
holder Advisory Council suggested we approach our activities on
the issue of human rights more systematically. We implemented
the recommendation in 2019 with the publication of the new
human rights position, a first gap analysis and the systematic
presentation of our due diligence process.
We draw on the competence of global initiatives and networks,
and contribute our own expertise. We are active in worldwide
initiatives with various stakeholder groups. These include the Busi-
ness for Inclusive Growth initiative, which was established in 2019
by a coalition of 40 international companies who have joined forces
with the G7 countries and the OECD to strengthen equality of
opportunity, and tackle regional disparities and gender discrimina-
tion. We also have been a member of the U.N. Global Compact
since its establishment in 2000. As a recognized LEAD company,
we contribute to the implementation of the Agenda 2030 and the
associated goals. We support projects such as the U.N. Global
Compact's Action Platforms on Decent Work in Global Supply
Chains (SDG 8) and on Good Health and Well-being (SDG 3), and
are a member of the U.N. Global Compact Expert Network. In
addition, BASF is a founding member of a global sustainable
finance initiative launched in December 2019 by a CFO taskforce.
BASF is also active in 15 local Global Compact networks.
Relevant considerations include topic-specific expertise and
willingness to engage in constructive dialog.
Our stakeholders include customers, employees, suppliers and
investors, as well as representatives from academia, industry,
politics and society. Parts of our business activities, such as the
use of certain new technologies or our environmental impacts, are
often viewed by stakeholders with a critical eye. We address these
questions, initiate dialogs and participate in discussions. Such
dialogs with our stakeholders help us to even better understand
what groups of society expect of us and which measures we need
to pursue in order to establish and maintain trust and build partner-
ships, and increase societal acceptance for and the sustainability
of our business activities. For important topics, we systematically
identify key stakeholders to discuss critical questions with them.
■ Continuous dialog with our stakeholders
Stakeholder engagement
For more information on Sustainable Solution Steering,
see basf.com/en/sustainable-solution-steering
To systematically align our portfolio with contributions to sustain-
ability, as of 2018, we will phase out all Challenged products
within five years of initial classification as such at the latest. We
strive to offer products that make a greater contribution to sustain-
ability in their area of application to live up to our own commitments
and meet our customers' demands. This is why our Sustainable
Solution Steering method is used in areas such as our research
and development pipeline, in business strategies as well as in
merger and acquisition projects.
€22 billion
Increase sales from Accelerator products to
2025 target
5 Overviews
BAS
Responsibility for human rights
Alliance to End Plastic Waste
associations of which we are a member, with explanations on our
approach.
see basf.com/guidelines_political_communication
For more information on our guidelines for responsible lobbying,
see basf.com/en/stakeholder-advisory-council
For more information on the Stakeholder Advisory Council,
For more information on stakeholder dialog, see basf.com/en/stakeholder-dialog
We have a particular responsibility toward our production sites'
neighbors. With the established community advisory panels, we
promote open exchange between citizens and our site manage-
ment and strengthen trust in our activities. Our globally binding
requirements for community advisory panels are based on the
grievance mechanism standards in the United Nations' Guiding
Principles on Business and Human Rights. We keep track of their
implementation through the existing global databank of the Responsible
Care Management System.
political purposes and independently decides how these are used, in
accordance with U.S. law.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Integration of Sustainability
To Our Shareholders
1
About This Report
39
BASF does not financially support political parties. In the United
States, employees at BASF Corporation have exercised their
right to establish a Political Action Committee (PAC). The BASF
Corporation Employee PAC is a voluntary, federally registered
employee association founded in 1998. It collects donations for
In January 2019, BASF co-founded the Alliance to End Plastic
Waste (AEPW) together with other companies from along the
value chain - from plastics producers and consumer goods
manufacturers to waste disposal companies. The AEPW has
over 40 members, who together aim to develop solutions that
avoid the discharge of plastic waste into the environment, espe-
cially the ocean. The focus is on four action areas: Development
of waste collection infrastructure, promotion of innovative recy-
cling methods, education and engagement of various stake-
holder groups, and clean-up of areas heavily affected by plastic
waste. The AEPW intends to invest up to $1.5 billion in various
projects and cooperative ventures over the next five years,
mainly in Asia and Africa. BASF is also driving forward its own
activities to strengthen the circular economy for plastics, includ-
ing the ChemCycling TM project (see page 105).
Impact on BASF
5 Overviews
high
1 Sources: JRC (Energy efficiency and GHG emissions: Prospective scenarios for the Chemical and Petrochemical Industry 2017, Boulamanti A., Moya J.A.); DECHEMA Technology Study (Low carbon energy and feedstock for the European chemical Industry, 2017)
BASF Report 2019
For a multiyear overview of research and development expenditures,
see the Ten-Year Summary on page 291
The number and quality of our patents also attest to our power of
innovation and long-term competitiveness. In 2019, we filed around
1,000 new patents worldwide. Also in 2019, we once again also
ranked among the leading companies in the Patent Asset Index, a
method that compares patent portfolios industry-wide.
Our global research and development presence is vital to our
success. We want to continue advancing our research and develop-
ment activities, especially in Asia and North America, with a focus on
growth in regional markets. A stronger presence outside Europe
creates new opportunities for developing and expanding customer
relationships and scientific collaborations as well as for gaining
access to talented employees. This strengthens our Research and
Development Verbund and makes BASF an even more attractive
partner and employer. The Ludwigshafen site in Germany is and will
remain the largest in our Research Verbund. This was once again
underlined with the investment in a new research center, which was
opened in 2019. It houses highly automated experimental facilities
for new process development and testing process catalysts. In
addition, three state-of-the-art electron microscopes started
operation in Ludwigshafen in 2019. These particularly benefit
research in inorganic material systems, such as catalyst and battery
research.
research and development program, Carbon Management R&D
Program, is focusing on the energy-intensive underlying production
processes for basic chemicals. These basic chemicals account for
around 70% of the CO2 emissions produced by the European
chemical industry.1 The program covers topics such as the develop-
ment of new catalysts for dry reforming methane with CO₂ to
produce syngas, and using methane pyrolysis to produce hydrogen
from natural gas.
We are fine-tuning our innovation strategies in all of our business
areas to ensure a balanced portfolio of incremental and break-
through innovation, as well as of process, product and business
model innovation. One of the steps taken in 2018 to further promote
breakthrough innovation was the establishment of BASF's incubator,
Chemovator GmbH, based in Mannheim, Germany. This actively
nurtures promising business ideas with the help of external experts,
who act as consultants, coaches, mentors or intermediaries, and
quickly bring them to market readiness. We have also identified addi-
tional, far-sighted topics that go above and beyond the current focus
areas of our divisions. The aim is to use these to exploit new
business opportunities within the next few years. Above and beyond
this, we are working on overarching projects with a high techno-
Our cross-divisional corporate research will remain closely aligned
with the requirements of our operating divisions and allows space to
review creative research approaches quickly and in an agile way. We
strengthen existing and continually develop new, key technologies
that are of central significance for our operating divisions, such as
polymer technologies, catalyst processes or biotechnological methods.
Our focus is on the development of value-adding innovations for our
customers to secure our long-term competitiveness. Under our
updated strategy, we have brought research and development even
closer together from an organizational perspective, and thus better
aligned with the needs of our customers. Our aim is to continue to
shorten the time to market and accelerate the company's organic
growth. A strong customer focus, digitalization, creativity, efficiency
and collaboration with external partners are among the most impor-
tant success factors here. In order to bring promising ideas to
market as quickly as possible, we regularly assess our research
projects using a multistep process and prioritize our focus areas
accordingly.
research focusing on long-term topics of strategic importance to the logical, social or regulatory relevance. For instance, one global
BASF Group.
Research and development expenses amounted to €2,158 million,
above the prior-year level (€1,994 million). The increase was mainly
attributable to the research-intensive seed business, which BASF
acquired from Bayer in August 2018. The operating divisions
accounted for 81% of total research and development expenses in
2019. The remaining 19% related to cross-divisional corporate
■ Further development of our innovation strategies
■ Close cooperation between research and business units
with strong customer focus
Our eight Academic Research Alliances are complemented by
cooperations with around 300 universities and research institutes]
as well as collaborations with a large number of companies.
Strategic focus
We are working on innovative components and materials for electro-
chemical energy storage with the Karlsruhe Institute of Technology
(KIT) at the Battery and Electrochemistry Laboratory (BELLA). At the
joint Catalysis Research Laboratory (CaRLa), BASF is researching
homogeneous catalysis in cooperation with the University of Heidel-
berg. BasCat is a joint laboratory operated by the UniCat cluster of
excellence and BASF at the Technical University of Berlin, where new
heterogenous catalysis concepts are being explored together with
the Fritz Haber Institute of the Max Planck Society. The iL (Innovation
Lab) in Heidelberg, Germany, focuses on functional printing, printed
sensors and loT (internet of things) applications.
chemical synthesis, and in engineering sciences and biosciences.
The Joint Research Network on Advanced Materials and Systems
(JONAS) research center is active in Europe. Research here concen-
trates on supramolecular chemistry as well as nanotechnology and
polymer chemistry. At the Network for Asian Open Research (NAO)
in the Asia Pacific region, research focuses on polymer and colloid
chemistry, catalysis and machine learning.
5 Overviews
32
Consolidated Financial Statements
32
1 To Our Shareholders
The insecticide InscalisⓇ was developed by a team of scientists
from the research division Bioscience Research and the Agricultural
Solutions segment in collaboration with Meiji Seika Pharma Co.,
Ltd., Tokyo, Japan, and the Kitasato Institute. The highly effective
insecticide offers farmers extra long-lasting crop protection without
affecting beneficial pollinators like bees. InscalisⓇ contains an active
ingredient based on a natural fermentation process using the Penicillium
At BASF, we develop new technologies that can be used to signifi-
cantly reduce emissions. In collaboration with Linde and academic
partners, we successfully produced syngas from methane and CO2
in a process known as "dry reforming." This can be converted into
dimethyl ether (DME) in an intermediate step and then into olefins,
the main intermediate in the chemical industry. New catalysts from
BASF are used in both the production of syngas and its subsequent
conversion into DME. Following complex high-throughput screen-
ings, an automated testing method with parallel experiments, and
a data-based optimization approach for the catalyst structures,
scientists from the Process Research & Chemical Engineering
research division also developed proprietary production processes
for the catalysts. Together with employees from the Catalysts divi-
sion, the researchers transferred the new catalysts to production
and worked on pilot tests in 2019.
- Quality of life
Food and nutrition
Resources, environment and climate
-
―
Our focus areas in research are derived from the three major areas
in which chemistry-based innovations will play a key role in the
future:
■ Biopolymers with enhanced properties
insect-friendly insecticide
■ New catalysts for olefin production
■Long-lasting crop protection with beneficial
Research focus areas - examples
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Innovation
About This Report
coprobium fungus. By optimizing the fermentation conditions, the
researchers were able to considerably increase the yield of the
natural substance pyripyropene A (PPA). The PPA is refined into the
final active ingredient using chemical synthesis in an optimized two-
step process. A patented formulation concept also ensures a sig-
nificantly improved active ingredient uptake. The active ingredient
was first approved in Australia, India, Canada, the United States
and China in 2018, followed by further approvals in Mexico and
Argentina in 2019. In 2019, the researchers also won the BASF's
internal innovation prize for their outstanding research work.
4
2 Management's Report
Innovation
UniCat BASF Joint Lab
Fudan University
Shanghai, China
Dalian Institute of Chemical Physics
Dalian, China
Beijing Institute of Technology
Beijing, China
Tsinghua University
Changchun, China
Changchun Institute of Applied Chemistry
Network for Asian Open Research
NAO
BasCat
Battery and Electrochemistry Laboratory
Karlsruhe Institute of Technology (KIT)
Karlsruhe, Germany
Zurich, Switzerland
ETH Zürich
University of Freiburg
Freiburg, Germany
-Sustainable
Finance
Joint Research Network on
Advanced Materials and Systems
I.S.I.S-University of Strasbourg
Strasbourg, France
Our eight academic research alliances bundle partnerships with
several research groups in a region or with a specific research
focus. The Northeast Research Alliance (NORA, previously the
North American Center for Research on Advanced Materials) and
the California Research Alliance (CARA) are located in the United
States. NORA focuses on materials science and biosciences,
catalysis research, digitalization and cooperation with startups,
while the interdisciplinary CARA research center works on new
functional materials, formulations, digital methods, catalysis,
Technical University of Berlin
Berlin, Germany
3 Corporate Governance
iL
Zhejiang University
Hangzhou, China
To Our Shareholders
1
About This Report
34
31
BASF Report 2019
Heidelberg, Germany
Heidelberg University
Karlsruhe Institute of Technology (KIT).
Karlsruhe, Germany
Seoul, South Korea
Seoul National University
Kyoto, Japan
Kyoto University
Tokyo, Japan
Tokyo Institute of
Technology
Chengdu, China
Sichuan University
Innovation Lab
For many years now, one focus area of BASF's research has been
the full biodegradability of biopolymers in various biospheres and
soils. Our multidisciplinary Research Verbund ensures that scien-
tists with a wide range of skills adopt a holistic approach in driving
forward this complex area of research. Employees from the research
division Advanced Materials & Systems Research continued to
expand our competence profile in 2019. With ecovioⓇ M 2351, we
have developed the first plastic for mulch films to be certified as
biodegradable according to the European standard DIN EN 17033.
For more information on research and development, see basf.com/innovations
Beijing, China
Around the world, experts in the Process Research & Chemical
Engineering research division are working on innovative cathode
active materials for high-performance lithium-ion batteries to
meet the growing demand for powerful, reliable and affordable
electric vehicles. Digital methods such as machine learning
enable us to make early predictions about the quality of new
materials, such as their performance or life span. This helps to
accelerate research. The data used include electrochemical
measurements on battery cells and images from electron
microscopes, which are analyzed with respect to various
characteristics such as surface properties or defects.
■ Updated materiality matrix shows key sustainability topics
■ Sustainability as part of steering, compensation systems
and business models
Strategy
We are successful in the long term when we create value
added for the environment, society and the economy with
products, solutions and technologies. Sustainability is firmly
anchored in our corporate strategy. Using the various tools
of our sustainability management, we carry out our company
purpose: "We create chemistry for a sustainable future." We
systematically incorporate sustainability into our business
and our compensation systems. We identify sustainability
trends at an early stage and derive appropriate measures for
our business to seize new business opportunities and mini-
mize risks along the value chain.
[Integration of Sustainability]
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Integration of Sustainability
1 To Our Shareholders
About This Report
35
35
BASF Report 2019
1 Peak sales describes the highest sales value to be expected in one year. For more information, see the Glossary on page 299.
2 The GT27™ trait and LibertyLink® GT27™ are developed and marketed in cooperation with MS Technologies LLC, West Point, Iowa.
3 Traits developed in cooperation with Bayer Crop Science
BASF will also apply precision technologies and digitalization to
seize future innovation opportunities in agriculture. This includes
new, outcome-based business models marketed under the xarvioⓇ
brand. These will enable farmers to achieve yield forecasts that
have been agreed in advance.
We achieve long-term business success by creating value added
for the environment, society and the economy. Sustainability is at
the core of what we do, a driver for growth and value as well as an
element of our risk management. That is why sustainability is firmly
anchored into the organization as part of governance, compensa-
tion systems and business models.
rotation options for wheat growers in drier areas of North America.
From mid-decade, hybrid wheat seed will help growers in North
America and Europe to optimize yield, production stability and grain
quality, as well as to improve profitability and sustainability. Recently
launched vegetable seed innovations contribute to a healthy lifestyle
and help reduce the environmental impact of food production.
Innovative breeding processes ensure a constant supply of commer-
cially successful vegetable seed varieties, mainly marketed under
the NunhemsⓇ brand.
Based on our corporate strategy and the global targets derived
from this, from the 2020 business year onward, we will integrate the
sustainability targets (CO2-neutral growth until 2030 and achieve
€22 billion in Accelerator sales by 2025) into short-term Group-level
steering as well, as most important key performance indicators. We
started to establish the necessary steering mechanisms and control
systems in 2019.
Relevance for our stakeholders
Human
Rights
Employment & Diversity
Battery materials
Stakeholder
Engagement
Customer Engagement
Organizational
Resilience
Governance Structure
Responsible Supply Chain
Biodiversity
Digitalization &
Data security
Innovation
Resource Efficiency
& Waste
Business Ethics
Air & Soil Emissions
Climate & Energy
Water
Health & Safety /
Product Stewardship
extremely high
Materiality analysis to identify and assess sustainability topics
For seeds and traits, we will further strengthen our innovation
pipeline with new traits, including the soybean technology in our
LibertyLink® GT27™ trait platform² that has been available to
growers under the CredenzⓇ brand as well as under licensee
brands since 2019. Future launches will also include proprietary
stacks offering resistance to nematode and Asian soybean rust.
New traits to increase yields and stress resistance in soybean and
corn (maize)³ are under development. We are constantly improving
the seed genetics and trait innovations for our FiberMaxⓇ and
StonevilleⓇ cotton brands, for example with a proprietary herbicide
tolerance product, which will be launched before mid-decade. New
breeding tools will continue to speed up our innovation cycles for
InVigorⓇ canola seed. LibertyLink® yellow-seed canola can be
grown under more challenging conditions and will provide new
Transparency
Agricultural Solutions: At BASF, we believe in finding the right
balance for success. We believe that with our connected offer, we
can achieve this for the environment, society and agriculture alike.
We continually invest to expand our portfolio, focusing our research
activities on strategic crop combinations, known as crop systems. In
2019, we invested €879 million in research and development in the
Agricultural Solutions division, representing around 11% of sales for
the segment.
BASF launched a new vinyl monomer in 2019: vinyl methyl
oxazolidinone (VMOX). VMOX is particularly suitable as a reactive
diluent in ultraviolet curing coatings and inks, which can for example
be used for digital UV printing. In these applications, the vinyl
monomer offers technical benefits compared with conventional
reactive diluents. The monomer brings good properties on all
common substrates, even at low dosages. It also enables more
brilliant colors in the final printed products and coatings. VMOX also
Chemicals: In a research project on an alternative production
method for sodium acrylate, we are investigating the use of CO2
as a chemical feedstock. The focus is on finding more efficient and
more resource-friendly synthesis methods. Sodium acrylate is an
important starting material for superabsorbents, which are widely
used in diapers and other hygiene products. Unlike the current
propylene-based production method, the new process uses CO2
and ethylene, which are converted using a catalyst. BASF experts
have since made significant progress on this process. They
demonstrated that it can be successfully implemented at laboratory
scale, an important milestone toward industrial application. The use
of CO2 in the new process could replace around 30% of the fossil
fuels, provided that a larger-scale process also proves to be stable
and energetically favorable.
7% Nutrition & Care
10% Surface Technologies
5% Chemicals
9% Materials
9% Industrial Solutions
€2,158 million
Agricultural Solutions 41%
Corporate research, Other 19%
allows innovative coatings formulations with a favorable toxico-
logical profile compared with other, similar products.
Research and development expenses by segment 2019
5 Overviews
3 Corporate Governance
2 Management's Report
Innovation
1 To Our Shareholders
33
Our well-stocked innovation pipeline now has an even stronger
focus on sustainable solutions. It comprises seeds and traits,
chemical and biological crop protection, digital and regionally
tailored products and solutions. We estimate the peak sales
potential of products with launch dates between 2019 and 2029 to
be more than €7.5 billion. More than 30 pipeline products will be
launched worldwide by 2029. These will enable higher yields and
quality and even more sustainable production. In 2019, we success-
fully launched our new fungicide RevysolⓇ. It meets the highest
level of regulatory standards and offers outstanding biological
performance against a range of difficult-to-control pathogens in
specialty and row crops. LuximoⓇ and TirexorⓇ, our herbicides to
manage difficult-to-control grasses and broadleaf weeds, are
expected to enter the market from 2020 onward. Broflanilide, our
insecticide to help farmers protect specialty and field crops from
insects such as potato beetles and caterpillars, is scheduled for
market launch from 2020. We also launched PonchoⓇ VotivoⓇ 2.0
seed treatment in 2019. It includes a systemic insecticide and two
biological components to control insect pests and protect corn
(maize) seed from disease-causing nematodes.
About This Report
BASF Report 2019
Innovations in the segments - examples
Materials: The semi-crystalline polyamide UltramidⓇ Vision offers
very high light transmission with low light scattering compared with
opaque standard polyamides. Its high UV and temperature resis-
tance, scratch resistance and chemical resistance make UltramidⓇ
Vision an important building block wherever visual control or light
design play a role, for example in backlit switches or buttons in cars.
The polyamide has now been used in a car interior for the first time
- for the window regulators of a German automotive manufacturer.
UltramidⓇ Vision can be repeatedly exposed to aggressive media
such as sun cream, cleaning agents and solvents without sustaining
damage. The polyamide thus offers designers and developers a
broad range of possibilities for realizing design features and lighting
elements not only in car interiors, but in various consumer and
industrial applications as well.
4 Consolidated Financial Statements
Industrial Solutions: Preventing coatings from yellowing is key
for automotive refinish coatings. BasonatⓇ HI NG is an aliphatic
polyisocyanate hardener for two-component polyurethane (2C PU)
coatings. It provides outstanding durability and resistance against
light and weather, enabling complex formulations with significantly
Nutrition & Care: NephydratⓇ is a bioactive ingredient that
supports the skin's barrier function and helps it to retain moisture,
creating an even, fresh complexion. BASF sources the active
ingredient from the spiny peel of the rambutan fruit, grown
organically in close cooperation with local partners in Vietnam as
part of a socially and environmentally responsible supply chain.
NephydratⓇ is preservative-free, 100% natural origin and certified
according to the COSMOS standard for organic and natural cos-
metics.
The new insulation material Cavipor® FTX 1 combines the advan-
tages of a mineral-based insulation material with the easy, safe and
clean processability of a foam system. Cavipor® FTX 1 offers an
insulation performance comparable to mineral wool and expanded
polystyrene (EPS) and is particularly suitable for the energetic reno-
vation of buildings with double-wall masonry. One of its main advan-
tages is how simple it is to process: The three aqueous initial
components are aerated at the site, resulting in a flowable foam free
from dust and fibers. It is then injected into the cavity of the wall.
There, the foam cures and dries without further expansion, fixing it
as a seamless insulating layer. These process advantages, plus the
fact that Cavipor® FTX 1 is non-combustible, fiber-free and low-
emission, make it a groundbreaking innovation.
Consolidated Financial Statements
4
2 Management's Report
Innovation
1 To Our Shareholders
About This Report
=4
3 Corporate Governance
BASF Report 2019
reduced yellowing compared with standard HI-grade hardeners.
With this new product, BASF fulfils the market's highest technical
performance requirements.
Modern farming faces many challenges, including how to balance
the need for greater yields of fruits and vegetables, while simulta-
neously meeting the ever-stringent environmental protection require-
ments of organic food production. The light and heat stabilizer
TinuvinⓇ NORⓇ 356 protects and extends the life of agricultural films
that are exposed to very high levels of ultraviolet radiation, heat and
crop treatments such as elemental sulfur and the compounds
approved in certified organic farming to prevent plant diseases and
fertilize the soil. The improved film protection and longer life of
NOR®-stabilized greenhouse covers increase productivity, improve
crop quality and reduce plastic waste for farmers, which makes
them more competitive.
34
Surface Technologies: Styrene is a building block of the plastics
industry. With the recently launched styrene catalyst StyroStar®
S6-42 Select, BASF has brought to market an innovation that
reduces the formation of by-products such as benzene and toluene
thanks to improved selectivity. StyroStar® S6-42 Select is a robust
and durable catalyst, combining excellent mechanical stability with
exceptional performance.
5 Overviews
BASF has launched two digital virtual assistants to cover key
customer needs: ZoomLab™ and RegXcellence™. The formula-
tion assistant ZoomLabTM predicts optimized formulations of
pharmaceutical drugs faster and with more precision than is possible
today. Finding the right combination and balance between the
active pharmaceutical ingredient and excipients to optimize drug
performance is immensely time and resource consuming. Depending
on the properties of the active ingredient and the intended dosage,
ZoomLab TM predicts the best excipients. In addition, ZoomLab™
provides an intuitive rating system describing the suitability of an
excipient as well as formulation tips to make the process run
smoothly. This allows for a much higher precision, speed and
reduction of ingredients used in the drug development process.
RegXcellence™ makes registration processes seamless, saving
customers time and costs during important milestones such as
qualification of ingredients and market authorization of their drugs.
can be used on all aircraft types, including older models.
Together with Lufthansa Technik AG, Hamburg, Germany, BASF
has developed a functional film that helps to reduce carbon
emissions from air travel. The film has a unique surface structure
consisting of riblets of around 50 micrometers in size. These reduce
drag and thereby optimize the aerodynamics on the relevant parts of
the aircraft. This can reduce fuel consumption and the resulting
carbon emissions by up to 3%. The film is exposed to strong ultra-
violet radiation at high altitudes and extreme variations in tempera-
ture. BASF therefore put a high priority on durability in addition to
aerodynamics, during the development process. The technology
2018 2.8%
Energy and resources
2019 2.0%
3.1%
2018
2019 1.2%
2018 (1.1%)
Of which: automotive industry
2019 (2.6%)
Construction
2018 3.1%
2019 1.5%
2019 (5.4%)
2018 0.3%
2018 3.8%
Consumer goods
To Our Shareholders
1
About This Report
Transportation
45
BASF Report 2019
Agriculture
Electronics
2018 2.4%
2019 2.4%
Health and nutrition
2019 3.0%
2018 8.5%
2019 3.8%
2018 2.4%
2019 1.5%
Industry total
About This Report
expanded by 3.4% in South America. Argentina recorded particularly
strong growth (+15.4%); however, output there had declined by
14.3% in 2018 due to drought. As in the previous year, agricultural
production stagnated in Europe (2019: -0.1%, 2018: +0.0%). In
Asia, the growth rate was roughly on a level with the previous year,
at 3.3% (2018: +3.5%).
Growth in the emerging markets of Asia was likewise slower
overall than in 2018. In China, the GDP growth rate gradually
weakened over the course of the year, due among other factors to
the effects of the trade conflict with the United States, which
increasingly made itself felt (2019: +6.1%, 2018: +6.6%). Growth in
domestic demand was slower than in the previous year. However, in
light of the stable employment figures, the Chinese government did
not implement any major additional economic stimulus measures.
The Chinese industry saw very mixed trends: Production in the
automotive industry declined by 8.0%, while industries in the high-
tech sector gained more than 8.8% overall. In India, liquidity bottle-
necks negatively impacted lending and with it, demand for motor
vehicles and investment goods. Overall, growth was considerably
lower at 4.8% (2018: +6.1%). GDP growth in the remaining emerging
markets of Asia was 3.7%, around one percentage point weaker
than in the previous year.
Growth in the United States weakened over the course of the year
but remained at a comparatively high 2.3% (2018: +2.9%). The main
growth driver was private consumption, supported by rising employ-
ment and higher real incomes. Industrial investment grew at a much
slower pace due to lower capacity utilization. Exports stagnated
amid a weak global economic environment caused by the escalating
trade conflict and the resulting decline in exports to China.
private sectors; by contrast, exports and investments were weak.
Despite their close integration in European value chains, the eastern
E.U. countries posted much stronger growth than the rest of the
E.U., at 3.7%. Rising real incomes, higher employment figures, low
interest rates and increased government spending supported
growth and offset the dampening effects on exports from western
Europe. In Russia, by contrast, GDP growth slowed to only 1.3%
(2018: +2.2%) against a background of restrictive monetary and
fiscal policy, accordingly weak domestic demand and low export
growth.
In the European Union (E.U.), GDP growth declined from 2.0% in
2018 to only 1.4%. Growth was weaker than in the previous year in
almost all E.U. countries. The decline was especially pronounced in
Germany (2019: +0.6%, 2018: +1.5%). Due to its high share of
value added in investment goods and vehicles, Germany was par-
ticularly affected by the cyclical economic downturn, the political
trade distortions and the structural transformation in the automotive
industry. In Italy, GDP was virtually flat after growing by 0.7% in the
previous year. The dampening effects were not as strongly felt in
France (+1.3%) and Spain (+2.0%). Despite Brexit uncertainty,
growth in the United Kingdom remained largely stable (+1.4%). This
was mainly attributable to solid consumer demand in the public and
■ Crises and low growth in South America
■ Weaker growth in the European Union and United States
■ Volatile, weaker economic momentum in China
1 All information relating to past years in this section can deviate from the previous year's report due to statistic revisions.
Economic trends by region
2018
South America
2019 0.7%
2 Management's Report
Economic Environment
2018 0.3%■
0.7%
1.1%
Growth in key customer industries
Real change compared with previous year
BASF Report 2019
1
Most of the chemical industry's key customer sectors turned in
a much weaker performance than in the previous year: Global
automotive production declined by 5.4% (2018: -1.1%). Around
5.1 million fewer cars and light commercial vehicles were produced
worldwide. Production declined in all major economic regions, but
most notably in China (-8.0%). The downturn in the E.U. (-4.2%)
and North America (-4.0%) continued as well. Alongside complica-
tions from the introduction of new emission standards, market
weakness was due to the shift to electromobility, the associated
higher vehicle costs and the still inadequate charging infrastructure
in many places. In India, production fell by 11.0%; in South America,
this declined by 4.2% overall. Only Brazil recorded weak growth of
0.8%. At 2.0%, growth in the construction industry was compara-
tively solid but still much slower than in 2018 (+2.8%). A significant
contributing factor here was the drop by around 10% in the U.S.
housing market. Overall, construction activity in the United States
declined by 4.6% (2018: -1.3%). Higher spending on infrastructure
was unable to offset the decline in housing development. In the E.U.
(2019: +2.8%, 2018: +3.4%), the construction industry benefited
from the low interest rate environment, tight housing markets
in urban areas and growing demand for energy renovation. The
eastern E.U. markets performed particularly well (+6.9%), while
growth in the western E.U. countries was more subdued (+2.4%). In
Asia, growth in the construction industry weakened only slightly
(2019: +3.9%, 2018: +4.0%). As in 2018, the South American con-
struction industry was largely flat. Agricultural production grew by
2.4%, on a level with 2018 and thus below the long-term average of
around 3%. In the United States, planting was negatively impacted
by unusually strong rain in the spring. The trade conflict between the
United States and China also reduced agricultural exports from the
United States to China, such as soybeans. In this environment, U.S.
agricultural production declined by 1.5%. By contrast, production
in the previous year to 5.7%. In the remaining emerging markets of
Asia, growth fell from 5.3% to only 2.6%. One of the key drivers here
was below-average momentum in India (2019: +3.9%, 2018:
+6.0%).
Industrial production was largely stagnant in the E.U. (2019: -0.3%,
2018: +1.4%) and the United States (2019: -0.1%, 2018: +2.7%).
By contrast, this declined in Japan (2019: -1.7%, 2018: +0.8%) and
South America (2019: -1.3%, 2018: +0.5%). The gradual slow-
down in China continued, with industrial growth declining from 5.8%
Global industrial production grew by only 1.5% in 2019, roughly half
as strongly as in 2018 (+3.1%). Production declined overall in the
advanced economies (2019: -0.5%, 2018: +1.8%). Growth in the
emerging markets weakened considerably (2019: +3.4%, 2018:
+4.4%).
■ Weak development of global industrial production
■ Stronger declines in global automotive production
Trends in key customer industries
44
Growth fell sharply in South America. In Argentina, the economic
crisis intensified following the incumbent president's unexpectedly
weak showing in local primary elections. The Argentine peso
almost halved in value against the U.S. dollar and inflation jumped
to more than 50%. Argentina's GDP contracted even more strongly
than in the previous year (2019: -2.7%, 2018: -2.5%). The Brazil-
ian economy was on a growth path but here, too, economic
developments were curbed by the crisis in Argentina and the weak
global economy (2019: +1.2%, 2018: +1.3%). Growth in Chile,
Peru and Bolivia was dampened by social unrest there. Overall,
GDP growth in South America slowed from 1.1% in 2018 to 0.7%.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Economic Environment
To Our Shareholders
Japan was able to increase growth slightly, with GDP rising by
0.7% (2018: +0.3%). Consumer spending stagnated and growth
in private investment was slightly stronger than in the previous
year. Private consumption was impacted by the two percentage
point increase in sales tax in October 2019. Imports and exports
declined amid a weaker global economic environment. Alongside
the slowdown in China, developments were dampened by the
trade conflict between Japan and South Korea.
3 Corporate Governance
(0.4%)
Consolidated Financial Statements
Crude oil
Naphtha
120
130
$/bbl
2018 (0.6%)
110
South America
2018 1.3%
2019 (0.4%)
2018 3.8%
Emerging markets of Asia
2019 4.0%
2018 4.1%
2019 (2.0%)
2019 (0.4%)
2019: $505/t
100
1
2019
About This Report
40
330
64
2019: $64/bbl
46
50
60
70
80
90
2018: $602/t
June 19
2018
European Union
2019 (1.1%)
Price trends for crude oil (Brent) and naphtha
$/barrel, $/metric ton
The average price of gas in the United States was $2.56 per
mmBtu, below the level of the previous year ($3.16 per mmBtu). In
Europe, the average price of gas on the spot market was significantly
lower than in 2018, at $4.46 per mmBtu (2018: $7.90 per mmBtu).
Gas prices in China averaged around $6.39 per mmBtu nationally
(2018: $6.38 per mmBtu), while the average price in the coastal
provinces of Shanghai, Jiangsu, Zhejiang, Shandong and Guang-
dong was $7.59 per mmBtu (2018: $7.59 per mmBtu).
Over the course of the year, the average monthly price for the
chemical raw material naphtha ranged between $447 per metric
ton in August and $563 per metric ton in April. At $505 per metric
ton, the annualized average price of naphtha in 2019 was lower
than in 2018 ($602 per metric ton).
course of the year between $71 per barrel in April and May and $59
per barrel in January and August.
Averaging around $64 per barrel in 2019, the oil price for Brent
crude declined by about 9% compared with the previous year
($71 per barrel). The average monthly oil price fluctuated over the
■ Year-on-year decrease in gas prices, but with wide
regional variance
$/t
1,100
■ Lower prices for crude oil and naphtha
By contrast, chemical production in the emerging markets of Asia
grew by 4.0%, slightly stronger than expected (+3.6%). This was
primarily driven by continued solid growth in China (+4.7%). Chemical
production in the remaining emerging markets in the region only rose
by 1.1% (2018: +2.7%). By contrast, Japan saw a decline of 0.4%.
The year-on-year change was particularly pronounced in the United
States (2019: -0.4%, 2018: +4.1%). Consequently, our forecast for
2019 (+3.2%) was also significantly undershot. The drop in growth
there was mainly attributable to weak domestic demand from the
automotive industry, agriculture and the construction industry. In
addition, U.S. chemical exports to China fell significantly as a result
of the trade conflict. In South America, too, chemical production
declined by 2.0% amid a weak overall economic environment (2018:
-0.6%).
The global chemical industry (excluding pharmaceuticals) grew by
only 1.8%, well below our expectations (+2.7%) and the 2018 figure
(+2.8%). Chemical production in the E.U. declined for the second
year in a row (2019: -1.1%, 2018: -0.4%). We had forecast stag-
nation here (+0.1%).
■ Global growth much weaker than in prior year and below
expectations
Trends in the chemical industry
5 Overviews
Important raw material price developments
1,000
900
800
2018 2.8%
1.8%
2019
Chemical production (excluding pharmaceuticals)
Real change compared with previous year
BASF Report 2019
Japan
United States
World
Sept 18
200
100
300
400
500
600
700
4
6.1%
(47)
Emerging markets of Asia.
Investments and acquisitions 2019
Million €
disciplinary teams and assessed using various criteria. In this way,
we ensure that economic, environmental and social concerns are
included in strategic decision-making.
In addition, we are refining our portfolio through acquisitions that
promise above-average profitable growth as part of the BASF
Verbund to help reach a relevant market position. A key considera-
tion is that these are innovation-driven or offer a technological
differentiation, and make new, sustainable business models possi-
ble. Investments and acquisitions alike are prepared by inter-
With a world market share of more than 40%, China is today the
largest chemical market and drives the growth of global chemical
production. We expect China's share to increase to nearly 50% by
2030. To continue to participate in this growth in Asia in the future,
we are investigating the possibility of building an integrated Ver-
bund site in Zhanjiang in the southern Chinese province of Guang-
dong. A framework and investment agreement for the project was
signed with Guangdong Provincial Government in January 2019.
We also plan to expand the site we operate together with our
partner Sinopec in Nanjing, China.
For more information on our investments from 2020 onward, see page 138
By investing in our plants, we create the conditions for the profitable
growth we strive for while constantly improving the efficiency of our
production processes. For the period from 2020 to 2024, we have
planned capital expenditures (capex)¹ totaling €23.6 billion world-
wide.
Intangible assets
In addition to innovations, investments make a decisive con-
tribution toward achieving our ambitious growth goals. We
use targeted acquisitions to supplement our organic growth.
The BASF Group's
Business Year
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Material Investments and Portfolio Measures
Material Investments and Portfolio
Measures
1 To Our Shareholders
of which goodwill
Property, plant and equipment*
In North America, we continued construction of a MDI synthesis
unit in Geismar, Louisiana. Startup is scheduled for 2020. We are
expanding the output of the ibuprofen plant in Bishop, Texas.
(34)
4,131
3,842
3
3,839
(47)
Total
255
292
Total
Acquisi-
tions
Invest-
ments
For more information on investments within the segments, see page 60 onward
In Asia, we started construction of the first plants at the planned
integrated Verbund site in Zhanjiang, China, in 2019. The first
production facilities are scheduled for completion in 2022. We
started up a plant for plastics additives in Shanghai, China. These
investments strengthen our presence in Asia.
(37)
4,097
About This Report
41
■ BASF as a responsible neighbor
Social commitment
See basf.com/humanrights for more information on the human rights position and a comprehensive
report on the implementation of due diligence in human rights in accordance with the requirements
of the National Action Plan developed by the German government, and in accordance with the
U.N. Guiding Principles on Business and Human Rights
For more information on standards in our supply chain, see page 102 onward
For more information on compliance, see page 157 onward
For more information on systems for monitoring labor and social standards, see page 126 onward
For more information on our production standards, see page 109 onward
For many years now, we have engaged in constructive dialog on
human rights with other companies, nongovernmental organiza-
tions, international organizations and multi-stakeholder initiatives
to better understand different perspectives and address conflicting
goals. BASF is a founding member of the U.N. Global Compact
and a member of the Global Business Initiative on Human Rights
(GBI), a group of globally operating companies from various sec-
tors. The initiative aims to ensure implementation of the U.N.
Guiding Principles on Business and Human Rights. We report on
our global targets, monitoring systems and measures to integrate
human rights topics into our business activities in publications
such as this report and online.
■ Contribution to the United Nations' Sustainable
Development Goals
5 Overviews
4
3 Corporate Governance
2 Management's Report
Integration of Sustainability
1 To Our Shareholders
About This Report
To Our Shareholders
Consolidated Financial Statements
+4
Our social commitment helps to achieve the U.N. SDGs. As part of
our social engagement strategy, we focus on projects that will
have a lasting impact on specific target groups and offer learning
opportunities for participating cooperation partners and BASF. For
instance, we have supported Wissensfabrik, an initiative of German
businesses to promote education and entrepreneurship, for over
10 years.
We foster social integration, particularly of low-achieving young
people and refugees, with programs such as Start in den Beruf
and Start Integration. In 2019, 151 young people in the BASF
Training Verbund participated in these two programs in coopera-
tion with partner companies in the Rhein-Neckar metropolitan
region. The goal is to prepare participants for an apprenticeship
within one year, and ultimately secure the long-term supply of
qualified employees for BASF and in the region as a whole. Since
being launched at the end of 2015, BASF's Start Integration pro-
gram has supported around 380 refugees with a high probability of
being granted the right to remain in Germany, helping to integrate
them into the labor market. We spent around €3.4 million on the
BASF Training Verbund in 2019.
BASF Report 2019
For more information on social commitment at our sites, see ludwigshafen.basf.de/commitment
39.4% Education
For more information on Starting Ventures, see basf.com/en/starting-ventures
a Figure relates to all consolidated companies with employees including joint operations
13.7% Social projects
As a responsible neighbor, we strive to create a livable community
for our sites' neighbors, employees and their families. In Germany,
community engagement in Ludwigshafen and the Rhine-Neckar
metropolitan region includes strengthening participation and inte-
gration of disadvantaged groups as well as promoting research
and discovery. It is particularly important to us that we work together
with our partners to increase the effectiveness of individual measures.
In the project #WirGestalten Schule, for example, we are working
together with partners to improve education equality. We promote
cooperation between nonprofit organizations with the Gemeinsam
Neues schaffen program.
Culture 17.8%
Other 15.0%
BASF Group donations, sponsorship and own projects in 2019ª
The BASF Group spent a total of €32.0 million supporting projects
in 2019; we donated 42.5% of this amount (2018: €38.4 million, of
which 39% were donations).
In the area of international development work, we support the
BASF Stiftung, an independent nonprofit organization, through
donations to its projects with various U.N. organizations. In 2019,
BASF supported a project spearheaded by the U.N. Children's
Fund (UNICEF) to construct a youth center for young Rohingya
refugees in Bangladesh with its annual year-end donation cam-
paign to the BASF Stiftung. In total, €359,987.00 was raised for
the UNICEF project from donations by the employees of partici-
pating German Group companies and BASF.
We also aim to create long-term value for BASF and society with
new business models and cross-industry partnerships. Our Starting
Ventures program helps people with precarious livelihoods to
improve their income-earning opportunities and their quality of life.
At the same time, the program provides access to new markets
and strengthens our contribution to reaching the SDGs.
Two other examples of BASF's impact-driven social engagement
are its activities in India and Indonesia. In Mauk, Indonesia, we
initiated a school project in cooperation with local authorities and
the nonprofit organization Habitat for Humanity. The targeted use
of digital media improves teaching and learning conditions for
young people and helps to modernize and improve access to edu-
cation. At our Dahej and Mangalore sites in India, we support
projects with a focus on clean water, sanitation and education. For
example, we sponsored the construction of toilets and an accom-
panying educational program to strengthen community awareness.
Better hygiene and sanitation help prevent the spread of disease.
Sports 5.1%
Science 9.0%
Additions to property, plant and equipment by segment in 2019
Others (infrastructure, R&D) 6%
Agricultural Solutions 9%
Nutrition & Care 12%
a Including restoration obligations, IT investments and right-of-use assets arising from leases
For the outlook on the economic environment in 2020, see page 133 onward
Global economic growth in 2019 was weaker than we forecast
at the beginning of the year.' Industrial production in particular
remained well below our expectations. Against a background
of high political uncertainty and mounting trade barriers,
global gross domestic product (GDP) only rose by 2.6%,
considerably slower than in 2018 (+3.2%). Growth in the
industry as a whole declined at a much faster rate to only
1.5% (2018: +3.1%). As a result, growth in chemical production
(excluding pharmaceuticals) was also considerably slower
than in the previous year, at 1.8% (2018: +2.8%). The average
price for a barrel of Brent crude oil decreased to $64 per
barrel (2018: $71 per barrel).
Economic Environment
Economic Environment
5 Overviews
Consolidated Financial Statements
World
4
2 Management's Report
To Our Shareholders
1
About This Report
43
BASF Report 2019
3 Corporate Governance
On December 21, 2019, we signed an agreement with an affiliate of
Lone Star, a global private equity firm, on the sale of our construction
chemicals business. The purchase price on a cash and debt-free
basis is €3.17 billion. The transaction is expected to close in the
third quarter of 2020, subject to the approval of the relevant com-
petition authorities. The planned sale comprises the Construction
Chemicals division, including more than 7,000 employees and pro-
duction sites and sales offices in more than 60 countries. The busi-
ness generated sales of €2,553 million and EBITDA of €214 million
in 2019. On signing of the agreements, a disposal group was
established and the statement of income adjusted retroactively as of
January 1, 2019, and for the comparative year 2018. Until closing,
the income after taxes of the construction chemicals business will
be presented in the income after taxes of BASF Group as a separate
item ("Income after taxes from discontinued operations").
United States
Trends in the global economy in 2019
2019 5.4%
2018 2.9%
2019 2.3%
2018 2.0%
European Union
1.4%
Japan
2019
2018
2.6%
2019
Real change compared with previous year
Gross domestic product
At 2.6%, global GDP growth was significantly below the prior-year
figure but remained only slightly below expectations at the start of
the year (forecast: +2.8%) thanks to a stable services sector.
Industry growth declined at a much stronger pace. The escalation of
the trade conflict between the United States and China and the
ongoing uncertainty surrounding the timing and nature of Brexit
dampened demand for investment goods, consumer durables and
their intermediates from the chemical industry. An accelerated
structural transformation of the automotive industry also played a
role.
3.2%
On August 29, 2019, BASF and DIC, Tokyo, Japan, reached an
agreement on the acquisition of BASF's global pigments business.
The purchase price on a cash and debt-free basis is €1.15 billion.
The assets and liabilities to be divested were reclassified to a
disposal group in the Dispersions & Pigments division as of this
date. The transaction is expected to close in the fourth quarter of
2020, subject to the approval of the relevant competition authori-
ties.
research and development and technical consultation centers in
Asia and the Americas.
In September 2017, we signed an agreement with Solvay on the
acquisition of Solvay's global polyamide business, subject to the
approvals of the relevant antitrust authorities. The E.U. Commission
approved the acquisition of the polyamide business, subject to
certain conditions, on January 18, 2019. These conditions require
the sale of parts of the original transaction volume to a third party,
specifically Solvay's production plants in the engineering plastics
field in Europe. Domo Chemicals, Leuna, Germany, was approved
by the E.U. Commission as the buyer. The transactions between
Solvay and BASF and Solvay and Domo Chemicals closed on
January 31, 2020. BASF acquired the polyamide business for a
purchase price of €1.3 billion (on a cash and debt-free basis) and
will integrate it into the Performance Materials and Monomers
divisions. In addition to eight production sites in Germany, France,
China, India, South Korea, Brazil and Mexico, the acquisition includes
52% Europe
a Including restoration obligations, IT investments and right-of-use assets arising from leases
North America 29%
€3,839 million
South America, Africa, Middle East 3%
Asia Pacific 16%
Additions to property, plant and equipment by region in 2019
BASF Report 2019
20% Materials
28% Chemicals
Surface Technologies 14%
Industrial Solutions 11%
1 Additions to property, plant and equipment excluding acquisitions, restoration obligations, IT investments and right-of-use assets arising from leases
In Europe, we strengthened the Verbund by replacing our acety-
lene plant in Ludwigshafen, Germany, which plays a central role for
many products and value chains, with a modern, highly efficient
plant. We also built another production plant for special zeolites in
Ludwigshafen, Germany. Special zeolites are used to produce
state-of-the-art exhaust catalysts for commercial vehicles and
passenger cars with diesel engines. Construction continued for
another production plant for vitamin A, which is scheduled for
startup in 2021. In Antwerp, Belgium, we are expanding our ethylene
oxide complex.
We invested €3,839 million in property, plant and equipment in 2019
(previous year: €3,615 million). Capex¹ accounted for €3,349 million
of this amount (previous year: €3,498 million). Our investments in
2019 focused on the Chemicals, Materials, Surface Technologies
and Nutrition Care segments.
Investments
€3,839 million
42
42
About This Report
Following the approval of all relevant authorities, BASF and
LetterOne completed the merger of Wintershall and DEA effective
May 1, 2019. In September 2018, BASF and LetterOne had signed
a transaction agreement to merge their respective oil and gas
businesses in a joint venture. Shareholder loans were replaced by
bank loans in the course of the merger. BASF and LetterOne
intend to list Wintershall Dea on the stock exchange by way of an
initial public offering (IPO) in the second half of 2020, provided
market conditions are suitable. Since May 1, 2019, BASF's 72.7%
interest in Wintershall Dea has been reported in the Consolidated
Financial Statements of the BASF Group according to the equity
method, with an initial valuation at fair value. The gain of €5.7 billion
For more information on this divestiture, see the Notes to the Consolidated Financial Statements
from page 213 onward
On January 31, 2019, BASF and Solenis completed the transfer of
BASF's paper and water chemicals business to Solenis as
announced in May 2018. Since February 1, 2019, we have held a
49% share in Solenis, which is accounted for using the equity Agreed transactions
method. An equity-accounted interest in the amount of €590 million
was added in this connection.
We completed the sale of the ultrafiltration membrane business to
DuPont Safety & Construction (DuPont) on December 31, 2019.
The divestiture includes the shares of inge GmbH, the business'
headquarters and production site in Greifenberg, Germany, including
all employees, its international sales force, and certain intangible
assets. The ultrafiltration membrane business had been part of the
Performance Chemicals division.
On December 6, 2019, BASF India Limited sold its stilbene-based
optical brightening agents (OBA) business for paper and powder
detergent applications to Archroma India Private Limited, Mumbai,
India. The production plant was part of the Performance Chemi-
cals division and the stilbene-based OBA business was allocated
to the Performance Chemicals and Care Chemicals divisions.
from the transition from full consolidation to the equity method is
included in income after taxes from discontinued operations for the
second quarter of 2019.
Divestitures
On September 26, 2019, we acquired Isobionics B.V., Geleen,
Netherlands, an innovation leader in biotechnology. The company
develops and produces a wide range of natural flavors and
fragrances. The acquisition strengthens the Nutrition & Health division.
We added €3 million worth of property, plant and equipment
through acquisitions in 2019. Additions to intangible assets was
negative, at minus €37 million, due to the adjustment of the pur-
chase price allocation for the businesses acquired from Bayer.
For more information on acquisitions, see the Notes to the Consolidated Financial Statements
from page 210 onward
Acquisitions
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Material Investments and Portfolio Measures
1 To Our Shareholders
2018
2 Management's Report
Results of Operations
11,593
4
4,052
2018
2019
on intangible assets and property,
plant and equipmenta
+Impairments and reversals of impairments
+ Depreciation and amortizationa
EBIT before special items
- Special items
EBIT
EBITDA before special items
Million €
EBITDA before special items declined by €1,054 million year on
year to €8,217 million in 2019. At €8,036 million, EBITDA was down
€934 million from the prior-year figure. The EBITDA margin was
13.5% in 2019, compared with 14.9% in the previous year.
Income from operations before depreciation, amortization
and special items (EBITDA before special items) and income
from operations before depreciation and amortization (EBITDA)
are indicators that describe operational performance independent
of age-related depreciation and amortization of assets and any
impairment or reversal of impairment. Both figures are therefore
particularly useful in cross-company comparisons. EBITDA before
special items is also highly useful in making comparisons over time.
The EBITDA margin is a relative indicator and is calculated as the
ratio of EBITDA to sales revenue, enabling operational performance
to be compared independent of the size of the underlying business.
Other APMs are net debt, 1 free cash flow¹ and capital expenditure
(capex).2
We also use alternative performance measures (APMs) to steer the
BASF Group. Investors, analysts and rating agencies use them to
assess our performance. These are not defined by IFRS. As such,
the methods of calculation can differ from those used by other
companies. Alternative performance measures for the results of
operations are EBIT before special items, EBITDA before special
items, EBITDA, the EBITDA margin and adjusted earnings per share.
■ Adjusted earnings per share decline from €5.87 to €4.00
■ EBITDA before special items and EBITDA considerably
below previous year
5,974
(484)
(307)
4,536
49
BASF Report 2019
2 For more information on capex, see Value-Based Management on page 30 and Material Investments and Portfolio Measures on page 42
1 For more information on these indicators, see the Financial Position from page 54 onward
9,271
a Excluding depreciation, amortization, impairments and reversals of impairments attributable to the
discontinued construction chemicals business
8,217
Additional indicators for results of operations
EBITDA before special items
3,681
Depreciation, amortization, impairments and
reversals of impairments on intangible assets
and property, plant and equipment
47
21
2,943
3,660
6,281
2,990
For more information on the results of operations of discontinued operations, see page 98 onward
For information on the tax rate, see the Notes to the Consolidated Financial Statements from
page 233 onward
For information on the items in the statement of income, see the Notes to the Consolidated Financial
Statements from page 226 onward
48
a Including customer/supplier financing and other adjustments
86,556
86,950
Assets of the BASF Group as of December 31
16,807
2,706
About This Report
of which disposal groups for the oil and gas
business and the construction chemicals business
27,584
+ Assets not included in cost of capital
(1,534)
+ Deviation from cost of capital basis at closing rates
as of December 31
53,930
60,900
Cost of capital basis of segments,
average of month-end figures
26,856
49
1
2 Management's Report
Results of Operations
Net income amounted to €8,421 million, considerably higher than
the prior-year figure of €4,707 million due to the above-mentioned
book gain. Earnings per share were €9.17, compared with €5.12
in 2018.
Noncontrolling interests declined by €202 million to €70 million,
largely from the lower earnings of Shanghai BASF Polyurethane
Company Ltd. due to lower margins and as a result of the above-
mentioned deconsolidation of the Wintershall companies in the
second quarter of 2019.
the merger of the oil and gas activities of Wintershall and DEA on
May 1, 2019, contributed significantly to the increase. The income
after taxes of the discontinued construction chemicals business was
€24 million, around €10 million below the prior-year figure. The
decrease was mainly driven by special items in connection with the
planned divestiture.
Income after taxes from continuing operations declined from
€4,116 million to €2,546 million. Income after taxes from discon-
tinued operations rose by €5,082 million to €5,945 million. This
figure included the construction chemicals business and, until the
end of April, our oil and gas activities. A book gain of €5,684 million
from the deconsolidation of the Wintershall companies following
Income before income taxes decreased from €5,233 million in the
previous year to €3,302 million in 2019. Income taxes declined
accordingly, from €1,117 million in the previous year to €756 million
in 2019. The BASF Group tax rate amounted to 22.9% in 2019, after
21.3% in 2018. The increase was mainly attributable to taxes for
prior years, especially in Germany and the United States.
This was partly offset by a €95 million improvement in the other
financial result, primarily due to lower expenses from hedging of
financial indebtedness.
Higher interest expenses for financial indebtedness led to a lower
interest result of minus €465 million (2018: minus €363 million),
largely from higher U.S. dollar commercial paper during the year. In
addition, interest expenses of €39 million arose in connection with
leases.
To Our Shareholders
At minus €45 million, net income from shareholdings was down
€2 million from the previous year, mainly as a result of lower dividend
income.
■ Earnings per share increase from €5.12 to €9.17
■ Financial result slightly below previous year; considerable
year-on-year growth in net income
Financial result and income after taxes
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
The financial result amounted to minus €750 million in 2019,
compared with minus €741 million in the previous year.
About This Report
1
To Our Shareholders
3,742
Adjusted income after taxes
60,220
59,316
Sales revenue
(108)
5,559
5,663
- Adjustments to income after taxes from discontinued
operations
8,036
EBITDA
206
318
- Adjustments to income taxes
2,996
3,984
8,970
1
EBITDA margin
13.5
50
50
BASF Report 2019
The introduction of IFRS 16 increased capital employed by around
€1 billion. At the same time, depreciation and amortization rose by
around €350 million, which had a positive impact on EBITDA.
Interest effects of around €39 million in the year under review led to
a corresponding improvement in EBIT and EBIT before special
items. The increase in capital employed and the interest effects
had an offsetting impact on ROCE and slightly reduced the indica-
tor overall.
5.87
4.00
€
%
918,479
3,670
918,479
Weighted average number of outstanding shares (in thousands)
Adjusted earnings per share
273
72
- Adjusted noncontrolling interests
Adjusted net income
a Excluding depreciation, amortization, impairments and reversals of impairments attributable to the
discontinued construction chemicals business
14.9
5,390
277
8
Depreciation, amortization, impairments and
reversals of impairments on intangible assets
and property, plant and equipment
2018
2019
2018
2019
Million €
For information on the earnings per share according to IFRS, see the Notes to the Consolidated
Financial Statements on page 226
In 2019, adjusted earnings per share amounted to €4.00, compared
with €5.87 in the previous year.
EBIT
Compared with earnings per share, adjusted earnings per share
is firstly adjusted for special items. Amortization, impairment and
reversal of impairment on intangible assets are then eliminated.
Amortization of intangible assets primarily results from the pur-
chase price allocation following acquisitions and is therefore of a
temporary nature. The effects of these adjustments on income
taxes and on noncontrolling interests are also considered. This
makes adjusted earnings per share a suitable measure for making
comparisons over time and predicting future profitability.
Million €
EBITDA
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Results of Operations
Adjusted earnings per share
- Amortization, impairments and reversals of impairments on
intangible assets contained in special items
+ Depreciation and amortizationa
5,974
plant and equipmenta
476
652
+ Amortization, impairments and reversals of impairments on
intangible assets
53
324
on intangible assets and property,
4,052
+Impairments and reversals of impairments
(484)
- Special items
2,943
3,660
4,979
8,491
Income after taxes
(307)
502
+ Assets of disposal groups
1,716
60,220
59,316
2015
2016
2017
2018
2019
61,223
Million €
Sales declined by €904 million to €59,316 million in 2019 due to
lower volumes and prices. The Chemicals and Materials segments
in particular recorded lower sales volumes. Sales development was
dampened by lower prices, especially in the Materials and Chemicals
segments. By contrast, prices rose significantly in the Surface Tech-
nologies segment. Offsetting effects came from the acquisition of
significant businesses and assets from Bayer in the Agricultural
Solutions segment, which was completed in August 2018, and
positive currency effects.
■ Sales 2% lower at €59,316 million
Sales
Acquisitions
Currencies
Prices
Volumes
Salesa, b
Business reviews by segment can be found from page 60 onward
57,550
a Sales for 2018 were reduced by the share attributable to construction chemicals activities due to their
presentation as discontinued operations. Figures for the years 2015 to 2017 have not been restated.
b Sales for 2017 were reduced by the share attributable to oil and gas activities due to their presentation as
discontinued operations. Figures for the years 2015 to 2016 have not been restated.
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Results of Operations
To Our Shareholders
1
About This Report
70,449
17
BASF Report 2019
Special items in EBIT totaled minus €484 million in 2019,
compared with minus €307 million in the previous year. The increase
in special items is primarily attributable to structural measures in
connection with our Excellence Program. In addition, integration
costs rose from €169 million to €303 million, mainly for the
businesses acquired from Bayer in the Agricultural Solutions
segment. The increase in net special income from divestitures and
higher other income had an offsetting effect. Divestitures led to a
positive earnings contribution of €286 million in 2019, in particular
from the transfer of BASF's paper and water chemicals business to
the Solenis group and the sale of businesses in the Agricultural
Solutions segment in accordance with the conditions imposed by
antitrust authorities in connection with the acquisition of the Bayer
businesses. The special items recognized in other charges and
income amounted to €160 million in 2019, compared with minus
€63 million in the previous year, and mainly resulted from the sale of
BASF's share of the Klybeck site in Basel, Switzerland. This was
partly offset by a special charge from the impairment of project costs
b EBIT before special items for 2017 was reduced by the share attributable to oil and gas activities due to their
presentation as discontinued operations. Figures for the years 2015 to 2016 have not been restated.
a EBIT before special items for 2018 was reduced by the share attributable to construction chemicals activities
due to their presentation as discontinued operations. Figures for the years 2015 to 2017 have not been
restated.
Income from operations (EBIT) before special items decreased
by €1,745 million to €4,536 million as a result of significantly lower
contributions from the Materials and Chemicals segments. The
Materials segment in particular recorded a considerable decline in
earnings, mainly from lower isocyanate margins. The earnings
decrease in the Chemicals segment was attributable to lower
volumes and softer margins, especially in the Petrochemicals
division due in particular to the scheduled turnarounds of our steam
crackers in North America and Europe. The EBIT before special
items of Other was also considerably below the 2018 figure. By
contrast, we increased EBIT before special items in all other seg-
ments. This rose considerably in the Agricultural Solutions segment,
primarily from sales growth as a result of the businesses acquired
from Bayer. EBIT before special items was also considerably above
the prior-year level in the Industrial Solutions segment due to lower
fixed costs, positive currency effects and higher margins. The Sur-
face Technologies segment likewise saw a considerable improve-
■ Considerable decline in EBIT before special items,
EBIT and ROCE
Income from operations
47
5 Overviews
The world economy saw much weaker growth in 2019 than
in 2018. Growth in global industrial production and in the
global chemical industry (excluding pharmaceuticals) was
also significantly below the prior-year level. In this market
environment, BASF's business did not perform as well as we
expected: Sales were down slightly from the prior-year figure
and earnings declined considerably.
6,739
Million €
EBIT before special itemsa, b
2
1,183
(3)
(1,500)
For an explanation of the indicator EBIT before special items, see page 30
1,472
(3)
ment in EBIT before special items owing to an increase in both divi-
sions. In the Nutrition & Care segment, EBIT before special items
rose slightly due to a considerable improvement in the Care Chemi-
cals division's contribution.
in %
Change
Change
in million €
Factors influencing sales of the BASF Group
5 Overviews
Consolidated Financial Statements
(1,656)
Results of Operations
3
Divestitures
6,309
7,645
6,281
4,536
2015
2016
(2)
2019
(904)
2017
0
11
Changes in the scope of
consolidation
2018
(1)
(414)
Total change in sales
3 Corporate Governance
for a planned methane-to-propylene plant on the U.S. Gulf Coast in
the Chemicals segment.
Million €
53,930
60,900
6,480
4,719
(506)
(667)
5,974
%
4,052
2019
BASF Report 2019
1 For more information on net assets, see page 52 onward
Intangible assets
Capital employed
Million €
The calculation of EBIT as part of our statement of income is shown in the Consolidated Financial
Statements on page 194
For more information on the determination of ROCE, see page 30
2018
We have used the indicator return on capital employed (ROCE)
since the 2018 business year. It measures the profitability of the
capital employed by the segments. ROCE was 7.7%, after 12.0%
in the previous year. The decline in ROCE was primarily due to the
combination of lower EBIT and higher capital employed. The increase
in capital employed was largely attributable to the full-year inclu-
sion of the assets acquired from Bayer in August 2018. Higher
property, plant and equipment from the initial application of
IFRS 16 also contributed to the increase.1
7.7
2019
1,913
+ Current and noncurrent other receivables
and other assetsa
9,747
10,061
+ Accounts receivable, trade
10,611
+ Inventories
12.0
1,611
+ Investments accounted for using the equity method
17,973
20,472
+ Property, plant and equipment
11,995
14,832
2018
1,527
EBITa, b
At €4,052 million, EBIT for the BASF Group in 2019 was consider-
ably below the previous year's level (2018: €5,974 million). This figure
includes income from companies accounted for using the equity
method, which declined from €269 million to €116 million. Since
February 1, 2019, this has also included BASF's share in Solenis'
net income and since May 1, 2019, BASF's share in Wintershall
Dea's net income. Both shareholdings contributed losses to
income from companies accounted for using the equity method.
The contribution from BASF-YPC, which operates the Verbund site
in Nanjing, China, also declined.
Cost of capital basis of segments,
average of month-end figures
Divestitures
Integration costs
Restructuring measures
6,275
2016
2018
2019
Other charges and income
Million €
2017
Special items
5,974
2018
4,052
2019
For the definition of special items, see page 30
7,587
ROCE
(627)
2015
EBIT of the segments
- EBIT of Other
EBIT of BASF Group
Million €
ROCE
(307)
(484)
(95)
Total special items in EBIT
160
a EBIT for 2018 was reduced by the share attributable to construction chemicals activities due to their
presentation as discontinued operations. Figures for the years 2015 to 2017 have not been restated.
b EBIT for 2017 was reduced by the share attributable to oil and gas activities due to their presentation as
discontinued operations. Figures for the years 2015 to 2016 have not been restated.
20
286
(169)
(303)
6,248
(63)
5,770
2018: $71/bbl
BASF Report 2019
(151)
(73)
(66)
(17)
Income after taxes from continuing operations
Income before income taxes
Financial result
EBIT before special items
Special items
(307)
5,974
1,369
1,872
2,263
Income from operations (EBIT)
2,996
833
762
703
698
470
2,280
1,938
1,442
Adjusted earnings per share
Earnings per share
Net income
Income after taxes from discontinued operations
4,116
186
1,016
1,332
1,582
5,233
238
1,232
1,681
2,082
(741)
(232)
(137)
(191)
(181)
6,281
621
8,970
1,303
2,131
2,575
€18,377 million
3,240 Liabilities to banks
14,276 Bonds and other
liabilities to the capital market
Off-balance sheet financing tools are of minor importance to us.
BASF Group's most important financial contracts contain no side
agreements with regard to specific financial ratios (financial covenants)
or compliance with a specific rating (rating trigger).
For more information on the financing tools used, see Note 24 from page 261 onward and Note 27
from page 266 onward in the Notes to the Consolidated Financial Statements
To minimize risks and leverage internal optimization potential within
the Group, we bundle the financing, financial investments and
foreign currency hedging of BASF SE's subsidiaries within the BASF
Group where possible. Foreign currency risks are primarily hedged
centrally using derivative financial instruments in the market.
Our interest risk management generally pursues the goal of reducing
interest expenses for the BASF Group and limiting interest risks.
Interest rate hedging transactions are therefore conducted with
banks in order to turn selected liabilities to the capital market from
fixed to variable interest rates or vice versa.
Statement of cash flows
■ Cash flows from operating activities and free cash flow
lower year on year
Cash flows from operating activities amounted to €7,474 million,
€465 million below the 2018 figure. The decrease was mainly due
to lower net income after accounting for the reclassification of
disposal gains from divestitures in the amount of €5,874 million
to cash flows from investing activities. This was partly offset by
the contribution from the change in net working capital, which
improved by €1,940 million. This development was driven by the
cash released from the €1,208 million reduction in trade accounts
receivable in 2019, compared with cash tied up of €188 million in
the previous year. In addition, inventories were reduced in 2019,
after significant inventory growth in the previous year.
Cash flows from investing activities amounted to minus
€1,190 million in 2019, compared with minus €11,804 million in
2018. Payments made for intangible assets and property, plant
and equipment amounted to €3,824 million, only slightly lower
than in the previous year. The change mainly resulted from
acquisitions and divestitures. Payments received for divestitures in
2019 were €2,493 million higher than in the previous year. This
was primarily attributable to the total inflow of €2,393 million from
the merger of Wintershall and DEA's oil and gas businesses, largely
due to the repayment of internal loans and the implementation of
capital measures. Payments made for acquisitions amounted to
€239 million in 2019, compared with €7,362 million in the previous
year. In the previous year, these mainly related to the purchase
price payment to Bayer, which amounted to €7,208 million includ-
ing liquid funds assumed.
For more information on investments and acquisitions, see page 42 onward
Cash released from changes in financial assets and miscellaneous
items amounted to €273 million in 2019, after cash tied up of
€655 million in 2018. This was mainly attributable to higher disposals
of intangible assets and property, plant and equipment, as well as of
other financing-related receivables compared with the previous year.
Cash flows from financing activities amounted to minus
€6,405 million in 2019, after minus €52 million in 2018. The net
cash outflow from the change in financial and similar liabilities was
€3.3 billion in 2019. This was largely due to the €1.7 billion reduction
in U.S. dollar commercial paper by BASF SE and the repayment of
bonds in the amount of €2.0 billion. The net cash inflow of €3.0 billion
in the previous year was mainly from the issue of U.S. dollar commer-
cial paper by BASF SE with a carrying amount of around €2.5 billion.
In 2019, dividends of €2,939 million were paid to shareholders of
BASF SE and €125 million to noncontrolling interests, on a level with
the previous year overall.
Cash and cash equivalents amounted to €2,455 million as of
December 31, 2019. They declined by a cash-effective amount of
€121 million in 2019.
BASF Report 2019
56
About This Report
1 To Our Shareholders
2 Management's Report
Financial Position
861
a Quarterly results not audited
U.S. dollar commercial paper
9.17
2,961
9,271
1,451
2,204
2,639
2,977
Income from operations before depreciation and amortization and special items
Income from operations before depreciation and amortization (EBITDA)
Depreciation and amortization
a Amortization of intangible assets and depreciation of property, plant and equipment (including impairments
and reversals of impairments) excluding depreciation and amortization attributable to the discontinued
construction chemicals business
(31.9%)
5.87
4.00
€
Adjusted earnings per share
60,220
14,985
14,960
15,119
15,156
Sales
79.1%
5.12
€
3 Corporate Governance
176
251
55,960
Noncurrent assets
886
1.3
1,112
Other receivables and miscellaneous assets
2.7
2,342
3.3
64.4
2,887
0.7
570
0.7
636
Other financial assets
2.5
2,203
17.3
15,008
Deferred tax assets
43,335
1.0
50.0
3,139
4.3
3,790
Other receivables and miscellaneous assets
12.3
10,665
10.5
9,093
Accounts receivable, trade
14.1
12,166
12.9
11,223
Inventories
Property, plant and equipment rose by €1,012 million and
additionally included capitalized right-of-use assets arising from
leases in the amount of around €1.3 billion as a result of the initial
application of IFRS 16. Additions to property, plant and equipment
exceeded depreciation and impairment for 2019 by €434 million.
By contrast, the creation of the disposal groups for the construc-
tion chemicals and pigments businesses reduced property, plant
and equipment by €769 million and intangible assets by €1,667 million.
Amortization of intangible assets exceeded additions by €483 million;
overall, intangible assets declined by €2,029 million.
More information on the above transactions and disposal groups can be found on page 43 of this
Management's Report and in Notes 2.4 and 2.5 to the Consolidated Financial Statements from
page 210 onward
Noncurrent assets rose by €12,625 million to €55,960 million. All
items except intangible assets contributed here. The main driver
was investments accounted for using the equity method, which
rose by €12,805 million to €15,008 million. This was largely attri-
butable to the interest in Wintershall Dea GmbH, Kassel/Hamburg,
Germany, and to a lesser extent the interest in Solenis UK Interna-
tional Ltd., London, United Kingdom, both of which were included
for the first time.
Total assets amounted to €86,950 million as of December 31,
2019, slightly above the prior-year level.
■ €1.3 billion increase in property, plant and equipment
following introduction of IFRS 16
■ Growth in total assets due to addition of equity-accounted
shareholdings in Wintershall Dea and Solenis
100.0
Investments accounted for using the equity method
24.0
20,780
25.1
BASF Report 2019
b Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments) excluding depreciation and amortization attributable to the discontinued construction
chemicals business
5.87
0.72
1.48
1.76
1.91
€
5.12
0.37
1.31
1.61
1.83
€
4,707
348
1,200
1,480
1,679
863
245
555
191
51
1 To Our Shareholders
21,792
Property, plant and equipment
19.1
16,554
16.7
14,525
Intangible assets
%
Million €
%
Million €
December 31, 2018
December 31, 2019
Assets
Assets
Net Assets
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Net Assets
About This Report
3.6
4
5 Overviews
slight increase
considerable decline
slight increase
slight increase
slight increase
slight decline
considerable decline
considerable decline
slight increase considerable decline
Industrial Solutions
Surface Technologiesb
Nutrition & Care
Other
BASF Group
slight decline considerable decline
slight increase
slight increase
slight increase
a For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight" means a change of 1-10%, while "considerable"
is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%). At a cost of capital percentage of 10% for 2019, we define a change in ROCE of 0.1 to 1.0 percentage points as "slight," a change of
more than 1.0 percentage points as "considerable" and no change (+/-0 percentage points) as "at prior-year level."
acrylic monomers in the Petrochemicals division did not materialize.
Earnings development was also negatively impacted by lower sales
volumes in both divisions. As a result, ROCE did not just decline
slightly, but considerably.
Contrary to our forecast, the Materials segment saw a consider-
able decline in sales, rather than a slight increase. Price levels in the
Performance Materials division were slightly below the prior-year
level due to lower raw materials prices for methylene diphenyl
diisocyanates (MDI), and were thus unable to compensate for the
expected decline in isocyanate prices in the Monomers division.
Sales volumes in the Performance Materials division also fell short of
our expectations as a result of weak demand from key industries,
especially the automotive industry. The acquisition of Solvay's
integrated polyamide business was only completed on January 31,
2020, meaning that the acquisition did not lead to a positive
contribution in 2019. EBIT before special items and ROCE declined
considerably as expected.
Sales in the Industrial Solutions segment declined considerably
and were thus below our forecast of a slight decline. As expected,
we were able to increase sales volumes in the Performance
Chemicals division's remaining businesses following the transfer of
BASF's paper and water chemicals business to the Solenis group.
However, contrary to our assumptions, we recorded lower volumes
in the Dispersions & Pigments division and lower prices in both
divisions, mainly as a result of lower raw materials prices.
Nevertheless, we increased the segment's EBIT before special
items considerably as forecast. Driving factors here were lower fixed
costs, positive currency effects and higher margins. ROCE was
considerably above the prior-year level, as expected.
100.0
58
About This Report
1
To Our Shareholders
2 Management's Report
b Our forecast for the Surface Technologies segment at the beginning of the year still included the construction chemicals business. In determining actual development, we took into account the fact that, retroactively as of
January 1, 2019, the sales and earnings of the Construction Chemicals division are no longer included in the sales, EBIT before special items or ROCE of the Surface Technologies segment.
c We most recently updated our outlook in July 2019, forecasting a slight decline in sales and a considerable decline in EBIT before special items and ROCE.
slight increase
considerable increase
considerable increase
considerable increase
Sales
EBIT before special items
ROCE
2019 forecast
Agricultural Solutions
at prior-year level
slight increase
slight decline
slight increase
considerable increase
considerable increase
considerable increase
2019 actual
considerable decline
considerable decline
2019 forecast
slight increase
considerable decline
2019 actual
considerable decline
considerable decline
2019 forecast
slight decline
2019 actual
considerable decline
considerable decline
considerable decline
considerable decline
considerable increase
slight increase
considerable increase
considerable increase
considerable increase
considerable increase
considerable increase
considerable increase
considerable increase
3 Corporate Governance
Actual Development Compared with Outlook for 2019
4
Consolidated Financial Statements
5 Overviews
(EBITDA)
Income from operations (EBIT)
before special items
Materials
20%
2019
2018
2019
2018
2019
2018
Industrial Solutions
14%
Chemicals
9,532
11,694
1,545
2,234
791
1,587
Surface Technologies
22%
Sales
Materials
16%
Income from operations before
depreciation and amortization
Our forecast for the Surface Technologies segment at the
beginning of the year still included the construction chemicals
business. In determining actual development, we took into account
the fact that, retroactively as of January 1, 2019, the sales and
earnings of the Construction Chemicals division are no longer
included in the sales, EBIT before special items or ROCE of the
Surface Technologies segment. We considerably improved sales in
the Surface Technologies segment, outperforming our forecast of a
slight increase even though sales in the Coatings division did not
increase as we had anticipated, but remained at the prior-year level.
This was primarily attributable to considerably higher sales in the
Catalysts division on the back of higher precious metal prices. As
expected, we considerably improved EBIT before special items and
slightly increased ROCE.
In the Nutrition & Care segment, sales rose only slightly instead of
considerably. Contrary to our forecast, sales in the Care Chemicals
division declined due to a difficult market environment. The Nutri-
tion & Health division recorded considerable volumes growth, but
not as strong as expected. Consequently, EBIT before special items
also only improved slightly instead of considerably. Rather than
increasing slightly as expected, ROCE declined considerably, mainly
as a result of an impairment in connection with the optimization of
production sites within the Nutrition & Health division.
We considerably increased sales and EBIT before special items in
the Agricultural Solutions segment, as forecast. ROCE rose slightly
as expected.
Sales in Other were only slightly - instead of considerably - above
the prior-year level. This was attributable to lower prices in raw
materials trading. EBIT before special items declined considerably
as expected.
In 2019, we invested a total of €3.3 billion in capital expenditures
(capex), excluding additions from acquisitions, IT investments,
restoration obligations and right-of-use assets arising from leases.
The figure forecast at the beginning of 2019 was approximately
€3.8 billion. Capex in the Surface Technologies segment and Other
in particular was below the planned values.
For information on our expectations for 2020, see page 136 onward
For information on investments, see page 42
BASF Report 2019
59
59
About This Report
1 To Our Shareholders
2 Management's Report
Business Review by Segment
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Business Review by Segment¹
Segment overview
Million €
Contributions to total sales by segment
Chemicals
Consolidated Financial Statements
Chemicals
BASF Group sales declined slightly in 2019, contrary to our forecast
of slight growth. Sales development in the Materials and Chemicals
segments in particular was weaker than expected at the beginning
of the year. Contrary to our forecast of higher sales volumes, we
recorded a slight decline in volumes for the BASF Group as a whole.
Above all, the trade conflict between the United States and China
I did not ease. Consequently, income from operations (EBIT) before
special items declined considerably, rather than increasing slightly
as we had assumed. Earnings development in the Chemicals seg-
ment in particular did not meet our expectations. The BASF Group's
return on capital employed (ROCE) declined considerably rather
than slightly compared with 2018. ROCE was also considerably
below the cost of capital percentage; we had expected it to be
slightly above this at the beginning of 2019. We adjusted our outlook
in July 2019 due to the continued difficult global economic environ-
ment, forecasting a slight decline in sales and a considerable decline
in EBIT before special items and ROCE.
Free cash flow, which remains after deducting payments made for
intangible assets and property, plant and equipment from cash
flows from operating activities, represents the financial resources
remaining after investments. It declined to €3,650 million compared
with €4,045 million in the previous year due to the decrease in cash
flows from operating activities.
December 31,
December 31,
2019
2018
(3,824)
(3,894)
Cash flows from operating activities
7,474
Cash flows from investing activities
7,939
(7,255)
- Payments made for intangible assets
3,824
3,894
273
(655)
(1,190)
(11,804)
and property, plant and equipment
Free cash flow
2,361
Changes in financial assets and miscellaneous items
Acquisitions/divestitures
Payments made for intangible assets and property, plant and equipment
Statement of cash flows
Million €
2019
2018
Net income
8,421
4,707
Depreciation and amortization of intangible assets and property, plant and equipment
4,218
3,750
Changes in net working capital
1,410
(530)
Miscellaneous items
(6,575)
12
Free cash flow
Cash flows from operating activities
7,474
7,939
Million €
3,650
4,045
Capital increases/repayments and other equity transactions
Changes in financial and similar liabilities
0
2015
2016
2017
2018
2019
a In 2019 and 2018, cash and cash equivalents presented in the statement of cash flows deviate from the figures in the balance sheet due to the reclassification of cash and cash equivalents to disposal groups: for the construction
chemicals business (€21 million) and the pigments business (€7 million) in 2019, and for the oil and gas business (€219 million) in 2018.
Cash flows from operating activities
Payments made for intangible assets and property, plant and equipment
Free cash flow
BASF Report 2019
57
40
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Actual Development Compared with Outlook for 2019
4
Consolidated Financial Statements
5 Overviews
Actual Development Compared with
Outlook for 2019
Forecast/actual comparisona
2,519
Sales in the Chemicals segment declined considerably. At the
beginning of 2019, we expected sales to reach the prior-year level.
Contrary to expectations, the lower volumes projected as a result of
the scheduled turnarounds of our steam crackers in North America
and Europe could not be offset by higher volumes in the other
business areas. We recorded slightly lower volumes for plasticizers
and oxo alcohols in the Petrochemicals division, as well as for
amines and polyalcohols in the Intermediates division; sales volumes
for styrenes in the Petrochemicals division remained at prior-year
level. Lower capacity utilization of the condensate splitter in Port
Arthur, Texas, had a negative impact on volumes development in
North America. EBIT before special items did not increase slightly as
assumed, but declined considerably. In both divisions, we were
unable to improve overall margins. The expected margin growth in
the butanediol value chain in the Intermediates division, and in
2,455
6,436
Dividends
Cash flows from financing activities
1
3
Cash flow
(3,342)
2,966
Billion €
(3,064)
(3,021)
(6,405)
(52)
10
8
Changes in cash and cash equivalents affecting liquidity
(121)
(3,917)
6
4
Cash and cash equivalents at the beginning of the period and other changes
2,576
Cash and cash equivalents at the end of the yeara
Materials
Marketable securities
0.5
Special items
14.9
13.5
%
EBITDA margin
4,052
460
1,345
496
29
1,751
(10.4%)
8,970
8,036
3,984
1,031
923
1,039
991
Depreciation and amortization
Income from operations (EBIT)
(488)
280
(305)
(750)
(184)
(168)
(203)
(195)
Financial result
5,974 (32.2%)
4,052
Special items
Income from operations (EBIT)
4,536
765
1,065
984
1,722
EBIT before special items.
33.0%
2,996
3,984
Depreciation and amortization
(484)
Income from operations before depreciation
and amortization (EBITDA)
8,036
1,491
2,268
Q3
Q2
Q1
+/-
2018
2019
Million €
Sales and earnings by quarter in 2019ª
Million €
Sales and earnings
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Results of Operations
To Our Shareholders
1
About This Report
Maturities of financial indebtedness
Million €
December 31,
Q4
Income before income taxes
Full year
59,316
1,535
2,742
8,217
1,740
1,989
1,874
2,614
Income from operations before depreciation and amortization and special items
Income from operations before depreciation and amortization (EBITDA)
amortization and special items
(11.4%)
9,271
8,217
Income from operations before depreciation,
59,316
14,686
14,556
14,478
15,596
Sales
(1.5%)
60,220
Sales
December 31,
1,556
1,177
+ Current financial indebtedness
Financial indebtedness
- Marketable securities
- Cash and cash equivalents
Net debt
Financing policy and credit ratings
Earnings per share
Full year
Q4
Noncurrent financial indebtedness
Q3
Q1
4,707 78.9%
8,421
Net income
Sales and earnings by quarter in 2018ª
Million €
operations
863
5,945
Income after taxes from discontinued
Q2
Million €
Net debt
For more information on the development of the balance sheet, see the Ten-Year Summary on
pages 293 to 294
86,556
100.0
BASF Report 2019
In addition, provisions for pensions and similar obligations rose by
€249 million, primarily as a result of significantly lower discount rates.
Reclassifications to the disposal groups had an offsetting effect.
The €317 million decline in noncurrent financial indebtedness was
mainly due to the reclassification of two eurobonds with an aggre-
gate carrying amount of around €1.3 billion from noncurrent to current
financial indebtedness. This was partly offset by the issue of a
10-year eurobond with a carrying amount of €247 million and two
new euro-denominated loans taken out for a total of €650 million.
54
54
About This Report
1 To Our Shareholders
2 Management's Report
Financial Position
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Current liabilities declined by €6,725 million to €16,604 million.
This was mainly driven by the derecognition of the disposal group
for the oil and gas business in the amount of €5,750 million in the
second quarter of 2019. The reclassification of current and non-
current liabilities to the disposal groups for the pigments and con-
struction chemicals businesses had an offsetting effect.
Lower current financial indebtedness also contributed to the decline
in current liabilities. The €2,147 million decrease in current financial
indebtedness to €3,362 million was mainly due to the planned
repayment of two eurobonds worth around €2 billion in total, as well
as a reduction in U.S. dollar commercial paper. Offsetting effects
included the above-mentioned reclassification of two bonds from
noncurrent to current, as well as higher current liabilities to banks.
The €429 million increase in other liabilities is primarily attributable
to the initial inclusion of lease liabilities in connection with the
introduction of IFRS 16, as well as higher negative fair values of
derivatives.
Current provisions declined by €314 million compared with the
previous year, largely due to lower personnel provisions.
Tax liabilities rose by €61 million year on year to €756 million.
Net debt decreased by €2,691 million compared with Decem-
ber 31, 2018, to €15,506 million. This was mainly the result of the
€2,464 million decline in financial indebtedness.
For more information on the composition and development of individual equity and liability items,
see the Notes to the Consolidated Financial Statements from page 251 onward
operations
(38.1%)
4,116
2,546
(750)
Financial result
5,945
(36)
18
5,686
277
Income after taxes from discontinued operations
6,281 (27.8%)
4,536
EBIT before special items
2,546
223
917
243
1,163
Income after taxes from continuing operations
(307) (57.7%)
(484)
3,302
276
(741) (1.2%)
293
Net income
5,954
4.00
0.63
0.99
0.68
1.70
€
Adjusted earnings per share
Income after taxes from continuing
9.17
0.16
1.00
6.48
1.53
€
Earnings per share
5,233 (36.9%)
3,302
Income before income taxes
8,421
150
911
1,406
444
2020
2019
(5.6)
(4,850)
42.4
36,699
48.4
42,056
5.0
4,294
4.9
(5,939)
4,291
Million €
%
Million €
December 31, 2018
December 31, 2019
Equity
Noncontrolling interests
Other comprehensive income
Retained earnings
%
853
1.0
1,055
2.6
2,280
Tax provisions and deferred tax liabilities
8.6
7,434
8.8
7,683
Provisions for pensions and similar obligations
Compared with the end of 2018, noncurrent liabilities increased by
€878 million to €27,996 million. This was largely attributable to other
liabilities. These rose by €973 million, mainly due to the inclusion of
the lease liabilities recognized in connection with the initial applica-
tion of IFRS 16.
The equity ratio rose from 41.7% to 48.7%, mainly due to the book
gain on the deconsolidation of the Wintershall companies.
Equity rose by €6,241 million year on year to €42,350 million.
Retained earnings increased by €5,357 million to €42,056 million,
mainly because income after taxes significantly exceeded dividend
payments. Other comprehensive income amounted to minus
€4,850 million, after minus €5,939 million in the previous year. The
increase was primarily due to a positive effect in the translation
adjustment following the deconsolidation of Wintershall, which
more than offset the higher actuarial losses.
■ Net debt declines to €15,506 million
■ Equity ratio of 48.7%, compared with 41.7% in previous
year
Equity and liabilities
31.3
1.2
(6.9)
41.7
36,109
48.7
42,350
Paid-in capital
Equity and liabilities
Financial Position
5 Overviews
86,556
100.0
86,950
Total assets
50.0
43,221
35.6
30,990
Current assets
16.9
14,607
4.6
4,013
Assets of disposal groups
2.7
2,300
2.8
2,427
Cash and cash equivalents
0.4
344
BASF Report 2019
2,346
52
About This Report
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Financial Position
To Our Shareholders
1
About This Report
BASF Report 2019
53
For more information on the composition and development of individual asset items, see the Notes
to the Consolidated Financial Statements from page 239 onward
Cash and cash equivalents amounted to €2,427 million, slightly above
the prior-year level (2018: €2,300 million).
Inventories declined by €943 million to €11,223 million, again primarily
as a result of the reclassification to the disposal groups.
Trade accounts receivable declined by €1,572 million, due among
other factors to reclassifications to the disposal groups. The increase
in other receivables and miscellaneous assets to €3,790 million
(2018: €3,139 million) is mainly attributable to higher fair values for
derivatives and growth in precious metal trading items.
Current assets declined by €12,231 million to €30,990 million. This
was largely the result of the derecognition of disposal groups in the
total amount of €14,600 million for the paper and water chemicals
business in the first quarter, and for the oil and gas business in the
second quarter of 2019. Offsetting effects came from the reclassifi-
cation of assets to disposal groups for the pigments business in
the third quarter of 2019, and for the construction chemicals busi-
ness in the fourth quarter.
Other financial assets were also above the prior-year level, rising by
€66 million to €636 million. Deferred tax assets rose by €545 million
to €2,887 million, primarily as a result of the increase in pension
provisions. Other receivables and miscellaneous assets also rose
year on year, by €226 million to €1,112 million. This was mainly
due to the higher positive fair values of derivatives and interest and
currency swaps used to hedge bonds in U.S. dollars.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Net Assets
1 To Our Shareholders
42
3,362
2.7
1,340
Our financing policy aims to ensure our solvency at all times, limiting
the risks associated with financing and optimizing our cost of
capital. We preferably meet our external financing needs on the
international capital markets.
We strive to maintain a solid A rating, which ensures unrestricted
access to financial and capital markets. Our financing measures are
aligned with our operational business planning as well as the
company's strategic direction and also ensure the financial flexibility
to take advantage of strategic options.
Rated A2/P-1/outlook stable by Moody's and A/A-1/outlook stable
by Standard & Poor's, BASF enjoys good credit ratings, especially
compared with competitors in the chemical industry. Moody's
awarded its latest rating on November 4, 2019, and Standard &
Poor's most recently confirmed its rating on November 13, 2019.
The contract with Scope Ratings expired at the beginning of
September 2019 and was not extended by BASF.
BASF Report 2019
55
About This Report
1
To Our Shareholders
2 Management's Report
Financial Position
■ Rated A by Moody's and Standard & Poor's
3 Corporate Governance
Consolidated Financial Statements
5 Overviews
We have solid financing. Corporate bonds form the basis of our
medium to long-term debt financing. These are issued in euros and
other currencies with different maturities as part of our €20 billion
debt issuance program. The goal is to create a balanced maturity
profile, diversify our investor base and optimize our debt capital
financing conditions.
For short-term financing, we use BASF SE's U.S. dollar commercial
paper program, which has an issuing volume of up to $12.5 billion.
As of December 31, 2019, commercial paper with a nominal value
of $968 million was outstanding under this program, compared
with $2,922 million as of the previous year-end. A firmly commit-
ted, syndicated credit line of €6 billion was taken out in January
2019 to cover the repayment of outstanding commercial paper. It
can also be used for general company purposes. This credit line
was not used at any point in 2019. Our external financing is there-
fore largely independent of short-term fluctuations in the credit
markets.
Financing instruments
Million €
Total equity and liabilities
27.0
23,329
4
■ Financing principles remain unchanged
18,197
15,506
2018
2021
1,078
15,015
15,332
3,362
5,509
2022
2,157
2023
1,223
18,377
20,841
2024
1,310
444
344
2,427
2,300
2025 and beyond
9,247
19.2
16,604
Current liabilities
6.6
5,122
5.9
5,087
Accounts payable, trade
27,118
32.1
27,996
Noncurrent liabilities
0.8
705
1.9
1,678
Other liabilities
17.7
15,332
17.3
15,015
Financial indebtedness
1.5
1,301
1.5
5.9
Other provisions
Provisions
3.4
5,753
1.2
1,034
Liabilities of disposal groups
3.5
2,998
3.9
3,427
Other liabilities
6.4
5,509
3.9
3,362
Financial indebtedness
0.8
695
0.9
756
Tax liabilities
3.8
3,252
2,938
11,466
86,950
Investments including
acquisitionsa
Assets
15%
Nutrition & Care
Income from operations
(EBIT)
Million €
14%
Surface Technologies
Segment overview
Agricultural Solutions
17%
21%
Materials
19%
Chemicals
6,281
4,536
8,970
8,036
60,220
Industrial Solutions
59,316
20%
2018
639
784
9,005
8,782
2,374
973
Materials
962
1,108
2019
8,947
1,573
622
Chemicals
(6%)
Other
2018
2019
2018
2019
8,978
Industrial Solutions
BASF Group
(378)
1,120
11,199
13,142
Surface Technologies
13%
Agricultural Solutions
668
820
1,076
953
1,327
8,389
Industrial Solutions
10%
Nutrition & Care
2,400
1,003
2,993
1,691
13,270
9,120
(461)
722
Other
(483)
2,841
2,898
Other
Contributions to EBITDA by segment
734
1,095
985
1,647
617
6,156
Agricultural Solutions
736
793
1,107
1,189
5,940
6,075
Nutrition & Care
5%
7,814
889
(688)
6,903
Other
(667)
(506)
27,585
26,856
299
759
BASF Group
4,052
5,974
86,950
86,556
4,097
10,735
BASF Report 2019
1 The segment data for 2018 has been restated to reflect the new segment structure. Figures do not include the construction chemicals activities presented as discontinued operations.
60
60
653
7,110
320
a Additions to property, plant and equipment (of which from acquisitions: €3 million in 2019 and €1,425 million in 2018) and intangible assets (of which from acquisitions: minus €37 million in 2019 and €5,540 million in 2018)
16,530
7,464
16,992
426
436
663
574
11,773
11,062
565
531
Surface Technologies
644
715
6,399
6,230
591
595
298
Agricultural Solutions
Nutrition & Care
928
664
266
765
334
816
323
257
23%
Agricultural Solutions
115
398
251
80
457
Materials
155
108
(16%)
119
206
143
129
159
151
Surface Technologies
61
164
205
213
243
230
264
Industrial Solutions
Other
475
Industrial Solutions
Chemicals
Income from operations (EBIT) before special itemsa
24%
Materials
15%
Chemicals
a Quarterly results not audited
14,985
14,686
14,960
14,556
15,119
14,478
15,156
15,596
BASF Group
115
22%
Million €
Q1
16%
Nutrition & Care
2018
2019
2018
2019
2018
306
2019
2019
16%
Surface Technologies
Q4
Q3
222
Q2
2018
236
(77)
Nutrition & Care
Materials
Materials
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
68
BASF Report 2019
See page 137 for the outlook for 2020
The construction of the new acetylene plant in Ludwigshafen,
Germany, went according to plan and was started up on schedule
in late 2019. In Nanjing, China, BASF built a plant for the production
of several specialty amines. Our 50-50 joint venture there, BASF-
YPC Company Limited, completed a capacity expansion for propi-
onic acid.
EBIT declined by €951 million to €622 million. EBIT includes a
special charge from the impairment of project costs for a planned
methane-to-propylene plant on the U.S. Gulf Coast.
Margins in the Intermediates division declined slightly overall. In the
acids and polyalcohols business, margins were significantly lower
due to higher product availability on the market.
The Materials segment is composed of the Performance
Materials division and the Monomers division. The Materials
segment's portfolio comprises advanced materials and their
precursors for new applications and systems. These include
isocyanates and polyamides as well as inorganic basic
products and specialties for the plastics and plastics pro-
cessing industries. We want to focus primarily on organic
growth through differentiation via specific technological
expertise, industry know-how and customer proximity to maxi-
mize value in the isocyanate and polyamide value chains.
In particular, earnings from steam cracker products in the Petro-
chemicals division declined over the course of the year due to lower
volumes, mainly owing to the scheduled turnarounds of our steam
crackers in Europe and North America. Higher product availability
on the market of ethylene, ethylene glycols and styrene monomers
also contributed to the decrease in margins and earnings. In
addition, fixed costs rose. In the previous year, we had received
insurance refunds; in addition, maintenance expenses, especially for
our steam crackers, were above the 2018 figure.
Sales
Performance Materials
Income from operations before special items
Change: -7%
Percentage of sales: 53%
Performance Materials €6.064 million
Factors influencing sales
€13,270 million
Contributions to EBIT by segment
2018:
Change:
-14%
€11,466 million
2019:
Percentage of sales: 47%
Monomers €5,402 million
Change: -20%
Isocyanates and polyamides as well as inorganic basic products
and specialties for sectors such as the plastics, automotive and
construction industries
Monomers
Polyurethanes, thermoplastics and foam specialties for sectors
such as the transportation, construction and consumer goods
industries, as well as for industrial applications
Divisions
200
Income from operations (EBIT) before special items decreased
by €796 million compared with the previous year to €791 million.
The considerable decline in EBIT before special items affected both
divisions, but especially Petrochemicals, and was the result of lower
volumes and margins.
€2,862 million
(5)
73
278
121
423
740
Agricultural Solutions
79
126
189
225
214
220
254
222
161
North America 17%
38
(284)
Asia Pacific 38%
42% Europe
South America, Africa, Middle East 3%
Location of customer
Intermediates - Sales by region
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Chemicals
To Our Shareholders
1
About This Report
Million €
(182)
Other
734
2,945
844
1 To Our Shareholders
About This Report
Salesa
(132)
Volumes
(3%)
2019
Prices
(12%)
2018
Portfolio
0%
Currencies
1%
Sales
2 Management's Report
(14%)
3 Corporate Governance
Consolidated Financial Statements
2018
2019
2018
2019
17%
Chemicals
Q4
Q3
Q2
22
Q1
Contributions to EBIT before special items by segment
Million €
Business Review by Segment
5 Overviews
4
2019
BASF Report 2019
Change: -€1,397 million
Certified soil-biodegradable plastic for mulch films
Value for BASF
Annual volume of relevant market in Europe
> 100,000 metric tons
BASF has offered ecovio®, a biodegradable plastic for agricultural
mulch films, since 2012. In 2019, ecovioⓇ films became the first
material to be certified as soil-biodegradable according to the
European standard DIN EN 17033. Unlike the conventional
polyethylene (PE) films used in many countries, ecovioⓇ films do
not have to be laboriously collected after the harvest. Instead,
farmers can plough them into the soil. Naturally occurring micro-
organisms in the soil recognize the structure of the film as food
they can metabolize. This means that the film fully biodegrades in
the soil and does not remain there as microplastic like thin PE film
does. The European market for mulch films exceeds 100,000
metric tons per year, and the global market exceeds 2 million
metric tons per year. If tighter legislation is implemented to protect
soils from microplastics, this could provide additional sales
opportunities for ecovioⓇ.
In September 2017, BASF signed an agreement with Solvay on
the acquisition of Solvay's integrated polyamide business. The E.U.
Commission approved the acquisition on January 18, 2019 sub-
ject to certain conditions, including the sale of Solvay's polyamide
6.6 (PA6.6) production facilities in Europe. Domo Chemicals was
approved by the E.U. Commission as the buyer. The transactions
Value for the environment
Reduction in greenhouse gas emissions
up to
60%
An independently reviewed life cycle assessment of agriculture in
China shows that soil-biodegradable ecovioⓇ mulch films can
reduce the carbon footprint of crop production by up to 60%
compared with thin PE mulch films (thickness ≤25 micrometers).
While PE microplastic residues block access of nutrients to the
plant roots, ecovioⓇ films do not accumulate in the soil. As a
result, they do not inhibit the uptake of nutrients to the plant root
and enable more efficient use of fertilizers and irrigation water.
ecovioⓇ films thus help to sustain soil health, even in the produc-
tion of vegetables and other crops aimed at increasing yields.
between Solvay and Domo Chemicals and Solvay and BASF closed
on January 31, 2020.
For more information on the transaction with Solvay, see page 43
BASF Report 2019
70
10
ecovioⓇ
1,003
2,400
How we create value - an example
Additional differentiators, which continue to gain importance, are
our product portfolio of bio-based material solutions and our sus-
tainable production approaches. Such differentiated service and
product offerings enable us to continuously expand the application
horizon of our portfolio, thus generating innovative use cases and
ultimately broadening markets. The segment's global production
network allows us to operate close to our customers.
69
69
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Materials
Strategy
■Industry-leading portfolio of high-performance materials
and their precursors, leveraging two integrated value
chains
■ Differentiated products and solutions for the automotive,
construction and consumer goods industries
The Materials segment provides a toolbox of high-performance
materials that is unique in the industry. Our major integrated
isocyanate and polyamide value chains are complemented by a
number of specialties for the plastics and plastics processing
industries. The Materials segment offers specially developed
polymers and solutions to major customer industries such as auto-
motive, construction, electrical and electronics, and consumer
goods.
We cater to the growing needs of consumers in all key markets by
developing new applications, high-performance materials, systems
and digital solutions. Application know-how, industry knowledge
and customer proximity are key differentiators. BASF's compe-
tence in this field is extended by advanced material simulation
capabilities, which are a unique selling proposition in the industry.
The new MDI synthesis unit in Geismar, Louisiana, is a major mile-
stone toward increasing MDI production capacity in North America.
This investment supports the growth of our MDI customers in the
North American market.
757
2018
2018
1,469
1,519
1,439
1,495
1,568
1,561
Nutrition & Care
24%
Agricultural Solutions
3,085
3,634
2,629
3,325
2,844
3,161
1,500
2,641
1,464
(15%)
698
689
744
574
699
Other
1,684
1,808
1,243
1,561
1,501
1,796
1,728
2,649
Agricultural Solutions
Other
2019
3,022
18%
2,931
Materials
18%
Industrial Solutions
2,828
2,375
3,129
2,429
2,792
2,180
20
2,548
Chemicals
22%
Materials
3,460
Surface Technologies
2,961
2,894
Nutrition & Care
2,207
1,932
2,325
2,130
2,348
2,141
2,240
2,186
Industrial Solutions
16%
Surface Technologies
2,983
2,680
3,321
3,506
67
(161)
59% Europe
Comprehensive portfolio of intermediates and specialties, which are
used as precursors for products such as coatings, plastics, textile
fibers, pharmaceuticals and crop protection products
Sales
Intermediates €2,862 million
Change: -9%
Percentage of sales: 30%
Factors influencing sales
2019:
€9,532 million
Change:
-18%
2018:
€11,694 million
Petrochemicals €6,670 million
Income from operations before special items
Million €
Volumes
(11%)
2019
Prices
(9%)
2018
Portfolio
0%
Intermediates
Broad portfolio of high-quality basic chemicals and specialties
tailored to the needs of internal and external customers from
industries such as chemicals and plastics
Petrochemicals
Divisions
1,751
2,263
496
1,872
1,345
1,369
460
470
a Quarterly results not audited
BASF Report 2019
Currencies
62
About This Report
1
To Our Shareholders
2 Management's Report
Chemicals
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Chemicals
The Chemicals segment consists of the Petrochemicals and
Intermediates divisions. It supplies the other segments with
basic chemicals and intermediates, contributing to the
organic growth of our key value chains. Alongside internal
transfers, our customers mainly come from the chemical and
plastics industries. We aim to expand our competitiveness
through technological leadership and operational excellence.
62
2%
Sales
(18%)
€1 billion
In Ludwigshafen, Germany, BASF has started up a replacement
acetylene plant with a capacity of 90,000 metric tons. The new
plant offers extensive digital features such as augmented reality
and a reliability center, which help improve process efficiency and
ensure higher plant availability. This safeguards the site's supply
of this important intermediate and further strengthens the long-
term competitiveness of the Ludwigshafen site. Around 20 plants
use acetylene as a versatile component of downstream products.
These are essential to many value chains, including plastics,
solvents and electronic chemicals. BASF customers use these
products in the automotive, pharmaceutical, construction, con-
sumer goods and textiles industries. The new plant supplies and
safeguards value chains with a total annual contribution margin
of up to €1 billion.
Value for the environment
Fossil resource use
around -10%
BASF has developed a proprietary, multi-stage chemical process
to produce acetylene and a mixture of hydrogen and carbon
monoxide, which is used as syngas, from natural gas and
oxygen. Compared with the old plant, the new plant uses around
10% less fossil feedstock (such as natural gas) for this process
per metric ton of end product. In addition, the new plant also
generates less by-product (such as naphthalene and acetylene
coke) per metric ton of end product. Energy is also saved since
transportation logistics are no longer required for these by-products.
BASF Report 2019
19
64
About This Report
1 To Our Shareholders
up to
2 Management's Report
Chemicals
4
Consolidated Financial Statements
5 Overviews
feasibility study in October 2019. BASF's main focus is the invest-
ment in the acrylics value chain. In line with BASF's stated goal of
CO2-neutral growth until 2030, the partners are evaluating a globally
unique concept to fully power the site with renewable energy.
In October 2018, BASF and Sinopec signed a memorandum of
understanding to expand the existing 50-50 joint venture, BASF-
YPC Company Limited (BYC), at the Verbund site in Nanjing, China.
The aim is to further strengthen the joint production of chemical
products in China.
In 2020, we will expand production capacities for neopentyl glycol at
the Nanjing site to continue to support our Chinese customers'
growth.
At our Verbund site in Antwerp, Belgium, we are planning a signifi-
cant capacity expansion of our ethylene oxide plant. The project
also includes several downstream plants, for example for the
production of surfactants.
In Ludwigshafen, Germany, we further strengthened our Verbund by
replacing our acetylene plant with a modern, highly efficient plant.
The multi-stage startup process was completed in 2019.
Products, customers and applications
Division
3 Corporate Governance
BASF Group
Annual contribution margin along the value chain
More energy-efficient production of an intermediate essential to many value chains
BASF Report 2019
Change: -22%
Percentage of sales: 70%
791
1,587
Change: -€796 million
63
80
About This Report
1 To Our Shareholders
2 Management's Report
Chemicals
Value for BASF
3 Corporate Governance
Consolidated Financial Statements
5 Overviews
Strategy
■ Integrated production facilities form core of Verbund
■ Technological leadership and operational excellence
provide most important competitive edge
The Chemicals segment is at the heart of the Verbund. Its produc-
tion facilities supply BASF's segments with basic chemicals and
intermediates for the production of higher value-added products. In
this way, the segment makes a significant contribution to BASF's
organic growth. The Chemicals segment is also a reliable supplier
and provides chemicals of consistently high quality and markets
them to customers in downstream industries.
We create value through process and product innovation and invest
in research and development to implement new, sustainable tech-
nologies and to make our existing technologies even more efficient.
Technological leadership, operational excellence and a clear focus
on individual value chains are among our most important competi-
tive advantages. We concentrate on the critical success factors of
the classic chemicals business: leveraging economies of scale and
the advantages of our Verbund, high asset reliability, continuous
optimization of access to raw materials, lean and energy efficient
processes - including reducing greenhouse gas emissions - and
reliable, cost-effective logistics. Furthermore, we are constantly
improving our global production structures and aligning these with
regional market requirements. We continuously improve our value
chains and are expanding our market position - especially in Asia -
with investments and collaborations in growth markets.
Alongside the planned construction of an integrated Verbund site in
Zhanjiang in the southern Chinese province of Guangdong, we are
evaluating a joint investment in a chemical complex in Mundra, India,
together with our partners the Abu Dhabi National Oil Company
(ADNOC), Abu Dhabi, United Arab Emirates; the Adani group (Adani),
Ahmedabad, India; and Borealis AG (Borealis), Vienna, Austria. The
parties signed a memorandum of understanding to undertake a joint
How we create value - an example
New acetylene plant in Ludwigshafen, Germany
4
(171)
(142)
(99)
Q1
22
Q2
€6,670 million
Q3
Q4
2019
2018
2019
2018
Million €
2019
2019
2018
Chemicals
302
470
(37)
450
248
398
109
2018
255
Income from operations (EBIT)a
5 Overviews
(83)
(61)
(169)
BASF Group
1,722
2,280
984
1,938
1,065
1,442
Business Review by Segment
765
a Quarterly results not audited
BASF Report 2019
61
199
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4
Consolidated Financial Statements
621
Petrochemicals
Materials
811
207
212
224
186
89
69
Agricultural Solutions
772
417
29
248
259
43
(39)
84
(46)
Other
(319)
(86)
(375)
(150)
169
43
321
124
174
319
757
262
71
147
Industrial Solutions
407
248
228
207
Nutrition & Care
207
47
42
Surface Technologies
144
155
125
137
192
108
202
156
Intermediates
659
Location
Income from operations (EBIT)
Special items
EBIT before special items
Return on capital employed (ROCE)
2019
2018
+/-
9,532
11,694
(18%)
6,670
8,561
(22%)
2,862
3,133
(9%)
3,428
3,611
(5%)
12,960
15,305
(15%)
1,574
2,245
(30%)
1,545
Depreciation and amortizationa
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Sales including transfers
Intersegment transfers
590,000
Plasticizers
595,000
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
BASF Report 2019
66
99
About This Report
1
To Our Shareholders
2 Management's Report
Chemicals
3 Corporate Governance
2,234
4
5 Overviews
Business review
Segment data - Chemicals
Million €
Chemicals Petrochemicals Intermediates
■ Sales down 18% to €9,532 million due to lower volumes
and prices
■ EBIT before special items declines 50% to €791 million as
a result of considerably lower contributions from both
divisions
Sales to third parties in the Chemicals segment declined by
€2,162 million year on year to €9,532 million in 2019. This was
mainly due to the considerable sales decrease in the Petrochemi-
cals division of €1,891 million to €6,670 million. Sales also declined
considerably in the Intermediates division by €271 million to
€2,862 million.
Factors influencing sales - Chemicals
Sales to third parties
of which Petrochemicals
Intermediates
Consolidated Financial Statements
545,000
(31%)
16.2
Prices also decreased significantly overall, particularly in the Petro-
chemicals division. Prices declined in all regions and business areas
here, largely following the decrease in raw materials prices for
naphtha and butane, our most important feedstocks. Prices were
also pushed down by new ethylene capacities in the United States
as well as the trade conflict between the United States and China
and the resulting market uncertainty. Price levels declined consider-
ably in the Intermediates division, likewise in all regions and espe-
cially in the acids and polyalcohols business.
Sales development was attributable to lower volumes and prices in
both divisions, but especially in the Petrochemicals division. Here,
sales volumes declined significantly as a result of the scheduled
turnarounds of our steam crackers in North America and Europe. In
addition, lower capacity utilization of the condensate splitter in Port
Arthur, Texas, had a negative impact on volumes development in
North America. The slight decline in volumes in the Intermediates
division was largely attributable to lower sales volumes for butanediol
and derivatives, especially in the businesses serving the automotive
and textile industries.
a Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
b Additions to intangible assets and property, plant and equipment
(9%)
(22%)
(18%)
2%
1%
2%
Sales
Currencies
(5%)
114
108
Research and development expenses
0%
0%
0%
15%
962
1,108
Investments including acquisitionsb
(6%)
(10%)
(9%)
Positive currency effects in both divisions had a slight offsetting
effect.
Petrochemicals - Sales by region
Location of customer
South America, Africa, Middle East 5%
Asia Pacific 10%
North America 26%
19.1
923
661
40%
1,573
(60%)
(169)
(14)
791
1,587
(50%)
%
%
6.8
Volumes
Prices
Portfolio
(11%)
(13%)
(5%)
Assets
8,978
8,947
0%
Material investments
BASF Report 2019
17.7
2,610,000
622
350,000
Ludwigshafen, Germany
Nanjing, China
Antwerp, Belgium
2019
40,000
80,000
2020
30% increase
2022
65
About This Report
1
2 Management's Report
Chemicals
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Production capacities of significant products³
Product
Acrylic acid
Alkylamines
Formic acid
Benzene
Butadiene
Butanediol equivalents
Ethanolamines and derivatives
Expansion: ethylene oxide plant
Feedstock flexibilization of steam cracker
Ethylene
Replacement: acetylene plant
Construction: specialty amines plant
Expansion: propionic acid planta
Expansion: neopentyl glycol planta
Expansion: tertiary butylamine plant
BASF Report 2019
69,000
180,000
30,000
2019
n/a
21,000
2019
90,000
15,000
2019
1,080,000
2022
n/a
n/a
Startup
Total annual capacity
(metric tons)
Additional annual capacity
through expansion (metric tons)
Chemical, plastics, coatings, construction,
automotive, textile, pharmaceutical and
agricultural industries Production of detergents
and cleaners as well as crop protection products
and textile fibers
Use in the BASF Verbund
Chemical and plastics industry, construction,
detergent, hygiene, automotive, packaging and
textile industries; production of paints, coatings,
cosmetics, oilfield and paper chemicals
Customer industries and applications
Use in the BASF Verbund
Specialties: specialty amines such as tertiary
butylamine and polyetheramine, gas treatment
chemicals, vinyl monomers, acid chlorides,
chloroformates, chiral intermediates
Basic products: butanediol and derivatives,
alkylamines and alkanolamines, neopentyl
glycol, formic and propionic acid
Ethylene, propylene, butadiene, benzene,
alcohols, solvents, plasticizers, alkylene oxides,
glycols, acrylic monomers, styrene and
polystyrene, styrenic foams, superabsorbents
Products
a Operated by a joint venture with Sinopec
Ethylene oxide
To Our Shareholders
Oxo-C4 alcohols (calculated as butyraldehyde)
205,000
1,445,000
3,480,000
430,000
670,000
680,000
Project
South America,
Africa, Middle East
910,000
250,000
Neopentyl glycol
1,510,000
(metric tons):
Europe
North America
Asia Pacific
305,000
1,625,000
Annual capacity
PolyTHF®
Propionic acid
Propylene
StyroporⓇ/NeoporⓇ
Superabsorbents
-
■
-
Sites
0%
784
Investments including acquisitionsb
(3%)
639
(12%)
(21%)
0%
The sales decrease was primarily driven by significantly lower prices
for isocyanates in the Monomers division due to higher market
supply. Price levels for polyamides also declined. In the Performance
Materials division, sales were slightly reduced by lower sales prices Currency effects had a slightly positive impact in both divisions.
as a result of lower raw materials prices for methylene diphenyl
diisocyanate (MDI).
23%
0%
Research and development expenses
193
194
(1%)
Currencies
level. Higher isocyanate volumes were offset by lower polyamide prior-year level. The main driver was weak demand caused by
volumes due to weaker demand from key industries.
Portfolio
1%
Sales
(14%)
(7%)
(20%)
a Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
b Additions to intangible assets and property, plant and equipment
2%
1%
1
To Our Shareholders
Location of customer
Monomers - Sales by region
€6,064 million
39% Europe
North America 26%
Asia Pacific 31%
South America, Africa, Middle East 4%
South America, Africa, Middle East 7%
Prices
Performance Materials - Sales by region
Materials
5 Overviews
Consolidated Financial Statements
4
2 Management's Report
3 Corporate Governance
Location of customer
2 Management's Report
To Our Shareholders
1
About This Report
73
BASF Report 2019
See page 137 for the outlook for 2020
EBIT declined by €1,401 million year on year to €973 million. Special
charges arose in 2019, mainly from preparations for the integration
of the Solvay businesses acquired on January 31, 2020, and in
connection with the Excellence Program.
In addition, fixed costs in the Monomers division were slightly higher
than in the previous year. This was primarily attributable to the insur-
ance refunds received in the third quarter of 2018.
At €1,003 million, income from operations (EBIT) before special
items was €1,397 million below the prior-year level. Both divisions
contributed to the considerable decline in EBIT before special
items, but in particular Monomers. The decrease in the Monomers
division was mainly due to lower isocyanate margins. Lower vol-
umes and prices in the polyamide value chain also had a negative
effect. Volumes also declined in the Performance Materials division.
Asia Pacific 29%
North America 21%
43% Europe
Sales volumes also declined in the Performance Materials division.
The sales decrease here was driven by significantly lower demand
for our products from key industries, particularly the automotive
industry. In the Monomers division, volumes were at the prior-year
In the Performance Materials division, sales to the automotive
industry were considerably below the previous year due to lower
volumes, primarily reflecting the significant drop in automotive
manufacturers' production figures. Sales volumes were also
negatively impacted by tighter environmental protection require-
ments in our growth markets in Asia and political uncertainty. Sales
in the consumer goods industry were likewise down from the
political uncertainty in Europe and Asia, which dampened develop-
ments in our thermoplastic polyurethanes business in particular. By
contrast, our biodegradable plastics business developed positively
on the back of stronger demand and the favorable regulatory
environment. Sales to the construction industry were considerably
lower compared with the previous year, mainly due to lower sales
prices, especially in Europe and Asia. Sales volumes also declined,
largely as a result of lower demand for polyurethane systems in
Europe, Asia and North America.
BASF Report 2019
72
About This Report
€5,402 million
(2%)
718
8,782
910,000
820,000
2,610,000
545,000
■ Sales 14% below previous year at €11,466 million, mainly
as a result of lower prices
3 Corporate Governance
385,000
■ EBIT before special items of €1,003 million; 58% year-on-
year decrease primarily due to lower isocyanate margins
Sales to third parties in the Materials segment declined by
€1,804 million compared with the previous year to €11,466 million.
This was mainly attributable to the Monomers division, where
sales decreased considerably by €1,351 million year on year to
€5,402 million. The Performance Materials division also recorded a
considerable sales decrease of €453 million to €6,064 million.
675,000
Factors influencing sales - Materials
of which Performance Materials
Monomers
Intersegment transfers
Sales including transfers
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Depreciation and amortizationa
Income from operations (EBIT)
2019
2018
Sales to third parties
920,000
Startup
Project
Segment data - Materials
Business review
Materials
Million €
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
71
2022
Construction: engineering plastics plant
2020
Construction: MDI synthesis unit
2019
Capacity expansion: CellastoⓇ
2019
Capacity expansion: engineering plastics
+/-
11,466
13,270
(14%)
(59%)
Special items
(30)
(26)
(15%)
Performance
Materials
Materials
Monomers
Volumes
(3%)
(6%)
0%
EBIT before special items
Return on capital employed (ROCE)
Assets
1,003
2,400
(58%)
%
10.7
26.1
2,374
9,005
973
619
6,064
6,517
(7%)
5,402
6,753
(20%)
849
962
(12%)
12,315
14,232
(13%)
1,719
3,020
(43%)
1,691
2,993
(44%)
%
14.7
22.6
16%
4
Products
5 Overviews
57,000
265,000
Project
Startup
Construction: production plant for engine coolants
2020
Capacity expansion: antioxidants (IrganoxⓇ)
2021
Capacity expansion: antioxidants (IrganoxⓇ)
1,740,000
2019
2019
Capacity expansion: production plant for acrylics dispersions
Capacity expansion: light stabilizers (TinuvinⓇ NOR® 356)
Construction: production plant for plastic additives
2020
2020
2019
BASF Report 2019
77
About This Report
1
Capacity expansion: production plant for UV acrylic hotmelts.
Annual capacity
(metric tons)
Pontecchio, Italy
Shanghai, China
Pasir Gudang, Malaysia
4
Consolidated Financial Statements
5 Overviews
Production capacities of significant productsª
Product
Sites
South America,
Europe
North America
Asia Pacific
Africa, Middle East
Acrylics dispersions
Formulation additives
Polyisobutene
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Material investments
Location
Cincinnati, Ohio
Jurong, Singapore
Kaisten, Switzerland
Ludwigshafen, Germany
To Our Shareholders
3 Corporate Governance
2 Management's Report
Industrial Solutions
4
(2%)
3,211
3,828
(16%)
524
525
(0%)
8,913
9,645
5,292
(8%)
1,090
15%
1,327
1,076
23%
%
15.8
11.8
438
1,249
5,178
(8%)
9,120
Consolidated Financial Statements
5 Overviews
Business review
Segment data - Industrial Solutions
Million €
■ Sales 8% lower at €8,389 million, mainly due to the
transfer of the paper and water chemicals business to the
Solenis group
■ EBIT before special items €152 million higher as a result of
considerable earnings growth in both divisions
At €8,389 million, sales to third parties in the Industrial Solutions
segment were €731 million below the prior-year figure in 2019. This
was primarily attributable to considerably lower sales in the Perfor-
mance Chemicals division, where sales decreased by €617 million
to €3,211 million. Sales in the Dispersions & Pigments division
declined slightly by €114 million to €5,178 million.
Factors influencing sales - Industrial Solutions
Sales to third parties
of which Dispersions & Pigments
Performance Chemicals
Intersegment transfers
Sales including transfers
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
1,765,000
Depreciation and amortizationa
Income from operations (EBIT)
Special items
EBIT before special items
2019
2018
+/-
8,389
3 Corporate Governance
Consolidated Financial Statements
2 Management's Report
Industrial Solutions
About This Report
Portfolio
(8%)
Currencies
2%
Sales
(8%)
BASF Report 2019
820
668
2018
Change: €152 million
About This Report
1 To Our Shareholders
2 Management's Report
Industrial Solutions
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Strategy
■ Tailor-made products and solutions improve our
customers' applications and processes
74
(1%)
Prices
2019
Industrial Solutions
Industrial Solutions
The Industrial Solutions segment consists of the Disper-
sions & Pigments and the Performance Chemicals divisions.
The segment develops and markets ingredients and addi-
tives for industrial applications, such as fuel and lubricant
solutions, polymer dispersions, pigments, resins, electronic
materials, antioxidants, light stabilizers, oilfield chemicals,
and mineral processing and hydrometallurgical chemicals.
We aim to drive organic growth in key industries such as
automotive, plastics, electronics, and energy and resources,
and expand our position in value-enhancing additives and
solutions by leveraging our comprehensive industry exper-
tise and application know-how.
Sales
Divisions
Dispersions & Pigments
Raw materials used to formulate products in the coatings, con-
struction, paper, printing and packaging, adhesives and electronics
industries
Performance Chemicals
Customized products for various customer industries such as
chemicals, plastics, consumer goods, energy and resources, as well
as automotive and transportation
Performance Chemicals €3,211 million
Change: -16%
2019:
€8,389 million
Percentage of sales: 38%
Factors influencing sales
Change:
-8%
2018:
€9,120 million
Dispersions & Pigments €5,178 million
Change: -2%
Percentage of sales: 62%
Income from operations before special items
Million €
Volumes
(1%)
■ Global presence ensures reliable supply to customers in
all regions
1 To Our Shareholders
We take on the challenges posed by important future issues,
especially population growth: scarce resources, environmental and
climatic stressors, greater demand for food and the desire for better
quality of life. In doing so, we focus on research and development
and maintain close relationships with leading companies in our
customer industries. We position ourselves globally to reliably supply
customers in all regions. We invest in the development of innova-
tions that enable our products and processes - as well as our
customers' applications and processes - to make a contribution to
sustainability: for example, by allowing resources to be used more
efficiently.
We support our customers by serving as a reliable supplier with
consistently high product quality, good value offerings and lean
processes. We draw on our in-depth application knowledge and
technological innovations to strengthen customer relationships in
key industries.
5 Overviews
announced in May 2018. Since February 1, 2019, we have held a
49% share in Solenis, which is accounted for using the equity
method.
For more information on the transaction with Solenis, see page 43
Products, customers and applications
Division
On August 29, 2019, BASF and DIC, Tokyo, Japan, reached an
agreement on the acquisition of BASF's global pigments business.
The assets and liabilities to be divested were reclassified to a
disposal group in the Dispersions & Pigments division as of this
date. The transaction is expected to close in the fourth quarter of
2020, subject to the approval of the relevant competition authorities.
For more information on the transaction with DIC, see page 43
Dispersions & Pigments
Performance Chemicals
Consolidated Financial Statements
BASF Report 2019
Antioxidants, light stabilizers and flame retardants for plastic
applications
Fuel and refinery additives, polyisobutene, brake fluids and
engine coolants, lubricant additives and basestocks,
components for metalworking fluids and compounded lubricants
Process chemicals for the extraction of oil, gas, metals and
minerals; chemicals for enhanced oil recovery
Kaolin minerals
Customer industries and applications
Coatings, construction, paper, printing and packaging, adhesives
and electronics industries
Chemicals, plastics, consumer goods, automotive and
transportation industries, as well as energy and resources
76
984
Polymer dispersions, resins, additives, pigments, electronic
materials
4
3 Corporate Governance
2 Management's Report
Industrial Solutions
We are increasing global production capacity for the antioxidant
Irganox® 1010 by 40% through production increase projects at our
sites in Jurong, Singapore, and Kaisten, Switzerland. With the start
of production in Kaisten in 2019 and Jurong in early 2021, BASF
How we create value - an example
AlcotacⓇ
Use of organic binders reduces inorganic betonite binder usage in iron ore pelletization
Value for BASF
Expected annual sales growth
>25%
The market for binders used in the agglomeration of mineral
substrates, for example to create iron ore pellets, has a current
total volume of around €600 million. Betonite-based binders
currently make up more than 90% of the entire market. As part of
its Alcotac product line, BASF has now developed novel
polymer binding agents that offer better dose efficiency and can
be used as co-binders together with conventional betonite
binders. BASF strengthens its market presence with the organic
AlcotacⓇ binders and aims to generate annual sales growth of
more than 25% over the coming years.
aims to better serve the growing demand from customers in Asia
and Europe, the Middle East and Africa.
We launched our GlysantinⓇ branded engine coolant products in the
North American automotive market in January 2020. Capital invest-
ments at our production site in Cincinnati, Ohio, are underway,
adding to our global footprint, which includes sites in Europe, Asia
and South America.
BASF Report 2019
Value for the environment
Reduction of sulfur dioxide emissions
up to 25%
Iron ore pellets are still usually made using conventional betonite
binders. However, this produces undesirable contaminants such
as silicon dioxide and sulfur. The use of only small quantities of
AlcotacⓇ products as co-binders can reduce betonite usage by
up to 60%. The organic binder leaves virtually no residues in the
firing process. This increases the quality and thus the value of the
iron ore and can reduce sulfur dioxide emissions by up to 25%.
In 2019, we doubled the production capacity for the adhesive raw
material acResinⓇ with the startup of a second production facility in
Ludwigshafen, Germany.
To provide a reliable supply of high-quality dispersions solutions in
the growing ASEAN, Australian and New Zealand markets, we plan
to double the production capacity for acrylics dispersions in Pasir
Gudang, Malaysia. The new line will be operational in 2020.
On January 31, 2019, BASF and Solenis completed the transfer
of BASF's paper and water chemicals business to Solenis as
75
About This Report
1 To Our Shareholders
Our products create additional value for our customers and enable
market differentiation. We develop new solutions together with our
customers and strive for long-term partnerships that create profit-
able growth opportunities for both parties. Efficient production set-
ups, backward integration in our Production Verbund's value chains,
capacity management, and technology and cost leadership are
essential here.
BASF Report 2019
13%
Geismar, Louisiana
South America, Africa, Middle East 11%
37% Europe
Asia Pacific 26%
€3,211 million
North America 26%
Income from operations (EBIT) before special items rose by
€152 million to €820 million. This was mainly the result of lower fixed
costs, positive currency effects and higher margins. In both divisions,
we considerably improved earnings compared with the previous
year.
The earnings improvement in the Performance Chemicals division
was attributable to lower fixed costs and positive currency effects.
The slight margin growth in the Dispersions & Pigments division was
due to positive currency effects and lower raw materials prices. In
addition, fixed costs were below the prior-year level thanks to cost
optimization measures.
Compared with 2018, EBIT rose by €236 million to €889 million.
EBIT included special income of €185 million in the Performance
Chemicals division from the transfer of BASF's paper and water
chemicals business to the Solenis group.
See page 137 for the outlook for 2020
BASF Report 2019
79
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Location of customer
Performance Chemicals - Sales by region
5 Overviews
Consolidated Financial Statements
(2%)
(16%)
The sales decrease largely reflected the transfer of BASF's paper
and water chemicals business, which was previously reported under
the Performance Chemicals division, to the Solenis group as of
January 31, 2019.
Volumes were also lower overall. Slightly higher sales volumes in the
Performance Chemicals division, especially for fuel and lubricant
solutions, were unable to offset the slightly lower volumes in the
Dispersions & Pigments division.
The slight decline in prices in both divisions, mainly as a result of
lower raw materials prices, also contributed to the sales decrease.
Positive currency effects in both divisions, especially relating to the
U.S. dollar, had an offsetting impact.
BASF Report 2019
Dispersions & Pigments - Sales by region
Location of customer
South America, Africa, Middle East 6%
4
Asia Pacific 31%
North America 25%
38% Europe
78
About This Report
1 To Our Shareholders
2 Management's Report
Industrial Solutions
3 Corporate Governance
4
€5,178 million
(8%)
Consolidated Financial Statements
Surface Technologies
2019
Prices
2018
Portfolio
0%
Currencies
3%
Sales
Zhanjiang, China
BASF Report 2019
Percentage of sales: 71%
722
617
Change: €105 million
80
80
423
1%
Volumes
Million €
Income from operations before special items
Surface Technologies
The Surface Technologies segment comprises the Catalysts
and Coatings divisions. The segment bundles the chemical
surface solution businesses. Its portfolio includes coatings,
surface treatments, catalysts and battery materials for the
automotive and chemical industries. The aim is to drive
organic growth by leveraging our portfolio of technologies
and establishing BASF as a leading and innovative solution
provider in fields such as battery materials.
UPLAB
Divisions
Catalysts
Automotive and process catalysts, battery materials, precious
metal trading, recycling
Coatings
Coatings solutions, surface treatments, decorative paints
5 Overviews
Sales
Percentage of sales: 29%
Factors influencing sales
2019:
€13,142 million
Catalysts €9,396 million
Change: 26%
Change:
17%
2018:
€11,199 million
Coatings €3,746 million
Change: 0%
Sales
17%
2%
Automotive manufacture, electrical engineering, packaging,
games, sports and leisure, household, mechanical engineering,
construction, agriculture, medical technology, sanitation and
water industry, solar thermal energy and photovoltaics
Use in the BASF Verbund
Customer industries and applications
Isocyanates (MDI, TDI), ammonia, caprolactam, adipic acid,
chlorine, urea, glues and impregnating resins, caustic soda,
polyamides 6 and 6.6, standard alcoholates, sulfuric and nitric
acid
Engineering plastics, biodegradable plastics, foam specialties,
polyurethanes
Products
Monomers
Performance Materials
Division
Products, customers and applications
In late November 2019, the official groundbreaking ceremony was
held for the first plants at the planned integrated Verbund chemical
production site in Zhanjiang in the southern Chinese province of
Guangdong. The plants will produce engineering plastics and
thermoplastic polyurethane (TPU) to serve the growing demand in
various growth industries in the southern Chinese market and
throughout Asia.
Materials
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
Industries such as plastics, woodworking, furniture, packaging,
textile, construction and automotive
889
Production capacities of selected productsª
Ammonia
Dahej, India
a Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
b Additions to intangible assets and property, plant and equipment
Altamira, Mexico
Location
Material investments
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Sulfuric acid
Propylene oxide
Annual capacity
(metric tons)
South America,
Africa, Middle East
Asia Pacific
North America
Europe
Sites
Polyamide precursors
Polyamides 6 and 6.6
Isocyanates
Urea
Chlorine
Product
653
4%
Investments including acquisitionsb
8.7
Assets
6,903
7,464
(8%)
Volumes
Prices
Portfolio
(1%)
(3%)
2%
426
436
(2%)
(1%)
(1%)
(1%)
Research and development expenses
192
224
(14%)
(8%)
0%
(19%)
Currencies
%
Return on capital employed (ROCE)
12.5
Dispersions &
Pigments
Industrial
Solutions
23%
668
820
(15)
69
36%
2%
Performance
Chemicals
2%
To Our Shareholders
2 Management's Report
Surface Technologies
2019
4
Consolidated Financial Statements
1
2019
3 Corporate Governance
About This Report
2019/2020
82
2019
2020
2021
2020
2021
2020
2021
2022
82
2020
Prices
Startup
Ludwigshafen, Germany
Münster, Germany
Pinghu, China
Shanghai, China
Środa Śląska, Poland
Tultitlán, Mexico
Project
Capacity expansion: resin plant
Capacity expansion: resin plant
Capacity expansion: automotive refinish coatings plant
Capacity expansion: for NaftosealⓇ aircraft sealants.
Construction: specialty zeolites plant for mobile emissions catalysts
Construction: plant for functional films
Construction: laboratory building for automotive coatings
Replacement: small can filling and packaging system
Construction: cathodic dip coating line
New surface treatment site
Construction: plant for mobile emissions catalysts
5 Overviews
Capacity expansion: plant for mobile emissions catalysts
Capacity expansion: automotive coatings plant
BASF Report 2019
2020
Business review
Intersegment transfers
Sales including transfers
Million €
11,199
17%
9,396
7,469
26%
3,746
3,730
0%
212
13,142
192
13,354
11,391
17%
1,173
995
18%
1,120
953
18%
10%
Segment data - Surface Technologies
+/-
2019
■ Sales growth of 17% to €13,142 million, primarily as a
result of significantly higher precious metal prices in the
Catalysts division
■ EBIT before special items 17% higher at €722 million due
to increases in both divisions
Sales to third parties in the Surface Technologies segment rose by
€1,943 million to €13,142 million. This was due to considerably
higher sales in the Catalysts division, which was up €1,927 million
from the previous year at €9,396 million. At €3,746 million, sales in
the Coatings division were at prior-year level.
Factors influencing sales - Surface Technologies
Sales to third parties
Special items
16%
574
663
2018
21%
457
8.5
8.5
%
of which Catalysts
Coatings
Langelsheim, Germany
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Depreciation and amortizationa
Income from operations (EBIT)
379
Jiangmen, China
4
Caojing, China
3%
(1%)
217
214
Research and development expenses
0%
0%
0%
6%
4%
531
Investments including acquisitionsb
2%
18%
13%
6%
11,062
11,773
About This Report
1 To Our Shareholders
565
2 Management's Report
Surface Technologies
1%
26%
Volumes
5.3
5.7
%
Return on capital employed (ROCE)
Coatings
Catalysts
17%
617
17%
722
Surface
Technologies
(37%)
(43)
Currencies
Sales
1%
4%
a Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
b Additions to intangible assets and property, plant and equipment
0%
EBIT before special items
3 Corporate Governance
4
Consolidated Financial Statements
2 Management's Report
3 Corporate Governance
Portfolio
Consolidated Financial Statements
5 Overviews
Surface Technologies
Products, customers and applications
Division
Products
1 To Our Shareholders
Catalysts
Battery materials
Coatings
Material investments
Customer industries and applications
Automotive and chemical industries, refineries, battery manufacturers, solutions for the protection of air
quality as well as the production of fuels, chemicals, plastics and battery materials
Coatings solutions for automotive applications, technology and system solutions for surface treatments, decorative paints
Automotive industry, body shops, steel industry, aviation, aluminum applications in the architecture and
construction industries, household appliances, painting businesses and private consumers
Precious and base metal services
Location
Automotive catalysts, process catalysts and technologies
About This Report
81
BASF Report 2019
5 Overviews
Strategy
■ Development of chemical solutions for surfaces in close
collaboration with our customers
■ Targeting organic growth and a leading market position in
battery materials
In the Surface Technologies segment, our focus is on the protection,
modification and development of surfaces. We develop innovative
products and technologies in close collaboration with our customers
from the catalysts, coatings, battery materials and surface treat-
ments sectors. Our aim is to drive organic growth by leveraging our
portfolio of technologies to find the best solution for our customers
in terms of functionality and cost. This helps our customers to drive
forward innovation in their industries and contribute to sustainable
development.
We aim to establish BASF as a leading and innovative provider of
battery materials and benefit from the strong growth in this specific
market segment. A global production network for battery materials
is crucial here. In 2018, we started construction of a plant in
Harjavalta, Finland, to produce battery material precursors for the
European automotive market. The production plant is being built
next to the nickel and cobalt refinery owned by Norilsk Nickel
(Nornickel). BASF and Nornickel have signed a long-term, market-
based supply agreement for nickel and cobalt from Nornickel's
metal refinery. With the investment, BASF will be present in all major
How we create value - an example
OxsilanⓇ
Eco-friendly thin-film technology for metal pretreatment
Value for BASF
Number of cars in which OxsilanⓇ was used in 2019
around 2 million
Metal pretreatment provides long-term corrosion protection and
ensures optimal paint adhesion in manufacturing processes in
the automotive, appliance and packaging industries. In our
OxsilanⓇ process, the same degree of corrosion protection is
achieved with a thin layer of polysiloxanes as with the zinc-
phosphating layers in traditional phosphating processes, which
are around 10 times thicker. OxsilanⓇ, which we added to our
portfolio with the acquisition of the Chemetall business, was
used in around two million cars in 2019. We have recently gained
additional approvals from automotive manufacturers, especially
in Asia. We are continuously developing the technology to further
improve the anti-corrosion performance and are currently under-
going approval processes at original equipment manufacturers
for our latest OxsilanⓇ technology.
regions with local battery materials production and increased
customer proximity. Another focus area is the continuous optimiza-
tion of our product and services portfolio and our structures
according to different regional market requirements as well as trends
in our customer industries.
On December 21, 2019, BASF and an affiliate of Lone Star, a global
private equity firm, signed an agreement on the sale of BASF's
Value for our customers
Process costs reduced by
(59)
up to 20%
The OxsilanⓇ technology not only reduces materials consump-
tion in metal pretreatment due to thinner layers. OxsilanⓇ
additionally offers process cost savings of up to 20% in existing
plants resulting from shorter pre-treatment times and higher
productivity compared with traditional phosphating processes. It
also enables water savings of up to 50% and energy cost savings
of up to 40%.
construction chemicals business. The transaction is expected to
close in the third quarter of 2020, subject to the approval of
the relevant competition authorities. The Construction Chemicals
division was previously reported under the Surface Technologies
segment.
For more information on the agreement with Lone Star, see page 43
Greenville, Ohio
Key growth drivers for us are the positive medium-term develop-
ment of the automotive market, especially in Asia, the trend toward
sustainable, low-emission mobility in the automotive industry, and
the associated rise in demand for battery materials for electro-
mobility. Together with our customers, we are developing custom-
ized, sustainable solutions in these growth areas for battery
materials, emission control, lightweight engineering concepts and
coatings. Our specialties and system solutions enable customers to
stand out from their competition.
2020
Positive currency effects, mainly relating to the U.S. dollar, increased
sales slightly in both divisions.
1,696
1,957
(3%)
4,244
4,118
2%
5,940
15%
6,075
2018
2019
EBIT before special items
Income from operations (EBIT)
Special items
Depreciation and amortizationa
Income from operations before depreciation and amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Intersegment transfers
Sales including transfers
+/-
of which Care Chemicals
Nutrition & Health
490
4%
644
39%
392
545
18.6
19.6
%
470
7%
1,189
8%
1,128
1,214
2%
6,410
6,565
1,107
715
Sales to third parties
Sales to third parties in the Nutrition & Care segment amounted to
€6,075 million in 2019, €135 million above the prior-year figure. This
was the result of considerable sales growth of €261 million to
€1,957 million in the Nutrition & Health division. By contrast, sales
were slightly lower in the Care Chemicals division, declining by
€126 million compared with 2018 to €4,118 million.
Capacity expansion: production plant for alkyl polyglycosides
2022
Gradual upgrade of production plants in accordance with the Good Manufacturing
Practice Standard issued by the European Federation for Cosmetic Ingredients
(EFfCI)
Capacity expansion: production plant for ibuprofen
2018-2021
Startup
635,000
Capacity expansion: production plant for methane sulfonic acid
30,000
78,000
600,000
Annual capacity
(metric tons)
Gradual capacity expansion: alkoxylates
Project
Ludwigshafen, Germany
Jinshan, China
170,000
Factors influencing sales - Nutrition & Care
2019
Construction: production plant for vitamin A
■ Slight increase in EBIT before special items by €57 million
to €793 million due to significant improvement in the Care
Chemicals division
■ Sales growth of 2% to €6,075 million largely driven by
higher volumes in the Nutrition & Health division
Million €
Segment data - Nutrition & Care
Business review
5 Overviews
Consolidated Financial Statements
2021
4
2 Management's Report
Nutrition & Care
To Our Shareholders
1
About This Report
88
2021
BASF Report 2019
3 Corporate Governance
Düsseldorf, Germany
(10%)
(21)
Sales
2%
(3%)
15%
a Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)
b Additions to intangible assets and property, plant and equipment
The sales increase was mainly attributable to significantly higher
volumes in the Nutrition & Health division, especially of citral-based
products from our plants in Ludwigshafen, Germany, and Kuantan,
Malaysia. This more than offset lower volumes in the Care Chemi-
cals division.
Consistently positive currency effects in both divisions also lifted
sales slightly.
2%
By contrast, sales were weighed down by slightly lower prices in
both divisions. In the Care Chemicals division, price levels declined
in the oleo surfactants and alcohols business in particular. In the
Nutrition & Health division, the animal nutrition business saw the
biggest decline in prices.
Location of customer
South America, Africa, Middle East 9%
Asia Pacific 20%
52% Europe
€4,118 million
North America 19%
BASF Report 2019
Care Chemicals - Sales by region
89
2%
Currencies
6,230
3%
(2%)
(2%)
(3%)
Investments including acquisitionsb
595
2%
298
0%
0%
0%
Research and development expenses
161
152
6%
100%
(149)
About This Report
To Our Shareholders
6,399
11.8
10.0
%
Return on capital employed (ROCE)
Assets
16%
(3%)
00
2%
Prices
Volumes
Care Chemicals Nutrition & Health
Nutrition & Care
8%
736
793
Portfolio
1
90
See page 137 for the outlook for 2020
2 Management's Report
Nutrition & Care
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Nutrition & Health - Sales by region
Location of customer
BASF Report 2019
South America, Africa, Middle East 11%
Asia Pacific 34%
€1,957 million
North America 17%
We improved our income from operations (EBIT) before special
items slightly by €57 million year on year to €793 million thanks to a
significantly higher contribution from the Care Chemicals division.
The increase in EBIT before special items in the Care Chemicals
division was largely driven by higher margins, especially in the oleo
surfactants and alcohols business and in the home care, industrial
and institutional cleaning and industrial formulators business, and
one-off contractual income in the personal care solutions business.
EBIT before special items in the Nutrition & Health division decreased
considerably compared with 2018. This was mainly attributable to
higher fixed costs. In 2018, fixed costs were partly offset by insur-
ance refunds for production outages. Higher margins due to
improved product availability in 2019 had an offsetting effect.
EBIT declined by €71 million year on year to €644 million. This
included impairments in connection with the optimization of produc-
tion sites within the Nutrition & Health division.
We produce citral, citronellol and menthol at our new aroma
ingredients complex in Kuantan, Malaysia. We entered the market
for natural flavors and fragrance ingredients with the acquisition of
Isobionics, an innovation leader in biotechnology, and through a
cooperation agreement with Conagen, a leader in biotechnology
research.
38% Europe
Bishop, Texas
Antwerp, Belgium
Location
€5,940 million
2018:
Change:
2%
Factors influencing sales
Percentage of sales: 32%
€6,075 million
2019:
Care Chemicals €4,118 million
Change: -3%
Percentage of sales: 68%
Nutrition & Health €1,957 million
Change: 15%
Nutrition & Health
Ingredients for the cosmetics, detergent and cleaner industries,
agrochemical and technical applications
Care Chemicals
Divisions
Sales
In the Nutrition & Care segment consisting of the Care
Chemicals and Nutrition & Health divisions - we serve the
growing and increasingly sophisticated demands for fast-
moving consumer goods. Our customers include food and
feed producers as well as the pharmaceutical, cosmetics,
detergent and cleaner industries. We strive to expand our
position as a leading provider of ingredients and solutions
for consumer applications in the areas of nutrition, home
and personal care. Our goal is to drive organic growth by
focusing on emerging markets, new business models and
sustainability trends in consumer markets, supported by
targeted acquisitions.
-
Products for the food and feed industries, the flavor and fragrance
industry, the pharmaceutical industry and the ethanol industry
Nutrition & Care
Income from operations before special items
Volumes
85
Change: €57 million
736
793
BASF Report 2019
2%
Sales
Million €
2%
0%
Portfolio
2018
(2%)
Prices
2019
2%
Currencies
595
5 Overviews
4
4
3 Corporate Governance
2 Management's Report
Surface Technologies
1 To Our Shareholders
About This Report
883
83
Consolidated Financial Statements
€9,396 million
North America 34%
BASF Report 2019
Asia Pacific 27%
South America, Africa, Middle East 6%
Location of customer
Catalysts - Sales by region
Volumes also increased slightly overall. This was attributable to
higher volumes in the Catalysts division for mobile emissions
catalysts, in precious metal trading, and for battery materials and
refining catalysts. By contrast, sales volumes declined for chemical
catalysts. In precious metal trading, sales rose to €4,585 million,
mainly due to higher prices (2018: €3,190 million). Volumes develop-
ment in the Coatings division was dampened slightly by weaker
demand from the automotive industry.
33% Europe
Consolidated Financial Statements
5 Overviews
Location of customer
3 Corporate Governance
2 Management's Report
Nutrition & Care
1 To Our Shareholders
About This Report
=4
84
BASF Report 2019
Coatings - Sales by region
See page 137 for the outlook for 2020
We considerably increased income from operations (EBIT) before
special items by €105 million to €722 million. This was mainly attri-
butable to considerable growth in the Coatings division, largely
driven by lower fixed costs and higher margins as a result of higher
prices and the positive development of raw materials costs. We
slightly increased EBIT before special items in the Catalysts division,
primarily from volumes growth. Higher fixed costs, mainly due to the
startup of new plants, had an offsetting effect.
In the Coatings division, we significantly increased sales of decora-
tive paints in South America, mainly as a result of higher volumes
and prices. We recorded slightly lower sales in the automotive OEM
coatings business. Lower volumes on the back of a slowdown in the
automotive market could only be partly offset by positive currency
effects and higher sales prices. By contrast, we slightly increased
sales of automotive refinish coatings: Higher sales prices in all
regions more than offset lower sales volumes in North America in
particular. Sales remained at the prior-year level in the surface treat-
ments business. Higher prices in all regions and positive currency
effects, especially in North America, were offset by lower volumes,
particularly in Asia Pacific and Europe.
North America 24%
€3,746 million
Asia Pacific 26%
36% Europe
South America, Africa, Middle East 14%
We improved EBIT by €89 million year on year to €663 million. This
includes special charges from efficiency programs.
About This Report
1 To Our Shareholders
2 Management's Report
Nutrition & Care
1 To Our Shareholders
About This Report
40
87
BASF Report 2019
Food and feed industries, flavor and fragrance industry,
pharmaceutical industry and ethanol industry
Customer industries and applications
Cosmetics industry, detergent and cleaner industry,
agrochemical industry, technical applications for various
industries
2 Management's Report
Nutrition & Care
Excipients for the pharmaceutical industry and selected,
high-volume active pharmaceutical ingredients, such as
ibuprofen and omega-3 fatty acids
Industrial enzymes for ethanol production
Additives for the food and feed industries, such as vitamins,
carotenoids, sterols, enzymes, emulsifiers, omega-3 fatty acids,
human milk oligosaccharides
Chemical ingredients and processing additives, for example for
crop protection, excipients for chemical processes such as
emulsion polymerization, metal surface treatments or textile
processing, as well as products for concrete additives, biofuels
and other industrial applications
Ingredients for detergents and cleaners in household, institution
or industry, such as surfactants, enzymes, chelating agents,
water-soluble polymers, biocides and products for optical effects
Ingredients for skin and hair cleansing and care products, such
as emollients, cosmetic active ingredients, polymers and UV
filters
Products
Nutrition & Health
Natural and synthetic flavors and fragrances, such as citral,
geraniol, citronellol, L-menthol and linalool, vanillin, valencene
and nootkatone
Care Chemicals
3 Corporate Governance
Consolidated Financial Statements
Material investments
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Nonionic surfactants
Methane sulfonic acid
Chelating agents
Citral
Anionic surfactants
4
Africa, Middle East
North America
Europe
South America,
Sites
Product
Production capacities of significant productsª
5 Overviews
Asia Pacific
Division
Products, customers and applications
After expanding capacities in North America in 2018, BASF also
expanded production capacities for alkyl polyglycosides (APGs) in
China in 2019. APGs, which are used as surfactants in formulations
for industries such as cosmetics, detergents and cleaners, are
made completely from renewable raw materials and are biodegrad-
able.
around
Average annual sales
growth expected in
Europe until 2022
Value for BASF
SokalanⓇ HP 20
Effective washing at low temperatures
How we create value - an example
Innovation will be the key driver here, which is why we offer our
customers tailor-made solutions and new functionalities via product
and process innovation. Research platforms focusing on bio-based
and biodegradable products have been established to complement
our existing portfolio. We are working on innovative approaches
beyond the existing purely chemical solutions with research and
development in white biotech and fermentation technologies. Our
enzymes unit, founded in 2018, centrally steers the research, tech-
nology and production of the enzyme businesses at BASF. In addi-
Consumer demands and the markets for our products are constantly
changing. In the future, growth in these markets will be driven by
natural and organic ingredients, traceability of ingredients, sustaina-
ble solutions and a growing consumer base. In addition, the trend
toward individualization and local production supports new players
and business models. To better meet these dynamic consumer
demands, we aim to enhance and broaden our technology and
product portfolio.
6%
In the Nutrition & Care segment, we strive to expand our position as
a leading provider of nutrition and care ingredients for consumer
applications. We aim to enhance our technology capabilities in fields
such as biotechnology and broaden our product portfolio with bio-
based and biodegradable innovations. We focus on emerging mar-
kets, new business models and sustainability trends in consumer
markets - supported by targeted acquisitions. A strong integration
of various standard products such as surfactants and vitamins into
the Verbund enables efficient production structures and cost leader-
ship.
■ Organic growth driven by sustainable solutions for
emerging markets, new business models and targeted
acquisitions
Strategy
5 Overviews
Consolidated Financial Statements
(3%)
4
3 Corporate Governance
■ Efficient production structures through strong integration
of standard products into the Verbund
Value for the environment and society
Energy savings by reducing washing temperatures
from 40°C to 20°C
SokalanⓇ HP 20 is a high-performance ingredient for liquid deter-
gent. It supports the trend toward machine washing at low tem-
peratures with concentrated single-dose detergent pods. The
BASF solution enables a significant reduction in anionic surfac-
tant use. We expect SokalanⓇ HP 20 to generate average annual
sales growth of around 6% in Europe until 2022 - twice as high
as the market growth forecast for detergents in the European
home care industry.
By the end of 2021, BASF will increase its capacities for methane
sulfonic acid by around 65% to better meet growing cross-industry
demand and strengthen its position as a leading global producer.
This involves an investment to construct a new methane sulfonic
acid plant at the Ludwigshafen site in Germany. Methane sulfonic
acid is a strong organic acid used in numerous applications ranging
from chemical and biofuel synthesis to industrial cleaning and metal
surface treatment in the electronics industry.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Nutrition & Care
1 To Our Shareholders
About This Report
98
86
BASF Report 2019
We are expanding our existing ibuprofen production capacities in
Bishop, Texas. Our expanded vitamin A production facilities in
Ludwigshafen, Germany, are scheduled to begin operation in early
2021. BASF will also expand its integrated complex for ethylene
oxide and derivates such as surfactants at the Verbund site in
Antwerp, Belgium.
For standard products such as vitamins or surfactants, we focus on
backward integration in our Production Verbund's value chains and
cost leadership.
Sokalan HP 20 delivers outstanding washing performance even
at low temperatures, especially in combination with the pro-
tein-splitting enzyme Lavergy® Pro 104. By reducing washing
temperatures from 40°C to 20°C, consumers can achieve energy
savings of over 50%, lower their electricity costs and improve
their carbon footprint.
>50%
In September 2019, BASF entered the market for natural flavors
and fragrance ingredients with the acquisition of Isobionics, an
innovation leader in biotechnology serving the global market for
natural flavors and fragrances, and through a cooperation agree-
ment with Conagen, Bedford, Massachusetts, a leader in biotech-
nology research.
tion, this business unit markets enzymes directly. This allows us to
focus and accelerate existing enzyme business in various industries.
Sales growth was largely driven by the significant increase in
precious metal prices in the Catalysts division. We also achieved
slightly higher prices overall in the Coatings division. Prices rose in
the automotive refinish coatings and decorative paints businesses in
particular.
Assets
The dividend proposal
reflects the high
importance we place in a
reliable dividend even in
difficult times.
10
2020
822
EBIT before special items
2020
484
2019
820
2019
722
– Page 83
Page 89
EBIT before special items
Nutrition & Care
Agricultural Solutions
Million €
Sales
2020
6,019
Sales
2020
7,660
2019
6,075
2019
Million €
7,814
13,142
8,389
11,466
EBIT before special items
2020
445
EBIT before special items
2020
835
2019
791
2019
1,003
2019
Page 72
Industrial Solutions
Million €
Surface Technologies
Million €
Sales
2020
7,644
Sales
2020
16,659
2019
Page 78
EBIT before special items
2020
773
1
Independent Auditor's Report
214
Statement of Income
222
To Our Shareholders
7
Statement of Income and Expense Recognized in Equity.
223
Letter from the Chairman of the Board of Executive Directors
The Board of Executive Directors of BASF SE
8
213
Balance Sheet
11
Statement of Cash Flows
226
BASF on the Capital Market.
12
Statement of Changes in Equity
227
Notes
228
2
5
224
Statement by the Board of Executive Directors
212
Consolidated Financial Statements
EBIT before special items
2020
970
2019
793
2019
1,095
Page 94
Page 100
Welcome
to BASF
Our integrated corporate report
combines financial and
sustainability reporting to inform
shareholders, employees and the
interested public about the 2020
business year.
On the cover:
The new acetylene plant at the Verbund site in Ludwigshafen, Germany, was
gradually started up over a period of several months and has been in
operation since 2020. It has an annual production capacity of 90,000 metric
tons of acetylene. Around 20 plants in the BASF Production Verbund use
acetylene as a versatile chemical component.
For more information on the acetylene plant, see basf.com/acetylene
This page:
BASF presented a new, highly efficient process for chemically recycling
battery materials at its Research Press Conference in December 2020. This
recovers the lithium contained in batteries in high purity and with high yields.
The process also reduces waste and greenhouse gas emissions compared
with existing methods.
For more information on battery recycling, see page 37
The people pictured in this report complied with the local coronavirus
regulations in force at the time the photos were taken.
Contents
Detailed tables of contents can be found
on each colored chapter divider
About This Report
5
4
2019
Our Strategy
9,532
10,736
BASF Report 2020
-10.7%
Personnel expenses
million €
10,576
10,924
-3.2%
EBITDA
million €
6,494
8,185
8,324
-20.7%
2,086
2,158
-3.3%
development expenses
million €
EBIT before special itemsª
million €
3,560
4,643
-23.3%
EBITa
Research and
million €
7,435
EBITDA before special itemsa
D-BASF
Acetylen-Fak
BASF Report 2020
Economic, environmental and
social performance
O-BASF
We create chemistry
BASF
Group
2020
At a glance
Key data
2020
2019
million €
+/-
2019
+/-
Sales
million €
59,149
59,316
-0.3%
Employees at year-end
110,302
117,628
-6.2%
2020
-191
4,201
Greenhouse gas
emissions
80,292
86,950
-7.7%
Number of on-site sustainability
audits of raw material suppliers
50
81
-38.3%
Investments including
acquisitionsb
4,869
4,097
18.8%
million €
million €
b Additions to property, plant and equipment and intangible assets
c Excluding sale of energy to third parties
Segment data
Chemicals
Sales
Million €
Materials
Million €
2020
8,071
Sales
2020
a Restated figures 2019; for more information, see the Notes to the Consolidated Financial Statements from
page 232 onward
Total assets
9.17
€
million metric tons
20.8
20.1
3.5%
of CO2 equivalents
Net income
million €
-1,060
8,421
Energy efficiency in
production processes
kilograms of sales
540
598
-9.7%
product/MWh
ROCE
%
1.7
7.7
Accelerator sales
million €
16,740
15,017
11.5%
Earnings per share
2019
Management's Report.
-1.15
The BASF Group
Letter from the Chairman of
the Board of Executive Directors
The Board of Executive Directors of BASF SE
BASF on the Capital Market
12
8
About This Report
1 To Our Shareholders
2 Management's Report
Letter from the Chairman of the Board of Executive Directors
Share-
holders
3 Corporate Governance
5 Overviews
Dear shareholder,
The coronavirus pandemic was the defining event of the year 2020 and caused
the sharpest decline in global GDP in the post-war period. The health, social and
economic consequences were felt by people all over the world. For industry, and
therefore for BASF too, the restrictions associated with the pandemic posed an
enormous challenge.
We reacted quickly and decisively to the crisis. Our crisis teams coordinated
the necessary measures at our sites and used the strengths of our Verbund. We
were thus able to flexibly adapt our production to the needs of our customers,
safeguard the health of our employees and ensure reliable deliveries. In this
exceptional year, the BASF team demonstrated remarkable solidarity and
flexibility and worked tirelessly to find tailor-made solutions for our customers -
whether working from home or in the plants. I want to thank all employees for
their great work!
In 2020, there was demand for raw materials and products for the pharmaceuti-
cal and cleaning industries in particular. With our "Helping Hands" initiative, we
provided assistance from the very beginning of the
pandemic. At many BASF sites, we produced hand
sanitizer and disinfectants and distributed these for
free to hospitals and other institutions. In addition, we
purchased and donated more than 100 million protec-
tive masks.
>>>
With our "Helping Hands"
initiative, we provided
assistance from the very
beginning of the pandemic.
4 Consolidated Financial Statements
To Our
1
Chapter 1 pages 7-15
BASF Group's scope of consolidation for its financial reporting com-
prises BASF SE, with its headquarters in Ludwigshafen, Germany,
and all of its fully consolidated subsidiaries and proportionally
consolidated joint operations. Shares in joint ventures and associ-
ated companies are accounted for, if material, using the equity
method in the BASF Group Consolidated Financial Statements and
are thus not included in the scope of consolidation.
The section "Employees" refers to employees active in a company
within the BASF Group scope of consolidation as of December 31,
2020.
Our data collection methods for environmental protection and safety
are based on the recommendations of the International Council of
Chemical Associations (ICCA) and the European Chemical Industry
Council (CEFIC). In the section "Environmental Protection, Health
and Safety," we report all data including information on the emis-
sions and waste of the worldwide production sites of BASF SE, its
fully consolidated subsidiaries, and proportionally consolidated joint
operations. BASF SE subsidiaries that are fully consolidated in the
Group financial statements in which BASF holds an interest of less
than 100% are included in full in environmental reporting. The emis-
sions of proportionally consolidated joint operations are disclosed
pro rata according to our interest. Work-related accidents at all sites
of BASF SE and its subsidiaries as well as joint operations and joint
ventures in which we have sufficient authority in terms of safety
management are compiled worldwide regardless of our interest and
reported in full. Unless otherwise indicated, further data on social
responsibility and transportation safety refers to BASF SE and its
consolidated subsidiaries.
The disclosures and indicators in the Management's Report on
sustainability in 2020 no longer include data on the divested
construction chemicals business. Occupational and process safety
incidents in the construction chemicals business are reported until
September 30, 2020. The integrated polyamide business acquired
from Solvay as of January 31, 2020, is included pro rata in the
figures for employees, energy consumption, greenhouse gas emis-
sions (Scope 1 and 2) and occupational and process safety (LTI and
PSI rate). Sales of products from the business acquired from Solvay
have already been integrated in the portfolio to be evaluated under
the Sustainable Solution Steering method. They will be classified
from 2021. All other sustainability indicators for 2020 do not yet
include the acquired polyamide business.
For more information on companies accounted for in the Consolidated Financial Statements, see the
Notes from page 233 onward
The list of shares held can be found at basf.com/en/corporate governance
External audit
Our reporting is audited by a third party. KPMG AG Wirtschafts-
prüfungsgesellschaft has audited the BASF Group Consolidated
Financial Statements and the Management's Report and has
approved them free of qualification. The audit of the Consolidated
Financial Statements is based on the likewise audited financial
statements of the BASF Group companies.
The limited assurance of the sustainability information contained in
the Management's Report was conducted in accordance with
ISAE 3000 (Assurance Engagements other than Audits or Reviews
of Historical Financial Information) and ISAE 3410 (Assurance
Engagements on Greenhouse Gas Statements), the relevant inter-
national assurance standards for sustainability reporting. KPMG
conducted a reasonable assurance of all disclosures on the most
important nonfinancial key performance indicators, accelerator
sales and CO2-neutral growth. Both steering-relevant indicators and
their forecasts are part of the Management's Report and are thus
covered by the annual audit. The links and additional content
provided on the internet sites referred to in this report are not part of
the audited information.
KPMG also conducted a limited assurance of the nonfinancial group
statement (NFS).
The Independent Auditor's Report can be found on page 214 onward
An assurance statement on the sustainability information in the BASF Report 2020 can be found at
basf.com/sustainability_information
An assurance statement of the NFS can be found at basf.com/nfs-audit-2020
Forward-looking statements and forecasts
This report contains forward-looking statements. These statements
are based on current estimates and projections of the Board of
Executive Directors and currently available information. Forward-
looking statements are not guarantees of the future developments
and results outlined therein. These are dependent on a number of
factors; they involve various risks and uncertainties; and they are
based on assumptions that may not prove to be accurate. Such risk
factors include those discussed in Opportunities and Risks on
pages 158 to 166. We do not assume any obligation to update the
forward-looking statements contained in this report above and
beyond the legal requirements.
BASF Report 2020
6
The coronavirus pandemic plunged the global
economy into a deep recession. In the first half of
2020, production around the world plummeted in
record time. The transportation, energy, consumer
goods, construction industries saw the steepest drops. BASF was especially
affected by the downturn in the automotive sector. Our most important customer
industry was hit by collapsing demand, production stoppages and supply chain
disruptions.
All information and bases for calculation in this report are founded
on national and international standards for financial and sustain-
ability reporting. The data and information for the reporting period
were sourced from the expert units responsible using representative
methods. The reporting period is the 2020 business year. Relevant
information is included up to the editorial deadline of February 22,
2021. The report is published each year in English and German. It is
prepared in German and the German version is authoritative.
For the full year 2020, we achieved sales of €59.1 billion and EBIT before special
items of €3.6 billion. While we had communicated a significantly more positive
outlook when we published the BASF Report 2019 on February 28, 2020, we had
to withdraw this guidance on April 29, 2020. The indicators had shifted markedly.
But at the time, it was impossible to reliably estimate the duration and further
spread of the coronavirus pandemic or the future measures to contain it. On
October 9, 2020, we gave a new outlook: Sales of €57 billion to €58 billion in 2020
as well as EBIT before special items of between €3.0 billion and €3.3 billion. Ulti-
mately, a strong fourth quarter enabled us to exceed these forecasts. Thanks to
this year-end rally, our full-year sales almost matched the level of the previous year,
while EBIT before special items was 23% lower.
8
The coronavirus pandemic-related restrictions also had a noticeable impact on
the preparations for our planned major investment in a new Verbund site in
Guangdong in southern China. Nevertheless, we are still on schedule. Last year,
we successfully started construction of the first plants. Starting in 2022, these
With our Circular Economy Program, we have therefore set ourselves ambitious
targets: BASF has committed to transforming 250,000 metric tons of recycled
and waste-based raw materials into new products each year as of 2025. And we
want to increase our sales generated with solutions for the circular economy to
€17 billion by 2030 - this represents a doubling of the current figure.
and waste into new products and energy. In many areas of the chemical industry,
however, the use of resources can be further improved.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
1 To Our Shareholders
2 Management's Report
Letter from the Chairman of the Board of Executive Directors
In parallel, we are working on our energy transformation towards carbon neutrality.
This will decisively influence our future profitability and competitiveness. The
European Union, with its Green Deal, has set the ambitious target of climate
neutrality by 2050. With its strategy, BASF has taken a clear position. For us,
reducing CO2 emissions is immensely important. We have therefore committed to
climate-neutral growth until 2030. This means that we will further reduce our
specific CO2 emissions per kilogram of product sold, by an average of one-third.
To reduce CO2 emissions even further, we need the right political framework on
the one hand and groundbreaking technologies on the other. These technologies
are being developed in our comprehensive Carbon Management Program.
About This Report
BASF Report 2020
climate protection.
our strategy. We want to contribute to a world that
offers a future with enhanced quality of life for every-
one. We are therefore working closely with our cus-
tomers and partners to develop even better solutions.
With circular economy approaches, we want to further
decouple economic growth from resource consump-
tion and thus use limited resources even more efficiently. In some ways, we have
been doing this for a long time: Our Verbund, for example, transforms by-products
tion is a key responsibility and a crucial component of Despite the pandemic,
we cannot neglect
challenges such as
Despite the challenging global effects of the pandemic,
we cannot neglect fundamental long-term challenges
such as climate protection. For BASF, climate protec-
We also made progress with the further development of our portfolio in 2020. At
the end of January, we completed the acquisition of Solvay's integrated poly-
amide 6.6 business for €1.3 billion. This acquisition broadens our polyamide
capabilities with innovative products and enhances our access to the most
important precursor as well as to growth markets in Asia and North and South
America. At the end of September, we closed the divestiture of our construction
chemicals business to an affiliate of the global private equity firm Lone Star. Given
the challenging environment, this was an outstanding team accomplishment. The
purchase price on a cash and debt-free basis was €3.17 billion. We expect to
close the sale of BASF's pigments business to the Japanese fine chemicals
company DIC in the first half of 2021, subject to the pending approval of the U.S.
competition authorities.
The Asia Pacific region, especially China, is the key growth driver of global chem-
ical production. Over the next 10 years, more than two-thirds of global growth in
the chemical industry will take place in China. This trend became more pro-
nounced in 2020 with China's rapid economic recovery. With our new, fully inte-
grated Verbund site, we want to further expand our leading position as a western
chemical company in the world's most important chemical market.
plants will produce engineering plastics and thermoplastic polyurethane to serve
the growing demand in the markets of southern China and elsewhere in Asia.
O
One important example is our steam crackers. They are currently powered by
natural gas. In the future, we want to operate them with electricity from renewable
sources. For a world-scale cracker, this could mean an annual reduction of
1 million metric tons of CO2. However, to implement this we need very large vol-
umes of electricity from renewable energies - and at internationally competitive
prices. This, in turn, requires a long-term, integrated climate and industry policy
with supportive framework conditions at the national and international levels.
To create transparency, by the end of 2021, we will be the first chemical company
worldwide to provide our customers with a product carbon footprint for all of our
45,000 sales products. With our proprietary digital solution, we will be able to
determine the overall CO2 values for our products. This product carbon footprint
will be reported as CO2 units per metric ton of sales product and include all
emissions until the product leaves the factory gate for delivery to the customer. In
this way, we combine sustainability and digitalization into a highly innovative
offering for our customers.
About This Report
1 To Our Shareholders
2 Management's Report
Letter from the Chairman of the Board of Executive Directors
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Special items in EBIT totaled -€3.8 billion, compared with -€442 million in the
previous year. The increase in special items was primarily attributable to the
impairments we had to recognize in all segments in the third quarter as a result of
the effects of the coronavirus pandemic. Cash flows from operating activities
amounted to €5.4 billion, down 27.6% compared
with the previous year. Free cash flow amounted to
€2.3 billion, after €3.7 billion in 2019.
The development of the BASF share price reflected
the overall macroeconomic development. After sig-
nificant downturns caused by the pandemic in the
first half of 2020, BASF's share price recovered and
stabilized over the second half of the year. The clos-
ing price of €64.72 was, however, still 3.9% below
the level at the end of the previous year. Assuming
that dividends were reinvested, BASF's share performance rose by 2.3% in 2020.
The exceptionally strong adverse economic impacts of the coronavirus pandemic
also had a negative effect on the development of BASF Group's free cash flow.
Nevertheless, we will propose to the Annual Shareholders' Meeting a dividend of
€3.30 per share, a payment of €3.0 billion to shareholders for the 2020 business
year. This reflects the high importance we place in a reliable dividend even in
difficult times.
We continued to drive forward our Excellence Program. Overall, we are well on
track to achieve the targeted €2 billion annual EBITDA contribution by the end of
2021. We were not quite able to achieve an accelerated implementation of all
contributions from increases in sales and from cost savings - in this difficult
environment. But we reacted quickly here, and focused even more on efficiency
improvements.
-
Overview
Martin Brudermüller
Martin Prudenville
Yours,
The coronavirus vaccination campaigns worldwide
make me optimistic about 2021, but there are still many uncertainties. It will
take time for the global economy to return to pre-pandemic levels. And there is
no shortage of new challenges. We will ensure that our customers are always
the central focus of all our activities. Together with our customers, the BASF
team works passionately to create long-term, profitable growth. I appreciate
your support as we pursue this goal and thank you for your trust in BASF.
Carbon Management and
the circular economy are
important growth drivers
across all industries.
Innovations have made BASF the leading chemical company. I am convinced that
our that our innovative power will continue to be an important success factor for
profitable development in the future. Carbon manage-
ment and the circular economy are important growth
drivers across all industries. With tailor-made solutions,
we help our customers to further improve their sustain-
ability profile and that of their products - all the way to
carbon neutrality. Innovations therefore fuel BASF's
sustainable growth. And this depends on excellent
R&D - which is exactly what we have at BASF.
>>>
BASF Report 2020
■ Relevant information included up to February 22, 2021
■ Report published each year in English and German
11
5 Overviews
UN GLOBAL
COMPACT
Global Compact
LEAD
2020 PARTICIPANT
GRI
BASF SE
Content and structure
■ Integrated BASF Report serves as U.N. Global Compact
progress report
■ Sustainability reporting in accordance with Global
Reporting Initiative (GRI) standards
■ Financial reporting according to International Financial
Reporting Standards (IFRS), the German Commercial
Code and German Accounting Standards (GAS)
The BASF Report combines the major financial and sustain-
ability-related information necessary to comprehensively evaluate
our performance. We select the report's topics based on the follow-
ing reporting principles: materiality, sustainability context, complete-
ness, balance and stakeholder inclusion. In addition to the integrated
report, we publish further information online. The relevant links can
be found at the end of each chapter.
Our sustainability reporting has been based on GRI guidelines
and standards since 2003. We have applied the "Comprehensive"
option since the BASF Report 2017.
We have been active in the International Integrated Reporting
Council (IIRC) since 2014 in order to discuss our experiences of
integrated reporting with other stakeholders and at the same time,
receive inspiration for enhancing our reporting. This report addresses
elements of the IIRC framework by, for example, providing an
illustrative overview of how we create value or demonstrating the
relationships between financial and sustainability-related perfor-
mance in the sections on the segments. The information in the
BASF Report 2020 also serves as a progress report on BASF's
implementation of the 10 principles of the United Nations' Global
Compact and takes into consideration the Blueprint for Corporate
Sustainability Leadership of the Global Compact LEAD platform.
The detailed GRI and Global Compact Index can be found in the
online report. It provides an overview of all relevant information to
fulfill the GRI indicators, as well as how we contribute to the United
Nations' Sustainable Development Goals (SDGs) and the principles
of the U.N. Global Compact. The results of the limited assurance of
this information can also be found there in the form of an assurance
statement issued by KPMG AG Wirtschaftsprüfungsgesellschaft.
We also publish additional information on sustainability in accor-
dance with the industry-specific requirements (Chemicals Standard)
of the Sustainability Accounting Standards Board (SASB).
The information on the financial position and performance of the
BASF Group comply with the requirements of International Financial
Reporting Standards (IFRS), and, where applicable, the German
Commercial Code, German Accounting Standards (GAS) and the
guidelines on alternative performance measures from the European
Securities and Markets Authority (ESMA). Internal control mecha-
nisms ensure the reliability of the information presented in this report.
BASF's Board of Executive Directors confirmed the effectiveness of
the internal control measures and compliance with the regulations
for financial reporting.
Material topics along the value chain form the focal points of
reporting and define the limits of this report. We take three
dimensions into account in identifying and evaluating material
topics: the impact on BASF, the impact of BASF and relevance for
our stakeholders.
For more information on our selection of sustainability topics, see page 42 onward and
basf.com/materiality
For a visualization of BASF's business model based on the IIRC framework, see How We Create Value
on pages 24 and 25 and basf.com/how-we-create-value
For more information on our control and risk management system, see page 158 onward
The 2020 BASF Online Report can be found at basf.com/report
For more information on the Global Reporting Initiative, see globalreporting.org
For more information on the Global Compact, see globalcompact.org and
basf.com/en/global-compact
The GRI and Global Compact Index can be found at basf.com/en/gri-gc
The SASB index can be found at basf.com/sasb
COMPACT
BASF Report 2020
UN GLOBAL
Explanations of the symbols used can be found on page 17.
210
Data
Declaration of Corporate Governance
211
BASF Report 2020
How We Ca
How we create value - an overview
of BASF's business model based on
the framework developed by the
International Integrated Reporting
Council (IIRC)
For more information, see pages 24 and 25
4
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
About This Report]
Integrated reporting
This integrated report documents BASF's economic, environmental
and social performance in 2020. We show how sustainability con-
tributes to BASF's long-term success and how we as a company
create value for our customers, employees, shareholders, business
partners, neighbors and the public.
The BASF Report online
HTML version with additional features: basf.com/report
PDF version for download: basf.com/basf_report_2020.pdf
Symbols
WE SUPPORT
5
GRI Community
17
Compliance
168
167
Corporate Governance
3
152
110
Responsible Conduct Along the Value Chain
Forecast
50
.318
177
Glossary and Trademarks
314
Ten-Year Summary
20
313
Overviews
About This Report
16
The BASF Group's Business Year
2 Management's Report
3 Corporate Governance
26
Management and Supervisory Boards
Corporate Governance Report
Compensation Report.
180
Declaration of Conformity Pursuant to Section 161 AktG.
1 To Our Shareholders
4 Consolidated Financial Statements
203
Report of the Supervisory Board
183
Production capacities of selected productsa
Product
Annual capacity
(metric tons)
Sites
South America,
Europe
North America
78,000
Asia Pacific
600,000
5 Overviews
Capacity expansion: alkoxylates
Bishop, Texas
Düsseldorf, Germany
Antwerp, Belgium
Location
Material investments
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Nonionic surfactants
Methane sulfonic acid
Chelating agents
Citral
Anionic surfactants
Africa, Middle East
4 Consolidated Financial Statements
Project
3 Corporate Governance
Ingredients for detergents and cleaners in household, institution
or industry, such as surfactants, enzymes, chelating agents,
water-soluble polymers, biocides and products for optical effects
1 To Our Shareholders
Ingredients for skin and hair cleansing and care products, such
as emollients, cosmetic active ingredients, polymers and UV
filters
Products
Nutrition & Health
Care Chemicals
Division
Products, customers and applications
By the end of 2021, BASF will increase its capacities for methane
sulfonic acid by around 65% in response to growing cross-industry
demand, strengthening its position as a leading global producer.
This involves an investment to construct a new methane sulfonic
acid plant at the Ludwigshafen site in Germany. Methane sulfonic
acid is an organic acid used in numerous applications ranging from
chemical and biofuel synthesis to industrial cleaning and metal
surface treatment in the electronics industry.
To meet rising demand for high-performance and safe UV filters,
BASF is investing in a new production line at the Kaohsiung site in
Taiwan and plans to double its global UvinulⓇ A Plus production
capacity by mid-2022. The product is a photostable UVA filter that
reliably filters the sun's dangerous UVA rays and provides protection
against free radicals and skin damage.
We expanded our existing ibuprofen production capacities in
Bishop, Texas. Our expanded vitamin A production facilities in
Ludwigshafen, Germany, will begin operation in 2021. BASF is also
investing in its integrated complex for ethylene oxide and derivates
such as surfactants at the Verbund site in Antwerp, Belgium.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Nutrition & Care
2 Management's Report
Nutrition & Care
1 To Our Shareholders
95
170,000
Chemical ingredients and processing additives, for example for
crop protection, excipients for chemical processes such as
emulsion polymerization, metal surface treatments or textile
processing, as well as products for concrete additives, biofuels
and other industrial applications
95
Additives for the food and feed industries, such as vitamins,
carotenoids, sterols, enzymes, emulsifiers, omega-3 fatty acids,
human milk oligosaccharides
Industrial enzymes for bioethanol and food production
Natural and synthetic flavors and fragrances, such as citral,
geraniol, citronellol, L-menthol and linalool, Isobionics® Santalol,
valencene and nootkatone
Excipients for the pharmaceutical industry and selected,
high-volume active pharmaceutical ingredients, such as
ibuprofen and omega-3 fatty acids
Customer industries and applications
Cosmetics industry, detergent and cleaner industry,
agrochemical industry, technical applications for various
industries
Food and feed industries, flavor and fragrance industry,
pharmaceutical industry and bioethanol industry
96
BASF Report 2020
About This Report
About This Report
30,000
Segment data - Nutrition & Care
Startup
%
-3%
1,189
1,152
-2%
1,214
1,190
-2%
6,565
6,448
-12%
490
429
4%
1,957
2,030
-3%
4,118
3,989
19.1
-1%
19.6
545
2%
3%
Portfolio
Prices
Volumes
-3%
793
773
EBIT before special items
Care Chemicals Nutrition & Health
Nutrition & Care
43%
-149
-85
Special items
7%
644
688
-15%
464
635,000
6,075
+/-
97
40
BASF Report 2020
2021
2021
2022
2020
Construction: production plant for vitamin A
Capacity expansion: production plant for methane sulfonic acid
New production line: UV filters
Ludwigshafen, Germany
Kaohsiung, Taiwan
Jinshan, China
Capacity expansion: alkoxylates
2022
Gradual upgrade of production plants in accordance with the Good Manufacturing
Practice Standard issued by the European Federation for Cosmetic Ingredients
(EFfCI)
Capacity expansion: production plant for ibuprofen
2020
2018-2022
About This Report
6,019
1 To Our Shareholders
3 Corporate Governance
2019
BASF Report 2020
2020
Income from operations (EBIT)
Depreciation and amortizationa
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Sales including transfers
Intersegment transfers
Nutrition & Health
of which Care Chemicals
Sales to third parties
Factors influencing sales - Nutrition & Care
Sales to third parties in the Nutrition & Care segment declined by
€56 million year on year to €6,019 million in 2020. Sales in the
Nutrition & Health division improved by €73 million to €2,030 million.
This was unable to fully offset the slight sales decrease of €129 mil-
lion to €3,989 million in the Care Chemicals division.
■ EBIT before special items decreases slightly by €20 million
to €773 million due to lower contribution from the Care
Chemicals division
■ Sales decline €56 million to €6,019 million, mainly as a
result of negative currency effects
Million €
Business review
5 Overviews
4 Consolidated Financial Statements
2 Management's Report
Nutrition & Care
For standard products such as vitamins or surfactants, we focus on
backward integration in our Production Verbund's value chains and
cost leadership.
BASF Report 2020
Identifying and enhancing key product characteristics in the
manufacturing process enables BASF to meet the needs of its
customers and at the same time, exploit new market opportuni-
ties. Kolliphor® P 188 Bio is an example of this. Developed and
produced by BASF, this pharmaceutical processing aid is used in
drug production and ensures product quality, consistency and
performance in cell cultures. With KolliphorⓇ P 188 Bio, we expect
to grow faster than the market for biologics processing aids in the
future by winning new customers from other industries such as
cosmetics. We anticipate annual volume growth of an estimated
over 10%.
0%
4%
565
585
Investments including acquisitionsb
1%
43%
32%
0%
Assets
11,773
11,691
-14%
5.7
-4.8
%
7%
Sales to third parties
-1%
0%
Research and development expenses
246
Asia Pacific 30%
South America, Africa, Middle East 4%
Location of customer
Catalysts - Sales by region
Sales developments was also weighed down by slightly lower
volumes overall. This was largely the result of weaker demand from
the automotive and aviation industries due to the effects of the
coronavirus pandemic, which significantly depressed volumes
development in the Coatings division. Sales volumes declined sig-
nificantly here, especially in the automotive OEM coatings, surface
treatments and automotive refinish coatings businesses. Higher
volumes in the Catalysts division for mobile emissions catalysts in
Asia and in precious metal trading were unable to compensate for
this. Sales volumes declined for chemical catalysts and refining
catalysts in particular.
Negative currency effects had an offsetting impact in both divisions.
Sales growth was largely driven by the strong increase in precious
metal prices in the Catalysts division. In precious metal trading,
sales rose to €7,612 million, mainly as a result of higher prices
(2019: €4,585 million). The Coatings division also achieved slightly
higher prices, primarily in the decorative paints and surface treat-
ments businesses.
€13,570 million
35% Europe
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
-18%
44%
27%
Sales
-5%
-4%
-4%
15%
214
of which Catalysts
Coatings
North America 31%
Intersegment transfers
Sales including transfers
Depreciation and amortizationa
1,173
-18%
900
1,120
-20%
%
5.4
8.5
966
1,487
225%
-587
663
-1,071
-59
484
722
-33%
457
26%
13,354
16,862
Income from operations (EBIT)
Special items
EBIT before special items
Return on capital employed (ROCE)
2020
2019
+/-
16,659
13,142
27%
13,570
9,396
44%
3,089
3,746
-18%
203
212
-4%
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
BASF Report 2020
92
42
1 To Our Shareholders
About This Report
44
94
Change: -€20 million
793
773
BASF Report 2020
2 Management's Report
Nutrition & Care
-1%
-3%
Currencies
0%
Portfolio
2019
-1%
Prices
2020
Sales
3 Corporate Governance
4
Consolidated Financial Statements
>10%
Estimated annual volume growth
Value for BASF
In September 2019, BASF entered the market for natural flavors and
fragrance ingredients with the acquisition of Isobionics, an innova-
tion leader in biotechnology serving the global market for natural
the enzyme businesses at BASF. In addition, this business unit
markets enzymes directly. This allows us to focus and accelerate
existing enzyme business in various industries.
In drug manufacturing, cultivating cell cultures is a complex
process with stringent regulatory requirements that must be met
to ensure a high level of purity and cell viability. This enables
consistent drug production. Kolliphor® P 188 Bio is a high-
performance pharmaceutical processing aid from BASF that
supports the cultivation of cell cultures. It is added to cell culture
systems to reduce risks such as shear stress. A validated
production process and regular controls ensure the purity and
quality of Kolliphor® P 188 Bio. Its consistent performance and
supply reduce process-related impurities in our customers'
manufacturing processes around 40-fold. This saves them from
conducting additional tests and simplifies the manufacturing
process.
around 40-fold
Value for our customers
Reduces process-related impurities
High-purity poloxamer designed for biologics manufacturing
KolliphorⓇ P 188 Bio
How we create value - an example
We are working on innovative approaches beyond the existing
purely chemical solutions with research and development in white
biotech and fermentation technologies. Our enzymes unit, founded
in 2018, centrally steers the research, technology and production of
Innovation will be the key driver here, which is why we offer our
customers tailor-made solutions and new functionalities via product
and process innovation. Research platforms focusing on bio-based
and biodegradable products have been established to complement
our existing portfolio.
Future growth in our markets will be driven by trends like growing
consumer awareness and the resulting demand for sustainable
product solutions, natural and organic ingredients and their
traceability. In addition, the shift toward individualization and local
production supports new players and business models. Digitaliza-
tion and a focused technology and product portfolio as well as close
cooperation with our customers is crucial to meeting these dynamic
market requirements both now and in the future.
In the Nutrition & Care segment, we strive to expand our position as
a leading provider of nutrition and care ingredients for consumer
applications. We aim to enhance our technology capabilities in fields
such as biotechnology and broaden our product portfolio with bio-
based and biodegradable innovations. Targeted acquisitions com-
plement our focus on emerging markets, new business models and
sustainability trends in consumer markets. A strong integration of
various standard products such as surfactants and vitamins into the
Verbund enables efficient production structures and cost leadership.
■ Efficient production structures through strong integration
of standard products into the Verbund
■ Organic growth driven by sustainable solutions for
emerging markets, new business models and
targeted acquisitions
Strategy
5 Overviews
3%
Volumes
Million €
Income from operations before special items
About This Report
93
96
See page 155 for the outlook for 2021
EBIT decreased by €1,250 million to -€587 million. EBIT included
special charges, mainly for goodwill impairments of €786 million in
the surface treatments cash-generating unit, and for property, plant
and equipment, primarily in the Catalysts division in Europe. This
largely reflected significantly weaker demand due to the effects of
the coronavirus pandemic as well as the expected slow recovery in
the automotive and aviation industries.
Income from operations (EBIT) before special items amounted
to €484 million, €238 million below the prior-year level due to lower
earnings in both divisions. In the Coatings division, this was mainly
attributable to the development of volumes. Lower fixed costs and
lower raw materials prices were unable to compensate for this.
EBIT before special items declined in the Catalysts division, mainly
as a result of higher fixed costs, driven in particular by growth initia-
tives for battery chemicals. This could not be offset by a significant
improvement in earnings in precious metal trading.
North America 23%
€3,089 million
Asia Pacific 29%
35% Europe
South America, Africa, Middle East 13%
Location of customer
Coatings - Sales by region
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Surface Technologies
1 To Our Shareholders
About This Report
1 To Our Shareholders
flavors and fragrances, and through a cooperation agreement with
Conagen, Bedford, Massachusetts, a leader in biotechnology
research.
2 Management's Report
Nutrition & Care
4 Consolidated Financial Statements
Care Chemicals €3,989 million
Change: -3%
Percentage of sales: 66%
€6,075 million
2019:
Change:
-1%
Factors influencing sales
Percentage of sales: 34%
Products for the food and feed industries, the flavor and fragrance
industry, the pharmaceutical industry and the bioethanol industry
Nutrition & Health
Ingredients for the cosmetics, detergent and cleaner industries,
agrochemical and technical applications
Care Chemicals
€6,019 million
2020:
Nutrition & Health €2,030 million
Change: 4%
Divisions
Sales
In the Nutrition & Care segment consisting of the Care
Chemicals and Nutrition & Health divisions - we serve the
growing and increasingly sophisticated demands for
fast-moving consumer goods. Our customers include food
and feed producers as well as the pharmaceutical, cosmetics,
detergent and cleaner industries. We also offer solutions for
technical applications and for crop protection and plant
nutrition. We strive to expand our position as a leading
provider of ingredients and solutions for consumer applica-
tions in the areas of nutrition, home and personal care. Our
goal is to drive organic growth by focusing on emerging
markets, new business models and sustainability trends in
consumer markets, supported by targeted acquisitions.
-
Nutrition & Care
5 Overviews
3 Corporate Governance
Return on capital employed (ROCE)
Coatings
10.6
Catalysts
Surface
Technologies
Million €
Segment data - Surface Technologies
Business review
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Surface Technologies
Volumes
1 To Our Shareholders
91
BASF Report 2020
5
2020
2022
2019/2020
2021
2022
2021
About This Report
Prices
Portfolio
Currencies
Volumes
5%
2020
Prices
2%
2019
Portfolio
0%
Currencies
-9%
Sales
-2%
BASF Report 2020
970
1,095
Change: -€125 million
100
Sales to third parties in the Surface Technologies segment rose by
€3,517 million to €16,659 million in 2020. This was due to
considerably higher sales in the Catalysts division, which rose by
€4,174 million year on year to €13,570 million. In the Coatings
division, sales declined by €657 million to €3,089 million.
■ EBIT before special items 33% lower at €484 million due
to decreases in both divisions
5%
-1%
2022
2020
Factors influencing sales - Surface Technologies
About This Report
Harjavalta, Finland
Jiangmen, China
Münster, Germany
Pinghu, China
Shanghai, China
Schwarzheide, Germany
Środa Śląska, Poland
Project
Capacity expansion: resin plant
Capacity expansion: resin plant
Construction: precursor plant for cathode active materials
Capacity expansion: automotive refinish coatings plant
Construction: plant for coating functional films
Construction: laboratory building for automotive coatings
Replacement: small can filling and packaging system
Construction: cathodic dip coating line
New surface treatment site
Construction: plant for mobile emissions catalysts
Construction: cathode active materials plant
Capacity expansion: plant for mobile emissions catalysts
Startup
2020
2021
2022
2022
Greenville, Ohio
Million €
Caojing, China
Automotive industry, body shops, steel industry, aviation, aluminum applications in the architecture and
construction industries, household appliances, painting businesses and private consumers
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Surface Technologies
Products, customers and applications
Division
Products
Catalysts
Automotive catalysts, process catalysts and technologies
Battery materials
Coatings
Material investments
%
Customer industries and applications
Automotive, chemical and pharmaceutical industries, refineries, battery manufacturers, solutions for the
protection of air quality as well as the production of fuels, chemicals, plastics and battery materials
Precious and base metal services
Coatings solutions for automotive applications, technology and system solutions for surface treatments, decorative paints
Location
Income from operations before special items
■ Sales rise 27% to €16,659 million due to growth in the
Catalysts division, mainly as a result of significantly higher
precious metal prices
Percentage of sales: 30%
-3%
Herbicides €2,464 million
Change: -6%
Percentage of sales: 32%
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
The sales performance of both divisions was impacted by negative
currency effects.
Sales were also reduced by lower price levels in the Care Chemicals
division, especially in the home care, industrial and institutional
cleaning and industrial formulators business. Prices in the Nutrition &
Health division were on a level with the previous year.
Sales were positively impacted by higher volumes. Volumes rose
significantly in the Nutrition & Health division, particularly in the phar-
maceutical, aroma ingredients and human nutrition businesses. In
the Care Chemicals division, we recorded higher sales volumes in
the oleo surfactants and fatty alcohols business, as well as in the
home care, industrial and institutional cleaning and industrial formu-
lators business. This was partially offset by lower volumes in the
personal care solutions business.
Care Chemicals - Sales by region
Location of customer
South America, Africa, Middle East 9%
Asia Pacific 19%
North America 20%
BASF Report 2020
52% Europe
€3,989 million
98
98
About This Report
1
To Our Shareholders
2 Management's Report
Nutrition & Care
3 Corporate Governance
-1%
4 Consolidated Financial Statements
Sales
161
10.0
-1%
-2%
0%
Assets
6,214
6,399
-3%
0%
0%
0%
Investments including acquisitionsb
510
595
-14%
Currencies
-3%
-3%
-3%
Research and development expenses
160
-1%
5 Overviews
4%
Location of customer
Reducing competition from weeds for nutrients, water and sunlight
Insecticides
Combating insect pests in agriculture and beyond
Seed Treatment
Improving seeds' potential with chemical and biological protection
as well as inoculants
Seeds & Traits
Optimizing and developing seeds and new traits
Sales
Seeds & Traits €1,495 million
Change: 3%
Herbicides
Percentage of sales: 19%
Percentage of sales: 8%
Insecticides €825 million
Change: 3%
Percentage of sales: 11%
Factors influencing sales
2020:
€7,660 million
Change:
-2%
2019:
Nutrition & Health - Sales by region
Fungicides €2,267 million
Change: -2%
Seed Treatment €609 million
Change: -5%
Protecting crops against harmful fungal diseases
€7,814 million
Indications and sectors
Fungicides
South America, Africa, Middle East 10%
Asia Pacific 35%
€2,030 million
North America 18%
Income from operations (EBIT) before special items decreased
by €20 million compared with the previous year to €773 million due
to a slightly lower contribution from the Care Chemicals division.
This was primarily the result of lower sales and a one-off payment
received by the personal care solutions business in the previous
year.
EBIT before special items in the Nutrition & Health division increased
considerably compared with 2019. This was mainly attributable to
higher volumes. Higher fixed costs had an offsetting effect. In the
previous year, fixed costs were reduced by an insurance payment.
EBIT rose by €44 million year on year to €688 million. This included
special charges of €85 million, mainly for impairments and provi-
sions, primarily for the optimization of production structures in the
Nutrition & Health division in North America and Europe.
See page 155 for the outlook for 2021
BASF Report 2020
99
37% Europe
About This Report
99
In the Agricultural Solutions segment, we aim to further
strengthen our market position as an integrated provider of
seeds, crop protection and digital solutions. Our connected
offer comprises fungicides, herbicides, insecticides and
biological solutions, as well as seeds and seed treatment
products, complemented by digital products to help farmers
achieve better yield. Our strategy is based on innovation-
driven organic growth and targeted portfolio expansion
through acquisitions. Customer needs, societal expectations
and regulatory requirements are our innovation drivers.
5 Overviews
4 Consolidated Financial Statements
Agricultural Solutions
2 Management's Report
Agricultural Solutions
To Our Shareholders
1
3 Corporate Governance
- Responsibility for human rights (page 111)
- Employees (page 144)
We value people and treat them with respect
We are committed to doing business in a responsible, safe, efficient
and respectful way. Our actions are guided by our corporate values
and our global Code of Conduct. We comply with and in some
■ Comprehensive management and monitoring systems to
uphold our responsibility to the environment and society
Strategy
We contribute to a sustainable development and to the United
Nations' Sustainable Development Goals (SDGs) in many different
Iways (see page 32). For instance, our innovations, products and
technologies help to better use natural resources, produce enough
food, enable climate-smart mobility, reduce emissions, or increase
the capabilities of renewable energy. Alongside these positive
contributions, our business activities also have negative impacts.
For example, we create CO2 emissions and procure raw materials,
the sourcing of which by our suppliers involves a potential risk of
human rights violations. This is why we are constantly working to
broaden our positive impact on key sustainability topics (see
page 42) along our value chains and reduce the negative impact.
[We want to contribute to a world that offers a viable future
with enhanced quality of life for everyone. That is why
sustainability is firmly anchored in our corporate purpose,
our strategy, our targets and our operating business (see
page 42). It is at the core of what we do, a driver for growth
and an element of our risk management. We pursue a holistic
approach that covers the entire value chain – from our
suppliers and our own activities to our customers.
CUSTOMERS
BASF
Suppliers
Customers
BASF
Responsible Conduct
Along the Value Chain
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Responsible Conduct
P-Sompliance (page (page 47)
1 To Our Shareholders
SUPPLIERS
We source responsibly
cases exceed the applicable laws and regulations with voluntary
commitments. We stipulate binding rules for our employees with
standards that apply throughout the Group. In doing so, we consider,
respect and promote internationally recognized principles such as
the 10 principles of the U.N. Global Compact, the Universal
Declaration of Human Rights, or the Core Labor Standards of the
International Labor Organization (ILO).
We produce safely and efficiently
About This Report
110
BASF Report 2020
We are involved in numerous initiatives to drive forward sustainability
in general and, specifically, as this relates to our value chains. These
include the World Business Council for Sustainable Development
(WBCSD) and OECD's Business for Inclusive Growth (B4IG) initiative,
as well as networks with thematic focus like the Alliance to End
Plastic Waste (AEPW), the Global Battery Alliance (GBA) or the
Our business partners are also expected to comply with prevailing
laws and regulations and to align their actions with internationally
recognized principles. We have established appropriate manage-
ment and control systems, for example, for working with our
suppliers (see page 113).
organizations) and the guideline on compliance with international
labor norms, which applies Group-wide. This guideline specifies
what the issues in our global Code of Conduct mean for our
employees.
- Circular economy (page 30)
- Sustainable product portfolio (page 45)
- Innovation (page 35)
We drive sustainable solutions
We want to ensure that we act in line with the applicable laws and
uphold our responsibility to the environment and society with our
comprehensive management and monitoring systems. Our global
Responsible Care Management System covers environmental
protection, health and safety (see page 121). We meet our respon-
sibilities with respect to international labor and social standards
chiefly through three elements: the Compliance Program (including
internal and external compliance hotlines), close dialog with our
stakeholders (such as with employee representatives or international
- Biodiversity (page 142)
- Water (page 139)
- Air, waste and soil (page 137)
- Energy and climate protection (page 130)
- Transportation and storage (page 129)
- Product stewardship (page 126)
- Health protection (page 124)
- Occupational and process safety (page 122)
- Supplier management (page 113)
- Raw materials (page 116)
109
-201
At €247 million, EBIT in the region South America, Africa, Middle East
was down €55 million from the prior-year figure. This was due to
lower contributions from Other and from the Agricultural Solutions,
Industrial Solutions, Surface Technologies and Nutrition & Care seg-
ments. EBIT improved considerably in the Materials and Chemicals
segments.
8%
768
1,082
South America, Africa, Middle East
3,591
3,806
-6%
4,905
5,338
-8%
247
302
BASF Group
59,149
59,316
0%
59,149
59,316
0%
14,203
-191
11%
14,895
2,125
of which Germany
10,296
14,049
-27%
5,510
6,123
-10%
-1,712
504
North America
16,440
16,420
0%
15,709
15,948
-1%
692
Asia Pacific
13,384
4,201
a The 2019 figures have been restated to reflect the reclassification of income from non-integral companies accounted for using the equity method to net income from shareholdings.
Europe
Sales by region
Location of company
South America, Africa, Middle East 6%
Asia Pacific 25%
€59,149 million
North America 28%
Asia Pacific
■ Sales growth of 11% to €14,895 million
■ EBIT down 29% to €768 million
41% Europe
Sales at companies headquartered in the Asia Pacific region rose by
11% to €14,895 million in 2020. In local currency terms, sales were
14% above the prior-year level. This was largely due to considerably
higher sales in the Surface Technologies segment. Sales also
rose considerably in the Agricultural Solutions segment, while the
Materials segment recorded a slight improvement. By contrast,
sales declined considerably in the Industrial Solutions segment and
slightly in the Chemicals segment. Sales were at prior-year level in
the Nutrition & Care segment.
The sales performance was primarily the result of higher volumes in
all segments, but especially in the Surface Technologies and Agricul-
tural Solutions segments. Higher prices overall, mainly attributable
to the Surface Technologies segment, also contributed to the
increase in sales. By contrast, prices in the Materials, Industrial
Solutions, Chemicals and Nutrition & Care segments were below the
prior-year level. Sales were buoyed by portfolio effects, especially in
the Materials segment following the acquisition of the integrated
polyamide business from Solvay. Negative currency effects had an
offsetting impact.
EBIT in the region declined by €314 million compared with 2019 to
€768 million, primarily as a result of impairments. This was largely
due to the considerable decrease in EBIT in the Chemicals and
Surface Technologies segments. The Industrial Solutions segment's
contribution was also significantly lower. By contrast, the Materials,
Nutrition & Care and Agricultural Solutions segments posted much
higher earnings.
Even in the coronavirus pandemic, the Asia Pacific region remains
the strongest growth driver in the chemical industry. Our invest-
ments in local production plants and in research and development
meet the needs of our local customers and lay the foundation for
future growth in the Asian market. Following the official ground-
breaking in November 2019, we started construction of the first
plants at the planned integrated Verbund site in Zhanjiang in the
southern Chinese province of Guangdong. The first plants will pro-
duce engineering plastics and thermoplastic polyurethane (TPU) to
serve the growing demand in various growth industries in Asia,
including in the southern Chinese market. We also expanded our
dispersions portfolio at our site in Huizhou, China, to better serve the
fast-growing packaging industry in southern China. At the Nanjing
site, in 2020, we increased the production capacity for neopentyl
glycol to meet our Chinese customers' demands for environmentally
friendly automotive refinish coatings.
South America, Africa, Middle East
■ Sales down 6% at €3,591 million
■ EBIT declines 18% to €247 million
Sales at companies located in the region South America, Africa,
Middle East declined by 6% year on year to €3,591 million. In local
currency terms, by contrast, they rose by 22%. The decline in sales in
euros was mainly due to considerably lower sales in the Surface
Technologies segment. Sales were also considerably below the prior-
year level in the Industrial Solutions segment and decreased slightly in
the Agricultural Solutions segment. By contrast, the Materials segment
recorded considerable sales growth, while the Chemicals and
Nutrition & Care segments posted slight increases.
Sales performance in South America was primarily attributable to
negative currency effects. Higher price levels in all segments except
Chemicals had an offsetting effect. We also increased sales volumes
overall. Higher volumes, particularly in the Agricultural Solutions
segment, more than compensated for lower sales volumes in the
Surface Technologies segment due to the effects of the coronavirus
pandemic. Portfolio effects, especially in the Materials segment from
the acquisition of Solvay's integrated polyamide business, had a
positive impact on sales.
Companies located in Africa and in the Middle East recorded a
considerable sales decrease overall. Higher prices were unable to
offset lower volumes and negative currency effects.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
■ Sales down 6% compared with 2019 at €24,223 million
■ EBIT declines €3,130 million to -€1,005 million
Sales at companies located in Europe decreased by 6% year on
year to €24,223 million. This was mainly due to considerably lower
sales in the Chemicals and Materials segments. Sales also declined
considerably in Other and in the Industrial Solutions and Agricultural
Solutions segments, and slightly in the Nutrition & Care segment.
Considerable sales growth in the Surface Technologies segment
was unable to compensate for this.
Sales performance was primarily driven by lower volumes in almost
all segments and in Other, but especially in the Materials segment as
a result of weaker demand from the automotive industry. Price levels
declined in the Chemicals segment in particular, especially for steam
cracker products due to higher product availability on the market
and lower raw materials prices, as well as in the Materials segment
as a result of lower isocyanates prices. By contrast, prices in the
Surface Technologies segment were well above the prior-year level.
+/-
-29%
-18%
Negative currency effects also contributed to the sales decrease.
Portfolio effects in the Materials segment from the acquisition of
Solvay's integrated polyamide business had an offsetting impact.
At -€1,005 million, EBIT was down €3,130 million from the previous
year. All segments and Other recorded lower contributions, but
especially the Materials segment. This was largely attributable to
impairments.
We are strengthening our position in the European market with
investments such as the construction of a precursor plant for cath-
ode active materials in Harjavalta, Finland, and the construction of a
cathode active materials plant in Schwarzheide, Germany. With
these investments, BASF aims to expand its position as a leading
and innovative provider of battery materials. The two plants are
scheduled for startup in 2022 and will be able to equip around
400,000 fully electric mid-size vehicles per year.
North America
BASF Report 2020
■ Sales of €16,440 million at prior-year level
Sales at companies located in North America were on a level with the
previous year, at €16,440 million. In local currency terms, they rose by
2%. Considerable sales growth in the Surface Technologies segment
and slightly higher sales in the Nutrition & Care segment were offset
by considerable sales decreases in the Chemicals, Materials and
Industrial Solutions segments, as well as slightly lower sales in the
Agricultural Solutions segment.
Sales performance was positively impacted by an increase in prices
on the back of significantly higher price levels in the Surface Technolo-
gies segment. This more than compensated for lower prices in all
other segments. Sales were weighed down by lower volumes, espe-
cially in the Surface Technologies, Materials, Chemicals and Industrial
Solutions segments. This was mainly the result of lower demand from
the automotive industry due to the effects of the coronavirus pan-
demic and the unplanned outage at the steam cracker in Port Arthur,
Texas. Sales were also reduced by negative currency effects.
At -€201 million, EBIT was down €893 million from the prior-year
figure due to significantly lower contributions from almost all segments,
but especially from the Surface Technologies segment. EBIT includes
special charges, mainly from impairments in the Surface Technologies,
Agricultural Solutions and Chemicals segments. In addition, the con-
tribution from the Industrial Solutions segment was lower, after the
transfer of the paper and water chemicals business to the Solenis
group had positively impacted the segment's earnings in the previous
year. By contrast, EBIT rose considerably in Other and in the
Nutrition & Care segment.
BASF Report 2020
108
About This Report
1
To Our Shareholders
2 Management's Report
Regional Results
■ EBIT declines €893 million to -€201 million
15,406
970
-3%
2020
2019
7,660
7,814
+/-
-2%
91
197
Sales
-54%
8,011
-3%
1,680
1,809
-7%
1,582
1,647
7,751
-4%
Currencies
EBIT before special items
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Business review
Segment data - Agricultural Solutions
Million €
■ Sales of €7,660 million, slightly below prior-year level
despite higher volumes due to negative currency effects
■ EBIT before special items of €970 million, down 11% from
the 2019 figure mainly due to currency effects
Portfolio
At €7,660 million, sales to third parties in the Agricultural Solutions
segment were €154 million below the prior-year level in 2020. Sales
performance was significantly weighed down by negative currency
effects, particularly in the region South America, Africa, Middle East.
This contrasted with volume growth in a challenging market environ-
ment. Overall, prices were slightly above the prior-year level.
Prices
Sales to third parties
Intersegment transfers
Sales including transfers
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Depreciation and amortizationa
Income from operations (EBIT)
Special items
Factors influencing sales - Agricultural Solutions
Volumes
2 Management's Report
Agricultural Solutions
%
21.1
879
-4%
5%
Return on capital employed (ROCE)
Assets
2%
0%
840
Investments including acquisitionsb
Research and development expenses
-2%
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
In Europe, sales declined by €85 million year on year to €2,035 mil-
lion. This was largely attributable to lower volumes, especially of
herbicides and fungicides, mainly as a consequence of dry weather
conditions in large parts of Europe. Sales were also reduced by
negative currency effects, primarily in Turkey and eastern Europe.
Prices were on a level with the previous year.
Sales in North America decreased by €104 million to €3,004 mil-
lion. Prices were slightly below the prior-year level in a continued
challenging market environment, especially for herbicides and
fungicides. Sales development was also weighed down by
negative currency effects. This was partially offset by higher sales
volumes, particularly for fungicides, after the distributor destocking
and challenges relating to weather conditions and trade conflicts
that dominated the previous year.
Location of customer
Sales in Asia rose by €59 million to €844 million. This was largely Agricultural Solutions – Sales by region
attributable to higher sales volumes, especially of herbicides and
fungicides, primarily in India, China and Australia. Slightly higher
price levels contributed to the positive sales development, while
negative currency effects had a dampening impact.
-9%
20.7
43%
459
1,000
719
39%
582
928
-37%
-388
320
-167
-11%
%
3.6
5.3
14,840
16,530
-10%
1,095
To Our Shareholders
1
About This Report
Beneficial nematodes provide flexible pest control as they fit into
both conventional and organic farming practices and work across
glasshouse and outdoor-grown field crops, fruits and vegetables
as well as turf. These effective BioSolutions by BASF are in some
cases the only option to limit the spread of destructive pests such
as the codling moth. The larvae of this pest burrow under the bark
of apple trees to overwinter, where they cannot be reached with
other crop protection products. We have developed Nemasys® C
beneficial nematodes that reach these overwintering larvae and
provide up to 90% control in U.S. apple orchards, mitigating insect
numbers for the following year.
by integrating sustainability criteria into all business and portfolio
decisions.
The success of our customers depends on many factors such as
weather, disease, pest and weed pressure, soil conditions and
prices for agricultural produce. Our customers strive for better
yield yield produced in ways that are recognized as valuable by
society, are kind to the planet and enable farmers to run their farms
profitably in the long term while embracing digital and other new
technologies in day-to-day farm operations.
Value for BASF
BioSolutions by BASF portfolio with annual sales of
>€150 million
BioSolutions are part of our portfolio for sustainable agriculture. To
develop BioSolutions, we focus on leveraging in-house expertise
and strategic partnerships. These solutions are based on natural
mechanisms like beneficial nematodes, micro-organisms, plant
extracts and pheromones. They are natural partners for a wide
range of field and specialty crops and can be used in organic
farming or as a complement to conventional crop protection
products. Demand for BioSolutions, including seed treatment, soil
and foliar applications, results in annual sales of over €150 million.
up to 90%
Our innovative digital products, marketed under the xarvio® Digital
Farming Solutions brand, help farmers to make better decisions,
enable precision farming and in this way, enhance sustainability.
The investment in a crop protection production hub in Singapore
will, as announced in 2020, supply multiple formulation technologies
in close proximity to farmers in Asia Pacific. We also invested in the
expansion of our production site in Sparks, Georgia, establishing a
1 Source: U.N. World Population Prospects 2019
BASF Report 2020
101
About This Report
1
To Our Shareholders
Investments
2 Management's Report
Agricultural Solutions
Natural partners for the cultivation of field and specialty crops and conventional crop protection
Value for our customers and the environment
NemasysⓇ C: biological pest control with an effectiveness of
How we create value - an example
-1,005
About This Report
1 To Our Shareholders
2 Management's Report
Agricultural Solutions
3 Corporate Governance
4
Consolidated Financial Statements
BioSolutions by BASF
5 Overviews
■ Innovation-driven strategy for profitable growth in
selected markets
■ Strong customer orientation with a focus on strategic,
regional crop systems
■ A wide-ranging portfolio with more sustainable solutions
Farming is fundamental given that by 2050, the world's population is
expected to increase by two billion people.1 The growing demand
for food must be reconciled with limited natural resources such as
arable land and water. Agriculture is a key enabler in providing
enough healthy, affordable food and responding to changing con-
sumer behavior while reducing the impact on the environment. As
one of the world's leading agricultural solutions companies, we want
to create a positive impact and help shape a sustainable future for
farming. At BASF, we believe that the way forward for agriculture is
to find the right balance – for farmers, agriculture and future genera-
tions.
Farmers need to balance resources, technology, climate and
societal uncertainty in order to produce in an economically sound
way. We support them in finding the right balance by focusing more
than ever on the needs of our customers, societal concerns and
regulatory requirements. With a deep understanding of the way
individual growers manage their farms and crop systems, we provide
a connected offer, including seeds, traits, crop protection, and
digital products and solutions.
Our innovation-driven strategy for agriculture focuses on four
selected crop combinations, known as crop systems: 1. soy, corn
(maize) and cotton in the Americas; 2. wheat, canola (oilseed rape)
and sunflowers in North America and Europe; 3. rice in Asia; and 4.
fruit and vegetables globally. We actively steer our connected offer
for farmers and the agricultural industry toward sustainable solutions
Strategy
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Selected products
Fungicides
Herbicides
Insecticides
Seed Treatment
Seeds & Traits
Protecting crops against harmful fungal diseases; improving plant health, securing yield and
harvest quality
Applications
Reducing competition from weeds for nutrients, water and sunlight to secure yield and harvest
quality
Improving seeds' potential with chemical and biological protection as well as inoculants
Seeds and traits for key field crops such as canola (oilseed rape), cotton, soybean and wheat, as
well as vegetable seeds
Boscalid, dimethomorph, F500®, Initium®, metiram, metrafenone, Revysol®, Serifel®, Xemium®
BastaⓇ, dimethenamid-p, EngeniaⓇ, Finale®, imazamox, Kixor®, LibertyⓇ, pendimethalin, Tirexor®,
topramezone
Alpha-cypermethrin, chlorfenapyr, fipronil, InscalisⓇ, Interceptor®, NealtaⓇ, teflubenzuron, TermidorⓇ
Flo Rite®, ILEVO®, Integral®, Nodulator® PRO, Poncho®, Serifel®, SystivaⓇ, VaultⓇ HP, VelondisⓇ
CredenzⓇ, FiberMax®, InVigor®, LibertyLink®, Nunhems®, Stoneville®
BASF Report 2020
103
Combating insect pests in agriculture and beyond, such as in the fields of public health,
professional pest control and landscape maintenance
Indications and sectors
Products, customers and applications
5 Overviews
new formulation plant for seed treatment products there. At the
Nunhem site in the Netherlands, we started the expansion of our
breeding facilities for vegetable seeds with a state-of-the-art tomato
greenhouse. Further investments were made in the modernization of
site infrastructure in the Americas and Europe. To meet continuing
high demand for our innovative solutions in the future, between
2021 and 2025, we will invest more than €950 million in developing
and expanding our infrastructure and in our production and formu-
lation capacities for active ingredients as well as for seed solutions.
Research and development
Our research and development is based on a global network of
research sites, seed production and breeding capacities. It positions
us to seize future market opportunities and increase our competi-
tiveness.
Our biotechnology activities and our research and development
capabilities comprise advanced breeding techniques, analytics,
technology platforms and trait validation. To offer tailor-made,
sustainable crop solutions, our research platform on gene identifica-
tion focuses on plant characteristics that enable higher yields and
better quality, disease resistance and tolerance of negative environ-
mental factors, such as drought. We apply state-of-the-art scientific
methods, including genetic engineering and selective genome
editing. These activities are closely connected to our activities in the
field of biotechnology, which are part of BASF's Bioscience Research
division. Corporate research and development expenses, sales,
earnings and all other data for BASF's Bioscience Research division
are not reported in the Agricultural Solutions segment; they continue
to be reported under Other.
Our research and development activities are aligned with our
strategic crop systems to support our customers' success with
innovations. In 2020, we spent €840 million on research and devel-
opment in the Agricultural Solutions division, representing around
11% of the segment's sales. Our well-stocked innovation pipeline
comprises novel seeds and traits, new chemical and biological crop
protection products, new formulations and digital solutions to be
launched between 2020 and 2030. With a peak sales potential¹ of
more than €7.5 billion, our innovation pipeline has an even stronger Sustainability
focus on sustainable solutions - enabled by a research and devel-
opment process that is driven by sustainability criteria. We innovate
to create new business opportunities for farmers and for BASF by
developing solutions that meet the needs of customers and
consumers. By 2030, we will launch more than 30 major pipeline
projects across all business areas. These will provide sustainable
solutions to help farmers achieve better yield in their farm operations
and promote healthy eating, balancing economic, environment and
societal demands. Research and development activities in the
Agricultural Solutions division range from seeds and traits, research
and breeding capacities to solutions that protect plants against
fungal diseases, insect pests and weeds, and improve soil manage-
ment and plant health.
In 2020, we launched our Agricultural Solutions sustainability com-
mitments. We focus on four areas to help farmers to find the right
balance: climate-smart farming, sustainable solutions, digital farming
and smart stewardship.
Climate-smart farming: We help farmers tackle pressing climate
challenges with the right combination of technologies designed to
increase yield, make farm management easier and more effective,
and reduce the impact on the environment. Our technologies include
nitrogen management products to improve fertilizer efficiency and
lower greenhouse gas emissions, no-till herbicides, seeds and traits
for more stress-resilient crops, natural biological inoculants as well
as digital solutions.
Sustainable solutions: We systematically steer our innovation
pipeline according to sustainability criteria from an early stage. This
enables us to continually develop innovations that offer added value
for farmers, the environment and society. We also assess each
product in our existing portfolio with respect to its contribution to
sustainability. In this way, we systematically steer our portfolio to
every year increase the share of sales from solutions that make a
substantial sustainability contribution.
Digital farming: Digitalization has the power to transform agricul-
ture and make it more efficient, inclusive and sustainable. Our digital
solutions help farmers to produce more with less by growing their
business profitably while reducing their environmental footprint.
Smart stewardship: Our stewardship tools and services are
tailored to farmers' daily work. Farmers get the support they need to
use our products safely: access to tools and services, protective
equipment, customized training, digital solutions and new and
future-oriented application technologies such as drones.
1 Peak sales describes the highest sales value to be expected in one year. For more information, see the Glossary on page 322.
BASF Report 2020
102
About This Report
1 To Our Shareholders
3 Corporate Governance
4 Consolidated Financial Statements
Sales in the region South America, Africa, Middle East amounted
to €1,777 million, €24 million below the previous year. This was pri-
marily due to significantly negative currency effects, mainly from the
depreciation of the Brazilian real. Considerably higher volumes in all
indications and sectors, especially in Brazil, and higher price levels
were unable to fully offset the negative currency developments.
South America, Africa, Middle East 23%
2 Management's Report
Agricultural Solutions
€7,660 million
Equity-accounted income of the oil and gas business
As of January 1, 2020, BASF no longer presents equity-accounted
income from Wintershall Dea in the BASF Group's EBIT and EBIT
before special items, but under net income from shareholdings.
Wintershall Dea contributed -€890 million to net income from share-
holdings in 2020. This included impairments of €791 million, mainly
as a result of lower oil and gas price forecasts and changed reserve
estimates. In the previous year, Wintershall's earnings were
presented in income after taxes from discontinued operations until
the merger of Wintershall and DEA on April 30, 2019. Equity-
accounted income from Wintershall Dea in the period from May 1,
2019, to December 31, 2019, amounted to -€86 million.
Wintershall Dea conducts production, development¹ and explora-
tion activities in the following countries:
· Egypt (production, development, exploration)
- Algeria (production)
-
-
- Argentina (production, development, exploration)
Brazil (exploration)
The price of a barrel of Brent crude oil averaged $42 in 2020 (previ-
ous year: $64). Gas prices on the European spot markets declined
significantly compared with the previous year. The strong price
declines in the first half of 2020 were attributable to the drop in
global macroeconomic demand caused by the coronavirus pan-
demic. Oil and gas prices partially recovered in the second half of
the year.
Denmark (production, exploration)
- Libya (production)
Mexico (production, development, exploration)
Netherlands (production, development, exploration)
Norway (production, development, exploration)
1 Development activities include projects before and after the FID (final investment decision)
Russia (production, development)
United Arab Emirates (development, exploration)
- United Kingdom (production, development, exploration)
Wintershall Dea's activities in 2020
- Germany (production, development, exploration)
Wintershall Dea produced 227 million BOE (barrels of oil equivalent)
in 2020, of which around 162 million BOE of gas. This corresponded
to a daily production of 623 thousand BOE. Despite the macroeco-
nomic downturn caused by the coronavirus pandemic, Wintershall
Dea was able to increase daily production slightly compared with
the period from May 1, 2019, to December 31, 2019.
Macroeconomic environment
5 Overviews
385
411
-6%
a Information on the composition of Other can be found in the Notes to the Consolidated Financial Statements from page 241 onward.
b The 2019 figures have been restated to reflect the reclassification of income from non-integral companies accounted for using the equity method to net income from shareholdings.
c Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
d Contains assets of businesses recognized under Other as well as reconciliation to assets of the BASF Group
Non-Integral Oil and Gas Business
e Additions to property, plant and equipment and intangible assets
106
About This Report
1 To Our Shareholders
2 Management's Report
Non-Integral Oil and Gas Business
3 Corporate Governance
4
Consolidated Financial Statements
BASF Report 2020
Investment projects continued largely as planned. The Ærfugl
project in Norway started production of phase 1 on schedule and
budget - a milestone for subsea development in the Norwegian
Sea. However, a number of projects, such as the Njord and Nova
projects in Norway, were delayed by the coronavirus pandemic.
In Russia, the Achim Development joint venture operated with
Gazprom, in which Wintershall Dea holds a 25.01% interest, contin-
ued field development in blocks 4A and 5A of the Achimov For-
mation. Production is expected to start in the first quarter of 2021.
Another investment focus is Egypt, especially the Nile Delta. The
Raven subproject there commenced production at the beginning of
2021.
The Achimgaz joint venture with Gazprom successfully drilled further
production wells. Production is running at the expected high level.
Severneftegazprom, a joint venture between Gazprom, Wintershall
Dea and OMV, reached a major milestone in 2020: The Yuzhno-
Russkoye field in Russia's Yamalo-Nenets Autonomous District has
produced 300 billion cubic meters of natural gas since production
began in 2007.
In October 2020, Wintershall Aktiengesellschaft, in which Winters-
hall Dea holds a 51% interest, transferred operatorship of Contract
Areas 91 (formerly concession 96) and 107 (formerly concession 97)
Income from operations
by location of company
2020
2019
+/-
2020
2019
+/-
by location of company
2020
Europe
24,223
25,706
-6%
23,129
Asia Pacific 11%
23,827
2019
Sales
by location of customer
Sales
2 Scope 1 and 2 emissions from upstream activities operated by Wintershall Dea and upstream activities not operated by Wintershall Dea on a pro rata basis
BASF Report 2020
onshore Libya's Sirte basin to Sarir Oil Operations B.V. (SOO), a
newly established joint operating company with the National Oil
Corporation (NOC).
Wintershall Dea drilled 11 exploration wells in 2020. Of these,
around 64% were successful.
Wintershall Dea is also active in gas transportation. This includes
interests in GASCADE Gastransport GmbH and OPAL Gastransport
GmbH & Co. KG held by WIGA Transport Beteiligungs-GmbH & Co.
KG, and the interest in Nord Stream AG held directly by Wintershall
Dea. Wintershall Dea is involved in the financing of the Nord Stream 2
pipeline project, but does not hold an interest in the company.
As part of its climate strategy, which was communicated in Novem-
ber 2020, Wintershall Dea aims to achieve net zero emissions² from
upstream activities by 2030 and reduce the methane intensity of
its own natural gas production to 0.1% by 2025. During the next
10 years, Wintershall Dea intends to invest around €400 million
in reducing and offsetting greenhouse gas emissions.
In 2020, Wintershall Dea continued to drive forward the integration
that began with the merger and was able to realize the intended
synergies. Wintershall Dea has undertaken preparations for a
stock exchange listing, which is expected to take place over the
course of 2021 subject to market conditions.
107
1 To Our Shareholders
2 Management's Report
Regional Results
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Regional Results
Regions
Million €
Research and development expenses
-48%
About This Report
156
5 Overviews
Other
Other
Sales in Other declined by €538 million compared with 2019 to
€2,360 million. This was mainly due to the sales decrease in com-
modity trading and the remaining activities of BASF's paper and
water chemicals business, which were not part of the transfer to
Solenis and are reported under Other.
At -€769 million, income from operations before special items in
Other was €188 million below the prior-year figure. This is largely
attributable to lower contributions from other businesses and to
positive effects in 2019, primarily from changes to pension benefits
in the United States.
EBIT declined by €685 million to -€1,203 million. This included
special charges, in particular for the realignment of the Global Busi-
ness Services unit. The prior-year figure included special income
from the sale of our share of the Klybeck site in Basel, Switzerland.
Financial data - Othera
4 Consolidated Financial Statements
Million €
Income from operations (EBIT) b
Special items
EBIT before special itemsb
of which costs for cross-divisional corporate research
costs of corporate headquarters
2020
2019
+/-
Sales
Depreciation and amortization
2,360
3 Corporate Governance
About This Report
BASF Report 2020
North America 39%
299
27% Europe
104
About This Report
1 To Our Shareholders
2 Management's Report
2 Management's Report
Agricultural Solutions
4 Consolidated Financial Statements
5 Overviews
Income from operations (EBIT) before special items was
€970 million, €125 million below the 2019 figure. This was mainly
due to currency effects.
EBIT amounted to €582 million, €346 million less than in the previ-
ous year. This figure included special charges in the amount of
€388 million, primarily from impairments in connection with mea-
sures to streamline the global glufosinate-ammonium production
network.
See page 155 for the outlook for 2021
BASF Report 2020
105
3 Corporate Governance
2,898
1 To Our Shareholders
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)b
-231
7%
other businesses
143
179
-20%
Investments including acquisitions
-58
-89
35%
-276
-43
Assetsd
24,131
-19%
27,585
-13%
-214
8%
foreign currency results, hedging and other measurement effects
miscellaneous income and expenses
-364
-414
-47%
-397
-609
-1,032
-334
171
184
-1,203
-7%
-518
-434
63
-769
-581
-32%
BASF Report 2020
2 Management's Report
Raw Materials
About This Report
For more information, see basf.com/massbalance
1
To Our Shareholders
customers. Mass balance products are identical in quality to
conventional products but make a substantial sustainability
contribution to the use of bio-based or recycled raw materials.
This method has already been applied to over 200 BASF
products (2019: around 80 products), for example, for engineer-
ing plastics, superabsorbents, dispersions and intermediates.
We share our expertise in various stakeholder platforms to
harmonize and standardize different allocation methods and
certification systems for mass balance products. For instance,
BASF contributed to position paper on the mass balance
approach published by the industry association PlasticsEurope in
2020.
116
3 Corporate Governance
BASF's most important raw materials (based on volume) include
liquid gas and natural gas, as well as crude oil-based petrochemical
products such as naphtha and benzene. We mainly use liquid gas
and natural gas to generate energy and steam, and to produce key
basic chemicals such as ammonia or acetylene. Naphtha is mostly
fed into our steam cracker, where it is split into products such as
ethylene and propylene both important feedstocks for numerous
value chains. We use aromatics such as benzene or toluene to
manufacture high-performance plastics, among other products.
Thanks to a high degree of forward and backward integration, we
can produce many feedstocks for our value chains efficiently while
Consolidated Financial Statements
5 Overviews
BASF's Verbund concept is key to making the use of raw materials
in our own processes as efficient as possible: Intelligently linking and
steering our plants and processes creates efficient value chains.
By-products from one facility are used as feedstocks elsewhere.
This saves raw materials and energy (see page 130). At the same
time, the Verbund offers many opportunities to use renewable and
recycled raw materials. We want to better leverage this potential
going forward (see page 30). For example, we are driving forward
chemical recycling of mixed plastic waste and used tires in our
ChemCycling TM project (see page 118).
Resource efficiency and stewardship are also becoming increasingly
important topics for our customers. That is why we are constantly
working to reduce the resources consumed in the production of our
products, for example through more efficient processes or the use
of renewable and recycled raw materials. This enables us to offer
our customers solutions that make a greater contribution to sustain-
ability, like a smaller carbon footprint. Our products also improve our
customers' resource efficiency and sustainability in many areas.
For example, metal pretreatment using our innovative OxsilanⓇ
thin-film technology requires significantly less material than conven-
tional processes. At the same time, it can achieve water savings of
up to 50% and reduce energy costs by up to 40%.
Fossil and petrochemical resources
-
conserving resources within the BASF Verbund. This increases
supply security and reduces dependence on external supply
sources to just a few key raw materials. We source these from
different suppliers to minimize supply risks.
In addition to fossil resources, we employ renewable raw materials,
mainly based on vegetable oils, fats, grains, sugar and wood. In
2020, we purchased around 1.2 million metric tons of renewable
raw materials. For instance, we use renewable resources to produce
ingredients for the detergent and cleaner industry, or to source
natural active ingredients for the cosmetics industry. We also use
renewable feedstocks such as biomethane or bio-naphtha in our
Verbund as an alternative to fossil resources. The mass balance
approach allows us to allocate the amount of renewable resources
used to a wide variety of end products (see box on page 116).
Examples include the biomass balance polyisobutene OPPANOL®
BMBCertTM (see page 84) or the biomass balance versions of our
Styropor®, NeoporⓇ and StyrodurⓇ insulation materials.
■ Numerous projects and cooperative ventures to improve
sustainability along the value chain
Renewable resources
As part of our efforts to improve sustainability, we are continuously
investigating whether fossil and petrochemical resources can be
replaced with non-fossil alternatives. We carefully consider
economic, environmental and social aspects, as well as other
important criteria like supply security and product safety. Our aim is
to increase the share of renewable and recycled feedstocks in our
value chains. This brings with it challenges and compromises in the
supply of both energy and resources for carbon-based organic
chemistry, for example, in striking the balance between competitive-
ness and the additional costs of using renewable energy, or between
renewable resources and land use. We raise awareness of these
trade-offs through close dialog with our stakeholders and our
involvement in sustainability initiatives, and help to find solutions.
4
Many BASF value chains start in syngas plants or steam crackers,
where fossil resources, mostly natural gas and naphtha, are
converted into hydrogen and carbon monoxide or important
basic chemicals such as ethylene and propylene. These are used
to create thousands of products in the BASF Verbund. Alongside
fossil resources, bio-based and recycled raw materials such as
biomethane, bio-naphtha or pyrolysis oil can be used as feed-
stocks. It is not possible to physically or chemically match the
feedstock to the output as our plants simultaneously process
fossil, bio-based and recycled raw materials. The share of bio-
based or recycled raw materials can be allocated to certain
products using the mass balance approach, which is audited by
a third party, and certification (such as the REDcert2 standard for
the chemical industry). It is similar in principle to green power,
which has been established for many years: Energy from renew-
able sources is fed into the grid and then charged to individual
BASF Report 2020
Our expectations of our suppliers are laid down in the Supplier Code
of Conduct (see page 113). We take a closer look at suppliers in
critical supply chains, for example for mineral raw materials, renew-
able resources such as palm kernel oil, for a number of pigments or
highly toxic substances. Upstream stages of the value chain are
assessed for serious sustainability risks and, if necessary, suitable
remedial measures are identified. In addition, we develop and test
approaches to make raw materials supply more sustainable in joint
initiatives with suppliers and other partners. Examples include our
cooperative ventures to recycle battery materials (see page 119) or
our joint activities on certified sustainable supply chains for renew-
able raw materials such as palm and castor oil.
We are also in regular contact with our supplier Nornickel on sus-
tainability matters and other aspects relevant to our cooperation.
These include current events and the findings from the mining-
specific TFS audits conducted in 2017 at Nornickel's sites in Polar
and Kola (both in Russia) and in Harjavalta, Finland. The audits
identified some need for adjustment in the areas of waste, waste-
water, emissions and land rehabilitation to mitigate environmental
and production risks. A number of points have since been imple-
mented, while others are still outstanding and are included in
site-specific action plans. In addition, Nornickel has committed to
becoming certified according to the standards of the International
Council on Mining and Metals (ICMM) and the Initiative for Respon-
sible Mining Assurance (IRMA). This involves comprehensive audits,
which are planned for 2021.
For more information on the supplier relationship with the Sibanye-Stillwater mine,
Need for action was identified in areas such as health and safety and
the environment, for example in storing corrosive substances, fire-
fighting capabilities and compliance with soil and water emission
limits. All of the deviations identified by the audit were included in an
action plan. BASF and Sibanye-Stillwater discuss the progress
made on its implementation four times a year. The improvements
were documented by the end of 2020 as planned. Sibanye-Stillwater
is a member and supporter of the International Platinum Group
Metals Association (IPA) sustainability initiative that was co-founded
by BASF. The initiative's measures include conducting comprehen-
sive sustainability audits in the South African platinum group metals
sector and exchanging factors for success. BASF continued its
regular dialog with local stakeholder groups in 2020.
As for fossil raw materials, we also consider how renewable
resources impact sustainability topics along the value chain. Along-
side positive effects like saving greenhouse gas emissions, these
can also have negative effects on areas such as biodiversity, land
use or working conditions, depending on the raw material. This is
why we carefully weigh up the advantages and disadvantages of
using renewable resources, for example using Eco-Efficiency
Analyses. We also take recognized certification standards such as
the Roundtable on Sustainable Palm Oil into account in our deci-
sions. We want to minimize raw material-specific risks and increase
sustainability with measures, projects and targeted involvement in
initiatives. Our activities here concentrate on value chains that are
relevant quantitatively, such as palm-based raw materials, or that do
not yet have certification standards, such as castor oil. We are also
working on product innovations and on enhancing production pro-
cesses to improve the profitability and competitiveness of renew-
able resources.
see basf.com/en/marikana
Using TfS evaluations, we pursue a risk-oriented approach with
clearly defined, BASF-specific follow-up processes. If we identify
deviations from our standards, we ask our suppliers to develop and
implement corrective measures within a reasonable time frame. We
support them in their efforts, for example by providing training on
environmental, social and corporate governance topics. We trained
employees from 43 Chinese suppliers in 2020 as part of a partner-
ship with the East China University of Science and Technology in
Shanghai, China.
As part of TfS, training was developed for suppliers that already
have a sustainability rating but have potential for improvement in
environmental, social and corporate governance. In 2020, more
than 1,000 participants attended TfS training on this topic in China
and Brazil. The TfS Supplier Academy is also developing training
opportunities for our suppliers around the world. These will be
implemented in 2021.
We review our suppliers' progress according to a defined timeframe
based on the sustainability risk identified, or after five years at the
latest. In the case of ongoing, serious violations of the standards
defined in our Supplier Code of Conduct or international principles,
we reserve the right to impose commercial sanctions. These can go
as far as termination of the business relationship. In 2020, this was
decided in four cases.
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1 To Our Shareholders
2 Management's Report
Raw Materials
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Raw Materials
SUPPLIERS
BASF
CUSTOMERS
In 2020, BASF purchased a total of around 30,000 different
raw materials from more than 6,500 suppliers. Using
resources as efficiently and responsibly as possible and the
concept of a circular economy are firmly embedded in our
strategy and our actions, supported by our Verbund structure
and the use of renewable and recycled feedstocks. We expect
our suppliers to source and produce raw materials
responsibly. In the search for alternative raw materials, we
employ solutions that also contribute to sustainability.
Strategy
from responsible
Our strategy covers the entire value chain
procurement and using and recycling raw materials efficiently in our
own processes to developing green products and technologies for
our customers. We want to decouple growth from resource
consumption with process and product innovations to drive forward
the shift toward closed-loop value creation systems (see page 30).
Alongside economic, environmental and social criteria, we also
consider aspects such as product safety and supply security when
selecting raw materials for our production processes.
The mass balance approach
Palm oil, palm kernel oil and their derivatives are some of our most
important renewable resources. We mainly use these raw materials
to produce ingredients for the cosmetics, detergent, cleaner and
food industries. We aim to ensure that palm-based raw materials
come from certified sustainable sources and have actively supported
the Roundtable on Sustainable Palm Oil (RSPO) since 2004. Based
on the Group-wide Supplier Code of Conduct (see page 113), we
have laid down our expectations of suppliers in the oil palm value
chain in an additional Palm Sourcing Policy. This addresses aspects
such as forest and peat conservation, respect of human and labor
rights, smallholder inclusion, and certification and traceability
standards. The annual BASF Palm Progress Report reports on our
measures and progress toward more sustainability and transparency
in the value chain.
Sourcing mineral raw materials responsibly is important to BASF. We
have selected suppliers confirm to us that they do not source
minerals as defined in the Dodd-Frank Act from the Democratic
Republic of Congo or its neighboring countries. If there is cause for
concern, we reserve the right to audit suppliers and, if necessary,
terminate the business relationship. We implemented the E.U. Con-
flict Minerals Regulation by the deadline in early 2021. This defines
supply chain due diligence for importers and processors of certain
mineral raw materials originating from conflict regions and high-risk
areas.
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5 Overviews
pyrolysis oil from used tires in 2020 with a partnership with New
Energy and an investment in Pyrum Innovations AG.
We also took a crucial step forward in the chemical recycling of used
polyurethane foam mattresses in 2020: A wet chemical process
developed by BASF can be used to break down soft polyurethane
foam to recover the polyol originally used, which can be used to
produce new polyurethane foam. The first test foams show promis-
ing results.
BASF continues to recycle the precious metals used in automotive,
process and chemical catalysts. These contain precious metals like
platinum, palladium and rhodium. Treating and recovering resources
from spent automotive catalysts is a complex process. All of the
precious metals we recover in this way are reused as feedstocks in
catalyst production.
The growing demand for electromobility is also increasing the need
for lithium-ion battery recycling. As a leading producer of battery
materials with local production capacities in the three main markets
- Asia, Europe and the United States - in the future, BASF has
in-depth expertise in battery chemistry and process technology.
Together with our partners, we are leveraging this expertise to
develop a closed-loop system for the raw materials used to produce
cathode active materials, such as nickel, cobalt, manganese and
lithium. The objective is to further increase sustainability in the value
chain for batteries. In 2020, we launched the project "Recycling
lithium-ion batteries for electric vehicles" (ReLieVe) together with
Eramet and SUEZ. The project received €4.7 million in funding from
the European Union. The aim is to develop an innovative, large-scale
process to recycle batteries along the entire value chain - from col-
lecting end-of-life batteries and recovering mineral raw materials to
using these in the production of new battery materials.
For more information on BASF's Circular Economy Program, see page 30
For more information on recycled raw materials, see basf.com/circular-economy
Mineral raw materials
We procure a number of mineral raw materials, which we use to
produce mobile and process emissions catalysts or battery
materials, among other products. We are continually improving our
products and processes to minimize the use of primary mineral raw
materials. At the same time, we are driving forward the recycling of
mineral raw materials, for example, by recovering platinum metals
from mobile and process emissions catalysts and using these as
secondary resources (see "Recycled feedstocks").
In addition to responsible procurement of "conflict minerals," BASF
is committed to responsible and sustainable global supply chains for
other mineral raw materials. These include cobalt, a key component
in the production of battery materials for electric vehicles, among
other applications. Our cobalt supply chain for battery materials is
organized according to special sustainability criteria for cobalt pro-
curement. For example, we do not purchase cobalt from artisanal
mines and also aim to exclude this in supply chains through our
supply chain management as long as responsible artisanal produc-
tion cannot be verified. In addition, we have signed a long-term
supply agreement with Nornickel for nickel and cobalt from a metal
refinery in Finland. The agreement ensures locally sourced and
secure supply of raw materials for battery production in Europe.
Together with BMW, Samsung SDI, Samsung Electronics,
Volkswagen and the German governmental agency for international
cooperation (Gesellschaft für Internationale Zusammenarbeit, GIZ),
we have been involved in Cobalt for Development since 2018. The
cross-industry initiative aims to identify how to improve working
conditions in artisanal mines, as well as living conditions in the sur-
rounding communities in the Democratic Republic of Congo. To
achieve this, the initiative offers programs such as training on
important environmental, social and governance aspects of respon-
sible mining practices. Training for 12 mining cooperatives in Kolwezi
started in October 2020. The initiative aims to train more than 1,500
artisanal cobalt miners on topics such as occupational safety and
environmental management by mid-2021. Cobalt for Development
also works closely together with local nongovernmental organiza-
tions and Bon Pasteur/the Good Shepherd International Foundation
to create additional income opportunities for families and improve
access to education. For example, a new building for Kisote's public
elementary and secondary school was constructed and training was
held on topics such as farming.
We are also involved in various international initiatives to strengthen
sustainability and innovation in the value chain for batteries. These
include the Global Battery Alliance (GBA), which we co-founded in
2017. It brings together business, government and civil society and
develops standards and tools to create a socially responsible, eco-
logical and economically sustainable, and innovative value chain for
batteries. For instance, BASF is working with the GBA on a battery
pass. In the future, this "digital twin" will contain information on the
sustainability of a battery to increase transparency in the value chain.
The first test version will be developed in 2021 and the battery pass
should be ready to be used by the end of 2022. BASF is also an
active member of the Responsible Minerals Initiative (RMI).
BASF Report 2020
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Raw Materials
3 Corporate Governance
4 Consolidated Financial Statements
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Another mineral raw material that BASF processes is mica. We use
mica to produce pigments, which are used in products such as
coatings. For the majority of our demand, we use mica from our own
mine in Hartwell, Georgia, and some of our businesses source
exclusively from this mine. Third-party suppliers are requested to
source mica in accordance with internationally recognized standards
which, among other things, exclude child labor. As a member of the
cross-industry Responsible Mica Initiative, BASF actively contributes
to the eradication of child labor and unacceptable working conditions
in the Indian mica supply chain.
BASF Report 2020
inclusive stakeholder engagement forum. These include maintaining Supplier development
the cooperation between Sibanye-Stillwater and the authorities to
improve local living conditions. In addition, the audit team recom-
mended that the implementation and management of the social
engagement strategy continue to be systematically monitored.
For more information on the Cobalt for Development project, see basf.com/cobalt-initiative
Consolidated Financial Statements
BASF Report 2020
4
2 Management's Report
Raw Materials
About This Report
1 To Our Shareholders
2 Management's Report
Raw Materials
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
We purchased 227,213 metric tons of certified palm oil and palm
kernel oil in 2020. We therefore reached our goal of only sourcing
RSPO-certified palm oil and palm kernel oil by 2020. By 2025, we
I want to do the same for the most important intermediate products
based on palm oil and palm kernel oil, including fractions and
primary oleochemical derivatives as well as vegetable oil esters. We
were able to trace 96% of our global palm footprint to oil mill level as
of the end of 2020. In addition, we continued to drive forward the
RSPO supply chain certification of our sites for cosmetic ingredients.
At the end of 2020, 25 production sites worldwide were certified by
the RSPO.
We continue to see growing demand for certified palm-based prod-
ucts from our customers. Sales volumes rose by more than 30%
compared with the previous year. We are expanding our range of
certified sustainable products in accordance with the RSPO's mass
balance supply chain model. This helps our customers to meet their
obligations to customers, consumers and stakeholders.
We source most of our palm-based raw materials from Malaysia and
Indonesia. Smallholders account for around one-third of the total
volumes produced there. We have worked together with The Estée
Lauder Companies, the RSPO and Solidaridad in Indonesia since
2019 to strengthen smallholder structures and sustainable produc-
tion methods at local level. The project in the province of Lampung
supports around 1,000 independent smallholders in improving their
livelihoods and the sustainable production of palm oil and palm
kernel oil. The focus is on efficient and sustainable farming practices
and health and safety standards. The goal is for at least one-third of
program participants to become certified according to the RSPO
Smallholder Standard in three years.
Also important for BASF, albeit at a much smaller scale, is castor oil.
We use castor oil to manufacture products such as plastics and
ingredients for paints and coatings, as well as products for the
cosmetics and pharmaceutical industries. We established the Sus-
tainable Castor Initiative - Pragati in 2016 together with Arkema,
helps to preserve the argan forest and strengthens local communi-
ties, for example, by providing additional income and through
literacy programs and health initiatives. In 2020, the certification
organization Ecocert awarded our cosmetic active ingredient
LipofructyTM Argan the "Fair for Life" label for the fourth time in a row,
confirming the sustainability of the supply chain.
For more information on renewable resources, see basf.com/renewables
Jayant Agro and Solidaridad as there were previously no globally
defined and recognized certification standards. The aim is to
improve the economic situation of castor oil farmers in India and, at
the same time, raise awareness of sustainable farming methods.
Around 80% of the world's castor beans are produced in India,
mainly by smallholders. As part of the project, smallholder farmers
receive training on topics such as cultivation methods, efficient
water use, health and the safe use of crop protection products
based on a specially developed sustainability code. Since the
project was initiated, more than 4,500 smallholders and over
8,700 hectares of land have been certified for sustainable castor Recycled feedstocks
cultivation. Yields from this land have risen by at least 50% compared
with baseline 2016. We will source the first certified sustainable
castor oil from the program in 2021. In the long term, we want to
increase the share of this oil to cover our total demand.
Our raw materials for cosmetic active ingredients mainly come from
plants. Two examples of holistic programs that consider the various
aspects of sustainability are our products based on rambutan and
argan. The rambutan tree belongs to the soapberry family. Its fruit is
mainly sold for food. Our research and development discovered a
method to extract the bioactives contained in the peel, leaves and
seeds. The commercialization of the rambutan tree's by-products,
which were previously disposed of as waste, creates new income
streams for farmers and expands our portfolio of natural active
ingredients. As part of our rambutan program, we have worked
closely together with two small plantations in the Vietnamese prov-
ince of Dong Nai since 2014, which supply us with sustainably pro-
duced, certified organic raw materials. The partnership focuses in
particular on responsible farming practices and social inclusion,
including gender equality, safe working conditions and fair incomes.
We have cooperated with Targanine in the region of Agadir in
Morocco since 2005. The network of six argan oil cooperatives
supplies 16 products - including argan oil, essential oils and bee
products to BASF under fair trade conditions. Some 2,000 women
from rural areas now work in the cooperatives. Commercialization
For more information on our voluntary commitment to palm oil products and the Palm Progress
Report, see basf.com/en/palm-dialog
Recycling is becoming increasingly important due to limited
resources, growing sustainability requirements in the markets and
regulatory developments. We want to increase the use of recycled
feedstocks with our Circular Economy Program. From 2025 onward,
we aim to process around 250,000 metric tons of recycled and
waste-based raw materials every year worldwide, replacing fossil
raw materials (see page 30).
One focus here is chemically recycling plastic waste. This technology
complements mechanical recycling and can help to reduce the
amount of plastic waste that is disposed of in landfill or thermally
recovered. Chemical recycling breaks down plastics into their build-
ing blocks or converts them into basic chemicals. Different methods
are used to achieve this. In our ChemCycling TM project, our partners
use the thermochemical process of pyrolysis to extract pyrolysis oil
from mixed plastic waste or used tires, which were not previously
recycled. We can feed this pyrolysis oil into our Verbund structure as
an alternative to fossil raw materials and use it to make new prod-
ucts. These have the same properties as products manufactured
from fossil feedstocks. We use a certified mas balance approach to
allocate the percentage of recycled materials to the end product
(see box on page 116). Since 2020, we have been able to offer our
customers the first commercial Ccycled TM products. After investing
in Quantafuel AS in 2019, we expanded our supply base with
BASF Report 2020
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1 To Our Shareholders
3 Corporate Governance
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1 To Our Shareholders
3 Corporate Governance
2 Management's Report
Responsible Conduct
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
projects, assessments along the product life cycle, and systems to
monitor labor and social standards. Aspects of human rights
related to site security, such as the right to liberty and security of
person, are a component of the global qualification requirements of
our security personnel. Respect for human rights is a mandatory
element of any contract with service providers of the BASF Group
who are active in this area.
As an international company, we are a part of society in the countries
in which we operate and have business relationships with different
partners around the world. We have trustful working relationships
with our partners (joint venture partners, contractors, suppliers, and
customers), expect them to comply with internationally recognized
human rights standards and to demand the same of their partners
further along the value chain. For instance, we contractually agreed
with our two joint venture partners in the Chinese region of Xinjiang
that the basis for joint activities is the BASF Code of Conduct and
the requirements embedded in it to respect human rights and rele-
vant labor and social standards (such as the exclusion of forced
labor and discrimination in hiring, promotion and dismissal practices).
We review this on a regular basis with audits. The most recent audits
on compliance with labor and social standards at our joint ventures
were performed in the first half of 2020, despite the challenges
posed by the coronavirus pandemic. The audits were conducted
with the support of a well-known external auditor. They reviewed the
implementation of measures agreed in previous internal audits and
again verified compliance with BASF's requirements regarding inter-
national labor and social standards.
We support our partners in their efforts to meet their respective
responsibilities. This is because we can only meet our goal of eradi-
cating human rights abuses along our value chains if we work
together. We have defined our expectations in a binding Supplier
Code of Conduct.
Employees and third parties around the world can report potential
violations of laws or company guidelines to our compliance hotlines.
Since 2020, employees have also been able to contact specialists
directly via a new internal online platform or the corresponding app.
In 2020, 261 human rights-related complaints were received by
phone as well as by post and e-mail. All complaints received were
reviewed and forwarded to the relevant departments for in-depth
investigation. If justified, appropriate measures were taken.
We report on our global targets, monitoring systems and measures
to integrate human rights topics into our business activities in
publications such as this report and online.]
For more information on standards in our supply chain, see page 113 onward
For more information on our production standards, see page 121 onward
About This Report
For more information on systems for monitoring labor and social standards, see page 144 onward
For more information on corporate governance and compliance, see page 167 onward
For more information on the Human Rights Advisory Council, see basf.com/human-rights-council
BASF Report 2020
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2 Management's Report
Supplier Management
3 Corporate Governance
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Consolidated Financial Statements
5 Overviews
See basf.com/humanrights for more information on the human rights position and a comprehensive
report on the implementation of due diligence in human rights in accordance with the requirements
of the National Action Plan developed by the German government, and in accordance with the
U.N. Guiding Principles on Business and Human Rights
111
We want to ensure that our actions do not have a negative impact
on human rights. We have long used monitoring and management
systems to identify potential and actual negative impacts. Our mea-
sures and criteria for monitoring and observing human rights are
integrated into supplier assessment processes and our global
monitoring systems for environmental protection, safety and secu-
rity, health protection and product stewardship. They are also inte-
grated into the evaluation of investment, acquisition and divestiture
In 2020, we conducted a comprehensive review of our human rights
management system and the related processes. The review showed
that we have achieved important milestones in the area of human
rights and in terms of our due diligence processes. These include
the introduction of explicit questions on due diligence aspects in the
risk analyses conducted by business units, standard supplier
assessments or evaluations of investment projects. The analysis,
which was discussed with the Board of Executive Directors, did
however also reveal potential for improvement that we have ambi-
tions to pursue, such as awareness of human rights topics within
our organization. Continued efforts are needed to help all employees
better understand how these topics are relevant to our daily work. In
addition, we want to expand our due diligence process to more
effectively identify challenges at different stages of our value chain. A
human rights risk assessment is to be more systematically incorpo-
rated into strategy development for our procurement units. We also
want to further strengthen our grievance mechanisms and introduce
a standardized global hotline and reporting system in 2021. In
consultation with the Human Rights Advisory Council, Corporate
Compliance is developing specific measures for improvement
together with the expert group and the relevant units. Aware-
ness-raising measures are currently being developed, including
training concepts and content to make employees more conscious
of human rights.
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-
Roundtable on Sustainable Palm Oil (RSPO). In addition, we realize
a wide range of projects - often together with partners – for exam-
ple, to improve sustainability in the supply chain, to promote a circu-
lar economy model or on the responsible use of crop protection
products.
For more information on sustainability management, see page 42 onward
For more information on responsible procurement, see page 113 onward
For more information on environmental protection, health and safety, see page 121 onward
For more information on employees, see page 144 onward
For more information on social engagement, see page 47 onward
For more information on corporate governance and compliance, see page 167 onward
Responsibility for human rights
■ Human rights topics coordinated and steered by
Corporate Compliance
■ Creation of an independent Human Rights Advisory
Council for trust-based dialog and consultation
BASF acknowledges its responsibility to respect internationally
recognized human rights. For many years now, we have engaged in
constructive dialog on human rights with other companies, non-
governmental organizations, international organizations and multi-
stakeholder initiatives to better understand different perspectives
and address conflicting goals. BASF is a founding member of the
U.N. Global Compact and a member of the Global Business Initia-
tive on Human Rights (GBI), a group of globally operating companies
from various sectors. The initiative aims to ensure implementation of
the U.N. Guiding Principles on Business and Human Rights. We are
confronted by the fact that there are states that do not honor their
obligation to protect human rights. People are particularly at risk in
such countries and companies' ability to act is often limited. Never-
theless, we are committed to our values - including and especially
there and contribute to the respect of human rights.
We have embedded this into our Code of Conduct and our human
rights position (for more information, see page 177). All employees
and members of management bodies are responsible for ensuring
that we act in accordance with our Code of Conduct and our human
rights position. We uphold our standards worldwide, including
where they exceed local legal requirements. We avoid causing or
contributing to adverse human rights impacts through our own
operations.
-
Our Corporate Compliance unit is responsible for steering human
rights topics and developing binding policies. A group of internal
experts from various specialist units environment, health and
safety, sustainability, legal, procurement, human resources and
supply chain - and the operating divisions works closely together to
coordinate measures across units. This expert working group
provides support and advice in challenging and critical situations, on
the development of internal processes, and on the creation of
information and training offerings, among other things. Together with
our Human Rights Advisory Council, it ensures that we can meet our
due diligence obligations.
We established the Human Rights Advisory Council to systematically
integrate external expertise. Its members include independent inter-
national human rights experts. The trust-based dialog on human
rights topics helps us to better understand critical perspectives and
to deal more openly with dilemmas. At the same time, the renowned
external experts show us where we have potential for improvement
and help us to build on our strengths in how we handle human
rights. The council is chaired by our Chief Compliance Officer. Meet-
ings are also attended by employees from Corporate Sustainability
and Corporate Compliance. Other representatives, for example,
from the operating divisions or procurement, are invited depending
on the focus topics. Its composition allows the Human Rights Advi-
sory Council to provide an external perspective on our processes
and contribute this in discussions with senior management. Similarly,
the Stakeholder Advisory Council brings outside views to discus-
sions with the Board of Executive Directors. We see assuming our
BASF Report 2020
human rights responsibilities as a continuous process. This is why
we continuously review our policies and processes and update
them if necessary.
Supplier Management]
SUPPLIERS
BASF
CUSTOMERS
5 Overviews
addition to protecting the environment. The Code of Conduct is
available in the most relevant languages for our suppliers and is inte-
grated into electronic ordering systems and purchasing conditions
across the Group. In 2020, 4,918 new suppliers committed to our
Code of Conduct.
BASF reserves the right to conduct audits or evaluations to ensure
that suppliers comply with the applicable laws, rules and standards.
In addition, BASF reserves the right to discontinue business relation-
ships for non-adherence to international principles, failure to correct
violations, or for displaying patterns of non-compliance with these
standards. Potential violations of laws, rules or standards can be
reported - including anonymously - to one of our more than 50
externally operated hotlines worldwide. Each case is documented
and investigated, and appropriate measures are taken as necessary.
For more information on responsible conduct along the value chain, see page 110 onward
For more information on the Supplier Code of Conduct, see basf.com/suppliers
Selection and evaluation of our suppliers
New suppliers are selected and existing suppliers are evaluated
not only on the basis of economic criteria, but also environmental,
social and corporate governance standards. As such, the selection,
evaluation and auditing of suppliers is an important part of our
sustainable supply chain management. Approaches and responsi-
bilities are set out in a global guideline. Due to the size and scale of
our supplier portfolio, our suppliers are evaluated based on risk,
including materiality and country and industry-specific risks. We also
use observations from our employees in procurement and informa-
tion from internal and external databases, such as Together for
Sustainability (TFS) assessments.
We have suppliers with a high potential sustainability risk evaluated
by third parties, either through sustainability evaluations or on-site
audits. The list of suppliers to be assessed is updated every year.
Sustainability evaluations and on-site audits are mainly conducted
according to the TfS framework. A total of 50 raw material supplier
sites were audited on sustainability standards on our behalf in 2020.
We received sustainability evaluations for 628 suppliers. We also
take into account other certification systems and external audits,
such as from the Roundtable on Sustainable Palm Oil, when evalu-
ating our suppliers' sustainability performance. Depending on busi-
ness requirements, we additionally conduct our own Responsible
Care audits at selected suppliers (see page 121).
For more information on raw materials, see page 116 onward
For more information on Together for Sustainability, see basf.com/en/together-for-sustainability
Audit results
We carefully analyze the results of sustainability evaluations and
on-site audits and document these in a central database. The
supplier audits conducted over the past few years have identified
some need for adjustment with respect to environmental, social and
corporate governance standards, for example in waste manage-
ment or deviations in occupational health and safety measures and
standards under labor law. Follow-up audits in 2020 identified
improvements, for example the correct storage of hazardous
substances, proper disposal of waste, the implementation of occu-
pational and process safety measures, the correct implementation
of emergency plans, and compliance with labor law requirements. In
2020, none of our audits identified any instances of child labor or
dangerous work and overtime performed by persons under 18.
In January 2020, a full mining-specific re-audit was performed at our
platinum supplier Sibanye-Stillwater in Marikana, South Africa,' in
accordance with TFS standards to re-evaluate the situation following
the previous audits in 2015 and 2017. This identified fundamentally
solid management systems at Sibanye-Stillwater in line with good
industry practice and international standards, especially in the area
of health and safety. The audit also recognized the significant efforts
by Sibanye-Stillwater since the acquisition of Lonmin in 2019 in
the area of social engagement, as well as the establishment of an
TOGETHER FOR
SUSTAINABILITY
Together for Sustainability (TFS)
BASF is a founding member of Together for Sustainability (TFS).
The initiative was established in 2011 to improve sustainability
in the supply chain. The focus is on standardizing and simplify-
ing supplier evaluations and audits globally. This increases
transparency and creates synergies. Suppliers only have to
complete an assessment process once. The results are then
made available to all TfS members in a database and are
mutually recognized - saving time and money for both parties.
Suppliers are evaluated by independent experts either in on-site
audits or online assessments. The latter are conducted
by EcoVadis, a ratings agency specialized in sustainability
analyses.
At the end of 2020, TfS had 29 members with a combined
procurement spend of around €227 billion. A total of 258 audits
and 4,675 online assessments were performed. As a TfS mem-
ber, BASF itself is assessed and was one of the best-rated
companies in 2020. With 80 points in sustainable procurement,
BASF is among the top 1% in this category worldwide.
For more information on Together for Sustainability, see tfs-initiative.com
1 In 2012, an extended strike at a mine formerly operated by Lonmin Plc, London, UK, in Marikana, South Africa, culminated in a violent confrontation between mine workers and armed South African police. Employees of the platinum supplier Lonmin were among the fatalities. Ownership of the Marikana mine was transferred to Sibanye-Stillwater
with its acquisition of Lonmin in 2019.
BASF Report 2020
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1 To Our Shareholders
2 Management's Report
Supplier Management
Consolidated Financial Statements
4 Consolidated Financial Statements
4
2 Management's Report
Supplier Management
BASF sources a wide range of raw materials, technical goods
and services. Our suppliers are an important part of our value
chain. Our objective is to secure competitive advantages
for BASF through our professional procurement structures.
At the same time, together with our suppliers, we want to
improve sustainability in the supply chain and minimize risks.
Strategy
Our partnerships with suppliers are based on mutual value creation,
as well as a reliable supply of raw materials, technical goods and
services at competitive prices. We work together in an open and
transparent way to generate long-term benefits for both sides.
Our sustainability-oriented supply chain management helps to man-
age risks. We have defined our standards and processes in global
guidelines and are constantly refining and optimizing these. Our
risk-based approach aims to identify and evaluate sustainability
risks in our value chains as best possible to improve sustainability
together with our suppliers. We regularly review and document
progress based on the risk level. Employees with procurement
responsibility receive ongoing training in sustainability-oriented sup-
plier management and responsible procurement. In 2020, 462 BASF
employees received such training.
Our expectations of our suppliers are laid down in the global
Supplier Code of Conduct. This clarifies for our suppliers the stan-
dards to be met and supports them in carrying out our requirements.
We count on reliable supply relationships and want to make our
suppliers' contribution to sustainable development visible to us.
2025 target
Share of relevant spend
covered by sustainability
evaluations
2025 target
Percentage of suppliers with
improved sustainability
performance upon re-evaluation
90%
80%
We actively promote sustainability in the supply chain and have set
ourselves ambitious targets for this: By 2025, we aim to have
conducted sustainability evaluations for 90% of the BASF Group's
relevant spend² and will develop action plans where improvement
is necessary. In addition, we are working toward having 80% of
suppliers improve their sustainability performance upon re-evalua-
tion by 2025. In 2020, 80% of the relevant spend had been evalu-
ated. Of the suppliers re-evaluated in 2020, 68% had improved. The
global targets are embedded in the target agreements of persons
responsible for procurement.
➡ For more information on suppliers, see basf.com/suppliers
Worldwide procurement
Our more than 70,000 Tier 1 suppliers play an important role in value
creation at our company. We work in long-term partnership with
companies from different industries around the world. They supply
us with raw materials, precursors, investment goods and consum-
ables, perform a range of services and are innovation partners.
Procurement management systems such as guidelines and targets
are set centrally and are binding for all employees with procurement
responsibility worldwide.
We acquired raw materials, goods and services for our own
production worth approximately €31.5 billion in 2020. Of this,
around 90% was procured locally. 3 There were no substantial
changes to our supplier structure.
What we expect from our suppliers
Together with our suppliers, we want to improve sustainability in the
supply chain. Consequently, we expect our suppliers to comply with
the applicable laws in full and to adhere to internationally recognized
environmental, social and corporate governance standards. We also
expect our suppliers to make an effort to implement these standards
at their suppliers. In addition, we ask our suppliers to acknowledge,
support and abide by our Supplier Code of Conduct - or to demon-
strate and ensure their commitment to the principles specified in the
Code of Conduct, for example in their own code of conduct. Our
Supplier Code of Conduct is founded on internationally recognized
guidelines, such as the principles of the United Nations' Global
Compact, the U.N. Guiding Principles on Business and Human
Rights, the International Labor Organization (ILO) conventions and
the topic areas of the Responsible Care initiative. Topics covered by
the Code of Conduct include compliance with human rights, the
exclusion of child and forced labor, safeguarding labor and social
standards, and antidiscrimination and anticorruption policies in
1 BASF considers all direct suppliers of the BASF Group in the business year concerned as Tier 1 suppliers. These are suppliers that provide us with raw materials, investment goods, consumables and services. Suppliers can be natural persons, companies or legal persons under public law.
2 We understand relevant spend as procurement volumes with relevant suppliers. We define relevant suppliers as Tier 1 suppliers showing an elevated sustainability risk potential as identified by our risk matrices, our purchasers' assessments or other sources.
3 "Local" means that a supplier is located in the same region (according to BASF's definition) as the procuring company.
BASF Report 2020
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About This Report
1 To Our Shareholders
3 Corporate Governance
1 To Our Shareholders
About This Report
2016
[Product stewardship]
SUPPLIERS
BASF
CUSTOMERS
We review the safety of our products from research and
development through production and all the way to our cus-
tomers' application. We continuously work to ensure that our
products pose no risk to people or the environment when
they are used responsibly and in the manner intended.
Strategy
■ Global directives with uniformly high standards
5 Overviews
-
We maintain and evaluate environmental, health and safety data for
all of our substances and products in a global database. This infor-
mation is continuously updated. The database forms the basis for
our safety data sheets, which we make available to our customers
in around 40 languages. These include information on the physical/
chemical, toxicological and ecotoxicological properties of products,
potential hazards, first aid measures, measures to be taken in the
case of accidental release, and disposal. Our global emergency
hotline network enables us to provide information around the clock.
In order to help users to quickly find out about our products and the
risks associated with them, we use the Globally Harmonized System
(GHS) to classify and label our products around the world, provided
this is legally permissible in the country concerned. We take into
account any national or regional modifications within the GHS
framework, such as the CLP Regulation in the European Union or
HazCom in the United States. We train our employees, customers
and logistics partners worldwide on the proper handling and optimal
use of selected products with particular hazard potential. In associ-
ations and together with other manufacturers, BASF is pushing for
the establishment of voluntary global commitments to prevent the
misuse of chemicals.
BASF supports the implementation of initiatives such as the Global
Product Strategy (GPS) of the ICCA. GPS is establishing worldwide
standards and best practices to improve the safety management of
chemical substances and to support governments in the introduc-
tion of local chemical regulations. We are also involved in initiatives
such as workshops and training seminars in emerging markets. In
2020, these included the virtual ASEAN (Association of Southeast
Asian Nations) workshop on regulatory cooperation.
For more information on GPS, see basf.com/en/gps
Global chemicals regulations
Most of the products we manufacture are subject to statutory
chemicals regulations. We want to ensure compliance with these.
We are bound by the relevant regional and national chemicals
regulations, which continue to grow in number worldwide. Examples
include REACH in the European Union, TSCA in the United States,
KKDIK in Turkey or K-REACH in South Korea. BASF Group compa-
nies work closely together with a global network of experts to ensure
that BASF complies with the applicable regulations. For example,
we submitted the relevant substances to the Turkish authorities in
2020 an important milestone in the pre-SIEF notification process.1
Product stewardship is of central importance for us. We want to
ensure that our products meet our customers' quality expectations
and pose no risk to people, animals or the environment when used
in the manner intended. We are committed to continuously minimiz-
ing the negative effects of our products on the environment, health
and safety along the value chain - from development to disposal
and to the ongoing optimization of our products. This commitment
to product stewardship is enshrined in our Responsible Care®
charter and the initiatives of the International Council of Chemical
Associations (ICCA). Our aim is to comply with all relevant national
and international laws and regulations. Our global requirements
define rules, processes and responsibilities, for example, to ensure
uniformly high product stewardship standards worldwide. In some
cases, voluntary initiatives exceed local statutory regulations. We
regularly conduct internal audits to monitor compliance with global
standards.
Consolidated Financial Statements
4
3 Corporate Governance
We regularly check our emergency systems, crisis management
structures and drill procedures with employees, contractors, local
authorities and emergency rescue workers. For example, in 2020 we
conducted 176 drills and simulations in Ludwigshafen, Germany, to
instruct participants on our emergency response measures.
We analyze the potential safety and security risks associated with
investment projects and strategic plans, and define appropriate
safety and security concepts. Our guiding principle is to identify risks
for the company at an early stage, assess them properly and derive
appropriate safeguards.
We inform business travelers and transferees about appropriate
protection measures prior to and during travel in countries with
elevated security risks. After any major incident, we can use a
standardized global travel system to locate and contact employees
in the affected regions.
We protect our employees, sites, plants and company know-how
against third-party interference. This includes, for example, analyz-
ing potential security risks in the communities surrounding our pro-
duction sites and addressing in depth the issue of cybersecurity.
BASF applies the "security by design" principle. As early as the
concept phase, all internet of things applications are critically
reviewed from a cybersecurity perspective. We are continually
developing our ability to prevent, detect and react to security inci-
dents with various measures and training programs. Our global
Cyber Security Defense Center monitors and protects our IT
systems against hacker attacks. We cooperate closely with a global
network of experts and partners to ensure that we can protect our-
selves against cyberattacks as far as possible. Our IT security
system is certified according to ISO 27001:2013. This also includes
ISO 27019:2018 for critical infrastructure.
Around the world, we work to sensitize our employees about
protecting information and know-how. For example, we further
strengthened our employees' awareness of risks in 2020 with man-
datory online training for all employees and other offerings such as
seminars, case studies and interactive training. We have defined
mandatory information protection requirements to ensure compli-
ance with our processes for protecting sensitive information and
perform audits to monitor this.
Our worldwide network of information protection officers comprises
around 650 employees. They support the implementation of our
uniform requirements and hold events and seminars on secure
behaviors. Around 100,000 employees had been trained on the
basics of cybersecurity and information protection in 2020. Our
standardized Group-wide recommendations for the protection of
information and knowledge were expanded to include additional
guidance for employees and updated in line with current
developments.
For more information on emergency response, see basf.com/emergency_response
-BASF
E
Global Be Secure month
Cyberattacks have become commonplace. Social engineering
calls in particular have risen sharply in recent times. Alongside
technical security, every individual's conduct plays an important
role in protecting companies against information theft and
cybercrime.
We want to raise employee awareness around cybersecurity
and give them the tools to effectively defend themselves. As
well as online training, which is compulsory for all employees,
we hold a Be Secure month every year in October. In 2020,
over 16,000 employees participated in around 90 events in
nine languages. These ranged from talks on topics such as
counter-espionage at BASF to live hacking demonstrations by
an external digital forensics expert. In addition, information
protection officers around the world organized regional and
local events, mainly held online due to the coronavirus
pandemic.
BASF Report 2020
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1 To Our Shareholders
2 Management's Report
Product stewardship
After successfully registering all substances in Europe, our REACH
activities concentrate on aspects such as dossier evaluation,
substance evaluation, authorization and restriction. We are also
required to continually update our registration dossiers. To satisfy
the complex requirements of REACH, we are in regular contact with
suppliers, customers, industry associations and government
authorities. For example, BASF is working together with the
European Chemicals Agency (ECHA) on a project to improve the
quality of REACH dossiers. BASF was one of the first companies to
join this industry-wide initiative.
Product stewardship for crop protection products and seeds
Crop protection products and seeds are highly regulated at national
and international level, which brings with it strict requirements for
registering and re-registering active ingredients and crop systems.
Regulatory approval is only granted when extensive documentation
can be provided showing that our products are safe for people,
animals and the environment. Potential risks are assessed and
minimized throughout the research, development and registration
process, and on an ongoing basis following successful market
registration. We regularly perform a large number of scientific stud-
ies and tests to ensure that, as far as possible, our registration
dossiers address all questions on potential environmental and health
effects.
We adapt our portfolio to the specific regional markets as crops,
soils, climate conditions, plant diseases and farming practices vary
around the world. Consequently, product approvals differ from
country to country.
We adhere to the specifications laid down by the German Animal
Welfare Act as well as the requirements of the Association for
Assessment and Accreditation of Laboratory Animal Care - the
highest standard for laboratory animals in the world. We develop
and are continuously optimizing alternative methods to experimen-
tally assess the safety and tolerance of our products without animal
studies. Our aim is to replace, reduce and refine animal studies to
minimize the impact on them. We already use alternative methods in
more than a third of our toxicological tests. Currently, 35 alternative
methods are being used in our labs and another 14 are in the devel-
opment stage. BASF spent €3.5 million toward this purpose in
2020. The development of alternative methods for testing the po-
tential of substances to induce developmental toxicity has been a
focus area of our research since 2017.
Since 2016, BASF SE's Experimental Toxicology and Ecotoxicology
department has been working together with a total of 39 partners on
one of the largest European collaborative projects for alternative
methods. The project, planned to run for six years, aims to develop
alternative methods to the point that chemical risk assessments can
be efficiently conducted largely without animal testing. We are also
involved in initiatives such as the European Partnership for Alterna-
tive Approaches to Animal Testing (EPAA) to strengthen the
cross-sector development of alternative methods.
Management of new technologies
■ Continual safety research on nano- and biotechnology
Nanotechnology and biotechnology offer solutions for key societal
challenges - such as environmental and climate protection or health
and nutrition. For example, nanomaterials can improve battery per-
formance and biocatalytic methods can improve process resource
efficiency. We want to harness the potential of both technologies.
Using them safely and responsibly is our top priority.
Safe handling of nanomaterials is stipulated in our Nanotechnology
Code of Conduct. In recent years, we have conducted over 250
scientific studies and participated in numerous Verbund projects
related to the safety of nanomaterials in Germany and around the
world. The results were published in more than 150 scientific articles.
Together with partners from academia and government authorities,
we are working on E.U.-funded projects to develop and validate
methods for evaluating and grouping nanomaterials without the use
of animal studies. In particular, grouping nanoforms can reduce
BASF Report 2020
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1 To Our Shareholders
2 Management's Report
Product stewardship
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
animal testing since individual forms do not have to undergo full
toxicological testing - only one or more representative of the entire
group. This is why we are developing new methods to group nano-
materials in groups with the same hazard potential in the E.U.'s
PATROLS project. In the E.U.'s GRACIOUS project, we are develop-
ing concepts for defining and then evaluating the toxicological
effects of these groups. In addition, together with the European
Centre for Ecotoxicology and Toxicology of Chemicals (ECETOC),
we developed an internet application (NanoApp) and put this online
in late November 2020. This makes the concepts developed to date
available for the entire industry together with the regulatory require-
ments. The aim is to simplify the registration of nanomaterial groups
under REACH.
Before launching products on the market, we subject them to a
variety of environmental and toxicological testing using state-of-the-
art knowledge and technology. Animal studies are only conducted
when they are required by law, for example as part of REACH, and
none of the alternative methods approved by the authorities are
available.
We are well prepared for crisis situations thanks to our global crisis
management system. In the event of a crisis, our global, regional or
local emergency response plans and crisis management structures
are engaged, depending on the impact scope. We involve situa-
tion-related partners and suppliers as well as cities, communities
and neighboring companies. An IT system to support emergency
response helps us to speed up communication between the rele-
vant players in the event of a crisis and maintain the best possible
overview of the situation. This enables the crisis management team
to record and process events around the world better and in more
detail.
■ Use of alternative methods for animal studies
For more information on our Agricultural Solutions segment, see page 100 onward
For more information on biodiversity, see page 142 onward
BASF adheres to the International Code of Conduct issued by the
World Health Organization (WHO) and the Food and Agriculture
1 Pre-SIEF notification for KKDIK, Turkish REACH, is similar but not identical to pre-registration under E.U. REACH. It serves to bring together future registrants for the purposes of joint registration and to enable the creation of a SIEF (substance information exchange forum).
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1
To Our Shareholders
2 Management's Report
Product stewardship
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Organization (FAO) for the distribution of crop protection products.
These are only marketed once they have been approved by the rele-
vant authorities. We want to ensure and meet high safety standards
worldwide for our products. This applies in particular to distribution
in countries that do not have their own or only low-level regulation
for crop protection products, as is the case in many emerging
markets. We no longer market WHO Class 1A or 1B products (high
acute oral and dermal toxicity). Depending on availability, we offer
our customers alternatives.
All of BASF's crop protection products can be used safely under
local farming conditions if the information and directions on the label
are followed. Customers can contact us directly if they have any
questions, complaints or issues, for example, by calling the
telephone number printed on product labels, using the contact
forms on our websites or by approaching our sales employees
directly. We record all products incidents relating to health or the
environment in a global database. If necessary, we take appropriate
measures in the basis of this information, such as updating the
instructions for use on the product label to minimize preventable
incidents in the future. We communicate changes to instructions for
use through channels such as our Farmer Field School initiatives in
Asia and in training programs such as the On-Target Application
Academy in the United States or our FarmNetwork Sustainability in
Europe.
One of the ways we meet our commitment to product stewardship
is by offering a wide range of courses and training on the safe
storage and safe use of our products. In India, for example, BASF
launched the Suraksha Hamesha program. Suraksha Hamesha
means "safety all the time." The program creates a platform for
educating farmers and agricultural workers about the nine steps of
responsible use of crop protection products and personal protec-
tion. Through Suraksha Hamesha, BASF has engaged with around
150,000 agricultural workers and around 29,000 users across India
since 2016. BASF also involves government agencies and the
central government's farm extension teams in these meetings to
support and promote farm safety. We are additionally involved in
numerous scientific and public organizations and initiatives.
Together, we are working on solutions for sustainable agriculture
that meet long-term economic, ecological and social needs.
We also work closely together with associations such as Crop Life
International and the European Crop Protection Association (ECPA)
to promote the safe and proper use of crop protection products. For
example, we support the two associations' safe use initiatives and
various programs on the proper disposal and recycling of product
containers. Technological innovations developed together with
industry partners such as the easyconnect closed transfer system in
Europe or the Wisdom system in South America also help to make
using crop protection products easier and safer.
Environmental and toxicological testing
■ Comprehensive protection measures against third-party
interference
■ Regular review of emergency systems and crisis
management structures
Emergency response, corporate security and cybersecurity
Process safety is a core part of safe, effective and thus sustainable
production. We meet high safety standards in the planning, con-
struction and operation of our plants around the world. These meet
and, in some cases, go beyond local legal requirements.
■ Global initiatives to reduce process safety incidents
■ Production networks and global training methods foster
dialog
■ Regular review of plant safety concepts and performance
of implementation checks and safety-related measures
Process safety
For more information on occupational safety, see basf.com/occupational_safety
In 2020, 0.3 work-related accidents per 200,000 working hours¹
occurred at BASF sites worldwide (2019: 0.3). The share of
chemical-related accidents declined slightly to 6% (2019: 7%).
Unfortunately, there was one fatal work-related accident in 2020
(2019: 1). At the Gunsan site in South Korea, an employee of a
contractor succumbed to injuries sustained from falling after
receiving an electric shock during painting work on a high-voltage
transmission tower. BASF supported the relevant authorities in their
investigation into the circumstances and cause of the accident. We
use the findings to take appropriate measures to prevent this from
happening again. Such measures include regular information and
awareness campaigns.
Hazard assessments are the main occupational safety tool for
preventing accidents and work-related illness. In the future, a
new mobile hazard assessment app can be used at the
Ludwigshafen site in Germany to report occupational hazards
directly on site using explosion-proof smartphones or tablets.
This information can later be edited on a computer. There are
many advantages to this approach. Digital processes do not
just save time and avoid transcription errors - images and
notes also allow more detailed information to be passed on
without having to enter this twice. This makes is easier to review
the effectiveness of the measures, making the app a valuable,
integrated tool that complements the existing backend applica-
tion. The hazard assessment app was tested at the first plants
in 2020 and made more user-friendly based on the findings. We
want to expand availability to further plants at the Ludwigshafen
site from 2021 and share experiences from the pilot phase in a
global network.
Easier with an app
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Safety and security
To Our Shareholders
1
About This Report
122
Our global standards provide the framework for the safe construction
and operation of our plants as well as the protection of people and
the environment. Our experts have developed a plant safety concept
and implementation check for every plant that considers the key
aspects of safety, health and environmental protection from
conception to startup - and stipulates specific protection measures.
BASF Report 2020
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2025 target
We play an active role in improving process safety around the world
in a global network of internal and external experts, through our
involvement in organizations such as the International Council of
Chemical Associations (ICCA) or the Center for Chemical Process
Safety (CCPS), and by fostering dialog with government institutions.
For more information on process safety, see basf.com/process_safety
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Safety and security
To Our Shareholders
1
About This Report
123
BASF Report 2020
1 Hours worked by BASF employees, temporary employees and contractors
In addition, we are continually refining and expanding our training
methods and offerings to increase risk awareness. Due to the
restrictions associated with the coronavirus pandemic, in-person
seminars were also held as virtual meetings or taught using web-
based applications in 2020.
Around the world, we promote the reduction of process safety inci-
dents and improve risk awareness with a culture of dealing openly
with mistakes and initiatives to foster dialog around potential safety
risks. In reducing plant safety incidents, the main focus is on the
implementation of technical measures. Bolstered by a greater risk
awareness, avoiding and detecting all leaks was again a key priority
in 2020 with the "Zero Loss of Containment Mindset" initiative in
North America and the "Zero leakage” initiative in South America.
We use the number of process safety incidents (PSI) per 200,000
working hours¹ as a reporting indicator. We have set ourselves the
goal of reducing process safety incidents to a rate of no more than
0.1 per 200,000 working hours by 2025. In 2020, we recorded
0.3 process safety incidents per 200,000 working hours worldwide
(2019: 0.3). We investigate every incident in detail, even under the
constraints of the coronavirus pandemic, analyze causes and use
the findings to derive suitable measures. We share the findings in our
global network in the interest of continuous improvement.
≤0.1
Reduction of worldwide process safety
incidents per 200,000 working hours
In order to maintain the highest level of safety at our plants across
their entire life cycles, we verify that our protection concepts, safety
reviews and resulting safety measures have been carried out in all
our plants at timely intervals based on risk potential. We regularly
update our plants' safety and security concepts in line with changing
technologies and as necessary.
Appropriate OECD testing and implementation guidelines must be
developed for the new requirements for nanomaterials under
REACH, the European chemicals regulation. We support this
process by contributing our expertise in various working groups of
the European Chemicals Agency (ECHA) and the OECD's Business
and Industry Advisory Group (BIAC). Many of the methods devel-
oped for nanoparticles could, in our view, also be used to evaluate
solid particles in the future, an approach we bring up in regulatory
discussions.
1 Hours worked by BASF employees, temporary employees and contractors
≤0.1
2019
2020
With an HPI of 0.92, we once again reached this target in 2020
(2019: 0.97). The figure is slightly lower than in previous years due to
the coronavirus pandemic, as a result of which a number of criteria
crucial to the HPI could not be fully met. For instance, activities that
required physical participation such as emergency drills, examina-
tions or first aider training could not be held on the usual scale.
The coronavirus pandemic also made many health protection mea-
sures necessary in 2020. Activating our pandemic plans, which
have been mandatory for all sites since 2010, sharing information in
our global BASF medical network, and working closely together with
the authorities, employee representatives and our partners at BASF
sites enabled us to make and successfully implement sound and
timely decisions according to the situation. Our actions focused on
the health of all of our employees, contractors and third parties.
Measures included developing hygiene concepts, tracing and
breaking infection chains, and providing information to and raising
awareness among employees via the intranet and at the site gates.
In light of the coronavirus pandemic, the annual global health cam-
paign on the theme "Protect yourself and others - stay healthy in
2020" was developed at short notice and offered around the world.
The focus was on preventive hygiene measures, vaccinations and
preventing infection. There were also special offerings on remote
working, such as videos and consultations on nutrition, exercise/
ergonomics and psychological stress. Over 450 sites worldwide
took part in the health campaign with activities such as workshops,
courses, talks and exercises. Another focus in 2020 was on influenza
prevention. BASF employees could be vaccinated against the
seasonal flu at many sites around the world, an offer that was very
well received. At the Ludwigshafen site in Germany, for example,
around three times more employees participated in the vaccination
campaign than in past years.
We raise employee awareness of health topics with offerings tailored
to specific target groups. The BASF health checks form the
foundation of our global health promotion program and are offered
to employees at regular intervals.
For more information on occupational medicine, health campaigns and the HPI, see basf.com/health
1 In 2020, medical personnel including auditors had to concentrate on monitoring and responding to the pandemic situation and on global pandemic preparedness. For this reason and due to the coronavirus-related travel restrictions, only one site was audited on occupational medicine and health protection in the year under review (see page 121).
BASF Report 2020
124
About This Report
1
To Our Shareholders
2 Management's Report
Safety and security
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
2018
In addition to the legally required briefings, BASF requires new
employees and contractors to complete compulsory safety training,
as well as regular training on the safe handling of chemicals and the
correct use of personal protective equipment for employees at our
production sites.
2017
0.96
per 200,000 working hours
Reduction of worldwide
lost-time injury rate
2025 target
Our aim is to reduce the worldwide lost-time injury rate to no more
than 0.1 per 200,000 working hours¹ by 2025. To prevent work-
related accidents, we encourage and promote risk-conscious
behavior and safe working practices for every individual, learning
from incidents and regular discussion. We are constantly refining
and enhancing our requirements and training.
■ Employees and contractors worldwide instructed on safe
behavior
For more information on the global safety initiative, see basf.com/global-safety-initiative
Our global safety initiative was established in 2008 and plays a key
role in the ongoing development of our safety culture. For the first
time, decentralized virtual safety days were held around the world in
2020. As a result of the new organizational structure and due to the
different regional measures to fight the coronavirus pandemic, each
■ First decentralized Global Safety Days
Health protection
■ Global standards for corporate health management
■ 2020 Global Health Campaign: "Protect yourself and
others"
Our global corporate health management serves to promote and
maintain the health and productivity of our employees. Our world-
wide standards for occupational health are specified in a require-
ment. A global network of experts provide implementation support.
We monitor compliance with these standards at BASF sites with
regular audits. We measure our performance in health protection
using the Health Performance Index (HPI). This has five components:
recognized occupational diseases, medical emergency drills, first
aid, preventive medicine and health promotion. Each component
contributes a maximum of 0.2 to the total score, meaning that the
highest possible score is 1.0. We aim to reach a value of more than
0.9 every year.
Development of the Health Performance Index (HPI)
Target score
0.96
0.9
0.97
0.92
BASF makes successful use of biotechnology. We produce a range
of products with the help of biotechnological methods. This provides
us with extensive experience in their safe use in research and devel-
opment as well as in production. Biotechnological methods are
used to develop and produce products such as natural flavors and
fragrances, enzymes and vitamins. Another application is the devel-
opment of seeds for agriculture. We use both conventional and
molecular biological methods to develop plants with improved
characteristics, such as greater resistance to drought, pests or the
pathogens that cause plant diseases. Tolerance of certain herbicides
also secures yields and enables sustainable, no-till crop systems to
increase CO2 retention in the soil. Innovative breeding technologies
can play a key role in the sustainable development of agriculture, for
0.97
BASF Report 2020
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Safety and security
To Our Shareholders
1
5 Overviews
About This Report
BASF Report 2020
1 The decrease compared with the previous year is attributable to the sale of the construction chemicals business and the related sites.
example, with varieties that are better adapted to changing environ-
mental conditions or that have higher disease tolerance. In using
biotechnology, we want to adhere to all relevant standards and legal
regulations governing production and marketing. We are also guided
by the code of conduct set out by EuropaBio, the European bio-
technology association.
654
a Investments comprise end-of-pipe measures as well as integrated environmental protection measures.
b Values shown refer to December 31 of the respective year.
693
121
[Safety and security]
SUPPLIERS
BASF
BASF Report 2020
130
Global safety initiative
Leaders are important role models for employees, which is why
environmental protection, health, safety and security are discussed
with newly appointed senior executives. Senior executives with a
particular responsibility for such topics, for example, in production,
also receive specific further training to be able to meet their
responsibilities. Due to the restrictions caused by the coronavirus
pandemic, the seminars for senior executives could only take place
to a limited extent in 2020. We will therefore expand our offering with
digital formats in 2021.
By the end of 2020, we had introduced digital solutions and applica-
tions at around 250 plants worldwide to further increase safety,
security, planning capability and availability. We plan to implement
these at around another 170 plants by 2022. Such solutions include
augmented reality: At many sites, our employees already use mobile
end devices and special apps for day-to-day tasks such as safety
inspections, which continuously improves the efficiency and quality
of our processes. Other applications include efficiently simulating
maintenance and production processes in digital plant models and
predictive maintenance. At the Ludwigshafen site in Germany, for Occupational safety
example, over 40 plants already use predictive maintenance models
to monitor plant components such as compressors, pumps or heat
exchangers.
initiative. In the Asia Pacific region, many sites organized activities
under the banner of “Safety, my responsibility!" while numerous
events reflecting the motto of "Halt! Safety champions pause for
safety" were held at the Ludwigshafen site in Germany. Many events
were held online using interactive formats In the interest of our
employees' health, giving them the opportunity to find out about
safety-related topics and to learn from each other. This involvement
and lively discussion, even in times of a pandemic, make a major
contribution to our safety culture.
to learn from examples of good practice and in this way, continually site could decide on the focus and implementation of the safety
develop our safety culture.
We promote risk awareness for every individual with measures such
as systematic hazard assessments, specific and ongoing qualifica-
tion measures and global safety initiatives. We analyze accidents
and incidents as well as their causes and consequences in detail at
a global level to learn from these. Hazard assessments and the risk
minimization measures derived from them are an important preven-
tion tool. We also promote regular dialog across different sites to
strengthen risk awareness among our employees and contractors,
The safety of our employees, contractors and neighbors, and pro-
tecting the environment is our top priority. This is why we have set
ourselves ambitious goals for occupational and process safety as
well as health protection. We stipulate mandatory global standards
for safety, security, and environmental and health protection. A
worldwide network of experts ensures these are implemented. As
part of our continuous improvement process, we regularly monitor
progress toward our goals.
■ Comprehensive incident analyses and global experience
and information exchange
■ Strengthening risk awareness
■ Global safety standards
Strategy
For occupational and process safety as well as health and
environmental protection and corporate security, we rely on
comprehensive preventive measures and expect the cooper-
ation of all employees and contractors. Our global safety and
security concepts serve to protect our employees, contrac-
tors and neighbors, to prevent property and environmental
damage, and to protect information and company assets.
CUSTOMERS
Provisions for environmental protection
measures and remediationb
We participate in the program established by the international non-
profit organization CDP for reporting on data relevant to climate
328
Investments in new and improved
environmental protection plants and
facilitiesa
Responsible Care Management System
[Protecting people and the environment is our top priority.
Our core business - the development, production, process-
ing and transportation of chemicals - demands a responsible
approach. We address environmental, health and safety risks
with a comprehensive Responsible Care Management
System. We expect our employees and contractors to know
the risks of working with our products, substances and plants
and to handle these responsibly.
CUSTOMERS
BASF
SUPPLIERS
Responsible Care Management System
■ Global EHS directives and standards
Environmental Protection, Health
and Safety
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Responsible Care Management System
1 To Our Shareholders
About This Report
5 Overviews
BASF is actively involved in the International Council of Chemical
Associations' (ICCA) Responsible Care® initiative and has endorsed
the Responsible Care® Global Charter. Our Responsible Care
Management System comprises the global directives, standards
and procedures for environmental protection, health and safety
(EHS) for the various steps along our value chain. Our regulations
cover the transportation of raw materials, activities at our sites and
warehouses, and distribution of our products as well as our custom-
ers' application of the products. Specifications for implementing
these measures are laid out in binding directives that are introduced
in consultation with employee representatives. These describe
responsibilities, requirements and assessment methods. The Envi-
ronmental Protection, Health & Safety unit in the Corporate Center
defines Group-wide management and control systems and monitors
compliance with internal guidelines and legal regulations, while the
sites and legal entities implement these requirements locally. Our
policies and requirements are continuously updated. This is why we
also maintain dialog with government institutions, associations and
international organizations.
-
1,035
1,125
2019
2020
Operating costs for environmental
protection
Costs and provisions for environmental protection in the BASF Group
Million €
For more information on occupational safety and health protection, see page 122 onward
Due to the coronavirus pandemic, medical personnel including
auditors had to concentrate on monitoring and responding to the
pandemic and on global pandemic preparedness. For this reason
and due to the travel restrictions, only one site was audited on
occupational medicine and health protection in 2020 (2019: 15). All
other audits and health performance control visits were postponed
to 2021.]
In the BASF Group in 2020, 112 environmental and safety audits
were conducted at 60 sites (2019: 137 audits at 90 sites). The focus
was on auditing sites based on the level of risk. For production
plants with a medium and high hazard potential, we additionally
conducted 19 short-notice audits at seven sites (2019: 42 audits at
33 sites). The sites of the businesses acquired from Bayer in 2018
were evaluated in 2020 as planned. We aim to audit the sites
acquired from Solvay in 2020 from the end of 2021.
BASF production sites are certified in accordance with ISO 14001
and EMAS (Eco-Management and Audit Scheme) (2019: 183).1 In
addition, 54 sites worldwide are certified in accordance with
OHSAS 18001 or ISO 45001 (2019: 53).
Regular audits help ensure that our safety, security, health and envi-
ronmental protection standards are met. We conduct regular audits
every three to six years at all BASF sites and at companies in which
BASF is a majority shareholder. We take a risk-based approach and
use an audit database to ensure that all sites and plants worldwide
are regularly audited. Sites and companies acquired as part of
acquisitions are audited in a timely manner to bring these into line
with our standards and directives as necessary. After the integration
phase is complete, they are generally audited within one to two
years, depending on complexity and size. We have defined our
regulations for Responsible Care audits in a global Corporate
Requirement. During our audits, we create a safety and environ-
mental profile that shows if we are properly addressing the existing
hazard potential. If this is not the case, we agree on measures and
monitor their implementation, for example, with follow-up audits.
Our Responsible Care audit system complies with the ISO 19011
standard and is certified according to ISO 9001. Worldwide, 150
■ 131 audits to monitor performance and progress
Audits
For more information on Responsible Care®, see basf.com/en/responsible-care
We set ourselves ambitious goals for environmental protection,
health and safety (see page 32) and regularly review our perfor-
mance and progress with audits. We assess the potential risks and
weaknesses of all our activities - from research and production to
logistics and the effects of these on the safety and security of our
employees, the environment or our surroundings. We use data-
bases to document accidents, near misses and safety-related inci-
dents at our sites as well as along our transportation routes to learn
from these; appropriate measures are derived according to specific
cause analyses.
231
We offer our customers solutions that help prevent greenhouse gas
emissions and improve energy and resource efficiency. More than
40% of our annual research and development spending² goes
toward developing these products and optimizing our processes,
as well as toward research projects to make our processes more
energy and resource-efficient and to prevent greenhouse gas emis-
sions.
For more information, see the Notes to the Consolidated Financial Statements on pages 252 and 289
developed in the Carbon
Management R&D Program
Activities in external networks
We are actively involved in external networks, which quickly provide
information and assistance in emergencies. These include the Inter-
national Chemical Environmental (ICE) initiative and the German
Transport Accident Information and Emergency Response System
(TUIS), in which BASF plays a coordinating role. In 2020, we
provided assistance to public emergency response agencies and
other companies in 112 cases (2019: 165). This included informa-
tion on chemicals and their proper disposal, on-site operational
support for transportation accidents involving hazardous goods, or
information on human biomonitoring. We apply the experience we
have gathered to improve our own processes and set up similar
systems in other countries.
For more information on transportation safety, see basf.com/distribution_safety
For more information on emergency response, see basf.com/emergency_response
BASF Report 2020
129
About This Report
1
To Our Shareholders
2 Management's Report
Energy and climate protection
3 Corporate Governance
optimizing fairways on the Middle Rhine to improve long-term
shipping conditions on the Rhine. We recorded no extended low
water events that significantly restricted our logistics in 2020.
4 Consolidated Financial Statements
[Energy and climate protection]
SUPPLIERS
BASF
CUSTOMERS
As an energy-intensive company, we are committed to
energy efficiency and global climate protection. We want to
further reduce emissions along the value chain. To achieve
this, we rely on efficient technologies for generating steam
and electricity, for example, and the increased use of renew-
able energies. We make our production processes as energy
efficient as possible with the help of comprehensive energy
management. We are researching and developing completely
new processes and technologies to reduce our greenhouse
gas emissions over the long term. In addition, our climate
protection products make an important contribution toward
emission reduction and resource efficiency.
Strategy
■ Climate protection target: CO2-neutral growth until 2030
■ Carbon management to reduce emissions
Climate protection is very important to us and is an important part of
our corporate strategy. As a leading chemical company, we want to
achieve CO2-neutral¹ growth until 2030. We aim to keep total green-
house gas emissions from our production sites and our energy
purchases stable at the 2018 level while growing production
volumes. Based on our growth plans until 2030, this would mean
reducing our specific greenhouse gas emissions by up to one-third
compared with 2018. To achieve this, we have adopted comprehen-
sive carbon management (see page 135) with three strategic levers:
optimizing our plants, increasingly sourcing low-carbon energy, and
developing completely new, low-emission technologies and pro-
cesses. With these innovations, we want to lay the foundation for
significant emissions reductions from 2030 onward. In connection
with our climate protection target, we made Group-wide CO2 emis-
sions one of our most important key performance indicators at the
Schematic overview: development of the BASF Group's greenhouse gas emissions (Scope 1 and 2)
Million metric tons of CO2 equivalents
40.1
5 Overviews
1990
At the Verbund site in Ludwigshafen, Germany, around 50% of
incoming volumes are transported to the site by ship under normal
conditions. In recent years, hot and dry summers often led to
extended low water levels on the Rhine River, temporarily impacting
logistics. We are implementing various measures to make the site
more resilient to extended low water events in particular. These
include a digital early warning system for low water, which was intro-
duced in 2020. This makes it possible to forecast water level trends
up to six weeks in advance, which significantly simplifies planning for
raw materials supply and alternative transportation routes. We are
also working with the German Federal Institute for Hydrology to
improve water level forecasts. In addition, we chartered more ships
that can navigate low water levels and invested in making loading
stations more flexible. Together with partners, we are also develop-
ing our own type of ship designed for extreme low-water situations,
which should start operation in late 2022. We support the hydraulic
engineering measures proposed by the German Federal Ministry of
Transport's "Low water on the Rhine" action plan, in particular
We stipulate worldwide requirements for our logistics service provid-
ers and assess them in terms of safety and quality. Our experts use
our own evaluation and monitoring tools as well as internationally
128
About This Report
1 To Our Shareholders
highly efficient combined heat and power plants with gas and steam
turbines, and on the use of heat released by production processes.
Furthermore, we are committed to energy management that helps
us analyze and further improve the energy efficiency of our plants on
an ongoing basis. We continuously analyze potential risks to our
business operations arising in connection with the topics of energy
and climate protection and derive appropriate measures.
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
[Transportation and storage]
SUPPLIERS
1 Hazardous goods are classified in accordance with national and international hazardous goods regulations.
BASF
approved schemes such as the ship inspection reports issued by
the Chemical Distribution Institute (CDI) and the Oil Companies
International Marine Forum (OCIMF).
Our regulations and measures for transportation and ware-
house safety cover the delivery of raw materials, the storage Transportation incidents
and distribution of chemical products among BASF sites and
customers, and the transportation of waste from our sites to
the disposal facilities.
Strategy
■ Risk minimization along the entire transportation chain
We are systematically implementing our measures to improve trans-
portation safety. We report in particular on goods spillages that
could lead to significant environmental impacts such as dangerous
goods leaks of BASF products in excess of 200 kilograms on public
traffic routes, provided BASF arranged the transport.
We recorded two incidents in 2020 with spillage of more than
200 kilograms of dangerous goods¹ (2019: 3). None of these trans-
portation incidents had a significant impact on the environment
(2019: 0).
We want our products to be safely loaded, transported, handled and
stored. This is why we depend on reliable logistics partners, global
standards and an effective organization. Our goal is to minimize risks
along the entire transportation chain - from loading and transporta-
tion to unloading. Some of our guidelines for the transportation of Securing raw materials supply via the Rhine River
dangerous goods go above and beyond national and international
dangerous goods requirements. We have defined global guidelines
and requirements for the storage of our products and regularly
monitor compliance with these through audits and assessments.
Accident prevention and emergency response
■ Risk assessments for transportation and storage
We regularly assess the safety and environmental risks of transport-
ing and storing raw materials and sales products with high hazard
potential using our global requirement. This is based on the
Guidance on Safety Risk Assessment for Chemical Transport Oper-
ations published by the European Chemical Industry Council
(CEFIC). We also have binding global standards for load safety.
CUSTOMERS
1990 to 2018
2 Management's Report
Transportation and storage
2018 to 2030
2030
2050
From 2030
1 The goal includes other greenhouse gases according to the Greenhouse Gas Protocol, which are converted into CO2 equivalents.
2 Costs not relevant to the calculation of this share include research expenses in early innovation stages of the phase-gate process, patent costs and expenses for supporting services.
Most of our greenhouse gas emissions are from the consumption of
energy. At sites with internal supply capabilities, we primarily rely on
Our climate protection activities are based on a comprehensive
analysis of our emissions. We report on greenhouse gas emissions
in accordance with the Greenhouse Gas Protocol as well as the
sector-specific standard for the chemical industry. Sharp increases
in our greenhouse gas emissions, due for example to the startup of
large-scale plants, are progressively offset. We assess investments
and acquisitions with respect to the impact on our climate protection
target. If, for technical or economic reasons, our carbon manage-
ment activities cannot stabilize emissions at the 2018 level, we will
also consider taking short-term external offsetting measures such
as purchasing certificates.
beginning of the 2020 business year (see page 33). This makes
emissions even more important to the operational and strategic
steering of the BASF Group.
- Fundamentally new technologies
- Purchasing electricity from renewable sources
- Increased process and energy efficiency
21.9
2030 target:
CO2-neutral growth
2018
- Higher process and energy efficiency
Without active carbon management:
Estimated emissions from planned production growth
Sales product volumes doubled and
emissions almost halved through:
- Decomposition of nitrous oxide
Reduce emissions through:
Expand production while keeping
emissions at the 2018 level,
primarily through:
0.16
Waste generation in the BASF Group
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Air, waste and soil
1 To Our Shareholders
of which transported hazardous waste
a Physical/chemical and biological treatment, underground disposal
b Waste is classified as hazardous or nonhazardous waste according to local regulations.
0.36
Million metric tons
0.43
0.92
About This Report
0.25
0.28
We have global standards for managing contaminated sites. A
worldwide network of experts ensures these are implemented. We
develop remediation solutions that balance nature conservation,
climate protection concerns, costs and social responsibility. This
means making customized decisions on a case-by-case basis,
founded on the legal framework and current technological standards.
Contaminated sites are documented in a database. Ongoing reme-
diation work around the world continued on schedule in 2020 and
planning was concluded on future remediation projects.
For more information on provisions for environmental protection, see the Notes to the Consolidated
Financial Statements on pages 230 and 260
For more information on the Alliance to End Plastic Waste, see basf.com/en/aepw and
endplasticwaste.org
Alliance to End Plastic Waste
In 2019, we co-founded the Alliance to End Plastic Waste
(AEPW) with other companies from along the value chain - from
plastics producers and consumer goods manufacturers to
waste disposal companies. The AEPW has around 50 mem-
bers, who together aim to develop solutions that stop plastic
waste from entering the environment, especially the ocean.
There are four main focus areas: developing infrastructure for
waste collection, promoting innovative recycling methods,
education and engagement of various stakeholders, and
cleanup of areas heavily impacted by plastic waste. BASF
supports the AEPW's goal of establishing a circular economy
for plastics with its ChemCycling TM project. BASF is also
involved in Alliance initiatives such as cleanup efforts. For
instance, almost 300 BASF employees participated in the
AEPW's All Together Global Cleanup campaign in Ludwigs-
hafen, Germany, and Shanghai, China, in September 2020.
BASF Report 2020
0.89
2020
2019
Total waste generation
Othera
0.38
0.35
In surface landfills
0.78
0.74
Through incineration
1.35
1.25
Waste disposed of
0.54
Classification of waste for disposal
0.52
Nonhazardous waste
Hazardous waste
0.45
0.44
Recycled
0.99
0.96
2.34
2.21
Waste recovered
0.19
Thermally recovered
17.025
138
BASF
SUPPLIERS
[Air, waste and soil]
Air, waste and soil
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
BASF Report 2020
5. The carbon produced is a solid granulate.
CUSTOMERS
4. The hydrogen rises to the top and can be
extracted.
5
LO
2. Methane is heated to over 1,000°C using
electricity from renewable sources (such as
solar and wind power).
Hydrogen
4
1. Methane flows into the reactor.
с
Carbon
granulate
> 1,000°C
1
Methane
CH
2
3
3. The methane is split in the hot center of the
reactor. Gaseous hydrogen and solid carbon
are formed.
137
We want to minimize the impact of our activities on people
and the environment by further reducing emissions to air,
preventing waste and protecting the soil. Our plants are
operated responsibly and we use natural resources with
respect. We have set ourselves standards in global require-
ments and are continually improving the resource efficiency
of our processes with our Operational Excellence program.
■ Minimizing environmental impacts
BASF Report 2020
2 Heavy metals are included in the figure for dust (see the table "Emissions to air").
1 The comparative figure for 2019 has been adjusted to reflect updated data.
We are working intensively on solutions for a circular economy (see
page 30). We want to further reduce our demand for primary
resources and at the same time, help to reduce waste generation
through better recycling, for example, of platinum group metals, or
the use of recycled feedstocks such as pyrolysis oil from mixed
plastic waste or used tires (see see page 119). We are also involved
in various initiatives to avoid waste and strengthen the circular
economy. For example, as a founding member of the Alliance to
End Plastic Waste (AEPW), we cooperate with around 50 other
companies along the value chain to put plastic waste to good use
and reduce the amount that enters the environment. The AEPW
intends to invest up to $1.5 billion in various projects and coop-
erative ventures to this end, mainly in Asia and Africa (see box on
page 138).
We use the BASF Verbund to efficiently manage our material flows.
The by-products of one plant often serve as feedstocks for another
plant, avoiding waste. At the Antwerp site in Belgium, for example,
we re-use a carboxylate solution from the cyclohexanone plant in
the production of soda ash. Other material flows can be used to
generate steam, which saves fossil fuels.
■ Systematic management of contaminated sites
We want to further reduce our emissions with various measures. For
instance, we use catalysts to reduce nitrogen oxides or feed waste
gases back into the production process. One example of this is the
production of adipic acid at the Ludwigshafen site in Germany. The
nitrous oxide generated in the process is not broken down, but
isolated and used in the BASF Verbund as a feedstock for interme-
diates. This reduces our emissions and simultaneously increases
process and resource efficiency.
1,711
3,507 3,530
10,010 10,534
4,702 4,496
1,861 1,982
2,000 2,320a
2,178
23,791 25,040ª
2020 2019
a The comparative figure for 2019 has been adjusted to reflect updated data.
Total
NH3 (ammonia) and other inorganic substances
Strategy
Dust
NOx (total nitrogen oxides)
CO (carbon monoxide)
Air pollutants from BASF operations
Metric tons
Emissions to air
Total emissions of air pollutants from our production plants amounted
to 23,791 metric tons in 2020 (2019: 25,040 metric tons¹). Emissions Management of waste and contaminated sites
of ozone-depleting substances as defined by the Montreal Protocol
totaled 14 metric tons in 2020 (2019: 26 metric tons¹). The succes-
sive changeover to alternative coolants has significantly reduced
these emissions, down from 229 metric tons in 2002. Emissions of
heavy metals2 in 2020 amounted to 4 metric tons (2019: 5 metric
tons¹).
■ Total waste volume slightly lower
In addition, our portfolio contains a variety of products to help
reduce the emission of air pollutants - from process catalysts for
industry applications and plastics additives to catalysts for the auto-
motive industry.
■ Emissions to air slightly lower
Emissions to air
Our waste management is based on the systematic tracking of
material flows and follows a clear hierarchy. We aim to avoid waste
as far as possible. If this is not possible, we review the options for
recycling or energy recovery in terms of a circular economy. Non-
recyclable waste is disposed of properly and in an environmentally
responsible manner. BASF's Verbund structure helps us to avoid or
reduce waste. We regularly audit external waste disposal compa-
nies to ensure that waste is disposed of properly. In this way, we
also contribute to preventive soil protection and keep today's waste
from becoming tomorrow's contamination. If soil and groundwater
contamination occurs at active or former sites, appropriate remedi-
ation measures are reviewed and implemented.
Regular monitoring of our emissions to air is a part of our environ-
mental management. In addition to greenhouse gases (see page 130
onward), we also measure and analyze emissions of air pollutants to
avoid potentially harmful substances as best possible.
■ Maximizing recovery options
NMVOC (nonmethane volatile organic compounds)
SOx (total sulfur oxides)
About This Report
CUSTOMERS
2 Management's Report
62
218
Production
1,417
Surface water / freshwater
Brackish water / seawater
Groundwater
13%
6,776
1,728
Use
1,429ª
Discharge
-87%
Cooling
Abstraction /
supply
In 2020, around 25% of our production sites were located in water
stress areas. These sites accounted for 1% of BASF's total water
abstraction (2019: 1%).1 This demand was covered for the most
part by freshwater (97%). We mainly source water from third parties
The BASF Group's water consumption describes the amount of
water that is not discharged to a supply source, meaning that it is no
longer available to other users. Consumption is mainly attributable
to the evaporation of water during closed-circuit cooling. A smaller
amount is from the water contained in our products. Water
consumption in 2020 amounted to around 63 million cubic meters
(2019: 61).
We predominantly use water for cooling purposes (87% of water
abstraction), after which we discharge it back to our supply sources.
We reduce our demand for cooling water by recirculating as much
of it as possible. To do this, we use recooling plants that allow water
to be reused several times. Around 13% of our total water abstrac-
tion is used in production plants, for example, for extraction or dis-
solution processes or for cleaning. Most of this water is discharged
back to our supply sources after being treated in BASF or third
party plants.
Our water abstraction totaled 1,728 million cubic meters in 2020
(2019: 1,717). This demand was covered for the most part by fresh-
water such as rivers and lakes (87% of water abstraction). At some
sites, we use alternative sources such as treated municipal waste-
water, brackish water or seawater. A small part of the water we use
reaches our sites as part of raw materials and steam, or is released
in our production processes. We abstract most of the water we
need for cooling and production ourselves. In 2020, 5% of our total
water demand was covered by third parties.
■ Optimizing demand and efficient use
Million cubic meters per year
Water in the BASF Group 2020
Water balance
Water
5 Overviews
16.860
2018
(baseline)
Cooling
6,544
23
3
0.609
0.598
0.677
0.025
140
BASF Report 2020
1 Aqueduct 3.0 was used to identify sites in water stress areas to determine pro rata water abstraction and water consumption.
BASF carefully assesses the impact of wastewater discharge in
accordance with the applicable laws and regulations. The responsible
local authorities regularly review our analyses and precautions in
accordance with the relevant local requirements to prevent contami-
nants from entering water bodies.
A total of 1,429 million cubic meters of water were discharged from
BASF production sites in 2020 (2019: 1,509), including 166 million
cubic meters of wastewater from production. Total wastewater in
water stress areas was less than 1%. As cooling water is recirculated
as much as possible there, the share of wastewater from production
processes is comparatively higher than at other BASF sites.
■ Emissions slightly lower
The supply, treatment, transportation and recooling of water is
associated with a considerable energy demand. We are constantly
working to optimize our energy consumption and the amount of
water we use, and to adapt to the needs of our business and the
environment. One example of this is the nitric acid Verbund at the
Ludwigshafen site in Germany. Various recooling optimization mea-
sures not only significantly reduce the use of cooling water there, but
also save 12 gigawatt hours of energy and avoid 3,500 metric tons
of CO2 every year.
(73%). Water consumption in water stress areas accounted for Emissions to water
around 11% of our total water consumption (2019: 14%) and was
primarily attributable to evaporation in cooling processes.
2019
a The difference between the volume of water abstracted and the volume discharged is primarily attributable to evaporation losses during recirculation of cooling water and limited accuracy in measuring cooling water discharge.
b Total from production processes, graywater, rinsing and cleaning in production
Reusable wastewater
from third parties
Water produced
Drinking water
External treatment plant
232
Production b
5
203
1,205
Surface water / freshwater
Brackish water / seawater
Groundwater
1,263
5,281
of which recirculating
once-through
|-」
1 To Our Shareholders
2020
Use of biomass'
BASF Report 2020
1 We define water stress areas as regions in which more than 40% of available water is used by industry, households and agriculture. Our definition is based on the Water Risk Atlas (Aqueduct 3.0) published by the World Resources Institute. For more information, see wri.org/aqueduct.
2 Our water target also continues to take into account the sites that we identified as water stress sites in accordance with Pfister et al. (2009) prior to 2019.
We identify and implement potential for improvement as part of
sustainable water management. For instance, we use wastewater
from municipal wastewater treatment plants to reduce our fresh-
water demand at our sites in Tarragona, Spain (since 2013) and
Freeport, Texas (since 2019). At the Pontecchio site in Italy, our
need for river and groundwater is reduced by the use of rainwater
and optimized sludge dewatering, which started up in late 2020. At
the Ludwigshafen site in Germany, we have continually optimized
cooling water needs over the past few years with technical improve-
ments, most recently in the production of higher carboxylic acids, for
example. In addition, the startup of a new recooling plant in 2020
makes the site less dependent on changes in water temperature
and water levels on the Rhine. We have also taken numerous mea-
sures to secure the supply of raw materials to the site and the
transportation of our products by ship on the Rhine River, even in
the case of extended periods of low water (see page 129).
We pursue our goal by applying the European Water Stewardship
standard, which rests on four principles: sustainable water abstrac-
tion, maintaining good water quality, preserving conservation areas,
and ensuring continuous improvement processes. In addition, we
are a member of the global Alliance for Water Stewardship.
Introduction of sustainable water management at our
production sites in water stress areas and at our
Verbund sites
2030 target
Our goal is to introduce sustainable water management at our
production sites in water stress areas and at our Verbund sites by
2030, covering 93% of BASF's total water abstraction. We achieved
46.2% of our target in 2020 (2019: 35.8%).2 Sustainable water
management was introduced at six sites in 2020 (2019: 8).
Global target and measures
We report transparently and comprehensively on water. For instance,
we again provided detailed answers to the 2020 water survey from
the nonprofit organization CDP. In the final assessment, BASF again
achieved the top grade of A and thus Leadership status. CDP eval-
uates how transparently companies report on their water
management activities and how they reduce risks such as water
scarcity. The assessment also considers the extent to which product
developments - including at the customers of the companies being
evaluated can contribute to sustainable water management.
For more information on the CDP water survey, see basf.com/en/cdp
We offer our customers solutions that help purify water and use it
more efficiently while minimizing pollution. These include high-
performance plastics to produce ultrafiltration membranes, seeds
with higher drought and heat tolerance, or water-saving thin-film
processes for metal pretreatment. Together with other companies
from along the value chain, we are also involved in global initiatives
such as the Alliance to End Plastic Waste (see page 138), the World
Plastics Council and Operation Clean Sweep to prevent plastics
from entering the environment, especially water bodies.
portation safety standards (see pages 123 and 129) aim to maintain
good water quality and minimize the risk of product spillages into
water bodies.
We advocate the responsible use of water as a resource along the
entire value chain. We audit supplier compliance with environmental
standards in our regular supplier assessments (see page 113). In
addition, we support a wide range of initiatives to promote sustain-
ability in the supply chain (see page 117). Our Responsible Care
Management System (see page 121) and global process and trans-
Sustainable water management has been a central element of our
strategy to use water responsibly for many years. We aim to intro-
duce sustainable water management at all relevant production sites.
These include our Verbund sites and sites in water stress areas.1
Our sustainable water management aims to protect water as a
resource, continuously improve water use efficiency, and consis-
tently reduce emissions. We consider the quantitative, qualitative
and social aspects of water use.
BASF is committed to the United Nations' Sustainable Development
Goals. These cover topics such as the responsible use and sustain-
able management of water (SDG 6). We have defined global stan-
dards and processes in our Responsible Care Management System.
■ Using water responsibly with sustainable water
management
Strategy
Water is of fundamental importance in chemical production.
It is used as a coolant, solvent and cleaning agent, to make
our products and transport our goods. We are committed to
its responsible use along the entire value chain and especially
in our production sites' water catchment areas. We have set
ourselves a global target for sustainable water management.
15.855
BASF
SUPPLIERS
[Water]
Water
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
139
About This Report
1 To Our Shareholders
2 Management's Report
CO2
Total
Methane pyrolysis
Sale of energy to third parties (Scope 1)e
About This Report
1 To Our Shareholders
2 Management's Report
Energy and climate protection
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
protection and have done so since since 2004. BASF achieved a
score of A in CDP's 2020 climate change questionnaire, again
attaining Leadership status. Companies on the Leadership level
are distinguished by factors such as the completeness and
transparency of their reporting. They also pursue comprehensive
approaches in managing the opportunities and risks associated with
climate change as well as strategies to achieve company-wide
emission reduction goals.
Climate protection is a shared global task. This is why we support
various international initiatives and are involved in partnerships. For
instance, we are committed to an ambitious climate policy as part of
the Business 20 (B20) - the central dialog platform between busi-
ness and politics in the G20 group of countries. In 2020, we helped
draft climate protection recommendations for the G20 Summit in
Saudi Arabia as a member of the B20's taskforce on Energy,
Sustainability & Climate. BASF also supports the recommendations
of the Task Force on Climate-related Financial Disclosures (TCFD). In
2020, we contributed to the TCFD report on climate-related scenario
analyses as a member of a TCFD advisory group. Since the 2019
reporting year, BASF's annual report has included an overview show-
CO2
ing the sections and subsections in which TCFD-relevant informa-
tion can be found (see page 19).
BASF Group's greenhouse gas emissions according to the Greenhouse Gas Protocola
Million metric tons of CO2 equivalents
BASF operations
Scope 1b
CO2 (carbon dioxide)
N2O (nitrous oxide)
CH4 (methane)
HFC (hydrofluorocarbons)
Scope 2d
Total
CO₂
Offsetting
Total after offsetting
4 Consolidated Financial Statements
3 Corporate Governance
For more information on climate protection, see basf.com/climate_protection
For more information on carbon management, see basf.com/en/carbon-management
0.032
The framework for the transformation
6
4
2
Internally generated 49%
-10 -8 -6 -4 -2
37.6 million MWh
Residual fuels
5.6 million MWh
0.8 million MWh
Coal
Heating oil
0.1 million MWh
31.1 million MWh
8
Natural gas
40.3 million
MWha
14.9%
Steam
2.1%
0.3%
82.7%
Electricity
14.7 million
MWh
Fossil and residual fuels used for own generation in power
plants of the BASF Group
Waste heat 45%
2018
baseline
2020
Total:
2019
10
a Conversion factor: 0.75 MWh per metric ton of steam
2018
0.577
Additional key indicators for energy and climate protection in BASF operations
Energy and climate protection
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
Specific greenhouse gas emissions in 2020 amounted to
0.639 metric tons of CO2 equivalents per metric ton of sales
product, an increase of 11.3% compared with the previous year
(2019: 0.574 metric tons of CO2 equivalents per metric ton of sales
product). This was mainly due to changes in BASF's portfolio from
the acquisition of the carbon-intensive polyamide business from
Solvay and the sale of the less carbon-intensive construction chemi-
cals business. In addition, some plants could not be run at optimal
capacity due to weaker demand as a consequence of the corona-
virus pandemic, which led to higher specific emissions. Since 1990,
we have been able to lower our overall greenhouse gas emissions
from BASF operations by 48.1% and even reduce specific emis-
sions by 72.1%.
132
2 The selection of relevant sites is determined by the amount of primary energy used and local energy prices; does not yet include the polyamide business acquired from Solvay.
1 Sales product volumes include sales between BASF Group companies; merchandise is not taken into account.
A global working group is responsible for steering the introduction of
certified energy management systems and providing ongoing imple-
mentation support. All energy efficiency measures are recorded in a
global database, analyzed and made available to BASF sites as best
practices. We are currently pursuing more than 200 technical and
organizational measures to reduce energy consumption and
increase competitiveness. Further sites across all regions were
Through the introduction and ongoing maintenance of certified
energy management systems, we want to identify and implement
further potential for improvement in energy efficiency. This not only
reduces greenhouse gas emissions and saves valuable energy
resources, but also increases our competitiveness.
We achieved our goal of introducing certified energy management
systems according to DIN EN ISO 50001 at all relevant production
sites2 by the end of 2020.
2020
0.023°
0.639
The transition toward a climate-friendly society remains a funda-
mental challenge of the 21st century. There are many ways in which
the chemical industry can be part of the solution. The political and
regulatory environment is also crucial to the development and indus-
trial application of completely new production processes. Demand
for green electricity will increase sharply with innovative, more
climate-friendly technologies. At the Ludwigshafen site in Germany
alone, we would need to roughly triple or quadruple our current
electricity use (2020: 6.0 TWh) to fully implement new, low-carbon
electricity-based production processes. As well as its availability, the
price of green power is also a critical success factor. High prices are
already hindering the more widespread adoption of green power
today and impact the economic feasibility of future, new production
processes. Sectors like the chemical industry, which compete in an
international market, cannot pass on the additional costs caused by
low-carbon technologies to their customers until a comparable
carbon pricing mechanism exists globally - or at least at G20 level.
Until then, governments must implement measures to ensure the
competitiveness of climate-friendly processes.
0.574
Specific greenhouse gas emissions from BASF operations
Metric tons of CO2 equivalents per metric ton of sales product¹
BASF Report 2020
2020
Purchased 6%
Internally generated 70%
a BASF reports separately on direct and indirect emissions from the purchase of energy. Scope 1 emissions encompass both direct emissions from production and generation of steam and electricity, as well as direct emissions
from the generation of steam and electricity for sale. Scope 2 emissions comprise indirect emissions from the purchase of energy for BASF's use.
n/a
0.004
0.024
22.660
20.856°
21.674
0.773
0.779c
0.869
21.887
b Emissions of N₂O, CH4 and HFC have been translated into CO₂ emissions using the Global Warming Potential, or GWP, factor. GWP factors are based on the Intergovernmental Panel on Climate Change (IPCC) 2007, errata
table 2012. HFC (hydrofluorocarbons) are calculated using the GWP factors of the individual components.
20.077°
0
0
0
21.887
20.077c
20.805
4.067
3.519
3.279
0.091
0.082
20.805
Steam supply
C The comparative figure for 2019 has been adjusted to reflect updated data.
Global target and measures
Purchased 30%
Electricity supply
Energy supply of the BASF Group 2020
%
Greenhouse gas emissions from BASF operations (excluding sale of
energy to third parties) compared with baseline 2018
to increase energy efficiency and optimize processes, for example,
to significantly reduce nitrous oxide emissions in Ludwigshafen,
Germany. In addition, we are switching energy supply agreements
to renewable energy sources, for example, in Freeport, Texas, where
Iwe have signed long-term supply agreements for wind power.
Emissions will also be reduced by the divestiture of BASF's global
pigments business in 2021.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Energy and climate protection
d Market-based approach. Under the location-based approach, Scope 2 emissions were 3.552 million metric tons of CO2 in 2019 and 3.362 million metric tons of CO2 in 2020.
e Includes sales to BASF Group companies; as a result, emissions reported under Scope 2 can be considered twice in some cases.
f Emissions are reported separately from Scope 1 and Scope 2 in accordance with the Greenhouse Gas Protocol.
To Our Shareholders
About This Report
131
BASF Report 2020
constant
(BASF operations excluding sale of energy to third parties, including offsetting)
Annual greenhouse gas emissions compared
with baseline 2018
CO2-neutral growth:
2030 target
Despite the global economic recovery and growing demand for
chemical products, CO2 emissions are expected to be at the prior-
year level in 2021. We will implement targeted measures to stabilize
emission levels. These include the implementation of further projects
ciency and optimize processes as well as lower production volumes
were more than offset by the integration of the polyamide business
acquired from Solvay in January 2020 and the fact that there were
fewer shutdowns of large-scale, emission-intensive plants.
We want to achieve CO2-neutral growth until 2030. In other words,
we aim to maintain total greenhouse gas emissions from our
production sites (excluding emissions from sale of energy to third
parties) and our energy purchases at the 2018 level (21.9 million
metric tons of CO2 equivalents) while increasing production. In 2020,
the emissions reported under this target amounted to 20.8 million
metric tons of CO2 equivalents, an increase of 3.5% compared with
the previous year (2019: 20.1 million metric tons of CO2 equivalents).
The decline in emissions due to measures to increase energy effi-
1
2019
2019
0.639
■ Calculation of product carbon footprints to increase
transparency for our customers
BASF has published a comprehensive corporate carbon footprint
every year since 2008. This reports on all emissions along the value
chain - from raw materials extraction to production and disposal. It
also shows, on the basis of selected climate protection products,
the emissions avoided through the use of these products.
The greenhouse gas emissions arising before and after BASF's
activities in the value chain (Scope 3 in accordance with the Green-
house Gas Protocol) amounted to around 92 million metric tons of
BASF Report 2020
133
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4
■ Customers' use of BASF climate protection products
avoids greenhouse gas emissions
Consolidated Financial Statements
Energy and climate protection
Greenhouse gas emissions along the BASF value chain in 2020a,b
Million metric tons of CO2 equivalents
52
Suppliers
Purchased products, services and
capital goods (C 1, 2, 3a)
Customers
Emissions from the use of
end products (C 11)
BASF
Production (including generation
of steam and electricity)
5 Overviews
■ Reporting on greenhouse gas emissions along the entire
value chain
Carbon footprint and climate protection products
We also rely on locally available sources to supply our sites with
power. We generally consider the use of renewable energies in our
decision-making processes, especially when purchasing electricity.
Our research also helps to increase the efficiency of technologies for
using renewable energy sources.
a Scope 1 and Scope 2 (market-based) according to the GHG Protocol, excluding emissions from the generation of steam and electricity for sale to third parties, including offsetting
b Sales product volumes include sales between BASF Group companies; merchandise is not taken into account.
c Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes
certified in accordance with ISO 50001 in 2020. These include four
sites in the United States, three sites in China, and one additional
site each in France and Chile. At the end of 2020, 81 sites were
certified worldwide, representing 91% of our primary energy
demand.
Certified energy management systems (ISO 50001) at BASF Group
sites worldwide, in terms of primary energy demanda
%
42.3
85.1
69.9
54.3
91.0
2016
2017
2018
2019
2020
a Relevant sites are selected based on the amount of primary energy used and local energy prices; does not
yet include the polyamide business acquired from Solvay.
Energy supply and efficiency
■ Internal supply and Verbund system as important
components of our energy efficiency strategy
60.586
626
To generate our own steam and power, we mainly use natural gas
(82.7%) and what are known as substitute fuels (14.9%). These are
residues from chemical production plants that can no longer be
reused. We cover more than 70% of the BASF Group's electricity
demand with gas and steam turbine plants in highly efficient com-
bined heat and power plants. Compared with separate methods of
generating steam and electricity, we saved 12.0 million MWh of
fossil fuels and avoided 2.4 million metric tons of carbon emissions
in 2020. In 2020, internally generated power in the BASF Group had
a carbon footprint of around 0.24 metric tons of CO2 per MWh of
electricity and was below the national grid factor at most BASF Group
locations. The figure for purchased electricity in 2020 was around
0.41 metric tons of CO2 per MWh (market-based approach). As part
of our carbon management (see page 135), we therefore initially aim
to reduce the carbon footprint of purchased electricity.
The Verbund system is an important component of our energy effi-
ciency strategy: Waste heat from one plant's production process is
used as energy in other plants. In this way, the Verbund saved us
around 18.7 million MWh in 2020, which translates to 3.8 million
metric tons less CO2 released into the environment. With combined
power and steam generation as well as our optimized Energy
Verbund, we were thus able to avoid a total of 6.2 million metric tons
of carbon emissions in 2020.
We further improved energy and resource consumption in produc-
tion with numerous projects around the world in 2020. In China, for
example, we reduced our steam demand by optimizing steam traps
at the Caojing site and installing a steam cooler at the Nanjing site.
In the United States, we saved electricity by replacing a cooling
tower at the Geismar site and modernizing a chilling unit in Freeport,
among other measures. Process improvements at many other sites
led to additional savings in steam, electricity and fuel.
21
Energy efficiency (kilograms of sales product per MWh)
4
Transport
6.2
million metric tons
BASF's Verbund concept also plays a key role in increasing
efficiency. It helps us to realize synergies across all segments and to
efficiently steer value chains. Intelligently linking production and
energy demand enables us to use fewer resources and reduce our
emissions. Together, combined power and steam generation and
our continuously enhanced Energy Verbund avoided a total of 6.2
million metric tons of carbon emissions in 2020 (see page 133).
Our carbon management aims to increase the share of renewables
in our energy supply. Nineteen sites in Europe and North America
already source partially or fully emission-free electricity from
suppliers.
Number of sites partially
or fully powered by emission-free
electricity in 2020
19
Wherever possible, we incorporate renewable energies when
constructing plants and modernizing or establishing new sites. For
example, we only used hydropower for the construction of our new
battery materials plant in Harjavalta, Finland, in 2020 (planned
startup: 2022). We plan to mainly use locally generated renewable
electricity in the operational phase as well. This will enable us to
offer cathode active materials with a lower carbon footprint. In
2020, we also started up photovoltaic plants with a nameplate
capacity of around 1,300 kWp (kilowatt peak), for example at the
Caojing and Pudong sites in China.
Developing climate-smart technologies
Most of our production processes and methods are already highly
optimized, making further improvements to existing plants an
increasingly difficult task. As a result, completely new technologies
are needed to reduce greenhouse gas emissions over the long term
and on a large scale. BASF researchers are working at full speed on
this in our Carbon Management R&D Program, which focuses on
the production of basic chemicals. These are the basis for many
Verbund and combined heat and power
generation in 2020
1 The goal includes other greenhouse gases according to the Greenhouse Gas Protocol, which are converted into CO2 equivalents.
135
value chains and account for around 70% of the chemical industry's Another example from our Carbon Management R&D Program,
greenhouse gas emissions in Europe.
0.027
by electrical heating concepts
for steam crackers
up to
90%
As part of this R&D program, we are developing an innovative,
climate-friendly production process for hydrogen (methane pyroly-
sis) together with partners from academia and industry in a project
sponsored by the German Federal Ministry of Education and
Research, to name one example. Hydrogen is used as a reactant in
many chemical processes, such as ammonia synthesis. However,
the processes currently used to produce hydrogen from methane,
such as steam reforming, are extremely CO2 emission-intensive. In
methane pyrolysis, by contrast, methane is split directly into hydro-
gen and carbon. The resulting solid carbon could be used in the
future to produce aluminum, for example. Methane pyrolysis requires
around 80% less electricity than the alternative method of producing
hydrogen using water electrolysis. If this energy comes from renew-
able sources, the process could be made carbon-free. Following
extensive groundwork, including research into the reaction kinetics
of the pyrolysis process and technical feasibility studies, we started
up a test facility for methane pyrolysis at the Ludwigshafen site in
Germany in 2020. It will provide insights into the heating concept, as
well as the use of new types of high-temperature materials.
Another focus area of the R&D program is alternative heating con-
cepts for our steam crackers. These large-scale industrial plants are
used in the chemical industry to split petroleum into olefins and aro-
matics. To do this, it needs to reach temperatures of 850°C and
higher. The cracker's furnaces are usually operated with natural gas.
An interdisciplinary team is working on developing a fundamentally
new furnace concept based on an electrical resistance heater (e-fur-
nace). If powered by renewable energy, this could avoid up to 90%
of CO2 emissions.
which has been marketed since mid-2019 in cooperation with
Linde, is a process known as dry reforming to produce syngas from
methane and CO2. Thanks to BASF's newly developed SYNSPIRE™
catalyst in combination with an innovative process technology from
Linde, less water vapor is required in syngas production and CO2 is
used in the process as a raw material. In this way, the DRYREF™M
technology improves plants' energy and carbon footprint.
BASF Report 2020
CO2 avoided by the
We aim to make our plants and processes even more efficient and
resource-saving. When investing in our sites, we draw on our exper-
tise and innovative technologies to optimize the use of raw materials
and in this way, reduce CO2 emissions. For example, our gas and
steam turbine power plant at the Schwarzheide site in Germany is
currently undergoing a €73 million modernization. Once it is started
up in 2022, it will produce 10% more electricity and the CO2 emis-
sions factor of the power generated will be around 10% lower
thanks to higher fuel efficiency.
Further improving process and energy efficiency
Transport of products,
employees' commuting and
business travel (C 4, 6, 7, 9)
Disposal
(baseline)
24
a According to Greenhouse Gas Protocol; Scope 1, 2 and 3; categories within Scope 3 are shown in parentheses. For more information on Scope 3 emissions reporting, see basf.com/corporate_carbon_footprint
b Emissions figures do not yet include the polyamide business acquired from Solvay.
6
Other
(C 3b, 3c, 5,
8, 13, 15)
In the future, we will calculate cradle-to-gate greenhouse gas emis-
sions for almost all of our products to increase carbon transparency
for our customers. We use an in-house digital solution to calculate
the product carbon footprint (PCF). The methodology follows
general standards for life cycle analysis such as ISO 14044 and
ISO 14067, as well as the Greenhouse Gas Protocol Product Stan-
dard. We used the new method to calculate PCFs for the first
products in 2020. We want to make the data for around 45,000
sales products available by the end of 2021. The transparency this
creates enables us to target our CO2 reduction measures to those
areas where our customers can later achieve the greatest value
added from lower carbon emissions in the value chain.
For more information on the sustainability analysis of our product portfolio, see page 45 onward
For more information on our emissions reporting, see basf.com/corporate_carbon_footprint
CO2 equivalents in 2020 (2019: 100 million metric tons of CO2
equivalents). In 2020, BASF implemented a new digital application
to calculate transport-related emissions, which evaluated around
68 billion metric ton kilometers for transport within BASF and to
BASF customers by distance and transportation mode.
Our climate protection products offer our customers solutions to
avoid greenhouse gas emissions over their entire life cycle com-
pared with reference products. The systematic analysis we conduct
on our portfolio - Sustainable Solution Steering (see page 45) - rates
the use of these Accelerator solutions as particularly good with
respect to climate protection and energy.
One example of Accelerator products are our lubricant additives,
which give hydraulic fluids long-term lubrication stability combined
with wear and corrosion protection. These can be used to design
high-quality products with a longer service life. Together with our
customer Fuchs Petrolub, we examined the environmental and
climate friendliness of different hydraulic fluids. A joint eco-efficiency
analysis analyzed three mineral oil-based fluids from Fuchs over
their entire life cycle, including over 8,000 hours of use in a crawler
excavator.
This showed that a standard hydraulic fluid has the lowest carbon
footprint during the production stage. BASF uses more energy to
produce the lubricant additives needed for high-performance
hydraulic fluids, which means that these have higher carbon emis-
sions. However, these products offer a significant advantage during
the use phase: Compared with a standard hydraulic fluid, these
reduce friction and increase pump efficiency, which significantly
reduces the excavator's fuel consumption. They save 9,600 liters of
diesel over 8,000 hours of crawler excavator operation. Viewed over
the entire life cycle, the high-performance hydraulic fluids therefore
have a much better carbon footprint than standard hydraulic fluids.
Overall, the reduction in greenhouse gases corresponds to around
30 metric tons of CO2 equivalents. In addition, high-performance
hydraulic fluids have a much longer service life, which also saves
fossil resources.
The findings of the study show that the advantages of high-perfor-
mance oils first become clear in a holistic cradle-to-grave assess-
ment that also considers the use phase. The product-related
greenhouse gases emitted from resource extraction to the produc-
tion of precursors and the BASF product (cradle to gate) are an
important part of this approach.
BASF Report 2020
134
Climate
protection with
carbon
management
Climate protection is firmly embedded in our
corporate purpose, "We create chemistry for a
sustainable future," and is a cornerstone of our
strategy. We are committed to the Paris Climate
Agreement and the goal of limiting global warming
to below 2 degrees Celsius. Our innovative climate
protection products such as insulation materials
for buildings or battery materials for electromobility
play a role here. We are also continually working to
reduce our own carbon emissions. We have
already almost halved our carbon emissions since
1990 through improvements to processes and
methods - while simultaneously doubling sales
product volumes.
Until 2030, we want to grow our production without adding
further CO2 emissions. Our carbon management bundles our
global activities to meet this climate protection target and
further reduce our greenhouse gas emissions over the long
term. We have adopted a three-pronged approach: We aim to Increasing use of renewable energy
increase production and process efficiency, purchase elec-
tricity from renewable sources, and develop completely new
low-emission technologies and processes. We want to use
these to significantly reduce our CO₂ emissions from 2030
onward.
That is why we will continue to invest in the creation and optimization
of Verbund structures and drive forward the consolidation of produc-
tion at highly efficient sites.
6
Specific greenhouse gas emissionsa (metric tons of CO2 equivalents per metric ton of sales product)
Primary energy demand (million MWh)
Incineration with energy
recovery, landfilling (C 12)
Potential CO2 avoided
598
540
58.520
0.574
60.256
CUSTOMERS
[Our employees make a significant contribution to BASF's
success. We want to attract and retain talented people for our
company and support them in their development. To do so, we
cultivate a working environment that inspires and connects
people. It is founded on inclusive leadership based on mutual
trust, respect and dedication to top performance.
110,302
SUPPLIERS
North America
16,948
Employees
5 Overviews
Consolidated Financial Statements
Employees around the world
Employee engagement and
leadership impact
on center stage
changing environment, demographic change and the digital work-
place. In everything we do, we are committed to complying with
internationally recognized labor and social standards. We want our
working conditions to be a motor for innovation, and one way of
achieving this is through inclusion of diversity. Lifelong learning and
individual employee development lay the foundation for this.
Compensation and benefits as well as offerings to balance personal
and professional life complete our attractive total offer package. We
track our employer rankings so that we can continue to attract
talented people to the company in the future. Our employees play
an important role here as ambassadors for BASF. ]
BASF Group employees by region
(Total: 110,302, of which 25.5% women, as of December 31, 2020)
BASF
(€ 15.4%)
Europe¹
68,849
(62.4%)
As of December 31, 2020, the number of employees decreased
to 110,302 employees compared with 117,628 employees as of
December 31, 2019. The decrease was due primarily to the sale
of the construction chemicals business, which affected around
7,500 employees. An offsetting factor was the acquisition of
Solvay's polyamide business due to which around 1,200 employees
joined the BASF Group including the employees of the Butachimie
SNC and Alsachimie S.A.S. joint operations, both in Chalampé,
France, which were counted on a pro rata basis. We employed
3,120 apprentices¹ (2019: 3,161). 2,128 employees were on
temporary contracts (of which 44.0% were women).
(=6.1%)
6,752
Africa,
Middle East
South America,
31.2%
BASF Report 2020
73.1%
26.9%
1 At BASF, the apprenticeship program trains students for technical, scientific and business vocations as well as for trade and craft professions.
Our employees are key to the successful implementation of BASF's
strategy. We are convinced of the value of excellent employees,
leaders and working conditions, and strive to give our employees
the tools and skills necessary to be able to offer our customers
products and services with an even greater level of differentiation
and customization. Our corporate strategy promotes a working
atmosphere based on mutual trust, in which employees are given
the space to optimally develop their individual talents and potential.
This positions us to meet the challenges of an increasingly rapidly
■ We are committed to valuing and treating people with
respect, and fostering an inspiring working environment
Strategy
75.6%
24.4%
4
Number of employees
3 Corporate Governance
About This Report
1 To Our Shareholders
2 Management's Report
Biodiversity
1 To Our Shareholders
About This Report
142
BASF Report 2020
We want to ensure that our products meet our customers' stan-
dards in quality and, through appropriate use, pose no risk to
humans, animals or the environment. Our commitment to the objec-
tives set forth by the Responsible Care® charter of the International
Council of Chemical Associations (ICCA) obligates us to continu-
ously minimize the negative effects of our products on the environ-
ment, health and safety and to optimize our products on an ongoing
basis. For example, we evaluate our products and solutions in crop
protection and seeds throughout the entire research, development
and registration process. After they have been approved for the
market, we continue assessing them regularly for potential risks and
impact to the ecosystems in which they are used. We have initiated
various projects and offer training to prevent inappropriate applica-
tion of our products (see page 126).
3 Corporate Governance
Our management of our product impact
Our responsibility to our sites and our production
In cooperation with partners, we are also developing innovative
solutions to reduce pressure for economic use of forests. For exam-
ple, the Nutrition & Health division and Isobionics® launched
Isobionics Santalol in 2020, which is a biotechnologically produced
fragrance and a convincing alternative to natural sandalwood oil.
This oil is extracted from the wood and roots of the sandalwood
tree, which is on the Red List of the International Union for Conser-
vation of Nature (IUCN) because it is highly endangered by overex-
ploitation. Our newly developed fragrance addresses customer
demand for reliability in the supply of raw materials while conserving
natural resources.
BASF procures a variety of renewable raw materials. Particularly
palm and palm kernel oil, soy oil and its derivatives as well as ligno-
sulphonates, which are extracted from wood, have been determined
to have a high deforestation risk. Based on purchasing volume,
palm oil products are the most relevant renewable raw materials for
BASF. To achieve greater sustainability in this supply chain, a
detailed Palm Commitment went into effect in 2011 and was
extended in 2015. It was put into practice through our Palm Sourc-
ing Policy. Furthermore, we are involved in a range of projects in
other supply chains promoting responsible use of natural resources
and biodiversity (see page 118). BASF was rated for the first time
in 2020 in the nonprofit organization CDP's forest assessment
(grade: A-). It evaluates companies' management of environmental
risks and opportunities. It is based on detailed insights into our palm
value chain and the impact of our activities on ecosystems and
habitats.
renewable raw materials. Our aim is to prevent these areas from
being developed for intensive economic use. Furthermore, we want
any land use development activity to respect the rights of indigenous
and local communities. We are working with partners to increase
supply chain sustainability, for instance with the Roundtable on
Sustainable Palm Oil (RSPO) in our supply chain for palm-based raw
materials (see page 117).
We published our Position on Forest Protection in June 2020. In it,
we commit to the preservation of areas of High Conservation Value,
High Carbon Stock forest areas and peatlands when procuring
The business activities of our raw materials suppliers often involve
land use and the associated impact on biodiversity, whether it is in
natural gas and crude oil production, mineral extraction or cultivation
of crops such as oil palms and castor-oil plants. Our expectations
with regard to environmental, labor and social standards in the
supply chain are laid down in the Supplier Code of Conduct (see
page 113).
Preservation of biodiversity is also taken into consideration in the
management of our sites. We respect natural resources at all our
production sites and have committed to the following measures: We
operate our facilities in a responsible manner and minimize negative
effects on the environment, including forests, by keeping air, water
and soil emissions as low as possible and reducing and avoiding
waste (see page 137). Moreover, we conduct systematic assess-
ments of sustainability aspects when making decisions about
investments in the construction of new sites or expansion of existing
ones, including the potential impact on forests and biodiversity. Our
water management (see page 139) and our involvement in organiza-
tions such as the Alliance to End Plastic Waste (AEPW) (see
page 138) contribute to the preservation of biodiversity in bodies of
water.
4 Consolidated Financial Statements
5 Overviews
All types of land development, such as agriculture and forestry, play
a role in changing biodiversity. Activities such as tillage, drainage,
fertilization and the use of crop protection products can affect flora
and fauna by influencing their food sources.
Asia
Pacific
143
BASF Report 2020
With this project, BASF is showing in Germany that striking a
balance between productive agriculture and biodiversity is
possible. In a pilot project with a local bakery chain and a mill,
four farmers from the BASF FarmNetwork Sustainability have
created "lark windows" on a total of 40 hectares of winter wheat
fields. These "lark windows" are open spaces in fields with an
area of about 20 m², which skylarks use as "runways" when
they brood in the fields and search for food. The harvested
wheat is processed into "lark's bread" and sold at a markup
that compensates farmers for their efforts and yield loss as well
as supports further biodiversity measures.
The "Lark's Bread" project to foster
biodiversity
For more information on our position on forest protection, see basf.com/forestprotection
For more information on our commitment to biodiversity, see basf.com/biodiversity
For more information on product stewardship, see page 126
For more information on our responsible management of resources, see page 116
The Mata VivaⓇ Initiative in Brazil is a collaboration between BASF
and the Fundação Espaço ECO® organization as well as partners
from many facets of society. It was established in 1984 to preserve
water quality and soil and create a natural habitat for indigenous
animal and plant species. To date, a total of 730 hectares of land
have been reforested and 1.2 million seedlings have been planted.
A program started in 2020 restores forests in the Mata do Barreiro
Rico green reserve. The reserve is one of the last sanctuaries of the
southern muriqui monkey (Brachyteles arachnoides), which is clas-
sified by the IUCN as critically endangered.
The BASF Farm Network Sustainability was established in 2013 with
the goal of developing feasible measures to increase biodiversity
across intensively farmed land. The network is composed of farms
in Europe, including in Germany, the United Kingdom, France, Italy
and Poland. Independent external experts on nature conservation
and environmental protection assess the development of biodiver-
Isity at some of these farms.
to make an impact on the ground. To promote biodiversity, we are
pursuing various initiatives such as the BASF Farm Network Sustain-
ability, the Mata VivaⓇ Initiative and the "Lark's Bread" project (see
box on the right).
Engaging in an ongoing dialog with a variety of stakeholders is of
utmost importance to BASF. For this reason, we will continue to
pursue an exchange with partners in the value chain, in government
and in civil society to preserve the natural habitats of plants and wild
animals and thus play our part in protecting biodiversity. We work
with a number of organizations including the Roundtable on
Sustainable Palm Oil (RSPO), the Sustainable Palm Oil Forum, the
Brazilian Coalition on Climate, Forests and Agriculture and the High
Carbon Stock Approach Steering Group. We seek to collaborate
with additional relevant stakeholders and organizations to raise and
increase awareness and drive the necessary market transformation
Our biodiversity initiatives
We strengthened our commitment to sustainable agriculture in
2020. We focus on four areas to help farmers to find the right
balance: climate-smart farming, sustainable solutions, digital farm-
ing and smart stewardship (see page 102). In this context, we work
with farmers to create balanced agricultural systems which enable
productive and efficient farming of high-quality food products and at
the same time promote biodiversity in the field. For example, we
advise them on soil cultivation and look for suitable ways to improve
biodiversity in farmlands. Our many years of experience in sustain-
ability measurement and evaluation in agriculture are particularly
useful here. Our AgBalance® method and the biodiversity calculator,
which has been available since 2020, enable a scientifically sound
assessment of the impact of agricultural practices on biodiversity.
Based on these assessments, we issue recommendations for mea-
sures such as planting flower strips or establishing nesting places to
benefit pollinators, like wild bees, and farmland birds. Our modern
seed solutions also enable better yield on existing farmlands and
thus help protect natural habitats.
2 Management's Report
Employees
Our responsibility to our supply chains
17,753
68.8%
21,630
25.5%
43,322
30.0%
37,715
Women
Men
(Total: 110,302, of which 25.5% women, as of December 31, 2020)
BASF Group employee age structure
Diversity also relates to the company's demographic profile, which
varies widely by region within the BASF Group. Our aim is to create
a suitable framework to help maintain the employability of our per-
sonnel at all stages of life and ensure the availability of qualified
employees over the long term.
BASF is one of approximately 150 companies that support the
United Nations Global LGBTI (lesbian, gay, bi, trans and intersex)
Standards of Conduct for business and has done so since 2018.
The U.N. recommendations show the many opportunities compa-
nies have to contribute to positive social change. As part of pride
month, employees promoted openness, acceptance and tolerance
with campaigns at various sites around the world.
In North America, conversational formats on the inclusion of diversity
were developed for employees and leaders. These led to the
creation of further action areas, such as promoting talent and
training on intercultural communication and leadership, with the aim
of further increasing the inclusion of diversity. BASF also took a
stand against racism with various internal and external activities in
2020.
Integrating different perspectives is very important to BASF. There
are a large number of Employee Resource Groups around the world
dedicated to different aspects of diversity.
Our leaders play an important role in its implementation. We support
them with various, flexible offerings. For instance, we have provided
a toolbox with a wide range of content to enable a change of per-
spective and on promoting diversity and inclusion. A new podcast
series from leaders shows the importance of appreciative, fair and
inclusive leadership.
Promoting and valuing diversity across all hierarchical levels is an
integral part of our strategy and is also embedded in our corporate
values. BASF strives to foster a working environment based on
mutual respect, trust and appreciation. This is enshrined in our
global Competency Model, which provides a framework for our
employees and leaders. The inclusion of diversity is anchored in this
model as one of the behaviors expected of employees and leaders.
17.6%
70.0%
7,635
82.4%
About This Report
146
BASF Report 2020
We have developed a global dashboard to permanently monitor our
progress toward this target.
30%
Proportion of women in
leadership positions with
disciplinary responsibility
2030 target
The global character of our markets translates into different customer
requirements. We want to reflect this diversity among our employees,
too, because it enables them to better meet our customers' needs.
For us, diversity means, among other things, having people from
different backgrounds working at our company who can draw on
their individual perspectives and skills to grow our business. By
valuing and promoting employee diversity, we boost our teams'
performance and power of innovation, and increase creativity, moti-
vation and employees' identification with the company.
After achieving our original target for women in leadership positions
ahead of schedule, BASF set a new, more ambitious target in 2020
to further strengthen diversity. By 2030, we aim to increase the
proportion of women in leadership positions to 30%. We have made
important progress toward this goal. In the BASF Group, the global
proportion of female leaders with disciplinary responsibility was
24.3% at the end of 2020 (2019: 23.0%). We intend to employ
various measures to reach our ambitious target.
74.5%
Up to and
including 25 years
74.6%
55 years and up
40-54 years
26-39 years
25.4%
We also promote diversity in leadership development. Since 2015,
BASF has set itself global quantitative goals for increasing the
percentage of women in leadership positions.
■ Fostering diversity is part of our company culture
■ Progress made in increasing the proportion of women in
leadership positions
[Inclusion of diversity]
To optimally support our leaders - including during the challenging
times of the coronavirus pandemic - existing leadership develop-
ment tools were converted to virtual formats and our internal toolbox
was expanded to include new elements such as a CORE leadership
podcast or a website with information on how to handle challenges
during the pandemic.
Our aim is to keep this score above 80%. We support our leaders
with a range of follow-up measures to decentrally address individual
action areas and in this way, help to further strengthen employee
engagement together with their employees.
The 2020 survey revealed an engagement index of 82% (2019:
79%). This result reinforces our existing approach taken by our
corporate strategy, even in a difficult environment. It also shows that
we can rely on our engaged employees, even in a challenging year
dominated by the coronavirus pandemic.
BASF can rely on the engagement of its employees. Employee
engagement is shown by, for example, a passion for the job, a
dedication to top performance and a commitment to BASF. Global
employee surveys and pulse checks are an established feedback
tool in the BASF Group, and are used to actively involve employees
in shaping their working environment. The results are communicated
to employees, the Board of Executive Directors, the Supervisory
Board and stakeholders. We have performed regular global
employee surveys since 2008. We aim to keep the employee
engagement determined by these surveys at a high level and
increase it even further as far as possible. As part of the BASF strat-
egy, we therefore set ourselves the following goal in 2018: More
than 80% of our employees feel that at BASF, they can thrive and
perform at their best. We regularly calculate the employee engage-
ment level as an index score based on five questions on set topics
in our employee surveys. Overall, more than 72,000 employees
worldwide participated in this year's survey, representing 66% of
survey recipients.1
■ Own employee engagement target met
■ Engagement index of 82%
[Employee engagement]
5 Overviews
4 Consolidated Financial Statements
What we expect from our leaders]
3 Corporate Governance
1 To Our Shareholders
About This Report
144
51,961 (47.1%) 24.0% * 76.0%
34,484 (31.3%) 21.7% 1 78.3%
1 Of which Germany
Of which BASF SE
73.7%
26.3%
2 Management's Report
Employees
(16.1%)
■ Leaders as role models
Our leaders and their teams should make a sustainable contribution
to BASF's success. This is why we promote high-quality leadership
and measure its impact. We understand impactful leadership as
leaders that serve as role models by having a positive influence on
the engagement and development of their employees, and develop-
ing and implementing business strategies in line with our corporate
values. These expectations are part of the standard global nomina-
tion criteria for leadership positions. Our leadership culture is based
on BASF's corporate values: creative, open, responsible and entre-
preneurial - CORE. Our specific expectations of leaders' conduct
are derived from these: the CORE Leadership Values (see box on
the right).
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Employees
1 To Our Shareholders
About This Report
■ CORE Leadership Values as the basis for our leadership
culture
145
1 Scope of employees surveyed goes beyond the scope of consolidation presented on page 6. However, there are exceptions for companies that represent joint ventures and joint operations, as well as companies held for sale.
selves and their own skills. This enables them to drive forward
change together with their teams.
Regular training and company-wide dialog on best practices in
implementing the CORE Leadership Values in all relevant
processes across the company - such as the recruitment and
development of talented employees - are important tools to
ensure a consistent global leadership culture.
Excellent leadership is crucial to our customer focus, growth,
value creation, employee performance, sustainable goals and
new ways of working. The expectations surrounding specific
leadership behaviors are aligned with BASF's strategic goals
and reflect our company's leadership vision.
The CORE Leadership Values serve as the guiding principles
for all leaders and set out BASF's expectations of leadership
behavior. We have derived specific descriptions of desired
leadership skills from each individual CORE corporate value.
CORE Leadership Values
We offer our leaders a wide variety of learning and development
opportunities for each phase of their career, as well as various
formats that enable them to learn from one another and external
experts. Global, regional and local offerings are optimally
coordinated. We aim to develop leaders who lead their teams with
optimism, empathy and trust, and in this way, create a competitive
advantage for BASF. Regular feedback plays an important role in the
development of leaders. This is why we implemented the compre-
hensive FEEDback&forward program for all leaders Group-wide in
2020, in which employees provide regular feedback on their
managers' leadership skills. The questionnaire focuses on behaviors
like empathy or the ability to make difficult decisions and approach
change positively. Employees can also report back to their leaders
which leadership behaviors they want in the future. In this way,
FEEDback&forward promotes regular and open dialog between
employees and leaders, and encourages them to reflect on them-
BASF Report 2020
Thanks to responsible procurement practices, the efficient use of
raw materials, our product solutions and involvement in numerous
initiatives, our business conduct is consistent with the United
Nations' Sustainable Development Goals and we reduce our nega-
tive impact on biodiversity. It is currently extremely difficult to mea-
sure impacts on biodiversity and thus BASF's impacts in full. At the
same time, we help to measure significant impacts on land use in
individual steps of the value chain, for example with our Value to
Society method. We also initiated a pilot project in 2020 to improve
methodological measurement of the impacts of individual product
applications on biodiversity.
To combat the shortage of skilled workers in production and
technical areas, due among other factors to demographic-related
declines in Ludwigshafen, Germany, we have strengthened our
social media presence, for example, to alert qualified specialists to
new career prospects at BASF.
CUSTOMERS
For more information, see basf.com/apprenticeship
As of December 31, 2020, the BASF Group was training 3,120 peo-
ple in 15 countries and around 50 occupations. We spent a total of
around €113 million on vocational training in 2020.
31.0
6,340
38.1
544
South America, Africa, Middle East
Total
28.1
1,234
Asia Pacific
33.0
1,399
North America
30.0
December 31, 2020 Of which women (%)
3,163
[Learning and development ]
Europe
■ Lifelong learning concept
Learning and development are essential success factors for a strong
company culture. The skills and competencies of our employees are
critical for profitable growth and lasting success. For this reason, we
want to further modernize our learning culture and step up our
efforts to promote lifelong, self-directed learning. Employee devel-
opment at BASF is guided by the belief that talent is in everyone.
This means that development opportunities and support are open to
all employees. In our understanding, there is more to development
than a promotion or a job change - it encompasses the develop-
ment of personal experience and abilities.
Our approach is to reduce wastewater volumes and contaminant
loads at the source in our production processes, and to reuse
wastewater and material flows internally as far as possible. To treat
wastewater, we use both central measures in wastewater treatment
plants and the selective pretreatment of individual wastewater
streams before these are sent to the wastewater treatment plant.
Suitable methods are used, depending on the type and degree of
contamination - including biological processes, chemical oxidation,
membrane technologies, precipitation or adsorption.
Emissions of nitrogen to water amounted to 2,900 metric tons in
2020 (2019: 3,000). Around 11,500 metric tons of organic
substances were emitted in wastewater (2019: 12,100). Our waste-
water contained 22 metric tons of heavy metals (2019: 25).
Phosphorus emissions amounted to 270 metric tons (2019: 260).
Water
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
In addition, more and more academies in the divisions and service
units, which teach specific professional content, offer virtual training.
We have offered virtual presence training since 2018, which gives all
employees the opportunity to attend professional development
courses via digital communication channels such as virtual meetings.
To harness the opportunities of the digital transformation for BASF,
the #liveitleadit initiative for leaders focused on agility in 2020. Over
3,000 participants discussed methods, best practices and insights
into agile working and digital leadership in monthly digital events.
We enable our employees to take responsibility for their own
professional development within the company with digital and novel
offerings. To support multidisciplinary teams in the development
of products, services or business models, workshops on design
thinking empower participants to find creative and innovative solu-
tions to complex problems. This fosters an agile learning and work-
ing culture, which will ultimately also help us to master the digital
transformation.
Digital learning formats play an important role in our development
offerings. Even before the coronavirus pandemic, training for leaders
and employees was updated to meet the challenges of the digital
transformation and modern working life with appropriate learning
formats and content. For example, the Digitalization & Me platform
was established as a central resource where employees and leaders
can find a wide range of online training, learning paths on LinkedIn
Learning, or virtual continuous professional development events.
Both target groups can also hold joint workshops in an avatar-based
3D working and learning environment.
follow the "70-20-10" philosophy: We apply the elements "learning [Compensation and benefits ]
from experience" (70%), “learning from others” (20%) and "learning
through courses and media" (10%). Our learning and development
offerings cover a range of learning goals: starting a career, expand-
ing knowledge, personal growth and leadership development.
In regular development meetings, which are held as part of our
annual employee dialogs, employees outline ideas for their individual
development together with their leaders and determine specific
measures for further training and development, which focus on
personal and professional competencies. Our learning activities
■ Focus on virtual learning and digitalization
In order to avoid unanticipated emissions and the pollution of sur-
face or groundwater, we have water protection concepts for our
production sites in place. This is mandatory for all production plants
as part of our Responsible Care Management System. The waste-
water protection plans involve evaluating wastewater in terms of risk
and drawing up suitable monitoring approaches. We use audits to
check that these measures are being implemented and complied
with.
BASF Group new hires in 2020
4 Consolidated Financial Statements
a Employees with disciplinary leadership responsibilities
b Specialists without disciplinary leadership responsibilities
For more information on health protection, see page 124
Of which women (%)
24.3
For more information on diversity in the Board of Executive Directors and the Supervisory Board,
see page 169 onward
For more information, see basf.com/diversity
31.8
Competition for talent ]
■ Positioning as an attractive employer
■ Addressing specific target groups, including during the
coronavirus pandemic
Attracting and retaining the best employees is crucial to our
success. Having an attractive and compelling total offer package for
employees is becoming increasingly important given the strong
global competition for the best qualified employees and leaders.
This is why we are constantly working on measures to increase
BASF's appeal in the global labor markets. Target group-specific
campaigns focus on sustainability, digital ways of working and inno-
vation for the future - reflecting our strategic action areas and key
labor market trends.
We are increasingly using digital platforms such as our country-
specific career websites as well as global and regional social
networks to reach potential candidates. This enables us to appropri-
ately address different target groups.
In light of the coronavirus pandemic, we used digital solutions for
our talent search activities in 2020. For instance, in order to still be
present at career fairs, we participated virtually. As a result, we were
able to continue to attract and recruit talented employees. We also
offered virtual tours of the Ludwigshafen site for universities in
Germany. In addition, we consistently take part in specific career
events to directly reach and attract talented female recruits in the
natural sciences.
The talent program for external students and former interns was
redesigned and expanded to include targeted retention measures.
For example, special online events on different career opportunities
and an exclusive journal help to maintain contact with talented
students who impressed us with their outstanding personal qualities
and skills. Mentors at BASF also keep in contact until they have
completed their degree and can be recruited.
8,881
38,484
5 Overviews
December 31, 2020
(Senior) executivesa
3 Corporate Governance
2 Management's Report
Employees
1 To Our Shareholders
About This Report
147
BASF Report 2020
The BASF Group hired 6,340 new employees in 2020. The percent-
age of employees who resigned during their first three years of
employment the early turnover rate - was 1.0% worldwide in
2020. This turnover rate was 0.7% in Europe, 1.5% in North
America, 1.8% in Asia Pacific and 1.8% in South America, Africa,
Middle East. Our early turnover rate is therefore at a desirable low
level.
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Another step toward digitalization is the jobsharing app introduced
in 2020, which leaders and employees that wish to share a position
can use to network with each other. Job sharing is a future-ready
working model that offers benefits for both sides and makes it easier
for employees to balance their personal and professional lives.
BASF also renewed its commitment to promoting gender equality
by endorsing the United Nations' Women's Empowerment Princi-
ples (WEPs) in 2020. The WEPs are seven principles providing
guidance to business on how to promote gender equality and
women's empowerment in the workplace, the labor market and the
community.
In the global Business for Inclusive Growth (B4IG) initiative, which we
joined in 2019, we campaign together with other companies along-
side the G7 and the OECD for inclusive growth, greater gender
equality, and the promotion of diversity and inclusion in business.
We are also involved in other external initiatives to promote inclusion
of diversity at work, such as the Chefsache initiative and the
European Round Table.
Leaders and professionals in the BASF Group
Professionalsb
For more information, see basf.com/water
BASF Report 2020
141
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Employees
1 To Our Shareholders
About This Report
149
BASF Report 2020
1 The term "senior executives" refers to leadership levels 1 to 4, whereby level 1 denotes the Board of Executive Directors. In addition, individual employees can attain senior executive status by virtue of special expertise.
Our flexible tools proved extremely helpful during the coronavirus
pandemic. They help our employees to master the increased chal-
lenges around work and personal life during the pandemic. One of
the tools that increases flexibility is moving larger employee events
that were previously held in-person to virtual formats and recording
these. We have developed a global policy and framework for the
future of work to integrate the positive experiences from the surge in
remote working into our working culture. The aim is to further pro-
mote and facilitate flexible working models for interested employees.
Our identity as an employer includes our belief in supporting our
employees in balancing their personal and professional lives. We
want to strengthen their identification with the company and our
position in the global competition for qualified personnel. To achieve
this, we have a wide range of offerings aimed at employees in differ-
ent phases of life that accommodate the growing demand for flexi-
bility in when and where they work. BASF helps employees to adapt
working hours and location to their personal circumstances with a
wide range of established options, including flexible working hours,
part-time employment and remote working. We are constantly
working to expand these options and increasingly support the effec-
tive use of digital solutions here.
■ Wide range of offerings for different phases of life
■ Flexible working models support employees during the
coronavirus pandemic
[Balancing personal and professional life]
-3.2%
10,924
Regional initiatives specifically address the needs of our employees
at a local level. For example, our startup 1000 Satelites continued
to expand the number of flexible co-working spaces in the Rhine-
Neckar region in Germany and tested these in pilot projects.
10,576
Our Work-Life Management employee center in Ludwigshafen,
Germany, (LuMit) offers a number of services under one roof: child-
care, fitness and health, and social counseling and coaching offered
by BASF Stiftung. We also provide employee assistance programs
at other sites in Germany and around the world to help employees
overcome difficult life situations and maintain and restore their
employability.
Trust-based cooperation with employee representatives is an
important component of our corporate culture. Our open and ongo-
ing dialog lays the foundation for balancing the interests of the
company and its employees, even in challenging situations. In the
case of organizational changes or if restructuring leads to staff
downsizing, for example, we involve employee representatives to
develop socially responsible implementation measures at an early
stage. In 2020, this happened in connection with the transformation
of the newly created Global Business Services unit, for example. Our
actions are aligned with the respective legal regulations and the
agreements reached, as well as operational considerations. During
the coronavirus pandemic, we developed solutions together with
employee representatives to continue our trust-based cooperation,
despite the necessary pandemic-related restrictions. This enabled
us to sign a new site agreement with the Works Council of BASF SE
for the Ludwigshafen site in Germany in May 2020, which contains
a clause that excludes forced redundancies until 2025.
We once again achieved high scores in a number of employer rank-
ings in 2020. For example, in a study conducted by Universum,
engineering and IT students ranked BASF as the 51st most attrac-
tive employer in the world (2019: 47th). In North America, DiversityInc
named BASF as one of the top 50 companies for diversity in recruit-
ing for the eighth consecutive year. In Asia, Top Employer recognized
BASF China as one of the best employers for the eleventh time in
succession. In South America, BASF was recognized by Valor
Econômico newspaper as one of the employers with the best
personnel management in Brazil.
SUPPLIERS
[Biodiversity]
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Biodiversity
150
BASF Report 2020
It forms the basis for our global management process: We regularly
monitor changes to the national law of all the countries in which
BASF operates and evaluate our adherence to international labor
and social standards. If the national law contains no or lower
requirements, action plans are drawn up to successively close these
gaps in a reasonable time frame. If conflicts with national law or
practices arise, we strive to act in accordance with our values and
internationally recognized principles without violating the law of the
country concerned. As part of the management process, we regu-
larly follow up on and document the results of the comparison
between national law and our guideline, as well as measures to
implement the guideline. This is our central due diligence system.
We act responsibly toward our employees. Part of this is our volun-
tary commitment to respecting international labor and social stan-
dards, which we have embedded in our global Code of Conduct.
This encompasses internationally recognized labor norms as stipu-
lated in the United Nations' Universal Declaration of Human Rights,
the OECD Guidelines for Multinational Enterprises, and the Tripartite
Declaration of Principles Concerning Multinational Enterprises and
Social Policy of the International Labour Organization (ILO). BASF is
committed to complying with these standards worldwide. We mainly
approach our adherence to international labor and social standards
using three elements: the Compliance Program (including external
compliance hotlines), close dialog with our stakeholders (such as
with employee representatives or international organizations) and
the BASF guideline on compliance with international labor norms,
which applies Group-wide. This guideline makes concrete what the
human rights issues and international labor standards in our global
Code of Conduct mean as these relate to our employees.
■ Alignment with U.N. Guiding Principles on Business and
Human Rights
[International labor and social standards]
By focusing our discussions on the local and regional situations, we
aim to find tailored solutions to the different challenges and legal
considerations for each site. The BASF Europa Betriebsrat
(European Works Council) addresses cross-border matters in
Europe. In South America, we foster dialog with the Diálogo Social.
For more information, see basf.com/employeerepresentation
[Dialog with employee representatives]
32.9%
554
736
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Employees
1 To Our Shareholders
About This Report
148
BASF Report 2020
1 In calculating ROCE, adjustments are made for negative and positive special items resulting from acquisitions and divestitures (for example, integration costs in connection with acquisitions and gains or losses from the divestiture of businesses) when these exceed a corridor of +/-1% of the average cost of capital basis. An adjustment of the
ROCE (in the first 12 months after closing) therefore only occurs in cases of exceptionally high special items resulting from acquisitions and divestitures.
We want our employees to contribute to the company's long-term
success. This is why the compensation granted to the vast majority
of our employees includes variable compensation components,
with which they participate in the success of the BASF Group as
a whole and are recognized for their individual performance. The
same principles basically apply for all employees worldwide. The
amount of the variable component is determined by economic
success as well as the employee's individual performance. We use
the BASF Group's return on capital employed (ROCE) to measure
economic success for the purposes of variable compensation. This
links variable compensation to our ROCE target.¹ Individual perfor-
mance is assessed as part of a globally consistent performance
manage-ment process. In numerous Group companies, our "plus"
share program ensures employees' long-term participation in the
company's success through incentive shares. In 2020, for example,
around 27,600 employees worldwide (2019: around 25,400) partici-
pated in the "plus" share program.
We want to attract engaged and qualified employees, retain them
and motivate them to achieve top performance with an attractive
package including market-oriented compensation, individual devel-
opment opportunities and a good working environment so that they
contribute to the company's long-term success. Our employees'
compensation is based on global compensation principles accord-
ing to position, market and performance. As a rule, compensation
comprises fixed and variable components as well as benefits that
often exceed legal requirements. In many countries, these benefits
include company pension benefits, supplementary health insurance
and share programs. We regularly review our compensation systems
at local and regional level.
■ ROCE determines variable compensation
■ Compensation based on employee's position and
individual performance as well as company's success
1 To Our Shareholders
About This Report
5 Overviews
BASF offers senior executives' the opportunity to participate in a
share price-based compensation program, the long-term incentive
(LTI) program. The BASF Group's share price-based compensation
program (BASF Option Program, BOP), which has existed since
1999, was offered for the last time in 2020. Around 87% of the
people eligible to participate in the program around the world did so,
investing up to 30% of their actual variable compensation (for the
2019 business year) in BASF shares. From 2020 onward, the
previous LTI program for senior executives will be replaced by a new
LTI (Strive!) in the form of a performance share plan. The new, four-
year program takes into account the development of the total
shareholder return and incentivizes the achievement of strategic
growth, profitability and sustainability targets. To take part in this
new LTI, participants must hold BASF shares, the amount of which
is based on their individual fixed compensation. In 2020, around
94% of the people eligible to participate in the new LTI around the
world did so, investing between 30% and 70% of their fixed annual
compensation in BASF shares.
For more information, see the Notes to the Consolidated Financial Statements from page 307 onward
Personnel expenses
Total personnel expenses
Pension expenses
1,545
1,424
Social security contributions and assistance.
expenses
-4.6%
8,825
Biodiversity describes the variety of life forms on Earth.
Animals and plants fulfill a variety of functions and guarantee
the ability of their ecosystem to withstand alterations such as
climate change. As a chemical company, we depend on eco-
system services like the availability of renewable resources
and air, water and soil quality, while also influencing them.
Protecting biodiversity is therefore a key element of our
commitment to sustainability.
8,416
+/-
2019
2020
-7.8%
Million €
BASF Group personnel expenses
The BASF Group's expenses for wages and salaries, social security
contributions and pensions and assistance in 2020 totaled
€10,576 million (2019: €10,924 million). This amount included
proportional personnel expenses for 2020 from the disposal group
for the construction chemicals business in the amount of €291 mil-
lion. In 2019, personnel expenses from the disposal groups for the
construction chemicals business and proportionally for the oil and
gas business totaled €557 million. The decrease in personnel
expenses was primarily due to lower bonus provisions and the lower
average number of employees which resulted, in particular, from the
divestiture of the construction chemicals business. A higher wage
and salary level as well as higher pension expenses because of
increased service costs had an offsetting effect.
Wages and salaries
BASF
2 Management's Report
Employees
1 To Our Shareholders
Opportunities and Risks
About This Report
1
To Our Shareholders
2 Management's Report
Employees
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
We monitor our voluntary commitment to international labor and
social standards as part of our management process. As before,
individual elements of the guideline are also reviewed as part of
internal control processes such as Responsible Care audits at
BASF Group companies. In addition to these quality assurance
measures, compliance with international labor and social stan-
dards is an integral part of the standard questionnaire in the com-
pliance management audit conducted by BASF's Corporate Audit
department.
For more information on global standards, see page 31
For more information on our responsibility for human rights, see page 111
For more information on compliance, see page 177 onward
For more information on labor and social standards, see basf.com/labor_social_standards
151
About This Report
1
To Our Shareholders
2 Management's Report
Economic Environment in 2021
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
The goal of BASF's risk management is to identify and
evaluate opportunities and risks as early as possible and to
take appropriate measures in order to seize opportunities
and limit risks. The aim is to avoid risks that pose a threat to
BASF's continued existence and to make improved mana-
gerial decisions to create value. We define opportunities
as potential successes that exceed our defined goals. We
understand risk to be any event that can negatively impact
the achievement of our short-term operational or long-term
strategic goals.
Opportunities
Potential successes that exceed our
defined goals
Risks
In order to mitigate the risks to the financial reporting processes
listed in our central risk catalog, critical processes and control
activities are documented.
Assessment of control activities
After documentation, a review is performed to verify whether the
described controls are capable of adequately covering the risks. In
the subsequent test phase, samples are taken to test whether, in
practice, the controls were executed as described and effective.
Monitoring of control weaknesses
The managers responsible receive reports on any control weaknesses
identified and their resolution, and an interdisciplinary committee
BASF Report 2020
160
Procurement
Company-specific opportunities and risks
Regulation/policy
Competition
Forecast
Margins
Possible variations related to:
Potential short-term effects on EBIT of key opportunity and risk factors
subsequent to measures takena
Ultimately, however, residual risks (net risks) remain in all entrepre-
neurial activities that cannot be ruled out, even by comprehensive
risk management.
According to our assessment, there continue to be no significant
individual risks that pose a threat to the continued existence of the
BASF Group. The same applies to the sum of individual risks, even
in the case of a global economic crisis, such as the intensification of
the coronavirus crisis.
For 2021, we anticipate a considerable global economic recovery
after the downturn in the previous year due to the coronavirus
pandemic. General economic uncertainty will nevertheless remain
high until widespread immunization of the population has been
achieved. Specifically, production stoppages due to official orders or
high infection rates can lead to disruptions in the supply chains of
our customer industries, with our suppliers and in our own
production plants. Moreover, restricted economic activity resulting
from further lockdowns can have a significant negative impact on
aggregate demand. An escalation of geopolitical conflicts as well as
the ongoing trade conflicts between the United States and China
and the associated slowdown of the economy also pose significant
risks. These developments could have a negative impact on demand
for intermediate and investment goods worldwide. Opportunities
arise from continued strong demand, supported by earlier and better
availability and broader acceptance of the coronavirus vaccine than
is assumed in our forecasts. In addition to the uncertainties sur-
rounding market growth and the development of key customer
industries, material opportunities and risks for our earnings arise
from margin volatility. From today's perspective, Brexit does not give
rise to any material opportunities or risks for the BASF Group due to
the trade agreement reached between the European Union and the
United Kingdom.
■ No threat to continued existence of BASF
■ Significant opportunities and risks arise from overall
economic developments, margin and exchange rate
volatility
Overall assessment
In order to effectively measure and manage identified opportunities
and risks, we quantify these where appropriate in terms of probability
and economic impact in the event they occur. Where possible, we
use statistical methods to aggregate opportunities and risks into risk
factors. This way, we achieve an overall view of opportunities and
risks at a portfolio level, allowing us to take effective measures for
risk management.
Events that can negatively impact the
achievement of our goals
Business environment and sector
Market growth
Economic Environment in 20211
-
-
United States
4.0%
Emerging markets of Asia.
6.9%
Japan
2.3%
South America
4.4%
Trends in gross domestic product 2021-2023
Average annual real change
World
3.0%
3.7%
3.0%
United States
3.2%
Emerging markets of Asia
5.6%
Japan
1.6%
South America
3.3%
Outlook for key customer industries
European Union
Identification and documentation of control activities
European Union
World
We expect the global economy to gradually recover in 2021
after the sharp downturn resulting from the coronavirus
pandemic. Gross domestic product (GDP) will return to
roughly the pre-crisis level. We assume that global GDP will
grow by 4.3% (2020: -3.7%). Consumers and companies in
many countries remain restricted in their freedom of actions
for the time being due to measures to combat the pandemic.
Positive seasonal impulses should start to make themselves
felt as the year progresses. We expect that growing immuni-
zation of the population especially risk groups
will
increasingly support the economic recovery in the second
half of 2021. Regional differences will presumably remain
significant: While we assume emerging markets in Asia will
experience robust growth, momentum in Europe, the United
States and Japan is likely to initially remain sluggish. Uncer-
tainty about future developments is exceptionally high. It is
very difficult to predict how the coronavirus pandemic will
progress. Furthermore, the aftereffects of the sharp economic
decline in the business sector and the labor market from the
past year will materialize further.
Trends in the global economy in 2021
■ Moderate growth expected in Europe and the United
States
■ Strong growth likely in Asia
We anticipate an overall moderate GDP growth rate of 3.0% (2020:
-6.4%) in the European Union (E.U.). We expect base effects to
support growth momentum in countries that were hit especially hard
by the pandemic. These include southern European countries with
a high percentage of tourism, but also economies in northwestern
and eastern Europe where industry is specialized in investment
goods and automotive production. It is likely, though, that measures,
to contain the coronavirus pandemic, which vary in degree among
the different E.U. member countries, will continue to have a signifi-
cant impact on economic growth. Furthermore, we expect Brexit to
have a negative effect on economic growth in the E.U. In the United
Kingdom, we are forecasting weak GDP growth of 2.4% due to
Brexit and extremely high infection rates at the beginning of the year,
after the considerable decline in the previous year (2020: -9.9%).
We expect a GDP growth rate of 4.0% in the United States. A
further government spending plan is likely to significantly bolster the
economy. However, since the 2020 economic decline in the United
States was only about half of what the E.U. saw, base effects should
have a smaller impact. Private consumption in 2020 was significantly
supported by government payments. Consequently, no strong
catch-up effects can be expected in the consumption of goods in
2021. Moreover, we expect the labor market to recover more slowly
than in the previous year. While the weaker U.S. dollar should have
a positive effect on exports, import prices will foreseeably rise year
on year. We do not expect tariffs imposed on imported intermediate
or consumer goods from China to drop for the time being, and thus
no favorable effect on import prices is foreseeable.
The emerging markets of Asia will presumably see considerably
higher growth rates. In China, private consumption will increasingly
bolster growth. Global economic recovery should also have a stim-
ulating effect on exports. Overall, growth is likely to slow during the
course of the year. Year on year, growth will still be relatively high, at
over 7%, and thus above average for recent years. We expect India
to see a continuation of the dynamic recovery that began in the
second half of 2020. In the other Asian emerging markets, we antici-
pate a growth rate comparable to the long-year average before the
crisis, slightly above 4%.
In Japan, we expect moderate GDP growth of just slightly above
2%. Although this country has been able to control the pandemic
better than other advanced economies so far, domestic demand for
consumer and investment goods will presumably only recover
slowly after the sharp decline in the previous year. Exports are likely
to see a considerably better upswing, especially due to increasing
demand from China.
Growth prospects in South America will probably remain subdued.
We are forecasting total GDP growth in this region of slightly above
4%. Fiscal impetus in Brazil is likely to weaken over the course of the
year and dampen further economic recovery (2021: +3.5%; 2020:
-4.6%). Macroeconomic imbalances, primarily rising inflation rates
coupled with continued low interest rates and growing national
debt, will presumably continue to burden the Brazilian currency. In
Argentina, too, the debt and currency crisis are expected to dampen
the country's economic recovery following the sharp decline in the
previous year (2021: +5.0%; 2020: -10.4%). In the other countries
of South America, we anticipate moderate growth in domestic
demand and a favorable impact on demand for industrial and agri-
cultural raw materials from the recovering global economy.
4.3%
1 Our assumptions account for current estimates by external institutions, including economic research institutes, banks, multinational organizations and consulting firms.
152
About This Report
1 To Our Shareholders
2 Management's Report
Economic Environment in 2021
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Outlook for gross domestic product 2021
Real change compared with previous year
BASF Report 2020
Adherence to internal and external guidelines that are relevant for the
maintenance of a reliable control environment is checked by means of
a standardized questionnaire.
In these companies, the process comprises the following steps:
Evaluation of the control environment
Moreover, a centralized selection process identifies companies that
are exposed to particular risks, that are material to the Consolidated
Financial Statements of the BASF Group, or that provide service
processes. The selection process is conducted annually. Persons
responsible for implementing the requirements for an effective
control system in financial reporting are appointed at the relevant
companies.
Information technology
Acquisitions/divestitures/cooperations
Personnel
Supply chain
Investments/production
■ Decentralized management of specific opportunities and
risks
■ Aggregation at a Group level
The BASF Group's risk management process is based on the
international risk management standard, COSO II Enterprise Risk
Management Integrated Framework, and has the following key
features:
-
Organization and responsibilities
Law
-
The Board of Executive Directors is supported by the Corporate
Center. Corporate Finance and Corporate Development, which
are units within the Corporate Center, and the Chief Compliance
Officer coordinate the risk management process at a Group level,
examine financial and sustainability-related opportunities and
risks, and provide the structure and appropriate methodology.
Opportunity and risk management is thus integrated into the
strategy, planning and budgeting processes.
BASF's risk committee reviews the BASF Group's risk portfolio at
least twice a year to evaluate any adjustments to risk-management
measures and informs the Board of Executive Directors of these.
Organization of BASF Group's risk management since January 1, 2020
Corporate Audita
Chief Compliance Officer
Supervisory Board
↑
Board of Executive Directors
External auditors
↑
Risk management is the responsibility of the Board of Executive
Directors, which also determines the processes for approving
investments, acquisitions and divestitures.
Corporate Center
Financial
Other financial opportunities and risks
5 Overviews
■ Integrated process for identification, assessment and
reporting
Risk management process
As a non-integral shareholding, income from Wintershall Dea is
reported in net income from shareholdings. The opportunities and
risks resulting from the shareholding in Wintershall Dea are therefore
not included in the outlook for the EBIT of the BASF Group.
Opportunities and risks that have an impact on net income from
shareholdings and cash flow from the shares in Wintershall Dea are
monitored and tracked through BASF's involvement in the relevant
governing bodies.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
Exchange rate volatility
About This Report
BASF Report 2020
☐
a Using a 95% confidence interval per risk factor based on planned values; summation is not permissible
- 2021 +
Outlook
≥ €1,000 million < €1,500 million
€1,500 million €2,000 million
€500 million < €1,000 million
€100 million < €500 million
€100 million
<
158
■ Recovery expected in the automotive industry and for
consumer goods
Corporate
Development
Corporate Legal,
Compliance,
Tax & Insurance
4 Consolidated Financial Statements
5 Overviews
-
as well as on any significant results. He also provides a status
report to the Supervisory Board's Audit Committee at least once
a year, including any major developments. The Board of Executive
Directors immediately informs the Audit Committee about signifi-
cant incidents.
The internal audit unit (Corporate Audit) is responsible for regularly
auditing the risk management system established by the Board of
Executive Directors in accordance with section 91(2) of the
German Stock Corporation Act. Furthermore, as part of its moni-
toring of the Board of Executive Directors, the Supervisory Board
considers the effectiveness of the risk management system. The
suitability of the early detection system we set up for risks is
evaluated by our external auditor.
Tools
- The Governance, Risk Management, Compliance (GRC) Policy,
applicable throughout the Group, forms the framework for risk
management and is implemented by the operating divisions, the
service and research units and the regions according to their
specific business conditions.
-
A catalog of opportunity and risk categories helps to identify all
relevant financial and sustainability-related opportunities and risks
as comprehensively as possible. We also systematically assess
opportunities and risks with effects that cannot yet be measured
in monetary terms, such as reputational and climate risks. To
reflect these, risks for companies in connection with the transition
to a low-carbon economy (transition risks) as well as physical
risks as defined by the Task Force on Climate-related Financial
Disclosures (TCFD) were added to the catalog in 2020.
- We use standardized evaluation and reporting tools for the
identification and assessment of risks. The aggregation of
opportunities, risks and sensitivities at division and Group level
using a Monte Carlo simulation helps us to identify effects and
trends across the Group.
3 Corporate Governance
For more information on our sustainability management processes, see page 42 onward
For more information on our Group-wide Compliance Program, see page 177 onward
Significant features of the internal control and risk
management system with regard to the Group financial
reporting process
■ Conducted in accordance with standardized Group
guidelines
■ Segregation of duties, principle of dual control and clearly
regulated access rights
■ Annual evaluation of the control environment and relevant
processes at significant companies
The Consolidated Financial Statements are prepared by a unit in the
Corporate Finance department. BASF Group's accounting process
is based on a uniform accounting guideline that sets out accounting
policies and the significant processes and deadlines on a Group-wide
basis. There are binding directives for the internal reconciliations and
other accounting operations within the Group. Standard software is
used to carry out the accounting processes for the preparation of
the individual financial statements as well as for the Consolidated
Financial Statements. There are clear rules for the access rights of
each participant in these processes.
Employees involved in the accounting and reporting process meet
the qualitative requirements and participate in training on a regular
basis. There is a clear assignment of responsibilities between the
specialist units, companies and regional service units involved. We
strictly adhere to the principles of segregation of duties and dual
control, or the "four-eyes principle." Complex actuarial reports and
evaluations are produced by specialized service providers or
specially qualified employees.
An internal control system for financial reporting continuously
monitors these principles. To this end, methods are provided to
ensure that evaluation of the internal control system in financial
reporting is structured and uniform across the BASF Group.
The significant risks for the BASF Group regarding a reliable control
environment for proper financial reporting are reviewed and updated
on an annual basis. Risks are compiled into a central risk catalog.
Our Group-wide Compliance Program aims to ensure adherence
to legal regulations and the company's internal guidelines. Our
global employee Code of Conduct firmly embeds these mandatory
standards into everyday business. Members of the Board of
Executive Directors are also expressly obligated to follow these
principles.
Corporate
Finance
2 Management's Report
Opportunities and Risks
About This Report
Corporate
Corporate
Human Resource
Corporate
Communications &
Government
Relations
Corporate
Investor Relations
Divisions
a The Corporate Audit unit is part of the Corporate Center.
-
Regions
Environmental
Protection,
Health & Safety
Members of the risk committee are the head of Corporate Finance
(president), the head of Corporate Development, the head of
Corporate Legal, Compliance, Tax & Insurance and representa-
tives of the Corporate Audit and Corporate Environmental Protec-
tion, Health & Safety units.
1 To Our Shareholders
- The management of specific opportunities and risks is largely
delegated to the divisions, the service and research units and the
regions, and is steered at a regional or local level. This also applies
to sustainability-related topics relevant to BASF including the
impact of climate change on BASF. Financial risks are an excep-
tion. The management of liquidity, currency and interest rate risks
is conducted in the Corporate Finance unit. The management of
commodity price risks takes place in the Global Procurement unit
or in authorized Group companies.
ཀ
-
-
Service units
Research units
The BASF Group's management is informed of short-term
operational opportunities and risks that fall within an observation
period of up to one year in the monthly management report
produced by the Corporate Finance department. In addition,
Corporate Finance provides information twice a year on the
aggregated opportunity/risk exposure of the BASF Group.
Furthermore, if a new individual risk is identified which has a more
than €10 million impact on earnings or bears reputational risks, it
must be immediately reported.
As part of strategy development, the Corporate Development unit
conducts strategic opportunity/risk analyses for long-term
opportunities and risks with a 10-year assessment period. These
analyses are annually reviewed as part of strategic controlling and
are adapted if necessary.
BASF's Chief Compliance Officer (CCO) manages the imple-
mentation of our Compliance Management System, supported by
additional compliance officers worldwide. He regularly reports to
the Board of Executive Directors on the status of implementation
BASF Report 2020
159
A network of risk managers in the divisions, service and research
units as well as in the regions advances the implementation of
appropriate risk management practices in daily operations.
Overall, we anticipate 4.4% (2020: -4.0%) growth in global industrial
production. Growth in advanced economies (2021: +3.1%; 2020:
-6.5%) is likely to be weaker than growth in emerging markets
(2021 +5.5%; 2020: -1.8%).
BASF Report 2020
we anticipate moderate growth momentum in 2021 following the
rapid recovery in 2020. By contrast, we expect stronger recovery
effects in western and eastern Europe as well as in North America,
India and Japan. The percentage of hybrid and electric vehicles
should continue to rise due to buying incentives, vehicle tax rebates
and the expansion of the charging infrastructure.
BASF Group
59,149
€61 billion-€64 billion
3,560
€4.1 billion-€5.0 billion
1.7%
considerable increase
considerable increase
considerable increase
considerable increase
considerable increase
8.0%-9.2%
a For sales, "slight" represents a change of 1%-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight" means a change of 1%-10%, while
"considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%). At a cost of capital percentage of 9% for 2021, we define a change in ROCE of 0.1 to 1.0 percentage points as "slight,"
a change of more than 1.0 percentage points as "considerable" and no change (+/-0 percentage points) as "at prior-year level."
Sales and earnings forecast for the segments
3.6%
For the Chemicals segment in 2021, we expect a slight increase in
sales, mainly driven by growth in volumes in line with a market
recovery and higher prices. In the Petrochemicals division, we
expect an improved availability of steam cracker products following
the unplanned outage at the steam cracker in Port Arthur, Texas,
in 2020. In the Intermediates division, we anticipate higher sales
volumes in all business areas. Price levels will likely rise, primarily
due to higher raw materials prices in both divisions and from a favor-
able product mix in the Petrochemicals division. Currency effects are
expected to dampen sales performance. We expect considerable
growth in EBIT before special items, mainly through higher sales
volumes, due in part to improved availability of steam cracker prod-
ucts, and a recovery in margins.
customer industries. For the Monomers division, we anticipate
higher volumes, specifically for isocyanates and polyamides.
Currency effects should reduce sales performance. We want to
considerably increase EBIT before special items through the
increase in volumes and a recovery in margins, especially in the
Monomers division.
Sales in the Industrial Solutions segment will likely decline slightly
in 2021, mainly as a result of the agreement to divest BASF's global
pigments business to DIC. This should be partially offset by higher
volumes in both divisions. We anticipate slightly lower EBIT before
special items, due in particular to the sale of BASF's global pigments
business and higher fixed costs. This will not be completely offset by
the expected growth in volumes.
In the Surface Technologies segment, we are forecasting slight
sales growth in 2021, primarily from higher precious metal prices in
the Catalysts division and higher volumes in both divisions. We aim
to considerably improve the segment's EBIT before special items
compared with 2020, mainly through volume growth. We anticipate
considerably higher EBIT before special items in the Coatings
division but a slight year-on-year decrease in EBIT before special
items in the Catalysts division due to lower contributions from
precious metal trading.
For the Nutrition & Care segment, we expect slightly higher sales
than in 2020. Higher volumes in both divisions will likely be partially
offset by negative price and currency effects. Our planning assumes
improved product availability, especially in the Nutrition & Health
division. We expect the segment's EBIT before special items to be
slightly above the previous year, due to a higher contribution from
the Nutrition & Health division, driven by volume growth. For the
Care Chemicals division, we are forecasting a slight year-on-year
decrease in EBIT before special items as a result of slightly higher
fixed costs due to costs for the startup of new plants.
We expect sales to be slightly above the prior-year level in the
Agricultural Solutions segment. We aim to increase our sales
volumes and prices, which should more than offset negative
currency effects. Overall, we expect a slight increase in EBIT before
special items. Alongside higher sales, this will be driven by stringent
fixed cost management. In addition, we will benefit from the
measures to increase efficiency initiated in 2020. We will continue to
invest in research and development and digitalization at a high level
in 2021. Currency effects will presumably have a significantly
negative impact on EBIT before special items in 2021.
Sales in Other are expected to be considerably above the 2020
level in 2021. This will be driven by sales growth in commodity
trading. We anticipate a considerable improvement in EBIT before
special items compared with the previous year. This should mainly
reflect lower research expenses and higher contributions from other
businesses.
BASF Report 2020
156
About This Report
For the Materials segment, we expect sales to be considerably
above the previous year in 2021 due to higher volumes. In the
Performance Materials division, we expect higher demand from all
1
10.6%
-769
Industrial Solutions
7,644
slight decline
822
Surface Technologies
16,659
slight increase
484
slight decline
considerable increase
-2.2%
-1.1%
9.3%
-4.8%
slight increase
slight increase
considerable increase
considerable increase
6,019
slight increase
773
Agricultural Solutions
7,660
slight increase
970
Other
2,360
considerable increase
Nutrition & Care
considerable increase
considerable increase
To Our Shareholders
3 Corporate Governance
Other 25%
(infrastructure, R&D)
Agricultural Solutions 4%
€22.9 billion
Nutrition & Care 13%
Surface Technologies 14%
BASF Report 2020
30% Chemicals
We have an ambitious dividend policy and offer our shareholders an
attractive dividend yield. We aim to increase our per-share dividend
each year.
Information on the proposed dividend can be found on page 13
Capex by segment 2021-2025
10% Materials
4% Industrial Solutions
In 2021, we expect cash outflows in the equivalent amount of
around €1.0 billion from the scheduled repayment of bonds. To
refinance maturing bonds and to optimize our maturity profile, we
continue to have medium to long-term corporate bonds and our
global commercial paper program at our disposal.
Information on our financing policies can be found on page 64
Events after the reporting period
There have been no significant changes in the company's situation
or market environment since the beginning of the 2021 business
year.
157
About This Report
1 To Our Shareholders
2 Management's Report
Opportunities and Risks
3 Corporate Governance
4 Consolidated Financial Statements
Financing
2 Management's Report
Outlook 2021
Dividend
Ludwigshafen, Germany
Zhanjiang, China
4
Consolidated Financial Statements
5 Overviews
Projects currently being planned or underway include:
Capex by region 2021-2025
South America, Africa, Middle East 1%
1% Alternative sites currently
being investigated
Project
Capacity expansion: integrated ethylene oxide complex
Gradual capacity expansion: alkoxylates
We are forecasting a considerable recovery in the transportation
industry' as a whole after the sharp decline in the previous year. We
expect global automotive production to grow significantly. In China,
Construction: production plant for vitamin A
Planned construction: integrated Verbund site
39% Europe
Capacity expansion: MDI plant
Investment: battery materials
18% North America
Capital expenditures (capex)
■ Capex of around €3.6 billion planned for 2021
We are planning capital expenditures (additions to property, plant
and equipment excluding acquisitions, IT investments, restoration
obligations and right-of-use assets arising from leases) of around
€3.6 billion for the BASF Group in 2021. For the period from 2021 to
2025, we have planned capital expenditures totaling €22.9 billion.
The investment volume in the next five years will thus be below that
of the planning period 2020 to 2024 (€23.6 billion). A focus area is
our investment project in Zhanjiang, China, to expand our businesses
in Asia.
Capex: selected projects
Location
Antwerp, Belgium
Geismar, Louisiana
Harjavalta, Finland, and
Schwarzheide, Germany
€22.9 billion
835
Asia Pacific 41%
10,736
World
4.4%
European Union
3.2%
United States
2.6%
Emerging markets of Asia.
5.9%
1.0%
3.0%
Outlook for chemical production 2021 (excluding pharmaceuticals)
Real change compared with previous year
Japan
Trends in chemical production 2021-2023 (excluding pharmaceuticals)
Real change compared with previous year
World
3.9%
European Union
2.3%
United States
2.6%
Emerging markets of Asia
5.3%
1.0%
2.5%
Japan
South America
South America
In South America, chemical production will presumably lag slightly
behind the economy as a whole (2021: +3.0%; 2020: -1.1%).
Chemical growth will be buoyed by the recovery in automotive
production, as well as in the agriculture, nutrition and industrial raw
materials sectors.
We expect chemical production in the United States to grow by
2.6% (2020: -4.3%). Further recovery in automotive production and
considerable growth in health and nutrition and in electronics should
have positive effects on chemical demand, whereas the construction
and oil and gas industries are only expected to provide weak growth
stimulus.
In the energy and raw materials sector, we expect moderate
overall growth in energy demand and demand for industrial raw
materials. Production growth should only be small in advanced
economies. In the emerging markets by contrast, we are forecasting
considerable growth. Approximately half of total global growth is
expected to be in Asia.
considerable increase
Production in the construction industry will presumably grow
moderately in 2021. We anticipate low growth rates in commercial
construction but higher growth in housing construction and in the
infrastructure segment. While the construction business in Europe
is likely to grow moderately, we only foresee a slight increase in the
United States. This is because of small base effects after the
upswing in the housing market in the previous year and government
spending on construction, which is only likely to benefit from the
economic stimulus packages after a delay. By contrast, we expect
considerably higher growth rates in Asia.
Due to recovery effects, overall production of consumer goods,
primarily textiles and consumer durables, will foreseeably grow at a
somewhat higher rate than global GDP. Production of care products,
by contrast, will grow approximately in line with the gross domestic
product.
The electronics industry should benefit from the ongoing digitali-
zation trend, more frequent use of electronic parts in the automotive
industry and the advancement of connectivity and automation. We
therefore continue to expect above-average growth.
In line with overall economic recovery, the health and nutrition
sector should grow markedly in the year to come. We expect
above-average growth in the pharmaceutical industry, which will be
favorably affected by global vaccine activities. Expansion in the
nutrition sector should almost equal that of the global economy.
Under normal weather conditions, agricultural production will
presumably see similar growth in 2021 to the past few years. In
Europe, we expect a slight increase in agricultural production given
the low basis for comparison. In the United States, the trade agree-
ment with China is likely to boost agricultural exports again in 2021,
and similarly high growth rates are expected to those of 2020. In
Brazil, economic recovery and the considerable currency devalua-
tion should be favorable to the sales volumes of agricultural prod-
ucts. For this reason, higher growth in sales volumes can be
expected. In Asia, which is by far the largest agricultural market
because of the size of its population, we expect solid growth in
agricultural production.
1 The transportation industry includes the production of motor vehicles, motor vehicle parts and the construction of other vehicles (especially ships and boats, trains, air and spacecraft, and two-wheelers).
BASF Report 2020
153
In Japan, we anticipate moderate growth in chemical production,
analogous to the modest overall economic recovery.
About This Report
To Our Shareholders
2 Management's Report
Economic Environment in 2021
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Outlook for the chemical industry
■ Above-average growth expected in the chemical industry
In China, the world's largest chemical market, we are forecasting a
growth rate in chemical production of 6.3% (2020: 3.4%).
Momentum is likely to slow down after the rapid recovery in
production in 2020. Nevertheless, we anticipate demand across all
customer industries to grow for intermediate inputs from the chem-
ical industry, in particular consumer goods and in the automotive
industry.
In the European Union, we are forecasting an increase in chemical
production of 3.2% (2020: -1.9%), roughly in line with GDP growth.
The expected marked recovery in the automotive industry along
with moderate growth in the construction industry and in consum-
ables in the health and nutrition sector, as well as somewhat stronger
growth in consumer durables should bolster domestic chemical
demand. We anticipate weaker growth momentum in the United
Kingdom. Higher transaction costs are likely to dampen chemical
production due to the end of the Brexit transition period and the
negative economic impact of the coronavirus pandemic (2021:
+2.0%; 2020: +1.0%).
1
154
Global chemical production (excluding pharmaceuticals) is expected
to grow by 4.4% (2020: -0.4%) in 2021, which is above average for
the years prior to the coronavirus pandemic. This growth should be
seen predominantly in emerging markets (2021: +5.4%; 2020:
+1.8%). In advanced economies, we anticipate a growth rate of
2.5% (2020: -4.2%), which is above average for pre-crisis years.
The level of production from 2019 will thus already be surpassed in
2021 in emerging markets. Overall, production in advanced econo-
mies will presumably still be considerably lower.
About This Report
1 To Our Shareholders
2 Management's Report
Outlook 2021
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Forecast by segmenta
Million €
Forecast 2021
Sales
About This Report
ROCE
Forecast 2021
2020
Forecast 2021
2020
Chemicals
8,071
slight increase
BASF Report 2020
445
Materials
2020
155
EBIT before special items
1 For sales, "slight" represents a change of 1%-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight" means a change of 1%-10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%). At a cost of capital
percentage of 9% for 2021, we define a change in ROCE of 0.1 to 1.0 percentage points as "slight," a change of more than 1.0 percentage points as "considerable" and no change (+/-0 percentage points) as "at prior-year level."
3 Corporate Governance
BASF Report 2020
1 To Our Shareholders
4
Consolidated Financial Statements
5 Overviews
Outlook 2021
Based on these assumptions, we aim to increase our sales to
between €61 billion and €64 billion (2020: €59,149 million). The
BASF Group's income from operations (EBIT) before special
items is expected to be between €4.1 billion and €5.0 billion
(2020: €3,560 million). The return on capital employed (ROCE)
should be between 8.0% and 9.2% (2020: 1.7%).
For 2021, we anticipate Accelerator sales of between €18 bil-
lion and €19 billion (2020: €16.7 billion). Our CO2 emissions are
expected to stabilize at between 20.5 million metric tons and
21.5 million metric tons in 2021 (2020: 20.8 million metric tons).
For more information on our expectations for the economic environment in 2021, see page 152 onward
For more information on our opportunities and risks, see page 158 onward
Sales, earnings and ROCE forecast for the BASF Group'
We expect the global economy to recover in 2021 after the
sharp downturn resulting from the coronavirus pandemic.
However, uncertainty about future developments remains
exceptionally high. Our forecast therefore includes wide
ranges to account for the possibility of significant disruptions
to global supply chains and negative effects on the entire
economy. At the same time, we are confident that without
such negative impacts, we will be able to achieve earnings at
the upper end of the forecast range. Our forecast assumes
growth in our customer industries. For the automotive industry
in particular, we are forecasting significant production growth
compared with 2020. The global economy should see signifi-
cant growth of 4.3% compared with 2020 (-3.7%). Global
chemical production is expected to expand by 4.4%, well
above the prior-year level (2020: -0.4%). We anticipate an
average oil price of $50 for a barrel of Brent crude and an
exchange rate of $1.18 per euro.
2 Management's Report
Outlook 2021
■ ROCE of between 8.0% and 9.2%
In 2021, we expect the BASF Group as a whole to increase sales to
between €61 billion and €64 billion (2020: €59,149 million). The main
drivers should be volume growth and higher prices. By contrast,
currency and portfolio effects will have a negative impact. The
Materials segment and Other are expected to see considerable sales
growth. We are forecasting slightly higher sales in the Surface
Technologies, Chemicals, Agricultural Solutions and Nutrition & Care
segments, and a slight year-on-year decline in the Industrial Solutions
segment.
The BASF Group's EBIT before special items is expected to increase
to between €4.1 billion and €5.0 billion (2020: €3,560 million). We
anticipate considerably higher contributions from the Materials and
Chemicals segments, Other and the Surface Technologies segment.
The Agricultural Solutions and Nutrition & Care segments should
record slightly higher EBIT before special items. By contrast, we are
forecasting slightly lower EBIT before special items in the Industrial
Solutions segment.
Based on the expected recovery in the global economy, a positive
business trajectory and a lower cost of capital basis in 2021, we
expect the BASF Group's ROCE to be between 8.0% and 9.2%
(2020: 1.7%). We expect a considerable increase in ROCE in all
segments compared with the previous year.
Our forecast for 2021 takes into account the agreement between
BASF and DIC on the sale of the global pigments business. The
transaction is expected to close in the first half of 2021, subject to the
approval of the U.S. competition authorities, which is still outstanding.
Until closing, the assets and liabilities to be divested will be presented
in a disposal group in the Dispersions & Pigments division.
Accelerator sales and CO2 emissions forecast for the
BASF Group
We expect Accelerator sales to increase to between €18 billion and
€19 billion in 2021 (2020: €16.7 billion), in line with the global economic
recovery and growing demand for chemical products. The divestiture
of BASF's global pigments business will also reduce sales of Acceler-
ator products in BASF's portfolio. Compensating factors will include
the expected increase in Accelerator products from the initial portfolio
segmentation of the businesses acquired from Solvay.
■ Sales growth to between €61 billion and €64 billion
■ EBIT before special items of between €4.1 billion and
€5.0 billion
The significant opportunities and risks that could affect our forecast
are described under Opportunities and Risks on pages 158 to 166.
Despite the global economic recovery and growing demand for
chemical products, CO2 emissions are expected to stabilize at
between 20.5 million metric tons and 21.5 million metric tons in 2021.
We will keep emissions roughly at the prior-year level (2020:
20.8 million metric tons) with targeted measures. These include the
implementation of further projects to increase energy efficiency and
optimize processes, for example, to significantly reduce nitrous oxide
emissions in Ludwigshafen, Germany. In addition, we are switching
energy supply agreements to renewable energy sources, for example
in Freeport, Texas, where we have signed long-term supply agree-
ments for wind power. Emissions will also be reduced by the divestiture
of BASF's global pigments business in 2021.
BASF Report 2020
163
About This Report
1
5 Overviews
2 Management's Report
Opportunities and Risks
oil and gas price developments, impairments of the shareholding
and of the assets held by the company are possible.
4
Asset impairment risk arises if the assumed interest rate in an
impairment test increases, the predicted cash flows decline, or
investment projects are suspended. Following the impairments
recognized in the third quarter of 2020, we currently consider the
risk of further impairment for assets such as property, plant and
equipment, goodwill, technologies and trademarks to be immaterial.
The same applies to investments accounted for using the equity
method, with the exception of Wintershall Dea, which was revalued
in 2019. As the value of the shareholding is dependent on expected
Consolidated Financial Statements
To Our Shareholders
3 Corporate Governance
Interest rate risks
We limit country-specific risks with measures based on internally
determined country ratings, which are continuously updated to
reflect changing environment conditions. We selectively use invest-
ment guarantees to limit specific country-related risks. We lower
credit risks for our financial investments by engaging in transactions
only with banks with good credit ratings and by adhering to fixed
limits. Creditworthiness is continuously monitored and the limits are
adjusted accordingly. We reduce the risk of default on receivables
by continuously monitoring the creditworthiness and payment
behavior of our customers and by setting appropriate credit limits.
Risks are also limited through the use of credit insurance and bank
guarantees. Due to the global activities and diversified customer
structure of the BASF Group, there are no major concentrations of
credit default risk.
Risk of asset losses
Risks from fluctuating cash flows are recognized in a timely manner
as part of our liquidity planning. We have access to extensive liquid-
ity at any time thanks to our good ratings, our unrestricted access to
the commercial paper market and committed bank credit lines. In
the short to medium term, BASF is largely protected against poten-
tial refinancing risks by the balanced maturity profile of its financial
indebtedness as well as through diversification in various financial
markets.
Liquidity risks
In the catalysts business, BASF employs commodity derivatives for
precious metals and trades precious metals on behalf of third parties
and on its own account. Appropriate commodity derivatives are also
traded to optimize BASF's supply of refinery products, gas and
other petrochemical raw materials. To address specific risks associ-
ated with these non-operating trades, we set and continuously
monitor limits with regard to the type and volume of the deals con-
cluded.
Risks from metal and raw materials trading
In addition to market interest rates, BASF's financing costs are
determined by the credit risk premiums to be paid. These are mainly
influenced by our credit rating and the market conditions at the time
of issue. In the short to medium term, BASF is largely protected from
the possible effects on its interest result thanks to the balanced
maturity profile of its financial indebtedness.
Interest rate risks result from potential changes in prevailing market
interest rates. These can cause a change in the fair value of fixed-
rate instruments and fluctuations in the interest payments for vari-
able-rate financial instruments, which would positively or negatively
affect earnings. To hedge these risks, interest rate swaps and
combined interest rate and currency derivatives are used in individ-
ual cases.
Financial currency risks result from the translation of receivables,
liabilities and other monetary items in accordance with IAS 21 at the
closing rate into the functional currency of the respective Group
company. In addition, we incorporate planned purchase and sales
transactions in foreign currencies in our financial foreign currency
risk management. These risks are hedged using derivative instru-
ments, if necessary.
tions remain the same. On the production side, we counter exchange
rate risks by producing in the respective currency zones.
Our competitiveness on global markets is influenced by fluctuations
in exchange rates. For BASF's sales, opportunities and risks arise in
particular when the U.S. dollar exchange rate fluctuates. A full-year
appreciation of the U.S. dollar against the euro by $0.01, which
could result from a macroeconomic slowdown, would increase the
BASF Group's EBIT by around €30 million, assuming other condi-
As a part of risk management, activities in countries with transfer
restrictions are continuously monitored. This includes, for example,
regular analysis of the macroeconomic and legal environment,
shareholders' equity and the business models of the operating units.
The chief aim is the management of counterparty, transfer and
currency risks for the BASF Group.
Long-term incentive program for senior executives
BASF offers leaders the opportunity to participate in a share price-
based compensation program. The need for provisions for this
program varies according to the development of the BASF share
price and the MSCI World Chemicals Index; this leads to a corre-
sponding increase or decrease in personnel costs.
Exchange rate volatility
Impairment risks
From 2020 onward, the previous long-term incentive (LTI) program
for senior executives will be replaced by a new LTI program in the
form of a performance share plan. The new LTI plan incentivizes the
achievement of strategic growth, profitability and sustainability tar-
gets and takes into account the development of the BASF share
price and the dividend. The need for provisions for this program
varies according to assumptions on the degree of strategic target
achievement, the development of the BASF share price and the
dividend. This leads to a corresponding increase or decrease in
personnel costs.
Consolidated Financial Statements
Most employees are granted company pension benefits from either
defined contribution or defined benefit plans. We predominantly
finance company pension obligations externally through separate
plan assets. This particularly includes BASF Pensionskasse WaG
and BASF Pensionstreuhand e.V. in Germany, in addition to the
large pension plans of our Group companies in North America, the
United Kingdom and Switzerland. To address the risk of underfund-
ing due to market-related fluctuations in plan assets, we have
investment strategies that align return and risk optimization to the
structure of the pension obligations. Stress scenarios are also simu-
lated regularly by means of portfolio analyses. An adjustment to the
interest rates used in discounting pension obligations leads immedi-
ately to changes in equity. To limit the risks of changing financial
market conditions as well as demographic developments,
employees have, for a number of years now, been almost exclusively
average. This will create opportunities that we want to exploit by
expanding our local presence.
Detailed guidelines and procedures exist for dealing with financial
risks. Among other things, they provide for the segregation of trad-
ing and back office functions.
Our decisions on the type, scope and locations of our investment
projects are based on assumptions related to the long-term
development of markets, margins and costs, as well as raw material
availability and country, currency and technology risks. Opportunities
and risks arise from potential deviations in actual developments from
our assumptions. We expect the increase in chemical production in
emerging markets in the coming years to remain above the global
Portfolio development through investments
For more information on innovation, see page 35 onward
The trust of customers and consumers is essential for the successful
introduction of new technologies. That is why we enter into dialog
with our stakeholders at an early stage of development. The trend
toward increased sustainability requirements in our customer
industries continues. Our aim is to leverage the resulting opportunities
in a growing market even more effectively in the future with
innovations. This is why we applied the Sustainable Solution
Steering method, which is used to evaluate the sustainability of our
product portfolio, to assessments of innovation projects, and
integrated it into an early stage of our research and development
processes as well as the development of our business strategies. In
this way, we want to benefit from the higher profitability of our
Accelerator products compared with the rest of our evaluated
portfolio. At the same time, we reduce reputational and financial
risks by phasing out products for which we have identified substantial
sustainability concerns ("Challenged" products) within five years of
initial classification as such at the latest. We develop action plans for
these products at an early stage to minimize any potential financial
risks. These can include research projects, reformulations or even
replacing one product with another.
The opportunities and risks of digitalization are steered by the
divisions and service units.
ment & Supply Chain Services, Legal, Taxes, Insurance and Intellec-
tual Property.
5 Overviews
4
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
164
BASF Report 2020
Potential applications of digital technologies and solutions along the
entire value chain are evaluated and implemented in the divisions
and service units as well as by cross-divisional teams. They are
supported here by the Global Digital Services unit. We analyze the
opportunities and risks of digitalization in Production, Logistics,
Research & Development and for business models as well as in
corporate functions such as Finance, Human Resources, Procure-
We also address the risk of the technical or economic failure of
research and development projects by maintaining a balanced and
comprehensive project portfolio, as well as through professional,
milestone-based project management.
Research activities funded by the BASF Group promote the targeted
development and enhancement of key technologies as well as the
establishment of new business areas. Focus areas in research are
determined based on their strategic relevance for BASF, above and
beyond existing business areas.
The central research areas Process Research & Chemical
Engineering, Advanced Materials & Systems Research and
Bioscience Research serve as global platforms headquartered in
our regions: Europe, Asia Pacific and North America. Together with
the development units in our operating divisions, they form the core
of the global Know-How Verbund. Our strong regional presence
opens up opportunities to participate in local innovation processes
and gain access to local talent. We optimize the effectiveness and
efficiency of our research activities through our global Know-How
Verbund.
Innovation
In order to achieve lasting profitable growth, tap into new market
segments and make our customers more successful, our research
and business focus is on highly innovative business areas, some of
which we enter into through strategic cooperative partnerships.
For more information on the Excellence Program, see page 21
We continuously improve our processes in order to remain
competitive through our operational excellence. We are streamlining
our administration, sharpening the roles of services and regions, and
simplifying procedures and processes as part of our ongoing Excel-
lence Program.
Development of competitive and customer landscape
We expect competitors from Asia and the Middle East in particular
to gain increasing significance in the years ahead. Furthermore, we
predict that many producers in countries rich in raw materials will
expand their value chains. We counter this risk through active port-
folio management.
For more information on the corporate strategy, see page 26 onward
We assume that growth in chemical production (excluding pharma-
ceuticals) will be slightly stronger than global gross domestic prod-
uct over the next five years and will be considerably stronger than
the previous five-year average. Through our market-oriented and
broad portfolio, which we will continue to strengthen in the years
ahead through investments in new production capacities, research
and development activities and acquisitions, we aim to achieve vol-
ume growth that slightly exceeds this market growth. Should global
economic growth see unexpected, considerable deceleration
because of prolonged restrictions due to the coronavirus pandemic,
an ongoing weak period in the emerging markets, protectionist
tendencies or geopolitical crises, the expected growth rates could
prove too ambitious.
Long-term demand development
Long-term opportunities and risks
offered defined contribution plans for future years of service. Some
of these contribution plans include minimum interest guarantees. If
the pension fund cannot generate this, it must be provided by the
employer. A permanent continuation of the low interest rate environ-
ment could make it necessary to recognize pension obligations and
plan assets for these plans as well.
Risks from pension obligations
Financial opportunities and risks
Opportunities and risks for the BASF Group primarily result from
higher or lower margins in the Chemicals and Materials segments.
Opportunities arise here if the positive margin trend driven by the
supply side continues for longer than expected. However, new
capacities or raw materials shortages could increase margin
pressure on a number of products and value chains. This would
have a negative effect on our EBIT.
particularly based on estimates as to the probability of occurrence
and the range of possible claims. These estimates are the result of
close cooperation between the relevant operating and service units
together with Corporate Finance and Corporate Legal. If sufficient
probability of occurrence is identified, a provision is recognized
accordingly for each proceeding. Should a provision be unneces-
sary, general risk management continues to assess whether these
litigations nevertheless represent a risk for the EBIT of the BASF
Group.
161
BASF Report 2020
In 2019/2020, we implemented a package of climate resilience
measures at our Verbund site in Ludwigshafen, Germany: We devel-
oped an early warning system for low water, created multimodal
transportation concepts, chartered more ships that can navigate
low water levels and, in cooperation with partners, are currently
developing our own type of ship designed for extreme low-water
Around the world, the frequency and intensity of extreme weather
conditions (such as high/low water levels on rivers or hurricanes) are
subject to change as a result of climate change. We address the risk
of supply interruptions on the procurement and sales side caused
by extreme weather conditions by switching to alternative logistics
carriers and the possibility of falling back on unaffected sites within
our global Verbund.
We minimize procurement risks through our broad portfolio, global
purchasing activities and the purchase of raw materials on spot
markets. If possible, we avoid procuring raw materials from a single
supplier. When this cannot be avoided, we try to foster competition
or we knowingly enter into this relationship and assess the
consequences of potential nondelivery. We continuously monitor
the credit risk of important business partners.
Purchasing and supply chain
Political measures could also give rise to opportunities. For example,
we view measures around the world to increase energy efficiency
and reduce greenhouse gas emissions as an opportunity for
increased demand for our products, such as our insulation foams
for buildings, catalysts, battery materials for electromobility, or our
solutions for wind turbines. Our broad product portfolio enables us
to offer alternatives if new chemicals have to be developed as a
result of restrictions in connection with the REACH chemicals regu-
lation or new standards in our customers' industries.
In addition, risks to the BASF Group can be posed by further
regulations in key customer industries or on the use or registration of
agricultural and other chemicals.
Risks for us can arise from intensified geopolitical tensions, new
trade sanctions, stricter emissions limits for plants, changes in
chemical regulations and energy and climate laws.
Regulation and political risks
We continuously enhance our products and solutions in order to
maintain competitive ability. We monitor the market and the
competition, and try to take targeted advantage of opportunities
and counter emerging risks with suitable measures. Aside from
innovation, key components of our competitiveness are our ongoing
cost management and continuous process optimization.
Competition
The year's average oil price for Brent crude was $42 per barrel in
2020, compared with $64 per barrel in the previous year. For 2021,
we anticipate an average oil price of $50 per barrel. We therefore
expect price levels for the raw materials and petrochemical basic
products that are important to our business to rise slightly.
Moreover, if oil and gas prices rise, Wintershall Dea does not have a
compensating effect on the BASF Group's EBIT because this
shareholding is no longer reported in EBIT, but in net income from
shareholdings.
Margin volatility
Weather-related influences can result in positive or negative effects
on our business, particularly in the Agricultural Solutions segment.
We also consider risks from deviations in assumptions. Stronger
demand caused by an accelerated lifting of lockdowns, for example
as a result of high efficacy and acceptance of coronavirus vaccines,
give rise to macroeconomic opportunities. A significant macro-
economic risk arises from the possibility that measures to contain
the coronavirus are kept in place for a longer period of time or
expanded, and that global economic growth slows as a result.
Additional macroeconomic risks result from the escalation of geo-
political conflicts and the ongoing trade conflict between the United
States and China. Both can have a considerable impact on global
demand for intermediate goods for industrial production and
demand for investment goods.
The development of our sales markets is one of the strongest
sources of opportunities and risks. More details on our assumptions
regarding short-term growth rates for the global economy, regions
and key customer industries, such as the chemicals, automotive
and construction sectors, can be found under Economic Environ-
ment in 2021 on pages 152 to 154.
Market growth
Short-term opportunities and risks
investigates their relevance for the BASF Group. The Board of
Executive Directors and the Audit Committee are informed if
control weaknesses with a considerable impact on financial
reporting are identified. Only after material control weaknesses
have been resolved does the company's managing director
confirm the effectiveness of the internal control system.
Internal confirmation of the internal control system
All managing directors and chief financial officers of each
consolidated Group company must confirm to the Board of
Executive Directors of BASF SE every half-year and at the end of
the annual cycle, in writing, that the internal control system is
effective with regard to accounting and reporting.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
For more information on our investment projects, see page 157 onward
About This Report
We use our internal control system to limit risks from potential
infringements of rights or laws. For example, we try to avoid patent
and licensing disputes whenever possible through extensive clear-
ance research. As part of our Group-wide Compliance Program, our
employees receive regular training.
1 To Our Shareholders
3 Corporate Governance
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Opportunities and Risks
1 To Our Shareholders
About This Report
162
BASF Report 2020
We constantly monitor current and potential legal disputes and
proceedings, and regularly report on these to the Board of Executive
Directors and Supervisory Board. In order to assess the risks from
current legal disputes and proceedings and any potential need to
recognize provisions, we prepare our own analyses and assess-
ments of the circumstances and claims considered. In addition, in
individual cases, we consider the results of comparable proceedings
and, if needed, independent legal opinions. Risk assessment is
Legal disputes and proceedings
BASF also established the Cyber Defense Center in 2015, is a
member of Cyber Security Sharing and Analytics e. V. (CSSA), and a
founding member of the German Cybersecurity Organization
(DCSO) together with Allianz SE, Bayer AG and Volkswagen AG.
BASF has also established an information security management
system and is certified according to ISO/IEC 27001:2013.
To minimize such risks, BASF uses globally uniform processes and
systems to ensure IT availability and IT security, such as stable and
redundantly designed IT systems, backup processes, virus and
access protection, encryption systems as well as integrated, Group-
wide standardized IT infrastructure and applications. The systems
used for information security are constantly tested, continuously
updated, and expanded if necessary. In addition, our employees
receive regular training on information and data protection. IT-related
risk management is conducted using Group-wide regulations for
organization and application, as well as an internal control system
based on these regulations.
sophisticated technology, and have far more resources available. If
data are lost or manipulated, this can, for example, negatively affect
plant availability, delivery quality or the accuracy of our financial
reporting. Unauthorized access to sensitive data, such as personnel
records or customer data, competition-related information or
research results, can result in legal consequences or jeopardize our
competitive position. This would also be accompanied by the asso-
ciated loss of reputation.
BASF relies on a large number of IT systems. Their nonavailability,
violation of confidentiality or the manipulation of data in critical IT
systems and applications can all have a direct impact on production
and logistics processes. The threat environment has changed in
recent years, as attackers have become better organized, use more
Information technology risks
For more information on our compensation system, see page 149
For more information on risks from pension obligations, see page 164
Due to BASF's worldwide compensation principles, the develop-
ment of personnel expenses is partly dependent on the amount of
variable compensation, which is linked to the company's success,
among other factors. The correlation between variable compensa-
tion and the success of the company has the effect of minimizing
risk. Another factor is the development of interest rates for discount-
ing pension obligations. Furthermore, changes to the legal environ-
ment of a particular country can have an impact on the development
of personnel expenses for the BASF Group. For countries in which
BASF is active, relevant developments are therefore constantly
monitored in order to recognize risks at an early stage and enable
BASF to carry out suitable measures.
Personnel
For more information on opportunities and risks from acquisitions and divestitures in 2020, see
page 51
Opportunities and risks arise in connection with acquisitions and
divestitures from the conclusion of a transaction, or it being com-
pleted earlier or later than expected. They relate to the regular
earnings contributions gained or lost as well as the realization of
gains or losses from divestitures if these deviate from our planning
assumptions.
We constantly monitor the market in order to identify possible
acquisition targets and develop our portfolio appropriately. In addi-
tion, we work together in collaborations with customers and part-
ners to jointly develop new, competitive products and applications.
Short-term risks from investments can result from, for example,
technical malfunctions or schedule and budget overruns. We
counter these risks with highly experienced project management
and controlling.
Crisis management also includes dealing with extreme weather
conditions such as hurricanes (for example, at the sites on the Gulf
of Mexico in Freeport, Texas, and Geismar, Louisiana) or significantly
elevated water temperatures in rivers due to extended heat waves,
which limit the available cooling capacity (for example, at the
Ludwigshafen site in Germany). Appropriate precautions are taken
at the sites in the case of a potential change in risk in connection
with climate change. For example, over the past few years, the
Verbund site in Ludwigshafen, Germany, has implemented a pack-
age of measures to increase cooling capacity, including expanding
and optimizing the central recooling plants and optimizing cooling
water flows. These are capable of avoiding production outages due
to extreme heatwaves like the one in 2018.
In the event of a production outage caused by an accident, for
example - our global, regional or local emergency response plans
and crisis management structures are engaged, depending on the
impact scope. Every region has crisis management teams on a local
and regional level. They not only coordinate the necessary
emergency response measures, they also initiate the immediate
measures for damage control and resumption of normal operations
as quickly as possible.
We try to prevent unscheduled plant shutdowns by adhering to high
technical standards and by continuously improving our plants. We
reduce the effects of an unscheduled shutdown on the supply of
intermediate and end products through diversification within our
global production Verbund.
Investments and production
situations. These measures are already making long periods of low Acquisitions, divestitures and cooperations
water on the Rhine River, like in 2018, more manageable.
5 Overviews
4 Consolidated Financial Statements
2 Management's Report
Opportunities and Risks
Acquisitions, divestitures and cooperations
Management and Supervisory Boards
The evaluation of opportunities and risks plays a significant role
during the assessment of acquisition targets. A detailed analysis
and quantification is conducted as part of due diligence. Examples
of risks include increased staff turnover, delayed realization of
synergies, or the assumption of obligations that were not precisely
quantifiable in advance. If our expectations in this regard are not
met, risks could arise, such as the need to impair intangible assets;
however, there could also be opportunities, for example, from
additional synergies.
The aim is to enable the Supervisory Board to ensure a reasonable
level of diversity with respect to education and professional
experience, cultural background, international representation,
gender and age when appointing members of the Board of Executive
6 members
appointed by the Supervisory Board
Chair
appointed by the Supervisory Board
reports to Supervisory Board
Directors. Irrespective of these individual criteria, a holistic approach
will ultimately determine a person's suitability for appointment to
the Board of Executive Directors of BASF SE. Both systematic
succession planning and the selection process aim to ensure that
the Board of Executive Directors as a whole has the following profile,
which serves as a diversity concept:
12 members
6 shareholder representatives elected by the
Annual Shareholders' Meeting and
6 employee representatives
Chair
elected by the Supervisory Board
The first appointment of members of the Board of Executive
Directors is for a term of no more than three years. The standard age
limit for members of the Board of Executive Directors is 63.
The number of members on the Board of Executive Directors is
determined by the Supervisory Board. It is guided by insights
Many years of management experience in scientific, technical and gained by BASF as a company with an integrated leadership culture
commercial fields
International experience based on background and/or professional
experience
At least one female Board member
Role model function in putting corporate values into practice
Desire to shape strategic and operational decisions, and proven
success in doing so, as well as leadership skills, especially under
challenging business conditions
- Systematic development of leaders through the successful
assumption of tasks with increasing responsibility, where possible
in different business areas, regions and functions
-
4 Consolidated Financial Statements
5 Overviews
financial instruments. However, this is only necessary if the
acquisition or disposal price or the amount of the issue in an
individual case exceeds 3% of the equity reported in the last
approved Consolidated Financial Statements of the BASF Group.
For more information on risk management, see the Forecast from page 158 onward
The members of the Board of Executive Directors, including their areas of responsibility and
memberships on the supervisory bodies of other companies, are listed from page 180 onward
Compensation of the Board of Executive Directors is described in detail in the Compensation Report
from page 183 onward
Two-tier management system of BASF SE
Board of Executive Directors
A balanced age distribution to ensure the continuity of the Board's
work and enable seamless succession planning
appoints the Board of Executive Directors
advises the Board of Executive Directors
Supervisory Board
Competence profile, diversity concept and succession
planning for the Board of Executive Directors
The Supervisory Board works hand in hand with the Board of
Executive Directors to ensure long-term succession planning for the
composition of the Board of Executive Directors. BASF aims to fill
most Board positions with leaders from within the company. It is the
task of the Board of Executive Directors to propose a sufficient
number of suitable individuals to the Supervisory Board.
BASF's long-term succession planning is guided by the corporate
strategy. It is based on systematic management development
characterized by the following:
- Early identification of suitable leaders of different professional
backgrounds, nationalities and genders
-
monitors the Board of Executive Directors
and is determined by the needs arising from cooperation within
the Board of Executive Directors. The Supervisory Board considers
six to be an appropriate number of Board members given the
current business composition, future responsibilities associated
with development and the fundamental organizational structure of
the BASF Group.
BASF Report 2020
169
The compensation of the Supervisory Board is presented in the Compensation Report from page 183
onward
The Statutes of BASF SE and the Employee Participation Agreement can be found at basf.com/statutes
and basf.com/en/corporate governance
Personnel Committee
Members
Dr. Kurt Bock (chair, since June 18, 2020),* Dr. Jürgen Hambrecht
(chair, until June 18, 2020),* Franz Fehrenbach, Sinischa Horvat,*
Michael Vassiliadis
Duties
Prepares the appointment of members to the Board of Executive
Directors by the Supervisory Board as well as the employment
contracts to be entered into with members of the Board of
Executive Directors
A list of the members of the Supervisory Board of BASF SE indicating which members are shareholder
or employee representatives and their appointments to the supervisory bodies of other companies
can be found from page 180 onward
When making recommendations for appointments to the Board of
Executive Directors, considers professional qualifications,
international experience and leadership skills as well as long-term
succession planning, diversity, and especially the appropriate
consideration of women
Audit Committee
Members
Dame Alison Carnwath DBE (chair),* Tatjana Diether,* Franz
Fehrebach (until February 29, 2020), Anke Schäferkordt (since
March 1, 2020),* Michael Vassiliadis
*
BASF Report 2020
170
In the future, we will continue to expand and refine our portfolio
through acquisitions that promise above-average profitable growth,
are innovation-driven or offer a technological differentiation and help
achieve a relevant market position, and make new, sustainable
business models possible.
Prepares the resolutions made by the Supervisory Board with
regard to the system and amount of compensation paid to
members of the Board of Executive Directors
3 Corporate Governance
Corporate Governance Report
Audit Committee, the Nomination Committee and the Strategy
Committee.
The Board of Executive Directors regularly informs the Supervisory
Board about matters such as the course of business and expected
developments, the financial position and results of operations,
corporate planning, the implementation of the corporate strategy,
business opportunities and risks, as well as risk compliance
management. The Supervisory Board has embedded the main
reporting requirements in an information policy. The chair of the
Supervisory Board is in regular contact with the Board of Executive
Directors, especially with its chair, outside of meetings as well.
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Corporate Governance Report
4
Consolidated Financial Statements
5 Overviews
BASF SE's Supervisory Board has established a total of four
Supervisory Board Committees: the Personnel Committee, the
The current composition of the Board of Executive Directors meets
the competence profile and the requirements of the diversity concept
in full.
■ Supervisory Board appoints, monitors and advises Board
of Executive Directors
■ Four Supervisory Board committees
The Supervisory Board appoints the members of the Board of
Executive Directors and supervises and advises the Board of
Executive Directors on management issues. As members of the
Supervisory Board cannot simultaneously be on the Board of
Executive Directors, a high level of autonomy is already structurally
ensured with regard to the supervision of the Board of Executive
Directors.
In addition to the SE Council Regulation, the relevant legal basis for
the size and composition of the Supervisory Board is provided by
the Statutes of BASF SE and the Agreement Concerning the
Involvement of Employees in BASF SE (Employee Participation
Agreement), which also includes the regulations applicable to BASF
for implementing the statutory gender quota for the Supervisory
Board. The German Codetermination Act does not apply to BASF
as a European stock corporation (Societas Europaea, SE).
The Supervisory Board of BASF SE comprises 12 members. Six
members are elected by the shareholders at the Annual Share-
holders' Meeting. The remaining six members are elected by the
BASF Europa Betriebsrat (BASF Works Council Europe), the
European employee representation body of the BASF Group. In
accordance with the resolution of the Annual Shareholders' Meeting
on June 18, 2020, the period of appointment for newly elected
members of the Supervisory Board was reduced from five to four
years; and the Statutes were amended accordingly. This ensures
that the maximum membership duration of 12 years up to which a
Supervisory Board member can be classified as independent
corresponds to a total of three election terms. In accordance with
the German Corporate Governance Code (Code 2020), the
Supervisory Board reduced the membership duration used as a
basis for its independence rating from 15 to 12 years in December
2019.
The meetings of the Supervisory Board and its committees are
called by their respective chairs and, independently, at the request
of one of their members or the Board of Executive Directors. The
shareholder and employee representatives of the Supervisory Board
prepare for Supervisory Board meetings in separate preliminary
discussions in each case. Resolutions of the Supervisory Board are
passed by a simple majority vote of the participating members. In
the event of a tie, the vote of the chair of the Supervisory Board, who
must always be a shareholder representative, shall be the casting
vote. This resolution process is also applicable for the appointment
and dismissal of members of the Board of Executive Directors by the
Supervisory Board. Resolutions can, as needed, also be made in
writing or through communication outside of the meetings, as long
as no member objects to this form of passing a resolution.
Supervision of company management by the Supervisory
Board
2 Management's Report
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 172 for the criteria used to determine independence)
About This Report
In addition to climate-related risks, there are also opportunities. Our
broad product portfolio includes, among other things, solutions for
the circular economy and climate protection (such as insulation
foams for buildings, materials for electromobility and bio-based
products). Increased social awareness offers additional market
opportunities for these products. We are working with numerous
scientific and public organizations and initiatives on solutions for
sustainable agriculture that meet economic, ecological, and social
demands over the long term.
Our decentralized specialists use a central decision tree to document
reportable sustainability risks within the meaning of section 289b et
seq. of the German Commercial Code. No reportable residual net
risks within the meaning of section 289b et seq. of the German
Commercial Code were identified for 2020.
For more information on sustainability management, see page 42 onward
For more information on energy and climate protection, see page 130 onward
For more information on opportunities and risks from energy policies, see page 161
For more information on our positions on and contributions to climate protection, see
basf.com/climate_protection
BASF Report 2020
166
Risks to our production and our supply chain resulting from greater
weather extremes (e.g. storms), highly fluctuating water levels and
increased water temperatures are addressed by our risk
management in production and in procurement. For example, we
can no longer rule out extreme low-water situations or heat waves
caused by climate change at our Verbund site in Ludwigshafen,
Germany. In 2019/2020, we therefore implemented a package of
climate resilience measures.
Chapter 3 pages 167-211
Corporate
Governance
Corporate Governance Report
168 Compensation Report
183
Compliance
177
3
Report of the Supervisory Board
to protect the environment) in publicly accessible sources (such as
this annual report or on the BASF website) and in direct dialog with
external stakeholders.
4 Consolidated Financial Statements
1 To Our Shareholders
For more information on our acquisitions and divestitures, see page 51 onward
Divestitures also play a key role in the development of our portfolio.
Risks could arise from divestitures as a result of potential warranty
claims or other contractual obligations, such as long-term supply
agreements.
between personal and professional life and promote healthy living.
This increases BASF's appeal as an employer and retains our
employees in the long term.
For more information on the individual initiatives and our goals, see page 144 onward
Sustainability
Opportunities and risks that could arise from material sustainability
topics can only rarely be measured in specific financial terms and
have an impact on business activities, especially in the medium to
long term.
5 Overviews
We reduce potential risks in the areas of environmental protection,
safety and security, health protection, product stewardship,
compliance, supplier relationships and labor and social standards
by setting ourselves globally uniform requirements. These often go
beyond local legal requirements.
Furthermore, ongoing climate change poses both opportunities and
risks for BASF. As an energy-intensive company, climate-related
risks arise particularly from regulatory changes, such as in carbon
prices through emissions trading systems, taxes or energy
legislation. In addition, BASF's emissions footprint and intensity
could lead to a negative perception and reduced appeal among
external stakeholders such as customers or investors. We counter
these risks with our carbon management measures and by
transparently disclosing our positions on and contributions to
climate protection (such as political demands, progress in the
implementation of our climate strategy and how our products help
BASF Report 2020
165
About This Report
1 To Our Shareholders
2 Management's Report
Opportunities and Risks
3 Corporate Governance
We verify compliance with these standards through internal
monitoring systems such as global surveys or audits. In 2020, for
example, suppliers were audited for sustainability at a number of
sites. Our global Code of Conduct was revised in 2020 to which all
employees, managers and Board members are required to adhere.
It defines a binding framework for our activities. The monitoring
systems are complemented by grievance mechanisms such as our
compliance hotlines.
203
Recruitment and long-term retention of qualified employees
BASF anticipates growing challenges in attracting qualified
employees in the medium and long term due to demographic
change, especially in North America and Europe. As a result, there
is an increased risk that job vacancies may not be filled with suitable
applicants, or only after a delay. We address these risks with
measures to integrate diversity, employee and leadership
development, and intensified employer branding. At local level,
demographic management includes succession planning,
knowledge management and offerings to improve the balance
Declaration of Conformity Pursuant to
Supervisory Board
appoints, monitors and advises Board of Executive
Directors
Shareholders
exercise rights of co-administration and supervision at
Annual Shareholders' Meeting
The fundamental elements of BASF SE's corporate governance
system are: its two-tier system, with a transparent and effective
separation of company management and supervision between
BASF's Board of Executive Directors and the Supervisory Board; the
equal representation of shareholders and employees on the
Supervisory Board; and the shareholders' rights of co-administra-
tion and supervision at the Annual Shareholders' Meeting.
Directors
■ Board of Executive Directors strictly separate from the
Supervisory Board
■ Responsible for company management
■ Sets goals and strategic direction
The Board of Executive Directors is responsible for the management
of the company, and represents BASF SE in business undertakings
with third parties. BASF's Board of Executive Directors is strictly
separated from the Supervisory Board, which monitors the Board of
Executive Directors' activities and decides on its composition. A
member of the Board of Executive Directors cannot simultaneously
be a member of the Supervisory Board. As the central duty of
company management, the Board of Executive Directors agrees on
the corporate goals and strategic direction of the BASF Group as
well as its individual business areas; determines the company's
internal organization; and decides on the composition of manage-
ment on the levels below the Board. It also manages and monitors
BASF Group business by planning and setting the corporate bud-
get, allocating resources and management capacities, monitoring
and making decisions on significant individual measures, and super-
vising operational management.
The Board's actions and decisions are geared toward the company's
best interests. It is committed to the goal of sustainably increasing
the company's value. Among the Board's responsibilities is the
preparation of the Consolidated and Separate Financial Statements
of BASF SE and reporting on the company's financial and non-
financial performance. Furthermore, it must ensure that the
company's activities comply with the applicable legislation and
regulatory requirements, as well as internal corporate directives.
This includes the establishment of appropriate systems for control,
compliance and risk management as well as establishing a
company-wide compliance culture with undisputed standards.
Decisions that are reserved for the Board as a whole by law, through
the Board of Executive Directors' Rules of Procedure or through
resolutions adopted by the Board, are made at regularly held Board
meetings called by the chair of the Board of Executive Directors.
Board decisions are based on detailed information and analyzes
provided by the business areas and specialist units, and, if deemed
necessary, by external consultants. Board decisions can generally
be made via a simple majority. In the case of a tied vote, the casting
vote is given by the chair of the Board. However, the chair of the
Board does not have the right to veto the decisions of the Board of
Executive Directors. Members of the Board of Executive Directors
are authorized to make decisions individually in their assigned areas
of responsibility.
The Board can set up Board committees to consult and decide on
individual issues such as proposed material acquisitions or
divestitures; these must include at least three members of the Board
of Executive Directors. For the preparation of important decisions,
such as those on acquisitions, divestitures, investments and
personnel, the Board has various commissions at the level below
the Board. Independently of the affected business area, these
commissions carefully assess the planned measures and evaluate
the associated opportunities and risks. Based on this information,
they report and make recommendations to the Board.
The Board of Executive Directors informs the Supervisory Board
regularly, without delay and comprehensively, of all issues important
to the company with regard to planning, business development, risk
situation, risk management and compliance. Furthermore, the
Board of Executive Directors coordinates the company's strategic
orientation with the Supervisory Board.
The Statutes of BASF SE and the Supervisory Board have defined
certain transactions that require the Board of Executive Directors to
obtain the Supervisory Board's approval prior to their conclusion.
Such cases include the acquisition and disposal of enterprises and
parts of enterprises, as well as the issue of bonds or comparable
180
Board of Executive Directors
manages company and represents BASF SE in business
with third parties
Corporate governance refers to the entire system for
managing and supervising a company. This includes its
organization, values, corporate principles and guidelines as
well as internal and external control and monitoring mecha-
nisms. Effective and transparent corporate governance
ensures that BASF is managed and supervised responsibly
with a focus on value creation. It fosters the confidence of
our investors, the financial markets, our customers and
other business partners, employees, and the public in BASF.
BASF Report 2020
Corporate Governance Direction and management by the Board of Executive
Board of Executive Directors.
Report
180
Section 161 AktG
210
Supervisory Board
181
Declaration of Corporate Governance
168
About This Report
211
Consolidated Financial Statements
4
5 Overviews
2 Management's Report
1
To Our Shareholders
3 Corporate Governance
Corporate Governance Report
We Always Speak Up
We Lead Integrity
Sensitive Company
-
-
We protect
- Environmental
Protection, Health
and Safety
- Gifts and
Entertainment
Conflicts of Interest
-
Information
We Respect
We Play Fair
- Anti-Money
Laundering
Anti-Corruption
Trade Control
We Earn Trust
Human Rights, Labor
and Social Standards
- Antitrust Laws
BASF's Compliance Program is based on our corporate values and
voluntary commitments, as well as international standards. It
describes our commitment to responsible conduct and expectations
around how all BASF employees interact with business partners,
officials, coworkers and the community. At the core of our
Compliance Program is the global, standardized Code of Conduct.
All employees and managers are obligated to adhere to its guide-
lines, which cover topics ranging from corruption and antitrust laws
to human rights, labor and social standards, conflicts of interest and
trade control, and protection of data privacy.
Digital Responsibility
Company Property
2 Management's Report
- How We Make
Decisions
To Our Shareholders
1
About This Report
177
BASF Report 2020
Personal Data
Participants in compliance training
61 internal audits
conducted on compliance
Code of Conduct
to take part in basic compliance training, refresher courses and
special tutorials dealing with, for example, antitrust legislation, taxes
or trade control regulations. In addition, the new Code of Conduct
contains a section dedicated to leading with integrity. Newly
appointed senior executives therefore receive special training on
compliance. Course materials and formats are constantly updated,
taking into account the specific risks of individual target groups and
business areas. In total, more than 42,000 participants worldwide
received around 54,000 hours of compliance training in 2020.
For more information on the BASF Code of Conduct, see basf.com/code_of_conduct
We perform a systematic risk assessment to identify the risk of
compliance violations, including corruption risks. These are
conducted at divisional, regional and country levels. The regular
compliance audits performed by the Corporate Audit department
are another source of information for the systematic identification of
risks. These risks are documented in the relevant risk or audit report.
The same applies to specific risk minimization measures as well as
the time frame for their implementation.
Abiding by compliance standards is the foundation of responsible
leadership. This has also been embedded in our values. We are
convinced that compliance with these standards will play a key role
in securing our company's long-term success. Our efforts are
principally aimed at preventing violations from the outset.
case studies, FAQs and additional references. A new internal online
platform and the corresponding app are available to employees
worldwide, providing them continuously with up-to-date content,
interactive educational options as well as direct contact to subject
specialists.
BASF's global Code of Conduct from 2013 was thoroughly revised
and republished in June 2020. The content of the new Code of
Conduct is fundamentally the same as that of the previous global
Code of Conduct but has been supplemented with specific
additional topics. New sections include "Digital Responsibility" and
"How We Make Decisions." A greater emphasis is placed on the
importance of raising concerns openly and speaking up when our
gut feeling tells us to. A further focus of the new version is its modern
design, which offers employees more user-friendly features such as
- Accurate Books and
Records
is the core of our Compliance Program
More than 42,000
One key element in the prevention of compliance violations is
compulsory training and workshops held as classroom or online
courses. All employees are required within a prescribed time frame
About This Report
-
Information on the auditor
For more information, see Note 32 to the Consolidated Financial Statements on page 312
proposed for election at the Annual Shareholders' Meeting as
BASF's auditor without further tendering processes up to and
including the 2025 business year. Dr. Stephanie Dietz has been the
auditor responsible for the Consolidated Financial Statements since
auditing the 2020 Financial Statements. Since the 2020 Financial
Statements, the auditor responsible for the Separate Financial
Statements has been Stephan Kaiser. The total fee paid to KPMG
and auditing firms of the KPMG group by BASF SE and other BASF
Group companies for non-audit services, in addition to the auditing
fee, was €1.2 million in 2020. This represents around 6.1% of the
fees for auditing the financial statements.
As legally stipulated by Article 19(1) MAR, all members of the Board
of Executive Directors and the Supervisory Board as well as certain
members of their families are required to disclose the purchase or
sale of financial instruments of BASF SE (e.g., shares, bonds,
options, forward contracts, swaps) to the Federal Financial
Supervisory Authority (Bundesanstalt für Finanzdienstleistungs-
aufsicht) and to the company if transactions within the calendar year
exceed the threshold of €20,000. In 2020, a total of 26 purchases
by members of the Board of Executive Directors and the Supervisory
Board and members of their families subject to disclosure were
reported as directors' dealings, involving between 17 and 10,000
BASF shares or BASF ADRs (American Depositary Receipts). The
price per share was between €38.99 and €66.49. The volume of the
individual trades was between €978.29 and €479,087.94. The
disclosed share transactions are published on BASF SE's website.
For more information on securities transactions reported in 2020, see basf.com/en/directorsdealings
Share dealings of the Board of Executive Directors and
Supervisory Board¹
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Corporate Governance Report
2 Management's Report
To Our Shareholders
1
About This Report
175
BASF Report 2020
An overview of the BASF shares held by individual members of the Board of Executive Directors can
be found at basf.com/shares-held
The Annual Shareholders' Meeting of June 18, 2020, once again
elected KPMG AG Wirtschaftsprüfungsgesellschaft as the auditor of
the BASF Group Consolidated Financial Statements and Separate
Financial Statements of BASF SE for the 2020 business year, as well
as the corresponding management's reports. KPMG member firms
also audit the majority of BASF Group companies included in the
Consolidated Financial Statements. KPMG has been the continuous
auditor of BASF SE since the 2006 Financial Statements. A public
call to tender was issued in 2015 to all auditors for the audit of the
2016 Consolidated and Separate Financial Statements, in line with
the E.U. Regulation 537/2014 of April 16, 2014. Based on the
results of the tendering process, the Audit Committee recommended
to the Supervisory Board that it once again propose KPMG for
election. After completing the tendering process, KPMG can now be
Our Code of Conduct
1 Obligatory reportable and publishable directors' dealings under Article 19(1) of the E.U. Market Abuse Regulation 596/2014 (MAR)
176
We Care
The structure of BASF's Code of Conduct
■ New Code of Conduct "We are BASF"
■ Regular compliance training for employees
■ Integrated into corporate values
Compliance Program and Code of Conduct
Our Group-wide Compliance Program aims to ensure
adherence to legal regulations, the company's internal guide-
lines and ethical business practices. Our employee Code
of Conduct firmly embeds these mandatory standards into
day-to-day business. Members of the Board of Executive
Directors are also expressly obligated to follow these
principles.
Compliance
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Compliance
2 Management's Report
To Our Shareholders
1
BASF Report 2020
3 Corporate Governance
Compliance
Board of Executive Directors
Consolidated Financial Statements
Dr. Melanie Maas-Brunner (since February 1, 2021)
Degree: Chemistry, 52 years old, 24 years at BASF
Responsibilities until May 31, 2021: Advanced Materials &
Systems Research; Bioscience Research; Process Research &
Comparable German and non-German supervisory bodies:
Solenis UK International Ltd. (member of the Board of Directors)
First appointed: 2017, term expires: 2025
Degree: Chemistry, 50 years old, 22 years at BASF
Responsibilities: Catalysts; Coatings; Dispersions & Pigments;
Performance Chemicals; Advanced Materials & Systems Research
(until January 31, 2021); BASF New Business (until January 31,
2021); Greater China; South & East Asia, ASEAN & Australia/New
Zealand; Mega Projects Asia
Dr. Markus Kamieth
Saori Dubourg
Wintershall AG (Chairman of the Supervisory Board)
Comparable German and non-German supervisory bodies:
Nord Stream AG (member of the Shareholders' Committee)
Wintershall Dea GmbH (Chairman of the Supervisory Board until
July 31, 2020, Deputy Chairman of the Supervisory Board since
August 1, 2020)
Internal memberships within the meaning of section 100(2) of
the German Stock Corporation Act:
Responsibilities: Corporate Finance; Corporate Audit; Global
Business Services; Global Digital Services; Global Procurement
First appointed: 2008, term expires: 2023
Vice Chairman of the Board of Executive Directors
Degree: Law, 61 years old, 33 years at BASF
Dr. Hans-Ulrich Engel
First appointed: 2006, term expires: 2023
Chairman of the Board of Executive Directors
Degree: Chemistry, 59 years old, 33 years at BASF
Responsibilities: Corporate Legal, Compliance, Tax & Insurance;
Corporate Development; Corporate Communications & Govern-
ment Relations; Corporate Human Resources; Corporate Investor
Relations
Dr. Martin Brudermüller
Degree: Business, 49 years old, 24 years at BASF
Responsibilities: Agricultural Solutions; Care Chemicals;
Nutrition & Health; Bioscience Research (until January 31, 2021); Chemical Engineering; BASF New Business
Europe
The composition of the Board of Executive Directors and the
responsibilities of individual members are as follows:
First appointed: 2017, term expires: 2025
Wintershall Dea GmbH (member of the Supervisory Board)
No member of the Board of Executive Directors or the Supervisory
Board owns shares in BASF SE and related options or other
derivatives that account for 1% or more of the share capital. Further-
more, the total volume of BASF SE shares and related financial
instruments held by members of the Board of Executive Directors
and the Supervisory Board accounts for less than 1% of the shares
issued by the company.
180
BASF Report 2020
Comparable German and non-German supervisory bodies:
Inter Pipeline Ltd. (member of the Board of Directors since May 7,
2020)
First appointed: 2012, term expires: 2021
Responsibilities until May 31, 2021: Monomers; Performance
Materials; Petrochemicals; Intermediates; Process Research &
Chemical Engineering (until January 31, 2021); Market & Business
Development, Site & Verbund Management North America; Country
Platforms North America
Degrees: Chemical Engineering, MBA, 60 years old, 17 years at
BASF
Wayne T. Smith
First appointed: 2021, term expires: 2024
Responsibilities from June 1, 2021: Corporate Environmental
Protection, Health & Safety; European Site & Verbund Management;
Global Engineering Services; Advanced Materials & Systems
Research; Bioscience Research; Process Research & Chemical
Engineering; BASF New Business
Wintershall Dea GmbH (member of the Supervisory Board)
Comparable German and non-German supervisory bodies:
BASF Antwerpen N.V. (Chairman of the Administrative Council)
Internal memberships within the meaning of section 100(2) of
the German Stock Corporation Act:
First appointed: 2011, term expires: 2024
Degree: MBA, 56 years old, 37 years at BASF
Responsibilities until May 31, 2021: Corporate Environmental
Protection, Health & Safety; European Site & Verbund Manage-
ment; Global Engineering Services; South America
Responsibilities from June 1, 2021: Monomers; Performance
Materials; Petrochemicals; Intermediates; North America; South
America
Michael Heinz
Internal memberships within the meaning of section 100(2) of
the German Stock Corporation Act:
4
As part of its long-term succession planning and in line
with its diversity concept, the Supervisory Board appointed
Dr. Melanie Maas-Brunner as a member of the Board of
Executive Directors on December 17, 2020. As of February 1,
2021, the Board of Executive Directors therefore temporarily
comprises seven members and, following a transition period,
will again be reduced to six members with the departure of
Wayne T. Smith as of May 31, 2021. Some of the responsi-
bilities within the Board of Executive Directors will be reallo-
cated effective June 1, 2021, as a result of this change.
Management and
Supervisory Boards
178
BASF Report 2020
As prescribed by BASF's Code of Conduct and corporate values,
we adhere to uniformly high standards and integrity regarding
tax-related issues. To aid in the achievement of the U.N. SDGs and
to meet our own standards for the creation of economic and social
value, we contribute to public finances in accordance with legal
requirements and our corporate values. BASF's Value to Society
approach considers taxes paid by BASF to be a social advantage.
We support the United Nations' Guiding Principles on Business and
Human Rights and are constantly working to enhance our internal
guidelines and processes in keeping with these principles. For
example, there is an internal guideline to respect international labor
and social standards that is applicable throughout the Group.
Outside of our company, too, we support respect for human rights
and the fight against corruption. We are a founding member of the
United Nations Global Compact. As a member of Transparency
International Deutschland and the Partnering Against Corruption
Initiative (PACI) of the World Economic Forum, we assist in the
implementation of these organizations' objectives.
We monitor our business partners in sales for potential compliance
risks based on the global Guideline on Business Partner Due
Diligence using a checklist, a questionnaire and an internet-based
analysis. The results are then documented. If business partners are
not prepared to answer the questionnaire, we do not enter into a
business relationship with them. A dedicated global Supplier Code
of Conduct applies to our suppliers, which covers compliance with
environmental, social and corporate governance standards, among
other requirements. As part of our trade control processes, we also
check whether persons, companies or organizations appear on
sanction lists due to suspicious or illegal activities, and whether
there are business processes with business partners from or in
countries under embargo.
BASF's Corporate Audit department monitors adherence to
compliance principles, covering all areas in which compliance
violations could occur. They check that employees uphold regula-
tions and make sure that the established processes, procedures
and monitoring tools are appropriate and sufficient to minimize
potential risks or preclude violations in the first place. In 2020, 61
Group-wide audits of this kind were performed (2019: 86). Our
compliance management system itself is also regularly audited by
the internal Corporate Audit department, most recently in November
2018. Overall, the audits confirmed the effectiveness of the
compliance management system.
In 2020, 387 calls and emails were received by our external hotlines
(2019: 408). The information received related to all categories of our
Code of Conduct, including environmental and human rights issues,
corruption and handling of company property. We carefully
investigated all cases of suspected misconduct that came to our
attention and, when necessary, took countermeasures on a
case-by-case basis. These included, for example, improved control
mechanisms, additional informational and training measures,
clarification and expansion of the relevant internal regulations, as
well as disciplinary measures as appropriate. Most of the justified
cases related to personal misconduct in connection with the
protection of company property, inappropriate handling of conflicts
of interests or gifts and invitations. In such isolated cases, we took
disciplinary measures in accordance with uniform internal standards
and also pursued claims for damages where there were sufficient
prospects of success. In 2020, violations of our Code of Conduct
led to termination of employment in a total of 31 cases (2019: 52).
This relates to all employee groups, including senior executives.
are also open to the public. Each concern is documented according
to specific criteria, properly investigated in line with standard internal
procedures and answered as quickly as possible. The outcome of
the investigation as well as any measures taken are documented
accordingly and included in internal reports.
We particularly encourage our employees to actively and promptly
seek guidance if in doubt. They can consult their managers,
specialist departments, such as the Legal department, and company
compliance officers. The new internal platform and corresponding
app also help employees to access advice by enabling direct
contact. In addition, we have set up more than 50 external hotlines
worldwide that our employees can use - including anonymously - to
report potential violations of laws or company guidelines. All hotlines
BASF's Chief Compliance Officer (CCO) reports directly to the
Chairman of the Board of Executive Directors and manages the
further development of our global compliance organization and our
Compliance Management System. The CCO is supported in this
task by the Corporate Compliance unit and more than 100 com-
pliance officers worldwide in the regions and countries as well as in
the divisions. Material compliance topics are regularly discussed in
the compliance committees established at global and regional level.
The CCO reports to the Supervisory Board's Audit Committee in at
least one of its meetings each year on the status of the Compliance
Program as well as any major developments. In the event of signifi-
cant incidents, the Audit Committee is immediately informed by the
Board of Executive Directors.
Monitoring adherence to our compliance principles
-
We firmly believe that for corporate responsibility to be a success,
there must be an active culture of living these guidelines within the
company. Thanks to the early introduction of our compliance
standards, which were consolidated in our global Code of Conduct
in 2013 and republished in June 2020 in our currently applicable
global Code of Conduct, these are firmly established and recognized.
We expect all employees to act in line with these compliance
principles. Managers play a key role here – they serve as an example
of and communicate our values and culture both internally and
externally.
Compliance culture at BASF
5 Overviews
About This Report
There were six members on the Board of Executive Directors
of BASF SE as of December 31, 2020.
1 To Our Shareholders
3 Corporate Governance
Compliance
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Management and Supervisory Boards
2 Management's Report
1 To Our Shareholders
About This Report
179
BASF Report 2020
For more information on human rights and labor and social standards, see basf.com/human_rights
For more information on on tax principles, see basf.com/en/corporate governance
For more information on the Code of Conduct, see basf.com/code_of_conduct
For more information on the Supplier Code of Conduct and supplier assessments, see page 113
onward
which are binding for all Group entities.
In 2020, we developed and published our BASF tax principles,
5 Overviews
4 Consolidated Financial Statements
2 Management's Report
Share ownership by members of the Board of Executive
Directors and the Supervisory Board
- At least 30% of members have international experience based on
their background or professional experience
Directors' and officers' liability insurance
2 Management's Report
1 To Our Shareholders
About This Report
171
BASF Report 2020
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 172 for the criteria used to determine independence)
*
The Supervisory Board's Rules of Procedure and its committees can be found at
basf.com/supervisoryboard
For an individual overview of meeting attendance, see basf.com/supervisoryboard/meetings
For more information on the Supervisory Board's activities and resolutions in the 2020 business year,
see the Report of the Supervisory Board from page 203 onward
The meetings of the Supervisory Board and its committees since the
beginning of the coronavirus pandemic in 2020 have been held in
accordance with appropriate safety measures and in compliance
with restrictions on assembly and travel as per the applicable
infection prevention laws. They took place as in-person meetings
with the additional option of virtual attendance via electronic
communication and as completely virtual meetings solely via
electronic communication.
With the exception of one meeting, at which one member was
absent, all respective members attended all meetings of the
Supervisory Board. With the exception of two meetings of the
Nomination Committee, at each of which one member was absent,
and one meeting of the Audit Committee, at which one member was
absent, all respective members attended all meetings of the
Supervisory Board's committees.
- The Strategy Committee did not meet.
-
- The Nomination Committee met twice.
3 Corporate Governance
Corporate Governance Report
-
4
5 Overviews
The Supervisory Board strives to achieve a reasonable level of
diversity with respect to character, gender, international repre-
sentation, professional background, specialist knowledge and
experience as well as age distribution, and takes the following
composition criteria into account:
Diversity concept
For more information on the Supervisory Board's competence profile, see basf.com/supervisoryboard
- At least one member with in-depth experience in human
resources, society, communications and the media
Specialist knowledge and experience in sectors outside of the
chemical industry
- At least one member with in-depth experience in digitalization,
information technology, business models and start-ups
- At least one member with in-depth experience in innovation,
research & development and technology
one independent member with accounting and auditing expertise
("financial expert") within the meaning of section 100(5) of the
German Stock Corporation Act (AktG)
- Appropriate knowledge within the body as a whole of finance,
accounting, financial reporting, law and compliance as well as
Members' collective knowledge of the chemical sector and the
related value chains
_
The following requirements and objectives are considered essential
to the composition of the Supervisory Board as a collective body:
– Leadership experience in managing companies, associations and
networks
Competence profile
One important concern of good corporate governance is to ensure
that seats on the responsible corporate bodies, the Board of
Executive Directors and the Supervisory Board, are appropriately
filled. On December 21, 2017, the Supervisory Board therefore
agreed on objectives for the composition, the competence profile
and the diversity concept of the Supervisory Board in accordance
with section 5.4.1 of the German Corporate Governance Code in
the version dated February 7, 2017, and section 289f(2) no. 6 of the
German Commercial Code (HGB). These were expanded on
December 19, 2019, in particular with respect to the criteria for
assessing independence, based on the new recommendations of
the German Corporate Governance Code, which was revised and
amended in 2019 (2020 Code). The guiding principle for the
composition of the Supervisory Board is to ensure qualified
supervision and guidance for the Board of Executive Directors of
BASF SE. Individuals shall be nominated to the Annual Share-
holders' Meeting for election to the Supervisory Board who can,
based on their professional expertise and experience, integrity,
commitment, independence and character, successfully perform
the work of a supervisory board member at an international chemical
company.
■ Composition criteria: professional and personal
qualifications, diversity, and independence
Competence profile, diversity concept and objectives for the
composition of the Supervisory Board
Consolidated Financial Statements
- At least 30% women and 30% men
The Personnel Committee met four times.
The Audit Committee met six times.
-
Deals with follow-up assessments of key acquisition and
investment projects
-
- Is responsible for business relations with the company's external
auditor: prepares the Supervisory Board's proposal to the Annual
Shareholders' Meeting regarding the selection of an auditor,
monitors the auditor's independence, defines the focus areas of
the audit together with the auditor, negotiates auditing fees,
evaluates the quality of the audit, and establishes the conditions
for the provision of the auditor's nonaudit services; the chair of the
Audit Committee regularly discusses this with the auditor outside
of meetings as well
Deals with monitoring the financial reporting process, the annual
audit, the effectiveness of the internal control system, the risk
management system, and the internal auditing system as well as
compliance issues
Prepares the negotiations and resolutions of the Supervisory
Board for the approval of the Financial Statements, the
Consolidated Financial Statements and the Management's
Reports including the Nonfinancial Statements and discusses the
quarterly statements and the half-year financial report with the
Board of Executive Directors prior to their publication
-
-
Duties
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Corporate Governance Report
2 Management's Report
1 To Our Shareholders
About This Report
- Is responsible for monitoring the internal process of identifying
related party transactions and ensuring adherence to statutory
approval and disclosure requirements; grants approval of related
party transactions
-
- Is authorized to request any information that it deems necessary
from the auditor or Board of Executive Directors; can also view all
of BASF's business documents and examine these and all other
assets belonging to BASF. The Audit Committee can also engage
experts such as auditors or lawyers to carry out these inspections
Pursuant to the German Corporate Governance Code, Dame Alison
Carnwath DBE, chair of the Audit Committee, has special knowledge
In the 2020 business year, meetings were held as follows:
The Supervisory Board met seven times.
Meetings and meeting attendance
- Prepares resolutions of the Supervisory Board on the company's
major acquisitions and divestitures
- Handles the further development of the company's strategy
Duties
Dr. Kurt Bock (chair, since June 18, 2020),* Dr. Jürgen Hambrecht
(chair, until June 18, 2020),* Dame Alison Carnwath DBE,*
Franz Fehrenbach, Waldemar Helber,* Sinischa Horvat,* Michael
Vassiliadis
Members
Strategy Committee
- Prepares the recommendations made by the Supervisory Board
for the election of Supervisory Board members for the Annual
Shareholders' Meeting
- Identifies suitable individuals for the Supervisory Board based on
objectives for the composition decided on by the Supervisory
Board
Duties
Dr. Kurt Bock (chair, since June 18, 2020),* Dr. Jürgen Hambrecht
(chair, until June 18, 2020),* Prof. Dr. Thomas Carell,* Dame Alison
Carnwath DBE,* Liming Chen (since December 17, 2020),*
Dr. Alexander C. Karp (until July 22, 2020),* Franz Fehrenbach,
Anke Schäferkordt*
Members
Nomination Committee
of, and experience in, applying accounting and reporting standards
and internal control methods and is familiar with the annual audit. A
further financial expert on the Supervisory Board is the vice chair of
the Supervisory Board, Franz Fehrenbach, who left the Audit Com-
mittee in February 2020, after 12 years of service.
Financial experts
BASF SE has taken out liability insurance that covers the activities of
members of the Board of Executive Directors and the Supervisory
Board (directors' and officers' liability insurance). This policy pro-
vides for the level of deductibles for the Board of Executive Directors
as prescribed by section 93(2) sentence 3 AktG (10% of damages
up to 1.5 times the fixed annual compensation).
At least 50% of members have different educational backgrounds
and professional experience
Further composition objectives
According to Article 59(1) of the SE Council Regulation, amend-
ments to the Statutes of BASF SE require a resolution of the Annual
Shareholders' Meeting adopted with at least a two-thirds majority of
the votes cast, provided that the legal provisions applicable to
German stock corporations under the German Stock Corporation
Act do not stipulate or allow for larger majority requirements. In the
case of amendments to the Statutes, section 179(2) of the German
Stock Corporation Act requires a majority of at least three-quarters
of the subscribed capital represented. Pursuant to Article 12(6) of
the Statutes of BASF SE, the Supervisory Board is authorized to
resolve on amendments to the Statutes that merely concern their
wording. This applies in particular to the adjustment of the share
capital and the number of shares after the redemption of repurchased
BASF shares and after a new issue of shares from authorized capital.
The appointment and dismissal of members of the Board of
Executive Directors is legally governed by the regulations in
Article 39 of the SE Council Regulation, section 16 of the SE
Implementation Act and sections 84 and 85 AktG as well as Article
7 of the Statutes of BASF SE. Accordingly, the Supervisory Board
determines the number of members of the Board of Executive Direc-
tors (at least two), appoints the members of the Board of Executive
Directors, and can nominate a chair, as well as one or more vice
chairs. The members of the Board of Executive Directors are
appointed for a maximum of five years. The maximum initial term of
appointment is three years. Reappointments are permissible. The
Supervisory Board can dismiss a member of the Board of Executive
Directors if there is serious cause to do so. Serious cause includes,
in particular, a gross breach of the duties pertaining to the Board of
Executive Directors and a vote of no confidence by the Annual
Shareholders' Meeting. The Supervisory Board decides on appoint-
ments and dismissals according to its own best judgment.
As of December 31, 2020, the subscribed capital of BASF SE was
€1,175,652,728.32, divided into 918,478,694 registered shares
with no par value. Each share entitles the holder to one vote at the
Annual Shareholders' Meeting. Restrictions on the right to vote or
transfer shares do not exist. The same rights and duties apply to all
shares. According to the Statutes, shareholders are not entitled to
receive share certificates. There are neither different classes of
shares nor shares with preferential voting rights (golden shares).
Disclosures according to section 315a(1) of the German
Commercial Code (HGB)1 and explanatory report of the
Board of Executive Directors according to section 176(1)
sentence 1 of the German Stock Corporation Act (AktG)
For more information on the Declaration of Conformity 2020, the implementation of the Code's
suggestions and the German Corporate Governance Code, see basf.com/en/corporate governance
The joint Declaration of Conformity 2020 by the Board of Executive Directors and Supervisory Board of
BASF SE is rendered on page 210
BASF advocates responsible corporate governance that focuses on
sustainably increasing the value of the company. BASF SE follows all
of the recommendations of the German Corporate Governance
Code in the version dated December 16, 2019 (Code 2020), the
version in force on submission of the Declaration of Conformity. In
the same manner, BASF follows all of the nonobligatory suggestions
of the German Corporate Governance Code.
■ BASF SE follows all recommendations of German
Corporate Governance Code
Implementation of the German Corporate Governance Code
shareholder rights and options for action were limited or handled in
an exceptional manner at this virtual meeting. With a few amend-
ments, these special policies are valid for Annual Shareholders'
Meetings in 2021 as well.
Due to assembly restrictions resulting from the coronavirus pan-
demic, the 2020 Annual Shareholders' Meeting took place virtually
without the physical presence of shareholders in accordance with
special regulations prescribed by the COVID-19 Act passed by the
lower house of the German parliament (Bundestag) in March 2020.
To ensure legally compliant execution of this special Annual
Shareholders' Meeting format, whereby shareholders participated
solely via electronic communication, some of the aforementioned
no registration restrictions and there is no limit to the number of
shares that can be registered to one shareholder. Only the persons
listed in the share register are entitled to vote as shareholders. Listed
shareholders may exercise their voting rights at the Annual Share-
holders' Meeting either personally, through a representative of their
choice or through a company-appointed proxy authorized by the
shareholders to vote according to their instructions. Individual
instructions are only forwarded to the company on the morning of
the day of the Annual Shareholders' Meeting. Voting rights can be
exercised according to shareholders' instructions by company-
appointed proxies until the beginning of the voting process during
the Annual Shareholders' Meeting. There are neither voting caps to
limit the number of votes a shareholder may cast nor special voting
rights. BASF has fully implemented the principle of "one share, one
vote." All shareholders entered in the share register are entitled to
participate in the Annual Shareholders' Meetings, to have their say
concerning any item on the agenda and to request information
about company issues insofar as this is necessary to make an
informed judgment about the item on the agenda under discussion.
Registered shareholders are also entitled to file motions pertaining to
proposals for resolutions made by the Board of Executive Directors
and Supervisory Board at the Annual Shareholders' Meeting and to
contest resolutions of the Meeting and have them evaluated for their
lawfulness in court. Shareholders who hold at least €500,000 of the
company's share capital, a quota corresponding to 390,625 shares,
are furthermore entitled to request that additional items be added to
the agenda of the Annual Shareholders' Meeting.
5 Overviews
Consolidated Financial Statements
4
By way of a resolution of the Annual Shareholders' Meeting on
May 3, 2019, the Board of Executive Directors is authorized, with
the consent of the Supervisory Board, to increase, until May 2,
3 Corporate Governance
Corporate Governance Report
1 In the version applicable to the Financial Statements and Management's Report for the 2020 fiscal year pursuant to Article 83 of the Introductory Act on the German Commercial Code (EGHGB)
174
For more information on bonds issued by BASF SE, see basf.com/bonds
By contrast, employees of BASF SE and its subsidiaries who are
classed as senior executives will still receive a severance payment
if their contract of employment is terminated by BASF within
18 months of a change of control event, provided the employee has
not given cause for the termination. The employee whose service
contract has been terminated in such a case will receive a maximum
severance payment of 1.5 times the annual salary (fixed component)
depending on the number of months that have passed since the
change of control event. A change of control is assumed when a
shareholder informs BASF of a shareholding of at least 25% or the
increase of such a holding. The remaining specifications stipulated
in section 315a(1) HGB refer to situations that are not applicable to
BASF SE.
An exceptional change of control compensation awarded to out-
going members of the Board of Executive Directors has not existed
since January 1, 2020, as of the introduction of the amended
compensation system for the Board of Executive Directors, which
was approved by the Annual Shareholders' Meeting on June 18,
2020. The general rule for severance payments granted for
premature terminations of appointments to the Board of Executive
Directors applies, which states that the maximum severance
payment may not exceed the amount of two years' compensation;
however, this may not exceed the compensation for the remaining
period of the contract.
Bonds issued by BASF SE and its subsidiaries grant the bearer the
right to request early repayment of the bonds at nominal value if,
after the date of issue of the bond, one person - or several persons
acting together - hold or acquire a volume of BASF SE shares that
corresponds to more than 50% of the voting rights (change of
control), and one of the rating agencies named in the bond's terms
and conditions withdraws its rating of BASF SE or the bond, or
reduces it to a noninvestment grade rating within 120 days of the
change of control event.
exchange or by way of a public purchase offer directed to all
shareholders. The Board of Executive Directors is authorized to sell
the repurchased company shares (a) through a stock exchange, (b)
through a public offer directed to all shareholders and - with the
approval of the Supervisory Board - to third parties, (c) for a cash
payment that is not significantly lower than the stock exchange price
at the time of sale and (d) for contributions in kind, particularly in
connection with the acquisition of companies, parts of companies
or shares in companies or in connection with mergers. In the cases
specified under (c) and (d), the shareholders' subscription right is
excluded. The Board of Executive Directors is furthermore autho-
rized to retire the shares bought back and to reduce the share
capital by the proportion of the share capital accounted for by the
retired shares.
At the Annual Shareholders' Meeting on May 12, 2017, the Board of
Executive Directors was authorized to purchase up to 10% of the
shares in issue at the time of the resolution (10% of the company's
share capital) until May 11, 2022. At the discretion of the Board of
Executive Directors, the purchase can take place on the stock
By way of a resolution of the Annual Shareholders' Meeting on
May 12, 2017, the share capital was increased conditionally by up
to €117,565,184 by issuing up to 91,847,800 new shares. The
contingent capital increase serves to grant shares to the holders of
convertible bonds or warrants attached to bonds with warrants of
BASF SE or a subsidiary, which the Board of Executive Directors
is authorized to issue up to May 11, 2022, by way of a resolution
of the Annual Shareholders' Meeting on May 12, 2017. A right
to subscribe to the bonds shall be granted to shareholders. The
Board of Executive Directors is authorized to exclude the share-
holders' subscription right in certain exceptional cases - as defined
in Article 5(9) of the BASF SE Statutes.
2024, on a one-off basis or in portions on a number of occasions,
the company's share capital by a total of up to €470 million by issu-
ing new shares against contributions in cash or in kind (authorized
capital). A right to subscribe to the new shares shall be granted to
shareholders. This can also be achieved by a credit institution
acquiring the new shares with the obligation to offer these to
shareholders (indirect subscription right). The Board of Executive
Directors is authorized to exclude the statutory subscription right of
shareholders to a maximum amount of a total of 10% of share
capital in certain exceptional cases that are defined in Article 5(8) of
the BASF SE Statutes. This applies in particular if, for capital
increases in return for cash contributions, the issue price of the new
shares is not substantially lower than the stock market price of
BASF shares and the total number of shares issued under this
authorization does not exceed 10% of the shares currently in issue
or, in eligible individual cases, to acquire companies or shares in
companies in exchange for surrendering BASF shares.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
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BASF Report 2020
At least 30% under the age of 60
2 Management's Report
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According to the Supervisory Board's own assessment, its current
composition meets all of the requirements of the competence
profile. With the court appointment of the new Supervisory Board
member Liming Chen on October 8, 2020, the competence area of
digitalization - which is key to the future viability of BASF - will
continue to be fully covered, despite the departure of Alexander C.
Karp on July 22, 2020.
Status of implementation
annual compensation of over 50% of the Supervisory Board
compensation, they do not qualify as independent. Furthermore,
if a Supervisory Board member or a related party of a Supervisory
Board member holds more than 20% of the shares in a company
in which BASF SE is indirectly or directly the majority shareholder,
the necessary independence is also not met.
5 Overviews
Consolidated Financial Statements
4
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BASF Report 2020
Age limit and period of membership: Persons who have
reached the age of 72 on the day of election by the Annual
Shareholders' Meeting should generally not be nominated for
election. Membership on the Supervisory Board should generally
not exceed three regular statutory periods in office, which will
correspond to 12 years in the future.
Independence: To ensure the independent monitoring and
consultation of the Board of Executive Directors, the Supervisory
Board should have an appropriate number of independent
members on the board as a whole, and an appropriate number of
independent shareholder representatives. The Supervisory Board
deems this to be the case if more than half of the shareholder
representatives and at least eight members of the Supervisory
Board as a whole can be considered independent. The
Supervisory Board's assessment of independence is based on
the criteria in the new version of the German Corporate
Governance Code, which was revised in 2019 (2020 Code).
Among other things, this means that members of the Supervisory
Board are no longer considered independent if they have been a
member of the board for 12 years or longer. The Supervisory
Board has additionally defined the following principles to clarify
the meaning of independence: The independence of employee
representatives is not compromised by their role as an employee
representative or employment by BASF SE or a Group company.
Prior membership of the Board of Executive Directors of BASF SE
does not preclude independence following the expiry of the
statutory cooling-off period of two years. Material transactions
between a Supervisory Board member or a related party or
undertaking of the Supervisory Board member on the one hand,
and BASF SE or a BASF Group company on the other, exclude a
member of the Supervisory Board from being qualified as
independent. A material transaction is defined as one or more
transactions in a single calendar year with a total volume of 1% or
more of the sales of the companies involved in each case. In the
same way, if a Supervisory Board member or a related party of a
Supervisory Board member has a personal service or consulting
agreement with BASF SE or one of its Group companies with an
Availability: Each member of the Supervisory Board ensures that
they invest the time needed to properly perform their role as a
member of the Supervisory Board of BASF SE. The statutory
limits on appointments to governing bodies and the recom-
mendations of the German Corporate Governance Code must be
complied with when accepting further appointments.
- Character and integrity: All members of the Supervisory Board
must be personally reliable and have the knowledge and
experience required to diligently and independently perform the
work of a supervisory board member.
According to the Supervisory Board's assessment, nine (five share-
holder representatives and four employee representatives) of the 12
current members are considered independent based on the above
criteria. As of January 2020, shareholder representative Franz
Fehrenbach is no longer classified as independent, because he has
been a member of the Supervisory Board since January 2008 and
no longer meets the criterion of a membership duration of less than
12 years. The same applies to employee representative Denise
Schellemans, who has also been a member of the Supervisory
Board since January 2008, and to employee representative Michael
Vassiliadis, who has been a member of the Supervisory Board since
August 2004.
1 To Our Shareholders
For more information on the statutory minimum quotas for the number of women and men on the
Supervisory Board, see the following section
Commitments to promote the participation of women in
leadership positions at BASF SE
173
BASF Report 2020
Each BASF SE share represents one vote. All of BASF SE's shares
are registered shares. Shareholders are obliged to have themselves
entered with their shares into the company share register and to
provide the information necessary for registration in the share
register according to the German Stock Corporation Act. There are
Shareholders exercise their rights of co-administration and
supervision at the Annual Shareholders' Meeting, which usually
takes place within the first five months of the business year. The
Annual Shareholders' Meeting elects half of the members of the
Supervisory Board and, in particular, resolves on the formal
discharge of the Board of Executive Directors and the Supervisory
Board, the distribution of profits, capital measures, the authorization
of share buybacks, changes to the Statutes and the selection of the
auditor.
■ One share, one vote
■ Shareholders' rights of co-administration and supervision
at the Annual Shareholders' Meeting
Shareholders' rights
The November 2015 Employee Participation Agreement relevant to the composition of the Supervisory
Board is available at basf.com/en/corporate governance
For more information on women in leadership positions in the BASF Group worldwide, see page 32
For more information on the inclusion of diversity, including promotion of women, see the chapter on
Employees in the Management's Report on page 146
BASF views the further development and promotion of women as a
global duty independent of individual Group companies. It has
committed to ambitious targets that were further raised in 2020. The
new target is to increase the proportion of women in leadership
worldwide to 30% by 2030. BASF will continue to work systema-
tically on expanding the percentage of women in its leadership
team. To achieve this, global measures will be implemented and
enhanced continuously.
target-attainment period were reached ahead of schedule at the
end of 2019.
The Board of Executive Directors also decided on target figures for
the proportion of women in the two management levels below the
Board of Executive Directors of BASF SE: Women are to make
up 12.1% of the leadership level directly below the Board, and the
level below that is to comprise 7.3% women. This corresponds to
the status at the time these target figures were determined. The
deadline for achieving the goals for the second target-attainment
period was set for December 31, 2021. The goals for the second
As a target figure for the Board of Executive Directors, the
Supervisory Board determined that, in accordance with section
111(5) AktG for the second target-attainment period after the law's
entry into force, which began on January 1, 2017, the Board of
Executive Directors should continue to have at least one female
member. This represented 12.5% on the date the target was set
(based on eight members of the Board of Executive Directors), and
represents 16.7% as of January 1, 2020 (based on six Board
members). With the appointment of Dr. Melanie Maas-Brunner to
the Board of Executive Directors, effective as of February 1, 2021,
there will be two female Board members. The proportion of women
will be 33.3% upon Wayne T. Smith's departure on May 31, 2021.
The supervisory board of a publicly listed European stock corporation
(SE) that is composed of the same number of shareholder and
employee representatives must, according to section 17(2) of the SE
Implementation Act, consist of at least 30% women and 30% men.
Since the 2018 Annual Shareholders' Meeting, the Supervisory
Board of BASF SE comprises four women, of whom two are
shareholder representatives and two are employee representatives,
and eight men. The Supervisory Board's composition meets the
statutory requirements.
■ Minimum quota on Supervisory Board, target figures for
Board of Executive Directors and top management
The independent Supervisory Board members are named under Management and Supervisory Boards
from page 180 onward
12.0%
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3 Corporate Governance
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2 Management's Report
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BASF Report 2020
- Current pensions are increased annually by 1% as of January 1.
If the member of the Board of Executive Directors dies while
receiving the annuity, the surviving spouse receives a survivor
benefits pension corresponding to 60% of the annuity. The same
applies for civil partners.
· For conversion into an annuity, the actuarial parameters relevant
at this point in time are used.
The pension benefit is paid as a capital payment, possibly in as
Imany as 10 installments. Moreover, there is the possibility of
choosing an annuity (lifetime pension payment).
For future entitlements from the new defined contribution pension
commitment in the form of a capital investment model, the following
applies:
- Members of the Board of Executive Directors can choose a pen-
sion allowance for private retirement savings instead of the defined
contribution pension commitment. In this case, the defined annual
pension contribution amount is paid in equal monthly installments
as a gross amount to the member of the Board of Executive
Directors. In this case, there is no further claim to benefits following
the conclusion of the Board mandate, since the annual pension
contribution is paid as a gross amount to the Board member in
equal monthly installments during the term of the mandate.
The pension benefits include disability and survivor benefits. The
disability capital corresponds to the value of the pension account
at the time the disability occurs, but at least to 80% of the sum of
the pension contributions paid by the company. The surviving
dependents capital corresponds to the value of the pension
account at the time of death of the member of the Board of
Executive Directors, but at least to 80% of the sum of the pension
contributions paid by the company.
For the purpose of building retirement assets (retirement capital),
the company pays pension contributions into an investment
model to be chosen by the company. The pension account is
managed by an external provider. The performance of the paid-in
contributions is determined by the returns generated by the
investment model. However, each member of the Board of
Executive Directors is guaranteed a benefit of least 80% of the
amount of the pension contributions paid by the company.
-
Since January 1, 2020, the company offers members of the Board
of Executive Directors a defined contribution pension commitment
in the form of a capital investment model. The company grants the
members of the Board of Executive Directors a fixed annual pension
plan contribution:
- Possibility to opt out in favor of an annual pension allowance
- Pension entitlement: retirement, disability and surviving
dependents' pensions
Defined contribution pension commitment in the form of an
external capital investment model
Company pension benefits
The previous pension benefits granted to members of the Board of
Executive Directors (Board Performance Pension, deferred com-
pensation program and basic coverage under BASF Pensionskasse)
were discontinued as of January 1, 2020, and replaced by a new
defined contribution pension.
3. Company pension benefits
4
5 Overviews
Consolidated Financial Statements
4. Short-term incentive (STI)
-4 pp
-6 pp
-5 pp
4.0%
0.3
The target ROCE for the variable compensation is one percentage
point above the cost of capital percentage for the fiscal year, which
is determined using the weighted average cost of capital (WACC)
approach in accordance with the capital asset pricing model.
A ROCE factor is assigned to each relevant ROCE value. If the
ROCE is two percentage points or more below the target ROCE, the
ROCE factor will decline at a faster rate. The ROCE factor will
increase at a slower rate if the ROCE is two percentage points or
more above the target ROCE.
For more information on operating assets, see Value-Based Management on page 33
With the ROCE as the key performance indicator for the variable
compensation, the short-term variable compensation is directly
linked to the company's operating success and aligned with the
BASF Group's financial goal of earning a premium on the cost of
capital. The ROCE of the particular fiscal year serves as the key
performance indicator for the success of the company when deter-
mining the STI. ROCE is the ratio of income from operations (EBIT)
of the segments in relation to the average operating assets of the
segments, plus the customer and supplier financing not included
there.
For each fiscal year, an STI with a one-year performance period is
granted. The STI is based on the achievement of operational and
strategic goals as well as the return on capital employed (ROCE),
which is relevant for the compensation of all employees. The actual
STI amount is paid out after the Annual Shareholders' Meeting in the
following year.
than 6 percentage points
below the target ROCE.
if the actual ROCE is more
Supervisory Board is required
A special resolution by the
The payout is limited to 200% of the target amount (cap).
The payment occurs after the Annual Shareholders' Meeting
following the fiscal year.
0.8
1.0
1.2
- The amount of the STI is based on the achievement of set
operational and strategic targets as well as the BASF Group's
ROCE.
One-year performance period
1.5
factor
ROCE
ROCE factor
Short-term incentive (STI)
5 Overviews
Target achievement
4 Consolidated Financial Statements
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BASF Report 2020
b The amount represents the target or maximum amount for the 2020 fiscal year for regularly granted fringe benefits. If one-off fringe benefits and/or transfer-related fringe benefits are granted in individual cases, the maximum
amounts specified for this also apply.
a
Payment after the Annual Shareholders' Meeting following the four-year performance period
€2,800,000ª corresponds to 200% of the annual target amount
€1,400,000ª
Cap
Payment after the Annual Shareholders' Meeting for the past fiscal year
Annual target
corresponds to 200% of the annual target amount
€1,000,000ª
€2,000,000ª
Cap
Annual target
with four-year performance
period
5. Long-term incentive (LTI)
Performance Share Plan
4. Short-term incentive (STI)
with one-year performance
period
Components of the compensation system also include a withhold-
ing and clawback clause for variable compensation components as
well as a Share Ownership Guideline, which obliges members of the
Board of Executive Directors to hold a defined number of shares for
the length of their Board mandate and beyond.
Since January 1, 2020, the compensation system for the Board of
Executive Directors contains the components listed in the overview
with the target and maximum amounts valid for the 2020 fiscal year.
€500,000ª
€100,000 corresponds to 200% of the annual target amount
Fixed annual pension contribution
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185
The members of the Board are covered by a directors' and officers'
liability insurance (D&O insurance) concluded by the company,
which includes a deductible. This policy provides for the level of
deductibles for the Board of Executive Directors as prescribed by
section 93(2) sentence 3 of the German Stock Corporation Act.
rental costs and school fees at the assignment location, or the
granting of a basic allowance and the assumption or reimbursement
of additional taxes. The fringe benefits granted by the company are
capped.
BASF Report 2020
Members of the Board of Executive Directors receive various fringe
benefits, in some instances event-related fringe benefits. The regu-
larly provided fringe benefits include accident insurance premiums,
transportation and benefits from the provision of security measures
by the company. The one-time, event-related fringe benefits include,
inter alia, security measures at the member's private residence upon
initial appointment to the Board of Executive Directors. The delega-
tion-related fringe benefits for members of the Board of Executive
Directors who are based abroad include fringe benefits to cover
additional costs of transfers, such as assumption of prevailing local
2. Nonmonetary compensation and other additional
compensation (fringe benefits)
The annual fixed salary for a member of the Board of Executive
Directors has been €800,000 since January 1, 2017. The fixed
salary for the chair of the Board of Executive Directors is two times
the value for a Board member, and 1.33 times this value for the vice
chair.
The fixed salary is a set amount of yearly compensation paid out in
equal installments. It is regularly reviewed by the Supervisory Board
and adjusted, when appropriate.
1. Fixed salary
Individual compensation components
Company pension benefits ~13%
Regular fringe benefits -1%
Fixed salary ~21%
a In individual cases, slight deviations are possible due to rounding.
Short-term incentive (STI) ~27%
Long-term incentive (LTI) -38%
Relative proportions of the compensation components in annual target total remunerationa
The relative proportions of the individual compensation components in the target total remuneration of members of the Board of Executive
Directors are:
5 Overviews
Consolidated Financial Statements
3 Corporate Governance
Compensation Report
Annual target
202 200
150%
100%
≥125%
0
0.5
1.0
1.5
The payout of the STI is determined as follows:
STI
Target
STI
ROCE
factor
Performance
factor
payout
(gross)
The payout is limited to 200% of the target amount (cap).
For more information on the determination of the cost of capital percentage, see Value-Based
Management on page 33
BASF Report 2020
187
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2 Management's Report
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4
Consolidated Financial Statements
5 Overviews
75%
5. Long-term incentive (LTI)
<50%
Performance factor
10.0%
8.0%
16.0%
If the actual ROCE
is more than 6
percentage points
above the target
ROCE, the ROCE
factor is increased
by 0.05 for each full
percentage point.
-2 pp
-1 pp
Target ROCE
+1 pp
+2 pp
+3pp
+4 pp
+5 pp
+6 pp
>6 pp
The ROCE factor is 1.0 if the ROCE achieved in the fiscal year is one
percentage point above the weighted cost of capital percentage
(based on the WACC in accordance with the capital asset pricing
model) for that year, meaning an appropriate premium on the cost of
capital was earned.
In calculating ROCE, adjustments are made for negative and posi-
tive special items resulting from acquisitions and divestitures (for
example, integration costs in connection with acquisitions and gains
or losses from the divestiture of businesses) when these exceed a
corridor of plus or minus 1% of the average cost of capital basis. An
adjustment of the ROCE (in the first 12 months after closing) there-
fore only occurs in cases of exceptionally high special items resulting
from acquisitions and divestitures.
The Supervisory Board sets a maximum amount for the STI (cap).
The current cap is €2,000,000 for a member of the Board of Execu-
tive Directors. The maximum amount for the chair of the Board of
Executive Directors is two times this value, and 1.33 times this value
for the vice chair.
For the fiscal year 2020, the target ROCE was 10% with a cost of
capital percentage of 9%. This figure is reviewed and communicated
annually. In order to assess the sustainable performance of the
Board of Executive Directors, each year the Supervisory Board sets
a target agreement with the Board of Executive Directors as a whole.
The target agreement contains:
One-year operational targets, primarily earnings, financial and
operational excellence targets. This includes, for example, EBIT
before special items.
- One-year strategic targets relating to the further development of
BASF, primarily targets for growth, portfolio optimization, invest-
ment and R&D strategy, digitalization, sustainability and BASF
corporate values.
These targets are in line with the outlook published in the forecast.
A performance factor with a value between 0 and 1.5 is determined
on the basis of the target achievement ascertained by the Supervi-
sory Board. A target achievement rate of 100% equates to a value
of 1.0 for the performance factor.
Target achievement and performance factor
Target achievement
Values between these figures are interpolated
100%
The LTI plan incentivizes the achievement of strategic goals and
takes into consideration the development of the BASF share and
dividend (Total Shareholder Return) over a period of four years. The
LTI is also offered with slight variations to senior executives of the
BASF Group.
Four-year performance period
188
Target achievement
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Consolidated Financial Statements
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250%
Strategic target 1: Grow sales volumes faster than global chemical
production every year
Strategic target 2: Increase EBITDA before special items by 3% to 5%
per year
Strategic target 3: Grow CO2-neutrally until 2030
200%
150%
100%
100%
50%
200
Target achievement
250%
250%
200%
BASF Report 2020
Long-term incentive (LTI)
For the LTI plan 2020 (performance period 2020-2023) the following
targets as communicated by the BASF corporate strategy (see
BASF Report 2019, page 27) apply:
Determination of target achievement: For each of the three stra-
tegic targets, at the beginning of the four-year performance period
the Supervisory Board defines a target value, which corresponds to
a target achievement of 100%, as well as a minimal value, a maxi-
mum value and a target achievement curve.
The payout amount is determined by the achievement of three
agreed strategic targets (growth, profitability, sustainability) and
the performance of the BASF share plus the dividends paid
(total shareholder return).
The payout is limited to 200% of the target amount (cap).
The payout occurs in May following the Annual Shareholders'
Meeting after the end of the four-year performance period.
Grant
(year 1)
LTI target amount
÷
Share price at grant date
-
Preliminary number of
(virtual) performance share
units (PSUs)
Achievement of strategic targets over a
Payout
(after year 4)
four-year performance period
Strategic target 1: Growth
Grow sales volumes faster than global chemical production every year
Strategic target 2: Profitability
Increase EBITDA before special items by 3% to 5% per year
Strategic target 3: Sustainability
Grow CO2 neutrally (<21.9 million metric tons
CO2 equivalents per year)
||
=
Final number of
(virtual) PSUs
Share price at end date
+Σ dividends
LTI payout (gross);
Cap at 200% of target
amount
Grant: For each fiscal year, an LTI plan with a four-year performance
period will be granted. The target amount will be converted into a
preliminary number of virtual performance share units (PSUs). To
undertake this conversion, the target amount is divided by the aver-
age price of the BASF share in the fourth quarter of the year prior to
the beginning of the respective plan.
Targets and target achievement: At the beginning of the four-year
performance period, the Supervisory Board defines three strategic
targets. Depending on the achievement of these strategic targets
over the four-year performance period, the number of PSUs can
increase or decline. To determine this, the number of provisional
PSUs at the end of the four years is multiplied by the weighted target
achievement rate for the three strategic targets.
Payout: The final number of PSUs determined in this way is multi-
plied by the average share price of the BASF share in the fourth
quarter of the last year of the four-year performance period plus the
cumulative dividend payments in the four fiscal years of the perfor-
mance period. The payout amount of the LTI therefore reflects not
only the achievement of the strategic targets but also the develop-
ment of BASF's total shareholder return. The actual LTI amount is
paid out after the Annual Shareholders' Meeting in the year following
the end of the four-year performance period. The payout is limited to
200% of the target amount (cap).
For each strategic target, the target achievement rate is determined
on an annual basis. At the end of the four-year performance period,
the arithmetic mean of the four annual target achievement rates is
calculated. The resulting average target achievement rates for the
individual strategic targets are combined according to the defined
weighting to reach a weighted target achievement. The preliminary
number of PSUs is multiplied by the weighted target achievement in
order to determine the final number of PSUs.
Cap
€50,000b
Annual target
■ The starting point for setting the four-year targets
is the EBITDA before special items in the year before
■
the start of the four-year performance period.
The target achievement for the entire performance period
2020-2023 is calculated as the arithmetic mean of the
degree of target achievements of each of the four years.
22.9
21.9 20.9 19.9 18.9
Emissions in million metric tons of CO2 equivalents
■ With emissions of 21.9 million metric tons of CO2
equivalents per year, the target achievement
is 100% (target value).
■ With emissions of 24.9 million metric tons of CO2
equivalents per year or more, the target achievement
is 0 (minimum value).
■ With emissions of 18.9 million metric tons of CO2
equivalents per year or less, the target achievement
is 200% (maximum value).
■ Intermediate values are determined by
linear interpolation.
17.9
■ The target achievement for the entire performance period
2020-2023 is calculated as the arithmetic mean of the
degree of target achievements of each of the four years.
BASF Report 2020
189
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2 Management's Report
3 Corporate Governance
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4 Consolidated Financial Statements
5 Overviews
Share Ownership Guideline
For the duration of their mandate, members of the Board of Execu-
tive Directors are obligated to hold a defined number of shares in the
company. The number of shares that must be held for a longer term
is determined at the beginning of the Board of Executive Directors
mandate (for current members of the Board of Executive Directors
as of January 1, 2020) and generally corresponds to a value repre-
senting 150% of the member's annual gross fixed salary on that
date. The conversion into a number of shares to be held is carried
out using the average price of the BASF share in the fourth quarter
of the year prior to the start of the first-time share ownership
guideline.
■ Intermediate values are determined by
linear interpolation.
The number of shares to be held rises accordingly with any increase
in the amount of fixed salary. The share ownership obligation ends
two years after the end of the mandate of the member of the Board
of Executive Directors (post-mandate share ownership obligation).
When members are first appointed to the Board of Executive Direc-
tors, they have until the end of the fourth calendar year following the
initial appointment to fulfill this share ownership obligation (built-up
phase). The built-up phase also applies for members of the Board of
Executive Directors who were members as of January 1, 2020,
regardless of when they were first appointed, with the stipulation
that the share ownership obligation be fulfilled by December 31,
2023.
■ If EBITDA before special items increases by
7% or more, the target achievement is 200%
(maximum value).
With an EBITDA before special items increase
-2.4% -1.9% -1.4% -0.9% -0.4% 0.1% 0.6% 1.1% 1.6% 2.1% 2.6%
BASF sales growth versus growth in global chemical production
■ The target is 100% achieved if BASF grows
0.1 percentage points faster than global chemical
production (target value).
■If this target value is undercut by two percentage
points or more, the target achievement is 0%
(minimum value).
■ If the target value is exceeded by two
percentage points or more, the target achievement
is 200% (maximum value).
■ Intermediate values are determined
by linear interpolation.
■ The target achievement for the entire performance period
2020-2023 is calculated as the arithmetic mean of the
degree of target achievements of each of the four years.
0%
0%
0%
1%
2%
3% 4%
5%
6%
7%
8%
0%
25.9
24.9 23.9
■
Increase in EBITDA before special items
by 4% (i.e., in the middle of the communicated
target corridor of 3% to 5%), the target achievement
is 100% (target value).
0%
Withholding and clawback clause
Members of the Board of Executive Directors must acquire the
shares with after-tax net income. It was confirmed to the Supervisory
Board that, taking into account the build-up phase, all members of
the Board of Executive Directors held the required number of BASF
shares or ADRs¹ as of December 31, 2020.
Prof. Dr. Thomas Carell, Munich, Germany*1
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
none
Member of the Supervisory Board since: May 12, 2017
Memberships of statutory supervisory boards in Germany:
Sinischa Horvat, Limburgerhof, Germany*2
Vice Chairman of the Supervisory Board of BASF SE
Chairman of the Works Council of BASF SE, Ludwigshafen Site;
Chairman of BASF's Joint Works Council and of the BASF Works
Council Europe
Stihl Holding AG & Co. KG4 (member of the Advisory Board)
Linde plc³ (member of the Board of Directors)
Stihl AG³ (Stihl Holding AG & Co. KG group company) (vice chair)
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises:
Vice Chairman of the Supervisory Board of BASF SE
Chairman of the Supervisory Board of Robert Bosch GmbH
Member of the Supervisory Board since: January 14, 2008
Memberships of statutory supervisory boards in Germany:
Robert Bosch GmbH4 (chair)
Franz Fehrenbach, Stuttgart, Germany¹
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
Bayerische Motoren Werke Aktiengesellschaft³ (member)
Member of the Supervisory Board since: June 18, 2020
Memberships of statutory supervisory boards in Germany:
Fuchs Petrolub SE³ (chair)
Former Chairman of the Board of Executive Directors of BASF SE
(until May 2018)
Chairman of the Supervisory Board of BASF SE
Dr. Kurt Bock, Heidelberg, Germany*1
The term of office of the Supervisory Board commenced following
the Annual Shareholders' Meeting on May 3, 2019, in which the
shareholder representatives on the Supervisory Board were elected.
In accordance with the applicable article of the Statutes as of the
date of election, it terminates upon conclusion of the Annual
Shareholders' Meeting that resolves on the discharge of members
of the Supervisory Board for the fourth complete business year after
the term of office commenced; this is the Annual Shareholders'
Meeting on April 25, 2024. The Chairman of the Supervisory Board,
Dr. Jürgen Hambrecht, resigned his Supervisory Board mandate as
of the conclusion of the Annual Shareholders' Meeting on June 18,
2020. The Annual Shareholders' Meeting on June 18, 2020,
appointed Dr. Kurt Bock to the Supervisory Board as his successor,
who was elected as the new Chairman of the Supervisory Board in
the subsequent Supervisory Board meeting. The Supervisory Board
member Dr. Alexander C. Karp resigned from the Supervisory
Board at the end of the Supervisory Board meeting on July 22,
2020. The Ludwigshafen local court (Amtsgericht) appointed Liming
Chen as a substitute member effective October 8, 2020. Accord-
ingly, the Supervisory Board comprises the following members:
In accordance with the Statutes, the Supervisory Board of
BASF SE comprises 12 members
Supervisory Board
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Supervisory Board
2 Management's Report
Dame Alison Carnwath DBE, Exeter, England*1
Senior Advisor Evercore Partners
The withholding and clawback provisions remain unchanged for the
STI and LTI. In the event that a Board member commits a serious
infringement of the Code of Conduct of BASF Group or of the duty
of care as a member of the management of the company, this pro-
vision allows for a reduction or cancellation of not yet paid variable
compensation as well as the clawback of variable compensation
paid out since January 1, 2018. In the years 2019 and 2020, no use
was made of the possibility to claw back, reduce or cancel the not
yet paid variable compensation.
Member of the Supervisory Board since: May 2, 2014
Memberships of statutory supervisory boards in Germany:
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises:
1 BASF ADRs (American Depositary Receipts); four BASF ADRS correspond to one BASF share.
BASF Report 2020
190
IBM Financing and Leasing Company Ltd.4 (chair, intragroup
membership)
2 Employee representative
1 Shareholder representative
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 172 for the criteria used to determine independence)
Memberships of comparable domestic and foreign supervisory intragroup membership)
bodies of commercial enterprises: none
IBM Solution and Services (ShenZhen) Company Ltd.4 (chair,
IBM (China) Company Ltd.4 (chair, intragroup membership)
IBM Global Services (DaLian) Company Limited 4 (chair, intragroup
membership)
none
Member of the Supervisory Board since: May 3, 2019
Memberships of statutory supervisory boards in Germany:
Professor for Organic Chemistry at Ludwig Maximilian University ship)
Munich
IBM China Investment Company Ltd.4 (chair, intragroup member-
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises:
none
Member of the Supervisory Board since: October 8, 2020
Memberships of statutory supervisory boards in Germany:
Chairman of IBM Greater China Group
Liming Chen, Beijing, China*1
Broadwell Capital Limited 4 (non-executive member of the Board of
Directors)
BP plc (non-executive director until January 15, 2021)
PACCAR Inc.³ (independent member of the Board of Directors)
Coller Capital Ltd.4 (non-executive member of the Board of
Directors)
Zürich Versicherungs-Gesellschaft AG (Zurich Insurance Group AG
group company) 4 (independent, non-executive member of the
Board of Directors)
Zurich Insurance Group AG³ (independent, non-executive member
of the Board of Directors)
none
50%
50%
☐ 100% 100% 100%
By taking into account the total shareholder return (development of
the share price and dividend), the new LTI enables both members of
the Board of Executive Directors and shareholders to participate in
the sustainable development of the company.
· The strategic target "yield" refers to an annual return on capital
employed (ROCE) above the cost of capital percentage. The
ROCE serves as the key performance indicator for determining
the performance bonus (short-term incentive, STI).
The strategic targets "growth," "profitability" and "CO2-neutral
growth until 2030" are represented in the new long-term
incentive (LTI) program. The final number of performance share
units (PSUs) is determined based on the level of target achieve-
ment for the three strategic targets over the entire four-year period
of the LTI program.
The compensation of the Board of Executive Directors is determined
by the company's size, complexity and financial position, as well as
the performance of the Board of Executive Directors as a whole
(Gesamtvorstand). It is designed to contribute to sustainable corpo-
rate development and the achievement of strategic corporate goals.
The long-term strategic goals communicated as part of BASF's
strategy form the key performance indicators for the short-term and
long-term variable compensation and thus foster the sustainable
development of the company.
Principles
simplified system of compensation for members of the Board of
Executive Directors has been applicable since January 1, 2020,
for all service contracts for members of the Board of Executive
Directors.
This report meets the disclosure requirements of the German Com-
mercial Code, supplemented by the additional requirements based
on the German Act on the Disclosure of Management Board Remu-
neration (VorstOG) as well as the German Act on the Appropriate-
ness of Management Board Remuneration (VorstAG), and is aligned
with the recommendations of the German Corporate Governance
Code (GCGC) in the version dated December 16, 2019. The existing
system of compensation for the Board of Executive Directors was
amended as of January 1, 2020, by resolution of the Supervisory
Board in order to meet the changed requirements from the 2020
fiscal year onward arising from the German Act Implementing the
Second E.U. Shareholder Rights Directive (ARUG II), which also
entered into force on January 1, 2020, and from the German Corpo-
rate Governance Code (GCGC) in the version dated December 16,
2019. The amended compensation system for members of the
Board of Executive Directors was approved by the Annual Share-
holders' Meeting on June 18, 2020. Significant changes apply to the
variable compensation and the pension benefits. The amended and
The one-year variable compensation is 70% below the
prior-year level (sum of performance bonus part 1 and part 2)
Members of the Board of Executive Directors voluntary
relinquished 20% of their fixed compensation in the second
quarter of 2020
New compensation system for Board of Executive Directors
applied for the first time in 2020
This report outlines the main principles of the compensation
for the Board of Executive Directors and discloses the
amount and structure of the compensation of each Board
member. Furthermore, it provides information on end-of-
service undertakings with respect to members of the Board
of Executive Directors, as well as information on the com-
pensation of Supervisory Board members.
Compensation Report
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Compensation Report
2 Management's Report
To Our Shareholders
1
About This Report
182
BASF Report 2020
4 Not publicly listed
3 Publicly listed
2 Employee representative
The compensation of the Board of Executive Directors is marked by
a pronounced variability in relation to the performance of the Board
of Executive Directors as a whole and the BASF Group's success.
The external and internal appropriateness of the Board's compensa-
1 Shareholder representative
tion is reviewed by an independent external auditor on a regular
basis. DAX companies in Germany and globally operating com-
panies in the rest of Europe¹ serve as an external reference.
Based on a proposal by the Personnel Committee, the Supervisory
Board determines the structure and amount of compensation of
members of the Board of Executive Directors. In the event of signifi-
cant amendments, but at least every four years, the compensation
system resolved by the Supervisory Board is presented to the
Annual Shareholders' Meeting for approval.
Payment in equal instalments
€800,000ª
Annual amount
3. Company pension benefits
2. Fringe benefits
1. Fixed salary
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Compensation Report
2 Management's Report
To Our Shareholders
1
About This Report
compensation
Performance-related
related compensation
Non-performance-
Overview of compensation system
183
BASF Report 2020
1 The European peer group for the 2019 appropriateness review comprised the following companies: ABB, Air Liquide, Akzo Nobel, BAE Systems, Bayer, BHP, BMW, BP, Continental, Daimler, DSM, E.ON, EDF, Henkel, Linde, Rolls Royce, Royal Dutch Shell, Siemens, Solvay, Thyssenkrupp, Total, Volkswagen.
In very exceptional cases (such as a severe economic crisis), the
Supervisory Board can temporarily deviate from the components of
the compensation system (procedures and rules on the compensa-
tion structure and amount as well as relating to the individual com-
pensation components) for the Board of Executive Directors, if this
is in the interest of the long-term well-being of the company.
For more information on the Supervisory Board and its committees, see page 181 and from page 205
onward
For internal comparison, the compensation of senior executives and
employees of BASF SE is considered in total as well as over time.
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 172 for the criteria used to determine independence)
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
none
Denise Schellemans, Brecht, Belgium²
Full-time trade union delegate
none
Member of the Supervisory Board since: April 29, 2016
Memberships of statutory supervisory boards in Germany:
Deputy Chairman of the Works Council of BASF SE, Ludwigshafen
Site
Waldemar Helber, Otterbach, Germany*2
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
none
Member of the Supervisory Board since: May 4, 2018
Memberships of statutory supervisory boards in Germany:
Member of the Works Council of BASF SE, Ludwigshafen Site, and
of the BASF Works Council Europe
Tatjana Diether, Limburgerhof, Germany*2
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Supervisory Board
2 Management's Report
1 To Our Shareholders
About This Report
181
BASF Report 2020
4 Not publicly listed
3 Publicly listed
IBM Factoring (China) Company Ltd.4 (chair, intragroup membership)
Inspur Power Commercial Systems Company Ltd.4 (chair,
intragroup membership)
150%
Member of the Supervisory Board since: January 14, 2008
Memberships of statutory supervisory boards in Germany:
none
The following member left the Supervisory Board on
June 18, 2020
Dr. Jürgen Hambrecht, Neustadt an der Weinstraße, Germany*1
Chairman of the Supervisory Board of BASF SE (until June 18,
Member of the Supervisory Board since: May 3, 2019
Memberships of statutory supervisory boards in Germany:
Dr. Alexander C. Karp, Palo Alto, California*1
CEO Palantir Technologies Inc.
The following member left the Supervisory Board on
July 22, 2020
Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
Daimler Truck AG³ (member)
Daimler AG³ (member)
Trumpf GmbH & Co. KG4 (chair)
Memberships of comparable domestic and foreign supervisory Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises:
Wayfair Inc.³ (non-executive director)
bodies of commercial enterprises: none
RAG Aktiengesellschaft³ (vice chair)
Henkel AG & Co. KGaA³ (member)
Vivawest GmbH4 (member)
Chairman of the Mining, Chemical and Energy Industries Union
Member of the Supervisory Board since: August 1, 2004
Memberships of statutory supervisory boards in Germany:
Steag GmbH4 (member)
About This Report
Michael Vassiliadis, Hannover, Germany²
Bayerische Motoren Werke Aktiengesellschaft³ (member since
May 14, 2020)
Member of the Supervisory Board since: December 17, 2010
Memberships of statutory supervisory boards in Germany:
Serviceplan Group Management SE, 4 partner with unlimited liability
of Serviceplan Group SE & Co. KG (member)
Anke Schäferkordt, Cologne, Germany*1
Member of the Supervisory Board
Memberships of comparable domestic and foreign supervisory Memberships of comparable domestic and foreign supervisory
bodies of commercial enterprises: none
V & B Fliesen GmbH4 (member)
Member of the Supervisory Board since: May 4, 2018
Memberships of statutory supervisory boards in Germany:
AbbVie Komplementär GmbH4 (member)
Regional Manager of the Rhineland-Palatinate/Saarland branch of Memberships of statutory supervisory boards in Germany:
IG BCE
Member of the Supervisory Board since: May 2, 2014
Former Chairman of the Board of Executive Directors of BASF SE
(until May 2011)
Roland Strasser, Riedstadt, Germany*2
Memberships of comparable domestic and foreign supervisory 2020)
bodies of commercial enterprises: none
bodies of commercial enterprises: none
Two times this value for the chair of the Board of Executive Directors and 1.33 times this value for the vice chair
Employee-related matters
investors from the rest of Europe hold a further 12% of capital.
Approximately 36% of the company's share capital is held by private
investors, nearly all of whom reside in Germany. BASF is therefore
one of the DAX 30 companies with the largest percentage of private
shareholders.
Chemicals
Actual Development Compared With Outlook for 2020
Business Review by Segment
The BASF Group's Business Year
Integration of Sustainability
Innovation
Value-Based Management
Our Targets and Status of Target Achievement in 2020
Our Strategic Action Areas
Customer Focus
Our Strategy
Corporate Strategy
How We Create Value
The BASF Group
17
TCFD Recommendations Index.
Overview
Manage-
ment's
Report
2
Chapter 2 pages 16-166
15
BASF Report 2020
Register for the newsletter with current topics and dates at basf.com/share/newsletter
Contact the Investor Relations team by phone at +49 621 60-48230 or email ir@basf.com
For more information about BASF stock, see basf.com/share
Analysts and investors have confirmed the quality of our financial
market communications. The Investor Relations Society recognized
BASF with the Best Practice Award 2020 in the categories "Best
Communication of ESG" and "Most Effective Use of Digital Commu-
nications." In the annual survey conducted by Britain's IR Magazine,
we were named the best company for IR in the materials sector.
Institutional Investor magazine also honored BASF with first place in
the categories "Best Investor Day" and "Best IR Program" in the
chemicals sector.
In 2020, we offered special events aimed at investors who base their
investment decisions on sustainability criteria. We outlined in par-
ticular our programs to reduce CO2 emissions and on the circular
economy. In addition, we issued our first green bond in 2020 and
took this opportunity to inform credit analysts and creditors about our
targets and measures for a more sustainable future. The bond has a
term of seven years, a volume of €1.0 billion and an annual coupon
of 0.25%; it serves to finance sustainable projects and the develop-
ment of sustainable products in the BASF Group.
numerous one-on-one meetings, as well as at roadshows and con-
ferences worldwide, and give private investors an insight into BASF
at informational events.
BASF on the Capital Market
Nonfinancial Statement Disclosures
5 Overviews
Responsible Conduct Along the Value Chain
18
Material Investments and Portfolio Measures
50
158
155
152
152
27 Opportunities and Risks
Outlook 2021
Economic Environment in 2021
2222332
42
35
110
28
26
Forecast
24
144
20 Employees
121
Environmental Protection, Health and Safety.
116
Raw Materials
19
113
Supplier Management
26
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
5.87
6.44
4.83
€
-1.15
9.17
5.12
6.62
4.42
€
Price-earnings ratio (P/E ratio)
BAS GY
4.00
Payout ratio
Dividend yieldb
BAS
Dividend per share
Adjusted earnings per share
Earnings per share
DE000BASF111
055262505
59.4
61.9
55.5
84.3
81.1
BASFY (ADR)
3.21
€
3.00
To Our Shareholders
1
About This Report
14
BASF Report 2020
b Based on year-end share price
a Average, Xetra trading
BASFn.DE
7.3
11.8
13.9
20.0
36
63
47
68
%
5.10
4.90
5.30
3.38
3.40
%
3.30
3.30
3.20
3.10
50
Economic Environment
52
Results of Operations.
Supplier management
Emergency response and corporate security
Energy and climate protection
Biodiversity
Process safety
The BASF Group
Topics
Anti-corruption and bribery matters
Respect for human rights
Social matters
Environmental matters
Business model
Emissions to air
NFS disclosure
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Overview
To Our Shareholders
1
About This Report
17
BASF Report 2020
In the version applicable to the Financial Statements and Management's Report for the 2020 fiscal year pursuant to Article 83 of the Introductory Act on the German Commercial Code (EGHGB)
1
Nonfinancial Statement (NFS) disclosures in the relevant chapters of the integrated report
Product stewardship
Steering of product portfolio
Transportation and storage
Pages 121 and 137 (targets, measures, results)
Pages 121 and 126-128 (targets, measures, results)
Page 32 (targets)
Page 113-115 (targets, measures, results)
Page 32 (targets)
Pages 121 and 125 (targets, measures, results)
Pages 121 and 130-136 (targets, measures, results)
Page 32 (targets)
Page 142-143 (targets, measures, results)
Pages 121 and 123-124 (targets, measures, results)
Page 32 (targets)
Pages 20-23
Concepts and results
Supplier management
Compliance
Responsibility for human rights
International labor and social standards
Supplier management
Social commitment
Compensation and benefits
Competition for talent
Employee engagement
Supplier management
Learning and development
International labor and social standards
Health protection
What we expect from our leaders
Dialog with employee representatives
Inclusion of diversity
Occupational safety
Management of waste and contaminated sites
Water
The content of this section is voluntary, unaudited information,
which was critically read by the auditor.
billion €
[ ] The content of this section is not part of the statutory audit but
has undergone a separate audit with limited assurance by our
auditor.
You can find more information in this report.
For more information, see page 30
108
We are making our value chains, processes, products and business models more circular with
our circular economy program.
Regional Results
107
Non-Integral Oil and Gas Business
106
Other
100
Agricultural Solutions
94
Nutrition & Care
Materials
89
83
Industrial Solutions
78
72
Care elements of the circular
69
67
63
Financial Position
61
Net Assets
56
Surface Technologies
About This Report
1
To Our Shareholders
The following symbols indicate further information:
Further information
BASF supports the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD). Disclosures recom-
mended by the TCFD are presented in a number of places through-
out this report. The table on page 19 shows the sections and sub-
sections in which the relevant information can be found. The table is
divided into four key areas in line with the TCFD recommendations:
governance, strategy, risk management, and metrics and targets.
Financial Disclosures
Recommendations of the Task Force on Climate-related
section 317(2) sentence 6 HGB, the auditor checked that the disclo-
sures according to section 315d HGB were made.
The Consolidated Declaration of Corporate Governance in accor-
dance with section 315d HGB in connection with section 289f HGB
can be found in the Corporate Governance chapter from page 167
onward and is a component of the Management's Report. It com-
prises the Corporate Governance Report including the description
of the diversity concept for the composition of the Board of Execu-
tive Directors and the Supervisory Board (excluding the disclosures
required by takeover law in accordance with section 315a(1) HGB),
compliance reporting and the Declaration of Conformity pursuant to
section 161 of the German Stock Corporation Act. Pursuant to
Consolidated Declaration of Corporate Governance in
accordance with section 315d HGB in connection with
section 289f HGB1
The Compensation Report including the description of the principles
of the compensation system in accordance with section 315a(2)
HGB can be found in the Corporate Governance chapter from page
183 onward, and the disclosures in accordance with section 315a(1)
HGB (takeover-related disclosures) from page 174 onward. They
form part of the Management's Report, which is audited as part of
the annual audit.
Compensation Report and disclosures in accordance with
section 315a HGB¹
Within the scope of the annual audit, KPMG checked pursuant to
section 317(2) sentence 4 HGB that the NFS was presented in
accordance with the statutory requirements. KPMG also conducted
a limited assurance of the NFS. An assurance statement of the
limited assurance can be found online at basf.com/nfs-audit-2020.
The assurance was conducted in accordance with ISAE 3000
(Assurance Engagements other than Audits or Reviews of Historical
Financial Information) and ISAE 3410 (Assurance Engagements on
Greenhouse Gas Statements), the relevant international assurance
standards for sustainability reporting.
- Anti-corruption and bribery matters
Respect for human rights
Social matters
- Employee-related matters
Environmental matters
-
-
The table on the following page shows the sections and subsections
in which the individual disclosures can be found. In addition to a
description of the business model, the NFS includes disclosures on
the following matters, to the extent that they are required to under-
stand the development and performance of the business, the
Group's position and the impact of business development on the
following matters:
The NFS disclosures can be found in the relevant sections of the
Management's Report and have been prepared in accordance with
the appropriate frameworks: the Global Reporting Initiative
Standards ("Comprehensive" application option) and the reporting
requirements of the U.N. Global Compact.
Nonfinancial Statement (NFS) in accordance with sections
315b and 315c of the German Commercial Code (HGB)
The Management's Report comprises the chapter of the
same name on pages 16 to 166, as well as the disclosures
required by takeover law, the Compensation Report and the
Declaration of Corporate Governance, which are presented
in the Corporate Governance chapter. The Nonfinancial
Statement (NFS) is integrated into the Management's Report.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Overview
You can find more information online. The content of these
links are voluntary disclosures that were not audited by the
auditor.
Market capitalization December 31
BASF11
918.5
DAX 30 3.5%
EURO STOXX 50
DAX 30
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
EURO STOXX 50 -3.2%
60
70
■ EURO STOXX 50 ■ MSCI World Chemicals
■ BASF share ■ DAX 30
80
9.0%
5.4%
90
7.1%
4.9%
2010-2020
100
10.3%
Weighting of BASF shares in important indexes as of December 31, 2020
MSCI World Chemicals 14.8%
MSCI World Chemicals.
BASF Report 2020
1.95
1.95
2.20
2.60
2.50
2.70
2.80
3.00
2.90
3.10
3.20
3.30
3.30
€ per share
Dividend per share
BASF on the Capital Market
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
12
6.0%
2.3%
5.5%
4.3%
1.70
110
2.8%
4
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
11
BASF Report 2020
Wayne T. Smith
Dr. Melanie Maas-Brunner
Dr. Markus Kamieth
Michael Heinz
Consolidated Financial Statements
Vice Chairman of the Board of Executive Directors
Saori Dubourg
Dr. Hans-Ulrich Engel,
Dr. Martin Brudermüller,
As part of its long-term succession planning, the
Supervisory Board appointed Dr. Melanie Maas-
Brunner as a member of the Board of Executive
Directors on December 17, 2020. As of Feb-
ruary 1, 2021, the Board of Executive Directors
therefore temporarily comprises seven members
and, following a transition period, will again be
reduced to six members with the departure of
Wayne T. Smith as of May 31, 2021.
The Board of
Executive
Directors of
BASF SE
The Board of Executive Directors of BASF SE
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
Chairman of the Board of Executive Directors
5 Overviews
BASF on the Capital Market
BASF on the Capital
Market
120
2015-2020
BASF share 2.3%
Mar
Feb
Jan
60
70
80
90
90
100
ㅎ
110
120
Long-term performance of BASF shares compared with indexes
Average annual increase with dividends reinvested
The assets of an investor who invested €1,000 in BASF shares at
the end of 2010 and reinvested the dividends in additional BASF
shares would have increased to €1,614 by the end of 2020. This
represents an annual yield of 4.9%.
the European EURO STOXX 50 index lost 3.2%. The global industry
index MSCI World Chemicals gained 14.8%.
Assuming that dividends were reinvested, BASF's share perfor-
mance rose by 2.3% in 2020. The DAX 30, the benchmark index of
the German stock market, rose by 3.5% over the same period, while
The BASF share closed the 2020 stock market year at €64.72, a
decrease of 3.9% compared with the previous year's closing price
(€67.35). After the significant downturn in share prices caused by
the pandemic in the first half of 2020, BASF's share price recovered
and stabilized over the second half of the year but remained slightly
below the prior-year closing price.
■ Assuming that dividends were reinvested, BASF's share
performance rose by 2.3%
■ BASF share price declines 3.9% in 2020
BASF share performance
With dividends reinvested; indexed
Change in value of an investment in BASF shares in 2020
Despite the exceptionally high economic burden caused by
the coronavirus pandemic, a dividend of €3.30 per share is to
be proposed to the Annual Shareholders' Meeting, as in the
previous year. Based on the year-end share price for 2020,
BASF shares continue to offer an attractive dividend yield of
around 5.1%.
In 2020, the stock markets were dominated by the spread
of the coronavirus and the resulting social and economic
effects.
5.0%
Page 45-46 (targets, measures, results)
Employees becoming shareholders
For more information on employee share purchase programs, see page 144
88.16
70.96
€
39.04
56.20
58.40
79.64
56.70
€
68.29
74.49
97.67
80.38
97.46
€
64.72
67.35
60.40
91.74
88.31
€
2020
2019
2018
2017
2016
88.31
64.77
53.31
Further information on BASF share
918.5
918.5
918.5
918.5
million shares
Number of shares December 31
4.1
2.9
2.9
2.1
2.9
million shares
219.2
187.6
229.6
185.7
201.9
million €
Reuters (Xetra trading)
Bloomberg (Xetra trading)
Pink Sheets / OTCQX
Deutsche Börse
International ticker symbols
ISIN International Securities Identification Number
United States (CUSIP number)
Germany
Securities code numbers
Our corporate strategy aims to create long-term value. We support
this strategy through regular and open communication with all capital
market participants. In light of the coronavirus pandemic, we mainly
used virtual formats such as video or conference calls for dialog in
2020. We engage with institutional investors and rating agencies in
In many countries, we offer share purchase programs that turn our
employees into BASF shareholders. In 2020, for example, around
27,600 employees (2019: around 25,400) purchased employee
shares worth €61.1 million (2019: €70.5 million).
■ BASF issues first green bond
Close dialog with the capital market
о
United Kingdom/Ireland 8%
Rest of Europe 12%
By region, rounded
Rest of world 4%
Not identified 9%
Shareholder structure
With over 700,000 shareholders, BASF is one of the largest publicly
owned companies with a high free float. An analysis of the share-
holder structure carried out at the end of 2020 showed that, at
around 20% of share capital, the United States and Canada made
up the largest regional group of institutional investors. Institutional
investors from Germany accounted for around 11%. Shareholders
from the United Kingdom and Ireland hold 8% of BASF shares, while
Broad base of international shareholders
Based on the year-end share price for 2020, BASF shares offer a
high dividend yield of around 5.1%. BASF is part of the DivDAX
share index, which contains the 15 companies with the highest
dividend yield in the DAX 30.
As in the previous year, a dividend of €3.30 per share is to be pro-
posed to the Annual Shareholders' Meeting, a payment of €3.0 bil-
lion to shareholders. Due to the exceptionally high economic burden
caused by the coronavirus pandemic, which also impacted the
BASF Group's free cash flow, the proposed dividend per share will
not be increased for the first time since the 2009 business year.
Proposed dividend of €3.30 per share
2020
2019
20% United States/Canada
2018
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
ÏÏBAS
2017
47% Germany
BASF - a sustainable investment
■ CDP again awards BASF Leadership status
Daily trade in sharesa
Year average
Year low
Year-end price
Year high
Key BASF share data
Around 30 financial analysts regularly publish studies on BASF. The
latest analyst recommendations for our shares as well as the aver-
age target share price ascribed to BASF by analysts can be found
online at basf.com/analystestimates.
Analysts' recommendations
For more information on the procurement of certified palm oil and palm kernel oil,
see page 116 onward
For more information on air and soil, see page 137
For more information on the key sustainability indexes, see basf.com/sustainabilityindexes
For more information on energy and climate protection, see page 130 onward
BASF continued to be included in the MSCI ESG Ratings in 2020
with the second-highest score of AA. The analysts highlighted
BASF's Verbund system as a key competitive advantage for
resource-efficient processes. BASF's emissions intensity for green-
house gases and air pollutants - one of the lowest compared with
competitors in the chemical industry - was also assessed positively.
BASF participated in the CDP's "Forest” assessment for the first
time in 2020 and was ranked A-. As a participant in various value
chains, BASF is committed to ending deforestation in these supply
chains. One of BASF's measures to protect the forests is its volun-
tary commitment to source 100% of its palm oil and palm kernel oil
from certified sustainable sources by 2020. We met this target in
2020.
implement its sustainable water management target at all relevant
production sites (Verbund sites and sites in water stress areas).
BASF on the Capital Market
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
13
BASF Report 2020
In the CDP assessment for sustainable water management, BASF
again achieved the top grade of A and thus Leadership status. The
assessment takes into account how transparently companies report
on their water management activities and how they reduce risks
such as water scarcity. CDP also evaluates the extent to which
product developments can contribute to sustainable water manage-
ment for customers of the companies assessed. BASF continues to
BASF has participated in the program established by the interna-
tional organization CDP (formerly the Carbon Disclosure Project) for
reporting on data relevant to climate protection since 2004. CDP is
an international organization representing around 515 investors with
over $106 trillion in assets and more than 150 major organizations
with $4 trillion in purchasing power. In 2020, BASF again scored an
A- on CDP's Climate List, giving it Leadership status. In the scoring
framework used by CDP in 2020, BASF was ranked among the best
25% of the participating chemical companies. To achieve its climate
target of CO2-neutral growth until 2030, BASF is continually optimiz-
ing existing processes and is increasingly using energy from renew-
able sources. BASF is also developing completely new low-emission
production processes. The company bundles this work in its ambi-
tious carbon management.
■ BASF continues to be included in MSCI ESG Ratings with
score of AA
■ Virtual formats facilitate dialog during coronavirus
pandemic
Pages 121 and 129 (targets, measures, results)
Pages 121 and 137–138 (targets, measures, results)
Overview
Pages 121 and 139-141 (targets, measures, results)
2
Materials
- Performance Materials
- Monomers
18%
- Dispersions & Pigments
3
6
Industrial Solutions
- Performance Chemicals
- Catalysts
5
4
Surface Technologies
28%
13%
- Coatings
- Intermediates
Chemicals
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
14%
The BASF Group
At BASF, we create chemistry for a sustainable future. We
combine economic success with environmental protection
and social responsibility. The approximately 110,000 employ-
ees in the BASF Group work on contributing to the success of
our customers in nearly all sectors and almost every country in
the world. Our portfolio is divided into the Chemicals, Materi-
als, Industrial Solutions, Surface Technologies, Nutrition &
Care and Agricultural Solutions segments.
Organization of the BASF Group
Structure of BASF
Percentage of total sales in 2020
- Petrochemicals
1
The BASF Group
Care Chemicals
5
Nutrition & Care
we contribute to our customers' success
4%
3
4
Our divisions bear operational responsibility here and are organized
according to sectors or products. They manage our 52 global and
regional business units and develop strategies for the 75 strategic
business units.
Broad portfolio
Smart Verbund concept
production, technology, market, digitalization
In around 90 countries
6 segments, 11 operating divisions, 75 strategic business
units
for greater customer proximity, increased competitiveness
and profitable growth
The regional and country units represent BASF locally and support
the growth of business units with local proximity to customers. For
financial reporting purposes, we organize the regional divisions into
four regions: Europe; North America; Asia Pacific; South America /
Africa/Middle East.
Together with the development units in our operating divisions, the
three global research divisions - Process Research & Chemical Engi-
BASF Report 2020
20
Page 32 (targets)
Organizational development
Other
7
In line with BASF's corporate strategy, the operating divisions, ser-
vice units, the regions and a Corporate Center have formed the
cornerstones of the BASF organization since January 1, 2020. We
have streamlined our administration, sharpened the roles of ser-
10%
- Nutrition & Health
6
Agricultural Solutions - Agricultural Solutions
13%
7
2
We have 11 divisions grouped into six segments:
Chemicals: Petrochemicals, Intermediates
-
-
Materials: Performance Materials, Monomers
Industrial Solutions: Dispersions & Pigments,
Performance Chemicals
Surface Technologies: Catalysts, Coatings
Nutrition & Care: Care Chemicals, Nutrition & Health
- Agricultural Solutions: Agricultural Solutions
We take a differentiated approach to steering our businesses
according to market-specific requirements and the competitive
environment. We provide a high level of transparency around the
results of our segments and show the importance of the Verbund
and value chains to our business success. BASF aims to differenti-
ate its businesses from their competitors and establish a high-
performance organization to enable BASF to be successful in an
increasingly competitive market environment.
19
BASF Report 2020
vices and regions, and simplified procedures and processes. These
organizational changes have created the conditions for greater
customer proximity, increased competitiveness and profitable
growth.
c We report comprehensively on climate-related opportunities and risks in reporting to CDP on data relevant to climate protection.
4 Consolidated Financial Statements
5 Overviews
Overview
Recommendations of the Task Force on Climate-related Financial Disclosures in the relevant chapters of the integrated report
Topic
Governance
3 Corporate Governance
Disclose the organization's governance around
climate-related risks and opportunities.
Section/explanation
Describe the board'sa oversight of climate-related risks and opportunities. Corporate Governance Report - Direction and management by the Board of Executive Directors
Report of the Supervisory Board - Supervisory Board meetings
Describe management's role in assessing and managing climate-related Integration of Sustainability - Our organizational and management structures
risks and opportunities.
Page
Pages 168-169
Pages 204-205
Pages 42-43
Strategy
Recommended disclosures
2 Management's Report
1 To Our Shareholders
About This Report
Page 32 (targets)
d Climate-related risks are identified, assessed and managed as part of the general risk management process.
Pages 121 and 122-123 (targets, measures, results)
Page 150 (targets, measures, results)
Page 32 (targets)
Page 146-147 (targets, measures, results)
Page 145-146 (targets, measures, results)
Pages 121 and 124 (targets, measures, results)
Page 150-151 (targets, measures, results)
Page 148 (targets, measures, results)
Page 32 (targets)
Page 145 (targets, measures, results)
Page 147-148 (targets, measures, results)
Page 149 (targets, measures, results)
Page 47-49 (targets, measures, results)
Page 150-151 (targets, measures, results)
Page 32 (targets)
Page 113-115 (targets, measures, results)
Page 111-112 (targets, measures, results)
Page 177-179 (targets, measures, results)
Page 32 (targets)
Page 113-115 (targets, measures, results)
BASF Report 2020
18
Disclose the actual and potential impacts of
climate-related risks and opportunities on the
organization's businesses, strategy, and financial
planning where such information is material.
Describe the climate-related risks and opportunities the organization has Opportunities and Risks - Short-term opportunities and risks
identified over the short, medium, and long term.c
Page 113-115 (targets, measures, results)
Page 32 (targets)
Opportunities and Risks - Long-term opportunities and risks
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse
gas (GHG) emissions, and the related risks.
Describe the targets used by the organization to manage climate-related
risks and opportunities and performance against targets.
Energy and climate protection - Global goals and measures
Water Global goal and measures
Integration of Sustainability - Steering of product portfolio based on sustainability performance
Energy and climate protection - Strategy
Energy and climate protection - Global goals and measures
Disclose the metrics used by the organization to assess climate-related
risks and opportunities in line with its strategy and risk management
process.
Energy and climate protection - Strategy
Water Strategy
Pages 131-133
a Refers to the Supervisory Board
Pages 130-131
Pages 131-133
Pages 130-131
Page 139
Pages 45-46
b Refers to the Board of Executive Directors and senior executives
Describe the impact of climate-related risks and opportunities on the
organization's businesses, strategy, and financial planning.
Integration of Sustainability - Steering of product portfolio based on sustainability performance
Disclose the metrics and targets used to assess
and manage relevant climate-related risks and
opportunities where such information is material.
Pages 139-140
Pages 45-46
Pages 159-160
Metrics and targets
Integration of Sustainability - Steering of product portfolio based on sustainability performance
Opportunities and Risks - Short-term opportunities and risks
Opportunities and Risks - Long-term opportunities and risks
Pages 161-163
Pages 164-166
Pages 135-136
Pages 45-46
Pages 161-163
Pages 164-166
Risk management
Disclose how the organization identifies, assesses,
and manages climate-related risks.
Describe the organization's processes for identifying and assessing
climate-related risks.d
Describe the resilience of the organization's strategy, taking into
In 2020, we enhanced and refined our long-term strategic scenarios and worked on their quantitative
consideration different climate-related scenarios, including a 2°C or lower implementation in order to include these in our strategic steering going forward.
scenario.
Describe the organization's processes for managing climate-related risks. Opportunities and Risks - Risk management process
Opportunities and Risks - Long-term opportunities and risks
Opportunities and Risks - Risk management process
Pages 164-166
Opportunities and Risks - Risk management process
Pages 159-160
Pages 159-160
Carbon management as a climate protection tool
Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organization's overall risk
management.
500d
1,340
3,244
3,566
4,567
Option rights that have not yet been exercised on retirement are to
be continued under the conditions of the program including the
4,014
Total compensation for previous Board members and their surviving
dependents amounted to €12.5 million in 2020 (2019: €11.5 mil-
lion). This figure also contains payments that previous Board mem-
bers have themselves financed through the deferred compensation
program, as well as the income for 2020 relating to option rights that
previous members of the Board still hold from the time of their active
service period. Moreover, this figure contains non-compete com-
pensation paid to a former member of the Board of Executive Direc-
tors. The increase in total compensation resulted from two opposing
effects: On the one hand, the fair value measurement of option
rights resulted in income of €0.7 million overall in 2020, mainly due
to the higher accounting valuation of the option rights due to the
increased share price (2019: expense of €0.6 million). On the other
hand, the inclusion of the non-compete compensation led to an
expense of €2.0 million in 2020.
Former members of the Board of Executive Directors
If a Board member's appointment is revoked within one year follow-
ing a change-of-control event, the Board member will receive the
contractually agreed payments for the remaining contractual term of
mandate as a one-off payment; however, this amount also may not
exceed the value of two years' compensation. The outstanding
pension contributions until the end of the regular contractual term of
office shall be paid as a one-time gross payment.
The following applies to end of service due to a change-of-control
event: A change-of-control event, in terms of this provision, occurs
when a shareholder informs BASF of a shareholding of at least 25%,
or the increase of such a holding.
appropriate, also the expected total compensation for the current
fiscal year.
8,154
72,090
This rule no longer applies for any member who was appointed to
the Board of Executive Directors after January 1, 2017.
In the event that a member of the Board of Executive Directors
appointed before 2017 retires from employment before the age of
60, either because their appointment was not extended or was
revoked for an important reason, they are entitled to pension bene-
fits under the system in effect until 2019 if they have served on the
Board for at least 10 years or if the period until they reach legal
retirement age is less than 10 years. The company is entitled to
offset compensation received for any other employment against
pension benefits until the legal retirement age is reached.
End-of-service benefits
a In the 2019 fiscal year, the present value of the defined benefit obligation for the pension entitlements
accrued until the end of 2019 by Sanjeev Gandhi, who left the Board of Executive Directors as of Decem-
ber 31, 2019, amounted to €4,824 thousand.
6,251
66,484a
6,417
5,797
7,100
15,201
16,253
14,081
16,219
6,611
There is a general limit on severance pay (severance payment cap)
for all Board members. Accordingly, payments made to a Board
member upon premature termination of their contract, without seri-
ous cause, may not exceed the value of two years' compensation,
including fringe benefits, nor compensate more than the remaining
term of the contract. The severance payment cap is to be calculated
on the basis of the total compensation for the past fiscal year and, if
500d
500
500
10,654
3,252
18,171
3,859
1,123
10,654
Company pension benefits
Service cost
Pension contribution / pension allowance
Total compensation in accordance with GCGC 2017
387
500
500
500d
500
500
500
491
500
500
387
699
491
500
500
500
500
500
699
19,490
166,272
2020
24,880
22,684
Wayne T. Smith
24,880
22,684
Dr. Markus Kamieth
Total
24,880
22,684
Michael Heinz
Wayne T. Smith
30,268
30,168
Total
Dr. Hans-Ulrich Engel
11,880
22,684
Saori Dubourg
Michael Heinz
44,024
45,368
Dr. Martin Brudermüller
Dr. Hans-Ulrich Engel
2019
2020
Saori Dubourg
1,393
151,247
Dr. Markus Kamieth
160,812ª
Accounting valuation of multiple-year variable
compensation (LTI programs)
a In the 2019 fiscal year, 24,880 option rights were granted to Sanjeev Gandhi, who left the Board of Executive
Directors as of December 31, 2019.
6,983
Total
Wayne T. Smith
Dr. Markus Kamieth
Michael Heinz
Dr. Hans-Ulrich Engel
Dr. Martin Brudermüller
Saori Dubourg
Thousand €
Present value of the defined benefit obligation
The present value of pension benefits (defined benefit obligation) is
an accounting figure for the entitlements that the Board members
have accumulated in their years of service at BASF. The table below
shows the defined benefit obligations for the pension entitlements
accrued until the end of 2020 (as of December 31 in each case).
The values for the company pension benefits granted to the mem-
bers of the Board of Executive Directors in 2020 are shown individ-
ually in the tables "Compensation granted in accordance with
GCGC 2017" and "Compensation allocated in accordance with
GCGC 2017." Effective January 1, 2020, the company offers mem-
bers of the Board of Executive Directors a defined contribution
pension commitment in the form of a capital investment model. The
company grants the members of the Board of Executive Directors a
fixed annual pension plan contribution. The pension entitlements
acquired until December 31, 2019, under the previous company
pension system are maintained as vested rights and upon retire-
ment, disability or death can be accessed by the member of the
Board of Executive Directors or by the surviving dependents as a
company pension or retirement capital in accordance with the pre-
vious rules.
Company pension benefits
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Compensation Report
2 Management's Report
To Our Shareholders
1
About This Report
199
BASF Report 2020
For more information on the LTI program, see page 149 and from page 310 onward
The performance share units granted to the members of the Board
of Executive Directors resulted in the following expenses in 2020
(2019: not applicable): Dr. Martin Brudermüller: expense of
€642 thousand; Dr. Hans-Ulrich Engel: expense of €427 thousand;
Saori Dubourg: expense of €321 thousand; Michael Heinz: expense
of €321 thousand; Dr. Markus Kamieth: expense of €321 thousand;
Wayne T. Smith: expense of €909 thousand.
The expenses reported below are purely accounting figures that do
not equate with the actual inflows from the LTI at the end of the
four-year performance.
In 2020, the performance share units granted as part of the new LTI
resulted in an expense. This expense refers to the total of all perfor-
mance share units from the LTI program 2020 and is calculated as
the difference in the fair value of the performance share units on
December 31, 2020, compared with the fair value on December 31,
2019. The fair value of the performance share units is based primarily
on the expected development of the BASF share price and the divi-
dend as well as assumptions relating to the expected weighted
level of target achievement for the three strategic targets in the four-
year performance period.
The outstanding option rights held by the members of the Board of
Executive Directors resulted in the following expenses in 2020: Dr.
Martin Brudermüller: expense of €266 thousand (2019: expense of
€464 thousand); Dr. Hans-Ulrich Engel: expense of €152 thousand
(2019: expense of €339 thousand); Saori Dubourg: expense of
€136 thousand (2019: expense of €66 thousand); Michael Heinz:
expense of €172 thousand (2019: expense of €334 thousand);
Dr. Markus Kamieth: expense of €203 thousand (2019: expense of
€124 thousand); and Wayne T. Smith: expense of €914 thousand
(2019: expense of €298 thousand).
The expenses reported below are purely accounting figures that do
not equate with the actual gains should options be exercised. Each
member of the Board of Executive Directors may decide individually
on the timing and scope of the exercise of options of the LTI pro-
grams, while taking into account the terms and conditions of the
program.
In 2020, the option rights granted resulted in an expense. This
expense refers to the total of all option rights from the LTI programs
2012 to 2020 and is calculated as the difference in the fair value of
the option rights on December 31, 2020, compared with the fair
value on December 31, 2019, considering the option rights exer-
cised and granted in 2020. The fair value of the option rights is
based primarily on the development of the BASF share price
and its relative performance compared with the benchmark index,
the MSCI World Chemicals Index.
2019
4,067
50% of the 2019 performance bonus (2019-2022)
7,654
500
557
557
3,000
312
836
840
840
1,400
846
1,393
1,393
4,400
500
1,140
1,000
0
2,000
800
1,000
0
2,000
800
20,634
800
800
800
Short-term incentive 2020
800
28
100
36
800°
800°
800°
800c
800°
800c
Fringe benefits
Total
Regularly provided fringe benefits
Event-related fringe benefits
Delegation-related fringe benefitsa
One-year variable compensation
36
40
40
600
46
593
593
3,600
340
323
3,600
36
40
40
100
46
36
1,000
2,867
0
1,000
0
2,000
1,736
0
4,254
LTI program 2020 (2020-2028)b
274
0
1,454
274
0
1,454
0
1,000
1,454
1,400
0
2,800
1,400
0
2,800
1,400
0
2,800
Total
2,857
3,514
840
LTI performance share plan 2020 (2020-2023)
2,000
0
1,000
0
2,000
Multiple-year variable compensation
1,221
1,674
0
4,254
1,221
1,674
0
4,254
1,312
50% of the 2019 performance bonus (2019-2022), deferral component
800
800
800
LTI program 2019 (2019-2027)
421
421
512
་་་་
19
100
500
304
3,000
1,123
1,123
4,400
2,000
20,634
1,641
27,443
760d
800
760
800
760
800
1,011
1,064
1,520
1,600
2020
2019
2020
800d
2019
2019
2020
2019
2020
2019
2020
2019
of Executive Directors
Wayne T. Smith
Dr. Markus Kamieth
Michael Heinz
Saori Dubourg
Dr. Hans-Ulrich Engel
Vice Chairman of the Board
2020
Dr. Martin Brudermüller
Chairman of the Board
of Executive Directors
760d
56
Event-related fringe benefits
Regularly provided fringe benefits
-
-
432
297
19
28
36
46
40
36
62
60
59
69
56
60
323
340
593
46
40
36
494
356
62
69
62
Fringe benefits
Fixed salarya
Thousand €
Plus allocated actual annual variable compensation (short-term incentive 2020)
485
485
485
Plus allocated actual annual variable compensation (performance bonus, part 1)
-40
-40
-40
Less voluntary relinquishment of salary (20% of fixed salary) in second quarter of 2020
LTI performance share plan 2020 (2020-2023)
-34
-34
-34
285
Less difference between target amount and market value at grant date for
-1,000
-1,000
-1,600
-1,600
-1,600
Less granted 2019 performance bonus (2019-2022), (one-year component and deferral components)
Less granted short-term incentive 2020
in connection with GAS 17
Reconciliation reporting of total compensation pursuant to section 314(1) no. 6a HGB
11,154
1,623
4,359
3,743
800
-1,000
285
285
Plus allocated multiple-year variable actual compensation LTI 2012 (2012-2020)
Less service cost
Allocation in accordance with GCGC 2017
The "Compensation allocated in accordance with the German Corporate Governance Code (GCGC) 2017" presented comprises the fixed and variable compensation components actually allocated, plus the
pension benefits granted to each member of the Board of Executive Directors in the reporting years (2020: pension contribution; 2019: service cost for previous pension plan) even though these do not actually
represent payment in the narrower sense.
Compensation allocated in accordance with the German Corporate Governance Code (GCGC 2017)
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Compensation Report
2 Management's Report
11,154
1 To Our Shareholders
About This Report
197
BASF Report 2020
d Wayne T. Smith opted for the pension allowance for private retirement savings.
3,501
2,137
-500
-491
3,278
1,752
-500
-699
2,725
1,742
-500
-387
a Figures only reported under 2020 (min.) / 2020 (max.) if delegation-relation fringe benefits were granted in the year 2020.
b Members of the Board of Executive Directors had the opportunity to participate for the last time in the BASF option program as of July 1, 2020, based on their performance bonus (gross) for the year 2019. The option rights granted are a component of the compensation for the Board of Executive Directors for the fiscal year 2019.
c Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
Total compensation
Less pension contribution / pension allowance
431
557
20,634
312
Delegation-related fringe benefits
2,117
2,143
3,146
3,202
Total compensation in accordance with GCGC 2017
500f
500
500
500
665
1,000
491
699
2,345
387
366
573
500
491
500
699
1,893
500
387
500
704
665
366
704
1,000
2,039
1,585
20,634
41,268
2019
2020
Dr. Martin Brudermüller
Number of performance share units (PSUs) granted
In 2020, members of the Board of Executive Directors were for the
first time granted Performance Share Units (PSUs) under the new
LTI program. The following table shows the number of PSUs granted
as of January 1.
Number of option rights granted
The table below shows the options granted to the Board of Execu-
tive Directors on July 1 of both reporting years. Option rights under
the BASF option program were granted for the last time in 2020.
The members of the Board of Executive Directors each voluntarily
relinquished 20% of their fixed salary for the period from April 1,
2020, until June 30, 2020.
5 Overviews
Consolidated Financial Statements
4
1,708
3 Corporate Governance
Compensation Report
1 To Our Shareholders
About This Report
198
BASF Report 2020
2020, at the end of the regular term of the LTI program 2012, exercise gains that were realized in 2017 were allocated to Wayne T. Smith in accordance with the special conditions of the U.S. LTI program.
f Wayne T. Smith opted for the pension allowance for private retirement savings.
e
d Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
c The basis for the short-term incentive (STI) is the ROCE factor and the performance factor in year the STI is granted. 100% of the actual STI is paid out.
a The members of the Board of Executive Directors each voluntarily relinquished 20% of their fixed annual salary for the period from April 1 until June 30, 2020.
b The basis for the performance bonus, part 1, is the ROCE factor and the average of the operating performance factor (OPF) and the strategic performance factor (SPF) in the year the performance bonus was granted. This includes contributions made to the deferred compensation program.
50% of the actual performance bonus is paid out; the remaining 50% of the actual performance bonus is not paid out for another three years (deferral component).
2,299
2,116
2,138
2,030
2 Management's Report
573
1,799
1,625
969
Performance bonus 2019 (2019-2022), part 1b
285
485
285
485
285
485
285
485
379
644
570
644
969
1,083
1,140
1,353
846
800
836
1,254
1,156
1,073
1,133
1,576
1,660
Total
One-year variable compensation
485
485
485
1,638
1,331
1,085
1,321
1,539
1,452
1,777
2,146
2,629
Pension contribution / pension allowance
Service cost
Company pension benefits
LTI 2016 (2016-2024)
LTI 2015 (2015-2023)
Total
LTI 2014 (2014-2022)
LTI 2013 (2013-2021)
431e
LTI 2011 (2011-2019)
Multiple-year variable compensation
431
285
285
285
285
379
570
Short-term incentive 2020°
485
304
800
LTI 2012 (2012-2020)
800
Grow sales volumes faster than global chemical production every year
Increase EBITDA before special items by 3% to 5% per year
(in %)
(in %)
-0.4
-0.5
90a
4.0
-9.5b
0
CO2-neutral growth, i.e., emissions no greater than 21.9 million metric tons
CO₂ equivalents
(in million metric tons of
CO₂ equivalents)
21.9
20.8
Actual 2020
137
(in %)
a In 2020, BASF's sales volumes (-0.5%) declined at a faster rate than global chemical production (-0.4% as of February 15, 2021). The target would have been 100% achieved if BASF's sales volumes had declined by
0.1 percentage points less than global chemical production.
b Based on the original baseline value for EBITDA before special items of €8,217 million for 2019
BASF Report 2020
194
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4
Consolidated Financial Statements
5 Overviews
Comparison of the previous and new compensation systems
for the Board of Executive Directors
Weighted target achievement
The new compensation system for the Board of Executive Directors
reduces complexity by discontinuing one component of the com-
benchmark 2020
76
Target amount
performance bonus,
STI 2020:
€1,000,000
ROCE factor
2020:
Synergies from acquisitions and joint ventures were above the
target level.
Based on the defined parameters, the performance bonus for a full-
year member of the Board of Executive Directors is calculated as
shown below. In light of the exceptional circumstances and the
achievements of the Board of Executive Directors in 2020, the
Supervisory Board considers this bonus to be appropriate and fair.
The Supervisory Board did not make use of the possibility, in very
exceptional cases (such as a severe economic crisis), to temporarily
deviate from the components of the compensation system for the
Board of Executive Directors.
Performance factor
2020:
0.3
0.95
=
STI payout
(gross):
€285,000
BASF Report 2020
193
Target/
About This Report
To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4
Consolidated Financial Statements
5 Overviews
LTI target achievement for the performance year 2020
The rates of target achievement for the first year of the four-year
performance period 2020-2023 of the 2020 LTI program were as
follows:
Strategic targets for the LTI 2020 (2020-2023)
Target
achievement
The degrees of target achievement determined for 2020 are fixed. At
the end of the four-year performance period, they are added
together to one arithmetic mean with the degrees of target achieve-
ment in the following years.
SPF 2020 for the deferral components from the performance
bonus programs 2018 and 2019
The still-running deferral components from the performance bonus
2018 (2018-2021) and 2019 (2019-2022) will be continued as
in % planned in accordance with the terms of the previous program and
will be paid out. To assess the strategic performance, the Super-
visory Board will therefore determine a separate strategic perfor-
mance factor (SPF) for each of the years 2020, 2021 and 2022. For
the performance bonus 2018 (2018-2021) as well as the perfor-
mance bonus 2019 (2019-2022), the Supervisory Board determined
an SPF 2020 of 1.0.
1
Annual variable compensation
Long-term incentive program (LTI)
Company pension benefits
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4
Consolidated Financial Statements
5 Overviews
Compensation granted in accordance with the German Corporate Governance Code (GCGC 2017)
Thousand €
Fixed salary
Fringe benefits
Total
Regularly provided fringe benefits
Event-related fringe benefits
About This Report
Delegation-related fringe benefitsa
Dr. Martin Brudermüller
Chairman of the Board of Executive Directors
Dr. Hans-Ulrich Engel
Saori Dubourg
Vice Chairman of the Board of Executive Directors
2020
2019
2020
(min.)
2020
(max.)
2020
2020
2020
2020
One-year variable compensation
195
BASF Report 2020
Furthermore, a reconciliation statement for total compensation to be
reported is provided below the table "Compensation granted in
accordance with the German Corporate Governance Code (GCGC)
2017" due to the disclosures required by section 314(1) no. 6a of
the German Commercial Code (HGB) in connection with the German
Accounting Standard 17 (GAS 17).
Withholding and clawback clause
pensation (performance bonus, part 2). The defined annual target
amounts for the pension contribution and for the new LTI also
increase transparency. This new system did not result in an increase
compared with the average total target compensation for 2017-
2019.
Compensation system for the Board of Executive Directors
until the end of 2019
Performance bonus
- The key performance indicator for the company's success is the
return on capital employed (ROCE).
Relevant performance factors are the operational performance
factor (OPF) for the current fiscal year and the strategic
performance factors (SPF) for the current and the following three
fiscal years.
50% paid out at the end of the current fiscal year and 50% after
the end of the four-year performance period
Long-term, share price-based incentive program
Performance period of up to eight years
Mandatory individual investment of 10% of the performance bonus
(gross); up to an additional 20% of the performance bonus (gross)
can be invested on a voluntary basis
The variable component of the pension unit is the result of
multiplying the fixed pension component with a performance factor
based on the relevant ROCE in the reporting year concerned, as
well as the performance factors relevant to the performance bonus.
The pensionable age for Board members (Board Performance
Pension) was raised from 60 to 63 years for new members
appointed to the Board of Executive Directors after January 1,
2017.
Option to choose between payment of pension entitlements in the
form of a lifelong pension or a lump sum
Withholding and clawback clause for the performance bonus and
the LTI program
New compensation system for the Board of Executive
Directors as of 2020
Performance bonus, short-term incentive (STI)
The key performance indicator for the company's success is
the return on capital employed (ROCE).
-
A performance factor is assigned based on the assessment
of the achievement of operational and strategic targets in the
past fiscal year.
The actual STI amount is paid out following the Annual
Shareholders' Meeting subsequent to the current fiscal year.
Long-term compensation program in the form of a
performance share plan
The new LTI plan incentivizes the achievement of strategic
goals and takes into consideration the development of the
BASF share and dividend (total shareholder return) over a
period of four years.
New, longer-term mandatory share ownership guideline as a
component of service contracts for members of the Board of
Executive Directors stipulating a shareholding worth 150% of
the member's fixed compensation
The previous company pension benefits granted to members
of the Board of Executive Directors (Board Performance
Pension, deferred compensation program and basic
coverage under BASF Pensionskasse) are discontinued as of
January 1, 2020.
Effective January 1, 2020, the company offers members of
the Board of Executive Directors a defined contribution
pension commitment in the form of a capital investment
model.
- The company grants the members of the Board of Executive
Directors a fixed annual pension plan contribution.
A members of the Board of Executive Directors has the
option to instead choose a pension allowance for private
retirement savings, which is then paid out in equal monthly
installments.
No change, withholding and clawback clause applies for the
performance bonus (STI) and the LTI program
Amount of total compensation in reporting year 2020
The tables below, which are based on the sample tables in the
German Corporate Governance Code in the version dated
February 7, 2017 (GCGC 2017), show the granted and allocated
compensation as well as service cost of each member of the Board
of Executive Directors.
Compensation granted in accordance with the German
Corporate Governance Code (GCGC 2017)
The table "Compensation granted in accordance with the German
Corporate Governance Code (GCGC) 2017" shows: fixed salary,
fringe benefits, performance bonus, LTI programs measured at fair
value as of the grant date and/or the target value and pension bene-
fits. The individual compensation components are supplemented by
individually attainable minimum and maximum compensation.
The target for investments in growth focus areas was met.
2019
Sales of products that make a substantial contribution to sustain-
ability (Accelerators) increased.
- The targets from the Excellence Program were exceeded.
1,064,000
1,600,000
1,600,000
Regularly provided fringe benefits
50,000
100,000a
50,000
100,000ª
Company pension benefits
500,000
STI amount
1,000,000
LTI amount
1,064,000
Total compensation 2020
500,000
2,000,000b
2,800,000b
6,200,000€
665,000
1,330,000
665,000
2,660,000b
1,862,000
3,724,000b
50,000
1,000,000
2,000,000
2,800,000
100,000ª
1,000,000
4,000,000b
-
-
5,600,000b
4,971,000
8,213,000°
1,400,000
3,750,000
7,450,000
800,000
Fixed salary
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4
Consolidated Financial Statements
5 Overviews
Maximum compensation
The total compensation is capped in accordance with the recom-
mendation of the German Corporate Governance Code (GCGC). By
establishing a maximum amount (cap) for the STI and the LTI, the
€
Member of the Board
of Executive Directors
amount of both variable compensation components is limited.
The maximum compensation levels based on the current target
compensation for members of the Board of Executive Directors are
presented in the following overview:
800,000
Vice chair of the Board
of Executive Directors
Chair of the Board
of Executive Directors
Target
compensation
Maximum
compensation
BOP2020
Long-term, share price-based incentive program (LTI program)
LTI program BASF option program (BOP)
The BASF option program was granted for the last time in
2020 and was replaced by the new LTI.
- Absolute performance threshold: BASF share price gains at
least 30% compared with the base price for the LTI program
concerned
-
-
Target
compensation
Maximum
compensation
Maximum
compensation
Target
compensation
12,300,000°
a This amount represents the maximum amount (200% of the target amount) in the fiscal year 2020 for regularly provided fringe benefits. For event-related fringe benefits, an additional maximum amount has been defined:
€500,000 for a member of the Board of Executive Directors, €533,000 for the vice chair of the Board of Executive Directors and €600,000 for the chair of the Board of Executive Directors. For delegation-related fringe benefits,
a maximum amount for a member of the Board of Executive Directors has been set at €3,000,000.
b Corresponds to 200% of the annual target amount
5 Overviews
The members of the Board of Executive Directors are obligated to
invest at least 10% of their individual performance bonus (gross) for
the previous year in the LTI program each year (share ownership
obligation). This mandatory investment is subject to a holding period
of four years. For any further additional voluntary investment of up to
20% of the performance bonus (gross) for the previous year, the
general holding period of two years applies.
Four options are granted for each BASF share brought into the LTI
program as an individual investment. After a four-year vesting period,
there is a four-year exercise period during which the members of the
Board of Executive Directors can exercise these options if perfor-
mance thresholds are met. During the exercise period, the exercising
of options is prohibited during certain periods (closed periods). Each
member of the Board of Executive Directors can individually decide
on the timing and extent of the exercising of options. Once the
options are exercised, the computed value of the options is paid out
in cash (cash settlement).
Each option consists of right A (absolute performance threshold)
and right B (relative performance threshold), whose value is deter-
mined by different performance targets.
At least one of the two conditions must be met in order for the
option to be exercised:
- Performance threshold, right A: BASF share price increases at
least 30% compared with the base price on the option grant date
for the LTI program concerned. The value of right A is calculated
as the difference between the market price of BASF shares on the
exercise date and the base price on the option grant date. It is
limited to 100% of the base price (cap). The base price for an LTI
program is the volume-weighted average share price in Deutsche
Börse AG's electronic trading system (Xetra) on the first trading
day after the Annual Shareholders' Meeting of BASF SE in the
year in which the LTI program is granted. The base price for the
LTI program granted in 2020 was €51.26 (2019: €68.21).
- Performance threshold, right B: The cumulative percentage per-
formance of the BASF share exceeds that of the MSCI World
Chemicals Index (outperformance) and the price of the BASF
share on the exercise date equals at least the base price. The
value of right B is calculated as the base price of the option multi-
plied by twice the outperformance of BASF shares on the exercise
date. It is limited to the closing price on the date of exercise minus
the computed nominal value of BASF shares.
In total, the maximum exercise gain (cap) is limited to five times the
individual investment.
For more information on the LTI program, see page 149 and page 310
Provisions relating to the previous multi-year variable
compensation components and to the previous pension plan
The still-running deferral components from the performance bonus
2018 (2018-2021) and 2019 (2019-2022) will be continued as
planned and paid out in accordance with the terms of the previous
program. To assess the strategic performance, the Supervisory
Board will therefore determine a separate strategic performance
factor (SPF) for each of the years 2020, 2021 and 2022. This SPF
will serve exclusively to determine the average SPFs necessary for
the deferral components of the performance bonus in accordance
with the terms of the program.
The option rights granted under the previous BASF option program
(BOP) and not yet exercised can continue to be exercised in accor-
dance with the specified terms of the BOP for the Board of Executive
Directors. Members of the Board of Executive Directors had the
opportunity to participate for the last time in the BASF option pro-
gram as of July 1, 2020, based on their performance bonus (gross)
for the year 2019. The existing applicable minimum investment of
10% and the additional voluntary investment of up to 20% of the
performance bonus (gross) for the previous year remain in effect
unchanged. The option rights hereby granted are a component of
the compensation for the Board of Executive Directors for the fiscal
year 2019 and were granted in accordance with the previous pro-
gram's terms as of July 1, 2020. Owing to the maximum program
duration of eight years, exercise gains from the option program may
be allocated to members of the Board of Executive Directors up
until June 30, 2028, at the latest.
The pension entitlements acquired until December 31, 2019, under
the previous pension benefits are maintained as vested rights and
upon retirement, disability or death can be accessed by the member
of the Board of Executive Directors or by the surviving dependents
as a company pension or retirement capital in accordance with the
previous rules.
BASF Report 2020
4 Consolidated Financial Statements
192
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Compensation Report
4
Consolidated Financial Statements
5 Overviews
Targets and determination of target achievement for the
variable compensation components 2020
Performance bonus (short-term incentive, STI) 2020
The STI is based on an annual target agreement between the
Supervisory Board and the Board of Executive Directors as well as
on the return on capital employed (ROCE). These targets are in line
with the outlook for 2020 published in the forecast. The amount of
the STI is calculated by multiplying the target amount by the perfor-
mance factor derived from the target achievement and by the ROCE
factor. If the ROCE is below the threshold of 4%, the compensation
system stipulates that the Supervisory Board determines the ROCE
factor by special resolution, either as zero or a value larger than zero.
If the ROCE factor is zero, the STI would also be zero, regardless of
the achievement of the agreed operational and strategic targets.
In the year 2020, BASF Group's ROCE was 1.7% and thus below
the target of earning a premium on the cost of capital as well as
below the threshold for the ROCE. The main reasons for this were
the slowdown in business – particularly in the second quarter - and
the negative impact on earnings resulting from impairments to fixed
assets.
As required by the compensation system, the Supervisory Board
determined an ROCE factor of 0.3 by special resolution. This corre-
sponds to the value that would be achieved with an ROCE of 4%
and equates to half the level of 2019. The following factors were
relevant in this decision:
The economic conditions in 2020 developed in an unforeseeable
and exceptional way due to the coronavirus pandemic. The Board
of Executive Directors reacted quickly, energetically and effectively,
ensured the protection of employees and steered BASF well through
this difficult phase with a focus on costs and liquidity.
At the same time, the Board of Executive Directors demonstratively
took on social responsibility by, for example, producing and donat-
ing disinfectant for clinics and doctors' offices and by procuring
masks. The Supervisory Board wants to expressly recognize these
achievements. Moreover, efforts to advance BASF's strategic further
development were unabated. Finally, the operational and strategic
targets were largely achieved. Despite the decline in earnings, based
on the target agreement, the performance factor amounts to 0.95:
- The EBIT target was clearly missed.
- The free cash flow target was not reached.
About This Report
3 Corporate Governance
Compensation Report
2 Management's Report
To Our Shareholders
c From options rights granted in 2020 as a component of the 2019 compensation for the Board of Executive Directors, an additional maximum amount of €1,453,500 for a member of the Board of Executive Directors, €1,933,155
for the vice chair of the Board of Executive Directors and €2,907,000 for the chair of the Board of Executive Directors may be allocated.
The compensation for the Board of Executive Directors was last
increased effective January 1, 2017. In the event that the Supervisory
Board resolves to adjust the compensation amount prior to the next
€
Maximum compensation until next say on
pay on the compensation system
scheduled say on pay on the compensation system by the Annual
Shareholders' Meeting in 2024, the following maximum compensa-
tion amounts would not be exceeded:
Member of the Board
Vice chair of the Board
of Executive Directors
of Executive Directors
7,500,000a
9,975,000ª
Chair of the Board
of Executive Directors
15,000,000ª
Relative performance threshold: BASF shares outperform the
MSCI World Chemicals Index and no share price loss
compared with the base price on the option grant date
Share ownership guideline: mandatory individual investment in
BASF shares with a holding obligation of 10% of the actual
performance bonus (gross), plus up to an additional 20% of the
actual performance bonus (gross)
Term: eight years
Exercise first possible: four years after the grant date (vesting
period)
- Maximum exercise gain (cap): five times the individual
investment
By resolution of the Supervisory Board, the BASF option program
(BOP) was replaced by the new LTI as of January 1, 2020. The BOP
is based on the STI paid out for the previous year and can therefore
be considered delayed compensation for the preceding fiscal year.
It was therefore offered for the last time in 2020, based on the
performance bonus for 2019.
To take part in the program, each participant must prove an individual
investment in BASF shares and hold the shares for this purpose for
a defined period of time (holding period). The individual investment
can amount to a maximum of 30% of the participant's performance
bonus (gross) for the previous year.
by the Annual Shareholders' Meeting
a This amount contains the maximum amount (200% of the target amount) for regular fringe benefits. For event-related fringe benefits, an additional maximum amount has been defined: €500,000 for a member of the Board of
Executive Directors, €533,000 for the vice chair of the Board of Executive Directors and €600,000 for the chair of the Board of Executive Directors. For delegation-related fringe benefits, a maximum amount for a member of
the Board of Executive Directors has been set at €3,000,000.
BASF Report 2020
191
About This Report
1
- A further improvement in customer and employee satisfaction
was achieved.
800
2020
(max.)
665
665
500
500
500
6,179
8,004
2,656
15,807
4,140
5,347
1,791
10,679
665
3,661
1,794
8,154
Reconciliation reporting of total compensation pursuant to section 314(1) no. 6a HGB
in connection with GAS 17
Less granted 2019 performance bonus (2019-2022), (one-year component and deferral components)
Less granted short-term incentive 2020
-3,200
-2,128
-1,600
-2,000
-1,330
-1,000
Less difference between target amount and market value at grant date for
-69
4,468
1,000
1,000
1,000
1,656
14,807
3,774
4,682
1,126
10,014
2,957
3,968
1,294
7,654
Company pension benefits
Service cost
Pension contribution / pension allowance
Total compensation in accordance with GCGC 2017
573
1,000
1,000
1,000
366
665
665
665
704
500
500
500
573
366
704
-46
7,004
-34
Less voluntary relinquishment of salary (20% of fixed salary) in second quarter of 2020
3 Corporate Governance
Compensation Report
4
Consolidated Financial Statements
5 Overviews
Compensation granted in accordance with the German Corporate Governance Code (GCGC 2017)
Thousand €
Michael Heinz
Dr. Markus Kamieth
Wayne T. Smith
2020
2020
2020
2020
2020
2 Management's Report
2020
2020
(min.)
(max.)
2019
2020
(min.)
(max.)
2019
2020
(min.)
(max.)
Fixed salary
800
2019
To Our Shareholders
1
About This Report
-80
-53
-40
Plus allocated actual annual variable compensation (performance bonus, part 1)
969
644
485
Plus allocated actual annual variable compensation (short-term incentive 2020)
570
379
285
Plus allocated multiple-year variable actual compensation LTI 2012 (2012-2020)
Less service cost
Less pension contribution / pension allowance
Total compensation
-573
3,375
-1,000
5,425
-366
-665
2,290
3,632
-704
-500
1,842
3,179
a Figures only reported under 2020 (min.) / 2020 (max.) if delegation-relation fringe benefits were granted in the year 2020.
b Members of the Board of Executive Directors had the opportunity to participate for the last time in the BASF option program as of July 1, 2020, based on their performance bonus (gross) for the year 2019. The option rights granted are a component of the compensation for the Board of Executive Directors for the fiscal year 2019.
c Payment was made partly in local currency abroad based on a theoretical net salary in Germany.
d Wayne T. Smith opted for the pension allowance for private retirement savings.
BASF Report 2020
196
LTI performance share plan 2020 (2020-2023)
(min.)
5,606
2,800
62
62
100
59
62
62
100
600
533
297
432
432
500
69
1,660
1,656
2,300
1,133
1,126
1,126
1,697
1,156
1,294
1,294
1,400
1,600
2,000
0
1,656
100
56
56
2019
2020
(min.)
(max.)
1,600
1,600
1,600
1,600
1,064
1,064
1,064
1,064
800
800
800
800
60
56
56
700
69
62
62
633
356
494
494
600
60
4,000
Total
1,064
0
4,254
50% of the 2019 performance bonus (2019-2022), deferral component
1,600
1,064
800
LTI program 2019 (2019-2027)
746
513
201
LTI program 2020 (2020-2028)b
548
0
2,907
0
364
1,933
274
0
1,454
LTI performance share plan 2020 (2020-2023)
2,800
0
5,600
1,862
0
3,724
1,400
0
0
1,674
1,001
5,657
2,660
800
1,000
0
2,000
50% of the 2019 performance bonus (2019-2022)
1,600
1,064
800
Short-term incentive 2020
2,000
0
4,000
1,330
0
2,660
1,000
0
2,000
Multiple-year variable compensation
BASF Report 2020
2,346
3,348
0
8,507
1,577
2,226
0
1,330
200
For more information on changes within the Supervisory Board, see the Corporate Governance Report on page 173
We would like to thank the now retired members of the Supervisory Board, Dr. Jürgen
Hambrecht and Dr. Alexander C. Karp, for their constructive and trust-based
cooperation, and their contributions to the success and further development of the
company. Dr. Jürgen Hambrecht held leadership roles at BASF for 44 years. As the
long-serving Chairman of the Board of Executive Directors and Chairman of the
Supervisory Board, he played a pivotal role in shaping BASF and the company's
development with far-sightedness and vigor.
Composition of the Supervisory Board
- The development of the joint venture Wintershall Dea created by the merger of the
oil and gas businesses of BASF and LetterOne
- The execution of the sale of the global construction chemicals business
In all meetings, it also discussed the progress of major investments and ongoing
portfolio projects. Discussions focused on:
In all meetings in 2020, the Supervisory Board addressed the development of the
coronavirus pandemic and its impact on the macroeconomic environment and
business developments and prospects of the BASF Group. It fully supported the
Board of Executive Directors' measures and initiatives to respond to the crisis, avoid
operational disruptions and ensure the health and safety of employees, including
extensive remote and mobile working offerings.
development, the status of important current and planned investment projects,
operational excellence and sustainability, developments on the capital markets,
significant managerial measures taken by the Board of Executive Directors and inno-
vation projects.
A significant component of all Supervisory Board meetings was the Board of Executive
Directors' reports on the current business situation with detailed information on sales
and earnings development, as well as on opportunities and risks for business
An individual overview of attendance at meetings of the Supervisory Board and its committees will be made available on the
company website at basf.com/supervisoryboard/meetings
With the exception of the meeting following the Annual Shareholders' Meeting, all
members of the Board of Executive Directors attended the Supervisory Board
meetings unless it was deemed appropriate that the Supervisory Board discuss
individual topics - such as personnel matters relating to the Board of Executive
Directors - without them being present. In addition, each Supervisory Board meeting
includes an agenda item that provides an opportunity for discussion without the Board
of Executive Directors (executive session).
The Supervisory Board held seven meetings in the 2020 business year. With the
exception of the meeting immediately following the Annual Shareholders' Meeting on
June 18, 2020, in which Dr. Kurt Bock was elected as Chairman of the Supervisory
Board following his appointment to the Supervisory Board, which one member of the
Supervisory Board was unable to attend, all members attended all Supervisory Board
meetings in 2020. Despite the restrictions due to the coronavirus pandemic, four of
the meetings were able to be held in person with most Supervisory Board members
physically present. The three meetings in April and June were held solely by means of
electronic communication as video conferences. The members of the Supervisory
Board elected by shareholders and those elected by the employees prepared for the
meetings in separate preliminary discussions in each case, which were also attended
by members of the Board of Executive Directors.
Supervisory Board meetings
The Chairman of the Supervisory Board and the Chairman of the Board of Executive
Directors were also in regular contact outside of Supervisory Board meetings. The
Chairman of the Supervisory Board was always promptly and comprehensively
informed of current developments and significant individual issues. The Supervisory
Board was involved at an early stage in decisions of major importance. The Super-
visory Board passed resolutions on all of those individual measures taken by the
Board of Executive Directors which by law or the Statutes required the approval of the
Supervisory Board.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Report of the Supervisory Board
2 Management's Report
- The execution of the sale of the global pigments business
-
The progress of the investment project to establish a new Verbund site in southern
China
At its meeting on February 26, 2020, the Supervisory Board reviewed and approved
the Consolidated Financial Statements, Management's Report and the proposal for
the appropriation of profit for the 2019 business year as presented by the Board of
Executive Directors. It also discussed the agenda for the Annual Shareholders'
Meeting, which was originally planned for April 30, 2020, and adopted its proposals
for resolutions. Other topics discussed at the meeting were business conditions and
BASF's development and prospects in China, the world's largest chemical market, as
well as the project to construct a new Verbund site in southern China, the report on
the strategy and focus areas of research and development, and the integration and
use of renewable energies in the BASF Group.
- Growth projects (the Verbund site in China and battery materials)
The further development of BASF's portfolio after the coronavirus pandemic
At the strategy meeting on October 22/23, 2020, the Board of Executive Directors
and the Supervisory Board discussed at length the status of implementation of the
corporate strategy with a particular focus on growth, strengthening profitability and
portfolio development, as well as key aspects of BASF's strategic development. These
included:
The main agenda items at the meeting on July 22, 2020, were BASF's leadership
development and personnel concept, as well as the current status of and the strategies
and main plans for the further development of the Nutrition & Health and Agricultural
Solutions divisions.
The Supervisory Board met virtually prior to the virtual Annual Shareholders' Meeting
on June 18, 2020, primarily to prepare for the Annual Shareholders' Meeting. In a
further meeting following the Annual Shareholders' Meeting, the Supervisory Board
elected Dr. Kurt Bock as the new Chairman of the Supervisory Board. He succeeds
Dr. Jürgen Hambrecht, who retired from the Supervisory Board.
due to the coronavirus pandemic, and agreed to it being held as a virtual event without
the physical presence of shareholders.
5 Overviews
To Our Shareholders
4 Consolidated Financial Statements
2 Management's Report
To Our Shareholders
1
About This Report
204
BASF Report 2020
The main focus of the meeting on April 29, 2020, was the effects of the coronavirus
pandemic, which had been spreading since the middle of the first quarter, on BASF's
business and prospects, as well as crisis management and measures in connection
with the coronavirus pandemic. The Supervisory Board also addressed the execution
of the Annual Shareholders' Meeting, which had been postponed to June 18, 2020,
3 Corporate Governance
Report of the Supervisory Board
1
About This Report
203
The company reimburses members of the Supervisory Board for
out-of-pocket expenses and value-added tax to be paid with regard
to their activities as members of the Supervisory Board or of a com-
mittee. The directors' and officers' liability insurance (D&O insurance)
concluded by the company covers the duties performed by the
members of the Supervisory Board. This policy provides for the
level of deductibles for the Supervisory Board as recommended in
section 3.8(3) of the German Corporate Governance Code (GCGC).
Total compensation of the Supervisory Board in 2020 was around
€2.9 million (2019: around €3.3 million). The compensation of the
individual Supervisory Board members is listed in the table on the
left.
Each member of the Supervisory Board is required to use 25% of
their fixed compensation to acquire shares in BASF SE, and to hold
these shares for the duration of membership on the Supervisory
Board. This does not apply to the amount of compensation that the
member of the Supervisory Board transfers to a third party on a pro
rata basis as a result of an obligation entered into before their
appointment to the Supervisory Board. In this case, the utilization
and holding obligation applies to 25% of the remaining compensa-
tion after deducting the amount transferred.
Share purchase and shareholding obligation for members of
the Supervisory Board
83.3
550.0
2019
BASF Report 2020
Compensation for membership on the Supervisory Board and its
committees, provided it is not withheld for the purpose of acquiring
shares, is due after the conclusion of the fiscal year for which the
compensation is paid. Beyond the compensation in accordance
with the Statutes presented in the table "Compensation of the
Supervisory Board of BASF SE," no Supervisory Board members
received any compensation in 2020 for services rendered personally,
in particular, the rendering of advisory and agency services.
I Member of the Audit Committee since March 1, 2020
j Member of the Audit Committee
i Chair of the Audit Committee and member of the Strategy Committee
h Member of the Personnel and Strategy Committees
g Member of the Audit Committee until February 29, 2020
f Member of the Personnel and Strategy Committees since May 3, 2019
e Member of the Personnel Committee and vice chair of the Strategy Committee until May 3, 2019
d Chair of the Strategy Committee since June 18, 2020
k Member of the Strategy Committee
-
For more information on share ownership by members of the Supervisory Board, see page 175
About This Report
BASF Report 2020
In 2020, the Supervisory Board of BASF SE exercised its duties as required by law and
the Statutes with the utmost care. It regularly monitored the management of the Board
of Executive Directors and provided advice on the company's strategic development
and important individual measures, about which the Supervisory Board was regularly
and thoroughly informed by the Board of Executive Directors. This occurred both
during and outside of the meetings of the Supervisory Board and its committees in the
form of written and oral reports on, for example, all of the major financial key
performance indicators (KPIs) of the BASF Group and its segments, the economic
situation in the main sales and procurement markets, and on deviations in business
developments from original plans. Furthermore, the Supervisory Board tackled
fundamental questions of corporate planning, including financial, investment, sales
volumes and personnel planning, as well as measures for designing the future of
research and development. It regularly discussed occupational and process safety,
with a particular focus on the measures resulting from the coronavirus pandemic. The
Supervisory Board discussed in detail the reports from the Board of Executive
Directors, and also deliberated on prospects for the company and its individual
business areas with the Board of Executive Directors. It was convinced of the
lawfulness, expediency and propriety of the Board of Executive Director's company
leadership.
Monitoring and consultation in an ongoing dialog with the Board of
Executive Directors
This year, we as the Supervisory Board will again not have any opportunity to meet
directly with you - our shareholders. We deeply regret this, because a physical Annual
Shareholders' Meeting is the ideal place to discuss the development of your BASF
with you. This report should give you the opportunity to appraise the Supervisory
Board's work. We hope to be able to again meet and talk with you directly as soon as
possible.
The Supervisory Board expressly supports this approach and would like to thank the
Board of Executive Directors and all employees worldwide for their extraordinary
dedication and hard work in the 2020 business year.
Board of Executive Directors led BASF through this difficult phase with strength,
prudence and foresightedness.
The 2020 business year was dominated by a turn of events that few had foreseen at
the beginning of the year: the coronavirus pandemic. The pandemic had a significant
impact on BASF's business and its activities. In particular, the dramatic downturn in
the second quarter left a clear mark on the BASF Group's earnings. The operating
result declined significantly. The bottom line - income after taxes - was negative for
the first time in many years due to special items. In this situation, the Supervisory
Board intensified its communication with the Board of Executive Directors. It was
informed in detail and at an early stage about changed business forecasts and the
measures to be taken. The Board of Executive Directors ensured that employees were
protected and kept costs and liquidity under control with effective crisis management.
At the same time, cooperation with customers was further strengthened. Key initiatives
to promote the long-term development of BASF continued unabated. In this way, the
202
Dear Shareholders,
Report of the Supervisory Board
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
Report of the
Supervisory Board
c Chair of the Personnel Committee since June 18, 2020
The development of the regulatory environment, including the European Green
Deal
The energy transformation to reduce CO2 emissions
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Report of the Supervisory Board
2 Management's Report
To Our Shareholders
1
About This Report
207
BASF Report 2020
An important aspect of good corporate governance is the independence of
Supervisory Board members and their freedom from conflicts of interest. The
Supervisory Board based the assessment of the independence of its members on the
recommendations of the German Corporate Governance Code and the additional
criteria for assessing the independence of Supervisory Board members contained in
the Rules of Procedure of the Supervisory Board, which were revised in the Super-
visory Board meeting on December 19, 2019. The criteria used to assess indepen-
dence are presented in the Corporate Governance Report on page 172. According to
the Supervisory Board's assessment, on the basis of these criteria, five of the six
shareholder representatives and four of the six employee representatives - 9 of the 12
members of the Supervisory Board in total - are considered to be independent. All
three non-independent Supervisory Board members were classified as such due to
the length of their membership on the Supervisory Board, which exceeds 12 years in
each case. Beyond this limitation, however, the Supervisory Board does not see any
indications that the Supervisory Board role is not performed completely indepen-
dently. In cases where Supervisory Board members hold supervisory or management
positions at companies with which BASF has business relations, we see no impairment
Independence and efficiency review
The full Declaration of Conformity is rendered on page 210 and is available to shareholders on the company website at
basf.com/en/corporate governance
At its meeting of December 17, 2020, the Supervisory Board approved the joint Dec-
laration of Conformity by the Supervisory Board and the Board of Executive Directors
in accordance with section 161 of the German Stock Corporation Act (AktG). BASF
complies with the recommendations of the German Corporate Governance Code in
the version dated December 16, 2019, without exception. The Corporate Governance
Report provides extensive information on the BASF Group's corporate governance.
Special onboarding events are held for new members of the Supervisory Board to
familiarize them with the basics of corporate governance at BASF, the organization
and internal structures of the BASF Group, and the composition of its businesses.
Above and beyond this, the company also supports the members of the Supervisory
Board with training for their activities on the Supervisory Board, whether through
external offerings such as topic-specific seminars or internal information offerings
such as site and plant visits.
In accordance with the recommendations of the German Corporate Governance
Code and the Guiding principles for the dialog between investors and German
supervisory boards, the Chairman of the Supervisory Board again sought dialog with
investors where appropriate in 2020.
of their independence. The scope of these businesses is relatively marginal and
furthermore takes place under conditions similar to those of a third party.
As a consequence of the change in assessed independence of Franz Fehrenbach, the
Supervisory Board resolved to appoint Anke Schäferkordt to the Audit Committee in
his place as of March 1, 2020, to ensure that the shareholder representatives on the
Audit Committee continue to solely be independent Supervisory Board members in
the future.
Independent of the efficiency review of the Supervisory Board, the Audit Committee
also conducted a self-assessment of its activities in 2020 based on individual
discussions between the chair of the Audit Committee and all members of the Audit
Committee. Material subjects were the topics addressed by the committee, the
number, organization and content of meetings, the depth and quality of discussions,
and the supply of information as the basis of the committee's work. The Audit
Committee discussed the results of the questionnaire and detailed suggestions at its
meeting on December 16, 2020. On this basis, the members judged the Audit
Committee's work to be efficient and appropriate.
Separate and Consolidated Financial Statements
4 Consolidated Financial Statements
3 Corporate Governance
Report of the Supervisory Board
2 Management's Report
To Our Shareholders
1
About This Report
208
The Supervisory Board places great value on ensuring good corporate governance: In
2020, it was therefore once again intensely occupied with the corporate governance
standards practiced in the company and the implementation of the recommendations
and suggestions of the German Corporate Governance Code in the current version
dated December 16, 2019. Other important consultation topics were the translation of
the second E.U. Shareholder Rights Directive into German law and, in particular, the
new regulations governing related party transactions.
BASF Report 2020
The auditor's reports were sent in a timely manner to every member of the Supervisory
Board. The auditor attended the accounts review meeting of the Audit Committee on
February 23, 2021, as well as the accounts meeting of the Supervisory Board on
February 24, 2021, and reported on the procedure and material findings of its audit,
including the key audit matters described in the Auditor's Report. The auditor also
provided detailed explanations of the reports on the day before the accounts meeting
of the Supervisory Board.
The assurance report issued by KPMG on the substantive audit of the NFS can be found at basf.com/nfs-audit-2020
Beyond the statutory audit of the Financial Statements, KPMG also conducted, on
behalf of the Supervisory Board, a substantive audit with limited assurance of the
Nonfinancial Statements (NFSs) for BASF SE and the BASF Group, which are integral
parts of the respective management's reports. On the basis of its audit, KPMG did not
raise any objections to the nonfinancial reporting and the satisfaction of the relevant
statutory requirements.
For more information on the auditor, see the Corporate Governance Report on page 176
The Auditor's Report is rendered from page 214 onward
Statements of BASF SE and the BASF Group Consolidated Financial Statements,
which were prepared in accordance with the International Financial Reporting
Standards (IFRS) as adopted by the European Union, and the additional requirements
that must be applied in accordance with section 315e(1) of the German Commercial
Code (HGB), including the Management's Report and the accounting records from
which they were prepared, and have approved them free of qualification. Furthermore,
the auditor certified that the Board of Executive Directors had taken the measures
incumbent on it under section 91(2) of the German Stock Corporation Act (AktG) in an
appropriate manner. In particular, it had instituted an appropriate information and
monitoring system that fulfilled the requirements of the company and is applicable for
the early identification of developments that could pose a risk to the continued
existence of the BASF Group. The results of the audit as well as the procedure and
material findings of the audit of the financial statements are presented in the Auditor's
Report.
KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected by the Annual
Shareholders' Meeting for the 2020 reporting year, has audited the Financial
The Audit Committee reviewed the Financial Statements and Management's Report at
its meeting on February 23, 2021, including the reports prepared by the auditor and
the key audit matters specified in the Auditor's Report, and discussed them in detail
with the auditor. The chair gave a detailed account of the preliminary review at the
Corporate governance and Declaration of Conformity
The Strategy Committee, which was established to discuss strategic options for the
further development of the BASF Group, did not meet in 2020.
The Nomination Committee is responsible for preparing candidate proposals for the
Supervisory Board members to be elected by the Annual Shareholders' Meeting. The
Nomination Committee is guided by the objectives for the composition of the Super-
visory Board adopted by the Supervisory Board as well as the competence profile and
diversity concept for the Supervisory Board resolved at the meeting on December 21,
2017. The Nomination Committee met twice in 2020. One member was absent at
each of the two meetings; otherwise, the meetings were attended by all committee
members. Items discussed at the meetings were the existing competence profile and
diversity concept for the Supervisory Board, the selection of candidates for
appointment to the Supervisory Board by the court following Dr. Alexander C. Karp's
departure from the Supervisory Board, and the proposal to nominate Liming Chen as
his successor.
Consolidated Financial Statements
4
3 Corporate Governance
Report of the Supervisory Board
2 Management's Report
To Our Shareholders
1
About This Report
5 Overviews
205
At its meeting on December 17, 2020, the Supervisory Board also addressed the
composition of the Board of Executive Directors and longer-term succession planning.
Based on the recommendation of the Personnel Committee, it appointed Dr. Melanie
Maas-Brunner as an additional member of the Board of Executive Directors as of
February 1, 2021. As a further element of this long-term succession planning, Wayne
T. Smith will leave the Board of Executive Directors at midnight on May 31, 2021, one
year before the end of his current appointment to the Board of Executive Directors,
which ends on conclusion of the Annual Shareholders' Meeting 2022.
For more information on the compensation of the Board of Executive Directors and the Supervisory Board, see the
Compensation Report on pages 183 to 202
At its meeting on December 17, 2020, the Supervisory Board evaluated, based on the
discussions and the corresponding recommendation of the Personnel Committee, the
Board of Executive Directors' performance in 2020 and resolved to grant short-term
variable compensation to the members of the Board of Executive Directors. The
resolution was necessary as the minimum return on capital employed (ROCE) required
for the short-term bonus of 4% was not achieved. The decision to grant a bonus was
justified by the Board of Executive Directors' sound crisis management during the
coronavirus pandemic and the achievement of key operational and strategic targets in
2020. In addition, the Supervisory Board defined the strategic performance factors for
the deferral compensation components for 2018-2021 and 2019-2022. The
Chairman of the Supervisory Board abstained from the resolution on the factor for the
performance bonus for 2018-2021 as this affected him personally.
At its meeting on February 26, 2020, the Supervisory Board discussed and agreed on
the 2020 targets for the Board of Executive Directors based on the preparations of the
Personnel Committee. At the meeting on April 29, 2020, in light of the dramatic
deterioration in business performance since the outbreak of the coronavirus pandemic,
it discussed the voluntary relinquishment by the members of the Supervisory Board of
part of their fixed Supervisory Board compensation, and the corresponding offer
made by the members to the Board of Executive Directors to voluntarily relinquish part
of their fixed compensation on a temporary basis. Corresponding waiver declarations
were subsequently submitted by all members of the Supervisory Board and the Board
of Executive Directors.
In several meetings over the 2020 business year, the Supervisory Board discussed
and passed resolutions on the compensation of the Board of Executive Directors and
its composition.
Compensation and composition
At its meeting on December 17, 2020, the Supervisory Board discussed and approved
the Board of Executive Directors' operational and financial planning, including the
investment budget for 2021, and, as in previous years, authorized the Board of
Executive Directors to procure the necessary financing in 2021 within a set limit.
BASF Report 2020
The transformation to a circular economy
Committees
For information on the composition of the committees and the tasks assigned to them by the Supervisory Board, see the
Corporate Governance Report on pages 170 to 171
impairment of various material assets. To this end, the Audit Committee received
regular reports from the Chief Financial Officer and discussed the ramifications. At an
extraordinary committee meeting on October 8, 2020, it discussed at length the
possible impairment of property, plant and equipment and intangible assets identified
by the Board of Executive Directors, in particular the assumptions underlying
measurement.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Report of the Supervisory Board
2 Management's Report
To Our Shareholders
1
The Supervisory Board of BASF SE has four committees: 1. the committee for
personnel matters of the Board of Executive Directors and the granting of loans in
accordance with section 89(4) of the German Stock Corporation Act (Personnel
Committee); 2. the Audit Committee; 3. the Nomination Committee; and 4. the
Strategy Committee. Following each Committee meeting, the chairs of the Commit-
tees reported in detail about the meetings and the activities of the Committees at the
subsequent meeting of the Supervisory Board.
About This Report
BASF Report 2020
In 2020, the Audit Committee's work focused on the effects of the coronavirus
pandemic on BASF's results of operations and business prospects, as well as the
Other important agenda items included providing guidance to the Board of Executive
Directors on accounting issues, the control system established by the Board of
Executive Directors, and follow-up assessments of acquisition and investment
projects. At its meeting on April 29, 2020, the Audit Committee addressed risk
management in the BASF Group and the organization of internal environmental,
health and safety audits. It focused on the internal auditing system and, in particular,
payment fraud prevention at the meeting on July 21, 2020, and compliance in the
BASF Group on December 16, 2020. In these meetings, the head of the Corporate
Audit department and the Chief Compliance Officer reported to the Audit Committee
and answered its questions. In all meetings, the Audit Committee also received infor-
mation on the development of risks from litigation.
At the meeting on July 21, 2020, the Audit Committee engaged KPMG AG
Wirtschaftsprüfungsgesellschaft - the auditor elected by the Annual Shareholders'
Meeting on June 18, 2020 - with the audit for the 2020 reporting year and auditing
fees were agreed upon. The focus areas and scope of the annual audit were discussed
and defined together with the auditor. The Audit Committee excluded in principle the
engagement of the auditor to perform any services outside of the audit of the annual
financial statements, including beyond prevailing legal limitations. For certain nonaudit
services, the Audit Committee authorized the Board of Executive Directors to engage
KPMG for such services to a very limited extent, or granted approval in individual
cases. At the meeting on December 16, 2020, the auditors responsible reported on
the status of the annual audit, as well as the focus areas of the audit and the most
important individual items.
At the meeting on February 23, 2021, the auditor reported in detail on its audits of
BASF SE's Separate and Consolidated Financial Statements for the 2020 business
year, including the corresponding management's reports, and discussed the results of
its audit with the Audit Committee. The committee's audit also included the nonfinancial
statements of BASF SE and the BASF Group. In preparation for this audit, the Audit
Committee had, following a corresponding resolution by the Supervisory Board,
additionally engaged KPMG to perform a substantive audit with limited assurance of
the Nonfinancial Statements and to issue an assurance report on it. KPMG also
reported in detail on the focus, the procedure and the key findings of this audit.
The Audit Committee met six times during the reporting period. With the exception
of one meeting, which one member did not attend, all committee members attended
all meetings. The Audit Committee is responsible for all the tasks listed in section 107(3)
sentence 2 of the German Stock Corporation Act (AktG) and the recommendations of
the German Corporate Governance Code. In 2020, the Supervisory Board additionally
tasked the Audit Committee with monitoring the internal process of identifying related
party transactions and adopting resolutions to approve related party transactions.
The Personnel Committee met four times during the reporting period. All committee
members attended all meetings. At its meeting on February 26, 2020, the Personnel
Committee discussed the targets for the Board of Executive Directors for the 2020
business year and the 2019 Compensation Report. A key topic of discussion at the
meeting on April 29, 2020, was the temporary, voluntary relinquishment by the Board
of Executive Directors and the Supervisory Board of part of their compensation. At its
meeting on July 22, 2020, the Personnel Committee addressed the status of leader-
ship development at the top levels of management below the Board of Executive
Directors and long-term succession planning for the Board of Executive Directors. At
its meeting on December 16, 2020, the Personnel Committee discussed the future
composition of the Board of Executive Directors with the suggestion to appoint
Dr. Melanie Maas-Brunner to the Board of Executive Directors and consequently
terminate Wayne T. Smith's mandate one year ahead of the end of his regular term of
office. Other topics were the appropriateness of the compensation of the Board of
Executive Directors, the assessment of its performance in 2020 and a proposal for the
performance-related variable compensation of the Board of Executive Directors.
206
5 Overviews
b Chair of the Strategy Committee until June 18, 2020
3,346.2
Fixed salary
2020
Compensation for
Thousand €
Compensation of the Supervisory Board of BASF SE
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Compensation Report
2 Management's Report
To Our Shareholders
1
About This Report
201
BASF Report 2020
account. For members of the Audit Committee, the further com-
pensation shall be €50,000. The chair of a committee shall receive
twice and a vice chair 1.5 times the further fixed compensation.
committee memberships
Total compensation
2019
2020
138.0
13.0
125.0
Michael Diekmann, vice chair until May 3, 2019€
262.5
29.2
233.3
Amount of compensation for serving on a committee
Members of the Supervisory Board who are members of a commit-
tee, except for the Nomination Committee, receive an additional
annual fixed compensation of €12,500. This also follows the GCGC
recommendation that the increased workload of Supervisory Board
members serving on committees should be appropriately taken into
250.0
25.0
500.0
225.0
Dr. Kurt Bock, chair since June 18, 2020c, d
Dr. Jürgen Hambrecht, chair until June 18, 2020a,b
2020
2019
50.0
Each member of the Supervisory Board shall receive annually a fixed
compensation of €200,000. In recognition of the increased demands
on the chair, the compensation of the Supervisory Board of BASF
follows the GCGC recommendation of function-related differentia-
tion of the compensation of the chair, vice chair and members. The
amount for the chair of the Supervisory Board is 2.5 times this value,
and 1.5 times this value for the vice chair compared with the com-
pensation of a member of the Supervisory Board. The members of
the Supervisory Board each voluntarily relinquished 20% of their
fixed compensation for the period from April 1, 2020, until Decem-
ber 31, 2020.
Amount of Supervisory Board compensation
Since 2017, the compensation of the Supervisory Board has been
purely fixed compensation, supplemented by share acquisition and
shareholding components. The obligation to purchase and hold
shares is a variable compensation component with a long-term
orientation which emphasizes the Supervisory Board's strategic
support role.
Income/expense from the fair value measurement of
option rights
11.2
Retirement and surviving dependents' pensions
2019
2020
10.9
Million €
-0.7
Total compensation of former members of the Board of Executive
Directors and their surviving dependents
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
Compensation Report
2 Management's Report
1 To Our Shareholders
About This Report
associated holding period to emphasize that the compensation for
the Board of Executive Directors is geared to sustainability.
Franz Fehrenbach, vice chair since May 3, 2019f.g
Non-compete compensationa
2.0
The compensation of the Supervisory Board is regulated by the
Statutes of BASF SE passed by the Annual Shareholders' Meeting.
The disclosure of compensation of the Supervisory Board is based
on the German Commercial Code and is aligned with the recom-
mendations of the German Corporate Governance Code in the
version dated February 7, 2017.
b The amount for the chair of a committee is two times this value, and 1.5 times this value for the vice
chair.
a The amount for the chair of the Supervisory Board is 2.5 times this value, and 1.5 times this value for the
vice chair compared with the compensation of a member of the Supervisory Board.
- Voluntary relinquishment of 20% of fixed compensation as
of the second quarter of 2020.
- No additional compensation is paid for the Nomination
Committee.
Compensation for committee memberships: €12,500b;
Audit Committee: €50,000b
Total
25% of the fixed compensation must be used to purchase
shares in BASF; these shares must be held for the duration
of membership on the Supervisory Board.
Compensation of Supervisory Board members
Fixed salary: €200,000ª
Compensation of Supervisory Board members
Pension provisions for previous Board members and their surviving
dependents amounted to €209.0 million (2019: €198.2 million).
11.5
0.6
a Sanjeev Gandhi stepped down from the Board of Executive Directors effective the end of December 31,
2019. Based on the termination agreement, non-compete compensation was agreed for a two-year,
post-contractual non-compete obligation.
12.5
Share purchase and share holding component:
a Chair of the Personnel Committee until June 18, 2020
255.0
33.3
Liming Chen, Supervisory Board member since October 8, 2020
200.0
170.0
200.0
170.0
Denise Schellemans
200.0
211.7
41.7
200.0
170.0
Anke Schäferkordt'
133.3
103.3
133.3
40.0
40.0
Roland Strasser
170.0
2,875.8
404.6
404.2
2,941.6
2,471.6
275.0
245.0
103.3
75.0
200.0
170.0
Total
Michael Vassiliadish.j
200.0
170.0
200.0
75.0
Dr. Alexander C. Karp, Supervisory Board member from May 3, 2019,
until July 22, 2020
212.5
182.5
Dame Alison Carnwath DBE
133.3
170.0
133.3
170.0
Prof. Dr. Thomas Carell, Supervisory Board member since May 3, 2019
325.0
170.0
280.0
25.0
300.0
255.0
Sinischa Horvat, vice chairh
333.3
288.3
66.6
25.0
266.7
200.0
112.5
12.5
12.5
200.0
170.0
Waldemar Helberk
250.0
220.0
112.5
50.0
200.0
170.0
Tatjana Diether
83.3
Prof. Dr. François Diederich, Supervisory Board member until May 3, 2019
312.5
282.5
50.0
Supervisory Board meeting on February 24, 2021. On this basis, the Supervisory
Board has examined the Financial Statements and Management's Report of BASF SE
for 2020, the proposal by the Board of Executive Directors for the appropriation of
profit, and the Consolidated Financial Statements and Management's Report for
2020. The results of the preliminary review by the Audit Committee and the results of
the Supervisory Board's own examination fully concur with those of the audit. The
Supervisory Board sees no grounds for objection to the management or the reports
submitted.
The Supervisory Board reviews the efficiency of its activities every year in the form of
a self-assessment. To this end, the new Chairman of the Supervisory Board Dr. Kurt
Bock met with all Supervisory Board members individually in June and July in
preparation, and again in December 2020. Topics centered in particular on Super-
visory Board meeting preparation and agendas, cooperation with the Board of
Executive Directors, the quality of the information supplied to the Supervisory Board,
cooperation between shareholder and employee representatives, the tasks,
composition and work of the committees, and the need for information and training for
Supervisory Board members. The results of these dialogs, including suggestions to
further improve the Supervisory Board's work, were presented by the Chairman of the
Supervisory Board at the Supervisory Board meeting on December 17, 2020, and
thoroughly discussed by the members of the Supervisory Board. Overall, its members
rated the Supervisory Board's activity as efficient.
Chairman of the Supervisory Board
At its accounts meeting on February 24, 2021, the Supervisory Board approved the
Financial Statements of BASF SE and the Consolidated Financial Statements of the
BASF Group prepared by the Board of Executive Directors, making the 2020 Financial
Statements final. The Supervisory Board concurred with the proposal of the Board of
Executive Directors regarding the appropriation of profit and the payment of a dividend
of €3.30 per share.
Ludwigshafen, February 24, 2021
The Supervisory Board
West Bank
Dr. Kurt Bock
BASF Report 2020
209
About This Report
1 To Our Shareholders
3 Corporate Governance
4 Consolidated Financial Statements
Declaration of Conformity Pursuant to Section 161 AktG
5 Overviews
Declaration of
2 Management's Report
Declaration of Conformity 2020 of the Board of Executive
Directors and the Supervisory Board of BASF SE
Dr. Jürgen Hambrecht, Chairman of the Supervisory Board, retired from the Super-
visory Board on conclusion of the Annual Shareholders' Meeting on June 18, 2020.
He had already announced his intention to resign from this position on his reelection
by the Annual Shareholders' Meeting 2019. The Annual Shareholders' Meeting
elected Dr. Kurt Bock to the Supervisory Board as his successor. The Supervisory
Board appointed Dr. Kurt Bock as Chairman of the Supervisory Board immediately
following the Annual Shareholders' Meeting. The Supervisory Board member
Dr. Alexander C. Karp left the Supervisory Board at the end of July 2020 after
announcing his resignation for professional reasons. At the request of the Chairman of
the Supervisory Board, supported by the members of the Nomination Committee, the
Ludwigshafen am Rhein local court (Amtsgericht) appointed Mr. Liming Chen to the
Supervisory Board as a shareholder representative effective October 8, 2020. Liming
Chen has many years of management experience at chemical and petrochemical
companies. As Chairman of IBM Greater China Group, he also brings with him
expertise in digitalization and is very familiar with the growth market of China. Liming
Chen is considered independent based on the criteria used by the company to assess
the independence of Supervisory Board members. The Supervisory Board satisfied
itself that he can devote the necessary time to the BASF mandate.
According to the Supervisory Board's assessment, the current members meet in full
the objectives for the composition of the Supervisory Board with respect to the
competence profile and the diversity concept.
210
BASF Report 2020
Conformity Pursuant to
Section 161 AktG
The Supervisory Board
of BASF SE
The Board of Executive Directors
of BASF SE
2. The recommendations of the Government Commission on
the German Corporate Governance Code as amended on
December 16, 2019, published by the Federal Ministry of
Justice on March 20, 2020, in the official section of the
Federal Gazette are complied with.
1. The recommendations of the Government Commission on
the German Corporate Governance Code as amended on
February 7, 2017, published by the Federal Ministry of Justice
on April 24, 2017, in the official section of the Federal Gazette
have been complied with since the submission of the last
Declaration of Conformity in December 2019.
The Board of Executive Directors and the Supervisory Board
of BASF SE hereby declare pursuant to section 161
of the German Stock Corporation Act (AktG)
Ludwigshafen, December 2020
17
.272
About This Report
Inventories
274
18 Receivables and miscellaneous assets
275
1 To Our Shareholders
26 Supplementary information on financial instruments
3 Corporate Governance
4 Consolidated Financial Statements
Statement by the Board of Executive Directors
Statement by the Board of
Executive Directors
and assurance pursuant to sections 297(2)
and 315(1) of the German Commercial Code
(HGB)
The Board of Executive Directors of BASF SE is responsible for preparing the
Consolidated Financial Statements and Management's Report of the BASF Group.
The BASF Group Consolidated Financial Statements for 2020 were prepared
according to the International Financial Reporting Standards (IFRS), which are
published by the International Accounting Standards Board (IASB), London, and have
been endorsed by the European Union.
16 Leases
We have established effective internal control and steering systems in order to ensure
that the BASF Group's Management's Report and Consolidated Financial Statements
comply with applicable accounting rules and to ensure proper corporate reporting.
2 Management's Report
268
251
264
Sales revenue
249
8
Functional costs
250
9 Other operating income and expenses
The risk management system we have set up is designed such that the Board of
Executive Directors can identify material risks early on and take appropriate defensive
measures as necessary. The reliability and effectiveness of the internal control and risk
management system are continually audited throughout the Group by our internal
audit department.
10 Investments accounted for using the
equity method and other financial assets
253
11 Financial result
258
12 Income taxes
259
13 Noncontrolling interests
263
14 Intangible assets
15 Property, plant and equipment
To the best of our knowledge, and in accordance with the applicable reporting rules,
the Consolidated Financial Statements of the BASF Group give a true and fair view
of the net assets, financial position and results of operations of the Group, and the
Management's Report of the BASF Group includes a fair review of the development
and performance of the business as well as position of the BASF Group, together with
a description of the principal opportunities and risks associated with the expected
development of the BASF Group.
213
Dr. Martin Brudermüller
We have audited the Consolidated Financial Statements of BASF SE
and its subsidiaries (the Group), which comprise the balance sheet
as at December 31, 2020, statement of income, statement of
income and expense recognized in equity, statement of cash flows,
statement of equity for the financial year from January 1, 2020 to
December 31, 2020 and Notes to the Consolidated Financial
Statements, including a summary of significant accounting policies.
In addition, we have audited the Group Management Report of
BASF SE for the financial year from January 1, 2020 to Decem-
ber 31, 2020.
In accordance with German legal requirements we have not audited
the content of those components of the Group Management
Report specified in the "Other Information" section of our auditor's
report.
The Group Management Report contains cross-references which
are not intended to use by law and are identified as unaudited. In
accordance with the German legal requirements we have not
audited the content of those cross-references and the related refer-
enced information.
In our opinion, on the basis of the knowledge obtained in the audit,
- the accompanying Consolidated Financial Statements comply, in
all material respects, with the IFRSS as adopted by the EU, and
the additional requirements of German commercial law pursuant
to Section 315e (1) of the German Commercial Code (HGB) and
full IFRS and, in compliance with these requirements, give a true
and fair view of the assets, liabilities, and financial position of the
Group as at December 31, 2020, and of its financial performance
for the financial year from January 1, 2020 to December 31, 2020,
and
- the accompanying Group Management Report as a whole pro-
vides an appropriate view of the Group's position. In all material
respects, this Group Management Report is consistent with the
Consolidated Financial Statements, complies with German legal
requirements and appropriately presents the opportunities and
risks of future development. Our opinion on the Group Manage-
ment Report does not cover the content of those parts of the
Group Management Report specified in the "Other Information"
section of our auditor's report. The Group Management Report
contains cross-references which are not legally required and are
identified as unaudited. Our opinion does not cover those
cross-references and the referenced information.
Pursuant to Section 322 (3) sentence 1 HGB, we declare that our
audit has not led to any reservations relating to the legal compliance
of the Consolidated Financial Statements and of the Group Man-
agement Report.
Basis for the Opinions
Opinions
We conducted our audit of the Consolidated Financial Statements
and of the Group Management Report in accordance with Section
317 HGB and the EU Audit Regulation No. 537/2014 (referred to
subsequently as "EU Audit Regulation") and in compliance with
German Generally Accepted Standards for Financial Statement
Audits promulgated by the Institute of Public Auditors in Germany
(Institut der Wirtschaftsprüfer, IDW). Our responsibilities under those
requirements and principles are further described in the "Auditor's
Responsibilities for the Audit of the Consolidated Financial State-
ments and of the Group Management Report" section of our audi-
tor's report. We are independent of the group entities in accordance
with the requirements of European law and German commercial and
professional law, and we have fulfilled our other German professional
responsibilities in accordance with these requirements. In addition,
in accordance with Article 10 (2) point (f) of the EU Audit Regulation,
we declare that we have not provided non-audit services prohibited
under Article 5 (1) of the EU Audit Regulation. We believe that the
evidence we have obtained is sufficient and appropriate to provide a
basis for our opinions on the Consolidated Financial Statements and
on the Group Management Report.
Key audit matters are those matters that, in our professional judg-
ment, were of most significance in our audit of the Consolidated
Financial Statements for the financial year from January 1, 2020 to
December 31, 2020. These matters were addressed in the context
of our audit of the Consolidated Financial Statements as a whole,
and in forming our opinion thereon, we do not provide a separate
opinion on these matters.
1 This is a translation of the German original. Solely the original text in German language is authoritative.
BASF Report 2020
214
About This Report
1 To Our Shareholders
2 Management's Report
Key Audit Matters in the Audit of the Consolidated Financial
Statements
Report on the Audit of the Consolidated Financial
Statements and of the Group Management Report
TO BASF SE, Ludwigshafen am Rhein
Independent Auditor's
Report¹
Chairman of the Board of Executive Directors
Dr. Hans-Ulrich Engel
Vice Chairman and Chief Financial Officer
Saori Dubourg
Michael Heinz
Dr. Markus Kamieth
Dr. Melanie Maas-Brunner
Chief Technology Officer
Wayne T. Smith
BASF Report 2020
5 Overviews
7
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Overviews
Ludwigshafen am Rhein, February 23, 2021
248
Declaration of Conformity with the German
241
278
214 21
Liabilities
279
22
Statement of Income
222
277
23
282
288
24 Risks from litigation and claims
290
Statement of Income and
25 Other financial obligations
291
Provisions for pensions and similar obligations
Other provisions
213 19 Capital, reserves and retained earnings
20 Other comprehensive income
Independent Auditor's Report
Statement by the Board of Executive Directors
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Declaration of Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Declaration of
Corporate Governance
Declaration of Corporate Governance in accordance with
section 315d HGB in connection with section 289f HGB1
The Declaration of Corporate Governance, pursuant to section
315d HGB in connection with section 289f HGB, comprises the
subchapters Corporate Governance Report including the descrip-
tion of the diversity concept for the composition of the Board of
Executive Directors and the Supervisory Board (except for the
disclosures pursuant to section 315a(1) HGB), Compliance and
Declaration of Conformity as per section 161 of the German Stock
Corporation Act (AktG) in the Corporate Governance chapter. It is a
component of the Management's Report.
Pursuant to section 317(2) sentence 6 HGB, the auditor checked
that the disclosures according to section 315d HGB were made.
1 In the version applicable to the Financial Statements and Management's Report for the 2020 fiscal year pursuant to Article 83 of the Introductory Act on the German Commercial Code (EGHGB)
BASF Report 2020
211
Chapter 4 pages 212-312
4
Consoli-
dated
Financial
Statements
Expense Recognized in Equity
223
224
27 Statement of cash flows and capital structure
32
Services provided by the external auditor
312
2 Scope of consolidation
233
33
3 Corporate Governance
235
Corporate Governance Code
312
Notes
1 Summary of accounting policies
3 Acquisitions and divestitures
4 BASF Group list of shares held pursuant to
section 313(2) of the German Commercial Code (HGB).
241
5 Reporting by segment and region
228
6 Earnings per share
311
31
management
Statement of Cash Flows
226
28
Personnel expenses and employees
304
306
29
Share price-based compensation programs
Statement of Changes in Equity
227
and BASF incentive share program
307
30 Compensation of the Board of Executive Directors and
Supervisory Board
310
228
Related party transactions
4 Consolidated Financial Statements
Independent Auditor's Report
Financial statement risk
Recoverability of goodwill
provides an appropriate view of the Group's position and is, in all
material respects, consistent with the Consolidated Financial State-
ments, complies with German legal requirements, and appropriately
presents the opportunities and risks of future development. In
addition, the Board of Executive Directors is responsible for such
arrangements and measures (systems) as they have considered
necessary to enable the preparation of a Group Management Report
that is in accordance with the applicable German legal requirements,
and to be able to provide sufficient appropriate evidence for the
assertions in the Group Management Report.
The Supervisory Board is responsible for overseeing the Group's
financial reporting process for the preparation of the Consolidated
Financial Statements and of the Group Management Report.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements and of the Group Management Report
Our objectives are to obtain reasonable assurance about whether
the Consolidated Financial Statements as a whole are free from
material misstatement, whether due to fraud or error, and whether
the Group Management Report as a whole provides an appropriate
view of the Group's position and, in all material respects, is consis-
tent with the Consolidated Financial Statements and the knowledge
obtained in the audit, complies with the German legal requirements
and appropriately presents the opportunities and risks of future
development, as well as to issue an auditor's report that includes our
opinions on the Consolidated Financial Statements and on the
Group Management Report.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Section 317
HGB and the EU Audit Regulation and in compliance with German
Generally Accepted Standards for Financial Statement Audits
promulgated by the Institut der Wirtschaftsprüfer (IDW) will always
detect a material misstatement. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggre-
gate, they could reasonably be expected to influence the economic
BASF Report 2020
218
About This Report
Furthermore, the Board of Executive Directors is responsible for the
preparation of the Group Management Report that, as a whole,
1 To Our Shareholders
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Overviews
decisions of users taken on the basis of these Consolidated Finan-
cial Statements and this Group Management Report.
We exercise professional judgment and maintain professional skep-
ticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the Con-
solidated Financial Statements and of the Group Management
Report, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opin-
ions. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresenta-
tions, or the override of internal control.
-
2 Management's Report
In preparing the Consolidated Financial Statements, the Board of
Executive Directors is responsible for assessing the Group's ability
to continue as a going concern. They also have the responsibility for
disclosing, as applicable, matters related to going concern. In addi-
tion, they are responsible for financial reporting based on the going
concern basis of accounting unless there is an intention to liquidate
the Group or to cease operations, or there is no realistic alternative
but to do so.
Financial Statements, in compliance with these requirements, give a
true and fair view of the assets, liabilities, financial position, and
financial performance of the Group. In addition, the Board of Execu-
tive Directors is responsible for such internal control as they have
determined necessary to enable the preparation of Consolidated
Financial Statements that are free from material misstatement,
whether due to fraud or error.
In connection with our audit, our responsibility is to read the
other information and, in so doing, to consider whether the other
information
5 Overviews
Our observations
The underlying approach for impairment testing for the above-
mentioned property, plant and equipment, including the valuation
method, is consistent with accounting principles. The assumptions
and data used by the group are appropriate. The disclosures in the
Notes on the key assumptions are appropriate and complete.
Other Information
The Board of Executive Directors and the Supervisory Board are
responsible for the other infor-mation. The other information com-
prises the following components of the Group Management Report,
whose content was not audited:
-
the information of the integrated non-financial statement which is
identified as unaudited
the corporate governance statement in the section Corporate
Governance of the Group Management Report, and
- is materially inconsistent with the Consolidated Financial State-
ments, with the Group Management Report information audited
for content or our knowledge obtained in the audit, or
- otherwise appears to be materially misstated.
If we conclude, based on the work we have conducted, that there is
a material misstatement of this other information, we are obligated
to report on this fact. We do not have anything to report in this
regard.
Responsibilities of the Board of Executive Directors and the
Supervisory Board for the Consolidated Financial
Statements and the Group Management Report
The Board of Executive Directors is responsible for the prepara-
tion of the Consolidated Financial Statements that comply, in all
material respects, with IFRSS as adopted by the EU and the
additional requirements of German commercial law pursuant to
the disclosures which are not normally part of the Group Manage- Section 315e (1) HGB and full IFRS and that the Consolidated
ment Report and which are identified as unaudited.
Additionally, the other Information comprises the remaining parts of
the BASF Report 2020.
The other Information does not comprise the Consolidated Financial
Statements, the audited parts of the Group Management Report
and our auditor's report.
Our opinions on the Consolidated Financial Statements and on the
Group Management Report do not cover the other information, and
consequently we do not express an opinion or any other form of
assurance conclusion thereon.
-
4 Consolidated Financial Statements
Independent Auditor's Report
Obtain an understanding of internal control relevant to the audit of
the Consolidated Financial Statements and of arrangements and
measures (systems) relevant to the audit of the Group Manage-
ment Report in order to design audit procedures that are appro-
priate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of these systems.
· Evaluate the overall presentation, structure and content of the
Consolidated Financial Statements, including the disclosures, and
whether the Consolidated Financial Statements present the
underlying transactions and events in a manner that the Consoli-
dated Financial Statements give a true and fair view of the assets,
liabilities, financial position and financial performance of the Group
in compliance with IFRSS as adopted by the EU and the additional
requirements of German commercial law pursuant to Section
315e (1) HGB and full IFRS.
In addition, the company's Board of Executive Directors is responsi-
ble for the internal controls they consider necessary to enable the
preparation of ESEF documents that are free from material intentional
or unintentional non-compliance with the requirements of Section
328 (1) HGB for the electronic reporting format.
The company's Board of Executive Directors is also responsible for
the submission of the ESEF documents together with the auditor's
report and the attached audited consolidated financial statements
and audited group management report as well as other documents
to be published to the operator of the German Federal Gazette
(Bundesanzeiger).
The supervisory board is responsible for overseeing the preparation
of the ESEF documents as part of the financial reporting process.
Our objective is to obtain reasonable assurance about whether the
ESEF documents are free from material intentional or unintentional
non-compliance with the requirements of Section 328 (1) HGB.
We exercise professional judgement and maintain professional
skepticism throughout the assurance work. We also:
- Identify and assess the risks of material intentional or unintentional
non-compliance with the requirements of Section 328 (1) HGB,
design and perform assurance procedures responsive to those
risks, and obtain assurance evidence that is sufficient and appro-
priate to provide a basis for our assurance opinion.
-
The company's Board of Executive Directors is responsible for the
preparation of the ESEF documents including the electronic repro-
duction of the consolidated financial statements and the group
management report in accordance with Section 328 (1) sentence 4
item 1 HGB and for the tagging of the consolidated financial state-
ments in accordance with Section 328 (1) sentence 4 item 2 HGB.
-
Obtain an understanding of internal control relevant to the
assurance of the ESEF documents in order to design assurance
procedures that are appropriate in the circumstances, but not for
the purpose of expressing an assurance opinion on the effective-
ness of these controls.
Evaluate the technical validity of the ESEF documents, i.e. whether
the electronic file containing the ESEF documents meets the
requirements of Commission Delegated Regulation (EU) 2019/815
on the technical specification for this electronic file.
- Evaluate whether the ESEF documents enable an XHTML repro-
duction with content equivalent to the audited consolidated finan-
cial statements and the audited group management report.
Evaluate whether the tagging of the ESEF documents with Inline
XBRL technology (iXBRL) enables an appropriate and complete
machine-readable XBRL copy of the XHTML reproduction.
BASF Report 2020
220
About This Report
-
We conducted our assurance work on the reproduction of the con-
solidated financial statements and the group management report
contained in the above-mentioned electronic file in accordance with
Section 317 (3b) HGB and the Exposure Draft of the IDW Assurance
Standard: Assurance in accordance with Section 317 (3b) HGB on
the Electronic Reproduction of Financial Statements and Manage-
ment Reports Prepared for Publication Purposes (ED IDW ASS 410).
Accordingly, our responsibilities are further described below. Our
audit firm has applied the IDW Standard on Quality Management 1:
Requirements for Quality Management in Audit Firms (IDW QS 1).
In our opinion, the reproduction of the consolidated financial state-
ments and the group management report contained in the
above-mentioned electronic file and prepared for publication pur-
poses complies in all material respects with the requirements of
Section 328 (1) HGB for the electronic reporting format. We do not
express any opinion on the information contained in this reproduc-
tion nor on any other information contained in the above-mentioned
file beyond this reasonable assurance opinion and our audit opinion
on the accompanying consolidated financial statements and the
accompanying group management report for the financial year from
January 1, 2020 to December 31, 2020 contained in the "Report on
the Audit of the Consolidated Financial Statements and the Group
Management Report" above.
We have performed assurance work in accordance with Section
317 (3b) HGB to obtain reasonable assurance about whether the
reproduction of the consolidated financial statements and the group
management report (hereinafter the "ESEF documents") contained
in the file that can be downloaded by the issuer from the electronic
client portal with access protection, "basf-gruppe-2020-12-31.zip"
(SHA256-hash value: 82cc4e309e39828deed8d847fadf9e0d1adf-
87cacaa62c0fa75f305e2421f883) and prepared for publication
purposes complies in all material respects with the requirements of
Section 328 (1) HGB for the electronic reporting format ("ESEF for-
mat"). In accordance with German legal requirements, this assur-
ance only extends to the conversion of the information contained in
the consolidated financial statements and the group management
report into the ESEF format and therefore relates neither to the in-
formation contained in this reproduction nor any other information
contained in the above-mentioned electronic file.
Obtain sufficient appropriate audit evidence regarding the finan-
cial information of the entities or business activities within the
Group to express opinions on the Consolidated Financial State-
ments and on the Group Management Report. We are responsible
for the direction, supervision and performance of the group audit.
We remain solely responsible for our opinions.
· Evaluate the consistency of the Group Management Report with
the Consolidated Financial Statements, its conformity with law,
and the view of the Group's position it provides.
- Perform audit procedures on the prospective information
presented by the Board of Executive Directors in the Group
Management Report. On the basis of sufficient appropriate audit
evidence we evaluate, in particular, the significant assumptions
used by the Board of Executive Directors as a basis for the pro-
spective information, and evaluate the proper derivation of the
prospective information from these assumptions. We do not
express a separate opinion on the prospective information and on
the assumptions used as a basis. There is a substantial
unavoidable risk that future events will differ materially from the
prospective information.
We communicate with the audit committee regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the audit committee with a statement that we have
complied with the relevant independence requirements, and com-
municate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where
applicable, the related safeguards.
From the matters communicated with those charged with gover-
nance, we determine those matters that were of most significance in
the audit of the Consolidated Financial Statements of the current
period and are therefore the key audit matters. We describe these
matters in our auditor's report unless law or regulation precludes
public disclosure about the matter.
BASF Report 2020
219
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Overviews
Other Legal and Regulatory Requirements
Report on the Assurance in accordance with Section 317 (3b) HGB
on the Electronic Reproduction of the Consolidated Financial State-
ments and the Group Management Report Prepared for Publication
Purposes
Evaluate the appropriateness of accounting policies used by the
Board of Executive Directors and the reasonableness of estimates
made by the Board of Executive Directors and related disclosures.
Conclude on the appropriateness of the Board of Executive Direc-
tors' use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on
the Group's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw atten-
tion in the auditor's report to the related disclosures in the Consol-
idated Financial Statements and in the Group Management
Report or, if such disclosures are inadequate, to modify our
respective opinions. Our conclusions are based on the audit evi-
dence obtained up to the date of our auditor's report. However,
future events or conditions may cause the Group to cease to be
able to continue as a going concern.
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Overviews
Our audit approach
First, we gained an understanding of the acquisition transaction by
surveying employees in the accounting and controlling units as well
as by evaluating the relevant contracts.
1
We assessed the competence, skills and objectivity of the indepen-
dent expert contracted by BASF. Moreover, against the backdrop of
our knowledge of BASF's business model, we evaluated the identi-
fication process for the acquired assets and assumed liabilities for
compliance with the requirements under IFRS 3. We examined the
valuation methods used for compliance with the relevant accounting
principles.
We discussed the expected development of sales and margins with
the persons responsible for planning. Moreover, we evaluated the
consistency of the assumptions with external market estimates. We
compared the license rates used in the valuation of intangible assets
with reference values from relevant external databases. We
evaluated the applied useful lives based on conversations with the
client's experts and on the underlying product life cycles.
Moreover, we satisfied ourselves of the methodological appropriate-
ness of the calculation and the appropriateness of the weighted cost
of capital rates. We compared the assumptions and data underlying
the cost of capital, in particular the risk-free rate, the market risk
premium and the beta factor, with our own assumptions and publicly
available data.
In order to assess the accuracy of the measurement, we reproduced
selected calculations taking into account risk-based considerations.
Finally, we assessed whether the disclosures in the Notes on the
acquisition of the polyamide business are complete and appropriate.
Our observations
The underlying approach for the identification and valuation of the
acquired assets and assumed liabilities is appropriate and consis-
tent with the applicable accounting principles.
The key assumptions and data are appropriate and the presentation
in the Notes to the Consolidated Financial Statements is complete
and appropriate.
Recoverability of the shareholding in Wintershall Dea
We consulted our valuation specialists in order to assess, among
other things, the appropriateness of the identification and valuation
methods as well as the assumptions used therein.
About This Report
215
BASF Report 2020
For information on the accounting principles applied, please refer to
Note 1.4 to the Consolidated Financial Statements on page 232.
The underlying assumptions used in the calculation and the disclo-
sures on the impairment tests performed are included in Note 14 to
the Consolidated Financial Statements from page 264 onward.
Financial statement risk
Intangible assets in the Consolidated Financial Statements of
BASF SE include goodwill in the amount of €6,959 million. Good-
will accounts for 8.7% of total assets and thus has a material impact
on the company's net assets. Goodwill must be tested for impairment
annually and whenever there is an indication that goodwill may be
impaired. Due to the demand declines and the expected slow recov-
ery in the automotive and aviation industries, the goodwill impairment
testing resulted in impairments of €786 million in the reporting year
in the cash-generating unit Surface Treatment in the Surface Tech-
nologies segment.
Goodwill impairment testing is based on a range of discretionary
assumptions. These include the forecasts for future cash inflows in
the detailed planning period, the assumed growth rate for subse-
quent periods and the cost of capital. These assumptions have a
material impact on the recoverability of goodwill. The growth fore-
casts of the Board of Executive Directors are associated with risks
and can be revised in light of volatile raw materials prices and an
instable macroeconomic environment.
There is the risk for the financial statements that an impairment as of
the balance sheet date is not identified or that an impairment as of
the balance sheet date is not recognized with an appropriate
amount. In addition, there is also a risk that the disclosures in the
Notes on the key assumptions are not appropriate and complete.
Our audit approach
We consulted our valuation specialists in order to assess, among
other things, the appropriateness of the key assumptions as well as
the Group's methods of calculation.
Our observations
The assumptions and data underlying the calculations of the Board
of Executive Directors are acceptable overall. The disclosures in the
Notes on the key assumptions are appropriate and complete.
For information on the accounting principles applied, please refer to
Note 1.4 to the Consolidated Financial Statements on page 232.
Information on the acquisition can be found in Note 3 to the Consol-
idated Financial Statements from page 235 onward.
We examined the forecast for the expected business and earnings The acquisition of Solvay's polyamide business
development in the detailed planning period, in particular with
respect to whether the expected development of the relevant sales
markets were given appropriate consideration and are consistent
with the current budgets adopted by the Board of Executive Direc-
tors and the Supervisory Board. We compared internal growth
forecasts with industry expectations and those of significant com-
petitors and we assessed whether assumptions contained in the
planning regarding the future development of margins and the
amount of investments are appropriate. Our review of the appropri-
ateness of the budgets adopted by the Board of Executive Directors
and the Supervisory Board also included a comparison of planning
in past business years with the results actually achieved. For
selected units, we examined whether reasons for not reaching
planned values in the past were given appropriate consideration in
current planning, to the extent that this was relevant.
We assessed the appropriateness of the assumed growth rate for
the period following the detailed planning period on the basis of
industry-specific and macroeconomic studies. We evaluated the
methodological appropriateness of the calculation and the appropri-
ateness of the weighted cost of capital rates. To this end, we calcu-
lated our own expected values for the assumptions and data under-
lying the weighted cost of capital rates and compared these with the
assumptions and data used.
On January 31, 2020, BASF acquired Solvay's global polyamide
business. The total acquisition costs amounted to €1,319 million.
Taking into account the acquired net assets of €1,299 million, good-
will amounted to €20 million.
As a rule, the acquired identifiable assets and assumed liabilities are
recognized at fair value on the date of acquisition in accordance with
IFRS 3. To identify and assess the acquired identifiable assets and
assumed liabilities, BASF consulted an external expert.
Identifying and assessing the acquired intangible assets are com-
plex and based on the discretionary assumptions of the Board of
Executive Directors. The key assumptions are the projected devel-
opment of sales and margins in the acquired business, the license
rates used in assessments based on the license price analogy
method, the underlying useful lives of the identified assets and the
cost of capital.
Finally, we assessed whether the disclosures in the Notes on the key There is the risk for the financial statements that the acquired intan-
assumptions are appropriate and complete.
gible assets are inaccurately identified and/or valued incorrectly. In
addition, there is also a risk that the disclosures in the Notes are not
complete and appropriate.
For information on the accounting principles applied and the under-
lying assumptions used in the calculation, please refer to Note 10.2
to the Consolidated Financial Statements on page 255.
Financial statement risk
In the Consolidated Financial Statements of BASF SE, shares in
Wintershall Dea in the amount of €10,199 million are reported under
non-integral shareholdings accounted for using the equity method.
The shareholding in Wintershall Dea accounts for 12.7% of total
assets and thus has a material influence on the company's net
assets.
The carrying amount of Wintershall Dea is calculated using the
equity method. Impairments of €843 million on assets belonging to
Wintershall Dea were taken into account. If, in addition to this, there
are indicators for an impairment of an equity-accounted sharehold-
ing as a whole, the company determines the recoverable amount as
of the reporting date and compares this with the carrying amount.
The recoverable amount is the higher of fair value less costs to sell
and the value in use of the shareholding. The recoverable amount is
determined using the discounted cash flow method. If the carrying
amount is higher than the recoverable amount, this results in an
impairment.
Impairments of property, plant and equipment
For information on the accounting principles applied, please refer to
Note 1.4 to the Consolidated Financial Statements on page 232.
The development of property, plant and equipment, including a list
of the impairments, can be found in Note 15 from page 268 onward
in the Notes to the Consolidated Financial Statements.
Financial statement risk
As of December 31, 2020, property, plant and equipment in the
amount of €19,647 million were recognized in the Consolidated
Financial Statements of BASF SE. Depreciation and amortization of
property plant and equipment in the 2020 business year included
impairments of €2,059 million. These impairments had a material
impact on the group's net assets and results of operations in the
business year ended December 31, 2020.
If there are indications for an impairment of assets, the company
determines the recoverable amount as of the balance sheet date
and compares this with the respective carrying amount. If the carry-
ing amount is higher than the recoverable amount, an impairment
must be recognized. The recoverable amount is the higher of fair
value less costs to sell and the value in use of the shareholding. The
recoverable amount is determined using the discounted cash flow
method. In general, the determination of the recoverable amount
takes place at the level of cash-generating units.
Impairment testing of assets using the discounted cash flow method
is complex and based on a range of discretionary assumptions.
These include, in particular, the projected cash flows as well as the
cost of capital rates used.
There is the risk for the financial statements that an impairment as of
the balance sheet date is not recognized with an appropriate
amount. In addition, there is also a risk that the disclosures in the
Notes on the key assumptions are not appropriate and complete.
Our audit approach
In a first step, we evaluated the design and establishment of controls
put in place by BASF for the valuation of property, plant and equip-
ment. In discussions with representatives of the group from corpo-
rate management, accounting and controlling, we gained an under-
standing of the specific valuation risks identified by the company
and we learned about the approaches used by the company to
determine impairments.
With regard to the valuation model, we assessed whether the valu-
ation methodology is consistent with the relevant valuation principles
and we confirmed the mathematical accuracy via modeling. In con-
sultation with our valuation specialists, we satisfied ourselves of the
methodological appropriateness of the calculation and the appropri-
ateness of the weighted cost of capital rates used. To this end, we
calculated our own expected values for the assumptions and data
underlying the weighted cost of capital rates and compared these
with the assumptions and data used.
In addition, we evaluated whether the assumptions and forecasts of
future cash flows underlying the valuations were based on appropri-
ate and acceptable assumptions. To this end, we sought explana-
tions of these assumptions from the persons responsible for plan-
ning and we evaluated the effects of the assumptions on the planning
of future cash flows. Through comparisons to other forecasts inter-
nally available within the company, we ascertained their consistency.
If the identified impairments resulted from changes in the market
environment, we assessed the appropriateness of the underlying
assumptions about expected cash flows and compared these with
external market estimates. We then discussed the calculated valua-
tion results with BASF and carried out the resulting accounting
treatment of the valuation results.
Finally, we assessed whether the disclosures in the Notes on the key
assumptions are appropriate and complete.
BASF Report 2020
217
About This Report
The company's assumptions and data underlying the measurement
are appropriate. The associated disclosures in the notes are appro-
priate and complete.
5 Overviews
The underlying calculation method for the impairment test of the
shareholding in Wintershall Dea as a whole is appropriate and con-
sistent with the applicable accounting principles.
Finally, we assessed whether the disclosures in the Notes on the
recoverability of the shareholding in Wintershall Dea as a whole are
appropriate and complete.
The calculation of the recoverable amount of the shareholding in the
Wintershall Dea is complex and based on discretionary assumptions.
These include, in particular, BASF's forecasts on production volumes
of Wintershall Dea's oil and gas fields based on expected license
terms and production profiles, the development of oil and gas prices,
and the cost of capital.
After carrying out impairment testing, the company did not identify a
need for an impairment of its shareholding in Wintershall Dea as a
whole.
There is the risk for the financial statements that a decline in the value
of the shareholding as a whole as of the balance sheet date was not
identified. In addition, there is also the risk that the associated disclo-
sures in the Notes are not appropriate and complete.
Our audit approach
From explanations provided by employees in accounting, we gained
an understanding of the company's process to identify indicators for
impairment as well as of the determination of the recoverable
amount. In doing so, we assessed, among other things, whether the
calculation of the recoverable amount of the shareholding in
Wintershall Dea is consistent with the relevant accounting principles
and whether the key assumptions made in this calculation are
appropriate.
We discussed the projected development of production volumes
and oil and gas prices with the persons responsible for planning. We
evaluated the production profiles used in the measurement of the
exploration and production business's assets, taking into account
assessments by experts contracted by Wintershall Dea. In order to
assess its suitability as a basis for calculation, we had the oil and gas
price scenario used by the company explained to us. To assess its
appropriateness, we compared the oil and gas price scenario used
by BASF with the published forecasts of industry associations, ana-
lysts, international institutions and other market participants.
BASF Report 2020
216
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Overviews
In consultation with our valuation specialists, we furthermore
satisfied ourselves of the methodological appropriateness of the
calculation and the appropriateness of the weighted cost of capital
rates. We compared the assumptions and data underlying the cost
of capital, in particular the risk-free rate, the market risk premium
and the beta factor, with our own assumptions and publicly available
data.
In order to assess the accuracy of the measurement of the interest
in Wintershall Dea, we reproduced selected calculations taking into
account risk-based considerations.
Our observations
Balance Sheet
291
1
KPMG AG
Wirtschaftsprüfungsgesellschaft
[Original German version signed by:]
Sailer
Wirtschaftsprüfer
[German Public Auditor]
Dr. Dietz
Wirtschaftsprüferin
[German Public Auditor]
BASF Report 2020
221
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Statement of Income
5 Overviews
Frankfurt am Main, February 23, 2021
The German Public Auditor responsible for the engagement is
Dr. Stephanie Dietz.
German Public Auditor Responsible for the Engagement
We declare that the opinions expressed in this auditor's report are
consistent with the additional report to the audit committee pursuant
to Article 11 of the EU Audit Regulation (long-form audit report).
1,878
[10]
21,792
19,647
[15]
14,525
13,145
[14]
Statement of Income
December 31, 2019
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Independent Auditor's Report
5 Overviews
Further Information pursuant to Article 10 of the EU Audit
Regulation
We were elected as group auditor by the annual general meeting on
June 18, 2020. We were engaged by the Chairwomen of the audit
committee on September 7, 2020. We have been the group auditor
of BASF SE without interruption since the financial year 2006.
December 31, 2020
BASF Group
Statement of income
Million €
Income taxes
Income after taxes from continuing operations
Income after taxes from discontinued operations
Income after taxes
Noncontrolling interests
Net income
Earnings per share from continuing operations (€)
Earnings per share from discontinued operations (€)
Earnings per share (€)
Income before income taxes
Dilution effect (€)
BASF Report 2020
Explanations in Note
2020
2019
[7]
59,149
59,316
[7]
Diluted earnings per share (€)
1,885
Financial result
Other financial expenses
Sales revenue
Cost of sales
Gross profit on sales
Selling expenses
General administrative expenses
Research and development expenses
Other operating income
Other operating expenses
Other financial result
Income from integral companies accounted for using the equity method
Income from non-integral companies accounted for using the equity method
Income from other shareholdings
Expenses from other shareholdings
Net income from shareholdings
Interest income
Interest expenses
Interest result
Other financial income
Income from operations
[10]
10,874
13,123
Other liabilities
Financial indebtedness
Tax liabilities
Provisions
Accounts payable, trade
Noncurrent liabilities
Other liabilities
Financial indebtedness
Liabilities of disposal groups
Other provisions
Deferred tax liabilities
Provisions for pensions and similar obligations
Equity
Noncontrolling interests
Equity attributable to shareholders of BASF SE
Other comprehensive income
Retained earnings
Capital reserves
Tax provisions
Subscribed capital
Current liabilities
Explanations in Note
670
[13]
41,497
33,728
-4,850
-8,474
[20]
42,056
Total equity and liabilities
37,911
3,115
3,115
[19]
1,176
1,176
[19]
December 31, 2019
December 31, 2020
[19]
-44,040
Million €
Balance Sheet
[18]
9,093
9,466
[18]
11,223
10,010
[17]
55,960
4,673
50,424
912
[18]
2,887
3,386
[12]
636
582
[10]
1,112
Equity and liabilities
3,790
444
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
224
BASF Report 2020
207
a In order to increase transparency on the reporting of BASF, companies accounted for using the equity method that are not an integral part of the BASF Group are classified as pure financial investments and are shown separately on the balance sheet as of January 1, 2020. For more information, see the Notes to the Consolidated Financial
Statements from page 228 onward
b For a reconciliation of the amounts in the statement of cash flows with the balance sheet item cash and cash equivalents, see page 226.
80,292
30,990
29,868
4,013
1,182
2,427
4,330
[1]
[3]
86,950
-43,061
15,109
16,255
54
Unrealized gains/losses from currency translation
Reclassification of realized gains/losses from currency translation recognized in the statement of income
Deferred taxes on reclassifiable gains/losses
Reclassifiable gains/losses after taxes from investments accounted for using the equity method (after taxes)
Reclassifiable gains/losses
-1,612
481
71
834
65
-5
-1,286
-9
-2,753
1,357
Other comprehensive income after taxes
of which attributable to shareholders of BASF SE
attributable to noncontrolling interests
Comprehensive income
-28
of which attributable to shareholders of BASF SE
Reclassification of realized gains/losses recognized in the statement of income in connection with cash flow hedges
25
5 Overviews
BASF Group
2020
2019
-1,075
8,491
Remeasurement of defined benefit plansb
Deferred taxes on the remeasurement of defined benefit plans
Unrealized gains/losses in connection with cash flow hedges
-1,376
422
359
Remeasurement of defined benefit plans from investments accounted for using the equity method (after taxes)
Nonreclassifiable gains/losses
-19
-46
-973
-393
14
-706
Income after taxes
attributable to noncontrolling interests
b For more information on the remeasurement of defined benefit plans, see Note 22 from page 282 onward
BASF Group
Assets
Million €
Intangible assets
Property, plant and equipment
Integral investments accounted for using the equity methodª
Non-integral investments accounted for using the equity methodª
Other financial assets
Balance Sheet
Deferred tax assets
Noncurrent assets
Inventories
Accounts receivable, trade
Other receivables and miscellaneous assets
Marketable securities
Cash and cash equivalentsb
Assets of disposal groups
Current assets
Other receivables and miscellaneous assets
a For more information on other comprehensive income, see Note 20 on page 278 of the Notes
Balance Sheet
4 Consolidated Financial Statements
BASF Report 2020
-3,726
964
-3,677
949
-49
15
-4,801
5 Overviews
9,455
9,370
-64
85
223
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
-4,737
853
Million €
BASF Group
-925
-149
157
33
-141
-78
-909
-194
[10]
164
-537
-648
-373
-465
118
81
-207
-321
183
-89
4,201
[5]
[8]
-7,497
-7,912
[8]
-1,228
-1,310
[8]
-2,086
-191
-2,158
1,399
2,095
[9]
-6,108
-3,034
[10]
220
265
[9]
Statement of comprehensive incomea
-240
-462
0.43
6.45
[6]
-1.15
9.17
[6]
0.00
-0.02
[6]
[6]
9.15
222
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Statement of Income and Expense Recognized in Equity
Statement of Income and Expense Recognized in Equity
-1.15
[11]
2.72
[6]
-705
-1,562
3,302
[12]
91
-756
-1,471
2,546
-1.58
[3]
5,945
-1,075
8,491
[13]
15
-70
-1,060
8,421
396
34,398
42,350
BASF Report 2020
8,421
8,421
-3,064
-125°
-2,939
-2,939
36,109
1,055
70
35,054
Non-
controlling
interests
Equity
attributable to
shareholders
of BASF SE
Other com-
prehensive
incomeb
-5,939
-113
5
-466
Cash flow
hedges
Currency of securities at
translation
fair value
Equity
Measurement
8,491
1,264
-35
5
798
-5,618
42,056
3,115
1,176
-150
-393
-162
140
140
-125
964
15
949
949
78
12
-4,850
ment of
defined
benefit
plans
-5,365
3,118
-12
-11
-1
53
53
-54
-3,726
-49
1,176
-3,677
-108
2
-2,598
-973
-1,075
-15
-1,060
-1,060
-3,677
36,699
3,115
-6,538
1,176
As of December 31, 2019
Changes in scope of consolidation and other changes
Other comprehensive income after taxes
Income after taxes
Dividends paid
As of January 1, 2019
Retained
earnings
37,911
Capital
reserves
Remeasure-
34,398
670
33,728
-8,474
-143
7
-1,800
Subscribed
capital
-3,139
41,497
42,350
-
- The parent company has rights to variable returns from the
investee
The parent company can use its decision-making power to affect
the variable returns
Based on corporate governance and any additional agreements,
companies are analyzed for their relevant activities and variable
returns, and the link between the variable returns and the extent to
which their relevant activities could be influenced.
According to IFRS 11, which regulates the accounting of joint
arrangements, a distinction must be made between joint ventures
and joint operations. In the case of a joint venture, the parties that
have joint control of a legally independent company have rights to
the net assets of that arrangement. In joint operations, the parties
that have joint control have direct rights to the assets and obligations
for the liabilities relating to the arrangement. This requirement is
particularly fulfilled if the production output of the joint arrangement
is almost entirely transferred to the partners, through which the
partners guarantee the joint arrangements' ongoing financing.
Companies whose corporate governance structures classify them
as joint arrangements are analyzed to determine if they meet the
criteria for joint ventures or joint operations in accordance with
IFRS 11. Should the arrangement be structured through a separate
vehicle, its legal form, contractual arrangements and all other facts
and circumstances are reviewed.
BASF Report 2020
230
-
BASF Report 2020
Amendments to IAS 1 - Presentation of Financial
Statements - Classification of Liabilities
The IASB issued further amendments to standards and interpre-
tations which are still subject to E.U. endorsement and whose
application is not yet mandatory. These amendments are unlikely to
have a material impact on the reporting of BASF. BASF does not
plan on early adoption of these amendments.
IFRSS and IFRICS not yet to be considered and not yet
endorsed by the E.U.
The amendments from phase 2 of the Interest Rate Benchmark
Reform, which were issued on August 27, 2020, are intended to
simplify accounting during the IBOR reform. They supplement the
requirements from the first phase and generally deal with the
replacement of one benchmark interest rate with another. With
respect to the presentation of financial instruments, it was clarified
that in the case of changes to contractual cash flows, the carrying
amount of financial instruments is not to be adjusted or derecog-
nized. Under certain conditions, the effective interest rate can be
changed to reflect the change in the alternative interest rate
benchmark. Similarly, with respect to the accounting treatment of
hedging transactions, under certain conditions, it is not necessary to
end a hedge accounting relationship designated for hedge account-
ing purposes due to changes arising from the IBOR reform. In
addition, minor changes to IFRS 16 and IFRS 4 as well as additional
IFRS 7 disclosure requirements were adopted. The amendments
were endorsed by the E.U. on January 13, 2021 and will come into
force for fiscal years beginning on or after January 1, 2021.
Amendments to IFRS 9 - Financial Instruments, IAS 39 -
Financial Instruments: Recognition and Measurement,
IFRS 7 - Financial Instruments: Disclosures, IFRS 4 -
Insurance Contracts, and IFRS 16 - Leases - Interest Rate
Benchmark Reform - Phase 2
The amendments to IFRS 4 issued on June 25, 2020 are aligned
with the two-year postponement of the date on which IFRS 17 will
come into force to reporting periods beginning on or after Janu-
ary 1, 2023. They include an analog extension of the temporary
exemption period for certain insurance companies from application
of IFRS 9 - Financial Instruments, requiring these insurance com-
panies to apply IFRS 9 for the first time in fiscal years beginning on
or after January 1, 2023. The amendments were endorsed by the
E.U. on December 15, 2020 and are to be applied for the first time
on or after January 1, 2021.
Amendments to IFRS 4 - Insurance Contracts - Extension of
Temporary Exemption from Application of IFRS 9
The effects on the BASF Group financial statements of the IFRSS
and IFRICS not yet in force in 2020 but already endorsed by the
European Union were reviewed and are explained below. BASF
currently assumes that they will have no material effect on the
Consolidated Financial Statements. It does not plan on early
adoption of these amendments.
The IASB issued amendments to IAS 1 on January 23, 2020. The
amendments pertain to a limited modification of the relevant criteria
used to classify liabilities as current or noncurrent. They specify that
the classification of liabilities as current depends on the company's
rights as of the balance sheet date to postpone settlement of the
liability by a minimum of 12 months after the end of the reporting
period. If such rights exist, the liability is classified as noncurrent.
Otherwise, it is classified as current. Classification is irrespective of
management's expectations and of possible events after the balance
sheet date. It also specifies that settlement of a liability is defined as
the repayment of a liability using cash, other economic resources or
a company's own equity instruments. The IASB issued a further
amendment on July 15, 2020 whereby the date of initial application
of the amendment on classification of liabilities will be postponed by
one year to January 1, 2023 - subject to endorsement by the E.U.
IFRSS and IFRICS not yet to be considered but already
endorsed by the E.U.
According to IFRS 10, a group consists of a parent entity and the
subsidiaries controlled by the parent. "Control" of an investee
assumes the simultaneous fulfillment of the following three criteria:
- The parent company holds decision-making power over the
relevant activities of the investee
1.3 Group accounting principles
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Amendments to IFRS 3 - Business Combinations, IAS 16 -
Property, Plant and Equipment, IAS 37 - Provisions,
Contingent Liabilities and Contingent Assets as well as
Annual Improvements to IFRS 2018-2020
These amendments were issued on May 14, 2020 and - subject to
E.U. endorsement - will come into force on January 1, 2022.
Scope of consolidation: The scope of consolidation is based on
the application of the standards IFRS 10 and 11.
The amendments to IFRS 3 include an update of the reference to
the Conceptual Framework in IFRS standards. Furthermore, an
additional provision will be added to IFRS 3 stating that an acquirer
must apply the provisions from IAS 37 and IFRIC 21 rather than the
Conceptual Framework when identifying assumed liabilities within
the scope of these standards. The content of the accounting rules
for business combinations will not change.
The amendments to IAS 37 pertain to the definition of the costs a
company includes when determining if a contract will cause losses.
Accordingly, settlement costs are all costs that would not be
incurred without the contract (incremental cost) as well as other
costs directly attributable to the contract.
The annual improvements to IFRS 2018-2020 pertain to amend-
ments to IFRS 9 - Financial Instruments, whereby only such costs
and fees which are paid to the lender by the company and vice
versa are to be included in the “10% test" for the purpose of
derecognition of financial liabilities. Costs or fees paid to other third
parties may not to be included. Moreover, they pertain to minor
amendments to IFRS 1 First-Time Adoption of International
Financial Reporting Standards, IAS 41 - Agriculture, and to the
explanatory examples of IFRS 16 - Leases.
IFRS 17 - Insurance Contracts, including amendments to
IFRS 17
229
Amendments to IAS 1 - Presentation of Financial State-
ments and IFRS Practice Statement 2 - Making Materiality
Judgements
The amendments were issued on February 12, 2021. The
amendments to IAS 1 - Disclosure of Accounting Policies - requires
that only material accounting policies shall be disclosed in the notes
in the future. Accounting policy information is material if it relates to
material transactions or events and there is a reason to consider
materiality (for example a change in accounting policy). The
guidelines in IFRS Practice Statement 2 were accordingly adjusted.
The amendments are to be applied in the fiscal year beginning on or
after January 1, 2023 - subject to endorsement by the E.U. The
effect on the reporting of BASF will be examined.
Amendments to IAS 8 - Accounting Policies, Changes in
Accounting Estimates and Errors
The amendments issued on February 12, 2021, clarify how entities
can better distinguish between changes resulting from changes in
accounting policies from changes in accounting estimates. For this
purpose, accounting estimates are defined as "monetary amounts
in financial statements that are subject to measurement uncertainty".
The amendments are to be applied in the fiscal year beginning on or
after January 1, 2023 - subject to endorsement by the E.U. The
effect on the reporting of BASF will be examined.
The amendments to IAS 16 specify that income received by a
company through the sale of items produced while the asset is
being brought to its location and into working order must be
recognized with the associated costs in profit or loss. Including
these items in the cost of the asset is not permissible.
853
On May 28, 2020, the IASB issued an amendment to IFRS 16 aimed
at simplifying lessees' accounting of concessions, such as
deferments of rent payment or deductions in rent prices, which are
granted as a direct result of the coronavirus pandemic. If certain
requirements are met, lessees may forego the determination of
whether a coronavirus-related rent concession presents a
modification of the lease agreement. These amendments were
endorsed by the E.U. on October 9, 2020. They had no material
effect on BASF.
The amendments issued on October 22, 2018 specify that a
business is a set of activities and assets with at least one input and
one substantive process that together significantly contribute to the
ability to create outputs. Outputs are defined as the provision of
goods and services to customers. The existing reference to cost
reduction as a characteristic of business combinations was
removed. In addition, the new provisions also contain an optional
concentration test designed to simplify identification of a business.
The modified definition was endorsed by the E.U. on April 21, 2020.
These amendments had no material effect on the reporting of BASF.
BASF SE (registered at the district trade register, or Amtsgericht, for
Ludwigshafen am Rhein, number HRB 6000) is a publicly listed
corporation headquartered in Ludwigshafen am Rhein, Germany. Its
official address is Carl-Bosch-Str. 38, 67056 Ludwigshafen am
Rhein, Germany.
1.1 General information
1 Summary of accounting policies
Notes
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
One change arose with respect to the presentation of some of the
investments accounted for using the equity method that are not an
integral part of the BASF Group. Income from non-integral
companies accounted for using the equity method is no longer
presented in the BASF Group's EBIT, but under net income from
shareholdings. Due to its increased significance, this will be
presented as a separate subtotal within income before income taxes
and is no longer part of the financial result. Integral and non-integral
investments accounted for using the equity method will also be
shown separately in the balance sheet. The statement of income for
2019 has been restated accordingly.
2 Management's Report
1
About This Report
227
BASF Report 2020
d Granting of BASF shares under BASF's "plus" share program
c Including profit and loss transfers
b Details are provided in the Statement of Income and Expense Recognized in Equity on page 223
a For more information on the items relating to equity, see Notes 19 and 20 from page 277 onward
To Our Shareholders
Amendments to IFRS 16 - Leases Relating to Coronavirus-
Related Rent Concessions
For more information, see Note 1.3 from page 230 onward and Note 10 from page 253 onward
1.2 Changes in accounting principles
Amendments to IFRS 3 - Business Combinations
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
On February 23, 2021, the Board of Executive Directors prepared
the Consolidated Financial Statements, submitted them to the
Supervisory Board for review and approval, and released them for
publication.
228
The IASB issued amendments to IFRS 9, IAS 39 and IFRS 7 on
September 26, 2019, completing Phase 1 of the Interest Rate
Benchmark Reform project. The amendments relate to existing
uncertainties surrounding the interest rate benchmark reform.
According to the original hedge accounting policies, pending
adjustments to interest rate benchmarks would, in many cases,
have resulted in an end to hedging relationships. The amendments
to IFRS 9 and IAS 39 ensure the continuity of hedging relationships
despite existing uncertainties regarding interest rate benchmarks,
for example by defining that the highly probable requirement is
always considered to be met. In connection with the amendments
to IFRS 9 and IAS 39, disclosure requirements were added to
IFRS 7. The amendments were endorsed by the E.U. on Janu-
ary 15, 2020. This change did not have a material impact on BASF
as no hedging relationships affected by interest rate benchmarks
were subject to hedge accounting.
Amendments to IFRS 9 - Financial Instruments, IAS 39 -
Financial Instruments: Recognition and Measurement, and
IFRS 7 - Financial Instruments: Disclosures - Interest Rate
Benchmark Reform
The amendments issued by the IASB on October 31, 2018 provide
a uniform and more precise definition of the materiality of information
provided in the financial statements, together with accompanying
examples. In this connection, the definitions in the Conceptual
Framework, IAS 1, IAS 8 and the IFRS Practice Statement 2 (Making
Materiality Judgements) were harmonized. The amendments were
endorsed by the E.U. on November 29, 2019. They had no material
effect on the reporting of BASF.
Amendments to IAS 1 - Presentation of Financial
Statements and IAS 8 - Accounting Policies, Changes in
Accounting Estimates and Errors
The amendments update references to and quotes from the
Conceptual Framework and were endorsed by the E.U. on Novem-
ber 29, 2019. The revised Conceptual Framework issued on
March 29, 2018 replaces the previous Conceptual Framework from
2010. The main changes primarily relate to the definition, recognition
and measurement of assets and liabilities, as well as the differentia-
tion between income and expense and other comprehensive
income. They had no material effect on BASF's Consolidated
Financial Statements.
Amendments to References to the Conceptual Framework
in IFRS Standards
The individual financial statements of the consolidated companies
are prepared as of the balance sheet date of the Consolidated
Financial Statements. Business continuity is assumed regardless of
the economic impact of the coronavirus pandemic. The accounting
policies applied are largely the same as those used in 2019.
The Consolidated Financial Statements of BASF SE as of Decem-
ber 31, 2020, have been prepared in accordance with the Inter-
national Financial Reporting Standards (IFRS) of the International
Accounting Standards Board (IASB), and section 315e (1) of the
German Commercial Code (HGB). IFRSS are generally only applied
after they have been endorsed by the European Union. For the 2020
fiscal year, all of the binding IFRSS and pronouncements of the Accounting policies applied for the first time in 2020
International Financial Reporting Interpretations Committee (IFRIC)
were applied. The Consolidated Financial Statements are for the
period from January 1, 2020 to December 31, 2020 and are
presented in euros. They are written in German and translated into
English. All amounts, including the figures for previous years, are
given in million euros unless otherwise indicated.
BASF Report 2020
About This Report
-108°
-3,031
Payments received for divestitures
Payments made for acquisitions
Payments made for property, plant and equipment and intangible assets
Payments made for financial assets and securities
Gains (-)/losses (+) from the disposal of noncurrent assets and securities
Cash flows from operating activities
Changes in pension provisions, defined benefit assets and other items
Changes in operating liabilities and other provisions
Changes in receivables
Changes in inventories
Payments received from the disposal of noncurrent assets and securities
Depreciation and amortization of property, plant and equipment and intangible assets
Million €
Statement of cash flowsa
BASF Group
Statement of Cash Flows
5 Overviews
4 Consolidated Financial Statements
Statement of Cash Flows
3 Corporate Governance
2 Management's Report
Net income
1 To Our Shareholders
Cash flows from investing activities
Additions to financial and similar liabilities
4,218
6,751
8,421
2019
2020
-1,060
BASF Report 2020
b In 2020 and 2019, cash and cash equivalents presented in the statement of cash flows deviate from the figures in the balance sheet. For explanations and other disclosures on the statement of cash flows, see Note 27 from page 304 onward.
a The statement of cash flows is explained in the Management's Report (Financial Position) on page 63.
Capital increases/repayments and other equity transactions
Cash and cash equivalents at the end of the yearb
changes in the scope of consolidation
From foreign exchange rates
Changes in cash and cash equivalents
Cash-effective changes in cash and cash equivalents
Cash flows from financing activities
noncontrolling interests
To shareholders of BASF SE
Repayment of financial and similar liabilities
Dividends paid
Cash and cash equivalents at the beginning of the yearb
849
About This Report
86,950
29,614
1,678
1,711
[21]
15,015
15,819
[21]
1,340
27,996
1,484
516
587
1,764
1,447
[12]
7,683
8,566
[22]
[23]
225
[21]
5,087
80,292
16,604
16,280
1,034
341
[3]
3,427
3,440
5,291
[21]
3,395
[21]
756
988
[12]
2,938
2,825
[23]
3,362
-3,031
479
25
Capital
Subscribed
Million €
Statement of changes in equity 2019a
As of December 31, 2020
Changes in scope of consolidation and other changes
Other comprehensive income after taxes
Income after taxes
capital
Dividends paid
Million €
Statement of changes in equity 2020a
BASF Group
Statement of Changes in Equity
5 Overviews
4 Consolidated Financial Statements
Statement of Changes in Equity
3 Corporate Governance
2 Management's Report
As of January 1, 2020
1 To Our Shareholders
reserves
Remeasure-
ment of
defined
benefit
plans
42,350
853
41,497
-4,850
-35
5
798
-5,618
Retained
earnings
42,056
1,176
Equity
Non-
controlling
interests
Equity
attributable to
shareholders
of BASF SE
Other com-
prehensive
incomeb
Cash flow
hedges
Currency of securities at
translation
fair value
Measurement
3,115
-2,176
About This Report
2,455
1,399
822
2,600
2,520
-239
-1,240
-1,126
-877
-1,904
-3,824
7,474
5,413
-634
-15
-5,941
137
906
927
-3,129
226
-1,190
15,135
-13,555
4,335
2,519
2,455
20
8
37
-81
-121
3
1,953
-1,556
-125
-108
-2,939
-3,031
-13,699
10,357
1
-6,405
On March 18, 2020, the IASB decided to postpone the date on
which IFRS 17 will enter into force to fiscal years beginning on or
after January 1, 2023. The amendment was issued on June 25, 2020.
It has not yet been endorsed by the E.U. IFRS 17 was issued on
May 18, 2017 and provides requirements on recognition, measure-
ment and presentation of insurance contracts within the scope of
the standard. IFRS 17 will replace IFRS 4.
Explanations in Note
Total assets
0.0
20
0.0
Alsachimie S.A.S., Chalampé, France, which is jointly operated
with Domo Chemicals for the production of adipic acid
Ellba C.V., Rotterdam, Netherlands, which is jointly operated with
Shell for the production of propylene oxide and styrene monomer
BASF DOW HPPO Production B.V.B.A., Antwerp, Belgium, which
is jointly operated with Dow for the production of propylene oxide
Butachimie SNC, Chalampé, France, which is jointly operated
with Invista for the production of adiponitrile (ADN) and
hexamethylenediamine (HMD)
-
-
The joint operations include, in particular:
2.2 Joint operations
Other financial obligations
Total equity and liabilities
of which financial indebtedness
Current liabilities
of which financial indebtedness
Noncurrent liabilities
Equity
Assets
of which cash and cash equivalents
0.0
0.0
43
0.0
24
To Our Shareholders
1
About This Report
234
BASF Report 2020
Stahl Lux 2 S.A., Luxembourg (BASF interest: 16.32%) is classified
as an associated company as BASF can exercise significant
influence over the company in a number of relevant board decisions.
For more information, see BASF Group list of shares held under basf.com/en/corporate governance
The material non-integral shareholding is Wintershall Dea GmbH,
Kassel/Hamburg, Germany. The company, which has been in
existence since May 1, 2019 and in which BASF holds 72.7%, is
considered a joint venture because BASF and its partner LetterOne
defined the decision-making processes in the governing bodies as
such that neither party alone can control the relevant activities.
The material equity-accounted shareholding that has been classified
as integral is BASF-YPC Company Ltd., Nanjing, China, in which
BASF and Sinopec each hold 50%, and which operates the Verbund
site in Nanjing.
Since 2020, a distinction between shareholdings accounted for
using the equity method in integral and those in non-integral
companies has been made.
Companies over which BASF exercises a significant influence or
which are jointly controlled with a partner and not classified as a joint
operation are accounted for using the equity method in accordance
with IAS 28 (associated companies) and IFRS 11 (joint ventures).
2.3 Joint ventures and associated companies
AO Achimgaz, Novy Urengoy, Russia, which was jointly operated
with Gazprom for the production of natural gas and condensate,
was derecognized in connection with the deconsolidation of the oil
and gas business as of April 30, 2019.
BASF controls these companies jointly with the respective partner.
The companies sell their products directly to the partners. The
partners ensure ongoing financing of the companies by purchasing
the production. The companies were therefore classified as joint
operations in accordance with IFRS 11.
0.0
43
0.0
-11
0.0
0.1
0.0
0.0
-11
0.9
Million €
2019
2020
Noncurrent assets
Sales
Overview of impact of changes to the scope of consolidation (excluding acquisitions and divestitures)
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
233
BASF Report 2020
7
9
302
282
%
Million €
%
-3
21
0.2
7
Current assets
0.0
-1
0.1
-23
13
2 Management's Report
0.2
of which property, plant and equipment
0.1
44
0.0
12
0.1
0.0
11
0.0
39
24
3 Corporate Governance
5 Overviews
1,319
Total purchase price
587
334
23
8
28
2
273
253
45
-
11
172
25
1,906
549
68
160
BASF Report 2020
165
235
1 To Our Shareholders
%a
Million €
%a
Million €
2019
2020
Other noncurrent assets
Financial assets
Property, plant and equipment
Other intangible assets
Goodwill
Effects of acquisitions and changes in the preliminary purchase price allocations
resulted in the transfer of assets or the assumption of additional
liabilities, these are shown as a net impact.
The following overview shows the effects of acquisitions in 2020 and
2019 on the Consolidated Financial Statements. When acquisitions
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
About This Report
156
1,357
3
Inventories
Noncurrent assets
Other receivables and miscellaneous assets
Deferred taxes
Integral investments accounted for using the equity method
Non-integral investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Other intangible assets
Goodwill
Million €
Purchase price allocation for the acquisition of assets and liabilities from
Solvay
- BASF acquired 100% of shares in Isobionics B.V., Geleen,
Netherlands, on September 26, 2019. The company develops
and produces a wide range of natural flavors and fragrances with
a focus on citrus oil components. This transaction strengthened
the Nutrition & Health division. The preliminary purchase price
allocation was immaterially revised in 2020, which led to an
increase in goodwill of €1 million.
In 2019, BASF acquired the following activity:
lion in income from operations in the 2020 fiscal year. Including
Solvay's businesses and assets in BASF's Consolidated Financial
Statements as of January 1, 2020 would have resulted in a sales
revenue contribution of €792 million and in income from opera-
tions of €104 million. These pro forma data are for comparison
purposes. They are not necessarily values that would have
resulted had the transaction taken place as of January 1, 2020
and are not suitable for forecasting future developments or events.
The majority of total goodwill is not tax deductible.
BASF closed the acquisition of Solvay's polyamide business
(PA 6.6) on January 31, 2020. Domo Chemicals, Leuna, Germany,
was approved by the E.U. Commission as the buyer of the
European polyamide business, which could not be acquired by
BASF under the conditions imposed by the authorities. The
transaction broadens BASF's polyamide capabilities with innova-
tive products. It also enhances the company's access to growth
markets in Asia as well as in North and South America. Through
the backward integration into the key raw material adiponitrile
(ADN), BASF is now integrated along the entire polyamide 6.6
value chain and can improve supply reliability. The purchase price
of the business acquired by BASF was €1.319 million on a cash
and debt-free basis. Of that amount, €1,308 million was already
cash effective. The business was integrated into the Performance
Materials and Monomers divisions. The transaction between
Solvay and BASF included eight production sites in Germany,
France, China, India, South Korea, Brazil and Mexico, as well as
research and development and technical consultation centers in
Asia and the Americas. It also included two shareholdings in
France, which are accounted for as joint operations: The 50%
interest in Butachimie SNC, Chalampé, France, to produce ADN
and hexamethylenediamine, and the 51% interest in the newly
established Alsachimie S.A.S., Chalampé, France, to produce
adipic acid. With the acquisition, around 700 Solvay employees
were transferred to BASF. Furthermore, some 1,000 employees of
the Alsachimie S.A.S. and Butachimie SNC joint operations are to
be included on a pro rata basis by BASF. The purchase price
allocation considers all the facts and circumstances prevailing as
of the date of acquisition that were known prior to the preparation
of these financial statements. Goodwill of €20 million resulted in
particular from sales synergies. The businesses acquired from
Solvay accounted for €678 million of sales revenue and -€114 mil-
-
In 2020, BASF acquired the following activity:
Acquisitions
3 Acquisitions and divestitures
Notes
Accounts receivable, trade
Other receivables and miscellaneous assets
Marketable securities
Cash and cash equivalents
105
559
20
670
Fair value as of
date of acquisition
Total liabilities
Current liabilities
Other liabilities
Financial indebtedness
Tax liabilities
4 Consolidated Financial Statements
Provisions
Noncurrent liabilities
Other liabilities
Financial indebtedness
Other provisions
Tax provisions
Deferred tax liabilities
Provisions for pensions and similar obligations
Total assets
Current assets
Accounts payable, trade
21
20
7
24.52
21.22
24.42
Mexico (MXN)
4.64
4.80
4.60
4.93
Malaysia (MYR)
122.01
121.85
121.94
126.49
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
21.56
5 Overviews
Norway (NOK)
9.86
1.12
1.23
United States (USD)
1,305.32
1,345.58
1,296.28
1,336.00
South Korea (KRW)
1.07
1.09
1.08
Switzerland (CHF)
72.46
82.72
69.96
91.47
Russia (RUB)
9.85
10.72
10.47
Notes
In addition to BASF SE, the Consolidated Financial Statements
include all material subsidiaries on a fully consolidated and all
material joint operations on a proportionally consolidated basis.
Companies whose business is dormant or of low volume, and are of
minor importance for the presentation of a true and fair view of the
net assets, financial position and results of operations, are not
consolidated, but rather are reported under other shareholdings.
These companies are carried at amortized cost and are written
down in the case of an impairment. The aggregate assets and equity
of these companies amount to less than 1% of the corresponding
value at Group level.
Joint ventures and associated companies are accounted for using
the equity method in the Consolidated Financial Statements.
Associated companies are entities that are not subsidiaries, joint
ventures or joint operations, and over whose operating and financial
policies significant influence can be exercised. In general, this
applies to companies in which BASF has an investment of between
20% and 50%. Associated companies and joint ventures that are
fully or predominantly allocated to operating divisions are classified
as integral because they are integrated into the value chain of the
respective division; are controlled by the divisions; and they generate
their income in close cooperation with the other assets of the BASF
Group and/or of these divisions. Equity-accounted income from
integral joint ventures or associated companies is reported as part of
income from operations (EBIT).
Dec. 31,
2020
2019
2020
2019
Brazil (BRL)
6.37
4.52
5.89
4.41
China (CNY)
8.02
7.82
7.87
7.74
United Kingdom (GBP)
0.90
0.85
0.89
Dec. 31,
Average rates
Closing rates
EUR 1 equals
Equity-accounted income from non-integral joint ventures or
associated companies is reported in net income from shareholdings.
For more information, see Note 10 from page 253 onward
Consolidation methods: Assets and liabilities of consolidated
companies are uniformly recognized and measured in accordance
with the principles described herein. For companies accounted for
using the equity method, material deviations in measurement
resulting from the application of other accounting principles are
adjusted for.
well as
Transactions between consolidated companies as
intercompany profits resulting from trade between consolidated
companies are eliminated in full. Sales and material other balances
and transactions between joint operations and fully consolidated
Group companies are eliminated. Material intercompany profits
related to companies accounted for using the equity method are
eliminated.
Capital consolidation is conducted at the acquisition date according
to the purchase method. Initially, all assets, liabilities and additional
intangible assets that are to be capitalized are measured at fair
value. Subsequently, the cost of acquiring the company is compared
with the proportional share of the fair value of the net assets
acquired. The resulting positive differences are capitalized as
goodwill. Negative differences are reviewed once more, then
recognized directly in the income statement.
The incidental acquisition costs of a business combination are rec-
ognized in the income statement under other operating expenses.
Foreign currency translation: The cost of assets acquired in
foreign currencies and revenue from sales in foreign currencies are
determined by the exchange rate on the date the transaction is
recognized. Foreign currency receivables and liabilities are valued at
the exchange rates on the balance sheet date. Changes in assets
and liabilities arising from foreign currency translation are recognized
in the income statement and reported under other operating income
or expenses, other financial result, and in the case of financial assets
measured at fair value through other comprehensive income, in
other comprehensive income.
Translation of foreign currency financial statements: The
translation of foreign currency financial statements depends on the
functional currency of the consolidated companies. For companies
whose functional currency is not the euro, translation into the
reporting currency is based on the closing rate method: Balance
sheet items are translated into euros using closing rates on the
balance sheet date; expenses and income are translated into euros
at monthly average rates and accumulated for the year. The
difference between a company's translated equity at historical rates
at the time of acquisition or retention and its equity at closing rates
on the balance sheet date is reported under other comprehensive
income (translation adjustments) and is recognized in the income
statement only upon the company's disposal.
1.14
For certain companies outside the eurozone or U.S. dollar zone, the
euro or U.S. dollar is the functional currency. In such cases, financial
statements prepared in the local currency are translated into the
functional currency using the temporal method: All nonmonetary
assets and related depreciation and amortization as well as equity
are translated at the exchange rate applying to the respective
transactions. All other balance sheet items are translated using
closing rates on the balance sheet date; other expenses and income
are translated at monthly average rates. The resulting translation
differences are recognized in the income statement under other
operating income or expenses. If necessary, financial statements in
the functional currency are translated into the presentation currency
according to the closing rate method.
231
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Selected exchange rates
BASF Report 2020
2
1.4 Accounting policies
1.12
16
7
16
First-time consolidations
8
7
2
5
of which proportionally consolidated
331
302
30
74
46
50
152
As of January 1
2019
2020
4
Middle East
43
of which proportionally consolidated
76
39
45
143
of which proportionally consolidated
As of December 31
1
of which proportionally consolidated
36
63
10
14
14
6
25
Deconsolidations
2
-
2
7
Asia Pacific
South America,
Africa,
North
America
An impairment is recognized if the recoverable amount of the asset
is lower than the carrying amount. The impaired asset (excluding
goodwill) is written down by the amount of the difference between
these amounts.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
232
BASF Report 2020
For more information, see Note 3 from page 235 onward and Note 14 from page 264 onward
Impairment tests on assets are carried out whenever certain
triggering events indicate potential impairment. External triggering
events include, for example, changes in customer industries,
technologies used and economic downturns. Internal triggering
events for an impairment test include lower product profitability,
planned restructuring measures or physical damage to assets.
Impairment tests entail a comparison of the carrying amount and the
recoverable amount. The recoverable amount is the higher of fair
value less costs to sell and the value in use. As a rule, value in use is
determined using the discounted cash flow method. The estimation
of cash flows and the assumptions used consider all information
available on the respective balance sheet date on the future
development of the operating business. Actual future developments
may vary. Impairment testing relies upon the cash-generating unit's
long-term earnings forecasts, which are based on macroeconomic
trends. The weighted average cost of capital (WACC) based on the
capital asset pricing model plays an important role in impairment
testing. It comprises a risk-free interest rate, the market risk premium
and an industry-specific spread for the credit risk. Additional
important assumptions are the forecasts for the detailed planning
period and the terminal growth rates used. Fair value less costs to
sell must be determined for the impairment test of disposal groups;
specific assumptions relating to the respective transaction must be
made for this determination.
cash flows in the context of impairment tests and purchase price
allocations; the useful lives of depreciable property, plant and
equipment and intangible assets; the carrying amount of sharehold-
ings; and the measurement of provisions for items such as employee
benefits, warranties, trade discounts, environmental protection and
taxes. Although uncertainty is appropriately incorporated in the
valuation factors, actual results can differ from these estimates.
The carrying amount of assets, liabilities and provisions, contingent
liabilities and other financial obligations reported in the Consolidated
Financial Statements depends on the use of estimates, assumptions
and discretionary scope. Specific estimates or assumptions used in
individual accounting or valuation methods are disclosed in their
respective sections of the Notes to the Consolidated Financial
Statements. They are based on the circumstances and estimates on
the balance sheet date and thus affect the amounts of income and
expenses shown for the reporting periods presented. These
assumptions primarily relate to the determination of discounted
Use of estimates and assumptions in preparing the
Consolidated Financial Statements
Discontinued operations: These are classified as held for sale and
are presented as discontinued operations in BASF's Consolidated
Financial Statements in accordance with IFRS 5. Until closing, the
income after taxes of discontinued operations is shown in income
after taxes of the BASF Group as a separate item (income after
taxes from discontinued operations). In addition, the assets and
liabilities of the discontinued operations are reclassified to a dispos-
al group (assets or liabilities of disposal groups). The statement of
cash flows is not restated. The activities of discontinued operations
are not allocated to any reportable segment in financial reporting.
For more information, see Note 3 from page 235 onward and Note 5 from page 241 onward
Groups of assets and liabilities held for sale (disposal groups):
These comprise those assets and directly associated liabilities
shown separately on the balance sheet whose sale in the context of
a single transaction is highly probable. A transaction is assumed to
be highly probable if there are no significant risks of completion of
the transaction, which usually requires the conclusion of binding
contracts. The assets and liabilities of disposal groups are recog-
nized at the lower of the sum of their carrying amounts or fair value
less costs to sell; this does not apply to assets that do not fall under
the valuation principles of IFRS 5. Depreciation of noncurrent assets
and the use of the equity method are suspended.
Business combinations: In business combinations, the acquired
assets and liabilities are recognized at fair value on the date the
acquirer effectively obtains control. The fair value of acquired assets
and assumed liabilities at the date of acquisition, as well as the
useful lives of the acquired assets, are determined on the basis of
assumptions. Measurement is largely based on projected cash
flows. Actual cash flows can deviate significantly from those.
Independent external appraisals are typically used for the purchase
price allocation of material business combinations. Valuations in the
course of business combinations are based on existing information
as of the acquisition date.
The accounting policies for the individual items in the Balance Sheet
and the Statement of Income are presented in the respective
sections of the Notes.
The goodwill impairment test is based on cash-generating units. At
BASF, these largely correspond to the business units, or in individual
cases the divisions. If there is a need for impairment, the existing
goodwill is, if necessary, completely written off as a first step. If there
is further need for impairment, this is allocated to the remaining
assets of the cash-generating unit. Goodwill impairments are
reported under other operating expenses.
For planning purposes, BASF assumes an oil price of $50/bbl (Brent)
and for gas of approximately €14/MWh (roughly $5/mmBtu) in 2021.
2 Scope of consolidation
2.1 Changes in scope of consolidation
Of which
Germany
Europe
Scope of consolidation
For more information, see basf.com/en/corporate governance
For more information, see Note 4 on page 241
A list of the companies included in the Consolidated Financial
Statements and of all companies in which BASF SE has a
shareholding as required by section 313(2) of the German
Commercial Code (HGB) is provided in the list of shares held.
Fifty-four companies were deconsolidated as a result of the
divestiture of construction chemicals activities in 2020.
Twelve companies were added to the scope of consolidation in
2020 as part of the acquisition of Solvay's polyamide business.
One newly established company with headquarters in Asia Pacific
- Five companies that had not been consolidated at the time of
initial inclusion in the Consolidated Financial Statements with
headquarters in Europe (three, two of those in Germany) and in
Asia Pacific (two)
1.11
One acquired company with headquarters in Europe
-
First-time consolidations in 2019 comprised:
Europe, six in North America, 11 in Asia Pacific and two in South
America, Africa, Middle East
Eleven companies that had not been consolidated at the time of
initial inclusion in the Consolidated Financial Statements in
- One newly established company with headquarters in Europe,
two newly established companies in Asia Pacific, and one newly
established company with headquarters in South America, Africa,
Middle East
-
- Four acquired companies with headquarters in Europe (one of
those in Germany), one in North America, one in South America,
Africa, Middle East, and three in Asia Pacific
First-time consolidations in 2020 comprised:
As of December 31, 2020, a total of 282 companies were included,
either proportionally or fully, in the scope of consolidation of the
Consolidated Financial Statements (December 31, 2019: 302). Of
these, 43 companies were first-time consolidations (2019: seven).
Since the beginning of 2020, a total of 63 companies (2019: 36)
were deconsolidated due to divestiture, merger, liquidation or
immateriality.
-
0.3
-47
-0.6
Million €
€
discontinued operations
0.02
0.43
Cash flows from the discontinued construction chemicals business
(excluding effects from the divestiture)
Earnings per share from
19
394
Income after noncontrolling
interests
The discontinued construction chemicals business accounted for
the following amounts in BASF's statement of cash flows:
5
2
of which attributable to
noncontrolling interests
24
396
Income after income taxes
a Purchase price adjustments take into account, among other things, cash, financial indebtedness and pension
obligations.
-24
Depreciation and amortization of
-235
January 1-
-162
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
239
BASF Report 2020
94
-63
-18
9
-107
-118
219
46
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Total
-1
of which impairments and reversals
of impairments
January 1-
December 31, 2019
November 30, 2020
property, plant and equipment and
intangible assets
Income taxes
48
631
Liabilities of the disposal group
-36
-26
5
Reinstated net assets
-66
-103
-3,066
Assets of the disposal group
-866
-503
-2,117
Disposed net assets
1,141
876
2,763
Disposal income
-1,412
-938
944
-171
-121
Noncontrolling interests
Income before income taxes
358
Disposal gain after taxes
financial result
-4
-8
Net income from shareholdings and
-208
Income taxes
4 Consolidated Financial Statements
566
52
52
639
EBIT
-88
Other
566
Gain on the disposal before income
taxes
8
Disposal gain before taxes
-407
5 Overviews
Groups of assets and liabilities held for sale (disposal
groups)
-202
1,278
1,182
-521
-501
-7
-5
-22
-33
-109
-112
-383
-351
-757
-681
-2
-4
-58
-51
-213
-8
-9
-9
240
920
841
358
341
-104
-113
-27
-40
-6
-5
-20
-15
-51
-53
-254
-228
-15
-8
-17
-8
-65
-64
Current assets
Cash and cash equivalents
Marketable securities
Other receivables and miscellaneous assets
Accounts receivable, trade
Inventories
Noncurrent assets
Other receivables and miscellaneous assets
Other comprehensive income included -€116 million (2019:
-€79 million) as of December 31, 2020 attributable to the business
to be sold.
The values for the disposal group are presented in the following
table.
With the agreement on the acquisition of the global pigments
business by the fine chemical company DIC, the affected assets
and liabilities were reclassified to a disposal group. The business
is allocated to the Dispersions & Pigments division. Impairment Property, plant and equipment
tests were conducted for the disposal group for the pigments
business as of December 31, 2019 and June 30, 2020. In
accordance with IFRS 5, the fair value less costs to sell must be
used as the recoverable amount and compared with the carrying
amount. The recoverable amount was determined as of Decem-
ber 31, 2019 and June 30, 2020 by discounting the respective
expected cash flows the planned transaction closing, including
income from the sale, at a discount rate after taxes of 7.98%. This
resulted in the need for impairment in the amount of €73 million as
of December 31, 2019 and, additionally, of €66 million as of
June 30, 2020, which was allocated to the goodwill of the disposal
group for the pigments business. The impairment test as of
December 31, 2020 revealed no need for a valuation adjustment.
Deferred tax assets
Non-integral investments accounted for using the equity method
Other financial assets
Integral investments accounted for using the equity method
Other intangible assets
Goodwill
Balance Sheet
Million €
Pigments business disposal group
Assets of the disposal group
Provisions for pensions and similar obligations
Deferred tax liabilities
Tax provisions
Other provisions
-266
-290
-22
-21
-336
-243
December 31, 2019
December 31, 2020
BASF Report 2020
Notes
Net assets
Current liabilities
Other liabilities
Financial indebtedness
Tax liabilities
Provisions
Accounts payable, trade
Noncurrent liabilities
Other liabilities
Financial indebtedness
Liabilities of the disposal group
3,170
Purchase price on a cash and debt-free basis
Purchase price adjustmentsa
November 30, 2020
1 To Our Shareholders
About This Report
236
BASF Report 2020
239
1,240
0
-68
239
1,308
-0.2
-177
0.7
598
0.0
8
-0.9
-154
2.1
2 Management's Report
334
3 Corporate Governance
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
237
Notes
BASF Report 2020
· On December 6, 2019, BASF India Limited sold its stilbene-based
optical brightening agents (OBA) business for paper and powder
detergent applications to Archroma India Private Limited, Mumbai,
India. The transaction included the stilbene-based OBA product
portfolio and the production plant in Ankleshwar, India. The
production plant was part of the Performance Chemicals division
and the stilbene-based OBA product portfolio was allocated to
the Performance Chemicals and Care Chemicals divisions.
- BASF sold its ultrafiltration membrane business to DuPont
Safety & Construction on December 31, 2019. The divestiture
included the shares of inge GmbH, the business' headquarters
and production site in Greifenberg, Germany, including all
employees, its international sales force, and certain intellectual
property rights which were previously owned by BASF SE. The
ultrafiltration membrane business had been part of the
Performance Chemicals division.
Holding GmbH and received new shares in the latter. The
company was renamed Wintershall Dea GmbH, Kassel/Hamburg.
Including preference shares, BASF has a shareholding of 72.7%
in Wintershall Dea GmbH. No later than 36 months after closing
but in all cases before an IPO, these preference shares will be
converted into ordinary shares in Wintershall Dea GmbH. From
the signing of the agreement in September 2018 until the closing
of the merger, BASF's oil and gas business was reported as a
discontinued operation. Since the merger, BASF's interest in
Wintershall Dea GmbH has been accounted for as a non-integral
shareholding using the equity method. The gain from the transition
from full consolidation to the equity method was reported in
income after taxes from discontinued operations.
BASF and LetterOne completed the merger of Wintershall and
DEA on April 30, 2019. On September 27, 2018, BASF and
LetterOne had signed a transaction agreement to merge their
respective oil and gas businesses in a joint venture, creating a
leading independent European exploration and production
company with international operations in core regions. LetterOne
contributed all shares in DEA Deutsche Erdöl AG to Wintershall
On January 31, 2019, following the approval of all relevant
authorities, BASF and Solenis had concluded the transfer of
BASF's paper and water chemicals business to Solenis. Since
February 1, 2019, the combined company has operated under
the name Solenis UK International Ltd., London, United Kingdom,
and offers bundled sales, service and production capabilities
across the globe. BASF holds a 49% share in the combined
entity; 51% of the shares are held by funds managed by Clayton,
Dubilier & Rice, and by Solenis management. The transaction
included production sites and plants of BASF's paper and water
chemicals business in Bradford and Grimsby, England; Suffolk,
Virginia; Altamira, Mexico; Ankleshwar, India; and Kwinana,
Australia. The divestiture affected the Performance Chemicals
division.
-
-
In 2019, BASF sold the following activities:
The effects of the disposal are disclosed in the Notes under "Discontinued operations" on
page 239
On September 30, 2020 and on November 30, 2020, BASF
closed the divestiture of its construction chemicals business to an
affiliate of Lone Star, Dallas, Texas, a global private equity firm.
The purchase price on a cash and debt-free basis was €3.17 bil-
lion. The sale covered approximately 7,500 employees as well as
production sites and sales offices in more than 60 countries of the
former Construction Chemicals division. From the signing of the
agreement on December 21, 2019 until the closing of the trans-
action, BASF's construction chemicals business was reported as
a discontinued operation.
In 2020, BASF sold the following activity:
Divestitures
4 Consolidated Financial Statements
-0.1
-23
0.9
548
Current assets
-0.1
-32
2.7
1,358
Noncurrent assets
0.1
2
2.5
108
0.0
3
2.8
559
0.2
10
10.8
670
1.8
94
0.3
of which cash and cash equivalents
264
a Proportional share in relation to the BASF Group
Payments made for acquisitions according to statement of cash flows
Additions of cash and cash equivalents
Payments made for acquisitions
Total equity and liabilities
of which financial indebtedness
Current liabilities
of which financial indebtedness
5 Overviews
Noncurrent liabilities
0.1
62
2.4
1,906
Assets
0.0
0
1.6
68
Equity
Notes
2020
2019
About This Report
238
BASF Report 2020
b Includes €89 million from the discontinued construction chemicals business in 2020 and €800 million primarily from the discontinued oil and gas business in 2019
c Includes project-related tax payments and derecognition of cash and cash equivalents in 2020; and payments received from capital repayments, settlement of receivables and derecognition of cash and cash equivalents in 2019
2,600
2,520
2,391
-239
209
2,759
1.2
1,018
-0.3
-276
-34.8
-5,779
-5.4
-883
0.8
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
January 1-
December 31, 2019
2,553
1,814
November 30, 2020
January 1-
Million €
Calculation of disposal gain on the discontinued construction chemicals
business
The calculation of the disposal gain on the discontinued construc-
tion chemicals business is presented in the following table:
Gross profit on sales
Selling expenses
Cost of sales
235
Sales revenue
Statement of income from the discontinued construction chemicals
business
Earnings from the discontinued construction chemicals business
until November 30, 2020 were as follows:
With the binding agreement on the sale of BASF's construction
chemicals business to a subsidiary of Lone Star, this business
was presented as a discontinued operation. The disposal group
was derecognized upon closing of the transaction in the fourth
quarter of 2020. The transfer of the construction chemicals
business occurred in two steps, on September 30, 2020 and on
November 30, 2020. Of total comprehensive income after taxes
attributable to BASF SE shareholders totaling -€4,737 million
(2019: €9,370 million), €331 million (2019: €11 million) related
to the discontinued construction chemicals business and
-€5,068 million (2019: €2,422 million) to continuing operations. In
2019, the discontinued oil and gas business contributed
€6,937 million to comprehensive income after taxes that is
attributable to BASF SE shareholders.
-
Discontinued operations / disposal groups
Other operating income and expenses
General administrative expenses
Research and development expenses
Notes
5 Overviews
Million €
Japan (JPY)
15.5
1.8
of which cash and cash equivalentsb
-44.8
-13,877
-10.2
-3,035
of which property, plant and equipment
Current assets
-0.1
-19
Noncurrent assets
26.2
14,686
-0.7
-414
-0.2
-91
%a
Million €
%a
Million €
-89
-802
-3,035
-3.8
607
a Proportional share in relation to the BASF Group
Payments received from divestitures according to statement of cash flows
Further effects in connection with divestitures
Payments received from divestitures
Total equity and liabilities
of which financial indebtedness
Current liabilities
of which financial indebtedness
6,562
Noncurrent liabilities
Assets
Sales
Effects of divestitures
On August 29, 2019, BASF and the fine chemicals company DIC,
Tokyo, Japan, reached an agreement to transfer the global
pigments business. The purchase price on a cash and debt-free
basis is €1.15 billion. The transaction is expected to close in the
first half of 2021. The sale is subject to approval by the relevant
antitrust authorities. The transaction affects approximately
2,600 employees in the Dispersions & Pigments division.
-
Agreed transactions
The following overview shows the effects of the divestitures
conducted in 2020 and 2019 on the Consolidated Financial
Statements. The sales line item showed the year-on-year decline
resulting from divestitures. Noncurrent assets in 2019 primarily
included the addition of the investments accounted for using the
equity method, Wintershall Dea GmbH and Solenis UK Inter-
national Ltd., while current assets and current liabilities showed the
assets and liabilities of the disposal groups. The impact on equity
related mainly to gains and losses from divestitures.
0.9
809
Equity
0.88
4,644
About This Report
920,238
920,044
Weighted average number of shares for diluted earnings per share
Earnings per share
From continuing operations
Diluted
From discontinued operations
Diluted
From continuing and discontinued operations
Diluted
€
1,000
-1.58
€
-1.58
2.70
€
0.43
6.45
€
0.43
6.45
€
2.72
1,565
1,759
1,000
2
24
Net income and noncontrolling interests from discontinued operations
million €
394
5,921
Income after taxes
of which noncontrolling interests
Net income and noncontrolling interests
Weighted average number of outstanding shares
Dilution effect from BASF's "plus" incentive share program
million €
-1,075
8,491
million €
-15
70
million €
-1,060
8,421
1,000
918,479
918,479
-1.15
million €
9.17
-1.15
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Sales by division and by indication and sector
Million €
2020
2019
1
Petrochemicals
Chemicals
Performance Materials
Monomers
Materials
5,426
6,670
2,645
2,862
8,071
9,532
Intermediates
About This Report
249
BASF Report 2020
9.15
In accordance with IAS 33, earnings per share are determined by
dividing earnings attributable to shareholders of BASF SE by the
weighted average of outstanding shares. Pursuant to IAS 33, a
potential dilutive effect must be considered in the diluted earnings
per share for those BASF shares that will be granted in the future as
part of BASF's "plus" share program. This applies regardless of the
fact that the necessary shares are acquired on the market by third
parties on behalf of BASF and that there are no plans to issue new
shares. There was no dilutive effect from the issue of "plus" shares
in 2020 (2019: €0.02).
BASF Report 2020
248
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
7 Sales revenue
Sales revenue from contracts with customers is recognized in the
amount of the consideration BASF expects to receive in exchange
for the goods or services when the customer obtains control of the
goods or services. Control is considered to be transferred when the
customer can direct the use of the goods or services and can obtain
all substantial remaining benefits from them.
BASF primarily generates income from the sale of goods. Because
the customer obtains control of the goods at a specific point in time,
the corresponding sales revenue is recognized based on a given
point in time. Determination of the point in time at which the
customer obtains control of the goods occurs in the context of an
overall assessment of the circumstances which considers the
existence of a present claim to payment, the legal title to the goods,
actual physical possession of the goods, the transfer of risks and
rewards as well as customer acceptance. The transfer of risks and
rewards takes into account the underlying terms of delivery
(especially Incoterms) and is of particular practical significance.
According to these principles, sales revenue from the sale of goods
is generally recognized upon delivery. If products are delivered to a
consignment warehouse, BASF normally retains control of the
goods. Accordingly, sales revenue is not recognized until the
customer collects the goods from the consignment warehouse.
Long-term supply agreements usually contain variable prices,
dependent on the development of raw materials prices and variable
volumes.
Services rendered to customers by BASF are invoiced according to
work completed and recognized as revenue accordingly.
BASF generates a portion of its sales revenue from license
agreements. Sales revenue from license agreements is recognized
based on a point in time or a period of time depending on whether
the licensee is being granted a right to use (revenue recognized at a
point in time) or a right to access (revenue recognized over time) the
intellectual property of BASF. Rights to use intellectual property are
characterized by the fact that the licensed technology remains
largely unchanged during the term of the license and, after initial
provision of the licensed technology, BASF has no further
performance obligations. Rights to access intellectual property, by
contrast, imply that BASF will perform ongoing development and
enhancement of the technology, and the licensee will take a
material interest in this ongoing development and enhancement.
Accordingly, sales revenue from license agreements granting rights
to access BASF's intellectual property is recognized over the term of
the license. Sales revenue from sales and usage-based royalties is
recognized in accordance with the underlying settlement agree-
ments.
Sales revenue from the sale of precious metals to industrial
customers is recognized on delivery and the corresponding
purchase prices are recorded as cost of sales. In the trading of
precious metals and their derivatives with traders, where there is
usually no physical delivery, revenues are netted against the
corresponding costs.
If a consideration that is contractually agreed upon by a customer
includes variable components, BASF estimates the amount of the
consideration. Variable components are recognized as revenue only
to the extent that it is highly probable that previously recognized
sales revenue will not have to be cancelled as soon as there is no
longer uncertainty about the actual amount of the consideration.
Primarily rebates and other discounts are recognized as a reduction
in revenue in accordance with the principle of individual measure-
ment. BASF grants customers rebates if the goods purchased by
the customer exceed a contractually defined threshold within the
period specified. Rebates are usually deducted from amounts
payable by the customer. Taking into account the specific terms of
the underlying contract, BASF uses the expected value method or
the most likely amount to estimate a variable consideration amount.
The method is selected based primarily on number of possible
results such as the number of volume thresholds with rebates. All
available information, particularly historical values, is used for
making estimates.
In some contracts, BASF grants the customer the right to return
goods within a specific period of time, even if they meet the agreed
specifications (sale with right of return). The actual expected amount
of the consideration BASF is entitled to receive in this case is
estimated using the expected value method. Refund liabilities are
recognized in the amount of considerations paid by the customer for
goods that are expected to be returned.
BASF opts to apply the practical expedient in IFRS 15.63 to not
adjust the amount of the agreed consideration for the effects of a
material financing component if, at the beginning of a contract, no
more than one year is expected to lapse between the transfer of
control of the goods or services and payment by the customer.
BASF also applies the practical expedient in IFRS 15.121 of not
reporting information on remaining performance obligations
resulting from a contract with a maximum expected original term of
one year. Furthermore, information on performance obligations is
not reported if the resulting revenue is recognized in accordance
with IFRS 15.B16.
€
5,635
5,945
million €
59,316
104
67
2
159
265
2,125
504
692
1,082
3,806
302
47,347
34,412
21,345
13,912
4,346
86,950
6,652
3,588
6,152
1,353
4,201
13,384
16,420
14,049
property, plant and equipment
integral investments accounted for using the equity method
Additions to intangible assets and property, plant and equipment (including acquisitions)
South America,
Europe
Of which Germany
North America
Asia Pacific Africa, Middle East
BASF Group
23,827
6,123
15,948
14,203
5,338
59,316
%
40.2
10.3
26.9
23.9
9.0
100.0
25,706
368
396
14,525
6,928
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
6 Earnings per share
Earnings per share
2020
2019
Income after taxes from continuing operations
of which noncontrolling interests
To Our Shareholders
Net income and noncontrolling interests from continuing operations
of which noncontrolling interests
million €
-1,471
2,546
million €
-17
46
million €
-1,454
2,500
Income after taxes from discontinued operations
1
About This Report
247
6,467
824
21,792
393
360
125
1,367
1,885
2,135
1,459
1,310
581
71
4,097
1,896
1,235
1,501
599
150
4,146
Amortization of intangible assets and depreciation of property, plant and equipment including impairments and reversals of
impairments
a The relevant 2019 figures have been restated to reflect the reclassification of income from non-integral companies accounted for using the equity method to net income from shareholdings.
BASF Report 2020
9,857
6,064
5,101
5,402
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
242
BASF Report 2020
Income from operations (EBIT) before special items is used for the
internal steering of the segments and complements the key
management indicator, ROCE. It is determined based on EBIT,
which is calculated from gross profit on sales, selling expenses,
general administrative expenses, research and development
expenses, other operating income and expenses, and income from
integral companies accounted for using the equity method. To
calculate EBIT before special items, this figure is then adjusted for
special items. Special items arise from the integration of acquired
businesses, restructuring costs, certain impairments, gains or
losses resulting from divestitures and sales of integral investments
accounted for using the equity method, and other expenses and
income that arise outside of ordinary business activities. EBIT and
EBIT before special items are alternative performance measures that
are not defined under IFRS and are to be considered as being
complementary to the indicators defined by IFRS.
Reconciliation of the assets of Other to the assets of the BASF Group
The same accounting rules are used for segment reporting as those
used for the Group, which are presented in these Notes. Transfers
between the segments are generally executed at adjusted
market-based prices, taking into account the higher cost efficiency
and lower risk of intragroup transactions. Assets, as well as their
depreciation and amortization, are allocated to the segments based
on economic control. Assets used by more than one segment are
allocated based on the percentage of usage.
a The 2019 figures have been restated to reflect the reclassification of income from non-integral companies
accounted for using the equity method to net income from shareholdings.
-518
35
-735
-1,203
Income from operations of Other
Miscellaneous income and expenses
Other businesses
-89
-59
Foreign currency results, hedging and other measurement
effects
Income from operations of Other declined by €685 million year on
year, from -€518 million to -€1,203 million. The costs for cross-
divisional corporate research decreased by €33 million to
-€364 million, and the costs of corporate headquarters were
€17 million lower at -€214 million. Income from other businesses
rose by €5 million to €169 million. The line item foreign currency
results, hedging and other measurement effects improved by
€30 million to -€59 million. In addition to currency effects, the
improvement was due mainly to earnings from hedging transactions.
The line item miscellaneous income and expenses decreased by
-€770 million from €35 million to -€735 million. This was due
especially to expenses related to the realignment of the Global
Business Services unit and to positive effects in 2019 primarily from
adjustments to pension benefits in the United States and gains from
the sale of BASF's share of the Klybeck site in Basel, Switzerland.
Million €
Segment assets
Assets of businesses included in Othera
2,429
2,375
123
126
2,871
4,537
2,887
3,386
13,760
11,456
2,780
2,251
59,365
56,161
December 31, 2019
December 31, 2020
Other assets of the construction chemicals business disposal group (2019)b
Assets of Other
Assets of the construction chemicals business disposal group (2019)b
Other receivables/prepaid expenses
Defined benefit assets
Cash and cash equivalents / marketable securities
Deferred tax assets
Other financial assets and non-integral investments accounted for using the equity method
164
2,661
169
-214
The Materials segment is composed of the Performance Materials
division and the Monomers division. The segment offers advanced
materials and their precursors for new applications and systems. Its
product portfolio includes isocyanates and polyamides as well as
inorganic basic products and specialties for plastics and plastics
processing.
The Chemicals segment comprises the Petrochemicals and
Intermediates divisions and is the cornerstone of BASF's Verbund
structure. It supplies the other segments with basic chemicals and
intermediates, contributing to the organic growth of our key value
chains. Alongside internal transfers, customers include the chemi-
cal and plastics industries. The segment's competitiveness is
strengthened by technological leadership and operational excel-
lence.
The divisions are allocated to the segments based on their business
models and according to their focal points, customer groups, the
focus of their innovations, their investment relevance and
sustainability aspects.
- Agricultural Solutions: Agricultural Solutions
- Surface Technologies: Catalysts, Coatings
Nutrition & Care: Care Chemicals, Nutrition & Health
· Industrial Solutions: Dispersions & Pigments, Performance
Chemicals
· Materials: Performance Materials, Monomers
- Chemicals: Petrochemicals, Intermediates
The BASF Group's business is operated by 11 divisions, grouped develops and markets ingredients and additives for industrial
into six segments:
The Industrial Solutions segment consists of the Dispersions &
Pigments and the Performance Chemicals divisions. The segment
applications, such as polymer dispersions, pigments, resins,
electronic materials, antioxidants and additives. Its customers come
from key industries such as automotive, plastics and electronics.
5 Reporting by segment and region
The list of consolidated companies and the complete list of all
companies in which BASF SE holds shares as required by section
313(2) HGB and information on the exemption of subsidiaries from
accounting and disclosure obligations are an integral component of
the audited Consolidated Financial Statements submitted to the
electronic Federal Gazette (Bundesanzeiger). The list of shares held
is also published online.
4 BASF Group list of shares held pursuant to
section 313(2) of the German Commercial Code
(HGB)
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
For more information, see basf.com/en/corporate governance
The Surface Technologies segment bundles chemical solutions for
surfaces with the Catalysts and Coatings divisions. Its product
spectrum includes catalysts and battery materials for the automotive
and chemical industries, surface treatments, colors and coatings.
The Nutrition & Care segment comprises the Care Chemicals
division and the Nutrition & Health division. The segment produces
ingredients and solutions for consumer applications in the areas of
nutrition, home and personal care. Its customers include food and
feed producers as well as the pharmaceutical, cosmetics, and the
detergent and cleaner industries.
The Agricultural Solutions segment consists of the division of the
same name. As an integrated provider, its portfolio comprises
fungicides, herbicides, insecticides and biological crop protection
products, as well as seeds and seed treatment products.
Furthermore, Agricultural Solutions offers farmers innovative
solutions, including those based on digital technologies, combined
with practical advice.
-364
Costs for cross-divisional corporate research
Costs of corporate headquarters
2019a
2020
-397
Income from operations (EBIT) of Other
Million €
Remanent fixed costs resulting from organizational changes or
restructuring; function and region-related restructuring costs not
allocated to a division; idle capacity costs from internal human
resource platforms; and consolidation effects that cannot be
allocated to the divisions.
Results from currency translation that are not allocated to the
segments; earnings from the hedging of raw materials prices and
foreign currency exchange risks; and gains and losses from the
long-term incentive programs (LTI programs).
The steering of the BASF Group by corporate headquarters.
Cross-divisional corporate research, which includes plant
biotechnology research, works on long-term topics of strategic
importance to the BASF Group. Furthermore, it focuses on the
development of specific key technologies, which are of central
importance for the divisions.
-
-
-
The following activities are also presented under Other:
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
241
BASF Report 2020
Activities that are not allocated to any of the segments are recorded
under Other. These include other businesses, which comprise
commodity trading, engineering and other services, rental income
and leases. Discontinued operations and certain activities remaining
after divestitures are also reported here.
-231
74
24,131
80,292
6,019
6,075
Fungicides
2,267
2,305
Herbicides
Insecticides
Seed Treatment
Seeds & Traits
Agricultural Solutions
Nutrition & Care
Other
2,464
2,616
825
800
609
639
1,495
1,454
7,660
2,360
BASF Group
1,957
2,030
Nutrition & Health
10,736
11,466
Dispersions & Pigments
Performance Chemicals
Industrial Solutions
Catalysts
4,869
5,178
2,775
3,211
7,644
8,389
13,570
9,396
Coatings
Surface Technologies
3,089
3,746
16,659
13,142
Care Chemicals
3,989
4,118
7,814
2,898
59,149
Sales revenue of €53 million, that was included in contract liabilities
as of January 1, 2020, was recognized in 2020. That included
€9 million related to changes in the time frame for underlying
performance obligations to be satisfied.
8 Functional costs
-769
5,224
4,329
Income before income taxes
Financial result
Net income from shareholdings
EBIT
EBIT of Other
EBIT of the segments
Special items
Special items of Other
Special items of the segments
EBIT before special items
EBIT before special items of Other
EBIT before special items of the segments
2019a
2020
Million €
Reconciliation of segment income to income before income taxes
a The carrying amounts of non-integral investments accounted for using the equity method previously presented under "Assets of businesses included in Other" have been reclassified to "Other financial assets and non-integral
investments accounted for using the equity method."
b For more information, see page 215 onward of the BASF Report 2019, Note 2.5.
86,950
Assets of the BASF Group
27,585
-581
of which intangible assets
3,560
-3,317
Under the cost of sales method, functional costs incurred by the
operating functions are determined on the basis of cost center
accounting. The functional costs particularly contain the personnel
costs, depreciation and amortization accumulated on the underlying
final cost centers as well as allocated costs within the cost
accounting cycle. Operating expenses that cannot be allocated to
the functional costs are reported as other operating expenses.
For more information on other operating expenses, see Note 9 from page 251 onward
Cost of sales
Cost of sales includes all production and purchase costs of the
company's own products as well as merchandise that has been sold
in the period, particularly plant, energy and personnel costs.
Selling expenses
Selling expenses primarily include marketing and advertising costs,
freight costs, packaging costs, distribution management costs,
commissions and licensing costs.
General administrative expenses
General administrative expenses include the costs of the Corporate
Center, of general management, the Board of Executive Directors
and the Supervisory Board. They also include the costs of managing
operating divisions and business units as well as the costs of the
59,316 supporting services in departments such as accounting, legal and
taxes and controlling.
Sales revenue for the 2020 fiscal year includes €218 million from
performance obligations fulfilled in prior periods in connection with
sales and usage-dependent licenses.
BASF Report 2020
250
-909
4,201
-191
-518
-1,203
4,719
1,012
-442
-3,751
63
-434
-505
4,643
Assets
2 Management's Report
Income from integral companies accounted for using the equity method
About This Report
243
BASF Report 2020
a The 2019 figures have been restated to reflect the reclassification of income from non-integral companies accounted for using the equity method to net income from shareholdings.
3,302
-1,562
-705
-462
-194
Income from operations
1 To Our Shareholders
464
171
6,685
of which impairments
592
800
106
1,013
53
296
20
1,000
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
2,861
59,149
2,360
7,660
6,019
16,659
7,644
10,736
8,071
Intersegment transfers
Sales
BASF Group
Other
Agricultural
Solutions
Nutrition & Care
Surface
Technologies
Industrial
Solutions
Materials
Chemicals
Million €
Segments 2020
Notes
5 Overviews
2,880
720
244
About This Report
849
524
212
490
197
77
Sales including transfers
12,960
12,315
8,913
3,428
414
8,011
2,975
5,777
65,093
Income from integral companies accounted for using the equity method
99
22
26
5
113
265
6,565
59,316
2,898
7,814
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Segments 2019ª
Million €
Chemicals
Materials
Industrial
Solutions
Surface
Technologies
Nutrition & Care
Agricultural
Solutions
Otherb
BASF Group
Sales
Intersegment transfers
9,532
11,466
8,389
13,142
6,075
BASF Report 2020
375
203
429
459
156
4,869
Depreciation and amortization of intangible assets and property, plant and equipment
1,429
1,665
469
1,487
208
710
510
integral investments accounted for using the equity method
893
2,528
2,353
2,973
2,040
4,498
4,362
property, plant and equipment
6,186
51
19,647
585
331
1,957
34
464
1,878
Liabilities
3,435
3,893
2,734
2,905
2,948
3,556
26,423
45,894
Research and development expenses
96
182
177
246
160
840
385
2,086
Additions to intangible assets and property, plant and equipment (including acquisitions)
871
3,716
453
1,018
197
-109
-192
Income from operations
220
82
4
55
17
16
46
Income from integral companies accounted for using the equity method
63,901
2,433
7,751
6,448
16,862
8,019
11,456
10,932
Sales including transfers
4,752
73
91
630
Income from operations
-587
582
698
53
other intangible assets
6,959
64
3,039
844
2,019
628
179
186
of which goodwill
80,292
24,131
14,840
6,214
11,691
6,402
9,118
7,896
Assets
-191
-1,203
688
622
13,354
889
9.3
26.6
26.0
8.3
100.0
Location of company
Sales
Income from integral companies accounted for using the equity method
Income from operations
Assets
of which intangible assets
property, plant and equipment
integral investments accounted for using the equity method
24,223
10,296
16,440
14,895
3,591
59,149
57
32
-2
165
220
-1,005
39.1
%
59,149
4,905
6
324
BASF Report 2020
245
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Regions 2020
-1,712
Million €
Sales
Share
South America,
Europe
Of which Germany
North America
Asia Pacific Africa, Middle East
BASF Group
23,129
5,510
15,709
15,406
Location of customer
-201
768
247
4,869
Amortization of intangible assets and depreciation of property, plant and equipment including impairments and reversals of
impairments
3,306
2,305
2,124
1,133
122
6,685
In the United States, sales to third parties in 2020 amounted to
€14,352 million (2019: €14,211 million) according to location of
companies and €13,414 million (2019: €13,506 million) according to
location of customers. In the United States, intangible assets,
property, plant and equipment, and investments accounted for
using the equity method amounted to €9,967 million on Decem-
ber 31, 2020, compared with €12,115 million in the previous year.
In China, sales to third parties in 2020 amounted to €7,839 million
(2019: €7,216 million) according to location of companies and
€7,877 million (2019: €6,734 million) according to location of
customers. In China, intangible assets, property, plant and
equipment, and investments accounted for using the equity method
amounted to €3,799 million on December 31, 2020, compared with
€4,299 million in the previous year.
BASF Report 2020
246
116
About This Report
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Regions 2019ª
Million €
Location of customer
Sales
Share
Location of company
Sales
1 To Our Shareholders
12
690
932
-191
45,551
32,270
17,628
13,725
3,388
80,292
6,700
3,588
5,126
1,013
306
1,044
13,145
6,192
5,275
4,220
602
19,647
423
391
105
1,350
1,878
Additions to intangible assets and property, plant and equipment (including acquisitions)
3,019
9,550
973
124
19
57
6,420
property, plant and equipment
5,117
4,999
2,226
3,078
2,347
2,938
1,087
21,792
763
3,507
108
1,108
923
146
integral investments accounted for using the equity method
Liabilities
Research and development expenses
Additions to intangible assets and property, plant and equipment (including acquisitions)
Depreciation and amortization of intangible assets and property, plant and equipment
of which impairments and reversals of impairments
a The relevant 2019 figures have been restated to reflect the reclassification of income from non-integral companies accounted for using the equity method to net income from shareholdings.
b Other includes assets and liabilities as well as amortization of intangible assets and depreciation of property, plant and equipment of the discontinued construction chemicals business. For more information, see Note 2.5 on page 215 onward of the 2019 BASF Report. Until reclassification to the disposal group, additions to intangible assets and
property, plant and equipment (including acquisitions) of the discontinued construction chemicals business, also included in Other, amounted to €176 million.
c Impairments and reversals of impairments included reversals of impairments in the amount of €4 million in Other and €2 million in Industrial Solutions in 2019.
235
37
4,224
558
1,158
256
663
644
928
-518
4,201
Assets
8,978
8,782
6,903
11,773
6,399
16,530
388
27,585
of which goodwill
201
172
649
2,912
884
3,219
68
8,105
other intangible assets
65
102
86,950
9
43
1,885
193
192
214
161
879
411
2,158
784
426
565
44,600
595
299
4,097
718
438
457
545
719
346
4,146
8
320
419
48
3,603
2,886
3,152
2,897
3,251
25,304
-65
Total comprehensive income
-87
-37
-136
-24
-1,255
-2
-50
-2,145
Changes in the scope of consolidation
Additions
Disposals
Transfers
Carrying amount according to the equity method as of the end of the year
14,078
-1,541
590
-63
Transfers contained dividend payments of €57 million by Wintershall
Dea GmbH in 2020. Transfers in 2019 included the reclassification
of the proportional carrying amount attributable to the share of
BASF Colors & Effects Switzerland AG in CIMO Compagnie
industrielle de Monthey S.A., Monthey, Switzerland, to the assets of
the disposal group for the pigments business.
The proportional changes of other comprehensive income
primarily included currency effects on the assets of the Wintershall
Dea Group.
Proportional income after taxes and other adjustments to
income and expenses also contain effects from the carryforward of
fair value adjustments made at initial recognition of Wintershall Dea.
Only the shareholding in Wintershall Dea GmbH is included in joint Disposals included to a capital decrease in Solenis UK Internatio-
ventures.
nal Ltd., London, United Kingdom, in the amount of €10 million in
2020.
722
-10
12,401
10,199
-57
675
11
256
636
582
135
49
501
533
December 31, 2020 December 31, 2019
Other financial assets
Long-term securities
3,272
-1,544
-3,080
3,891
Other shareholdings
May 1-December 31, 2019
122
January 1-December 31, 2020
34,509
30,340
Carrying amount of other financial assets
576
471
Net income from other shareholdings increased by €61 million in
2020. This resulted primarily from the measurement of sharehold-
ings at fair value.
2,178
1,968
6,028
5,886
15,273
14,343
17,058
14,029
Million €
75
-39
-68
-35
-373
-537
183
164
15
18
146
2020
Interest result
Interest expenses
Interest income
Interest and dividend income from securities and loans
Interest income from cash and cash equivalents
Million €
Financial result
Financial result
-424
-286
-2,981
-187
BASF Report 2020
257
-45
About This Report
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
1
BASF Report 2020
16
-141
Interest expenses
Interest income
Amortization/impairment and reversals of impairments
Sales revenue
Statement of income
Total equity and liabilities
of which financial indebtedness
Current liabilities
of which financial indebtedness
Noncurrent liabilities
Equity
Assets
of which marketable securities, cash and cash equivalents
Current assets
Income taxes
of which goodwill from fair value adjustments
Balance Sheet
Financial information on the Wintershall Dea Group, Kassel/Hamburg, Germany (100%)
Million €
Million €
Net income from other shareholdings
10.3 Other shareholdings and financial assets
The following table contains financial information on the material non-integral shareholding accounted for using the equity method, the
Wintershall Dea Group, including adjustments for fair value made at initial recognition and the resulting effects on earnings.
Financial information on the material non-integral investment accounted for using the equity method
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
Noncurrent assets
Total comprehensive income
2020
2019
Expenses from other shareholdings
Net income from other shareholdings
34,509
30,340
-23
-78
Write-downs on / losses from the sale of
shareholdings
814
821
2,589
2,459
-55
-63
Expenses from loss transfer agreements
2,688
2,740
33
157
18
15
Dividends and similar income
December 31, 2020
December 31, 2019
Income from the disposal of /write-up of
shareholdings
-78
136
Income from profit transfer agreements /
tax allocation to shareholdings
3
1
27,881
31,920
Income from other shareholdings
17
-86
2
284
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
BASF Report 2020
254
Transfers in 2020 included dividend payments from BASF-YPC
Company Ltd. in the amount of €110 million (2019: €200 million).
Disposals in 2020 included primarily a capital decrease in the
amount of €8 million at Yara Freeport LLC, Wilmington, Delaware.
Proportional changes of other comprehensive income included
income and expense recognized directly in equity and related
primarily to currency effects. Of that, -€17 million related to
BASF-YPC Company Ltd. in 2020, and €9 million in 2019.
Income from integral companies accounted for using the
equity method decreased by €45 million in 2020. Of the decrease,
€40 million related to the shareholding in BASF-YPC Company Ltd.,
Nanjing, China, primarily due to the scheduled turnarounds of the
production plants.
265
220
576
581
Financial information on the material integral investment accounted for using the equity method
1,309
10.2 Non-integral companies accounted for using the
equity method
Financial information on BASF-YPC Company Ltd., Nanjing, China (100%)
Million €
207
-610
of which joint ventures
Assets
of which marketable securities, cash and cash equivalents
Current assets
Noncurrent assets
Balance Sheet
149
-643
Proportional income after taxes
December 31, 2019
December 31, 2020
2019
2020
Million €
Income from non-integral companies accounted for using the equity
method
The following table contains financial information on the material integral company accounted for using the equity method, BASF-YPC
Company Ltd.
931
1,297
-7
Income from integral companies accounted for using
the equity method
associated companies
of which joint ventures
Other adjustments to income and expenses
associated companies
of which joint ventures
81
20
200
153
Total comprehensive income
284
234
Proportional income after taxes
-12
16
2019
193
-19
205
41
-277
-159
-8
-27
-6
5
Carrying amount according to the equity method as of the end of the year
2019
-9
Transfers
-21
-5
Disposals
-19
-14
Additions
79
Changes in the scope of consolidation
1,032
associated companies
-33
BASF Report 2020
prices assumed a price of $3.8 per mmBtu (TTF) for 2021 that rises
to a nominal $7.7 per mmBtu in 2025 and then follows the expected
cost trend. The expected cash flows were discounted using
country-specific cost of capital rates, which reflect the relevant
country risks and tax rates. The cost of capital rates in euros,
calculated using the capital asset pricing model, were between
3.4% and 14.4%. A decrease of 10% in price assumptions for the
entire planning period would result in the need for an impairment of
then develops in line with cost increases. The development of gas
Income from non-integral companies accounted for using the
equity method decreased by €776 million in 2020. This was
primarily due to impairments of assets of Wintershall Dea Group
amounting to €791 million as a result of lower oil and gas price
forecasts and changed reserve estimates. As part of the impairment
tests, the expected cash flows in euros from the exploration and
production assets held by Wintershall Dea were updated and
discounted. This assumed an oil price of $43 per bbl of Brent crude
in 2021 that expected rises to a nominal $62 per bbl by 2023 and
The carrying amount accounted for using the equity method of the shareholding in BASF-YPC Company Ltd. amounted to €710 million
as of December 31, 2020, and €772 million as of December 31, 2019.
98
44
230
71
4
2
3
3
209
202
1,995
January 1-December 31, 2020
255
January 1-December 31, 2019
2,536
About This Report
To Our Shareholders
722
12,401
Carrying amount according to the equity method as of the beginning of the year
Proportional income after taxes and other adjustments to income and expenses
Proportional changes of other comprehensive income
2019
2020
2019
2020
Associated companies
Joint ventures
Million €
Reconciliation of the carrying amount of non-integral investments accounted for using the equity method
about €320 million of the shareholding as a whole. The increase in
capital cost rates of one percentage point would not lead to an
impairment of the shareholding as a whole but would, however,
result in an impairment of around €250 million for value components
in individual countries that were recognized in connection with
BASF's purchase price allocation.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1
1,800
28
255
1,419
-5
-2
associated companies
1,800
1,751
-293
-280
of which joint ventures
148
229
-298
-282
Other adjustments to income and expenses
768
820
-58
1,542
Income from non-integral companies accounted for
using the equity method
-925
-149
1,751
54
329
Total comprehensive income
Income taxes
Interest expenses
Interest income
Amortization/impairment and reversals of impairments
-890
Sales revenue
Total equity and liabilities
of which financial indebtedness
Current liabilities
of which financial indebtedness
Noncurrent liabilities
Equity
3
3
Statement of income
168
Other income included refunds in the amount of €151 million in 2020
and €232 million in 2019. This was due in both years to research
project funding, government grants in multiple countries, regional
business development subsidies in China and insurance refunds.
Further income in 2020 resulted from gains in connection with the
premature termination of a long-term supply agreement in North
America in the amount of €103 million. Additional income resulted in
2019 from plan adjustments for pension benefits and similar
obligations in the amount of €137 million as well as from a
contractually agreed compensation payment in the amount of
€46 million. Moreover, income in both years was related to gains
from precious metal trading (2020: €304 million, 2019: €103 million),
refunds of consumption taxes and a number of additional items.
-465
In both years, losses from divestitures and the disposal of
noncurrent assets were mainly in connection with the planned
divestiture of the global pigments business.
In both years, other expenses included expenses for litigation, for
REACH, for the provision of services, for warranties and for activities
related to the BASF 4.0 project and for planning the new Verbund
site in Guangdong, China. Additional other expenses resulted in
2020 from the coronavirus pandemic, especially due to BASF's
"Helping Hands" aid campaign.
10 Investments accounted for using the equity
method and other financial assets
Joint ventures and associated companies are accounted for using
the equity method. The carrying amounts of shareholdings are
adjusted annually based on the pro rata share of net income,
dividends and other changes in equity. Should there be indications
of a reduction in the value of an investment, an impairment test is
conducted and, if necessary, an impairment is recognized in the
income statement. Furthermore, earnings and the carrying amount
are adjusted when accounting policies deviate or as a result of
purchase price allocations, which primarily affects Wintershall
Dea GmbH, Kassel/Hamburg, Germany.
Exploration and development expenses in the oil and gas business,
for which the equity method is applied, are accounted for using the
successful efforts method. Under this method, costs of successful
exploratory drilling as well as successful and dry development wells
are capitalized.
Income from integral companies accounted for using the equity
method is presented in the BASF Group's EBIT, and income from
non-integral companies accounted for using the equity method is
presented together with income from other financial assets in the
BASF Group's net income from shareholdings. Similarly, integral and
non-integral shareholdings accounted for using the equity method
are also shown separately in the balance sheet.
BASF Report 2020
253
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
10.1 Integral companies accounted for using the equity
method
Reconciliation of the carrying amount of integral shareholdings accounted for using the equity method
Million €
Expenses from foreign currency and hedging transactions as
well as from the measurement of LTI options related to foreign
currency translation of receivables and payables as well as changes
in the fair value of currency derivatives and other hedging trans-
actions. Expenses resulting from the measurement of LTI programs
amounted to €35 million in 2020 and €39 million in 2019.
Joint ventures
Costs from other miscellaneous revenue-generating activities
relate to the items presented in other operating income.
Depreciation, amortization and impairments of noncurrent
assets and of the disposal group rose to €2,968 million in 2020.
The increase was mainly due to impairments amounting to
€2,368 million resulting from the economic effects of the coronavirus
pandemic and affected all segments. In addition, impairments in the
amount of €377 million arose due to restructuring in North America,
Europe and Asia Pacific. Depreciation, amortization and impair-
ments of noncurrent assets amounting to €426 million in 2019
related primarily to the impairment of project costs for a planned
methane-based propylene production plant on the U.S. Gulf Coast,
as well as to the optimization of production sites within the
Nutrition & Health division in Europe.
Expenses from foreign currency and hedging transactions as well as from the measurement of LTI options
Losses from the translation of financial statements in foreign currencies
Losses from divestitures and the disposal of noncurrent assets
Expenses from the addition of valuation allowances on business-related receivables
Expenses for derecognition of obsolete inventory
Other
Other operating expenses
In 2020, expenses from restructuring and integration measures
in the amount of €651 million were attributable to restructuring
activities to improve competitiveness in various operating divisions
and in the Global Business Services unit and to site closures in
Europe, North America and Asia Pacific. In 2019, these expenses in
the amount of €481 million were mainly attributable to the
implementation of the new BASF strategy and, to a lesser extent, to
site closures in North America and Asia Pacific.
Expenses from integration measures amounted to €90 million in
2020 and related to the integration of Solvay's global polyamide
business. In 2019, these expenses amounted to € 43 million and
related to the integration of significant parts of Bayer's seed and
non-selective herbicide business as well as its vegetable seeds
business, which were acquired in 2018.
Environmental protection and safety measures, costs of
demolition and removal, and project costs not subject to
mandatory capitalization were expensed if requirements for
mandatory capitalization pursuant to IFRS were not met. Expenses
for demolition, removal and project planning totaled €218 million in
2020 and €243 million in 2019. In both years, these mainly related
to the Ludwigshafen site in Germany. Further expenses of €138 mil-
lion in 2020 and €77 million in 2019 arose from the addition to
environmental provisions. In both years, these concerned several
discontinued sites in North America and, in 2020, additionally a site
in Germany.
BASF Report 2020
252
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
For more information, see Note 14 from page 264 onward and Note 15 from page 268 onward
3,034
Associated companies
2019
-6.2
97
-0.8
-26
-2.1
32
-0.2
-6
4.2
-66
0.3
10
6.6
-103
-0.5
-17
-6.8
9
2020
0.2
5.8
2020
2019
Income from integral companies accounted for using the equity method
Million €
Carrying amount according to the equity method as of the beginning of the year
Proportional income after taxes and other adjustments to income and expenses
1,309
1,408
576
514
188
184
32
81
2020
260
22.9
756
-91
106
6,108
1,086
Income from foreign currency and hedging transactions as well as from the measurement of LTI options
Income from the translation of financial statements in foreign currencies
45
55
13
11
Gains on divestitures and the disposal of noncurrent assets
Reversals of impairment losses on noncurrent assets
Income from the reversal of valuation allowances for business-related receivables.
Other
Other operating income
62
822
6
22
19
959
882
189
1,399
244
54
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Research and development expenses
Research and development expenses include the costs resulting
from research projects as well as the necessary license fees for
research activities.
For more information on research and development expenses by segment, see Note 5 from page 241
onward
9
Other operating income and expenses
Other operating income
Million €
Income from the adjustment and release of provisions recognized in other operating expenses
Revenue from miscellaneous other activities
2020
2019
111
782
2,095
As in the previous year, revenue from miscellaneous other activi-
ties primarily included income from rentals, catering operations,
cultural events and logistics services. In 2020, €24 million in revenue
from finance leases was also included.
Environmental protection and safety measures, costs of demolition and removal, and project costs not subject to mandatory capitalization
Depreciation, amortization and impairments of noncurrent assets and of the disposal group
356
320
2,968
426
213
173
180
249
33
18
51
16
69
67
343
286
Restructuring and integration measures
Income from the adjustment and release of provisions
recognized in other operating expenses was largely related to
risks from lawsuits and damage claims, closures and restructuring
measures, employee obligations, and various other individual items
as part of the normal course of business. Provisions were reversed
or adjusted if, based on the circumstances on the balance sheet
date, utilization was no longer expected, or expected to a lesser
extent.
697
2019
Income from foreign currency and hedging transactions as well
as from the measurement of LTI options pertained to the foreign
currency translation of receivables and payables as well as of
currency derivatives and other hedging transactions. No income
from the release of provisions for the long-term incentive (LTI)
program was recognized in 2020. Only a minor amount was released
in 2019.
Income from the translation of financial statements in foreign
currencies included gains from the translation of companies'
financial statements whose local currency is different from the
functional currency.
At €62 million, gains on divestitures and the disposal of
noncurrent assets were significantly below the figure in the previous
year. They included primarily gains from the sale of fixed assets in
the amount of €44 million. Income of €390 million was recognized in
2019 from the transfer of BASF's paper and water chemicals
business to the Solenis group and the sale of assets in the
Agricultural Solutions segment in accordance with the conditions
imposed by antitrust authorities in connection with the acquisition of
the Bayer businesses. Furthermore, income of €421 million resulted
in 2019 from real estate divestitures in several countries, mainly
relating to the sale of a building complex in Switzerland in the
amount of €400 million.
BASF Report 2020
251
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Income from the reversal of valuation allowances for business-
related receivables resulted both from the reversal of impairments
for settled customer receivables for which impairments had been
recorded previously as well as from adjusted expectations regarding
default on individual customer receivables.
-35
Other operating expenses
Million €
Costs from other miscellaneous revenue-generating activities
2020
809
-648
1.8
-21.7
In Germany, a uniform corporate income tax rate of 15.0% as well
as a solidarity surcharge of 5.5% thereon are levied on all distributed
and retained earnings. In addition to corporate income tax, income
generated in Germany is subject to a trade tax. It varies depending
on the municipality in which the company is represented. As in the
previous year, the weighted average tax rate was 14.5% in 2020.
The 30% rate used to calculate deferred taxes for German Group
companies remained unchanged in 2020. The income of foreign
Group companies is assessed using the tax rates applicable in their
respective countries. These are also generally used to calculate
deferred taxes to the extent that tax rate adjustments for the future
have not yet been enacted.
Accounting policies
12 Income taxes
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
258
BASF Report 2020
a Reversals of write-downs on/income from securities and loans, interest income on income taxes and interest expenses on income taxes were reported as miscellaneous financial expenses in the previous year.
-705
-462
Financial result
-240
Deferred taxes are recorded for temporary differences between the
carrying amount of assets and liabilities in the financial statements
according to IFRS and the carrying amounts for tax purposes as
well as for tax loss carryforwards and unused tax credits. These also
comprise temporary differences arising from business combinations,
with the exception of goodwill. Deferred tax assets and liabilities are
calculated using the respective country-specific tax rates applicable
for the period in which the asset or liability is realized or settled. Tax
rate changes enacted or substantively enacted on or before the
balance sheet date are taken into consideration.
-89
Deferred tax assets are offset against deferred tax liabilities provided
they are related to the same taxation authority. Surpluses of deferred
tax assets are only recognized provided that the tax benefits are
likely to be realized. The valuation of deferred tax assets is based on
the probability of a reversal of the differences and the assessment of
the ability to utilize tax loss carryforwards and unused tax credits.
This depends on whether future taxable profits will exist during the
period in which temporary differences are reversed and in which tax
Changes in deferred taxes in the balance sheet are recorded as
deferred tax expense or income unless the underlying transaction is
not to be recognized directly in equity or in income and expenses
recognized in equity. For those effects which have been recognized
in equity, changes to deferred tax assets and tax liabilities are also
recognized directly in equity.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
259
BASF Report 2020
Other taxes included real estate taxes and other comparable taxes
totaling €106 million in 2020 and €101 million in 2019.
The BASF Group tax rate amounted to 5.8% in 2020 (2019: 22.9%).
The relatively low tax income in relation to pre-tax result in 2020
resulted primarily from a rise in nondeductible operating expenses
due to the non-tax-effective impairment of goodwill and the overall
negative earnings contribution from companies accounted for using
the equity method, mainly due to impairments of assets of the
Wintershall Dea Group, Kassel/Hamburg, Germany. This was
partially offset by a rise in tax income for previous periods, due
mainly to incentives offered by the CARES Act in the United States.
Changes in valuation allowances on deferred tax assets for tax loss
carryforwards resulted in income of €5 million in 2020 (2019:
expense of €1 million).
The decline in current tax expense was due mainly to tax income for
previous years, especially from incentives offered by the CARES Act
in the United States, and lower earnings, mainly in Germany and
North America.
Tax expense and tax rate
IFRIC 23 clarifies the application of the recognition and measure-
ment policies from IAS 12 when there is uncertainty regarding
income tax-related treatment of individual transactions. They are
accounted for with the assumption that tax authorities will examine
the questionable transaction and have all relevant information. The
amount of risk provisions is calculated and reviewed with con-
sideration for the results of past tax audits as well as the legal
assessment of not yet audited transactions and the risk of a deviating
tax-related interpretation by the tax authorities. The most probable
value of the individual risks is recognized.
Provisions for German trade tax, corporate income tax and similar
income taxes are calculated and recognized based on the expected
taxable income of the consolidated companies less any prepay-
ments that have been made. Provisions are set up for interest
accrued. This interest is reported under other financial result, not tax
expense. Other taxes to be assessed are considered accordingly.
Deferred tax liabilities are recognized for differences between the
proportional IFRS equity and the tax base of the investment in a
consolidated subsidiary if a reversal of these differences is expected
in the foreseeable future. Deferred tax liabilities are recognized for
dividend distributions planned for the following year if these
distributions lead to a reversal of temporary differences.
loss carryforwards and unused tax credits can be claimed. The
assessment of recoverability of deferred tax assets is based on
internal projections of the future earnings of the particular Group
company.
Notes
-321
-117
Miscellaneous financial income
16
31
4
35
35
30
Interest income on income taxesa
Income from the capitalization of borrowing costs
Reversals of write-downs on/income from securities and loansa
22
The decline in other financial expenses was primarily due to lower
net expenses associated with the translation of loans, bonds and
commercial paper and the valuation of the corresponding hedging
instruments against interest and currency risks.
The net interest expense from underfunded pension plans and
similar obligations declined year on year as a result of the lower
interest rate used to determine expenses for pension benefits
compared with the previous year.
The rise in write-downs on / losses from securities and loans
was primarily due to higher impairments on loans to nonconsolidated
Group companies.
The interest result improved by €92 million year on year, to
-€373 million, as a result of lower interest expenses. The decrease
in interest expenses was mainly due to lower interest rates on
financial debt, particularly commercial paper.
81
26
Other financial income
-207
118
-8
-10
-25
-20
Other financial result
Other financial expenses
Miscellaneous financial expenses
Interest expenses on income taxesa
Unwinding the discount on other noncurrent liabilities
-11
-11
Net interest expense from other long-term personnel obligations
-5
-2
Net interest expense from underfunded pension plans and similar obligations
-155
-108
Write-downs on / losses from securities and loans
-56
Tax expense
Million €
Current tax expense
3,302
-1,562
%
Million €
%
Million €
2019
2020
980
137
224
228
756
-91
4
-20
-26
-234
32
15.0
15.0
339
-1.2
-41
4.1
-64
7.8
257
-3.5
55
0.4
12
16.3
-255
0.1
2
-0.1
2
495
61
23
-298
Foreign tax rate differential
Trade taxes
Solidarity surcharge
Expected tax based on German corporate income tax rate (15%)
Income before income taxes
Reconciliation of income taxes and the effective tax rate
Tax expense
Other taxes as well as sales and consumption taxes
Income taxes
From valuation allowances on deferred tax assets
From changes in the tax rate
From changes in tax loss carryforwards/unused tax credits
From changes in temporary differences
Deferred tax expense (+) / income (-)
Taxes for prior years
Foreign income tax
Corporate income tax, solidarity surcharge and trade taxes (Germany)
Tax-exempt income
Nondeductible expenses
Income of companies accounted for using the equity method (Income after taxes)
Taxes for prior years (current and deferred taxes)
-129
-297
-489
10
-414
929
739
114
-372
Proportional changes of other comprehensive income
1,053
398
2019
2020
BASF Report 2020
Income taxes/effective tax rate
Other
Deferred tax liabilities for the future reversal of temporary differences associated with shares in participating interests
Changes in the tax rate
73
270
BASF Report 2020
About This Report
BASF Report 2020
a Including licenses to such rights and values.
December 31, 2020
13,145
6,959
592
94
2,997
1,112
1,391
Net carrying amount as of
4,096
775
381
140
266
About This Report
1 To Our Shareholders
2 Management's Report
and valuesa
Other rights
intangible
assets
production
technologies
generated
patents and
Product rights,
licenses and
trademarks
1,185
Distribution and
similar rights
Know-how,
Million €
Development of intangible assets 2019
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
Internally
Goodwill
275
As of December 31, 2020
6
Transfers
-27
-6
-59
0
-143
Disposals
821
786
0
3
15
2
15
0
-1
1
-2
-138
-11
-11
0
-51
-7
-58
1,340
Currency effects
1
0
0
0
-5
Transfers to disposal groups
4
-4
Total
20,368
0
46
11
47
Currency effects
-1,186
-5
-409
-410
-1,038
Transfers to disposal groups
20
26
-6
Transfers
-281
1
6
130
As of December 31, 2019
Additions
Changes in the scope of consolidation
255
94
1,046
376
2,043
-3
As of January 1, 2019
17,555
8,105
611
196
4,319
1,433
2,891
Accumulated depreciation and
amortization
-86
-25
-8
152
4,575
1,839
4,038
As of January 1, 2019
Cost
In 2019, additions to accumulated amortization contained impair-
ments of €15 million. These impairments pertained primarily to
patents that were not allocated to an operational segment and were
revalued due to a planned sale.
553
Transfers to disposal groups were attributable to intangible assets
in connection with the construction chemicals business in Decem-
ber 2019 and the pigments business in August 2019.
Additions from acquisitions resulted from the acquisition of
Isobionics B.V., Geleen, Netherlands, a startup company that
develops and produces natural flavors and fragrances. This
increased goodwill by €16 million and capitalized know-how by
€31 million. By contrast, there was a decrease of goodwill in the
amount of €65 million due to a retroactive purchase price allocation
and purchase price adjustment to assets from the acquisition of
significant parts of Bayer's seed and non-selective herbicide
businesses and its vegetable seeds business in the previous year.
Additions in 2019 related primarily to the acquisition of technologies
and patents amounting to €49 million from Grillo-Werke AG,
Duisburg, Germany, in the Nutrition & Care segment. Additions also
included newly acquired software licenses and rights of use.
-1,303
3,814
241
-3,048
292
Disposals of intangible assets amounting to €281 million primarily
concerned the derecognition of fully amortized assets for distribu-
tion and supply rights in the Agricultural Solutions segment and of
software licenses.
of which impairments
9,211
0
-157
Disposals
-37
-47
-46
52
1
Changes in the scope of consolidation
3
163
45
86
0
-2
Additions
0
Additions from acquisitions
-57
1,496
786
135
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
265
BASF Report 2020
Future cash flows for the Resins unit were adjusted downward due
to the effects of the coronavirus pandemic on the market environment
in the automotive industry. Besides the effects of the coronavirus
pandemic, profitability and efficiency-boosting measures, currently
being implemented, were factored into the impairment test. The
result of these assumptions was that the recoverable amount
exceeded the carrying amount by €68 million, given a weighted
average cost of capital rate after taxes of 6.63% (2019: 7.03%) and
a growth rate of 2.0% (2019: 2.0%). The recoverable amount would
be equal to the unit's carrying amount if the weighted average cost
of capital rate rose by 0.69 percentage points or the growth rate
were 1.03 percentage points lower. Goodwill in the amount of
€34 million was allocated to the Resins unit as of December 31, 2020.
This does not apply to the goodwill of the cash-generating unit and
business unit, Resins, in the Industrial Solutions segment.
After determining the recoverable amounts for the cash-generating
units, the conclusion was that reasonable possible deviations from
the key assumptions would not lead to the carrying amounts of
18 units exceeding their respective recoverable amounts.
The annual impairment tests of the other 19 cash-generating units
were performed in the fourth quarter of 2020. The calculation also
takes into account capital structure and the beta factor of the
respective peer group as well as the average tax rate of each
cash-generating unit. Impairment tests were performed on the units
assuming a weighted average cost of capital rate after taxes of
between 4.86% and 6.92% (2019: between 5.16% and 7.73%).
This corresponds to a weighted average cost of capital rate before
taxes of between 6.50% and 8.85% (2019: between 6.38% and
10.00%).
a Reclassification of goodwill from the construction chemicals business to the disposal group in the amount of €772 million as of December 21, 2019
b Reclassification of goodwill from the pigments business to the disposal group in the amount of €414 million as of August 29, 2019
c Growth rates used in impairment tests to determine terminal values in accordance with IAS 36
8,105
6,959
0.0%-2.0%
5 Overviews
Notes
Development of intangible assets
Development of intangible assets 2020
Million €
Disposals of intangible assets amounting to €249 million primarily
concerned the derecognition of fully amortized assets for distribution
and similar rights and of production technologies in the Industrial
Solutions and Nutrition & Care segments.
Additions from acquisitions resulted mainly from the acquisition of
Solvay's global polyamide business in the Materials segment, to
which the additional goodwill is also allocated.
Additions in 2020 related primarily to the acquisition of production
technologies amounting to €21 million from AgriMetis LLC,
Lutherville, Maryland, in the Agricultural Solutions segment.
Additions also included internally created intangible assets totaling
€37 million, comprising primarily the development of software not
allocated to an operational segment.
-235
Total
Goodwill
and valuesa
1,544
Other rights
production
technologies
generated
patents and
Product rights,
licenses and
trademarks
Distribution and
similar rights
Internally
Know-how,
intangible
assets
0.0%-2.0%
1,487
2.0%
2020
Goodwill as of December 31
Other cash-generating units
Catalysts division (excluding battery materials)
Personal Care Ingredients in the Care Chemicals division
Surface Treatment in the Coatings division
Agricultural Solutions division
Cash-generating unit
Million €
2019a, b
Goodwill of cash-generating units
Triggering events for potential impairment first became evident over
the course of the summer due to the significant economic impact of
the coronavirus pandemic. All cash-generating units were evaluated
for potential impairment risks based on analyses. Except for the
cash-generating unit and business unit, Surface Treatment, in the
Surface Technologies segment, the analyses resulted in solid
findings indicating no impairment risk.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
The impairment test for the cash-generating Surface Treatment unit
was accelerated; and future cash flows were adjusted downward
given the market environment in the automotive and aviation
industries due to the significant drop in demand from effects of the
coronavirus pandemic and expectations for slow recovery. The
impairment test also took into consideration measures approved
and being taken due to the pandemic, such as efficiency
improvements across the unit's entire value chain. Assuming a
weighted average cost of capital rate after taxes of 6.53% (2019:
5.17%), the changed assumptions resulted in a goodwill impairment
of €786 million of the Surface Treatment unit, recognized in other
expenses. The recoverable amount corresponds to the unit's value
in use and was €1,946 million as of September 30, 2020. A growth
rate reduction of 0.5 percentage points would lead to a further need
for impairment in the amount of €138 million. If all basic assumptions
remained constant, a reduction of 10 percentage points in income
from operations within the period of detailed planning would lead to
a further need for impairment in the amount of €161 million.
Irrespective of that, an additional impairment in the amount of
€185 million would result from an increase of 0.5 percentage points
to the cost of capital rate.
Transfers to disposal groups related to the adjustment of
reclassified amounts to the discontinued construction chemicals
business.
Goodwill
Goodwill
1,512
2.0%
696
2.0%
515
2.0%
493
Growth rate
2.0%
2.0%
1,244
2.0%
3,219
2.0%
3,039
Growth rate
1,315
259
In 2020, additions to accumulated amortization contained
impairments of €35 million (excluding goodwill). They related mainly
to customer relationships and to a production technology in the
Nutrition & Care segment. Its use was discontinued prematurely due
to the optimization of the production structure. Moreover, customer
rights and production technologies were impaired in the Agricultural
Solutions segment after the registration of an active ingredient
expired.
Cost
4,182
1,387
2,731
As of December 31, 2020
-798
-392
-20
0
-201
-46
-139
Currency effects
6
-14
13
234
973
7,734
17,241
33
281
44
217
Additions
-57
Changes in the scope of consolidation
0
3,030
112
1,072
238
1,323
As of January 1, 2020
amortization
Accumulated depreciation and
285
7
Transfers to disposal groups
-8
24
37
40
2
Additions
-59
-59
103
17,555
611
196
4,319
1,433
2,891
Changes in the scope of consolidation
As of January 1, 2020
8,105
Further impairments totaling €11 million were attributable to the
Chemicals, Industrial Solutions, Nutrition & Care, Agricultural
Solutions, Materials and Surface Technologies segments and related
primarily to know-how, patents and production technologies.
Additions from acquisitions
0
24
8
-34
0
-6
Transfers
-249
171
-28
-67
0
-147
Disposals
691
21
376
-7
About This Report
59
20
188
614
40
19
Additions
Changes in the scope of consolidation
1
1
43,716
158
196
3,472
144
33,110
144
3,401
106
392
195
-112
-2
Disposals
2,059
234
14
49
6,374
25
50
250
23
18
of which impairments
5,189
234
1,396
-27
65
As of January 1, 2020
-14
-39
Currency effects
18
60
-2
-4
-34
-3
-2
3
Transfers to disposal groups
-28
-6
-1,515
-404
-42
-1,567
-44
Accumulated depreciation
66,015
3,164
690
4,773
505
43,902
53
834
451
947
As of December 31, 2020
-2,401
-98
-26
-167
10,749
-546
-8
-135
To Our Shareholders
1
About This Report
269
BASF Report 2020
19,647
2,987
333
1,197
276
9,020
542
4,060
351
881
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Currency effects lowered property, plant and equipment by
€934 million and resulted mainly from the depreciation of the
U.S. dollar and the Brazilian real against the euro.
For more information on divestitures, see Note 3 from page 235 onward
Transfers to disposal groups related to amounts reclassified to
the discontinued construction chemicals business and to the
discontinued pigments business.
Transfers related mainly to the reclassification of operation-ready
assets from construction in progress to other asset categories.
Disposals of property, plant and equipment included the sale of a
production site in Denmark.
Impairments in the Agricultural Solutions segment arose in the
amount of €280 million almost completely from measures to
streamline the glufosinate-ammonium production network in North
America and Europe. These impairments concerned nearly all asset
classes, with €132 million attributable to machinery and technical
equipment, €60 million to buildings and €42 million to right-of-use
building assets.
Of all impairments in the Nutrition & Care segment, €20 million were
attributable to discontinued investment projects in Europe and Asia.
The impairments related in particular to miscellaneous equipment
and fixtures as well as to construction in progress
Net carrying amount as of December 31, 2020
Of all impairments in the Surface Technologies segment, the majority
(€197 million) related to the partial impairment of the production
network for catalysts in Europe with sites in Germany, Poland and
South Africa, due mainly to the economic impact of the coronavirus
pandemic and current market developments in the automotive
industry. The value in use was calculated using a cost of capital rate
after taxes of 7.13%. The impairments concerned nearly all asset
classes, with €123 million attributable to machinery and technical
equipment, €54 million to buildings and €9 million to construction in
progress. Furthermore, full depreciation of production plants and
construction in progress in Europe, North America and Asia was
recognized in the total amount of €41 million.
The majority of impairments (€748 million) in the Materials segment
was also attributable to ongoing excess supply - amplified by the
coronavirus pandemic - as well as to the associated decrease in
prices and margins. They related to nearly all classes of fixed assets,
especially machinery and technical equipment (€627 million),
construction in progress (€77 million) and buildings (€40 million).
They primarily comprised the depreciation of individual production
plants in Europe, North America and Asia. The values in use were
calculated using cost of capital rates after taxes between 6.92%
and 8.46% and led to full depreciation in the amount of €676 million.
Of all impairments in the Chemicals segment, the majority
(€550 million) was attributable to impairments resulting from ongoing
excess supply and the associated decrease in prices and margins.
The impairments concerned nearly all asset classes, especially
machinery and technical equipment (€414 million), construction in
progress (€53 million) and buildings (€42 million). They primarily
comprised the depreciation of individual production plants in Europe,
North America and Asia. The values in use were calculated using
cost of capital rates after taxes between 6.76% and 7.85% and led
to full depreciation in the amount of €456 million.
In 2020, impairments of €2,059 million were included in
accumulated depreciation. The impairments related to all
segments and were mainly attributable to the economic effects of
the coronavirus pandemic and to restructuring measures.
For more information on acquisitions, see Note 3 from page 235 onward
Additions from acquisitions resulted from the acquisition of Solvay's
global polyamide business.
Additions to property, plant and equipment arising from investment
projects (excluding leases) amounted to €3,007 million in 2020.
Investments were made at the following sites in particular:
Ludwigshafen, Germany; Antwerp, Belgium; Geismar, Louisiana;
and Shanghai, China. Material investments included the expansion
of the vitamin A plant in Ludwigshafen, Germany, and construction
of an ethylene oxide and polyethylene oxide production plant in
Antwerp, Belgium. Investments also included the upgrade and
capacity expansion of the MDI synthesis unit in Geismar, Louisiana.
Government grants for funding investment measures reduced
asset additions by €11 million. The additions to right-of-use
machinery and technical equipment related mainly to a syngas
separation unit facility in Geismar, Louisiana.
Notes
Of all impairments in the Industrial Solutions segment, €37 million
were related to production plants in Asia and resulted from
decreased production and the expectation of a slow recovery in the
automotive and aviation industries due to the effects of the corona-
virus pandemic. Furthermore, plants in North America were impaired
in the amount of €43 million in connection with restructuring. The
values in use were calculated using cost of capital rates after taxes
between 6.66% and 7.77%. Impairments related chiefly to
machinery and technical equipment (€54 million) and buildings
(€17 million).
46,368
177
357
3
-1
7
2
2
Transfers to disposal groups
Transfers
10
-24
-1
-45
34
-2
-1,070
-214
-25
-10
77
23
-4
3,576
229
34,882
292
6,689
100
66
Currency effects
As of December 31, 2020
-1
-11
-108
-13
-1,124
-15
-187
-1,467
6
1,123
1
Investment properties held to realize capital gains or rental income
are immaterial. They are valued at the lower of fair value or cost less
depreciation.
For more information, see Note 16 from page 272 onward
As lessee, BASF generally recognizes for all leases right-of-use
assets and lease liabilities in the balance sheet at the present value
of financial commitments entered.
Expenses related to the scheduled maintenance of large-scale
plants are capitalized separately and depreciated using the
straight-line method over the period until the next planned
turnaround. Costs for the replacement of components are
recognized as assets if an additional future benefit is expected. The
carrying amount of the replaced components is derecognized.
Costs for maintenance and repair as part of normal business
operations are recognized as an expense.
The cost of self-constructed plants includes direct costs,
appropriate allocations of material and production overhead costs,
and a share of the general administrative costs of the divisions
involved in the construction of the plants.
Property, plant and equipment are measured at cost less
depreciation and impairment over their useful lives. The revaluation
method is not applied. Low-value assets are fully expensed in the
year of acquisition.
Accounting policies
15 Property, plant and equipment
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
Both movable and immovable fixed assets are principally
depreciated using the straight-line method. The estimated useful
lives and depreciation methods of property, plant and equipment
are based on historical values, plans and estimates. The deprecia-
tion methods, useful lives and residual values are reviewed at each
balance sheet date.
Borrowing costs: If directly incurred as part of the acquisition,
construction or production of a qualifying asset are capitalized as
part of the acquisition or production cost of that asset. A qualifying
asset is an asset for which the process necessary to make it ready
for its intended use or sale is longer than one year. Borrowing costs
are capitalized up to the date the asset is ready for its intended use.
Borrowing costs were calculated based on a rate of 1.5% (previous
The weighted average depreciation periods of continuing operations year: 1.5%) and adjusted on a country-specific basis, if necessary.
were as follows:
Weighted average depreciation in years
About This Report
268
BASF Report 2020
Government grants: Government grants related to the acquisition
or construction of property, plant and equipment reduce the
acquisition or construction cost of the respective assets. Other
government grants or government assistance are recognized
immediately as other operating income or treated as deferred
income and released over the underlying period.
All other borrowing costs are recognized as an expense in the period
in which they are incurred.
For more information on the value in use and the weighted cost of capital rate, see Note 14 from
page 264 onward
If there is indication of a possible cause for impairment, an impairment
test is performed. Impairments to property, plant and equipment are
recognized if the recoverable amount of the asset is lower than the
carrying amount. The measurement is based on fair value less costs
to sell or the value in use. The value in use is determined on the
basis of future cash inflows and outflows and weighted average cost
of capital after taxes (determined using the capital asset pricing
model), depending on relevant tax rates and country-related risks.
An impairment is recognized for the difference between the carrying
amount and the recoverable amount. If the reasons for an impair-
ment no longer exist, the write-downs are reversed up to the value
of the asset, had an impairment not been recognized. Impairments
and reversals of impairments are reported in other operating income
and expenses.
267
6
11
10
17
16
2019
2020
Buildings and structural installations
Machinery and technical equipment
Miscellaneous equipment and fixtures
6
BASF Report 2020
a Including licenses to such rights and values
December 31, 2019
-3
-265
-190
-845
Transfers to disposal groups
15
15
Currency effects
Transfers
-82
-2
-22
-157
Disposals
738
113
-271
1
23
11
14,525
8,105
326
84
3,247
1,195
1,568
1
Net carrying amount as of
285
112
1,072
238
1,323
As of December 31, 2019
37
3,030
287
To Our Shareholders
3 Corporate Governance
3
82
12
Additions from acquisitions
3,516
1,842
202
199
147
787
120
161
40
18
Additions
400
10
3
1
282
5
Transfers
-1,198
-216
-36
-145
1
-13
-53
-129
-13
-3
Disposals
559
48
-590
Changes in the scope of consolidation
41
37
equipment
Right-of-use
miscellaneous
Miscellaneous
equipment
and fixtures
Right-of-use
machinery
and technical
equipment
Notes
technical
equipment
Right-of-use
buildings
and fixtures
Buildings
Land
Right-of-use
Machinery and
Million €
Development of property, plant and equipment including right-of-use assets arising from leases in 2020
5 Overviews
4 Consolidated Financial Statements
land
2 Management's Report
Advance
payments and
construction
in progress
advance
payments and
construction
in progress
1
2
65,508
6
3,006
551
4,808
Right-of-use
399
808
10,757
440
950
As of January 1, 2020
Cost
Total
43,783
264
123
The required discounting of cash flows for impairment testing is
calculated using the weighted average cost of capital rate after tax,
which is determined using the capital asset pricing model. It
comprises a risk-free interest rate, a market risk premium, and a
spread for credit risk based on the respective industry-specific peer
group.
13
-36
101
-65
-1,081
-1,044
89
-955
-1,068
-4
33
-8
-934
Financial assets
Property, plant and equipment
Intangible assets
Deferred tax
liabilities
Deferred tax
assets
-42
246
-1,314
-136
384
28
2,424
Provisions for pensions and similar obligations
-401
232
-169
-18
-3
-31
82
-199
Inventories and accounts receivable
-118
44
-74
-7
5
64
December 31, 2020,
net
14
Other
January 1, 2020, Effects recognized Effects recognized
net
in income in equity (OCI)
-199
261
-460
Provisions for pensions and similar obligations
2,149
-48
354
-31
17
2,424
-729
Other provisions and liabilities
633
222
-23
9
841
942
3,153
-14
-47
48
Million €
Deferred tax assets and liabilities 2020
Deferred taxes
BASF Report 2020
between fair values and the values in the tax accounts. This primarily
leads to deferred tax liabilities.
Deferred taxes result from temporary differences between tax
balances and the measurement of assets and liabilities according to
IFRS as well as from tax loss carryforwards and unused tax credits.
The remeasurement of all the assets and liabilities associated with
acquisitions according to IFRS 3 has resulted in significant deviations
The item Other in the reconciliation for 2020 included tax effects
from deferred tax assets not recognized on additions to loss
carryforwards in the amount of €14 million and on deductible
temporary differences in the amount of €17 million.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
-11
54
-190
Inventories and accounts receivable
-203
Business
combinations
1
2,851
3,342
2,140
Deferred tax assets (liabilities) after netting
1,123
489
381
-61
7
1,939
-2,140
3,386
BASF Report 2020
261
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
-1,447
-3,587
5,526
1,939
1
-10
505
505
15
14
-9
2
-4
18
82
-64
Other
Deferred tax assets (liabilities) before netting
Netting
1,123
489
381
-61
7
Notes
Deferred tax assets and liabilities 2019
Million €
January 1, 2019, Effects recognized Effects recognized
net
in income in equity (OCI)
122
-1,203
12
35
-1
-182
-136
193
Tax loss carryforwards
-155
986
831
36
3
-91
42
841
Other provisions and liabilities
-491
-1,081
-101
26
-16
Business
combinations
December 31, 2019,
Other
net
Deferred tax
assets
Deferred tax
liabilities
Intangible assets
Property, plant and equipment
Financial assets
-1,265
149
-4
59
125
-934
148
-1,082
-976
-113
-2
Tax loss carryforwards
332
Deferred tax assets (liabilities) before netting
Netting
BASF PETRONAS Chemicals Sdn. Bhd.,
Shah Alam, Malaysia
BASF India Limited, Mumbai, India
Group company
Noncontrolling interests
70
-15
Total
-28
BASF TOTAL Petrochemicals LLC, Port Arthur, Texas
-105
98
90
Noncontrolling interests in profits
2019
2020
Million €
Noncontrolling interests in profits and losses
Tax liabilities primarily include assessed income taxes and other
taxes as well as estimated income taxes not yet assessed for the
current year. As of 2020, BASF reports tax provisions separately
from deferred tax liabilities and no longer as a totals item. The
prior-year figures have been restated accordingly.
Noncontrolling interests in losses
Shanghai BASF Polyurethane Company Ltd.,
Shanghai, China
BASF TODA Battery Materials, LLC, Tokyo, Japan
BASF Shanghai Coatings Co. Ltd., Shanghai, China
Other
40.00
PETRONAS Chemicals Group Berhad,
Kuala Lumpur, Malaysia
42
26.67
52
44
26.67
Million €
%
%
Free float
Partner
Equity interest
December 31, 2019
December 31, 2020
Equity interest
Income and expenses recognized in equity that were attributable to
noncontrolling interests totaled -€49 million in 2020 and €15 million
in 2019. These effects resulted from currency translation in both
years.
Noncontrolling interests in losses rose year on year in 2020, due
chiefly to impairments of assets in BASF PETRONAS Chemicals
Sdn. Bhd., Shah Alam, Malaysia.
BASF Report 2020
Total
13 Noncontrolling interests
81
Tax liabilities
5 Overviews
2020
Deferred tax assets
Tax loss carryforwards
Total
Germany
Foreign
Million €
Tax loss carryforwards
The distribution of tax loss carryforwards and the associated
recognized deferred tax assets is as follows:
2019
Tax loss carryforwards
Undistributed earnings of subsidiaries resulted in temporary
differences of €10,398 million in 2020 (2019: €13,335 million) for
which deferred tax liabilities were not recognized, as they are either
not subject to taxation on payout or they are expected to be
reinvested for an indefinite period of time.
Deferred tax assets on deductible temporary differences in the
amount of €182 million were not recognized in 2020 (2019:
€124 million), as their utilization at reversal was not reasonably
certain.
-1,764
2,069
-2,069
2,887
1,123
-34
Other
Valuation allowances on deferred tax assets amounted to
€63 million in 2020 (2019: €88 million). Of this figure, €13 million
pertained to tax loss carryforwards in 2020 (2019: €19 million).
2020
2019
1,229
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
262
BASF Report 2020
Surpluses of deferred tax assets for companies that reported tax
losses in 2020 or 2019 totaled €2.645 million as of Decem-
ber 31, 2020 (December 31, 2019: €97 million). Deferred taxes were
recognized because, due to the planned earnings, use of temporary
differences or loss carryforwards is expected.
€257 million in 2020 (2019: €205 million). Of these, €52 million will
expire in 2021, €9 million in 2022, €35 million in 2023, €22 million in
2024, €52 million in 2025 and €14 million in 2026 and thereafter.
The remaining €73 million will not expire.
Tax loss carryforwards exist in all regions. Tax losses in Germany
may be carried forward indefinitely. In some foreign countries, tax
loss carryforwards are only possible for a limited period of time. No
deferred tax assets were recognized for tax loss carryforwards of
195
505
950
1,917
195
124
950
688
381
Notes
40.00
Million €
Total Petrochemicals & Refining USA, Inc., Houston, Texas
Shanghai Hua Yi (Group) Company, Shanghai, China, and
SINOPEC Assets Management Corporation, Bejing, China
TODA KOGYO CORP., Hiroshima, Japan
-3,833
555
297
259
The respective recoverable amounts were determined using the
value in use. Plans approved by company management and their
respective cash flows for the next five years were used. For the
period thereafter, a terminal value was calculated using a forward
projection from the last detailed planning year as a perpetual annuity.
Planning is based on experience, current performance and
management's best possible estimates on the future development
of individual parameters, such as raw materials prices and profit
margins. Market assumptions regarding, for example, economic
development, inflation expectations and market growth are included
based on external macroeconomic and industry-specific sources.
Chemicals, to the disposal groups in 2019. Impairment tests were
performed on goodwill for both cash-generating units prior to their
respective reclassifications in the previous year.
BASF's goodwill is allocated to 20 cash-generating units (2019: 22),
which are defined either on the basis of business units or at a higher
level. The reduction was due to the reclassification of goodwill for
two of these cash-generating units, Pigments and Construction
Goodwill is only written down in the case of an impairment.
Impairment testing is performed once a year and whenever there is
an indication of impairment. Goodwill impairments are not reversed.
Emission rights: Emission certificates, which are granted free of
charge by the German Emissions Trading Authority (Deutsche
Emissionshandelsstelle) or a similar authority in other countries, are
recognized in the balance sheet with a value of zero. Certificates
purchased on the market are capitalized at cost as intangible assets.
Emissions generated create an obligation to surrender the emission
certificates. Emission certificates purchased on the market are
subsequently measured at fair value, up to a maximum of the
amount of the acquisition costs. If the fair value is lower than the
carrying amount on the balance sheet date, the emission rights are
impaired.
5
172
4
4
15
16
19
30
14
2020
4,956
15
1,123
44
Deferred tax assets (liabilities) after netting
205
13
1
5
-31
193
193
0
-9
-5
-4
33
15
83
-68
555
297
259
-34
2019
5
Product rights, licenses and trademarks
Know-how, patents and production technologies
Internally generated intangible assets
40.00
78
40.00
Shanghai Huayi Fine Chemical Co., Ltd, Shanghai, China
37
34.00
29
29
65
Other rights and values
99
30.00
98
30.00
335
40.00
256
40.00
99
76
34.00
670
Internally generated intangible assets primarily comprise
internally developed software. Such software and other internally
generated intangible assets are measured at cost and amortized
over their estimated useful lives. Impairments are recognized if the
carrying amount of an asset exceeds the recoverable amount. In
addition to those costs directly attributable to the asset, costs of
internally generated intangible assets also include an appropriate
portion of overhead costs.
Intangible assets with indefinite useful lives are trade names and
trademarks that have been acquired as part of acquisitions. These
are measured at cost and tested for impairment annually, or if there
is an indication that their value has declined.
Impairments are recognized if the recoverable amount of the asset
is lower than the carrying amount. The recoverable amount is the
higher of either fair value less costs to sell or the value in use. The
value in use is determined on the basis of future cash inflows and
outflows, and the weighted average cost of capital after taxes,
depending on tax rates and country-related risks. If the reasons for
an impairment no longer exist, the write-downs are reversed up to
the value of the asset, had an impairment not been recognized.
Depending on the type of intangible asset, amortization is reported
under cost of sales, selling expenses, research and development
expenses or other operating expenses.
Distribution and similar rights
Acquired intangible assets (excluding goodwill) with defined
useful lives are generally measured at cost less straight-line
amortization. The useful life is determined using the period of the
underlying contract or the period of time over which the intangible
asset can be expected to be used.
Accounting policies
103
14 Intangible assets
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
263
853
The expected useful lives and amortization methods of intangible
assets are based on historical values, plans and estimates. The
weighted average amortization periods of intangible assets were as
follows:
Weighted average amortization in years
334
363
29
381
233
411
Following year 2
28
30
Following year 1
December 31, 2020
Interest portion
Lease
liabilities
Future
lease payments
Interest portion
liabilities
Lease
December 31, 2019
Precious metal trading items
1,604
261
Future
lease payments
269
18
296
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
18
Receivables and miscellaneous assets
Other receivables and miscellaneous assets
Million €
December 31, 2020
December 31, 2019
Noncurrent
Current
Noncurrent
Loans and interest receivables
127
About This Report
274
BASF Report 2020
Write-downs on inventory were recognized in the amount of
€65 million in 2020, and in the amount of €111 million in 2019.
20
Inventories are measured at acquisition cost or cost of conversion
based on the weighted average method. If the market price or the
fair value of the sales products, which are based on the net realizable
values, is lower, then the sales products are written down to this
lower value. The net realizable value is the estimated price in the
ordinary course of business less the estimated costs of completion
and the estimated selling costs.
In addition to direct costs, cost of conversion includes an appropri-
ate allocation of production overhead costs based on normal
utilization rates of the production plants, provided that they are
related to the production process. Pensions, social services and
voluntary social benefits are also included, as well as allocations for
administrative costs, provided they relate to the production.
Borrowing costs are not included in cost of conversion.
Inventories may be written down if the prices for the sales products
decline, or in cases of a high rate of days sales of inventory (DSI).
Write-downs on inventories are reversed if the reasons for them no
longer apply.
The exception made by IAS 2 for traders is applied to the measure-
ment of precious metals. Accordingly, inventories held exclusively
for trading purposes are measured at fair value less costs to sell and
recognized in the precious metal trading item (carrying amount as of
December 31, 2020: €1,604 million; as of December 31, 2019:
€977 million) under miscellaneous current assets. All changes in
value are immediately recognized in the statement of income.
Raw materials and factory supplies
Work in progress, finished goods and merchandise
Advance payments and services in progress
Inventories
Dec. 31,
2020
123
Dec. 31,
2019
3,379
6,784
7,742
121
10,010
11,223
Work in progress, finished goods and merchandise are combined
into one item due to production conditions in the chemical industry.
Services in progress mainly relate to services not invoiced as of the
balance sheet date.
Cost of sales included inventories recognized as an expense
amounting to €30,379 million in 2020, and €29,643 million in 2019.
3,105
19
165
105
Prepaid expenses
79
257
103
Defined benefit assets
126
123
Tax refund claims
104
1,158
132
967
Employee receivables
0
21
0
15
1,201
695
1,211
560
414
204
395
Receivables from finance leases
41
3
20
Receivables from capital equipment of nonconsolidated subsidiaries
Derivatives with positive fair values
122
Receivables from bank acceptance drafts
288
Other
287
261
306
217
Other receivables and assets that qualify as financial instruments
123
Million €
Inventories
49
151
606
390
122
512
Total
1,361
273
1,634
1,422
232
1,654
BASF Report 2020
BASF acts as a lessor for finance leases to a minor extent only.
Receivables on finance leases were €44 million in 2020 (2019:
€23 million). The leased assets pertained primarily to buildings and
production facilities.
Claims arising from operating leases amounted to €132 million in
2020 (2019: €174 million). As in the previous year, there were no
material operating leases for property, plant and equipment.
273
About This Report
455
More than 5 years
98
14
Following year 3
156
23
179
180
21
201
Following year 4
1
109
133
118
136
Following year 5
74
18
92
84
24
To Our Shareholders
2 Management's Report
3 Corporate Governance
Million €
Income from finance leases
of which gains and losses from sales
financial income from net investment
in the lease
income from variable lease payments not included
in measurement of net investment
Income from operating leases
of which income from variable lease payments not
dependent upon an index or interest rate
Income from leases for BASF as lessor
Total
2019
25
1
24
1
1
24
19
2020
27
174
32
4 Consolidated Financial Statements
5 Overviews
Notes
Future lease payments to BASF from operating lease contracts
17 Inventories
Million €
December 31, 2020
December 31, 2019
132
Accounting policies
1-5 years
25
22
66
120
More than 5 years
Total
41
Less than 1 year
102
-182
1
249
53
65
6,374
144
33,110
144
3,472
196
158
43,716
897
375
4,383
1
664
255
1,336
355
2,848
6
21,792
a Right-of-use assets of €1,318 million were capitalized as of January 1, 2019, following the initial application of IFRS 16; the values were restated accordingly.
BASF Report 2020
271
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
10,673
4 Consolidated Financial Statements
19
31
3,408
-81
-2
-576
-5
-166
-25
-17
-872
-48
49
-20
12
-87
198
69
70
-2
-2
-1
-1
-225
-8
-928
0
-123
-11
-1,297
1
-1
-45
170
5 Overviews
Additions to property, plant and equipment arising from investment
projects (excluding leases) amounted to €3,390 million in 2019.
Investments were made at the following sites in particular:
Ludwigshafen, Germany; Antwerp, Belgium; Shanghai, China;
Geismar, Louisiana; and Freeport, Texas. Material investments
included the acetylene plant as well as the expansion of the vitamin
A plant in Ludwigshafen, Germany. Furthermore, additions
included renovations and major repairs to the steam cracker and
the construction of a new propane tank in Antwerp, Belgium.
Investments also included the upgrade and capacity expansion of
the MDI synthesis unit in Geismar, Louisiana. Government grants
for funding investment measures reduced asset additions by
€9 million.
Expenses and income in the statement of income from
leases for BASF as lessee
Million €
Interest expenses for lease liabilities
2020
2019
-36
-39
Expenses for variable lease payments not included in the
measurement of lease liabilities
-13
-13
Income from sublease agreements
Expenses for short-term leases
1
2
BASF presents the interest component of lease payments in cash
flows from operating activities and the repayment portion in cash
flows from financing activities. Lease payments under short-term
agreements, agreements with low-value assets or variable payments
are presented in cash flows from operating activities.
-131
Expenses for leases for low-value assets
-43
-7
Gains and losses from sale and leaseback transactions
30
Total
-222
-216
In 2020 and 2019, no material sale and leaseback transactions
occurred.
BASF as lessor
BASF as lessee
Lease liabilities
Million €
977
-189
Notes
- If an existing lease contract is modified, the lease liability and
right-of-use asset must be remeasured, provided the modification
changes the payment profile (pursuant to the interest and princi-
pal plan) or the scope (either quantitatively or time-related) of use
of the asset.
After capitalization at commencement date, whereby the right-of-
use asset is measured at cost, the right-of-use asset is generally
depreciated over the lease term using the straight-line method.
A number of leases, particularly for real estate and barges, include
extension and termination options. Extension and termination
options are taken into account on recognition of the lease liability
only if BASF is reasonably certain that these options will be
exercised in the future. When contract terms are being deter-
mined, consideration is given to all facts and circumstances that
offer an economic incentive for exercising extension options or
not exercising termination options. Changes in lease terms arising
from the exercise of an extension option or non-exercise of a
termination option are only considered if sufficient certainty exists.
Estimates and expectations which are asserted at the com-
mencement date of the lease liability and the right-of-use asset
and pertain to future payments not yet determined on the date of
provision are assessed continuously during the lease term. If
subsequently improved or changed knowledge influences the
In 2019, impairments of €315 million and reversals of impairments
of €6 million were included in accumulated depreciation. The
impairments were primarily attributable to construction in progress
resulting from discontinued investment projects in North America
within the Petrochemicals division. Furthermore, impairments on
buildings and technical equipment at one production site in Europe
were also included in accumulated depreciation.
Disposals of property, plant and equipment included the sale of a
building complex in Switzerland.
Transfers related mainly to the reclassification of operation-ready
assets from construction in progress to other asset categories.
Transfers also included reclassification of existing finance leases as
of December 31, 2018 to right-of-use assets due to the initial
application of IFRS 16.
Transfers to disposal groups included property, plant and
equipment, which had been reclassified to the disposal groups for
the pigments business and the construction chemicals business.
For more information on divestitures, see Note 3 from page 235 onward
Currency effects raised property, plant and equipment by
€190 million and resulted mainly from appreciation of the U.S. dollar
against the euro.
16
Leases
Accounting policies
A lease is an agreement that conveys the right to control the use of
identified asset for a defined period of time in return for a payment.
Leases in which BASF is a lessee mainly relate to real estate and
transportation and technical equipment.
Leases can be embedded within other contracts. If separation is
required under IFRS, the embedded lease is recorded separately
from its host contract and each component of the contract is
accounted and measured in accordance with the applicable
regulations.
As lessee, BASF accounts for nearly all leases, recognizing
right-of-use assets for leased assets and liabilities for lease
agreements. The following principles are considered:
-
_
expected payment profile over time, the lease liability is
remeasured.
-
- Lease liabilities are measured at the present value of the remaining
lease payments, taking into account the incremental borrowing
rate.
As a general rule, BASF separates non-lease components, such
as services, from lease payments.
A right-of-use asset is generally recognized at the same amount
as the lease liability. Differences may arise from the lease payments
made prior to the provision of the leased asset, less any lease
incentives received.
BASF Report 2020
272
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
-
BASF exercises the exemption for lease agreements with a
maximum term of 12 months from the date of provision and
low-value assets. Low-value assets are generally defined as
leased assets worth a maximum of €5,000.
About This Report
162
80
Changes in the scope of consolidation
1
5
4
5
15
Additions
13
24
214
100
1,206
109
190
64,326
210
3,839
3
Additions from acquisitions
2
1
Disposals
-76
-4
-114
-33
-605
-8
-28
-15
1,767
-1,065
3,905
4,616
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Development of property, plant and equipment in 2019
Millionen €
Machinery and
Land
Right-of-use
landa
Buildings
Right-of-use
buildingsa
technical
equipment
Notes
274
Right-of-use
machinery
and technical
equipmentª
Right-of-use
miscellaneous
equipment
and fixturesa
Advance
payments and
construction
in progress
Right-of-use
advance
payments and
construction
in progressa
Total
Cost
As of January 1, 2019
1,349
154
10,807
700
42,331
190
Miscellaneous
equipment
and fixtures
384
Transfers
275
808
43,783
399
4,808
551
3,006
65,508
Accumulated depreciation
As of January 1, 2019
104
Changes in the scope of consolidation
Additions
Disposals
Transfers
10,757
Transfers to disposal groups
As of December 31, 2019
Net carrying amount as of December 31, 2019
6,238
32,480
3,400
42,228
-2
1
3
2
18
433
142
2,022
Currency effects
-266
440
As of December 31, 2019
207
92
1,841
107
321
129
-2,702
4
Transfers to disposal groups
-87
-7
-429
-55
-1,281
950
0
-35
13
-2,053
Currency effects
17
-3
70
4
285
1
31
1
33
439
-172
Other
1.625%
422
1.5%
494
495
1.63%
500
EUR
Bond 2019/2029
0.875%
247
247
1.01%
250
EUR
Bond 2017/2029
2.670%
162
153
2.69%
1,600
NOK
Bond 2017/2027
0.875%
987
989
1.04%
Bond 2018/2030
1,000
EUR
1.58%
Bond 2017/2032
1.450%
296
296
1.57%
300
EUR
Bond 2016/2031
2.37%
149
137
2.37%
1,300
HKD
Bond 2016/2031
0.875%
493
493
1.01%
500
EUR
Bond 2016/2031
1.5%
198
199
200
EUR
Bond 2020/2027
0.250%
500
EUR
Bond 2016/2023
43
292
277
1.06%
250
GBP
Bond 2020/2023
0.101%
999
0.14%
1,000
EUR
726
673
0.83%
850
USD
Bond 2017/2023
Bond 2012/2022
0.925%
2%
1,253
2.60%
499
498
2.5%
996
0.32%
1,000
EUR
Bond 2013/2025
3.675%
147
138
3.70%
1,450
NOK
Bond 2018/2025
a Nominal value as of December 31, 2020
0.875%
747
0.97%
750
EUR
Bond 2017/2025
1.750%
350
332
1.87%
300
GBP
Bond 2014/2024
746
BASF Report 2020
Continued on next page
279
Bond 2018/2025
3.625%
Bond 2016/2020
0.0%
BASF Finance Europe N.V.
266
244
4.45%
300
USD
U.S. private placement series C 2013/2034
4.43%
622
570
4.11%
700
USD
U.S. private placement series B 2013/2028
4.09%
222
203
3.92%
250
USD
U.S. private placement series A 2013/2025
0.75%
Bond 2016/2026
Other bonds
Bonds and other liabilities to the capital market
280
BASF Report 2020
18,377
19,214
3,240
3,735
15,137
15,479
608
102
496
496
3.89%
0.88%
EUR
177
163
3.69%
200
USD
999
0.14%
1,000
EUR
Financial indebtedness
Liabilities to credit institutions
500
1,252
82
1.03%
2.875%
492
493
3.15%
500
EUR
Bond 2013/2033
3%
December 31, 2019
December 31, 2020
Effective interest rate
currency of issue)
Currency
Nominal value (million,
Carrying amounts based on
effective interest method
Million €
Financial indebtedness
Continued from previous page
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
Bond 2013/2033
EUR
200
2.96%
10,000
JPY
Bond 2018/2048
1.025%
199
199
3.27%
200
EUR
Bond 2013/2043
3.25%
738
79
738
750
EUR
Bond 2017/2037
98
98
4.24%
160
AUD
Bond 2018/2033
4%
198
198
1.73%
1.93%
0.875%
EUR
-39
42
0
-3
137
240
364
Total
9
96
36
stage 3
0
stage 2
4
2
4
of which stage 1
13
98
40
Other receivables
73
89
281
-1
257
3
122
About This Report
276
BASF Report 2020
Additions included valuation allowances of €7 million due to a
change in valuation parameters. Additions primarily included
valuation allowances of loans to former and current Group
companies.
In 2020, valuation allowances of €98 million were recognized for
other receivables representing financial instruments, and valuation
allowances of €13 million were reversed. In the previous year,
valuation allowances of €15 million were recognized and valuation
allowances of €3 million were reversed.
Payment terms are generally agreed upon individually with cus-
tomers and, as a rule, are within 90 days. In 2020, valuation allow-
ances of €142 million were added for trade accounts receivable,
and valuation allowances of €124 million were reversed. In the
previous year, valuation allowances of €168 million were added for
trade accounts receivable, and valuation allowances of €146 million
were reversed.
At BASF, a comprehensive, global credit insurance program covers
accounts receivable, trade. Under a global excess of loss policy,
future bad debts are insured for essentially all BASF Group
companies excluding joint ventures. The program has no impact on
the calculation of valuation allowances in accordance with IFRS 9.
No compensation claims were incurred in either 2020 or 2019.
There are currently no significant credit risks (or a concentration
thereof) associated with other financial instruments. BASF generally
monitors the credit risk associated with counterparties with which
receivables exist representing financial instruments. In accordance
with IFRS 9, impairments for expected credit losses on receivables
are recognized based on this.
3,888
5,834
a Standard & Poor's rating
Low credit rating
stage 3
from BB- to D
from AAA to BBB-
High/medium credit
Gross carrying amounts
Equivalence to
external ratinga
of December 31,
2020
Creditworthiness as
421
-1
1,250
120
3
2
rating
1
51
43
About This Report
275
The rise in current other receivables and assets, which represent
financial instruments, was due to higher deposits on commodity
derivatives and increased receivables for other refunds.
The change in current tax refund claims was largely attributable to
the rise in open income tax receivables at various Group companies.
Prepaid expenses in 2020 mainly included prepayments of
€28 million related to operating activities compared with €30 million
in 2019, as well as €79 million in prepayments for insurance in both
2020 and 2019. Prepayments for license costs decreased from
€74 million in 2019 to €70 million in 2020. Prepaid expenses in 2020
included lower advance payments for received precious metal
catalysts to be refurbished.
Bank acceptance drafts are used as an alternative form of payment
in China. Bank acceptance drafts are issued at a discount from their
par value. They can be held to maturity, traded or redeemed
prematurely at a discount. If BASF discounts a bank acceptance
draft with recourse, a liability toward the credit institution is
recognized in the amount of the payment received. The increase
relates to higher sales and broader use of this form of payment in
China.
The decrease in noncurrent derivatives with positive fair values
primarily affected the market valuation of combined interest rate and
currency swaps. The change in current derivatives with positive fair
market values was largely attributable to the increase in fair values of
commodity derivatives for precious metals.
310
188
3
275
Current
The changes in loans and interest receivables were predominantly
due to reimbursements of and valuation allowances on loans to
nonconsolidated subsidiaries.
BASF Report 2020
3,790
1,112
4,673
912
2,589
417
3,462
352
Other receivables and assets that do not qualify as financial instruments
Other receivables and miscellaneous assets
320
59
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
of which stage 2
142
324
Accounts receivable,
trade
Additions
January 1, 2020
As of
299
-1
-42
0
124
53
As of
December 31,
2020
Translation
effect
Reclassification
between stages
Releases
Million €
Valuation allowances on receivables (financial instruments) 2020
Million €
Accounts receivable, trade
The following table presents the gross values and credit risks for
trade accounts receivable measured at amortized cost as of
December 31, 2020.
Expected losses of trade accounts receivable at BASF are
calculated primarily on the basis of internal or external customer
ratings and the associated probability of default.
Precious metal trading items primarily comprise physical items,
precious metal accounts as well as long positions in precious
metals, which are largely hedged through forward sales or
derivatives. The rise in 2020 was due to a significant increase in the
price of palladium and rhodium.
Notes
5 Overviews
Reclassification
to assets of
disposal groups
To Our Shareholders
-39
3 Corporate Governance
GBP
Commercial paper
861
2 Management's Report
220a
USD
December 31, 2019
December 31, 2020
Effective interest rate
currency of issue)
Currency
Nominal value (million,
Carrying amounts based on
effective interest method
BASF SE
Million €
Financial indebtedness
Liabilities
21
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
1,000
1,112
Commercial paper
EUR
Bond 2018/2022
1.375%
293
277
1.52%
250
GBP
Bond 2017/2022
2.5%
444
407
2.65%
278
500
Bond 2013/2021
1.875%
1,004
1,000
1.47%
1,000
EUR
Bond 2013/2020
variable
300
variable
300
USD
BASF Report 2020
178
Changes in the fair value of derivatives designated to hedging
relationships (cash flow hedge) adjusted for deferred taxes in the
amount of €24 million reduced equity by a total of €108 million. Of
that amount, -€163 million related to the hedging of cash flows at
shareholdings accounted for using the equity method.
830
901
December 31, 2020 December 31, 2019
Legal reserves
Other retained earnings
Retained earnings
Million €
Retained earnings
The acquisition of shares in companies that BASF already controls
or that are included in the Consolidated Financial Statements as a
joint arrangement is treated as a transaction between shareholders,
as long as this does not lead to a change in the consolidation
method. There were no material transactions of this type in 2020, as
in the previous year.
Retained earnings
Capital reserves include effects from BASF's share program,
premiums from capital increases and consideration for warrants and
negative goodwill from the capital consolidation resulting from
acquisitions of subsidiaries in exchange for the issue of BASF SE
shares at par value.
Capital reserves
Subscribed capital remained unchanged year on year at €1,176 mil-
lion and comprises 918,478,694 qualifying shares.
Subscribed capital
37,010
37,911
By way of a resolution of the Annual Shareholders' Meeting of
May 12, 2017, the Board of Executive Directors was authorized to
buy back shares until May 11, 2022, in accordance with sec-
tion 71(1) no. 8 of the German Stock Corporation Act (AktG). The
buyback may not exceed 10% of the company's share capital at the
time the resolution was passed and can take place via the stock
exchange, a public purchase offer addressed to all shareholders, or
a public invitation to the shareholders to submit sales offers. This
authorization has not been exercised to date.
In this connection, the share capital was increased conditionally by
up to €117,565,184 by issuing a maximum of 91,847,800 new
registered BASF shares. The conditional capital increase will only be
carried out to the extent to which holders of convertible bonds, or
warrants attached to bonds with warrants issued, exercise their
conversion or option rights. This authorization has not been
exercised to date.
with the approval of the Supervisory Board, to issue, on a one-off
basis or in portions on more than one occasion, bearer or registered
convertible bonds and/or bonds with warrants, or combinations of
these instruments, with or without maturity limitations up to a
nominal value of €10 billion until May 11, 2022. The notional interest
in the share capital attributable to the BASF shares to be issued in
connection with the debt instruments issued under this authoriza-
tion may not exceed 10% of the share capital.
By way of a resolution of the Annual Shareholders' Meeting of
May 12, 2017, the Board of Executive Directors was authorized,
Conditional capital
In accordance with the resolution of the Annual Shareholders'
Meeting on May 3, 2019, the Board of Executive Directors was
authorized, with the consent of the Supervisory Board, to increase,
until May 2, 2024, on a one-off basis or in portions on a number of
occasions, the company's share capital by a total of up to €470 mil-
lion by issuing new shares against contributions in cash or in kind. In
principle, shareholders are entitled to a subscription right. However,
the Board of Executive Directors is authorized, with the approval of
the Supervisory Board, to exclude shareholders' statutory subscrip-
tion rights in the cases specified in the authorizing resolution. The
Board of Executive Directors is authorized, with the consent of the
Supervisory Board, to lay down the further contents of the share
rights and the details of the execution of the capital increase. The
total shares issued on the basis of the above authorization with the
exclusion of the shareholders' subscription right in the case of
capital increases in return for contributions in cash or in kind must
not exceed 10% of the share capital at the time that this authoriza-
tion comes into effect or if this value is lower at the time of its
exercise. The proportionate amount of the share capital of those
shares that are to be issued on the basis of conversion or option
bonds granted during the term of this authorization under the
exclusion of the subscription right, must be credited against the
aforementioned ceiling of 10%. This authorization has not been
exercised to date.
BASF SE has only issued fully paid-up registered shares with no par
value. There are no preferential voting rights or other restrictions.
BASF SE does not hold any treasury shares.
Authorized capital
For more information on cash flow hedge accounting, see Note 26.5 from page 301 onward
19
Notes
5 Overviews
4 Consolidated Financial Statements
Authorization of share buybacks
41,226
Capital, reserves and retained earnings
Legal reserves rose by €70 million in 2020 and by €66 million in
2019 due to reclassifications from retained earnings.
42,056
Cash flow hedges
Furthermore, as a result of divestitures, €71 million after taxes was
reclassified to the income statement in 2020 and €834 million after
taxes in 2019.
Currency translation
For more information on the remeasurement of defined benefit plans, see Note 22 from page 282
onward
Because of the disposal of the construction chemicals business on
September 30, 2020, the amount of €53 million from the
remeasurement of defined benefit plans was reclassified from
income and expenses to retained earnings, in equity. In the previous
year, this type of reclassification resulted in the amount of €140 mil-
lion from the merger concluded on April 30, 2019 between
Wintershall and DEA.
Changes in the value of defined benefit plans reduced equity by
€973 million in 2020, and by €393 million in the previous year (after
taxes in both years). Of that amount, -€19 million was attributable to
investments accounted for using the equity method in 2020 (2019:
-€46 million). Deferred taxes amounted to €422 million in 2020, and
€359 million in 2019.
Remeasurement of defined benefit plans
The expenses and income shown in other comprehensive income
are divided into two categories: Items that will be recognized in the
income statement in the future (known as "recycling") and items that
will not be reclassified to the income statement in the future. The first
category includes gains and losses from currency translation, the
measurement of certain securities classified as debt instruments,
and changes in the fair value of derivatives held to hedge future cash
flows. Items that will not be reclassified to the income statement at
a future date include effects from the remeasurement of defined
benefit plans.
Accounting policies
Other comprehensive income
20
In accordance with the resolution of the Annual Shareholders'
Meeting on June 18, 2020, BASF SE paid a dividend of €3.30 per
qualifying share from the retained profit of the 2019 fiscal year. With
918,478,694 qualifying shares, this represented total dividends of
€3,030,979,690.20. The remaining €868,110,024.68 in retained
profits was allocated to retained earnings.
Differences resulting from currency translation reduced equity by a
total of €2,598 million. This included deferred taxes in the amount of
€19 million. At-equity investments accounted for €1,125 million. In
2020, the differences resulted primarily from the depreciation of the
U.S. dollar and the Brazilian real relative to the euro in 2020.
Notes
Payment of dividends
BASF Report 2020
About This Report
1
To Our Shareholders
277
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
2 Management's Report
Other retained earnings include, among other things, earnings
generated in the past by companies included in the Consolidated
Financial Statements. Because of the disposal of the construction
chemicals business on September 30, 2020, the amount of €53 mil-
lion from the remeasurement of defined benefit plans was reclassi-
fied from income and expenses to retained earnings, in equity. In the
previous year, this type of reclassification resulted in the amount of
€140 million from the merger concluded on April 30, 2019 between
Wintershall and DEA.
8
2,891
253
4,278
Total
541
-11
-39
-125
1
2,825
Other
2,938
4,278
4,309
Total
similar obligations
205
-20
-2,346
-9
462
-215
Notes
4,309
-8
290
BASF Report 2020
Furthermore, BASF SE and its affiliated companies are defendants
in or parties to a variety of judicial, arbitrational or regulatory
proceedings on a recurring basis. To our current knowledge, none of
these proceedings will have a material effect on the economic
situation of BASF.
At this time, BASF cannot predict the outcomes of resolving these
matters or what potential actions may be taken by regulatory
agencies. An adverse outcome in any one or more of these matters
could be material to BASF's financial results.
Since August 2019, BASF Corporation has been served in various
U.S. federal and state lawsuits alleging property and resource
damages and personal injuries from possible exposure to per- and
polyflouroalkyl substances (PFAS). In December 2018, a multi-
district litigation (MDL) was created to coordinate claims brought
against manufacturers, distributors, and suppliers of Aqueous Film
Forming Foam (AFFF) in particular, which plaintiffs allege contains
toxic levels of certain PFAS compounds including perfluorooctanoic
acid (PFOA) and perfluorooctane sulfonate (PFOS). Plaintiffs typically
allege that exposure to AFFF has caused loss of use and enjoyment
of property, diminished property value, remediation costs, and
personal injuries including various types of cancers. The complaints
name BASF as a defendant in connection with its 2009 acquisition
of Ciba Specialty Chemicals Inc. and the legacy Ciba/BASF Lodyne
fluorochemical product lines. BASF has been named in 638 suits as
of Janary 2021 and is defending all litigation.
On February 14/15, 2020, a jury in the United States District Court
for the Eastern District of Missouri awarded $15 million in compen-
satory damages and $250 million in punitive damages against
defendants Monsanto Company and BASF Corporation. The verdict
relates to alleged yield losses of a peach farmer in connection with
the use of the dicamba herbicide. BASF and Monsanto filed post-
trial motions to challenge the jury's verdict. On November 25, 2020,
the trial court ruled on the post-trial motions, and the punitive
damages award was reduced from $250 million to $60 million. The
court did not grant any other relief related to the jury's verdict. BASF
and Monsanto filed notices of appeal on December 18, 2020.
Between November 2014 and March 2015, a putative class action
lawsuit and several additional lawsuits were filed in the United States
District Court for the Southern District of New York against
BASF Metals Limited (BML), based in the United Kingdom, along
with other defendants, alleging violations of antitrust and
commodities laws stemming from the price discovery process for
platinum and palladium. The lawsuits were consolidated and
dismissed on jurisdictional grounds in March 2017. In May 2017, the
plaintiffs filed an amended Complaint that renews allegations against
defendants and BML. On March 29, 2020, all claims against all
defendants were dismissed. On April 27, 2020, plaintiffs filed a
notice of appeal to the United States Court of Appeals for the
Second Circuit, where the matter is still pending. A pro se complaint
filed in September 2015 that was not consolidated into the
consolidated class action was ultimately dismissed as of Novem-
ber 18, 2019.
BASF Corporation has potential liability under the Comprehensive
Response, Compensation and Liability Act of 1980, as amended,
and related state laws for investigation and cleanup at certain sites.
The Lower Passaic River Study Area (LPRSA) is one such site com-
prising the lower 17 miles of the Passaic River in New Jersey. BASF
Corporation and more than 60 other companies (collectively, the
Lower Passaic River Study Area Cooperating Parties Group or CPG)
agreed to complete a remedial investigation / feasibility study (RI/FS)
of the LPRSA. In 2016, the United States Environmental Protection
Agency (USEPA) selected a final remedy for the lower eight miles of
the LPRSA. A decision from USEPA on a targeted approach for the
upper portion of the LPRSA is expected for 2021. BASF Corpora-
tion established a provision covering BASF's currently estimated
share of the remediation costs.
Risks from litigation and claims
-307
24
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
289
BASF Report 2020
Other includes interest on noncurrent tax provisions. The rise in the
remaining other provisions as of December 31, 2020, is primarily
due to the rise in provisions for licenses.
The decrease in provisions for obligations from sales and pur-
chase contracts resulted from lower accruals for rebate programs.
The decrease in provisions for employee obligations was mainly
attributable to lower accruals for variable compensation compo-
nents.
5 Overviews
116
26
Litigation, damage claims, warranties and
21
Employer contributions
615
463
Switzerland
1,816
1,845
0
1,851
35
-53
Interest cost
-395
-542
Employee contributions
41
1,792
Plan settlements
-1,294
2,483 -1,192
286
389
Current service cost
-419
-380
Germany
21,535 19,995 14,426 13,879 -7,109 -6,116
Deviation between actual and standardized return on
plan assets
Past service cost
-6
137
765
2,128
United States
3,596
3,777
2,404
45
United Kingdom
1,986
1,911
2
-442
Total
29,840 28,423 21,400 20,863 -8,440 -7,560
Actuarial gains/losses of the defined benefit obligation
-2,131
-2,803
Past service cost
Benefits paid by unfunded plans
326
73
Plan settlements
-60
-198
Explanations regarding plan assets
Employer contributions
615
Effects from acquisitions and divestitures
Standardized return on plan assets
2,128
Deviation between actual and standardized return on plan assets
2,026
1,986
40
75
Standardized return on plan assets
286
389
Benefits paid
-769
-1,013
Other
907
895
693
723
-214
-172
765
2019
2020
2019
108
157
Net interest income from overfunded pension plans
0
-2
for adjustments relating to financial assumptions
adjustments relating to demographic assumptions
2,106
2,777
8
33
Expenses for pension benefits (recognized in the
financial result)
An alternative valuation of the defined benefit obligation was
performed to determine how changes in the underlying assumptions
influence the amount of the defined benefit obligation. A linear
extrapolation of these amounts based on alternative changes in the
assumptions as well as an addition of combined changes in the
individual assumptions is not possible.
The interest on the net defined benefit liability at the beginning of the
year is recognized in the financial result. This is the difference
between the interest cost of the defined benefit obligation and the
standardized return on plan assets as well as the interest cost for
the asset ceiling. The expected contribution payments and benefits
paid over the course of the fiscal year are taken into account when
determining net interest.
Net interest expense of the respective fiscal year is based on the
discount rate and the defined benefit obligation at the beginning of
the year.
Defined benefit obligation as of December 31
29,840 28,423
As of December 31, 2020, the weighted average duration of the
defined benefit obligation amounted to 16.6 years (previous year:
16.7 years).
Actuarial gains/losses
108
Net interest expense from underfunded pension plans and
similar obligations
-1,411
736
554
(recognized in income from operations)
Benefits paid
-1,095
-1,086
Discount rate
-2,221
-2,214
2,553
2,544
Employee contributions
41
45
Projected pension
increase
1,666
1,584
126
463
155
17
Million €
Million €
2020
2019
2020
2019
Plan assets as of January 1
20,863
19,280
Net defined benefit liability as of January 1
-7,560 -7,371
Pension
obligations
Plan assets
Net defined benefit
liability
2020
2019
2020
Regional allocation of defined benefit plans as of December 31
experience adjustments
Development of net defined benefit liability
Development of plan assets
-7
Effects from acquisitions and divestitures
Other changes
Currency effects
54
-802
-4
-11
-470
257
BASF Report 2020
285
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Million €
Expenses for pension benefits
Other changes
Plan assets as of December 31
Provisions for restructuring measures include severance payments
to departing employees or similar personnel expenses as well as
expected costs for site closures, including the costs for demolition
and similar measures. Provisions are recognized for these expenses
when the relevant measures have been planned and announced by
management.
Provisions for employee obligations primarily consist of variable
compensation including associated social security contributions, as
well as obligations for granting long-service bonuses. Provisions for
long-service and are predominantly calculated based on actuarial
principles.
Provisions for obligations from sales and purchase contracts
largely comprise obligations arising from rebates granted and other
price discounts in the Agricultural Solutions segment, warranties
and product liabilities, sales commissions and expected losses on
contracts.
Provisions for litigation, damage claims, warranties and similar
obligations contain anticipated expenses from lawsuits in which
BASF is the defendant party, as well as obligations under damage
claims against BASF and fines. In order to determine the amount of
the provisions, the company takes into consideration the facts
related to each case, the size of the claim, claims awarded in similar
cases and independent expert advice as well as assumptions
regarding the probability of a successful claim and the range of
possible claims. Actual costs can deviate from these estimates.
For more information, see Note 24 on page 290
The probable amount required to settle noncurrent provisions is
discounted if the effect of discounting is material. In this case, the
provision is recognized at present value. Assumptions must be
made in determining the discount rate (2020: 1.5%; 2019: 1.5%)
used for calculating noncurrent provisions. Financing costs related
to unwinding the discount of provisions in subsequent periods are
shown in other financial result.
BASF Report 2020
288
In addition, other provisions also cover expected costs for
restoration obligations for dismantling existing plants and
buildings. If BASF is the only responsible party that can be identified,
the provision covers the entire expected obligation. At sites operated
together with one or more partners, the provision generally covers
only BASF's share of the expected obligation. The amount of the
provision is determined based on the available technical information
on the site, the technology used, legal regulations, and official
requirements. The calculation accounts for expected significant
changes in obligations.
About This Report
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Other provisions
Million €
1 To Our Shareholders
Provisions for environmental protection and remediation costs
are recognized for expected costs for rehabilitating contaminated
sites, recultivating landfills, removal of environmental contamination
at existing production or storage sites and similar measures.
Other provisions are recognized when there is a present obligation
as a result of a past event and when there is a probable outflow of
resources whose amount can be reliably estimated. Provisions are
recognized at the probable settlement value.
Accounting policies
21,400
28,423
20,863
Defined contribution plans and government pensions
The contributions to defined contribution plans recognized
in income from operations amounted to €306 million in 2020 and
€332 million in 2019.
Contributions to government pension plans were €557 million in
2020 and €627 million in 2019.
Almost all of the equities are priced on active markets. The category
debt instruments includes promissory notes and debentures
(Pfandbriefe) acquired through private placements with a market
value in the amount of €110 million as of December 31, 2020, and
€193 million as of December 31, 2019. For such securities,
especially those held by domestic pension plans, there is no active
market. The capital market compensates for this lack of fungibility
BASF Report 2020
287
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
23 Other provisions
December 31, 2020
December 31, 2019
Of which
current
Of which
current
Additions
77
81
Unwinding of
discount
Utilization
Releases
Other
changes
December 31,
2020
3
-3
-3
-7
148
Obligations from sales and
Environmental protection and
654
January 1,
2020
20,863
Restoration obligations
1,653
The following table shows the development of other provisions by
category. Other changes include reclassifications to disposal
groups, changes in the scope of consolidation, divestitures, currency
Development of other provisions in 2020
effects and the reclassification of obligations to liabilities when the
amount and timing of these obligations become known.
Restoration obligations
148
21
77
Million €
Environmental protection and
693
114
654
110
remediation costs
Employee obligations
1,174
754
1,257
26,050
21,400
28,000
29,840
126
provisions for pensions and similar obligations
8,566
7,683
123
The target asset allocation has been defined by using asset liability
studies and is reviewed regularly. Accordingly, plan assets are
aligned with the long-term development of the obligations, taking
into consideration the risks associated with the specific asset
classes and the regulations relating to the investment of plan assets.
The existing portfolio structure is based on the target asset
allocation. In addition, current market assessments are taken into
consideration. In order to mitigate risks and maximize returns, a
widely spread global portfolio of individual assets is held.
Liability-driven investment (LDI) techniques, such as hedging the risk
of changes in interest rates and inflation, are used in some pension
plans, especially for U.K. and U.S. plans.
BASF Report 2020
286
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
of which defined benefit assets
Structure of plan assets
-7,560
Net defined benefit liability as of December 31
-11
-16
Effects from acquisitions and divestitures
-52
360
-332
227
Other changes
-7
-5
21,400 20,863
Currency effects
138
-30
The standardized return on plan assets is calculated by multiply-
ing plan assets at the beginning of the year with the discount rate
used for existing defined benefit obligations at the beginning of the
year, taking into account benefit and contribution payments to be
made during the year.
Effects from plan settlements resulted in 2020 primarily from the
transfer of small benefit entitlements and the corresponding assets
from the pension plan in Canada to an external insurer.
BASF's employer contributions in 2020 totaled €615 million,
including special contributions to BASF Pensionstreuhand e. V. in the
amount of €401 million and €58 million to American plan assets.
Through continuous monitoring of financing requirements of its
pension plans, BASF always strives to achieve the necessary yields
to fill financing gaps over the course of time. Company contributions
for 2021 are currently expected to be around €430 million.
-8,440
Currency effects
%
2020
Cash and cash equivalents
Total
100
with yield premiums depending on the maturity. With only a few
exceptions, there is no active market for plan assets in real estate
and alternative investments.
Plan assets as of the balance sheet date contained securities issued
by BASF Group companies with a market value of €1 million in 2020
and €2 million in 2019. The market value of the properties of legally
independent pension funds rented to BASF Group companies
amounted to €112 million on both December 31, 2020 and on
December 31, 2019.
Since 2010, there has been an agreement between BASF SE and
BASF Pensionskasse WaG on the granting of profit participation
capital with a nominal value of €80 million, which is used to
strengthen the financing of the BASF Pensionskasse WaG. Beyond
this, there were no material transactions between the legally
independent pension funds and BASF Group companies in 2020 or
2019.
The asset class debt instruments comprises promissory notes and
debentures (Pfandbriefe) as well as corporate and government
bonds. Government bonds primarily relate to bonds from countries
Iwith the very high credit ratings, such as the United States, the
United Kingdom, Germany and Switzerland. Government bonds
from emerging nations are also held to a limited extent. Corporate The funding of the plans was as follows:
bonds mainly comprise bonds from creditworthy debtors, although
particular high-yield bonds are also held to a limited extent. In
connection with the continuous monitoring of default risk based on
a given risk budget and on the observation of the development of
the creditworthiness of issuers, the plan asset allocation may be
adjusted in the case of a revised market assessment. Alternative
investments largely comprise investments in private and
infrastructure equity, absolute return funds and senior secured
loans.
Current funding situation of the pension plans as of December 31
Million €
2020
2019
Defined
benefit
obligation
Pension
assets
Defined
benefit
obligation
Pension
assets
Unfunded pension plans
Funded pension plans
1,840
2,373
Total
100
Equities
2
18
2019
28
29
Debt instruments
47
47
of which for government debtors
19
17
for other debtors
28
30
Real estate
5
4
Alternative investments
17
3
124
2019
2019
Other liabilities
Million €
Derivatives with negative fair values
Liabilities from leases
Loan and interest liabilities
2,343
December 31, 2020
Notes
December 31, 2019
Current
Noncurrent
Current
284
674
188
493
Noncurrent
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
53
Other currencies
39
52
Total
19,214
52
18,377
Other bonds consisted primarily of a bond issued by BASF Corpo-
ration that was used to finance investments in the United States.
Both the nominal interest rate and effective interest rate of this bond
were 6.95% in 2020. Its remaining term to maturity is 90 months. All
other BASF Corporation bonds reported in other bonds in 2019
were paid off ahead of schedule in 2020.
Liabilities to credit institutions
Liabilities to credit institutions rose from €3,240 million as of
December 31, 2019 to €3,735 million as of December 31, 2020.
The weighted average interest rate on loans amounted to 2.1% in
2020, compared with 3.8% in 2019.
BASF Report 2020
281
About This Report
1
To Our Shareholders
2 Management's Report
1,026
334
1,039
381
238
25
244
200
462
210
52
259
53
7
13
33
29
114
2
208
323
22
16
63
55
37
583
50
534
679
537
Advances received on orders
Miscellaneous liabilities
41
464
39
398
Other liabilities that qualify as financial instruments
1,388
2,734
1,316
Liabilities related to social security
76
Kazakhstani tenge
46
18
December 31, 2020 December 31, 2019
3,395
3,362
3,166
4,558
Following year 2
2,310
1,998
935
Following year 3
2,121
2,157
Norwegian krone
291
309
Following year 4
1,351
1,223
Following year 1
Chinese renminbi
11,283
Pound sterling
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
1,078
Unused credit lines
BASF SE had committed and unused credit lines with variable
interest rates amounting to €9,000 million as of December 31, 2020,
and €6,000 million as of December 31, 2019. BASF SE's existing
credit line of €380 million for the financing of specific research and
development activities as of December 31, 2019 was drawn on in
2020.
Breakdown of financial indebtedness by currency
Million €
Maturities of financial indebtedness
Million €
December 31, 2020 December 31, 2019
Euro
U.S. dollar
12,684
706
250
Following year 5
Other bonds
Indian rupee
86
69
Argentinian peso
66
75
Brazilian real
62
88
Ukrainian hryvnia
38
83
Turkish lira
34
123
Indonesian rupiah
65
253
95
98
1,787
1,310
Hong Kong dollar
137
149
Following year 6 and maturities beyond
8,250
9,247
this year
Japanese yen
136
138
Total
19,214
18,377
Australian dollar
98
South African rand
2020
362
3,440
Discount rate
Projected pension
increase
2020 2019 2020 2019
2020 2019
1.10 1.70 3.10 4.10 0.20 0.90
2020 2019
2.20 2.90
1.50 1.50
3.00 3.10
The assumptions used to ascertain the defined benefit obligation as
of December 31 are used in the following year to determine the
expenses for pension plans.
Switzerland Kingdom
A Group-wide, uniform procedure is used to determine the discount
rates applied for valuation of material pension obligations of the
BASF Group. Accordingly, the discount rates were derived from the
yields on corporate bonds in the respective currency zones with an
RP-2018 (modified) with MP-2018 generational
projection
BVG 2015 generational
S2PXA (standard actuarial mortality tables for
self-administered plans (SAPS))
BASF Report 2020
284
About This Report
1
Heubeck Richttafeln 2018G (modified)
United States
Germany
United
Actuarial mortality tables (significant countries) as of December 31, 2020
Germany
United States
Switzerland
United
Kingdom
Discount rate
2020 2019 2020 2019 2020 2019
0.70 1.10 2.30 3.10 0.10 0.20
2020 2019
1.50 2.20
Germany
United States
Projected pension
increase
1.50
1.50
3.10 3.00
Switzerland
United Kingdom
Assumptions used to determine expenses for pension benefits
in the respective business year
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Expenses for defined benefit plans
430
222
Plan settlements
-60
-219
Increase by
Decrease by
Expenses for defined contribution plans
306
332
0.5 percentage points
0.5 percentage points
Interest cost
395
542
2020
-137
The valuation of the defined benefit obligation is generally performed
using the most recent actuarial mortality tables as of December 31
of the respective business year, which in Germany and the United
States are derived from the BASF Group population and were last
updated in 2019 for the pension obligations in Germany and in 2018
for the pension obligations in the United States.
6
2019
5 Overviews
Notes
Sensitivity analysis
Explanation of the amounts in the statement of income and
balance sheet
Development of defined benefit obligations
Million €
A change in the material actuarial assumptions would have the
following effects on the defined benefit obligation:
2020
2019
Composition of expenses for pension benefits
Million €
Defined benefit obligation as of January 1
28,423 26,651
Current service cost
419
380
Sensitivity of the defined benefit obligation as of December 31
Million €
2020
Past service cost
issue volume of more than 100 million units of the respective
currency with a minimum rating of AA- to AA+ from at least one of
the following three rating agencies: Fitch, Moody's, or Standard &
Poor's.
Assumptions used to determine the defined benefit obligation as of
December 31
The valuation of the defined benefit obligation is based on the
following key assumptions:
264
116
279
136
Accounts payable, trade
Other liabilities
Secured liabilities
Liabilities to credit institutions were secured primarily with
registered land charges. Other liabilities included collateral for
derivative instruments with negative fair values. As in the previous
year, there were no secured contingent liabilities in 2020.
22 Provisions for pensions and similar obligations
Accounting policies
In addition to state pension plans, most employees are granted
company pension benefits from either defined contribution or
defined benefit plans. Benefits generally depend on years of service,
contributions or compensation, and take into consideration the legal
framework of labor, tax and social security laws of the countries
where the companies are located. To limit the risks of changing
financial market conditions as well as demographic developments,
employees have, for a number of years now, been almost exclusively
offered defined contribution plans for future years of service.
The accounting policies presented in the following relate to defined
benefit pension obligations.
Provisions for pensions are calculated on an actuarial basis in
accordance with the projected unit credit method using assumptions
relating to the following valuation parameters, among others: future
developments in compensation, pensions and inflation, employee
turnover and the life expectancy of beneficiaries. Obligations are
discounted based on the market yields on high-quality corporate
fixed-rate bonds.
Similar obligations, especially those arising from commitments by
North American Group companies to pay the healthcare costs and
life insurance premiums of retired staff and their dependents, are
reported under provisions for similar obligations.
Actuarial reports are used to calculate the amount of pension
provisions.
BASF Report 2020
282
5
About This Report
2
13
1,678
1,084
3,427
Employee liabilities
Liabilities from precious metal trading positions
Contract liabilities
Deferred income
Miscellaneous liabilities
Other liabilities that do not qualify as financial instruments
Other liabilities
Other liabilities
Contract liabilities include mainly customer payments entitling
them to access licenses over an agreed period of time. The majority
of existing contracts have terms of up to six years. Of the contract
liabilities reported as of December 31, 2020, €52 million are
expected to be recognized as revenue in 2021.
For more information on financial risks and derivative instruments, see Note 26
from page 291 onward
For more information on liabilities arising from leases, see Note 16 from page 272 onward
Secured liabilities
Million €
84
December 31, 2020 December 31, 2019
Liabilities to credit institutions
15
1,711
1 To Our Shareholders
3 Corporate Governance
283
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Switzerland
The employees of the BASF Group in Switzerland receive a company
pension, which is financed through a pension fund by employer and
employee contributions as well as the return on plan assets. The
pension plans are accounted for as defined benefit plans, as the
obligatory minimum pension guaranteed by law under the Swiss
Pension Fund Act (BVG) is included in the scheme. All benefits vest
immediately. According to government regulations, the employer is
obligated to make contributions, so that the pension funds are able
to grant the minimum benefits guaranteed by law. The pension
funds are managed by boards, where employer and employees are
equally represented, which steer and monitor the benefit plans and
asset allocation.
United Kingdom
Employees are granted benefits based on a defined contribution
plan.
The BASF Group also maintains defined benefit plans in the United
Kingdom, which have been closed for further increases based on
future years of service. Adjustments to compensate for increases in
the cost of living until the beginning of retirement are legally required
for beneficiaries of defined benefit plans.
The financing of the pension plans is determined by the provisions
of the regulatory authority for pensions and the relevant social and
labor law requirements. The defined benefit plans are administered
by a trust company, whose Board of Trustees, according to the
trustee agreement and law, represents the interests of the
beneficiaries and ensures that the benefits can be paid in the future.
The required funding is determined using technical valuations
according to local regulations every three years.
Other countries
For subsidiaries in other countries, defined benefits are covered in
some cases by pension provisions, but mainly by external insurance
companies or pension funds.
Actuarial assumptions
BASF Report 2020
2 Management's Report
Additional similar obligations arise from plans that assume the
healthcare costs and life insurance premiums of retired employees
and their dependents. Such plans have been closed to new entrants
since 2007. In addition, the amount of the benefits for such plans
has been frozen.
Effective 2010, the existing defined benefit plans were closed to
further increases in benefits based on future years of service, and
benefits earned in the past were frozen. There is no entitlement to
pension adjustments to compensate for cost-of-living increases.
4 Consolidated Financial Statements
5 Overviews
Notes
Actuarial gains and losses from changes in estimates relating to the
actuarial assumptions used to calculate defined benefit obligations,
the difference between standardized and actual returns on plan
assets, as well as the effects of the asset ceiling are recognized
directly in equity as other comprehensive income.
The Group Pension Committee monitors the risks of all pension
plans of the Group with regard to the financing of pension commit-
ments and the portfolio structure of existing plan assets. The
organization, responsibilities, strategy, implementation and reporting
requirements are documented for the units involved.
Economic and legal environment of the plans
In some countries - especially in Germany, in the United States, in
the United Kingdom and in Switzerland - there are pension
obligations subject to government supervision or similar legal
restrictions. For example, there are minimum funding requirements
to cover pension obligations, which are based on actuarial
assumptions that differ from those pursuant to IAS 19. Furthermore,
there are qualitative and quantitative restrictions on allocating plan
assets to certain asset categories. This could result in annual
fluctuations in employer contributions, financing measures and the
assumption of obligations in favor of the pension funds to comply
with regulatory requirements.
The obligations and the plan assets used to fund the obligations are
exposed to demographic, legal and economic risks. Economic risks
are primarily due to unforeseen developments on commodity and
capital markets. They affect, for example, pension adjustments
based on the level of inflation in Germany and in the United Kingdom,
as well as the impact of discount rates on the amount of the defined
benefit obligation. In previous years, measures taken to close plans
with defined benefits for future service, especially benefits based on
final pay promises and the assumption of healthcare costs for former
employees, led to a reduction in risk with regard to future benefit
levels.
The strategy of the BASF Group with regard to financing pension
commitments takes into account country-specific supervisory and
tax regulations.
In some countries, pension benefits were granted for which the
employer has a subsidiary liability. Pension benefits in a number of
countries include minimum interest guarantees to a limited extent. If
the pension fund cannot generate the income needed to provide the
minimum guarantee, this must be provided by the employer under
the subsidiary liability. To the extent that recourse to the employer is
unlikely based on the structure and execution of the pension benefits
as well as the asset situation of the pension fund, these plans are
treated as defined contribution plans.
Description of the defined benefit plans
The following section describes the typical plan structure in the
individual countries. Different arrangements may exist, in particular
due to the assumption of plans as part of acquisitions; however,
these do not have any material impact on the description of plans in
the individual countries.
Germany
For BASF SE and German Group companies, a basic level of
benefits is provided by BASF Pensionskasse WaG, a legally
independent plan, which is financed by employer and employee
contributions as well as the return on plan assets. BASF SE ensures
the necessary contributions to adequately finance the benefits
promised by BASF Pensionskasse WaG. Some of the benefits
financed via BASF Pensionskasse WaG are subject to adjustments
that must be borne by its member companies to the extent that
these cannot be borne by BASF Pensionskasse WaG due to the
regulations imposed by the German supervisory authority. In 2004,
the basic benefit plan was closed for newly hired employees at
German BASF companies and replaced by a defined contribution
plan. At BASF SE, occupational pension promises that exceed the
basic level of benefits are financed under a contractual trust
arrangement by BASF Pensionstreuhand e.V.; at German Group
companies, these benefits are financed primarily via pension
provisions. The benefits are largely based on cash balance plans.
Furthermore, employees are given the option of participating in
various deferred compensation schemes.
United States
Employees are granted benefits based on defined contribution
plans.
The legal and regulatory frameworks governing the plans are based
on the U.S. Employee Retirement Income Security Act (ERISA),
which requires the plan sponsor to ensure a minimum funding level.
Any employer contributions necessary to meet the minimum funding
level are based on the results of an actuarial valuation. Furthermore,
there are unfunded pension plans that are not subject to ERISA
requirements.
3
-1,328
-188
-53
1,174
Obligations from sales and purchase contracts
1,165
1,120
-862
-101
-39
1,134
205
161
126
74
Restructuring measures
141
376
warranties and similar
-73
-1,209
821
-18
693
1,134
1,114
1,165
1,161
purchase contracts
1
remediation costs
414
371
141
-66
116
Employee obligations
1,653
Restructuring measures
-20
Litigation, damage claims,
414
obligations
Other
541
290
462
220
-10
Core elements of the circular economy at BASF
We are driving forward the use of recycled raw materials with
projects such as ChemCycling TM, in which we use the pyrolysis oil
extracted by our technology partners from mixed plastic waste or
used tires to produce new products. The project is currently in the
scale-up phase. We already have many years' experience in the
industrial recycling of mobile emissions catalysts, where we recover
precious metals and use them to produce new mobile and process
emissions catalysts. We are working on other innovative material
cycles in over 20 initiatives. These include our chemical recycling
process for used polyurethane foam mattresses and the develop-
ment of plastic additives to improve the quality of mechanically recy-
cled plastics. In addition to these projects, we established a Group-
wide co-funding program for circular economy projects. It supports
our employees in developing new business models for the circular
economy - from the initial idea to market launch. The program aims
to create additional products and solutions that close loops, estab-
lish new loops or extend the life of a product.
Using plastics responsibly
Our circular feedstock target is part of our commitment to the Ellen
MacArthur Foundation's New Plastics Economy initiative. This
explores the design, use and reuse of plastics in the transition
toward a circular economy. BASF has been a member of the non-
profit organization since 2017 and is working on various cooperative
projects together with other members. In 2020, we were in continual
contact with the Ellen MacArthur Foundation on topics such as our
target on the use of recycled raw materials or the mass balance
Core elements of the circular
economy at BASF
00
approach. We support the responsible use of plastics and are a
co-founder and active member of the Alliance to End Plastic Waste
(AEPW) to help effectively reduce plastic pollution around the world.
For more information on the ChemCyclingTM project, see page 73
New
material cycles
New
business models
The core elements of a circular economy include reusing
resources, avoiding waste and optimizing product features
with respect to the entire product life cycle. BASF's Circular
Economy Program focuses on three action areas: increasing
the use of recycled and renewable feedstocks, innovative
material cycles and new business models for the circular
economy, including digital and service-based models.
For more information on recycled feedstocks, see page 118
For more information on the Alliance to End Plastic Waste, see page 138
For more information on the circular economy at BASF, see basf.com/circular-economy
New
feedstocks
The circular economy model has gained importance
in politics, industry and society in recent years. It
describes the transition from a linear "take-make-
dispose" model to a system of closed loops. We
want to actively drive this transition forward and
make our value chains, processes, products and
business models more circular. By 2030, we want
to double our sales of solutions for the circular
economy to €17 billion. Sales of circular solutions
include products based on renewable or recycled
raw materials, that close new material cycles or
increase products' resource efficiency or service
life. In addition, we aim to process 250,000 metric
tons of recycled and waste-based raw materials in
our production plants annually from 2025, replacing
fossil raw materials.
29
29
BASF Report 2020
BASF Report 2020
our customers, contributes to our reputation and to our company
value. We regularly measure our brand and communication success.
This gives us relevant and meaningful insights into how the BASF
brand is perceived among target groups. This enables us to further
refine the brand profile and develop strategies and measures to
continually improve our brand status.
We want BASF to be seen as a leading brand in the chemical
industry. Our corporate purpose We create chemistry for a
sustainable future - and our values (see page 31) together form the
basis of BASF's brand value proposition. This is connectedness,
which embodies one of BASF's core strengths: our Verbund
concept. The BASF Verbund is what makes innovative solutions for
a sustainable future possible. We want to communicate this world-
wide and make it tangible. The claim "We create chemistry," as
stated in the BASF logo, helps us embed our solution-oriented
strategy and our expertise in the public perception. Wherever our
stakeholders encounter our brand, we want to convince them that
BASF stands for innovation and sustainability. This builds trust with
The acquisitions and divestitures made in the past few years have
oriented our portfolio toward innovation-driven growth areas. The
acquisition of the integrated polyamide business from Solvay and
the purchase of various businesses from Bayer further strengthened
our position in engineering plastics and in the agricultural sector. We
completed the divestiture of our construction chemicals business to
Lone Star in 2020 as planned and aim to close the sale of our
pigments business to DIC in the first half of 2021 (see page 50). The
Asian market will play a key role in our future growth. With a share of [The BASF brand ]
more than 40%, China is already the world's largest chemical market
and drives the growth of global chemical production. We expect this
share to increase to around 50% by 2030. Our strong innovation,
production and sales base in China enables us to respond to the
needs of our customers in a differentiated way. To further strengthen
our position in this dynamic growth market, we plan to build an inte-
grated Verbund site in Zhanjiang in the southern Chinese province of
Guangdong. Construction of the first plants started in 2020. We are
also systematically expanding our battery materials business to
serve the fast-growing e-mobility market. We steer our six segments
along the value chain. This creates a high level of transparency
around our business activities. Our operating divisions drive forward
our industry and customer orientation with differentiated strategies.
Our employees are key to BASF's success. That is why we believe
that it is important to have a working environment that fosters
employees' individual talents and enables them and their teams to
perform at their best. We are pursuing three action areas to make
our high-performance organization even more so: empowerment,
differentiation and simplification. We are giving our employees more
individual freedom. At the same time, we encourage and promote a
leadership culture that empowers our employees to respond to
customer needs quickly and efficiently with a solution orientation.
We are simplifying our processes and continually refining our organi-
zational structure. Significant parts of the functional services that
were previously performed centrally by a total of around 20,000
employees have been integrated into our 11 operating divisions.
This and greater entrepreneurial freedom enable our business units
to take a differentiated, flexible approach to market requirements
with tailored business models. The aim is to increase both customer
satisfaction and the profitability of our business. We value diversity in
people, opinions and experience as being crucial to creativity and
innovation. We embrace bold ideas, help our employees to
implement them and learn from setbacks. This is why we foster a
feedback culture based on honesty, respect and mutual trust.
businesses more efficiently, improve processes and create value
added for our customers. We are already using artificial intelligence
to collate data from various sources, for example to accelerate inno-
vation processes, optimize our supply chains and logistics concepts,
and to simulate product applications for our customers. The combi-
nation of products, services and digital offerings also gives rise to
new business models and advantages for our customers, such as in
agriculture or 3D printing. We want to leverage this growth potential
and seize the opportunities offered by digitalization to the benefit of
our customers. To do so, we are making digital technologies and
practices an even more integral part of our processes, extensively
promoting digital skills among our employees, and cooperating with
external partners on specific topics.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Our strategic action areas
1 To Our Shareholders
[Circular economy]
30
4
5 Overviews
■ Our Responsible Care management
About This Report
1 To Our Shareholders
2 Management's Report
The BASF Group
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
neering, Advanced Materials & Systems Research and Bioscience
Research - safeguard our innovative capacity and competitiveness.
About This Report
Five service units provide competitive services for the operating divi-
sions and sites: Global Engineering Services; Global Digital Services;
Global Procurement; European Site & Verbund Management; Global
Business Services (finance; human resources; environmental pro-
tection, health and safety; intellectual property; communications;
procurement, supply chain and inhouse consulting services).
Following the bundling of services and resources and the implemen-
tation of a wide-ranging digitalization strategy, the number of
employees in the Global Business Services unit worldwide will
decline by up to 2,000 (from 8,000 currently) by the end of 2022.
From 2023 onward, the division expects to achieve annual cost
savings of over €200 million.
The Corporate Center units support the Board of Executive Direc-
tors in steering the company as a whole. These include central tasks
from the following areas: strategy; finance; law, compliance and tax;
environmental protection, health and safety; human resources;
communications; investor relations and internal audit.
The ongoing Excellence Program is expected to contribute €2 billion
to EBITDA annually from the end of 2021 onward compared with
baseline 2018, including from the reduction of around 6,000
positions worldwide until the end of 2021. This decrease results
from the organizational simplification and from efficiency gains in
administration, the service units and the operating divisions. In
addition, central, functional and regional structures are being
streamlined in connection with portfolio changes.
For more information on the products and services offered by the segments, see from pages 72, 78,
83, 89, 94 and 100 onward
For more information on the segment structure, see the Notes to the Consolidated Financial
Statements from page 241 onward
For more information on portfolio changes, see page 50 onward
To increase reporting transparency, the figures for investments
accounted for using the equity method were restated in the first
quarter of 2020. Some investments are not an integral part of the
BASF Group. These include, in particular, the shares in Wintershall
Dea GmbH, Kassel/Hamburg, Germany, and Solenis UK Interna-
tional Ltd., London, United Kingdom. Since the first quarter of 2020,
these have been classified as purely financial investments and
reported separately from the shareholdings that are integral to the
main business activities of the BASF Group. One material equity-
accounted interest that has been classified as integral is BASF-YPC
Company Ltd., Nanjing, China. Income from non-integral companies
accounted for using the equity method is no longer presented in the
BASF Group's EBIT and EBIT before special items, but under net
income from shareholdings. Due to its increased significance, this
will be presented as a separate subtotal within income before
income taxes and is no longer part of the financial result. Integral
and non-integral investments accounted for using the equity method
are also presented separately in the balance sheet. The statement of
income for 2019 has been restated accordingly.
On September 30, 2020, BASF completed the divestiture of its
construction chemicals business to an affiliate of Lone Star, a global
private equity firm, as agreed in December 2019. The purchase
price on a cash and debt-free basis was €3.17 billion. The Con-
struction Chemicals division was previously reported under the
Surface Technologies segment. The divested construction chemi-
cals business had around 7,500 employees and operated produc-
tion sites and sales offices in more than 60 countries. It generated
sales of around €2.6 billion in 2019. The disposal gain and the
income after taxes of the construction chemicals business until
closing are presented in the income after taxes of BASF Group as a
separate item ("Income after taxes from discontinued operations").
For more information on this divestiture, see the Notes to the Consolidated Financial Statements from
page 237 onward
1 The construction chemicals business was transferred in two steps, on September 30, 2020, and on November 30, 2020.
BASF Report 2020
21
24
About This Report
1
To Our Shareholders
2 Management's Report
The BASF Group
3 Corporate Governance
Consolidated Financial Statements
30
28
20
BASF Report 2020
[At BASF, we are passionate about chemistry and our
customers. We want to be the world's leading chemical
company for our customers, grow profitably and create value
for society. Thanks to our expertise, our innovative and
entrepreneurial spirit, and the power of our Verbund integra-
tion, we make a decisive contribution to changing the world
for the better. This is our goal. This is what drives us and what
we do best: We create chemistry for a sustainable future.
The world is facing major challenges. Climate change is advancing,
the world's population is growing and so is its need for food. More
and more people live in cities and the demand for individual mobility
is rising. At the same time, natural resources are limited. More than
ever before, we need solutions that make sustainable growth
possible. Chemistry plays a key role here. It can help to overcome
global challenges in almost all areas of life. By combining our
expertise with our customers' competence, we can together develop
sustainable and profitable solutions.
Our corporate purpose
We create chemistry for a sustainable future
Global trends provide opportunities for growth in the chemical industry
Population growth:
Driven by the emerging
markets
China the largest market:
Share of global
chemical market
Circular economy:
Non-recycled plastic
waste worldwide
Corporate Strategy
+25%
~50%
by 2030
~200
million metric tons per year
456
Digitalization:
Rapid growth in volume of
data
zettabytes in 2030
Climate change:
Required reduction of
global greenhouse gas
emissions to achieve the
2°C goal
2020 to 2050
-70%
Our Strategy
4 Consolidated Financial Statements
■ Product stewardship and training
We make positive contributions because we
■ Offer products that improve people's quality of life
■ Provide attractive jobs, train young people and promote
lifelong learning, health and diversity
■ Pay taxes and competitive wages and salaries
■ Help to solve challenges (for example, COVID-19)
Potential negative impacts
■ The risk of our suppliers violating labor, environmental and
social standards in the production of raw materials
■Lower demand for employees in some areas as a result of
digitalization and efficiency gains
We limit negative impacts through
■ Our sustainability-oriented supply chain management
■ Projects to improve sustainability in the supply chain
5 Overviews
■ Our compliance program and our Code of Conduct
1
IMPACT
We achieve long-term business success by creating value for our shareholders, our company, the environment and society (see page 43).
The outcomes category shows examples of positive contributions as well as negative impacts and the measures we take to mitigate them.
BASF Report 2020
25
25
About This Report
1 To Our Shareholders
2 Management's Report
Corporate Strategy
3 Corporate Governance
■ Our training programs for employees
by 2050
(baseline 1990)
Electromobility:
UltrasimⓇ: Shorter development times
thanks to virtual simulation
Technical progress requires innovative materials. This is why
engineering plastics are being used in more and more sectors
and applications. They are often significantly lighter than
conventional materials, are usually easier to process and offer
advantages such as heat and impact resistance or mechanical
strength. As a leading manufacturer, BASF not only offers a
comprehensive portfolio of high-performance plastics, but also
has extensive expertise in computer-aided engineering (CAE).
Ultrasim, our virtual simulation tool, covers the entire process
chain - from the selection of suitable materials and the develop-
ment of virtual prototypes to the optimal production process for
the component. Our customers find out quickly, precisely and
reliably how our materials behave in specific applications. This
reduces development times and saves costs for complex tests.
For more information on Ultrasim, see basf.com/en/ultrasim
1
The number of customers refers to all external companies (sold-to parties) that had contracts with the BASF Group in the business year concerned under which sales were generated.
BASF Report 2020
27
About This Report
1 To Our Shareholders
2 Management's Report
Customer focus
3 Corporate Governance
In Europe, the global surface treatments business in our Coatings
division, which operates under the Chemetall brand, received the
Airbus Supply Chain & Quality Improvement award in February for
the sixth time. It acknowledges Chemetall's performance, strong
continuous improvement and customer-oriented approach in line
with Airbus' targets and expectations.
4
5 Overviews
In Asia Pacific, we received an award from Godrej Interio, India's
leading home and commercial furniture brand, in the category "Best
Overall Performance" in July. BASF has supplied Godrej with
Elastoflex and Ultramid products since 2008. The award particularly [Our strategic action areas ]
recognizes delivery reliability and innovation. In September, this was
followed by the CIIF New Materials Award, presented by the orga-
nizers of the China International Industry Fair in Shanghai. The award
recognizes BASF for its modification of the intermediate PolyTHF,
which is used to produce elastic spandex textile fibers. The next
generation offers our customers easier processing and products
with improved stretch characteristics.
also meet industry and customer-specific quality requirements such
as IATF 16949 certification for the automotive industry.
In Brazil, we received several awards in 2020. BASF's Coatings
division markets a broad portfolio of decorative paints here under
the Suvinil brand. The national association of construction material
traders (Associação Nacional dos Comerciantes de Material de
Construção) selected Suvinil as the most popular brand for wall,
ceiling and exterior paints with the Anamaco award in the wholesale
category. The award was based on a survey of more than
1,600 traders conducted by the industry association. The market
research institute Instituto Melhores Empresas em Satisfação do
Cliente (MESC) also confirmed that Suvinil customers are satisfied
customers. According to a poll of over 250 companies and
41,000 customers conducted by the institute, Suvinil is one of
the brands with the highest customer satisfaction ratings in the
construction and decorative materials segment.
Quality management
Our customers' satisfaction is the basis for our success, which is
why quality management is of vital significance for BASF. We strive
to continually improve processes and products. This is also reflected
in our Global Quality Policy. The majority of our production sites and
business units are certified according to ISO 90011. In addition, we
Innovation is the bedrock of our success. BASF is an innovation
leader in the chemical industry, with around 10,000 employees in
research and development and R&D spending of around €2.1 billion
(see page 35). We continue to build on these strengths by bringing
research and development closer together and making our custom-
ers' demands a greater part of our innovation process. We involve
them at an earlier stage and are expanding our partnerships with
customers and external partners. Our balanced innovation pipeline
lays the foundation for future growth: We are working intensively on
pioneering product, process and business model innovations, for
example in chemical recycling, battery technologies, the low-carbon
production of basic chemicals and the digitalization of agriculture. At
the same time, we are driving forward incremental product improve-
ments in all business units that offer our customers sustainability
and/or cost advantages, such as in lightweight construction for the
automotive industry and energy-efficient building materials.
A key driver here is sustainability. We want to create value for the
environment, society and business with our products, solutions and
technologies. We pledged our commitment to sustainability in 1994
and since then, have systematically aligned our actions with the
principles of sustainability. We want to further cement our position
as a thought leader in sustainability, which is why we are increasing
the relevance of sustainability in our steering processes and busi-
ness models (see page 42). This establishes us as a key partner
supporting our customers, opens up new growth areas and secures
the long-term success of our company. Our approach covers the
entire value chain - from responsible procurement (see page 113)
and safety and resource efficiency in production (see page 121) to
sustainable solutions for our customers (see page 35). We have
already almost halved our carbon emissions since 1990 while simul-
taneously doubling sales product volumes. We want to achieve
CO2-neutral growth until 2030 with our ambitious carbon manage-
ment (see page 135). In addition, we have set ourselves the target
of significantly increasing sales of products that make a substantial
sustainability contribution in the value chain (Accelerator products)
to €22 billion by 2025 (see page 45). A particular focus is the circular
economy. For instance, we want to increase the use of recycled raw
materials in production, close materials cycles with innovations and
develop new, circular business models (see page 30).
Our core business is the production and processing of chemicals.
Our strength here lies - both now and in the future - in the Verbund
and its integrated value chains. The Verbund offers us many techno-
logical, market, production-related and digital advantages. Our
comprehensive product portfolio, which ranges from basic chemicals
to custom system solutions, enables us to meet the increasingly
diverse needs of our customers with a differentiated offering. This is
complemented by our global presence and our many decades of
experience, which have allowed us to develop an in-depth under-
standing of the needs and landscape of local markets. At the same
time, value chains in integrated Verbund structures can be steered
efficiently to conserve resources and optimize CO2. Thanks to our
Verbund structures, we were able to avoid 6.2 million metric tons of
CO2 globally in 2020 (see page 133). We want to invest around
€22.9 billion worldwide between now and 2025 to expand capaci-
ties based on market demand and to increase the availability, effi-
ciency and flexibility of our plants. Our aim here is to be close to our
customers and to grow with them.
Digitalization is an integral part of our business. We want to signifi-
cantly improve the availability and quality of our process data. To
achieve this, we will digitalize processes at more than 420 plants
worldwide by 2022. We will systematically analyze this data to
further automate processes and in this way, increase efficiency, for
example with predictive maintenance. In addition, combining internal
and external data provides many new opportunities to manage our
Consolidated Financial Statements
-
We again received awards from a number of satisfied customers in
2020. In North America, for example, BASF was recognized by
General Motors (GM) in June as a 2019 Supplier of the Year for the
fifteenth time since 2002. The award is presented to suppliers who
exceed GM's expectations around quality, execution, innovation
and total enterprise cost. GM also honored us with the Overdrive
Award for our sustainable construction solutions. BASF products
help GM to meet key sustainability targets such as a smaller
carbon footprint and water and energy savings - at two of its plants.
Customer awards
Growing demand for battery
materials until 2030
~25%
per year
Sources: U.N., IEA, Conversio, UBS Foresight, BASF
Our innovations, products and technologies help to use natural
resources more efficiently, produce enough food for everyone,
reduce emissions, enable climate-smart mobility, improve the
capabilities of renewable energy, and make buildings more energy
efficient, among other things. Our purpose reflects what we do and
why we do it: We create chemistry for a sustainable future.
-
We want to continue to grow profitably and make a positive contri-
bution to society and the environment. We see disruptive changes in
the chemical industry – like the advance of digitalization, the devel-
opment of circular economy models or the transformation to cli-
mate-neutral production - as an opportunity. We have set ourselves
ambitious targets along the entire value chain (see page 32). Our
customers and their needs are at the core of our strategy. We want
to maintain our leading position in an increasingly competitive
environment. To achieve this, we are accelerating our innovation
processes and deepening cooperation with our customers. We are
systematically aligning our portfolio with growth areas and integrating
sustainability into our value chains even more strongly. Our Verbund
structure is the basis for efficient, safe and reliable production both
now and in the future. We leverage digital technologies to continu-
ously improve processes and customer relationships, for example.
We create a working environment that best enables our employees
to contribute to BASF's success.]
For more information on our strategic action areas, see page 28 onward
For more information on our strategy, see basf.com/strategy
BASF Report 2020
26
About This Report
1
To Our Shareholders
2 Management's Report
Customer focus
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Customer focus
Our customers are our number one priority. BASF supplies products
and services to around 90,000 customers¹ from various sectors in
almost every country in the world (see page 23). Our customer
portfolio ranges from major global customers and small and
medium-sized enterprises to end consumers. Our comprehensive
product portfolio means that we are active in many value chains and
value creation networks. We use various business strategies, which
we adapt to the needs of individual industries and markets. These
range from cost leadership in basic chemicals to tailored,
customer-specific system solutions.
Innovations and tailored solutions
in close partnership with our customers
We want to be our customers' most attractive partner for all
challenges that can be solved with chemistry. This is why we
continue to drive forward our focus on customers and their needs.
We are refining our organizational structure so that our operating
divisions can flexibly address specific market requirements and
differentiate themselves from the competition (see page 20). In
addition, we are simplifying and digitalizing our processes to make
the way we work more effective, more efficient and more agile.
We are continuously increasing transparency for our customers
and improving our customer service with a range of measures. For
instance, we have used the Net Promoter SystemⓇ since 2019. We
are constantly improving our problem-solving skills, product quality
and delivery reliability based on customer feedback. In 2020, we
also started the global rollout of Salesforce, a new, integrated IT-
based customer relationship management system. The user-friendly
application helps sales employees deliver even better customer
support and simplifies their work.
Above and beyond this, we want to intensify cooperation with our
customers and leverage growth potential together with them. For
instance, we have created interdisciplinary teams in our business
units to even better and more quickly address the needs of our most
important customers. Cooperation and innovation are also the focus
at our Creation Centers in Ludwigshafen, Germany; Mumbai, India;
Shanghai, China; and Yokohama, Japan. These creative centers
bring together our comprehensive materials, design, and - in
particular - our digital development expertise in high-performance
plastics using the latest visualization and collaboration technologies.
This enables us to transform our customers' ideas into tailored
products and applications even more quickly - everything in one
place, from initial inspiration to solution.
Sites and Verbund
BASF has companies in around 90 countries. We operate six Ver-
bund sites and 241 additional production sites worldwide. Our
Verbund site in Ludwigshafen, Germany, is the world's largest
chemical complex owned by a single company that was developed
as an integrated network. This was where the Verbund principle
was originally established and continuously optimized. We then
implemented it at additional sites. In 2020, we started construction
of the first plants at the planned integrated Verbund site in Zhanjiang,
China.
■ Sustainable water and energy management
We also make use of the Verbund principle for more than produc-
tion, applying it for technologies, the market and digitalization as
well. Expert knowledge is pooled in our global research divisions.
1.2 MMT
We use natural resources to
manufacture products and
solutions with high value added
for our customers.
Environment
55.0 million MWh
Electricity and steam demand
€2.9 billion
Capex
Safety, quality, and reliability
are key to excellence in our
production and plant
operations.
Operations
R&D expenses
€2.1 billion
42.8%
Equity ratio
R&D employees
~10,000
We develop innovative
solutions for and with our
customers to expand our
leading position.
We use a wide range of resources to implement our customer-focused strategy.
INPUTS
Innovation
Total assets
Renewable raw materials
purchased
1,728 million m3
Total water usage
Employees
Everything we do is based
People
Portfolio
Digitalization
Operations
Sustainability
Innovation
Strategy
BUSINESS MODEL
€80.3 billion
Tier 1 suppliers
Cooperations with research
institutes
>250
Trust-based relationships are
crucial to our license to operate
and our reputation
Partnerships
€10.6 billion
Personnel expenses
Employees around the world
110,302
on the expertise, knowledge,
motivation and conduct of
our employees.
>70,000
the cost of capital.
limit financial risks and optimize
Our aim is to ensure solvency,
- International trade agreements
- Legal and political requirements (such as European Union regula-
tions)
Global economic environment
BASF's global presence means that it operates in the context of
local, regional and global developments and a wide range of condi-
tions. These include:
For more information on customers, see page 27 onward; for more information on suppliers, see
page 113 onward
We work with over 70,000 Tier 1 suppliers² from different sectors
worldwide. They supply us with important raw materials, chemicals,
investment goods and consumables, and perform a range of ser-
vices. Important raw materials (based on volume) include naphtha,
liquid gas, natural gas, benzene and caustic soda.
BASF supplies products and services to around 90,000 customers¹
from various sectors in almost every country in the world. Our
customer portfolio ranges from major global customers and small
and medium-sized enterprises to end consumers.
■ Around 90,000 customers; broad customer portfolio
■ More than 70,000 suppliers
- Industry standards
Business and competitive environment
Construction | Electronics | Energy and resources |
Health and nutrition
<10%
Agriculture | Consumer goods.
10%-20%
Chemicals and plastics | Transportation
>20%
39% Europe
Direct customers
27% North America
Our corporate purpose:
Environmental agreements (such as the E.U. Emissions Trading
System)
BASF holds one of the top three market positions in around 70%
of the business areas in which it is active. Our most important
global competitors include Arkema, Bayer, Clariant, Corteva,
Covestro, Dow, Dupont, DSM, Evonik, Huntsman, Lanxess, SABIC,
Sinopec, Solvay, Sumitomo Chemical, Syngenta, Wanhua and
many hundreds of local and regional competitors. We expect com-
petitors from Asia and the Middle East in particular to gain increasing
significance in the years ahead.
Financial
The overview provides examples of how we create value for our shareholders, our company, the environment and society. It is modeled on the framework of the International Integrated Reporting Council (IIRC). 1
How We Create Value
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
How We Create Value
• Social aspects (such as the U.N. Universal Declaration of Human
Rights)
1 To Our Shareholders
23
23
BASF Report 2020
2 BASF considers all direct suppliers of the BASF Group in the business year concerned as Tier 1 suppliers. These are suppliers that provide us with raw materials, investment goods, consumables and services. Suppliers can be natural persons, companies or legal persons under public law.
1 The number of customers refers to all external companies (sold-to parties) that had contracts with the BASF Group in the business year concerned under which sales were generated.
For more information, see the Notes to the Consolidated Financial Statements from page 233 onward
As the publicly traded parent company of the BASF Group,
BASF SE takes a central position: Directly or indirectly, it holds
the shares in the companies belonging to the BASF Group, and
is also one of the largest operating companies. The majority of
Group companies cover a broad spectrum of our business. In the
BASF Group Consolidated Financial Statements, 273 companies
including BASF SE are fully consolidated. We consolidate nine joint
operations on a proportional basis, and account for 25 companies
using the equity method.
Corporate legal structure
About This Report
The Verbund system is one of BASF's great strengths. We add value
by using our resources efficiently. The Production Verbund intelligently
links production units and their energy supply so that, for example,
the waste heat of one plant provides energy to others. Furthermore,
one facility's by-products can serve as feedstocks elsewhere. This
not only saves us raw materials and energy, it also avoids emissions,
lowers logistics costs and leverages synergies.
We create chemistry for a sustainable future
Our core values:
■ Accelerating the digital transformation of the industry
■ Strengthening our customers' competitiveness and innovative
strength with products and technologies
■ Driving forward growth, progress and value creation
We make positive contributions by
+
compliance standards
Internal audits on our
61
Social
Environmental
Economic
We want to increase our positive contributions, reduce negative impacts and carefully assess conflicting goals¹
OUTCOMES
Together for Sustainability
Suppliers screened through
678
Partnerships
■ Offering our investors an attractive dividend yield
Potential negative impacts
■ Weaker contributions to growth and value creation due to
reduced demand from our customer industries as a result of the
coronavirus pandemic
■ Our Circular Economy Program
■ Our carbon management
We limit negative impacts through
■ The potential misuse of our products
■ The consumption of raw materials and the creation of
non-recyclable waste in our production
■ The emission of CO2 and other gases that damage the climate
Negative impacts
■Improve the capabilities of renewable energy
■Reduce emissions and resource consumption
Engagement index according
to 2020 employee survey
■ Enable climate-smart mobility
We make positive contributions by operating our plants
efficiently and creating products that
■ Reducing the cost of capital
■ Systematic cost management
■ The acceleration of our Excellence Program
■ Active portfolio management
■ The disciplined implementation of our corporate strategy
We limit negative impacts through
■ A weaker share performance on the capital market
■ Help to use natural resources more efficiently
Cooling water recirculated
avoided by the Verbund and
combined heat and power
generation
Sales from Accelerator
products
1 The content of the graphic on pages 24 and 25 been audited within the scope of the relevant sections of the Management's Report in which they appear.
creative, open, responsible, entrepreneurial
Effective corporate governance
ensures responsible conduct along the value chain
Differentiated business strategies
from cost leadership to custom system solutions
with around 250 production sites worldwide, including six Verbund sites
Global, customer-focused presence
Eleven divisions organized into six segments
aligned with value chains, customer needs and market requirements
thanks to integrated value chains and our Verbund system
OUTPUTS
Efficient production
help to use resources more efficiently and overcome global challenges
Innovative products and solutions
Agricultural Solutions
Nutrition & Care
Industrial Solutions
Surface Technologies
Materials
Chemicals
Segments
Comprehensive product portfolio with high synergies
from basic chemicals to high value-added specialty products
In focus:
our customers
~90,000 customers from
almost all sectors and
countries
We focus on material sustainability topics and evaluate the opportunities and risks of our actions.
Operations
EBIT before special items
82%
Women in leadership
positions
Share of our waste recycled
or thermally recovered
80.7%
6.2 MMT CO₂
€16.7 billion
€3.6 billion
Sales products
Innovation
New patents worldwide
43.4%
~45,000
~950
Sales
€59.1 billion
Financial
Employees
Environment
24.3%
Procurement and sales markets
BASF sales by industry 2020
BASF Report 2020
Antwerp
Florham Ludwigshafen
Park
Geismar
Regional centers
Selected sites
Verbund sites
"Planned Verbund site
Selected research and
development sites
São Paulo
5 Overviews
Kuantan
Nanjing
Hong Kong
Zhanjiang
22
22
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
Freeport
4
BASF sites
The BASF Group
€59,149 million
For more information on the Verbund concept, see basf.com/en/verbund
Asia Pacific 26%
Consolidated Financial Statements
BASF sales by region 2020
Location of customer
South America, Africa, Middle East 8%
Offsetting of derivative assets and liabilities as of December 31, 2019
Million €
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Million €
Derivatives with negative fair values
Gross amount
415
563
Offsetting of derivative assets and liabilities as of December 31, 2020
Derivatives with positive fair values
AC
Derivatives with positive fair values
Potential net amount
financial collateral
-134
545
-18
-134
397
-18
About This Report
global netting agreements
Amount offset
Due to
Amounts that cannot be offset
Offset amounts
424
452
Gross amount
Derivatives with negative fair values
Net amount
298
1,558
f Does not include separately shown derivatives or receivables and liabilities from finance leases. If miscellaneous receivables are valued at fair value through profit or loss, their valuation is generally based on parameters
observable on the market. These are adjusted to reflect valuation-relevant characteristics of the respective assets in the fair value.
4
4
Derivatives hedge accounting
644
33
677
FVTPL
677
677
Derivatives no hedge accounting
5,087
AC
5,087
5,087
Accounts payable, trade
n/a
4
0
4
e Fair value was determined based on parameters for which there was no observable market data.
d Fair value was determined based on parameters for which directly or indirectly quoted prices on active markets were available.
b AC: amortized cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in Note 26.1 from page 291 onward.
c Fair value was determined based on quoted, unadjusted prices on active markets.
a In general, only significant shareholdings are measured at fair value. All insignificant shareholdings are measured at cost (carrying amount: €467 million). Fair value level 1 is applied to publicly listed shareholdings. Level 2 is
applied to shareholdings for which valuation is based on parameters observable in the market to the greatest extent possible. These may be adjusted to reflect valuation-relevant characteristics of the respective shareholding in
the fair value.
16,109
33
28,308
BASF Report 2020
27,123
1,420
Total liabilities
1,558
AC
-61
3,004
Other liabilities
28,569
202
-233
178
3,240
Liabilities from leases
1,420
1,420
300
BASF Report 2020
of which interest result
-512
-724
93
4
4
68
-37
48
256
Total
Financial liabilities measured at amortized cost
of which interest result
Financial assets at fair value through other comprehensive income
of which interest result
Financial instruments at fair value through profit or loss
of which interest result
AC
Financial assets measured at amortized cost
3,240
Liabilities to credit institutions
14,276
14,276
Bonds
1,040
784
14,028
14,495
17,501
Total assets
2,229
AC
2,229
2,229
Cash and cash equivalents
198
198
FVTPL
15,461
Commercial paper
861
861
AC
861
3,240
15,461
-403
1
134
-57
103
-116
Potential net amount
Relating to
financial collateral
BASF Report 2020
were included in current other liabilities, provided specific netting
agreements with customers existed. As a result, trade accounts
receivable were reduced by €616 million. The reduction in trade
accounts payable was €45 million and the reduction in advance
payments received on orders was €571 million. Accordingly, the net
amount for trade accounts receivable was €9,466 million (gross
amount before offsetting: €10,082 million). The net amount for trade
accounts payable was €5,291 million (gross amount before
offsetting: €5,336 million). The net amount for advance payments
received on orders was €679 million (gross amount before offsetting:
€1,250 million). In 2019, trade accounts receivable were only offset
against the advance payments received on orders included in
current other liabilities. Both balance sheet items were reduced by
€647 million. Accordingly, the net amount for trade accounts
receivable was €9,093 million (gross amount before offsetting:
€9,740 million). The resulting net amount for advance payments
received on orders was €537 million (gross amount before offsetting:
€1,184 million).
In addition to the offsetting of derivatives presented in the table
above, trade accounts receivable in 2020 were offset against trade
accounts payable and advance payments received on orders, which
Deviations from the derivatives with positive fair values and
derivatives with negative fair values reported in other receivables
and other liabilities at the end of 2020 and 2019 arose from
derivatives not subject to any netting agreements as well as from
embedded derivatives. These are therefore not included in the table
above.
The table "Offsetting of derivative assets and liabilities" shows the
extent to which assets and liabilities were offset in the balance sheet,
as well as potential effects from the offsetting of derivatives subject
to a legally enforceable global netting agreement (primarily in the
form of an ISDA agreement) or similar agreement. For positive fair
values of combined interest rate and currency swaps, the respective
counterparties provided cash collaterals in an amount comparable
to the outstanding fair values.
-163
354
-70
-163
382
-70
global netting agreements
Net amount
Amount offset
Due to
Amounts that cannot be offset
Offset amounts
299
-326
About This Report
2 Management's Report
2
65
691
32
-282
Total
Net gains and losses from financial instruments 2019
Million €
of which interest result
Financial liabilities measured at amortized cost
of which interest result
Financial assets at fair value through other comprehensive income
of which interest result
Financial instruments at fair value through profit or loss
of which interest result
Financial assets measured at amortized cost
Net gains and losses from financial instruments 2020
Million €
For more information, see page 227 of the Statement of Changes in Equity
Gains and losses from the valuation of securities recognized in equity are shown in development of
income and expense recognized in equity attributable to shareholders of BASF SE on page 223
The net gains and losses from financial instruments shown in the
following table comprise the results of valuations, the amortization of
discounts, the recognition and reversal of impairments, results from
the translation of foreign currencies as well as interest, dividends
and all other effects on the earnings resulting from financial
instruments. The line item financial instruments at fair value through
profit or loss contains only gains and losses from instruments that
are not designated as hedging instruments in accordance with
IFRS 9.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
1 To Our Shareholders
Relating to
44
-
Miscellaneous
liabilities
Total
2020
2,483
1,149
5,087
404
969
10,092
2021
Derivative
liabilities
1,252
146
334
1,821
2022
2,244
212
52
209
2,717
2023
89
1,239
payable,
trade
Liabilities to
1,701
1,749
215
70
91
2,125
8,133
1,035
80
605
credit institutions
9,853
3,842
5,291
644
2,022
29,196
Maturities of contractual cash flows from financial liabilities as of December 31, 2019
Million €
Bonds and
Accounts
other liabilities to
the capital market
17,397
132
221
139
5 Overviews
Notes
26.4 Classes and categories of financial instruments
For trade accounts receivable, other receivables and miscellaneous
assets, cash and cash equivalents, as well as trade accounts
payable and other liabilities, the carrying amount approximates the
fair value.
The fair value of financial indebtedness is determined on the basis of
interbank interest rates. The difference between carrying amounts
and fair values results primarily from changes in market interest
rates.
Carrying amounts and fair values of financial instruments as of December 31, 2020
Million €
Shareholdingsa
Receivables from finance leases
Accounts receivable, trade
Accounts receivable, trade
Derivatives - no hedge accounting
Derivatives hedge accounting
Total
carrying
amount
4 Consolidated Financial Statements
within scope
Carrying of application
amount
of IFRS 7
with
IFRS 9b
Fair value
Of which
fair value
level 1°
Of which
fair value
level 2d
Of which
fair value
level 3º
533
533
FVTPL
44
Valuation
category in
accordance
31
3 Corporate Governance
1 To Our Shareholders
1,630
2024
683
776
101
1,560
2025 and thereafter
9,541
888
101
2 Management's Report
493
Total
17,442
3,335
5,087
734
2,245
28,843
BASF Report 2020
296
About This Report
11,023
28
868
673
Crude oil, oil
products and
natural gas
December 31, 2019
December 31, 2020
Exposure
Value at risk
Exposure
Value at risk
56
5
87
3
Million €
Precious metals
1
112
2
Agricultural
commodities
37
37
0
163
0
88
The exposure corresponds to the net amount of all long and short
positions of the respective commodity category.
Exposure to commodity derivatives
BASF performs value-at-risk analyses for all commodity derivatives
and precious metal trading positions. Using the value-at-risk analysis
enables continual quantification of market risk and forecasting of the
maximum possible loss within a given confidence interval over a
defined period. The value-at-risk calculation is based on a confi-
dence interval of 95% and a holding period of one day. BASF uses
the variance-covariance approach.
-4
300
-4
of which payer swaps
Combined interest rate and currency
swaps
of which fixed rate
4,183
-163
4,183
60
BASF uses value at risk in conjunction with other risk management
tools. Besides value at risk, BASF sets volume-based limits as well
as exposure and stop-loss limits.
4,183
4,183
60
Commodity price risks: Some of BASF's divisions are exposed to
strong fluctuations in raw materials prices. These result primarily
from raw materials (for example naphtha, benzene, natural gas, LPG
condensate) as well as from precious metals. BASF takes the
following measures to reduce price risks associated with the
purchase of raw materials:
-
BASF uses commodity derivatives to hedge risks from the volatility
of raw materials prices. These are primarily options on crude oil,
oil products and natural gas.
The Catalysts division enters into both short-term and long-term
purchase contracts with precious metal and battery metal
producers. It also buys precious metals on spot markets from
various business partners. The price risk from metals purchased
to be sold on to third parties, or for use in the production of
catalysts and battery materials, is hedged using derivative
instruments. This is mainly performed using forward contracts,
which are settled by either entering into offsetting contracts or by
delivering the precious metal.
In the Agricultural Solutions division, the sales prices of products
are sometimes pegged to the price of certain agricultural
commodities. To hedge the resulting risks, derivatives on
agricultural commodities are concluded.
In addition, BASF holds limited unhedged precious metal and oil
product positions, which can also include derivatives, for trading on
its own account. The value of these positions is exposed to market
price volatility and is subject to constant monitoring.
By holding commodity derivatives and precious metal trading
positions, BASF is exposed to price risks. The valuation of
commodity derivatives and precious metal trading positions at fair
value means that adverse changes in market prices could negatively
affect the earnings and equity of BASF.
-163
For more information on BASF's financial risks and risk management, see Opportunities and Risks
from page 158 onward
Default and credit risk
Default and credit risks arise when customers and debtors do not
fulfill their contractual obligations. BASF regularly analyzes the
creditworthiness of the counterparties and grants credit limits on the
basis of this analysis. Due to the global activities and diversified
customer structure of the BASF Group, there is no significant
concentration of default risk. The carrying amount of all receivables,
loans and interest-bearing securities plus the nominal value of
financial obligations stemming from contingent liabilities not to be
recognized represents the maximum default risk for BASF.
trade
Derivative
liabilities
Miscellaneous
liabilities
Total
2,531
1,128
5,276
76
749
9,760
Accounts
payable,
2,161
12
287
267
3,022
2,150
301
3
103
178
2,735
295
Liabilities to credit
institutions
Bonds and
other liabilities to
the capital market
Total
For more information on credit risks, see Note 18 from page 275 onward
Liquidity risks
BASF promptly recognizes any risks from cash flow fluctuations as
part of liquidity planning. BASF has ready access to ample liquid
funds from the ongoing commercial paper program and confirmed
lines of credit from banks.
BASF Report 2020
295
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
26.3 Maturity analysis
The interest and principal payments as well as other payments for
derivative financial instruments are relevant for the presentation of
the maturities of the contractual cash flows from financial liabilities.
Future cash flows are not discounted here.
Derivatives are included using their net cash flows, provided they
have negative fair values and therefore represent a liability. Derivatives
with positive fair values are assets and are therefore not taken into
account.
Maturities of contractual cash flows from financial liabilities as of December 31, 2020
Million €
2021
2022
2023
2024
2025
2026 and thereafter
44
300
n/a
94
1,290
Commercial paper
15,500
15,500
AC
14,189
14,189
Bonds
738
446
1,290
15,918
20,171
Total assets
4,185
AC
4,185
4,185
Cash and cash equivalents
145
145
FVTPL
16,357
145
AC
Liabilities to credit institutions
Derivatives hedge accounting
932
25
957
FVTPL
957
957
Derivatives no hedge accounting
5,291
AC
1,290
5,291
Accounts payable, trade
1,360
n/a
1,360
1,360
Liabilities from leases
3,735
AC
3,735
3,735
5,291
1
145
42
Other receivables and miscellaneous assets
132
0
132
n/a
132
132
386
1
387
4,889
FVTPL
387
44
44
FVTPL
44
44
9,422
AC
9,422
9,422
387
Cash equivalents
1,075
1,075
207
249
FVTPL
249
249
Securities
0
FVTOCI
0
0
AC
Securities
AC
8
8
Securities
133
133
FVTPL
133
133
Other receivables and miscellaneous assets
8
1
n/a
1
AC
1,186
4,192
Other receivables and miscellaneous assets
162
0
162
n/a
162
162
1,186
436
437
FVTPL
437
437
Derivatives - no hedge accounting
Derivatives hedge accounting
338
338
FVTPL
338
338
1
Accounts receivable, trade
Other receivables and miscellaneous assets
88
198
198
Cash equivalents
563
563
FVTPL
563
563
Securities
4
88
FVTOCI
4
Securities
11
AC
11
11
Securities
88
88
FVTPL
4
8,755
AC
8,755
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
297
BASF Report 2020
f Does not include separately shown derivatives or receivables and liabilities from finance leases. If miscellaneous receivables are valued at fair value through profit or loss, their valuation is generally based on parameters
observable on the market. These are adjusted to reflect valuation-relevant characteristics of the respective assets in the fair value.
e Fair value was determined based on parameters for which there was no observable market data.
d Fair value was determined based on parameters for which directly or indirectly quoted prices on active markets were available.
b AC: amortized cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in Note 26.1 from page 291 onward.
c Fair value was determined based on quoted, unadjusted prices on active markets.
4 Consolidated Financial Statements
a In general, only significant shareholdings are measured at fair value. All insignificant shareholdings are measured at cost (carrying amount: €439 million). Fair value level 1 is applied to publicly listed shareholdings. Level 2 is
applied to shareholdings for which valuation is based on parameters observable in the market to the greatest extent possible. These may be adjusted to reflect valuation-relevant characteristics of the respective shareholding in
the fair value.
25
29,938
28,627
29,656
Total liabilities
1,804
AC
1,804
2,833
Other liabilities
16,433
5 Overviews
Notes
Carrying amounts and fair values of financial instruments as of December 31, 2019
8,755
Accounts receivable, trade
23
n/a
23
23
Receivables from finance leases
12
22
34
Of which
fair value
level 3º
Of which
fair value
level 2d
Of which
fair value
level 1°
Fair value
Valuation
category in
accordance
with IFRS 9b
FVTPL
501
501
Shareholdingsa
of IFRS 7
of application
Carrying
amount
Total
carrying
amount
within scope
Million €
$།བུ་
Interest rate swaps
n/a
December 31, 2019
Sensitivity
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
26.2 Financial risks
Market risks
Foreign currency risks: Changes in exchange rates could lead to
losses in the value of financial instruments and adverse changes in
future cash flows from planned transactions. Foreign currency risks
from financial instruments result from the translation at the closing
rate of financial receivables, loans, securities, cash and financial
liabilities into the functional currency of the respective Group
company. Foreign currency contracts in various currencies are used
to hedge foreign exchange risks from nonderivative financial
instruments and planned transactions.
The foreign currency risk exposure corresponds to the net amount
of the nominal volume of the primary and the derivative financial
instruments that are exposed to currency risks. In addition, planned
purchase and sales transactions of the respective following year are
included if they fall under the currency risk management system.
Long and short positions in the same currency are offset against
each other.
The sensitivity analysis was conducted by simulating a 5% and 10%
appreciation of the respective functional currency against the other
currencies. A 5% appreciation of the respective functional currency
would have reduced BASF's income before income taxes by
€203 million as of December 31, 2020. A 10% appreciation of the
respective functional currency would have resulted in a negative
effect on BASF's income before income taxes in the amount of
€390 million. A 5% appreciation of the respective functional currency
resulted in an effect on BASF's income in the amount of -€187 mil-
lion as of December 31, 2019 (-€356 million with a 10% apprecia-
tion). The effect from the items designated under hedge accounting
would have increased shareholders' equity before income taxes by
€36 million applying a 5% increase to the functional currency and by
€78 million applying a 10% increase to the functional currency as of
December 31, 2020 (2019: increase of €19 million applying a 5%
293
increase to the functional currency and increase of €40 million
applying a 10% increase to the functional currency). This only refers
to transactions in U.S. dollars.
Million €
increase of one percentage point would have lowered income before
income taxes by €6 million). Because no interest derivatives were
designated to hedge accounting relationships as of Decem-
ber 31, 2020, a change in interest rates would not have had an effect
on shareholders' equity. If the relevant interest rates had changed by
one half of a percentage point, the before-tax effect from items
designated under hedge accounting would have been an immaterial
increase in shareholders' equity as of December 31, 2019 (increase
of €1 million applying a 1% change in interest rates).
December 31, 2020
Exposure
Sensitivity
Exposure
+5%
+10%
+5%
USD
1,965
-101
Exposure and sensitivity by currency
-190
BASF Report 2020
In cash flow hedges, future cash flows and the related income and
expenses are hedged against the risk of changes in fair value. To this
end, future underlying transactions and the corresponding hedging
instruments are designated to a cash flow hedge accounting
relationship for accounting purposes. The effective portion of the
change in fair value of the hedging instrument, which often meets
the definition of a derivative, and the cost of hedging are recognized
directly in equity under other comprehensive income over the term
of the hedge, taking deferred taxes into account. The ineffective
portion is recognized immediately in the income statement. In the
case of future transactions that lead to recognition of a nonfinancial
asset or a nonfinancial liability, the cumulative fair value changes of
the hedge in equity are generally charged against the cost of the
hedged item on its initial recognition. For hedges based on financial
assets, financial liabilities or future transactions, cumulative fair value
changes of the hedges are transferred from equity to the income
statement in the reporting period in which the hedged item is
recognized in the income statement. The maturity of the hedging
instrument is aligned with the effective date of the future transaction.
Financial assets at fair value through profit or loss include all
financial assets whose cash flows are not solely payments of
principal and interest in accordance with the cash flow condition
established in IFRS 9. At BASF, derivatives, for example, are
allocated to this measurement category. In general, BASF does
not exercise the fair value option in IFRS 9, which permits the
allocation of financial instruments not to be measured at fair value
through profit or loss on the basis of the cash flow condition or the
business model criterion to the above category under certain
circumstances.
Financial assets measured at amortized cost include all assets
with contractual terms that give rise to cash flows on specific
dates, provided that these cash flows are solely payments of
principal and interest on the principal amount outstanding in
accordance with the cash flow condition in IFRS 9, to the extent
that the asset is held with the intention of collecting the expected
contractual cash flows over its term. At BASF, this measurement
category includes trade accounts receivable, as well as receiv-
ables reported under other receivables and miscellaneous assets
and certain securities.
Initial measurement of these assets is generally at fair value,
which usually corresponds to the transaction price at the time of
acquisition. Subsequent measurement effects are recognized in
income using the effective interest method.
Impairments are recognized for expected credit losses in both
initial and subsequent measurement, even before the occurrence
of any default event. Counterparties are generally considered to
default when they become insolvent, become a debtor in a
creditor protection program or are in a finance-related legal
dispute with BASF, or more than half of BASF's receivables
portfolio with them is more than 90 days overdue. In these cases,
individual impairments are recognized for the financial assets
measured at amortized cost that are then considered to be credit
impaired. In addition, an impairment must be recognized when
the contractual conditions that form the basis for the receivable
are changed through renegotiation in such a way that the present
value of the future cash flows decreases.
The extent of expected credit losses is determined based on the
credit risk of a financial asset, as well as any changes to this
credit risk: If the credit risk of a financial asset has increased
significantly since initial recognition, expected credit losses are
generally recognized over the lifetime of the asset. If, however, the
credit risk has not increased significantly in this period, impair-
ments are generally only recognized as 12-month expected
credit losses. By contrast, under the simplified approach for
determining expected credit losses permitted by IFRS 9, impair-
ments for receivables such as lease receivables and trade
accounts receivable always cover the lifetime expected credit
losses of the receivable concerned.
At BASF, the credit risk of a financial asset is assessed using both
internal information and external rating information on the respec-
tive counterparty. A significant increase in the counterparty's
credit risk is assumed if its rating is lowered by a certain number
of notches. The significance of the increase in the credit risk is not
reviewed for trade accounts receivable or lease receivables.
Furthermore, it is generally assumed that the credit risk for a
counterparty with a high credit rating will not have increased
significantly.
Regional and, in certain circumstances, industry-specific factors
and expectations are taken into account when assessing the
extent of impairment as part of the calculation of expected credit
losses and individual impairments. In addition, BASF uses internal
and external ratings and the assessments of debt collection
agencies and credit insurers, when available. Individual impair-
ments are also based on experience relating to customer solvency
and customer-specific risks. Factors such as credit insurance,
which covers a portion of receivables measured at amortized
cost, are likewise considered when calculating impairments. Bank
guarantees and letters of credit are used to an immaterial extent.
Expected credit losses and individual impairments are only
calculated for those receivables that are not covered by insurance
or other collateral. Impairments on receivables whose insurance
includes a deductible are not recognized in excess of the amount
of the deductible.
A decrease in impairment due, for example, to a reduction in the
credit risk of a counterparty or an objective event occurring after
the impairment is recorded in profit or loss. Reversals of
impairments may not exceed amortized cost, less any expected
future credit losses.
292
About This Report
1 To Our Shareholders
When fair value hedge accounting is used, the asset or liability
recognized is hedged against the risk of a change in fair value. The
hedging instruments used, which often take the form of a derivative,
are measured at fair value and changes in fair value are recognized
in the statement of income. The carrying amounts of the assets or
liabilities designated as the underlying transaction are also measured
at fair value through the statement of income.
2 Management's Report
4 Consolidated Financial Statements
5 Overviews
Notes
Financial assets at fair value through other comprehensive
income include all assets with contractual terms that give rise to
cash flows on specified dates that are solely payments of principal
and interest on the principal amount outstanding, in accordance
with the cash flow condition in IFRS 9. Furthermore, the assets in
this measurement category may not just be held with the intention
of collecting the expected contractual cash flows over their term,
but also generating cash flows from their sale. At BASF, certain
securities that are classified as debt instruments are allocated to
this category. BASF does not exercise the option to subsequently
measure equity instruments through other comprehensive
income.
Assets measured at fair value through other comprehensive
income are initially measured at fair value, which usually
corresponds to the nominal value of the securities allocated to this
category at the time of acquisition. Subsequent measurement is
likewise at fair value. Changes in the fair value are recognized in
other comprehensive income and reclassified to the statement of
income when the asset is disposed of.
Impairments on financial assets measured at fair value through
other comprehensive income are calculated in the same way as
impairments on financial assets measured at amortized cost and
recognized in profit or loss.
The following measurement categories are used for financial
liabilities:
-
Financial liabilities measured at amortized cost generally
include all financial liabilities, provided these do not represent
derivatives. They are generally measured at fair value at the time
of initial recognition, which usually corresponds to the value of the
consideration received. Subsequent measurement is recognized
in profit or loss at amortized cost using the effective interest
method. At BASF, for example, bonds and liabilities to banks
reported under financial indebtedness are measured at amortized
cost.
- Financial liabilities at fair value through profit or loss contain
derivative financial liabilities. These are likewise measured at the
value of the consideration received as the fair value of the liability
on the date of initial recognition. Fair value is also applied as a
measurement basis for these liabilities in subsequent measure-
ment. The option to subsequently measure non-derivative
financial liabilities at fair value is not exercised.
Derivative financial instruments can be embedded within other
contracts, creating a hybrid financial instrument. If IFRS policies
require separation, the embedded derivative is accounted for
separately from its host contract and measured at fair value. If
IFRS 9 does not provide for separation, the hybrid instrument is
accounted for at fair value in its entirety.
Financial guarantees of the BASF Group are contracts that require
compensation payments to be made to the guarantee holder if a
debtor fails to make payment when due under the terms of a trans-
action entered into with the holder of the guarantee. Financial guar-
antees issued by BASF are measured at fair value upon initial recog-
nition. In subsequent periods, these financial guarantees are carried
at the higher of amortized cost or the best estimate of the present
obligation as of the reporting date.
3 Corporate Governance
-
1,977
+10%
-209
Securities
51
206
89
490
Financial
17,742
1,472
15,848
2,529
indebtedness
BASF Report 2020
255
294
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
Nominal and fair values of interest rate swaps and combined
interest rate and currency swaps
Million €
Nominal
value
December 31, 2020 December 31, 2019
Fair
value
Nominal
value
Fair
value
About This Report
-111
156
75
Other
1,117
-66
-123
1,037
-56
-106
Million €
Total
3,082
-167
-313
115
3,014
-315
Due to the use of options to hedge currency risks, the sensitivity
analysis is not a linear function of the assumed changes in exchange
rates.
Interest rate risks: Interest rate risks arise from changes in prevailing
market interest rates, which can lead to changes in the fair value of
fixed-rate instruments and in interest payments for variable-rate
instruments. Interest rate swaps and combined interest rate and
currency derivatives are used in individual cases to hedge these
risks. The derivatives are presented in Note 26.5. Interest rate risks
are relevant to BASF's financing activities but are not of material
significance for BASF's operating activities.
The variable interest risk exposure, which also includes fixed rate
bonds maturing in the following year, amounted to -€1,659 million
as of December 31, 2020 (2019: -€1,414 million). An increase in all
relevant interest rates by one half of a percentage point would have
lowered income before income taxes by €5 million as of Decem-
ber 31, 2020. An increase in all relevant interest rates by one
percentage point would have lowered income before income taxes
by €10 million as of the same date. An increase in all relevant interest
rates by one half of a percentage point would have lowered income
before income taxes by €3 million as of December 31, 2019 (an
Carrying amount of nonderivative interest-bearing financial instruments
December 31, 2020
December 31, 2019
Fixed
interest rate
Variable
interest rate
Fixed
interest rate
Variable
interest rate
Loans
-167
The classification and measurement of financial assets is based on
the one hand on the cash flow condition (the "solely payments of
principle and interest" criterion), that is, the contractual cash flow
characteristics of an individual financial asset. On the other hand, it
also depends on the business model used for managing financial
asset portfolios. Based on these two criteria, BASF uses the
following measurement categories for financial assets:
BASF Report 2020
of observable market parameters for identical or similar items
changes.
Obligations arising from purchase contracts
2019
Million €
Bills of exchange
2
6
Dec. 31,
Guarantees
447
2021
Warranties
79
65
2022
347
Dec. 31,
2020
8,003
Obligations arising from purchase contracts resulted primarily from
long-term purchase obligations for raw materials. Firm purchase 26.1 Accounting policies
obligations as of December 31, 2020, were as follows:
About This Report
Except for financial assets measured at fair value through profit or
loss, IFRS 9 requires the recognition of impairments for expected
credit losses, independent of the existence of any actual default
events and individual impairments if evidence of a permanent need
for impairment exists. If this evidence no longer exists, the impair-
ment is reversed in the statement of income up to the carrying
amount of the asset had the default event not occurred. Impairments
are generally recognized in separate accounts.
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
25
Other financial obligations
The figures listed below are stated at nominal value:
Other financial obligations
Million €
Obligations arising from purchase contracts
26 Supplementary information on financial
instruments
Collateral granted on behalf of third-party liabilities
1
1
Initiated investment projects
The decline in liabilities from initiated investment projects is
mainly attributable to the completion of various large-scale projects
in 2020.
4,165
Financial instruments
Financial assets and financial liabilities are recognized in the
consolidated balance sheet when the BASF Group becomes a
party to a financial instrument. Financial assets are derecognized
when BASF no longer has a contractual right to the cash flows from
the financial asset or when the financial asset is transferred together
with all material risks and rewards of ownership and BASF does not
have control of the financial asset after it has been transferred. For
example, receivables are derecognized when they are definitively
found to be uncollectible. Financial liabilities are derecognized when
the contractual obligations expire, are discharged or cancelled.
Regular-way purchases and sales of financial instruments are
accounted for using the settlement date; in precious metal trading,
the trade date is used.
The fair value of a financial instrument is the price that would be re-
ceived to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
If pricing on an active market is available, for example in the form of
exchange prices, these are used as the basis for the measurement.
Otherwise, the measurement is based on either internal measure-
ment models using current market parameters or external measure-
ments, for example, from banks. These internal measurements rely
predominantly on the net present value method and option pricing
models. These models incorporate, for example, expected future
cash flows as well as discount factors adjusted for term and, poten-
tially, risk. Depending on the availability of market parameters, BASF
assigns financial instruments' market values one of the three levels
of the fair value hierarchy pursuant to IFRS 13. Reassignment to a
different level during a fiscal year is only carried out if the availability
BASF Report 2020
291
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
Notes
2023
BASF SE provides a guarantee to Abu Dhabi National Oil Corpora-
tion covering all obligations of Wintershall Dea Middle East GmbH
related to the Ghasha concession in the United Arab Emirates.
Furthermore, BASF SE assumed guarantees to the Danish Energy
Agency covering all obligations of Wintershall Dea Interna-
tional GmbH and Wintershall Noordzee B.V. related to licenses for
exploration and production of hydrocarbons in the Danish
concession area. In addition, BASF SE provides guarantees for
restoration obligations of Wintershall Dea Norge AS related to
various oil and gas facilities acquired from Equinor. The guarantees
do not stipulate a maximum amount. The risk of a claim being
exercised against the guarantees is classified as low.
80
5 Overviews
23,489
75
4,331
3,921
2024
5,347
3,419
1,317
of which purchase commitments
1,052
2025
1,093
for the purchase of intangible assets
Payment and loan commitments and other financial
obligations
15
25
2026 and maturities beyond this year
Total
1,238
17.48
2019
2020
€
27.95
Dividend yield
%
5.10
5.10
Strive!
Risk-free interest rate
-0.67
-0.70
%
BOP program of the year
Participants receive four option rights per invested share. Each
option consists of two parts, right A and right B, which may be
exercised if defined thresholds have been met: The threshold of
right A is met if the price of the BASF share has increased by more
than 30% in comparison with the base price on the option grant
date (absolute threshold). The value of right A is the difference
between the market price of BASF shares on the exercise date and
the base price; it is limited to 100% of the base price. If the cumulative
percentage performance of BASF shares exceeds the percentage
performance of the MSCI World Chemicals Index SM (MSCI Chemi-
cals), right B may be exercised (relative threshold). The value of
right B is the base price of the option multiplied by twice the per-
centage by which the BASF share outperforms the MSCI Chemicals
Index on the exercise date. It is limited to the closing price on the
date of exercise less the calculated nominal value of the BASF
share. From the 2013 BOP program onward, right B may only be
exercised if the price of the BASF share equals at least the base
price. The options granted as of July 1, 2020 may be exercised
between July 1, 2022, and June 30, 2028, following a two-year
vesting period. During the exercise period, there are certain times
(closed periods) during which the options may not be exercised.
Each option can only be exercised in full. This means that one of the
thresholds must be exceeded. If the other threshold is not exceeded
and the option is exercised, the other option right lapses. A partici-
pant's maximum gain from exercising an option is limited to five
times the original individual investment starting with the 2013 BOP
program. Option rights are nontransferable and are forfeited if the
option holders no longer work for the BASF Group or have sold part
of their individual investment before the expiry of the two-year vest-
ing period. They remain valid in the case of retirement. For the
members of the Board of Executive Directors, the long-term orienta-
tion of the program is significantly strengthened compared with the
conditions applying to the other participants. Members of the Board
of Executive Directors are required to participate in the BOP pro-
gram with at least 10% of their actual annual variable compensation.
In view of this binding personal investment (in the form of BASF
shares), an extended holding period of four years applies. Members
As a result of a resolution by the Board of Executive Directors in
2002 to settle option rights in cash, all outstanding option rights
under the 2013 to 2020 programs were valued at fair value as of
December 31, 2020. A proportionate provision is recognized for
programs in the vesting period. The LTI provision for BOP increased
from €90 million as of December 31, 2019 to €115 million as of
December 31, 2020, due to higher fair values of the outstanding
option rights. No utilization of provisions was recognized in 2019 or
2020. The expense from the addition of provisions totaled €25 mil-
lion in 2020 and €34 million in 2019. Of this amount, €1 million was
attributable to the disposal group for the discontinued pigments
business in 2020 and €1 million for the discontinued construction
chemicals business in 2019.
Weighted target achievement
Base price
Dividend
55.04
%
€
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
of the Board of Executive Directors may only exercise their option
rights four years after they have been granted at the earliest (vesting
period).
The 2013 to 2019 programs are similar in structure to the 2020 BOP
program.
The models used in the valuation of the option plans are based on
the arbitrage-free valuation model according to Black-Scholes. The
fair values of the options are determined using the binomial model.
Fair value of options and parameters used
as of December 31, 2020
Fair value
The exercisable options had no intrinsic value as of Decem-
ber 31, 2020 or as of December 31, 2019.
28.22
767,308
%
Fair value of PSUs and parameters used
as of December 31, 2020
Like BOP, a personal investment in BASF shares is a prerequisite for
participation in Strive!. Participants are required to own BASF shares
amounting to a predetermined percentage of their base salary for
the duration of the performance period. A set-up phase applies to
first-time participants. During this period, they are required to hold a
percentage of shares as their predetermined personal investment.
The set-up phase for 2020 ends on December 31, 2023.
Achievement of each strategic target is calculated for each year of
the four-year performance period. Upon conclusion of the perfor-
mance period, the average degree of target achievement for each
strategic goal is equal to the arithmetic mean of the degrees of target
achievement for the four years. The total target achievement for
Strive!2020 is determined by adding the target achievement degree
for the three strategic targets after having multiplied each by the
corresponding weighting factor. To calculate the final number of
PSUs, this weighted target achievement is multiplied by the
preliminary number of PSUs. The payment amount upon conclusion
of the four-year performance period is calculated by multiplying the
final number of PSUs by the average BASF share price for the fourth
quarter of the last year of the performance period, plus the accu-
mulated dividend payments in the four fiscal years. The payment
occurs in May of the following year and is capped at 200% of the
target amount. The payment amount therefore not only reflects
achievement of the strategic targets, but performance of BASF's
dividend and share price as well (total shareholder return).
ultimately paid out at the end of the performance period depends on
the achievement of the three strategic targets: growth (volume
growth compared with global chemical production), profitability
(increase in EBITDA before special items) and sustainability (CO2
emissions).
Notes
5 Overviews
Number of PSUs granted
Number of PSUs vested
4 Consolidated Financial Statements
2 Management's Report
To Our Shareholders
1
About This Report
%
308
3 Corporate Governance
2019
Strive! program of the
year
2020
17.87
18.71
%
79.66
80.05
Volatility BASF share
Volatility MSCI Chemicals.
Correlation BASF share price - MSCI Chemicals
The stated fair values and the valuation parameters relate to the
2020 and 2019 BOP programs. The fair value calculation was based
on the assumption that options will be exercised in a manner
dependent on their potential gains. For the programs from preceding
years, corresponding fair values and valuation parameters were
determined/used.
Volatility was determined on the basis of the monthly closing prices
over a historical period corresponding to the remaining term of the
options.
The number of options granted amounted to 1,693,748 in 2020
(2019: 2,099,028).
In 2020, a new LTI program – known as Strive! - was established in
the form of a performance share plan for senior executives and
members of the Board of Executive Directors. The new LTI plan is
based on achievement of strategic targets and takes into account
BASF's share price and dividend performance (total shareholder
return) over a four-year period. Participation in Strive! is voluntary
and is linked to a share ownership obligation. Approximately
700 people were eligible to participate in Strive! in 2020. In contrast
to the BOP program, Strive! offers rolling eligibility, without a dead-
line for participation. Members of the Board of Executive Directors
as well as about 90% of eligible senior executives participated.
A Strive! plan includes a four-year performance period with a fixed
disbursement date. A target amount is determined at the beginning
of a new Strive! plan for every participant. This target amount is
converted into a preliminary number of virtual performance share
units (PSUs) by dividing it by the average BASF share price in the
fourth quarter of the previous year. The number of PSUs that are
BASF Report 2020
191,827
29.32
92.50
1,545
64.72
Fair value of options and performance share units granted to the Board of Executive Directors in the fiscal year as
of grant datea
13.3
9.7
2019
2020
Non-performance-related and performance-related cash compensation of the Board of Executive Directors
12.1
Million €
30 Compensation of the Board of Executive Directors and Supervisory Board
Personnel expenses for BASF's "plus" incentive share program
totaled €28 million in 2020 and €33 million in 2019.
The fair value of the free shares to be granted is recognized as an
expense with a corresponding increase in capital reserves over the
term of the program.
Notes
5 Overviews
4 Consolidated Financial Statements
Compensation of the Board of Executive Directors and Supervisory Board
3.2
Total compensation of the Board of Executive Directors
Service costs for members of the Board of Executive Directors
21.8
Market valuation of the option rights of active and former members
of the Board of Executive Directors resulted in an expense totaling
The members of the Board of Executive Directors were granted
166,272 option rights under the previous long-term incentive (LTI)
program for the last time in 2020.
The STI performance bonus is based on the performance of the
Board of Executive Directors as a whole and the return on capital
employed (ROCE) of the BASF Group. Subject to certain conditions,
ROCE is adjusted for special items from acquisitions and divesti-
tures. The ROCE for 2020 is lower than the threshold according to
the bonus curve. In this case, the compensation system stipulates
that the ROCE factor be determined by a special resolution of the
Supervisory Board. The Supervisory Board has determined an
ROCE factor of 0.3.
198.2
209.0
11.5
12.5
3.3
2.9
a The Board of Executive Directors was granted the new LTI performance share plan for the first time in 2020.
Total compensation of former members of the Board of Executive Directors and their surviving dependents
Pension provisions for former members of the Board of Executive Directors and their surviving dependents
Guarantees assumed for members of the Board of Executive Directors and the Supervisory Board
Compensation of the Supervisory Board
3.7
3.7
16.5
3 Corporate Governance
€
2 Management's Report
About This Report
Bonus shares issued
As of January 1
Newly acquired entitlements
Shares
Number of free shares to be granted
The right to receive free BASF shares lapses if a participant sells the
individual investment in BASF shares, if the participant stops working
for a Group company or one year after retirement. The number of
free shares to be granted has developed as follows:
Employees who participate in BASF's "plus" incentive share program
and acquire shares in BASF as a personal investment from their
variable compensation. For every 10 BASF shares purchased in the
program, a participant receives one BASF share at no cost after
one, three, five, seven and 10 years of holding these shares. As a
rule, the first and second block of 10 shares entitles the participant
to receive one BASF share at no extra cost in each of the next
10 years.
Lapsed entitlements
The "plus" incentive share program was introduced in 1999 and is
currently available to employees in Germany, other European
countries and Mexico. Simultaneous participation in both the "plus"
program and an LTI program is not permitted.
The same plan conditions generally apply to members of the Board
of Executive Directors. Unlike for senior executives, share ownership
obligation is not voluntary for the Board of Executive Directors and is
outlined in their service contracts.
The resulting LTI provision for Strive! totaled €11 million as of
December 31, 2020. As Strive! was offered for the first time in 2020,
it represents an addition to provisions. No provisions were allocated
to the disposal group.
The number of PSUs granted amounted to 767,308 in 2020. PSUs
vested by the deadline totaled 191,827 and were recognized at fair
value in the amount of €55.04 in 2020. Fair value is determined
using the BASF share price of €64.72 on the balance sheet date and
the dividend payment of €3.30 in 2020, plus expected dividend
payments during the term of the program. The weighted target
achievement degree of 92.50 % in 2020 is also taken into account.
A fluctuation rate of 4% is assumed in the fair value calculation.
Fair value / PSU
3.30
€
BASF "Plus" Incentive Share Program
As of December 31
2020
2019
309
BASF Report 2020
The free shares to be provided by the company are measured at the
fair value on the grant date. Fair value is determined on the basis of
the BASF share price, taking into account the present value of
dividends, which are not paid during the term of the program. The
weighted-average fair value on the grant date amounted to €45.30
for the 2020 program, and €68.21 for the 2019 program.
3,025,462
3,251,576
-133,466
For more information on the compensation of members of the Board of Executive Directors, see the
Compensation Report from page 183 onward
For more information on the members of the Supervisory Board and Board of Executive Directors,
including their memberships on other boards, see page 180 onward
BASF Report 2020
310
About This Report
-226,521
2,927,843
758,255
-527,170
-490,050
3,025,462
942,685
1 To Our Shareholders
Pension expenses
307
Participation in BOP is voluntary. In order to take part in the program,
a participant must make a personal investment: Participants are
required to hold BASF shares representing between 10% and 30%
of their respective variable compensation for a two-year period from
the granting of the option (holding period). The number of shares to
be held is determined by the amount of variable compensation and
the volume-weighted average market price of BASF shares on the
first trading day after the Annual Shareholders' Meeting, which was
€51.26 on June 19, 2020.
52b
146b
-524
-2,633
736
554
Personnel expenses
10,576
10,924
306
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
18,392
Notes
541
-140
284
-94
1
-455
-57
889
Other financing-related liabilities
1,478
1,391d
452
7
-107
-399°
134
526
1
2
122
Financial and similar liabilities
Number of employees
As of December 31, 2020, a total of 1,137 employees (2019:
96 employees) worked at joint operations. The rise was mainly due
to additions related to the aforementioned acquisition of Solvay's
polyamide business.
in
Other
effects
Currency from lease
effects contracts
Changes
Additions
Acquisitions/
divestitures/
changes in the
scope of
consolidation
financing
activities
cash flows from
Cash effective in
For more information on the statement of cash flows, see the Management's Report from page 65
onward
For more information on receivables and miscellaneous assets, see Note 18 from page 275 onward
For more information on liabilities, see Note 21 from page 279 onward
Assets/liabilities from hedging transactions form part of the
balance sheet items derivatives with positive and negative fair values
respectively and include only those transactions which hedge risks
arising from financial indebtedness and financing-related liabilities
secured by micro hedges.
Other financing-related liabilities primarily comprise liabilities from
accounts used for cash pooling with BASF companies not included
in the Consolidated Financial Statements. They are reported in
miscellaneous liabilities within the balance sheet item other liabilities
that qualify as financial instruments.
Loan liabilities do not contain any interest components.
The reconciliation according to IAS 7 breaks down the changes in
financial and similar liabilities and their hedging transactions into
cash-effective and non-cash-effective changes. The cash-effective
changes presented above correspond to the figures in cash flows
from financing activities.
As in the previous year, cash and cash equivalents were not subject
to any utilization restrictions.
Dec. 31,
2019a
fair value
As of December 31, 2020, the number of employees decreased to
110,302 employees compared with 117,628 employees as of
December 31, 2019. The decrease was due primarily to the sale of
the construction chemicals business, which affected around
7,500 employees. An offsetting factor was the acquisition of
Solvay's polyamide business due to which the BASF Group's
number of employees rose by around 1,200 people - including the
employees of the Butachimie SNC and Alsachimie S.A.S. joint
operations, both in Chalampé, France - which were counted on a
pro rata basis.
Financial indebtedness
Lease liabilities
In 2020, members of the Board of Executive Directors were granted
151,247 performance share units for the first time in connection with
the new LTI performance share plan, which led to an expense of
€2.9 million in 2020.
The development of the number of employees was distributed over
the regions as follows:
Number of employees as of December 31
Europe
of which Germany
North America
2019
2020
68,849
72,153
51,961
54,028
16,948
19,355
Asia Pacific
17,753
21,351
Loan liabilities
22,915
-2,967
-1,226
Moody's
Ratings as of December 31, 2019
Fitch
negative
A-1
A
Standard & Poor's
stable
P-2
A3
Moody's
F1
A
Outlook
Current
financial
indebtedness
Noncurrent
financial
indebtedness
Ratings as of December 31, 2020
Standard & Poor's
BASF prefers to access external financing on the capital markets. A
commercial paper program is used for short-term financing, while
corporate bonds are used for financing in the medium and long
term. These are issued in euros and other currencies with different
maturities. The goal is to create a balanced maturity profile, achieve
a diverse range of investors and optimize our debt capital financing
conditions.
Noncurrent
financial
indebtedness
A2
1,424
Social security contributions and assistance
expenses
8,825
8,416
Wages and salaries
2019
2020
Million €
BASF Report 2020
BASF currently has the following ratings, which were most recently
confirmed by Fitch on February 12, 2021, Moody's on Febru-
ary 12, 2021 and by Standard & Poor's on December 8, 2020.
For more information on BASF's financing policy, see the Management's Report from
page 64 onward
BASF strives to maintain a solid A rating, which ensures unrestricted
access to financial and capital markets.
stable
A-1
A
stable
P-1
Current
financial
indebtedness
The equity of the BASF Group as reported in the balance sheet
amounted to €34,398 million as of December 31, 2020 (Decem-
ber 31, 2019: €42,350 million); the equity ratio was 42.8% on
December 31, 2020 (December 31, 2019: 48.7%).
Capital structure management focuses on meeting the requirements
needed to ensure unrestricted access to the capital market and a
solid A rating. The capital structure is managed using selected
financial ratios, such as dynamic debt ratios, as part of the company's
financial planning.
The aim of capital structure management is to maintain the financial
flexibility needed to further develop BASF's business portfolio and
take advantage of strategic opportunities. The objectives of the
company's financing policy are to ensure solvency, limit financial
risks and optimize the cost of capital.
261
1,350
452
156
-1,226
-3,342
22,980
Total
-49
261
-375
65
Assets/liabilities from hedging transactions
20,680
1,350
452
156
20,631
a Balances as of December 31, 2019 and 2018 also include contributions reclassified to the disposal groups and therefore deviate from balance sheet values.
b In accordance with IAS 8, other effects were reclassified retroactively to currency effects in the amount of €105 million.
C
Lease payments totaled €441 million in 2019. The principal component in the amount of €399 million is presented in cash flows from financing activities. BASF reports interest payments in cash flows from operating activities;
this amounted to €42 million.
Capital structure management
Personnel expenses
The BASF Group's expenses for wages and salaries, social security
contributions and pensions and assistance in 2020 totaled
€10,576 million (2019: €10,924 million). This amount included
proportional personnel expenses for 2020 from the disposal group
for the construction chemicals business in the amount of €291 mil-
lion. In 2019, personnel expenses from the disposal groups for the
construction chemicals business and proportionally for the oil and
gas business totaled €557 million. The decrease in personnel
expenses was primarily due to lower bonus provisions and the lower
average number of employees which resulted, in particular, from the
divestiture of the construction chemicals business. A higher wage
and salary level as well as higher pension expenses because of
increased service costs had an offsetting effect.
Personnel expenses
28 Personnel expenses and employees
Outlook
stable
Notes
Non-cash-effective changes
5 Overviews
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
305
BASF Report 2020
d This included the effect from the initial application of IFRS 16 in the amount of €1,400 million.
4 Consolidated Financial Statements
BASF Report 2020
Dec. 31,
2018a
a Balances as of December 31, 2020 and 2019 also include contributions reclassified to the disposal groups and therefore deviate from balance sheet values.
b Lease payments totaled €453 million in 2020. The principal component in the amount of €415 million is presented in cash flows from financing activities. BASF reports interest payments in cash flows from operating activities; this
amounted to €38 million.
c That includes mainly disposals from lease contracts.
2020
Million €
Statement of cash flows
Cash flows from operating activities contained the following
payments:
Statement of cash flows
27 Statement of cash flows and capital structure
management
In connection with its catalyst production, BASF is exposed to
commodity price risks associated with holding physical precious
metal items. These production-related precious metal inventories
are hedged with forward contracts in accordance with a defined
hedging strategy. In 2020, a portion of these precious metal
inventories was designated for the first time to a fair value hedge
accounting relationship with forward contracts on the precious
metals. Changes in the forward rate were considered costs of
hedging, and €2 million was recognized in other comprehensive
income and reclassified successively to profit or loss, being a
time-period-related hedge. All hedging instruments expired in 2020.
The hedged precious metals were sold. Cash flows in connection
with the hedging instruments were recognized in profit or loss in
2020. All hedging relationships were fully effective.
The occurrence of all forecasted transactions was considered to be
highly probable at all times during fiscal years 2019 and 2020.
Amounts accumulated in the cash flow hedge reserve for commodity
price risks are derecognized against the carrying amount of acquired
assets once the hedged transaction occurs. Thus, there is no
immediate reclassification of the amounts recognized in the cash
flow hedge reserve to profit or loss in these cases.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
18,634
South America, Africa, Middle East
6,752
7,486
2019
BASF Group
Income taxes
-1,280
315
244
-655
-487
interest paid
175
146
of which interest received
-480
-341
Interest payments
-1,288
-868
income tax payments
8
273
of which income tax refunds
-595
Dividends received
110,302
of which apprentices and trainees
South America, Africa, Middle East
BASF Group
7,326
7,607
115,973
119,200
of which apprentices and trainees
temporary staff
2,821
2,811
2,518
2,922
Employees from joint operations are included in the average number
of employees relative to BASF's share in the company. On average,
these had a total of 1,055 employees (2019: 206 employees).
The BASF Group's average number of employees for 2020 included
5,400 employees from the disposal group for the construction
chemicals business (2019: 6,801 employees).
Share price-based compensation programs
The BASF Group offered its share price-based compensation
program (the long-term incentive (LTI) program) known as BOP
(BASF Option Program), which started in 1999, for the last time in
2020. Effective retroactively as of January 1, 2020, a new LTI
program known as Strive! - was also introduced in the form of a
performance share plan. Generally, members of the Board of
Executive Directors and all senior executives are entitled to
participate in the LTI programs.
BASF Option Program (BOP)
This program grants virtual option rights. When exercised, the option
rights are settled in cash.
In accordance with the program's deadline requirement,
approximately 1,100 people, in particular members of the Board of
Executive Directors and senior executives, were eligible to participate
in the BOP program as of April 1, 2020. Around 90% of those
eligible participated.
18,843
117,628
18,719
19,624
3,120
3,161
temporary staff
2,128
2,606
The average number of employees was distributed over the regions 29 Share price-based compensation programs
as follows:
and BASF incentive share program
Average number of employees
Europe
of which Germany
North America
2020
2019
71,329
73,126
53,080
54,722
18,599
Asia Pacific
In 2020, BASF SE transferred securities in the amount of €401 mil-
lion (2019: €300 million) to BASF Pensionstreuhand e.V., Lud-
wigshafen am Rhein, Germany. This transfer was not cash effective
and therefore had no effect on the statement of cash flows.
Cash flows from investing activities included €1,240 million in
payments made for acquisitions for the polyamide business acquired
from Solvay (2019: €239 million for various transactions).
In 2020, payments received for divestitures arose in the amount of
€2,520 million due to the sale of the construction chemicals
business. These included tax payments in the amount of €150 mil-
lion that were directly associated with the transaction. In 2019,
payments received for divestitures recognized in the amount of
€2,600 million were mainly due to the merger of the oil and gas
businesses of Wintershall and DEA. The effects of the deconsolida-
tion of the Wintershall companies and the simultaneous recognition
1,209
20,680
Financial and similar liabilities
-3
-19
-36
284
Other financing-related liabilities
1,369
-74°
519
-85
-54
-415b
1,478
559
1
-90
-3
-875
-73
-43
228
2.
21,327
-365
-73
519
-875
-90
1,580
20,631
Total
-365
371
-49
Assets/liabilities from hedging transactions
21,370
519
-10
45
526
Financial indebtedness
Million €
Reconciliation according to IAS 7 for 2020
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
304
BASF Report 2020
Cash and cash equivalents in the amount of €4,335 million reported
in the statement of cash flows as of December 31, 2020, consisted
of the balance sheet value (€4,330 million) and the value reclassified
to the pigments business disposal group (€5 million). Cash and cash
equivalents in the amount of €2,455 million reported in the statement
of cash flows as of December 31, 2019, consisted of the balance
sheet value (€2,427 million) and the values reclassified to the dis-
posal groups for the construction chemicals business (€21 million)
and the pigments business (€7 million). At the beginning of the 2019
reporting period, the cash and cash equivalents of the oil and gas
business (€219 million) were reclassified to the disposal group.
For more information on the contribution of discontinued operations on BASF's statement of cash
flows, see Note 3 from page 235 onward
Cash and cash equivalents consist primarily of cash on hand and
bank balances with maturities of less than three months.
Payments made for property, plant and equipment and intangible
assets amounted to €3,129 million, €695 million lower than in the
previous year.
For more information on acquisitions and divestitures, see Note 3 from page 235 onward
of the equity-accounted interest in Wintershall Dea GmbH offset
each other. The only effect on cash was the outflow of cash and
cash equivalents in the amount of €800 million, as well as the
repayment of BASF SE's open finance-related receivables against
the Wintershall Dea group and capital decreases at Wintershall
Dea GmbH, Kassel/Hamburg, Germany, in the total amount of
€3.2 billion. In connection with the transfer of the paper and water
chemicals business to the Solenis group in the first quarter of 2019,
the majority of the purchase price was settled with the contribution
of the interest in Solenis UK International Limited, London, United
Kingdom (€590 million). The rest of the purchase price (€178 million)
was recognized in cash.
Loan liabilities
Lease liabilities
Dec. 31,
2019a
Acquisitions/
divestitures/
changes in the
3
-789
-7
1,615
18,392
fair value
in
Other
effects
Reconciliation according to IAS 7 for 2019
Million €
Currency from lease
effects contracts
activities
financing
Changes
Additions
Cash effective in
cash flows from
19,214
Dec. 31,
2020a
Non-cash-effective changes
scope of
consolidation
€1.1 million in 2020. In 2019, option rights led to an expense in the
amount of €3.0 million.
Income
statement item
303
5
-48
94
Other financial
income
90
102
n/a
Commodity price risks
7
0
Other receivables and
miscellaneous assets/
65
5
9
n/a
5
5
n/a
other liabilities
Total
132
920
0
Other receivables and
miscellaneous assets
90
Foreign currency risks
35
Other receivables and
miscellaneous assets
1,142
27
114
-77
Other
operating in-
come/income
from discontin-
ued operations
27
27
n/a
Interest in-
Interest risks
Other liabilities
-3
4
0
0
n/a
come
Combined interest/
foreign currency risks
Ineffective-
ness amount
2,127
72
Hedging
instrument
Hedged
transaction
Ineffective-
Income
ness amount statement item
10
7
0
Other
operating
10
10
n/a
income
Interest
Interest risks
Other liabilities
300
4
n/a
income
Combined interest/
Income
statement
item for
recognition
of reclassifi-
cation
37
reclassified to
profit or loss for
realized hedging
transactions
733
About This Report
122
134
Cash flow hedge accounting effects in 2019
Million €
Carrying amount of hedging instruments
Cash flow hedge reserve
Change in fair values for assessing
ineffectiveness
Recognized ineffectiveness
Foreign currency risks
18
Accumulated
amounts for
Financial
assets
Financial
liabilities
Nominal
Balance sheet item
value
continuing
hedging
relationships
Hedging effects
recognized in
other
comprehensive
income
Other receivables and
miscellaneous assets
Amounts
138
Hedged
transaction
cation
December 31, 2020
December 31, 2019
10
26
35
22
45
48
35
18
-4
-4
-163
60
90
138
-163
56
-321
7
-439
Furthermore, cash flow hedge accounting continued to be employed
to a minor extent for procuring natural gas, which is likewise exposed
-186
BASF is exposed to commodity price risks in the context of procuring
naphtha. Some of the planned purchases of naphtha are hedged
using swaps and options on oil and oil products. The main
contractual elements of these items are aligned with the
characteristics of the hedged item. Cash flow hedge accounting
was employed for a portion of these hedging relationships in 2020
and 2019. The average exercise price of the designated options
was $454.45 per metric ton as of December 31, 2020 (Decem-
ber 31, 2019: $529.53 per metric ton). Cash flows from designated
hedging instruments and hedged transactions occur in the following
year and are also recognized in profit or loss for that year.
The fair values of derivative financial instruments are calculated
using valuation models that use input parameters observable on the
market. Exceptions to this are some commodity derivatives, whose
valuation is based directly on market prices.
1
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
26.5 Derivative financial instruments and hedge accounting
The use of derivative financial instruments
BASF is exposed to foreign currency, interest rate and commodity
price risks during the normal course of business. These risks are
hedged using derivative instruments as necessary in accordance
with a centrally determined strategy. Hedging is employed for
existing underlying transactions from the product business, cash
investments and financing as well as for planned sales, raw material
purchases and capital measures. Furthermore, hedging is also used
for cash flows from acquisitions and divestitures. The risks from the
hedged items and the derivatives are continually monitored. Where
derivatives have a positive market value, BASF is exposed to credit
risks from derivative transactions in the event of nonperformance of
the other party. To minimize the default risk on derivatives with
positive market values, transactions are exclusively conducted with
creditworthy banks and partners and are subject to predefined
credit limits.
Fair value of derivative instruments
Million €
Foreign currency forward contracts
Foreign currency options
Foreign currency derivatives
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Interest rate swaps
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Combined interest rate and currency swaps
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Interest derivatives
Commodity derivatives
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Derivative financial instruments
To ensure efficient risk management, risk positions are centralized at Hedge accounting
BASF SE and certain Group companies. The contracting and
execution of derivative financial instruments for hedging purposes
are conducted according to internal guidelines, and subject to strict
control mechanisms.
In addition to the derivative instruments presented in the following
table, BASF also has derivatives that are embedded in other financial
instruments. This primarily relates to options embedded in a loan on
the borrower's equity instruments. The fair value of these derivatives
was €33 million as of December 31, 2020.
Hedging
instrument
6
to commodity price risks. Commodity price-based options serve as
hedging instruments, for which contract terms are defined to reflect
the risks of the hedged item. Depending on where trading took
place, the average exercise price of the designated options was
€13.35 per MWh or $2.7410 per mmBtu as of December 31, 2020.
The average exercise price of the designated options was $2.4539
per mmBtu as of December 31, 2019. Cash flows from the hedging
transaction and hedged item are generally recognized in profit or
loss for the following year.
Notes
Cash flow hedge accounting effects in 2020
Million €
Carrying amount of hedging instruments
Cash flow hedge reserve
Change in fair values for assessing
ineffectiveness
Recognized ineffectiveness
Accumulated
amounts for
continuing
Hedging effects
recognized in
other
Financial
assets
Financial
liabilities
Nominal
Balance sheet item
value
hedging
relationships
comprehensive
income
Amounts
reclassified to
profit or loss for
realized hedging
transactions
Income
statement
item for
recognition
of reclassifi-
5 Overviews
-82
4 Consolidated Financial Statements
2 Management's Report
The change in the options' time value is recognized separately in
equity as costs of transaction-related hedging and, in the year
during which the hedged items mature, it is initially derecognized
against the carrying amount of the procured assets and recognized
in profit or loss when the assets are consumed. In 2020, a decrease
in fair value of €17 million was recognized in equity attributable to
BASF Report 2020
301
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Notes
shareholders of BASF SE, and €13 million was initially derecognized
against the carrying amount of the inventories procured and then
recognized for their use in profit or loss. In 2019, a decrease in fair
value of €3 million was recognized in equity attributable to
shareholders of BASF SE, and €2 million was derecognized against
the carrying amount of the assets.
BASF's planned soybean procurement is also exposed to commodity
price risks. These commodity price risks are hedged with soybean
futures. The contractual conditions for these hedging transactions
correspond to the respective hedged item, and some are designated
as cash flow hedge accounting relationships. The average price
hedged using these instruments was $12.5175 per bushel as of
December 31, 2020 (December 31, 2019: $9.4559 per bushel).
Cash flows from these futures and the hedged expected future
transactions are generally recognized in profit or loss for the following
year.
BASF is exposed to foreign currency risks due to planned sales in
U.S. dollars. To some extent, cash flow hedge accounting is applied
using currency options. The hedged transaction - the designated
share of expected sales in U.S. dollars - is calculated based on
internal thresholds. The hedged volume is always below the total
amount of expected sales in U.S. dollars for the following fiscal year.
The average hedged rate was $1.1583 per euro as of Decem-
ber 31, 2020, and $1.1105 per euro in the previous year. The impact
on earnings from designated transactions in 2020 will be recognized
in the following year. The decrease in the options' time value
component arising in the amount of €30 million in 2020 was
recognized separately in equity as the cost of hedging and resulted
in a reduction in equity. Accumulated changes in the options' time
values were reclassified to profit or loss due to the maturity of
hedged items in the amount of €34 million. In 2019, -€38 million
was recognized separately in equity as a change in the options' time
value component, and €35 million was reclassified to profit or loss.
The interest rate risk of the variable-rate bonds issued by BASF SE
in 2013 was hedged using interest rate swaps, which converted the
bonds into fixed-interest rate bonds with a rate of 1.45%. The key
terms of the interest rate swap contracts used as hedging
instruments generally correspond to the contractual elements of the
hedged item. The bond and the interest rate swaps were designated
to hedge accounting. The hedge relationship ended in 2020 due to
maturity of the hedging transaction and hedged item.
Furthermore, BASF SE's fixed-rate U.S. private placement of
$1.25 billion, issued in 2013, was converted to euros using
cross-currency swaps, as the private placement exposes BASF to a
combined interest/currency risk. The hedged interest rate was
4.13% in the fiscal years 2020 and 2019. The hedged foreign
exchange rate in both years was $1.3589 per euro. This hedge was
designated as a cash flow hedge.
In 2020, the expected sale price associated with the disposal of the
construction chemicals and pigments businesses was partially
hedged against exchange rate fluctuations. The occurrence of the
hedged transactions was, due to contractual agreements,
considered highly probable; and the transactions and derivatives
used for hedging were designated to a cash flow hedge accounting
relationship. The hedge was initially achieved through foreign
currency forward contracts and, following the discontinuation of this
hedging relationship, with foreign currency options. Both cases
were transaction-related hedges. The change in the forward rate
and the change in the time value component are recognized as
hedging costs at a point in time. These costs were recognized in
BASF Group equity in the amount of -€18 million Due to the sale of
the construction chemicals business as of September 30, 2020,
€11 million was reclassified to profit or loss and included in disposal
gains from the discontinued construction chemicals business.
There was no ineffectiveness at any time during the year. The
average hedged rate was $1.1964 per euro as of Decem-
ber 31, 2020.
The effects of the hedging relationships on the balance sheet, the
cash flow hedge reserve, hedged nominal value and ineffectiveness
to be determined are presented in the following tables by fiscal year.
BASF Report 2020
302
About This Report
1 To Our Shareholders
3 Corporate Governance
foreign currency risks
21
To Our Shareholders
BASF Report 2020
-26
2,076
4
Total
n/a
2
2
n/a
4
2
123
68
Other receivables and
miscellaneous assets /
other liabilities
6
Commodity price risks
income
n/a
149
138
-21
58
-37
920
Other financial
Other receivables and
miscellaneous assets
0
-17
162
165
154
4
5.00
4.83
6.44c
5.87
4.00
3.21
2017
2016
2015
5.44
2013b
2012ª
2011
Key data
Million €
5 Overviews
Ten-Year Summary
Consolidated Financial Statements
3 Corporate Governance
2014
5.31
6.26
2018
2019
2020
Earnings per share
€
2 Management's Report
6.74
5.25
5.64
5.22
4.34
4.42
6.62°
5.12
9.17
-1.15
Adjusted earnings per share
€
5.61
Cash flows from operating activities
1 To Our Shareholders
314
2,631
2,770
3,600
3,691
3,586
3,155d
2,594
3,408
Number of employees
At year-end
Annual average
Personnel expenses
111,141
110,403
5,189
2,618
6,685
4,146
5,742
4,377
4,028
5,040
3,842
4,075
Depreciation and amortization of property, plant and equipment and intangible assets
of which property, plant and equipment
3,407
3,267
3,272
3,417
4,401
4,251
4,202
3,750d
110,782
109,969
112,206
113,292
111,844
Research and development expenses
1,605
1,732
1,849
1,884
1,953
1,863
1,843°
1,994d
2,158
2,086
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
c Figures for 2017 were restated with the presentation of the oil and gas activities as discontinued operations.
d Figures for 2018 were restated with the presentation of the construction chemicals activities as discontinued operations.
BASF Report 2020
10,576
About This Report
10,924
10,610
112,644
112,435
113,249
113,830
111,975
115,490
114,333
122,404
118,371
117,628
119,200
110,302
115,973
8,576
8,963
9,285
9,224
9,982
10,165
10,659
7,105
15.1
8,100
Exploration
Exploration refers to the search for mineral resources, such as crude
oil or natural gas, in the Earth's crust. The exploration process
involves using suitable geophysical methods to find structures that
may contain oil and gas, then proving a possible discovery by means
of exploratory drilling.
F
Formulation
Formulation describes the combination of one or more active sub-
stances with excipients like emulsifiers, stabilizers and other inactive
components in order to improve the applicability and effectiveness
of various products, such as cosmetics, pharmaceuticals, agricul-
tural chemicals, paints and coatings.
Free cash flow
Free cash flow is the cash flows from operating activities less
payments made for property, plant and equipment and intangible
assets.
G
Genome editing
Genome editing refers to a series of new molecular biological
methods to make specific changes in the genome. Naturally occur-
ring processes are used to make small changes to an organism's
genes to modify a specific characteristic. Such techniques have
great potential for innovative solutions in healthcare, agriculture and
industrial applications, for example.
Global Product Strategy (GPS)
The Global Product Strategy aims to establish global product stew-
ardship standards and practices for companies. The program aims
to improve the safety management of chemical substances and
to support governments in the introduction of local chemical
regulations.
Global Reporting Initiative (GRI)
The Global Reporting Initiative is a multistakeholder organization.
It was established in 1997 with the aim of developing a guideline
for companies' and organizations' voluntary reporting on their eco-
nomic, environmental and social activities.
Greenhouse Gas Protocol (GHG Protocol)
The Greenhouse Gas Protocol, used by many companies in different
sectors as well as nongovernmental organizations and govern-
ments, is a globally recognized standard to quantify and manage
greenhouse gas emissions. The reporting standards and recom-
mendations for implementing projects to reduce emissions are
jointly developed by companies, nongovernmental organizations
and governments under the guidance of the World Resources Insti-
tute and the World Business Council for Sustainable Development.
BASF Report 2020
319
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Glossary and Trademarks
H
The European Water Stewardship (EWS) Standard enables busi-
nesses and agriculture to assess the sustainability of their water
management practices. The criteria are sustainable water abstrac-
tion, maintaining good water quality, preserving conservation areas,
and ensuring continuous improvement processes. The EWS stan-
dard came into force at the end of 2011 and was developed
by nongovernmental organizations, governments and businesses
under the direction of the independent organization European Water
Partnership (EWP).
European Water Stewardship (EWS) Standard
The equity method is used to account for shareholdings in joint
ventures and associated companies. Based on the acquisition costs
of the shareholding as of the acquisition date, the carrying amount
is continuously adjusted to the changes in equity of the company in
which the share is held.
Equity method
D
Dodd-Frank Act
The Dodd-Frank Act issued in 2010 comprises accounting and
disclosure obligations for publicly listed U.S. companies regarding
the use of certain raw materials that come from the Democratic
Republic of the Congo or its bordering countries. The companies
must prove that the materials they use do not come from mines in
these conflict areas. The definition of conflict minerals as per the
Dodd-Frank Act includes the following materials and their deriva-
tives: columbite-tantalite (coltan), cassiterite, wolframite and gold.
Due diligence
An ongoing risk management process to identify and avoid negative
impacts on and by a company (for example, through human rights
violations in the supply chain).
BASF Report 2020
318
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Health Performance Index (HPI)
4
5 Overviews
Glossary and Trademarks
E
EBIT
Earnings before interest and taxes (EBIT): At BASF, EBIT corre-
sponds to income from operations.
EBITDA
Earnings before interest, taxes, depreciation and amortization
(EBITDA): At BASF, EBITDA corresponds to income from operations
before depreciation and amortization (impairments and reversals of
impairments).
EBITDA margin
The EBITDA margin is the margin that we earn on sales from our
operating activities before depreciation and amortization as a
percentage of EBITDA. It is calculated as income from operations
before depreciation, amortization, impairments and reversals of
impairments as a percentage of sales.
Eco-Efficiency Analysis
The Eco-Efficiency Analysis is a method developed by BASF for
assessing the economic and environmental aspects of products
and processes. The aim is to compare products with regard to
profitability and environmental compatibility.
Emerging markets
We define the emerging markets as Greater China, the ASEAN
countries (Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos,
the Philippines, Singapore, Thailand, Vietnam), India, Pakistan and
Bangladesh; Central America including Mexico and South America;
eastern Europe; the Middle East, Turkey and Africa.
Consolidated Financial Statements
The Health Performance Index is an indicator developed by BASF
to provide more detailed insight into our approach to health man-
agement. It comprises five components: recognized occupational
diseases, medical emergency drills, first aid, preventive medicine
and health promotion.
IAS
IAS stands for International Accounting Standards.
8.7
11.7
11.5
11.0
16.1
%
Return on assets
11.0
13.8
14.9d
17.6°
18.3
8.2
6,369
14.1
13.9
16.3
%
EBITDA margin
5,413
7,474
7,939
8,785
7,717
9,446
6,958
14.9
6,602
320
BASF uses a materiality analysis to identify and assess sustainability
topics. This considers the expectations and demands of external
stakeholders, as well as the expertise of members of the Stake-
holder Advisory Council. Assessments prepared by our employees
from various units are also taken into account. An analysis of various
data sources expands on and verifies these findings.
IFRS
The International Financial Reporting Standards (until 2001: Interna-
tional Accounting Standards, IAS) are developed and published by
the International Accounting Standards Board, headquartered in
London, United Kingdom. The "IAS Regulation” made the applica-
tion of IFRSS mandatory for listed companies headquartered in the
European Union starting in 2005.
ILO Core Labor Standards
The ILO Core Labor Standards are set out in a declaration of the
International Labor Organization (ILO), comprising eight conventions
that set minimum requirements for decent working conditions.
ISO 9001
ISO 9001 is an international standard developed by the International
Organization for Standardization (ISO) that determines minimum
requirements for a quality management system for voluntary
certification.
ISO 14001
ISO 14001 is an international standard developed by the Interna-
tional Organization for Standardization (ISO) that determines the
general requirements for an environmental management system for
voluntary certification.
ISO 19011
5,509
ISO 27001
ISO 27001 is an international standard developed by the Interna-
tional Organization for Standardization (ISO) that determines the
general requirements for an information security management
system for voluntary certification.
BASF Report 2020
ISO 50001
J
Joint arrangement
A joint arrangement refers to joint ventures and joint operations, and
describes a jointly controlled arrangement of two or more parties.
This arrangement exists if decisions about relevant activities require
the unanimous consent of all parties sharing control.
Joint operation
A joint operation is a joint arrangement in which the parties that
share control have direct rights to the assets and liabilities relating
to the arrangement. For joint operations, the proportional share
of assets, liabilities, income and expenses are reported in the
BASF Group Consolidated Financial Statements.
Joint venture
A joint venture is a joint arrangement in which the parties that have
joint control of a legally independent entity have rights to the net
assets of that arrangement. Joint ventures are accounted for using
the equity method in the BASF Group Consolidated Financial
Statements.
L
Long-term incentive program (LTI)
The long-term incentive is a share price-based compensation
program primarily for senior executives of the BASF Group and
members of the Board of Executive Directors. Among other things,
the program aims to tie a portion of the participants' annual
compensation to the long-term performance of BASF shares by
having the senior executives make an individual investment in the
company's stock. The introduction of the new LTI also incentivizes
the achievement of strategic growth, profitability and sustainability
targets.
M
Materiality analysis
ISO 50001 is an international standard developed by the Inter-
national Organization for Standardization (ISO) that determines
the general requirements for an energy management system for
voluntary certification.
We understand customers as all external companies (sold-to par-
ties) that had contracts with the BASF Group in the business year
concerned under which sales were generated.
6,428
3,199
Obligations arising from purchase contracts with joint ventures
amounted to €6 million as of December 31, 2020, and €4 million as
of December 31, 2019.
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
311
BASF Report 2020
lion), and in favor of associated companies in the amount of €28 mil-
lion as of December 31, 2020 (December 31, 2019: €36 million).
For more information on off-balance sheet financial obligations in connection with joint ventures,
see Note 25 on page 291
BASF had obligations from guarantees and other financial obliga-
tions in favor of nonconsolidated subsidiaries in the amount of
€8 million as of December 31, 2020 (December 31, 2019: €10 mil-
December 31, 2019 to €3 million as of December 31, 2020.
The balance of valuation allowances on other receivables from
nonconsolidated subsidiaries rose from €23 million as of Decem-
ber 31, 2019 to €105 million as of December 31, 2020. Of this
amount, €32 million was recognized as an expense.
The balance of valuation allowances on trade accounts receivable
Balances outstanding to related parties were generally not hedged from nonconsolidated subsidiaries rose from €2 million as of
and were settled in cash.
345
240
57
55
92
62
80
47
219
198
December 31, 2019
December 31, 2020
December 31, 2019
285
Annual minimum rental payments for an office building including a
parking area payable by BASF SE to BASF Pensionskasse VaG for
the nonterminable basic rental period until 2029 amounted to
€6 million.
BASF SE had other finance-related receivables from BASF Pensions-
kasse WaG in the amount of €3 million as of December 31, 2020.
Prof. Dr. Thomas Carell, member of BASF SE's Supervisory Board,
has a minor business relationship with the BASF Group in the form
of a shareholding in two start-up companies in the biochemicals
business, specifically DNA and RNA technologies. He holds 10.04%
in baseclick GmbH, in which BASF SE holds an indirect share
through its subsidiary, BASF Venture Capital GmbH, of 67.23%, and
4.2% in baseclick Vaccine GmbH, in which BASF SE holds an
indirect share of 51.4%. Additionally, as its shareholder, Prof. Dr.
Thomas Carell granted baseclick GmbH a loan in the amount of
€30,000.
There were no further reportable related party transactions with
members of the Board of Executive Directors or the Supervisory
Board and their related parties in 2020.
0
0.2
0.2
0.5
0.8
0.7
1.0
6.8
7.1
19.7
19.6
2019
2020
of which domestic
192
Total
of which domestic
Tax consultation services
of which domestic
Audit-related services
of which domestic
Annual audit
Million €
Services provided by the external auditor
BASF Group companies used the following services from KPMG:
32 Services provided by the external auditor
For more information on the members of the Board of Executive Directors and the Supervisory
Board, see Management and Supervisory Boards and Compensation Report from page 180 onward
from page 282 onward
For more information about defined benefit plants, the division of risk between Group companies,
see Provisions for pensions and similar obligations
For more information on subsidiaries, joint ventures and associated companies, see the 2020
BASF Group list of shares held on page 241
Other services
20.8
December 31, 2020
Other receivables
921
636
691
December 31, 2019
December 31, 2020
December 31, 2019
December 31, 2020
Services received
Services rendered
Associated companies
Joint ventures
Nonconsolidated subsidiaries
Million €
Sales to related parties
The decline in other receivables from nonconsolidated subsidiaries
resulted primarily from other finance-related receivables; and the
decline in other liabilities to associated companies was due mainly
to other finance-related and contract liabilities.
Other receivables and liabilities primarily arose from financing
activities, from accounts used for cash pooling, outstanding dividend
payments, profit and loss transfer agreements, and other finance-
related and operating activities and transactions.
Sales and trade accounts receivable from and trade accounts
payable to related parties mainly included business with own
products and merchandise, agency and licensing businesses, and
other operating businesses.
The following tables show the volume of business with related
parties that are included in the Consolidated Financial Statements at
amortized cost or accounted for using the equity method. The
values include sales, receivables, other receivables, liabilities and
other liabilities with respect to the disposal groups and/or
discontinued operations.
Related parties are legal or natural entities that can exert influence
on the BASF Group or over which the BASF Group exercises control
or joint control, or a significant influence. These primarily include
nonconsolidated subsidiaries, joint ventures and associated
companies.
Related party transactions
31
Notes
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
To Our Shareholders
1
About This Report
617
295
935
233
785
54
43
129
64
122
136
80
149
136
98
193
213
December 31, 2019
December 31, 2020
Other liabilities
December 31, 2019
Accounts
payable, trade
Accounts
receivable, trade
Associated companies
Joint ventures
Nonconsolidated subsidiaries
Other receivables from liabilities to related parties
Million €
Associated companies
Joint ventures
Nonconsolidated subsidiaries
Trade accounts receivable from / trade accounts payable to related parties
Million €
811
586
583
432
December 31, 2020
20.6
The services provided by the external auditor mainly include services
for the annual audit and, to a lesser extent, confirmation services
and tax consultation services.
The line item annual audit relates to expenses for the audit of the
Consolidated Financial Statements of the BASF Group, the legally
required financial statements of BASF SE and of the subsidiaries
and joint operations included in the Consolidated Financial
Statements as well as the voluntary audit of subgroups. Fees for
other services primarily include audits in connection with regulatory
demands as well as other confirmation services. Domestic tax
consultation services related primarily to tax declaration adjustments
for the Chemetall companies until the 2015 tax period.
Income from operations before depreciation and amortization (EBITDA)
-1,060
8,421
4,707
6,078
4,056
3,987
5,155
4,792
4,819
6,188
Net income
-1,075
8,491
4,979
6,352
4,255
4,301
5,492
5,113
5,067
6,603
Income after taxes
396
5,945
863d
760
Income after taxes from discontinued operations
-1,471
11,993
10,009
10,432
11,043
of which property, plant and equipment
4,869
4,097
10,735
4,364
7,258
6,013
7,285
7,726
5,263
3,646
Additions to property, plant and equipment and intangible assets
Capital expenditures, depreciation and amortization
3,560
2,546
4,643
7,645°
6,309
6,739
7,357
7,077
6,647
8,447
EBIT before special items
6,494
8,185
8,970d
10,765°
10,526
10,649
6,281d
4,116d
5,592
Income after taxes from continuing operations
2020
2019
2018
2017
2016
2015
2014
2013b
2012a
2011
5 Overviews
Ten-Year Summary
Million €
Ten-Year Summary
4 Consolidated Financial Statements
Statement of income
3 Corporate Governance
1 To Our Shareholders
About This Report
318
314
Glossary and Trademarks
Ten-Year Summary
Overviews
5
Chapter 5 pages 313-323
312
BASF Report 2020
The annual Declaration of Conformity with the German Corporate
Governance Code according to section 161 AktG was submitted by
the Board of Executive Directors and the Supervisory Board of
BASF SE in December 2020 and is published online.
For more information, see basf.com/en/corporate governance
Declaration pursuant to section 161 of the German Stock
Corporation Act (AktG)
33 Declaration of Conformity with the German
Corporate Governance Code
2 Management's Report
4,084
Sales
Income before income taxes
-1,562
3,302
5,233d
6,882€
5,395
5,548
7,203
6,600
5,977
8,970
-191
4,201
5,974d
7,587c
Income from operations (EBIT)
6,275
7,626
7,160
6,742
8,586
59,149
59,316
60,220d
61,223°
57,550
70,449
74,326
73,973
72,129
73,497
6,248
Customers
2,497
Compliance
1,176
1,176
1,176
1,176
2020
2019
2018
2017
2016
2015
2014
2013b
2012a
2011
Equity
Noncontrolling interests
Other comprehensive income
Retained earnings
Capital reserves
Subscribed capital
Million €
Balance sheet (IFRS)
5 Overviews
Ten-Year Summary
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Compliance is an important element of corporate governance. It
refers to the company's behavior in accordance with laws, guide-
lines and voluntary codices.
About This Report
1,176
1,176
1,176
1,176
-5,939
-5,282
-4,014
-3,521
-5,482
-3,400
-3,461
314
37,911
42,056
36,699
34,826
31,515
30,120
316
28,777
23,708
19,446
3,115
3,115
3,118
3,117
3,130
3,141
3,143
3,165
3,188
3,203
1,176
1,176
26,102
-4,850
BASF Report 2020
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
1,718
1,827
1,647
2,048
Cash and cash equivalents
207
444
344
52
536
21
19
17
14
19
Marketable securities
4,673
3,790
3,139
3,494
3,078
3,095
4,032
3,714
3,455
3,781
Other receivables and miscellaneous assets
9,466
9,093
2,241
1,375
6,495
2,300
80,292
86,950
86,556
78,768
76,496
70,836
71,359
64,204
62,726
61,175
Assets
29,868
30,990
43,221
c As of January 1, 2018, receivables from bank acceptance drafts are no longer reported under trade accounts receivable, but under the item other receivables and other assets. The 2017 figures have been restated accordingly.
31,145
24,566
27,420
25,951
27,467
27,088
Current assets
1,182
4,013
14,607
3,264
295
Assets of disposal groups
4,330
2,427
25,946
-8,474
1,246
1,010
4,502
5,121
Current liabilities
Liabilities of disposal groups
Other liabilities
Financial indebtedness
Tax liabilities
Provisions
Accounts payable, trade
29,614
27,996
27,118
29,132
28,611
25,055
27,271
22,192
20,395
19,313
1,711
1,678
705
1,095
873
869
1,197
1,194
1,111
1,142
5,153
4,861
4,020
4,610
3,767
4,074
3,545
3,256
4,094
3,985
988
756
695
1,119
1,288
1,082
1,079
968
15,819
870
2,825
2,938
3,252
3,229
2,802
2,540
2,844
2,670
2,628
3,210
5,291
5,087
5,122
4,971
1,038
15,015
15,332
15,535
Deferred tax liabilities
8,566
7,683
7,434
6,293
8,209
6,313
7,313
3,727
5,421
3,189
Provisions for pensions and similar obligations
34,398
42,350
2,628
36,109
32,568
31,545
28,195
27,673
25,621
25,385
670
853
1,055
919
761
629
581
630
34,756
10,665
2,234
3,420
12,545
11,123
11,839
11,151
8,704
9,019
1,484
1,340
1,301
3,478
3,667
3,369
3,502
3,226
2,894
2,925
Noncurrent liabilities
Other liabilities
Financial indebtedness
Other provisions
587
516
559
Tax provisions
1,447
1,764
1,787
2,731
3,317
3,381
3,335
10,801
1 To Our Shareholders
9,516
7.7
12.0d
15.4
%
Return on capital employed (ROCE)
-2.8
21.6
14.1
18.9
13.3
14.4
19.7
19.2
19.9
27.5
%
Return on equity after tax
-1.2
4.5
7.1
9.5°
3,362
3,395
3,036
2,623
2,292
3,564
2,520
2,850
1.7
Appropriation of profits
Net income of BASF SE
Dividend
3.10
3.00
2.90
2.80
2.70
2.60
2.50
€
3,031
3,031
2,939
2,847
2,755
2,664
3,064
2,572
2,388
2,296
3,946
3,899
2,982
3,130
2,808
2,158
5,853
2,826
2,880
3,506
Number of shares as of December 31
Dividend per share
2,480
3.20
2,998
3,440
4
Consolidated Financial Statements
5 Overviews
Glossary and Trademarks
Glossary and
Trademarks
A
AgBalance®
AgBalance® is a method to measure and assess sustainability in
agriculture. BASF developed the method based on its many years of
experience with the Eco-Efficiency Analysis and SEEBalanceⓇ and in
cooperation with customers and experts.
Associated companies
Associated companies are entities that are not subsidiaries, joint
ventures or joint operations, and over whose operating and financial
policies significant influence can be exercised. In general, this
applies to companies in which BASF has an investment of between
20% and 50%.
B
Barrel of oil equivalent (BOE)
A barrel of oil equivalent (BOE) is an international unit of measure-
ment for comparing the energy content of different fuels. It is equal
to one barrel of crude oil, or 6,000 cubic feet (169 cubic meters) of
natural gas.
Biotechnology
Biotechnology includes all processes and products that make use
of living organisms, including plants, bacteria and yeasts, or their
cellular constituents, such as enzymes.
C
Capital expenditures (capex)
We define capex as additions to property, plant and equipment
excluding additions from acquisitions, IT investments, restoration
obligations and right-of-use assets arising from leases.
Carbon management
Carbon management bundles our global activities and a long-term
research and development program to reduce our greenhouse gas
emissions. The objective is to achieve our climate protection target
and set the course for low-carbon chemical production.
CDP
The international nonprofit organization CDP (formerly the Carbon
Disclosure Project) analyzes environmental data of companies. The
CDP's indexes serve as assessment tools for investors.
Circular economy
The circular economy concept describes the transition away from a
linear model of "take-make-dispose" to a system of closed loops
powered by renewable energy. The core elements of a circular
economy include reusing resources, avoiding waste and optimizing
product features with respect to the entire product life cycle.
CO2 equivalents
CO2 equivalents are units for measuring the impact of greenhouse
gas emissions on the greenhouse effect. A factor known as the
global warming potential (GWP) shows the impact of the individual
gases compared with CO2 as the reference value.
Commercial paper program
The commercial paper program is a framework agreement between
BASF and banks regarding the issuing of debt obligations on the
financial market (commercial paper). The commercial paper is
issued under a rolling program for which the terms can be deter-
mined individually. This requires a good rating.
Competency Model
BASF's Competency Model is derived from our corporate strategy
and our values and translates these into specific day-to-day behav-
ioral standards. It is applicable worldwide, creating a common
framework for the conduct of all BASF employees and leaders to
enable us to reach our shared goals. The eight competencies are:
Drive Innovation, Collaborate for Achievement, Embrace Diversity,
Communicate Effectively, Drive Sustainable Solutions, Develop Self
and Others, Act with Entrepreneurial Drive, Demonstrate Customer
Focus.
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
87
10,952
5,753
1,034
341
16,477
16,710
14,339
15,893
14,236
15,317
14,880
23,329
16,604
3,427
16,280
61,175
62,726
64,204
71,359
70,836
76,496
78,768
86,556
86,950
80,292
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
c Tax provisions are reported separately as of January 1, 2020. Figures for the years 2018 and 2019 have been restated. In 2017 and earlier, tax provisions are included in other provisions.
BASF Report 2020
317
Equity and liabilities
3.30
1,993
million
1,498
877
911
561
Other receivables and miscellaneous assets
3,386
2,887
2,342
2,118
2,513
1,791
2,193
1,006
1,473
1,720
941
582
636
570
606
605
526
540
643
613
848
Other financial assets
10,874
13,123
Non-integral investments accounted for using the equity method
Deferred tax assets
1,878
1,210
886
3.30
10,385
10,233
9,506
10,886
Accounts receivable, trade
10,010
11,223
12,166
10,303
10,005
9,693
11,266
10,160
1,332
9,581
Inventories
50,424
55,960
43,335
47,623
50,550
46,270
43,939
38,253
35,259
34,087
Noncurrent assets
912
1,112
10,059
1,885
ISO 19011 is an international standard developed by the Inter-
national Organization for Standardization (ISO) that also serves
as a guide for auditing management systems, for example for
occupational health and safety, energy, quality and environmental
management.
4,715
2015
2014
2013b
2012a
2011
Million €
Balance sheet (IFRS)
5 Overviews
Ten-Year Summary
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
2016
BASF Report 2020
d Figures for 2018 were restated with the presentation of the construction chemicals activities as discontinued operations.
c Figures for 2017 were restated with the presentation of the oil and gas activities as discontinued operations.
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
918.5
918.5
918.5
918.5
918.5
918.5
918.5
918.5
918.5
918.5
2,203
e Calculated in accordance with German GAAP
2017c
315
2019
4,436
2018
4,647
3,245
4,174
3,459
1,852
Integral investments accounted for using the equity method
19,647
20,780
25,258
26,413
25,260
23,496
19,229
21,792
11,919
2020
Intangible assets
16,610
12,193
12,324
12,537
15,162
12,967
16,554
14,525
13,145
Property, plant and equipment
17,966
13,594
BASF developed the Value to Society approach in cooperation with
external experts to measure and assess in monetary terms the
economic, ecological, and social impacts of its business activities
along the entire value chain.
W
Verbund
In the BASF Verbund, production facilities and technologies are
intelligently networked, with high-output chemical processes that
use energy and resources efficiently. The by-products of one plant
serve as feedstock elsewhere, creating efficient value chains - from
basic chemicals to high value-added solutions such as coatings
or crop protection products. Our Verbund concept realized in
production, technologies, the market and digitalization - enables
innovative solutions for a sustainable future.
-
Water stress areas
Net Promoter System®
Water consumption
We calculate the water consumption of the BASF Group as the
sum of evaporation in cooling processes, water content in sales
products, and other water use at the sites.
Trademarksa
DRYREFTM
Registered trademark of Linde AG
Value to Society
We report on water stress areas as regions in which 40% or more of
available water is used. Our assessment is based on Aqueduct 3.0
(WRI, 2019). Our sustainable water management goal also takes
into account all sites that we defined prior to 2019 as sites in water
stress areas in accordance with Pfister et al. (2009), as well as the
Verbund sites.
A value chain describes the successive steps in a production
process: from raw materials through various intermediate steps,
such as transportation and production, to the finished product.
U
U.N. Sustainable Development Goals (U.N. SDGs)
The U.N. officially adopted its Sustainable Development Goals
(U.N. SDGs) in September 2015. These replaced the previous
Millennium Development Goals. The 17 SDGs provide a framework
for bringing together U.N. member states, NGOs, industry associa-
tions and employee representatives, academia, politics and busi-
ness to combat international challenges such as poverty, food and
water scarcity, and climate change.
Registered trademark of Bain & Company, Inc.
TUIS
TUIS is a German transport accident information and emergency
response system jointly operated by around 130 company fire
departments within the chemical industry and specialists. The
member companies can be reached by the public authorities at any
time and provide assistance over the telephone, expert on-site
advice or special technical equipment.
U.N. Global Compact (UNGC)
In the United Nations Global Compact network, nongovernmental
organizations, companies, international business and employee
representatives, scientists and politicians work on aligning global
business with the principles of sustainable development.
BASF Report 2020
Value chain
322
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Glossary and Trademarks
About This Report
Responsible Care®
OUR COMMITMENT TO SUSTAINABILITY
All other trademarks referred to in the BASF Report are registered
trademarks of the BASF Group (identified with the Ⓡ symbol),
trademarks pending (identified with the TM symbol), or trademarks
used by the BASF Group.
Phone: +49 621 60-0, email: global.info@basf.com
Media Relations
Jens Fey, phone: +49 621 60-99123
Sustainability Relations
Thorsten Pinkepank, phone: +49 621 60-41976
Investor Relations
General inquiries
Dr. Stefanie Wettberg, phone: +49 621 60-48002
basf.com
Responsible Care®
Traits are commercial plant characteristics, such as an inherent
resistance to certain herbicides or an inherent defense against
certain insects.
BASF supports the chemical industry's global Responsible Care initiative.
FSC
www.fsc.org
MIX
Internet
Registered trademark of the European Chemical Industry Council
Contact
Published on February 26, 2021
a Trademarks are not registered/used in all countries.
BASF Report 2020
323
Quarterly Statement Q1 2021 / Annual Shareholders' Meeting 2021
April 29, 2021
Half-Year Financial Report 2021
You can find this and other BASF publications
online at basf.com/publications
July 28, 2021
October 27, 2021
BASF Report 2021
February 25, 2022
Quarterly Statement Q1 2022 / Annual Shareholders' Meeting 2022
April 29, 2022
Further information
Quarterly Statement Q3 2021
Traits
BASF Report 2020
Together for Sustainability (TfS)
Naphtha is petroleum that is produced during oil refining. Heavy
naphtha is the starting point for gasoline production. Light naphtha
is the most important feedstock for steam crackers.
NMVOC (nonmethane volatile organic compounds)
VOCS (volatile organic compounds) are organic substances that are
present in the air as gas at low temperatures. These include some
hydrocarbons, alcohols, aldehydes and organic acids. NMVOCs are
VOCs from which methane is excluded.
O
OHSAS 18001
The Occupational Health and Safety Assessment Series (OHSAS)
includes the standard OHSAS 18001, which contains a framework
for an occupational safety management system. This system can be
integrated into an existing quality and environmental protection
management system and certified accordingly.
P
Naphtha
Peak sales potential
Process safety incidents (PSI)
Process safety incidents (PSI) is a worldwide harmonized industry
metric used to report events involving the release of a substance or
energy where this exceeds defined thresholds. BASF has used the
criteria and reporting thresholds developed by the International
Council of Chemical Associations (ICCA) since 2018.
Propylene oxide (PO)
Propylene oxide (PO), a very reactive compound, is generated by
the oxidation of propylene and is used as basic chemical for further
processing in the chemical industry.
R
REACH
REACH is a European Union regulatory framework for the regis-
tration, evaluation, authorization and restriction of chemicals, and
was implemented gradually by 2018. Companies are obligated to
collect data on the properties and uses of produced and imported
substances and to assess any risks.
The peak sales potential of the Agricultural Solutions pipeline
describes the total peak sales forecast for individual products in the
research and development pipeline. Peak sales are the highest sales
value to be expected from one year. The pipeline comprises innova-
tive products that have been on the market since 2019 or will be
launched on the market by 2029.
Renewable resources
The International Organization for Standardization defines nano-
materials as materials with one or more external dimensions on a
nanoscale or with internal structure or surface structure on a nano-
scale. For regulatory purposes, there are additional definitions for
nanomaterials worldwide.
N
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
5 Overviews
Glossary and Trademarks
Nanomaterials
MDI
Million British thermal unit (mmBtu)
The British thermal unit (Btu) is a unit of energy observed in the
Anglo-American measuring system. It is used for indicating values
such as the energy content of gas. One mmBtu (million British
thermal units) is equal to approximately 1,003 cubic feet of gas or
28 cubic meters of gas.
Monitoring system
Monitoring systems and tools serve to measure and ensure the
adherence to standards. One area that is monitored is our voluntary
commitments, such as the adherence to human rights and interna-
tionally recognized labor standards.
MSCI World Chemicals Index
The MSCI World Chemicals Index is a stock index that includes the
world's biggest chemical companies. It measures the performance
of the companies in the index in their respective national currencies,
thus considerably reducing currency effects.
MDI stands for diphenylmethane diisocyanate and is one of the
most important raw materials for the production of polyurethane.
This plastic is used for applications ranging from the soles of high-
tech running shoes and shock absorbers for vehicle engines to insu-
lation for refrigerators and buildings.
Global initiative of various companies from the chemical industry
for the global standardization of supplier evaluations to improve
sustainability in the supply chain.
Renewable raw materials are products made from biomass such as
sugars, starches and vegetable oils that are not used as food or
feed, but as feedstock or to generate warmth, electricity or fuels.
Responsible Care® refers to a worldwide initiative by the chemical
industry to continuously improve its performance in the areas of
environmental protection, health and safety.
Special items arise from the integration of acquired businesses,
restructuring measures, impairments, gains or losses resulting from
divestitures and sales of shareholdings, and other expenses and
income that arise outside of ordinary business activities.
Spot market (cash market)
A spot market is a market where an agreed-upon deal, including
delivery, acceptance and payment, occurs immediately, as opposed
to forward contracts, where the delivery, acceptance and payment
occurs at a point in time after the conclusion of the deal.
Steam cracker
A steam cracker is a plant in which steam is used to "crack" naphtha
(petroleum) or natural gas. The resulting petrochemicals are the raw
materials used to produce most of BASF's products.
Sustainable Solution Steering
Special items
We use Sustainable Solution Steering to review and guide our
product portfolio in terms of sustainability. The four categories -
Accelerators, Performers, Transitioners and Challenged - indicate
how our products and solutions already comply with sustainability
requirements and how we can increase their contribution.
TCFD
The Task Force on Climate-related Disclosures (TCFD) established
by the G20 Financial Stability Board promotes the disclosure of
information and data relevant to climate change by companies, and
develops corresponding recommendations. The objective is to
improve market participants' understanding of material climate-
relevant risks and enable them to better assess the opportunities
and risks of climate change. BASF supports the recommendations
and is involved in the work of the Task Force.
TDI
TDI stands for toluene diisocyanate and is a raw material for the
production of polyurethane. It is used primarily in the automotive
industry (for example, in seat cushions and interiors) and the furni-
ture industry (for example, for flexible foams for mattresses or
cushioning, or in wood coating).
Tier 1 suppliers
BASF considers all direct suppliers of the BASF Group in the busi-
ness year concerned as Tier 1 suppliers. These are suppliers that
provide us with raw materials, investment goods, consumables and
services. Suppliers can be natural persons, companies or legal
persons under public law. Suppliers usually work together with other
suppliers, which are categorized as Tier 2, Tier 3, etc. based on their
role in the value chain.
T
Responsible CareⓇ
SEEbalance is the Socio-Eco-Efficiency analysis developed by
BASF. It can be used to evaluate and compare the environmental
impact, costs and social aspects of products and manufacturing
processes. SEEbalance® makes sustainable development measur-
able and manageable for companies by combining the three dimen-
sions of sustainability - economy, environment and society - in an
integrated product assessment tool.
The Sustainability Accounting Standards Board (SASB) is a
U.S.-based nonprofit organization that develops industry-specific
sustainability reporting standards. These aim to create transparency
around material dimensions of sustainability: economic, environ-
mental and social impact.
Retention
Profits generated can be used in two ways: distribution to share-
holders or retention within the company.
321
About This Report
1 To Our Shareholders
2 Management's Report
SEEbalance®
3 Corporate Governance
Consolidated Financial Statements
5 Overviews
Glossary and Trademarks
ROCE
Return on capital employed (ROCE) is a measure of the profitability
of our operations. This is calculated as the EBIT generated by the
segments as a percentage of the average cost of capital basis. The
average cost of capital basis corresponds to the operating assets of
the segments plus the customer and supplier financing not included
there and is calculated using the month-end figures.
S
SASB
4
4 Consolidated Financial Statements
COMC 2102 E
Papler aus verantwor-
tungsvollen Quellen
FSC® C021366
About This Report
Heidelberg University
Heidelberg, Germany
Karlsruhe Institute of Technology (KIT)
Karlsruhe, Germany
Indian Institute of
Technology Bombay
Mumbai, India
Pune, India
Laboratory
National Chemical
Seoul, South Korea
Seoul National University
Kyoto, Japan
Kyoto University
Tokyo, Japan
Tokyo Institute of
Technology
Fudan University
Shanghai, China
Innovation Lab
iL
Technical University of Berlin
Berlin, Germany
UniCat BASF Joint Lab
Zhejiang University
Hangzhou, China
Sichuan University
Chengdu, China
Dalian Institute of Chemical Physics
Dalian, China
Beijing Institute of Technology
Beijing, China
BASF Report 2020
Tsinghua University
Beijing, China
35
About This Report
As part of our corporate strategy, we combined research and
development at an organizational level, making it better aligned with
the needs of our customers. Our aim is to continue to shorten the
time to market and accelerate the company's organic growth. A
strong customer focus, digitalization, creativity, efficiency and
collaboration with external partners are among the most important
success factors here. In order to bring promising ideas to market as
quickly as possible, we regularly assess our research projects using
a multistep process and prioritize our focus areas accordingly.
Research and development expenses amounted to €2,086 million
in 2020 (2019: €2,158 million). The operating divisions accounted
for 82% of total research and development expenses in 2020. The
remaining 18% related to cross-divisional corporate research
focusing on long-term topics of strategic importance to the
BASF Group.
■ Further development of our innovation strategies
■ Close cooperation between research and business units
Strong customer focus
Strategic focus
For more information on our collaboration initiatives, see basf.com/innovate-with-us
Our eight Academic Research Alliances are complemented by
cooperations [with around 250 universities and research institutes]
as well as collaborations with a large number of companies.
We are working on innovative components and materials for electro-
chemical energy storage with the Karlsruhe Institute of Technology
(KIT) at the Battery and Electrochemistry Laboratory (BELLA). At the
joint Catalysis Research Laboratory (CaRLa), BASF is researching
homogeneous catalysis in cooperation with the University of Heidel-
berg. Researchers there have discovered a new approach to using
CO2 as a chemical feedstock. They identified the catalysts and
process conditions to produce sodium acrylate from ethylene and
CO2, a crucial step toward scaling the process for industrial use.
BasCat is a joint laboratory operated by the UniCat cluster of
excellence and BASF at the Technical University of Berlin, where
new heterogenous catalysis concepts are being explored together
with the Fritz Haber Institute of the Max Planck Society. The iL
(Innovation Lab) in Heidelberg, Germany, focuses on functional
printing, printed sensors and loT (internet of things) applications.
At the Network for Asian Open Research (NAO) in the Asia Pacific
region, research focuses on polymer and colloid chemistry, catalysis,
machine learning and smart manufacturing.
In cooperation with ETH Zürich, we have developed an analysis tool
that can be used to evaluate biodegradable polymers with respect
to both their technical properties and stakeholder acceptance at an
early stage of our innovation process. The aim is to concentrate on
the development of such sustainable, biodegradable polymers.
35
The Joint Research Network on Advanced Materials and Systems
(JONAS) research center is active in Europe. Research here concen-
trates on supramolecular chemistry, polymer chemistry and the
incubation of sustainable technologies. Biopolymer synthesis and
research into the full biodegradability of biopolymers in various bio-
spheres have been a focus area of BASF's research for many years.
to bundle cooperation
Eight Academic
Research Alliances
Our eight academic research alliances bundle partnerships with
several research groups in a region or with a specific research focus.
strengthen our portfolio with creative new projects, and in this way,
reach our growth targets.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Innovation
1 To Our Shareholders
The Northeast Research Alliance (NORA) and the California
Research Alliance (CARA) are located in the United States. NORA
focuses on materials science and biosciences, catalysis research,
digitalization and cooperation with startups. The computer models
developed together with our partners suggest new synthesis path-
ways for molecules and enable us to better predict molecular
properties, for example for selecting test substances for crop
protection products. Big data from BASF and novel algorithms were
used to optimize these models. Teams at the interdisciplinary CARA
research center are working on new functional materials,
formulations, digital methods, catalysis, chemical synthesis, and in
engineering sciences and biosciences. As part of this cooperative
venture, BASF researchers and partners are investigating catalyst
nanoparticles made of palladium and platinum, among other things.
With the help of computer-based calculations, the team developed
a completely new understanding of how catalysts work, enabling us
to produce new, more powerful catalysts.
Our success factors
Changchun, China
Network for Asian Open Research
Caltech
Pasadena, California
Stanford University
Stanford, California
UC Santa Barbara
Santa Barbara, California
UC Davis
Davis, California
UC Berkeley
Berkeley, California
California Research
Alliance
CARA
Global network: eight Academic Research Alliances
~10,000
Employees in research and development worldwide
improved products - especially with Accelerator products, which
make a substantial sustainability contribution in the value chain.
[In 2020, we generated sales of around €10 billion with products
launched on the market in the past five years that stemmed from
research and development activities. J In the long term, we aim to
continue significantly increasing sales and earnings with new and
UCLA
Our three global research divisions are run from our key regions
Europe, Asia Pacific and North America: Process Research &
Chemical Engineering (Ludwigshafen, Germany); Advanced Materi-
als & Systems Research (Shanghai, China); and Bioscience
Research (Research Triangle Park, North Carolina). Together with
the development units in our operating divisions, they form the core
of our global Know-How Verbund. BASF New Business GmbH and
BASF Venture Capital GmbH supplement this network with the task
of developing new technologies, attractive markets and new busi-
ness models for BASF.
Supplying a fast-growing global population with food, energy
and clean water, making the best use of limited natural
resources and protecting our climate are among the greatest
challenges of our time. Innovations based on chemistry play
a pivotal role in overcoming these. New, resource-efficient
solutions and business models are needed to decouple
growth from the consumption of finite resources. Together
with our customers from almost all sectors, we are working
on innovative processes, technologies and products for a
sustainable future. This is how we ensure our long-term
business success and that of our customers.
Innovation
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Innovation
To Our Shareholders
1
About This Report
=4
Innovation has always been the key to BASF's success, especially in
a challenging market environment. The knowledge and skills of our
highly qualified employees is our most valuable resource here and
the source of our innovative strength. We had approximately 10,000
employees involved in research and development worldwide in
2020.
Changchun Institute of Applied Chemistry
Los Angeles, California
Los Angeles, California
NAO
BasCat
Battery and Electrochemistry Laboratory
Karlsruhe Institute of Technology (KIT)
Karlsruhe, Germany
Zurich, Switzerland
ETH Zürich
I.S.I.S-University of Strasbourg
Strasbourg, France
University of Freiburg
Freiburg, Germany
Joint Research Network on
Advanced Materials and Systems
Our global network of outstanding universities, research institutes
and companies forms an important part of our Know-How Verbund.
It gives us direct access to external scientific expertise, talented
minds from various disciplines as well as new technologies, and
helps us to quickly develop targeted, marketable innovations,
■ Academic Research Alliances bundle partnerships by
topic and region
■ Close cooperation with universities, research institutes
and companies
USC
Global network
● BELLA
Heidelberg University
Heidelberg, Germany
Catalysis Research Laboratory
Massachusetts Institute of
Technology
Cambridge, Massachusetts
University of Massachusetts
Amherst, Massachusetts
Harvard University
Cambridge, Massachusetts
Northeast Research Alliance
◆ NORA
UC Riverside
Riverside, California
UC San Diego
San Diego, California
UC Irvine
Irvine, California
CaRLa
JONAS
Customer focus, digitalization, creativity, efficiency and
collaboration with external partners
Our cross-divisional corporate research remains closely aligned with
the requirements of our operating divisions and allows space to
review creative research approaches quickly and in an agile way. We
strengthen existing and continually develop new, key technologies
that are of central significance for our operating divisions, such as
polymer technologies, catalyst processes or biotechnological
methods.
BASF Report 2020
BASF Report 2020
39
99
Research and development expenses by segment 2020
1 To Our Shareholders
2 Management's Report
Innovation
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Surface Technologies
BASF and IntelliSense.io, a leading industrial artificial intelligence (AI)
company, have combined their expertise in mineral processing, ore
beneficiation chemistry and industrial Al technology. The joint
offering is called the BASF Intelligent Mine powered by
IntelliSense.io and delivers Al solutions embedded with BASF's
mineral processing and chemical expertise. The solution helps
customers to make their mine operations more efficient, sustainable
and safe, while offering a real-time decision-making platform. Each
mining process, such as grinding, thickening, flotation and pumping,
is supported by an Optimization as a Service application that pre-
dicts and simulates future performance, generating process-specific
recommendations for optimization. This enables customers to real-
ize efficiency gains across the entire value chain.
The Fourtune™ FCC catalyst is the latest addition to the refining
catalysts portfolio. It is based on BASF's Multiple Framework
Topology technology. Fourtune has been optimized to deliver supe-
rior butylene over propylene selectivity while maintaining catalyst
activity and performance. The technology provides an answer to the
increased demand for octane since today's tighter sulfur regulations
often require post treatment on the gasoline stream. This can nega-
tively impact the octane pool. The higher butylene selectivity enables
refineries to optimize gasoline octane and with it, their profitability.
With GlasuritⓇ 100 Line and R-MⓇ AGILIS, BASF has introduced
the most advanced waterborne basecoat technology for refinish
coatings, offering outstanding efficiency and environmental advan-
tages. The focus in product development was on sustainability, with
the result that VOC levels are consistently below 250g/l. This is the
lowest VOC level on the market, making the new product line the
eco-friendliest automotive refinish coatings available. The innovative
formulation optimizes the processing properties for fast and efficient
application, enabling customers to cut process times by up to 35%.
Another 20% can be saved from the reduction in material consump-
tion. This allows body shops to reduce their CO2 emissions through
faster application and shorter drying cycles. At the same time, they
can increase profitability and improve their environmental footprint.
Nutrition & Care
Together with other quality ingredients from the BASF Home Care
and Industrial & Institutional Cleaning portfolio, the cellulase
LavergyⓇ C Bright 100 L harnesses the combined power of
different technologies to achieve a sustainable, performance-
differentiated solution. Lavergy® C Bright 100 L can be combined
with other selective ingredients to prevent fabrics from graying.
Whether whites or colors, cotton or synthetic fibers - clothes look
like new even after multiple washes. Lavergy® C Bright 100 L also
meets the criteria for various ecolabeling systems including EU
Ecolabel and Blue Angel. Excellent cleaning performance and good
environmental compatibility, as well as suitability for use with many
types of fabric are the hallmarks of BASF's one-fits-all solution.
BASF has launched the new fragrance Isobionics® Santalol, an
alternative to sandalwood oil. Isobionics® Santalol is produced on a
biotechnological basis from renewable raw materials and is 100%
free of endangered sandalwood. Our fermentation technology
ensures consistent high quality, effective production and year-round
availability. Isobionics® Santalol resembles the floral heart of
sandalwood oil and is particularly suitable for use in perfumes and
exclusive personal care products thanks to its woody odor profile.
Agricultural Solutions
We leverage the potential of digitalization in agriculture to help
farmers grow their business profitably and reduce their environmental
footprint. Launched in 2020, the new outcome-based business
model xarvioⓇ HEALTHY FIELDS provides a tailored, optimized
field and season-specific crop protection strategy. By measuring
and classifying externally induced plant stress, automatically defining
buffer zones and recording biodiversity on and off arable land, it
guarantees plant health and enables farmers to achieve agreed yield
forecasts. This way, we respond to modern farming challenges,
requirements by society and political action plans and contribute to
more sustainable farming.
In 2020, xarvioⓇ HEALTHY FIELDS received the Crop Science
Award, one of the most important and renowned awards in the
agricultural industry worldwide, for the “Best Innovation in Digital
Farming Technology."
Wheat is one of the most produced crops in the world and demand
continues to increase based on the growing world population. Our
agricultural innovations for wheat production contribute to food
security, which will help to reach the U.N. Sustainable Development
Goals (SDGs). Our R&D pipeline comprises solutions that help
farmers to achieve better yield - balancing the needs of the environ-
ment, society and agriculture.
In 2020, we received the first registration worldwide for the new
herbicide active ingredient TirexorⓇ. It will give wheat growers in
Australia more choice for effective weed control to combat resistance
and enable climate-smart, no-till farming. Further dossier submis-
sions in other countries across Asia, South and North America are
planned.
BASF Report 2020
GlasuritⓇ 100 Line and R-M® AGILIS
Waterborne basecoat technology
Reduces volatile organic compounds
(VOC)
40
Demand for biocide-free products with high scrub resistance and
low levels of volatile organic compounds (VOC) has become a
driving force in the European market for water-based interior paints
in recent years. For 20 years, the market has been dominated by
ethylene vinyl acetate dispersions, which cannot be used in bio-
cide-free paints. BASF offers an attractive alternative: AcronalⓇ 6292.
Acronal® 6292 is a styrene-acrylate binder that makes it possible to
produce environmentally friendly, biocide-free and low-VOC paints.
This has enabled BASF to successfully open up a new market
segment that addresses customers' requirements around avoiding
allergic reactions while maintaining the same product properties.
meets additional health and safety requirements by enabling asphalt
to be produced and processed at significantly lower process
temperatures. The innovative additive enables faster completion
times and reduces emissions, improving the carbon footprint and
making roads more durable.
Agricultural Solutions 40%
Chemicals
5% Chemicals
9% Materials
8% Industrial Solutions
€2,086 million
12% Surface Technologies
8% Nutrition & Care
BASF's Styrodur® Hybrid is the next generation of the green
insulation boards made from extruded polystyrene for customers
in the construction industry. The hybrid version has vertical grooves
on one side to bond better with the concrete. The simpler and
cleaner processing leads to considerable time and cost savings in
construction, for example by eliminating the need for full-surface
adhesion. These advantages are in addition to the general benefits
offered by Styrodur, such as high compressive strength, low mois-
ture absorption, and excellent thermal insulation properties, which
play a significant role in reducing CO₂ emissions and cutting heating
costs.
StyrodurⓇ Hybrid
Insulation board with excellent thermal
insulation properties
Industrial Solutions
Reduces CO2 emissions and cuts
heating costs
branded technology helps refiners and gas processors to meet their
sulfur removal targets while reducing their carbon footprint. It
ensures the highly selective removal of hydrogen sulfide (H2S) from
gas streams while minimizing carbon dioxide (CO2) co-absorption.
This provides a competitive advantage by increasing plant capacity
and lowering investment and production costs.
Materials
OASE® sulfexx™
Energy-efficient amine gas treatment
technology
Highly selective removal of hydrogen
sulfide (H₂S)
ElastollanⓇ
New generation of recyclable bicycle
tubes based on ElastollanⓇ
- Around 40% lighter than alternatives on
the market
Together with our partner Schwalbe, we have developed a new
generation of bicycle tubes based on the thermoplastic polyurethane
(TPU) ElastollanⓇ. The new Aerothan bicycle tube offers exceptional
performance, puncture resistance and stable handling thanks to the
special mechanical properties of ElastollanⓇ®. It is around 40% lighter
than the established alternatives on the market, is easy to assemble
and has a small packing size. Another advantage of the Aerothan
bicycle tubes is that they are recyclable. They are made entirely of
thermoplastic polyurethane and can be returned to the manufacturer,
easily and free of charge, via the tube recycling program. The
material of the old tubes is processed and then reused as sealing or
insulating material.
BASF's new additive for the asphalt industry, B2LastⓇ, has been
designed for sustainable road construction. It extends pavement life
while cutting CO2 emissions along the production chain. B2LastⓇ
In 2020, BASF launched OASE® sulfexxTM 1- a new, energy-efficient
amine gas treatment technology developed in cooperation with
ExxonMobil Catalysts and Licensing LLC. The new OASE® sulfexx™
34
40
5 Overviews
Food and nutrition
Resources, environment and climate
Our focus areas in research are derived from the three major areas
in which chemistry-based innovations will play a key role in the
future:
■ Solvent-free polyurethane system for synthetic leather
■ Sustainable fungal disease control
■Innovative recycling method for lithium-ion batteries
Research focus areas - examples
For a multiyear overview of research and development expenditures, see the
Ten-Year Summary on page 314
The number and quality of our patents also attest to our power of
innovation and long-term competitiveness. In 2020, we filed around
950 new patents worldwide. The Patent Asset Index, a method that
compares patent portfolios, once again ranked us among the
leading companies in the chemical industry in 2020.
Our global research and development presence is vital to our
success. In Asia in particular, we want to continue advancing our
research and development activities with a focus on growth in
regional markets. A stronger presence outside Europe creates new
opportunities for developing and expanding customer relationships
and scientific collaborations as well as for gaining access to
talented employees. This strengthens our Research and Develop-
ment Verbund and makes BASF an even more attractive partner
and employer. The Ludwigshafen site in Germany is and will remain
the largest in our Research Verbund. This was once again under-
lined with the investment in a combined laboratory building for
cleanroom and elemental analysis. The new building is scheduled to
open in 2022 and will enable us to continue to drive forward Analytics
4.0 with innovative digitalization and automation solutions.
- Quality of life
We have also identified additional, far-sighted topics that go above
and beyond the current focus areas of our divisions. The aim is to
use these to leverage new business opportunities within the next
few years. In addition, we are working on overarching projects with
a high technological, social or regulatory relevance. For instance,
one global research and development program, the Carbon
Management R&D Program, is focusing on the underlying energy-
intensive production processes for basic chemicals. These basic
chemicals account for around 70% of the CO2 emissions produced
by the European chemical industry.1 The program covers topics
such as the development of new catalysts for dry reforming methane
with CO2 to produce syngas, and using methane pyrolysis to
produce hydrogen from natural gas or biogas.
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Innovation
To Our Shareholders
1
About This Report
36
36
We are fine-tuning our innovation strategies in all of our business
areas to ensure a balanced portfolio of incremental and disruptive
innovation, as well as of process, product and business models.
Innovations in the segments - examples
Recycling lithium-ion batteries
Recovery of high-purity lithium
High yields
Employees from the Process Research & Chemical Engineering
research division in Ludwigshafen, Germany, are developing a new
chemical process to recycle lithium-ion batteries. It enables the
lithium contained in the battery to be recovered in high purity and
with high yields. The batteries are first disassembled and shredded,
which creates a substance known as "black mass." This contains
valuable resources such as lithium, cobalt and nickel. In BASF's new
process, lithium is extracted directly from the black mass as lithium
hydroxide, not initially as lithium carbonate like in other processes.
After purification to battery quality, with foreign ions removed to
trace level, the lithium hydroxide can be used directly to produce
cathode active materials. The process avoids waste and has lower
CO2 emissions and energy costs than existing methods. The team
successfully completed the first pilot tests in 2020 and are currently
designing a pilot plant.
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Innovation
1 To Our Shareholders
About This Report
BASF Report 2020
For more information on our aid measures during the coronavirus pandemic, see
page 49
In 2020, BASF experts supported the search for
improved derivatives of active ingredients to
combat the SARS-CoV-2 coronavirus and provided
academic working groups with free access to
substances from its compound library, comprising
several million entries. Our researchers were
additionally involved in the global search for a
substance that inhibits what is known as the viral
main protease, an essential enzyme of the virus.
This inhibitor aims to stop the virus from
multiplying in the human body. Using an internally
developed computer program and the
supercomputer Quriosity, our researchers were
able to identify and optimize numerous new
molecules. With the help of the supercomputer,
BASF also tested around 1.2 billion synthetically
producible compounds for their potential to inhibit
the main protease of the SARS-CoV-2 virus. BASF
does not develop or produce its own vaccine. We
are involved in numerous development projects to
treat or prevent COVID-19 with our pharmaceutical
ingredients.
For more information on research and development, see basf.com/innovations
-
Haptex®, a solvent-free polyurethane system for synthetic leather,
was developed by a team from the Advanced Materials & Systems
Research research division and the Performance Materials division.
Until now, polyurethane resin for synthetic leather has mainly been
produced using the solvent dimethylformamide. BASF researchers
have now succeeded in modifying the polyurethane formulation so
that synthetic leather can be produced without organo-tin catalysts
or organic solvents. Thanks to its optimized formulation, Haptex® is
also low-emission and well compatible with water-based top layers
in synthetic leather. Custom HaptexⓇ synthetic leather grades do not
yellow, are chemically resistant, very soft and the surface can be
structured using embossing techniques. In cooperation with our
customers, our experts also simplified the complex production
process. Its many customizable properties mean that our customers
can use Haptex® for a wide range of synthetic leather applications in
industries such as furniture, automotive, footwear, sporting equip-
ment, clothing and accessories.
BASF supports search for
active ingredients to combat
the SARS-CoV-2 coronavirus
Simplified production process
Solvent-free polyurethane solution for
synthetic leather
Haptex®
- Higher yield
Fungicide protects key crops against
fungal diseases
RevysolⓇ
37
BASF Report 2020
1 Sources: JRC (Energy efficiency and GHG emissions: Prospective scenarios for the Chemical and Petrochemical Industry 2017, Boulamanti A., Moya J.A.); DECHEMA Technology Study (Low carbon energy and feedstock for the European chemical Industry, 2017)
Triazole fungicides are crucial to fungal disease control in key crops
such as wheat, corn (maize) and rice. Developing a new, sustainable
active ingredient in this class of fungicides requires new approaches
to research and development and the use of cutting-edge scientific
tools to overcome increasing resistances and meet high regulatory
requirements. No new triazole fungicide has been registered for
more than 10 years. An interdisciplinary team from the research
division Bioscience Research and the Agricultural Solutions segment
adopted a new research approach to test and optimize the biologi-
cal efficacy and the toxicological parameters of triazole fungicides at
an early stage of development. Thousands of compounds were
designed, synthesized and tested using 3D modeling. Today,
BASF's RevysolⓇ fungicide offers farmers around the world an
effective, innovative crop protection product that protects their
crops against fungal diseases and increases their yield. In 2020, the
team won BASF's internal innovation award for their work.
BASF Report 2020
Corporate research, Other 18%
Furthermore, we comment on and forecast sales at Group and
segment level in our financial reporting as a significant driver for EBIT
before special items and thus ROCE.
QMNATION
DECENT WORK AND
-0.5%
>-0.4%
Grow sales volumes faster than global chemical
production every year
MCO
12
10 RESPONSIBLE
ECOND GROWTH
For more information, see page 113
DECENT WORK AND
68%
80%
Σ
For more information, see page 56
Have 80% of our suppliers improve their sustainability
performance upon re-evaluation
QMSTRY NONATION
ANDIRASTRUCTURE
8 CENUME GROWTH
DECENT MORK AND
1.7%
>9%
ECENEME GROWTH
For more information, see page 56
Σ
Resource efficiency and safe production
Reduce worldwide process safety incidents
per 200,000 working hours to ≤0.1 by 2025
>€3.30
Increase the dividend per share every year based on
a strong free cash flow
8
DECENT WORK AND
0.3
≤0.1
Reduce the worldwide lost-time injury rate
per 200,000 working hours to ≤0.1 by 2025
☑
STRICTURE
Σ
80%
For more information, see page 58 onward
-10.7%
3%-5%
For more information, see page 123
Increase EBITDA before special items by 3%-5%
per year
QDECENT WORK AND
OECONOMIC GROWTH
0.3
≤0.1
SDG
2020 status
Target
DECENT WORK AND
SDG
2020 status
Target
90%
The OECD Guidelines for Multinational Enterprises
· The core labor standards of the ILO and the Tripartite Declaration
of Principles Concerning Multinational Enterprises and Social
Policy (MNE Declaration)
-
The Universal Declaration of Human Rights and the two
U.N. Human Rights Covenants
- The 10 principles of the U.N. Global Compact
Entrepreneurial: We focus on our customers, as individuals and as
a company. We seize opportunities and think ahead. We take
ownership and embrace personal accountability.
Responsible: We value the health and safety of people above all
else. We make sustainability part of every decision. We are commit-
ted to strict compliance and environmental standards.
Open: We value diversity, in people, opinions and experience. This
is why we foster feedback based on honesty, respect and mutual
trust. We learn from setbacks.
Creative: We make great products and solutions for our customers.
This is why we embrace bold ideas and give them space to grow.
We act with optimism and inspire one another.
are binding for all employees and provide the framework
for our actions
- The Responsible Care® Global Charter
Our values and standards
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Our values and global standards
[Our values and global standards]
For more information on the development of these indicators, see Results of Operations from
page 56 onward
How we act is critical to the successful implementation of our strat-
egy and how our stakeholders perceive us. This is what our four
core values represent: creative, open, responsible, entrepreneurial.
They guide our actions and define how we want to work together -
as a team, with our customers and our partners.
€3.30²
- The German Corporate Governance Code
Our targets
Cover 90% of our relevant spend with sustainability
evaluations by 2025
Achieve a return on capital employed (ROCE)
considerably above the cost of capital percentage
every year
SDG1
2020 status
Target
Profitable growth
[Responsible procurement
Status of Target Achievement in 2020
Status of Target Achievement in 2020
5 Overviews
We stipulate rules for our employees with standards that apply
throughout the Group. We set ourselves ambitious goals with volun-
tary commitments and monitor our performance in terms of environ-
mental protection, health and safety using our Responsible Care
Management System. We mainly approach our adherence to
international labor and social standards using three elements: the
Compliance Program including our Code of Conduct and compliance
hotlines, close dialog with our stakeholders, and the global manage-
ment process to respect international labor norms. Our business
partners are expected to comply with prevailing laws and regulations
and to align their actions with internationally recognized principles.
We have established appropriate monitoring systems to ensure this.
For more information on responsible conduct along the value chain, see page 110 onward
For more information on corporate governance and compliance, see page 167 onward
4 Consolidated Financial Statements
2 Management's Report
To Our Shareholders
1
About This Report
4
31
BASF Report 2020
The objective of these targets is to steer our business into a sustain-
able future, and at the same time, contribute to the implementation
of the United Nations' Sustainable Development Goals (SDGs) (see
page 42). We are focusing on issues where we as a company can
make a significant contribution, such as climate protection, sustain-
able consumption and production, and fighting hunger.
We want to grow faster than the market, further increase our profit-
ability, achieve a return on capital employed (ROCE) considerably
above the cost of capital percentage and increase the dividend per
share every year based on a strong free cash flow. In addition to
these financial targets, we pursue broad sustainability targets. For
example, we have resolved to limit total greenhouse gas emissions
from our production sites and our energy purchases to the 2018
level while growing production volumes. We want to strengthen the
sustainability focus of our product portfolio and significantly increase
sales of Accelerator products. We also strive to strengthen sustain-
ability in our supply chains and use natural resources responsibly.
We want to further improve safety in production. In addition, we aim
to promote diversity within the company and create a working
environment in which our employees feel that they can thrive and
perform at their best.
Business success tomorrow means creating value for the environ-
ment, society and business. That is why we have set ourselves
ambitious global targets along our entire value chain and the three
dimensions of sustainability. We report transparently on our target
achievement so that our customers, investors, employees and other
stakeholders can track our progress.
3 Corporate Governance
For more information, see page 13
Our standards fulfill and in some cases, exceed existing laws and
regulations and take internationally recognized principles into
account. We respect and promote:
Σ
Calculating ROCE and cost of capital
1
As part of our corporate strategy and the global targets derived from
this, we have also used CO2-neutral growth and Accelerator sales as
the most important nonfinancial key performance indicators since
the 2020 business year. Two targets are based on these indicators:
sustainability-oriented portfolio management with our Sustainable
Solution Steering method and CO2-neutral growth.
We follow a value-oriented steering concept with our financial targets.
We use the return on capital employed (ROCE) for operational
steering as a key target and management indicator for the BASF
Group, its operating divisions and business units. As stated in our
strategic goals, we aim to achieve a ROCE considerably above the
cost of capital percentage every year. With ROCE, the same logic
and data is used for internal management, external communication
with the capital markets and variable compensation. This improves
the consistency of the indicators used for BASF's value-based
management with variable compensation and pension systems, and
our shareholders' objectives.
The BASF Group's steering concept
A company can only create value in the long term if it gener-
ates earnings that exceed the cost of the capital employed.
This is why we encourage and support all employees in
thinking and acting entrepreneurially in line with our value-
based management concept. Our key financial management
indicator is the return on capital employed (ROCE). Based on
our corporate strategy and the global targets derived from
this, we have used CO2-neutral growth and Accelerator sales
as additional key performance indicators since January 1,
2020. These are the BASF Group's most important nonfinan-
cial key performance indicators.
Value-Based Management
5 Overviews
Consolidated Financial Statements
4
ROCE is calculated as the EBIT of the segments as a percentage of
the average cost of capital basis at each month-end.
3 Corporate Governance
1 To Our Shareholders
About This Report
32
32
BASF Report 2020
2 Dividend proposed by the Board of Executive Directors
1 For more information on the Sustainable Development Goals (SDGs), see page 42 and sustainabledevelopment.un.org
Most important key performance indicators
J
M
2 Management's Report
Value-Based Management
For more information, see page 145
To calculate the EBIT of the segments, we take the BASF Group's
EBIT and deduct the EBIT of activities recognized under Other,
which are not allocated to the divisions.
The cost of capital percentage, which we have integrated into our
ROCE target as a comparative figure, is determined using the
weighted cost of capital from equity and borrowing costs (weighted
average cost of capital, WACC). To calculate a pre-tax figure similar
to EBIT, it is adjusted using the projected tax rate for the BASF Group
for the business year. In addition, the projected net expense of Other
is already provided for by an adjustment to the cost of capital
percentage. The cost of equity is ascertained using the capital asset
pricing model. Borrowing costs are determined based on the
financing costs of the BASF Group. The cost of capital percentage
for 2021 is 9% (2020: 9%).
- Capital expenditures (capex) comprise additions to property,
plant and equipment excluding additions from acquisitions, IT
investments, restoration obligations and right-of-use assets aris-
ing from leases. It is used to manage capital employed in the
BASF Group. Capex is not just relevant to ROCE management,
but also supports our long-term goal of increasing our dividend
each year based on a strong free cash flow.
The
development over time. Special items arise from the integration
of acquired businesses, restructuring measures, certain impair-
ments, gains or losses resulting from divestitures and sales of
shareholdings, and other expenses and income that arise outside
of ordinary business activities.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Value-Based Management
1 To Our Shareholders
About This Report
33
The cost of capital basis consists of the operating assets of the
segments and is calculated using the month-end figures. Operating
assets comprise the current and noncurrent asset items of the
segments. These include tangible and intangible fixed assets, inte-
gral investments accounted for using the equity method, inventories,
trade accounts receivable, other receivables and other assets
generated by core business activities and, where appropriate, the
assets of disposal groups. The cost of capital basis also includes
customer and supplier financing.
- EBIT before special items is used to steer profitability at Group
and segment level. This is calculated by adjusting the EBIT
reported in the Consolidated Financial Statements for special
items, making it especially suitable for assessing economic
An important part of our value management is the target agreement
process, which aligns individual employee targets with BASF's
targets. As of 2019, the most important financial performance indi-
cator in the operating units is ROCE. The other units' contribution to
value is also assessed according to effectiveness and efficiency on
the basis of quality and cost targets. To assess this, we use metrics
such as BASF's internal service score in the service and research
units.
Value-based management throughout the company
For more information on sustainability-oriented portfolio management, see page 45 onward
Accelerator sales refer to sales generated by the BASF Group from
products in our strategic portfolio to third parties in the business
year concerned. As part of our corporate strategy, we set ourselves
the global target of achieving €22 billion in Accelerator sales by
2025.
Calculation of Accelerator sales¹
For more information on CO2-neutral growth, see page 130 onward
from the generation of energy for third parties are not considered
here. Relevant emissions include other greenhouse gases according
to the Greenhouse Gas Protocol, which are converted into CO2
equivalents. We aim to grow CO2-neutrally until 2030 compared
with baseline 2018.
The definition and further information can be found in the Sustainable Solution Steering manual at basf.com/en/sustainable-solution-steering
We calculate the indicator CO2-neutral growth on the basis of CO2
emissions, which are the sum of direct emissions from production
processes and the generation of steam and electricity, as well as
indirect emissions from the purchase of energy. Direct emissions
Calculation of the indicator "CO2-neutral growth until 2030"
We use ROCE as the BASF Group's most important financial key
performance indicator for measuring economic success as well as
for steering the BASF Group and its operating units. EBIT before
special items and capex (capital expenditure) are key performance
indicators for BASF that have a direct impact on ROCE and as such,
support its management.
QO
BASF Report 2020
For more information, see page 45 onward
2020 status
Target
Employee engagement and diversity
QO
AND PRODUCTION
For more information, see page 139
12 RESPONSIBLE
CLEAN WATER
46.2%
100%
SDG
Introduce sustainable water management at our
production sites in water stress areas and at our
Verbund sites by 2030
For more information, see page 123
13
20.8
MMT
≤21.9
(Development of carbon emissions compared with baseline 2018)
Grow CO2-neutrally until 2030
2020 status SDG
Effective climate protection
AND PRODUCTION
Target
☑
For more information, see page 130 onward
MMT
30%
Increase the proportion of women in leadership positions
with disciplinary responsibility to 30% by 2030
DECENT WORK AND
12 CLIMATE
82%
>80%
13
billion
More than 80% of our employees feel that at BASF,
they can thrive and perform at their best
SSS
€16.7
€22.0
billion
12 RESPONSIBLE
2
5
CLEAN WATER
GENDER
Target
2020 status
Sustainable product portfolio
SDG
For more information, see page 146 onward
Achieve €22 billion in Accelerator sales by 2025
24.3%
2 Management's Report
Integration of Sustainability
BASF Report 2020
1 To Our Shareholders
About This Report
64
46
4 Consolidated Financial Statements
3 Corporate Governance
Attractive and fair employer
Health protection
Employees and management
Fair and reliable business relationship
Support in complying with our Supplier Code of
Conduct (environmental and social requirements)
-
Support for local communities
Suppliers
- Safe, disruption-free operations
Attractive jobs
Opportunities for professional development
5 Overviews
Through our social engagement, we want to take into account the
needs of the communities surrounding our production sites world-
wide, help achieve the United Nations' Sustainable Development
Goals (SDGs), and have a positive long-term impact on the environ-
ment and society. This is why social engagement is a cornerstone of
our corporate social responsibility. Our social engagement policy
was updated in 2020 and provides the guardrails for our activities. It
stipulates that all social engagement measures worldwide must be
conducted in line with our compliance policy, BASF's strategy and
our sustainability commitments. We want to have a positive impact
on society in our three focus areas: future health, future skills and
future resources. We support projects that aim to have a lasting
impact on specific target groups and offer learning opportunities for
participating cooperation partners and BASF.
Our political advocacy is conducted in accordance with transparent
guidelines and our publicly stated positions. The same applies to our
activities in associations. For instance, we published an Industry
Associations Review comparing the energy and climate protection
positions of BASF and the most important associations of which we
are a member, with explanations on our approach.
About This Report
47
Community
BASF Report 2020
We support the Espérance Banlieues program in France for children
from elementary and high schools in 17 low socioeconomic areas
with our Kids' Lab program. The hands-on program provides a play-
based introduction to science and teaches topics such as a healthy
diet. The program ultimately aims to prevent early school leaving
and to make it easier to access further education. During the
coronavirus pandemic, BASF France supported partner schools
with donations of protective face masks and disinfectant.
We foster societal integration, particularly of low-achieving young
people and refugees, with our Start in den Beruf and Start Integra-
tion programs. In 2020, 106 young people in the BASF Training
Verbund participated in these two programs in cooperation with
partner companies in the Rhein-Neckar metropolitan region. The
goal is to prepare participants for an apprenticeship within one year,
and ultimately secure the long-term supply of qualified employees
for BASF and in the region as a whole. Since being launched at the
end of 2015, BASF's Start Integration program has supported
around 420 refugees with a high probability of being granted the
right to remain in Germany, helping to integrate them into the labor
market. We spent around €2.6 million on the BASF Training Verbund
in 2020.
-
We are a member of Wissensfabrik - Unternehmen für Deutsch-
land e. V., a network of over 130 companies and organizations with
close links to business that supports children, young people, stu-
dents and young entrepreneurs through its involvement with educa-
tional institutions and start-ups. The focus is on school projects that
provide hands-on experience with STEM (science, technology,
engineering and mathematics). Due to the coronavirus pandemic,
the project's initiatives (such as IT2School Gemeinsam IT
entdecken and KiTec - Kinder entdecken Technik) were also offered
in digital formats, allowing these educational programs to continue
even as school operations were restricted.
In 2020, we once again met with the Stakeholder Advisory Council
to discuss important aspects of sustainability. The main topics were
climate protection, circular economy and sustainable finance. The
Human Rights Advisory Council discussed impacts on selected
aspects of our products' value chains and interacting with vulnerable
groups.
nonprofit organizations with the Gemeinsam Neues schaffen
program.
■ BASF as a responsible neighbor at our sites worldwide
■ Contribution to the United Nations' Sustainable
Development Goals
Social engagement
For more information on the Industry Associations Review, see basf.com/corporate governance
For more information on the BASF Climathon, see climathon.basf.com
For more information on stakeholder dialog, see basf.com/en/stakeholder-dialog
For more information on our guidelines for responsible lobbying, see
basf.com/guidelines_political_communication
personal carbon footprints to supporting customer-focused busi-
ness ideas.
We also use digital formats to initiate dialog on sustainability topics.
The first Climathon was held in November 2020 as an initiative for
employees. During the one-day hackathon, teams of (IT) experts
developed digital solutions for sustainability issues, from calculating
We have a particular responsibility toward our production sites'
neighbors. With the established community advisory panels, we
promote open exchange between citizens and our site management
and strengthen trust in our activities. Our globally binding require-
ments for community advisory panels are based on the grievance
mechanism standards in the United Nations' Guiding Principles on
Business and Human Rights. We keep track of their implementation
through the existing global databank of the Responsible Care
Management System.
BASF does not financially support political parties. In the United
States, employees at BASF Corporation have exercised their right to
establish a Political Action Committee (PAC). The BASF Corporation
Employee PAC is an independent, federally registered employee
association founded in 1998. It collects donations for political pur-
poses and independently decides how these are used, in accor-
dance with U.S. law.
As a responsible neighbor at our Ludwigshafen site and a partner in
the Rhine-Neckar metropolitan region, our social engagement in
Germany includes strengthening participation and integration of
disadvantaged groups as well as promoting research and discovery.
It is particularly important to us that we work together with our
partners to increase the impact of individual measures. In the project
#WirGestalten Schule, for example, we are working with our partners
to improve education equality. We promote cooperation between
- Jobs and taxes
1 To Our Shareholders
Responsible and trustworthy partner
45
BASF Report 2020
In 2020, we generated sales of €16.7 billion with Accelerator
products (2019: €15.0 billion). Accelerator products account for
30.9% of the evaluated relevant portfolio. Performer products
account for 56.4% and Transitioner products for 12.6% of the
solutions assessed. Sales of Accelerator products rose by 11%
64
72
€22 billion
Increase sales from Accelerator products to
2019
About This Report
2020
2019
6,799
2020
2025 target
bebuejeyo
2 The definition of the relevant portfolio and further information can be found in the Sustainable Solution Steering manual at basf.com/en/sustainable-solution-steering
1 To Our Shareholders
1 Parts of the relevant portfolio have not yet been evaluated, including the integrated polyamide business acquired from Solvay in 2020.
4,705
- Production of safe products in compliance with environ-
mental and social standards
2 Management's Report
Integration of Sustainability
4
Society: politics, NGOs, media
Our stakeholders include customers, employees, partners and
suppliers, investors, representatives from academia, industry,
politics and society, as well as from the communities surrounding
our production sites. Parts of our business activities, such as the
use of certain new technologies or our environmental impacts, are
often viewed by stakeholders with a critical eye. We take these
questions seriously, initiate dialogs and participate in discussions.
Such ongoing exchange with our stakeholders helps us to even
better understand what matters to groups of society, what they
■ Continuous dialog with our stakeholders
Stakeholder engagement
Strong long-term share performance
Attractive dividend yield
- Innovative and sustainable solutions
- Reliable partner
Customers
3 Corporate Governance
We draw on the competence of global initiatives and networks, and
contribute our own expertise. We are active in worldwide initiatives
with various stakeholder groups. For instance, we have been a
member of the U.N. Global Compact (UNGC) since its establish-
ment in 2000. As a recognized LEAD company, we contribute to the
implementation of the Agenda 2030 and the associated goals. We
support UNGC Action Platforms, for example on Good Health and
Well-being (SDG 3), and contribute to the UNGC Expert Network. To
celebrate the 75th anniversary of the United Nations on Septem-
ber 21, 2020, we reaffirmed our commitment to the UNGC and
pledged our support for the Women's Empowerment Principles and
the CFO Principles on Integrated SDG Investments and Finance.
BASF is also active in 16 local Global Compact networks.
Stakeholder demands and expectations of BASF
BASF was awarded the 2020 CSR Prize by the German federal
government, which highlighted BASF's long-standing commitment
to CSR (corporate social responsibility) and its comprehensive
sustainability strategy. In its justification, it emphasized BASF's
pioneering role, particularly in integrated reporting and the disclo-
sure of CO2 emissions, and the fact that BASF also encourages the
expect of us and which measures we need to pursue in order to
establish and maintain trust, build partnerships, and increase socie-
tal acceptance for and the sustainability of our business activities. In
doing so, we want to harness potential for mutual value creation and
strengthen the legitimacy of our business activities - our license to
operate. For important topics, we systematically identify key stake-
holders at an early stage to discuss critical questions with them.
Relevant considerations include their topic-specific expertise and
willingness to engage in constructive dialog.
For more information on Sustainable Solution Steering, see basf.com/en/sustainable-solution-steering
If, during reassessment of our portfolio, we identify products with
substantial sustainability concerns, we classify these as "Challenged."
Challenged products account for around 0.1% of the evaluated
relevant portfolio. We develop and implement action plans for all
products in this category. These include research projects and refor-
mulations to optimize products, or even replacing the product with
an alternative. To systematically align our portfolio with contributions
to sustainability, as of 2018, we will phase out all Challenged products
within five years of initial classification as such at the latest. We strive
to offer products that make a greater contribution to sustainability in
their area of application to live up to our own commitments and meet
our customers' demands. This is why our Sustainable Solution
Steering method is used in areas such as our research and develop-
ment pipeline, in business strategies as well as in merger and acqui-
sition projects.
compared with the previous year. This is primarily attributable to the
positive development of Accelerator sales in the Surface Technolo-
gies and Agricultural Solutions segments. In the Agricultural Solutions
segment, the first-time assessment of the seed business acquired
from Bayer contributed to the increase.
5 Overviews
Consolidated Financial Statements
implementation of sustainability at other companies in the industry
through transparency.
2 Management's Report
Integration of Sustainability
Invest-
ments
4 Consolidated Financial Statements
4,075
559
3,516
€3,516 million
21
21
Nutrition & Care 14%
794
691
103
Others (infrastructure, R&D) 4%
Agricultural Solutions 12%
Total
Acquisi-
tions
24% Chemicals
Additions to property, plant and equipment by segment in 2020
For more information on investments within the segments, see page 69 onward
facilities are scheduled for completion in 2022. We started up a plant
for emissions catalysts in Shanghai, China.
3,619
1,250
4,869
Surface Technologies 16%
Industrial Solutions 9%
Transparently classifying our products on the basis of their contribu-
tion to sustainability enables us to systematically improve them.
Accelerator products make a substantial sustainability contribution in
the value chain. These include catalysts that reduce emissions to the
environment, biodegradable mulch films for agricultural applications,
and high-performance insulation materials for higher energy savings
and reduced material use in building construction. Based on our
corporate strategy, we have set ourselves a global target: We aim to
make sustainability an even greater part of our innovation power and
achieve €22 billion in Accelerator sales by 2025.
50
50
54% Europe
a Including restoration obligations, IT investments and right-of-use assets arising from leases
€3,516 million
North America 29%
South America, Africa, Middle East 3%
Asia Pacific 14%
Total
Additions to property, plant and equipment by region in 2020
1 Additions to property, plant and equipment excluding acquisitions, restoration obligations, IT investments and right-of-use assets arising from leases
In Asia, we continued to drive forward construction of the new inte-
grated Verbund site in Zhanjiang, China, in 2020. The first production
In North America, we continued construction of an MDI synthesis
unit in Geismar, Louisiana, and started up the first plants.
In Europe, construction continued for another production plant for
vitamin A at the Ludwigshafen site in Germany. It is scheduled for
startup in 2021. We are expanding the ethylene oxide complex in
Antwerp, Belgium, and are building production plants for battery
materials and their precursors in Harjavalta, Finland, and Schwarz-
heide, Germany.
Investments in property, plant and equipment amounted to
€3,516 million in 2020 (2019: €3,839 million). Capex' accounted for
€2,878 million of this amount (2019: €3,349 million). Our invest-
ments in 2020 focused on the Chemicals, Materials, Surface Tech-
nologies and Nutrition & Care segments.
Investments
a Including restoration obligations, IT investments and right-of-use assets arising from leases
20% Materials
BASF Report 2020
3 Corporate Governance
of which goodwill
Property, plant and equipmentª
Investments and acquisitions 2020
Million €
Using our procurement networks
Within a very short period of time, we modified production processes
at plants in different countries to manufacture urgently needed
disinfectants - products that are not usually part of BASF's portfolio.
Employees in countries such as Brazil, Germany, France, the
Netherlands, Switzerland, Spain, Turkey and the United States
helped to avoid local bottlenecks with their team spirit and great
flexibility. In Europe alone, BASF produced more than 900,000 liters
of disinfectant between March and December and donated this to
hospitals, medical workers, care homes, local government, educa-
tional institutions and nonprofit initiatives such as UNO-Flüchtlings-
hilfe, the German partner of the U.N. refugee agency.
Production and donation of disinfectants
Our activities to fight the coronavirus were wide-ranging: We
produced and donated disinfectant, supplied personal protec-
tive equipment, supported medical facilities and food bank
initiatives, and contributed our expertise to medical research.
Civil society, government, business and the
nonprofit sector must work closely together to
overcome the coronavirus pandemic. Our Helping
Hands aid campaign contributed to the fight against
the novel coronavirus - as part of society, as a
partner at our sites and as an international
company. We used our expertise in research,
production, procurement and logistics to help
during the crisis.
[Helping Hands - our aid
measures during the
coronavirus pandemic]
48
BASF Report 2020
1 As of 2020, we report a total figure for our social engagement activities. Consequently, a graphic representation of individual expenses, as shown in the 2019 report, is no longer provided. The figure includes all consolidated companies with employees, including joint operations. A large part of the expenses in 2020 related to activities in
connection with the Helping Hands initiative.
For more information on social engagement at our sites, see ludwigshafen.basf.de/commitment
For more information on our social engagement around the world, see basf.com/en/engagement
For more information on Starting Ventures, see basf.com/en/starting-ventures
~€76 million
BASF Group expenses for social engagement activities 1
In the area of international development work, we support BASF
Stiftung, an independent nonprofit organization, with donations for
its projects with various U.N. organizations. The 2020 year-end
donation campaign in favor of BASF Stiftung supported the United
Nations World Food Programme's (WFP) efforts to deliver humani-
tarian food aid in Yemen. A total of around €396,600 was raised for
WFP from donations by the employees of participating German
Group companies and BASF. A donation of €65 can feed a family in
Yemen for one month.
We promote resource stewardship with different programs around
the world, such as our Water Producer Program. This was estab-
lished in 2011 through a partnership between BASF's Guaratinguetá
site in Brazil, the organization Fundação Espaço ECO® and local
government. BASF sponsors the program and wants to strengthen
the local community and environment with the initiative. The program
aims to support conservation measures usually performed by
farmers such as the reforestation of riverbank woodlands, soil
restoration and protecting native plants and water sources - with
financial assistance and training from the organization's environ-
mental consultants. Since being founded, the program has
supported more than 60 farmers. It directly contributes to water
conservation in the Ribeirão Guaratinguetá basin, which supplies
90% of communities in the area. The Fundação Espaço ECO® was
founded by BASF in Brazil and supports BASF business units and
other customers on their journey to becoming more sustainable.
The organization celebrated its 15th anniversary in 2020.
We aim to create long-term value for BASF and society with new
business models and cross-sector partnerships. Our Starting Ven-
tures program helps people with precarious livelihoods to improve
their income-earning opportunities and their quality of life. At the
same time, the program provides access to new markets and
partners, and strengthens our contribution to reaching the SDGs.
For example, we support the Waste-2-Chemicals project in Lagos,
Nigeria, in which citizens help to keep the city clean by collecting and
sorting plastic waste. The plastic waste is converted into pyrolysis oil
in a chemical recycling process and used as feedstock in the
production of high-quality chemical products. BASF cooperates with
the organizations Wecyclers and RecyclePoints to make this circular
value creation process possible. We are also planning to build
centers where plastic waste can be collected and converted into
pyrolysis oil. In this way, we want to provide local collectors and their
families with a regular income in the future.
5 Overviews
Given the strained supply situation at the beginning of the pandemic,
we used our procurement networks to purchase more than 100 mil-
lion protective masks and donate these to the Federal Republic of
Germany and the state of Rhineland-Palatinate. We also supported
local healthcare facilities in many other countries, including Belgium,
Brazil, China and the United States, by providing masks, protective
eyewear, protective clothing and materials to protective visors free
of charge.
Assistance initiatives and programs for those in need
Together, BASF SE and BASF Stiftung also established assistance
initiatives and programs for those in need. An assistance fund
focused on organizations that provide and distribute food to those in
need. Other institutions, individuals and BASF employees could also
donate to the fund. BASF Stiftung provided assistance to those who
have suffered long-term loss of income due to COVID-19 illness or
whose households were in financial distress as a result of the
pandemic. We also donated to hospitals and healthcare providers in
the communities surrounding our sites in China, India, Italy, South
Korea, Poland and Spain, for example.
Investments and acquisitions alike are prepared by interdisciplinary
teams and assessed using various criteria. In this way, we ensure
that economic, environmental and social concerns are included in
strategic decision-making.
In addition, we are refining our portfolio through acquisitions that
promise above-average profitable growth as part of the BASF
Verbund to help reach a relevant market position. A key considera-
tion is that these are innovation-driven or offer a technological differ-
entiation, and make new, sustainable business models possible.
With a world market share of more than 40%, China is today the
largest chemical market and drives the growth of global chemical
production. We expect China's share to increase to around 50% by
2030. To continue to participate in this growth in Asia in the future,
we plan to build an integrated Verbund site in Zhanjiang in the
southern Chinese province of Guangdong. Construction of the first
plants started in 2020. We also plan to expand the site we operate
together with our partner Sinopec in Nanjing, China.
For more information on our investments from 2021 onward, see page 157
By investing in our plants, we create the conditions for the profitable
growth we strive for while constantly improving the efficiency of
our production processes. For the period from 2021 to 2025, we
have planned capital expenditures (capex)1 totaling €22.9 billion
worldwide.
In addition to innovations, investments make a decisive
contribution toward achieving our ambitious growth goals.
We use targeted acquisitions to supplement our organic
growth.
Material Investments and Portfolio
Measures
The BASF Group's
Business Year
Intangible assets
5 Overviews
3 Corporate Governance
2 Management's Report
Material Investments and Portfolio Measures
1 To Our Shareholders
About This Report
49
BASF Report 2020
We also made our expertise and infrastructure available for research
into the virus, for example, in the search for active ingredients to
treat COVID-19 patients. Our supercomputer Quriosity identified
and optimized promising molecules for public research projects (see
page 38 for more information). In addition, we opened our expertise
and laboratory facilities to TÜV Nord at the BASF Innovation Campus
in Shanghai, China, where quality checks on protective face masks
were conducted on behalf of the German Federal Ministry of Health.
For more information on the Helping Hands aid campaign, see basf.com/en/helping-hands
BASF infrastructure supports search for active ingredients
4 Consolidated Financial Statements
Significant sustainability
concern identified and
action plan in development
or implementation
the positive contribution and minimize the negative effects of our
business activities.
A significant steering tool for the product portfolio, based on the
sustainability performance of our products, is the Sustainable
Solution Steering method. By the end of the 2020 business year,
we had evaluated 98.4%¹ of the relevant portfolio.2 This refers to
the BASF Group's sales from products in its strategic portfolio to
third parties in the business year concerned. By the end of 2020,
sustainability analyses and assessments had been conducted for
more than 57,000 specific product applications, accounting for
€54.1 billion in sales. These consider the products' application in
various markets and sectors. New market requirements arise as a
result of the continuous development of new product solutions in
the industry or changing regulatory frameworks. This has an effect
on comparative assessments, which is why we regularly reassess
our product portfolio.
Prioritization and grouping
- External inquiries
- Value to Society results
- Prior materiality analyses
topics (around 100) based on
Complete list of potentially relevant
Identifying and assessing sustainability topics 1, 2
For more information on compensation structures, see the Compensation Report on page 183 onward
For more information on the organization of our sustainability management,
see basf.com/sustainabilitymanagement
in internal workshops
For more information on our risk management, see pages 158 to 166
contribute their perspectives to discussions with BASF's Board of
Executive Directors. The HRAC is led by our Chief Compliance
Officer. It comprises external human rights specialists and internal
experts, who advise senior management. This help us to build on
our strengths in how we handle human rights and address potential
for improvement.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Integration of Sustainability
To Our Shareholders
1
About This Report
We systematically evaluate sustainability criteria, including the
effects of climate change, as an integral part of decisions on acqui-
sitions and investments in property, plant and equipment or financial
assets. In this way, we not only assess economic dimensions, but
also the potential impacts on areas such as the environment, human
rights or the local community. We evaluate both the potential
impacts of our activities as well as which effects we are exposed to.
For more information on our financial and sustainability targets, see page 32
Harnessing business opportunities and measuring value
added by sustainability
■ Product Carbon Footprints (PCFs) for around 45,000 sales
products by the end of 2021
We take advantage of business opportunities by offering our
customers innovative products and solutions that support their
sustainability goals. We ensure that the business units automatically
evaluate and take into account relevant sustainability criteria when
they develop and implement strategies, research projects and inno-
vation processes.
43
BASF Report 2020
BASF also plans to make the individual carbon footprints for around
45,000 sales products available by the end of 2021 with the help of
a new, in-house digital solution. PCFs comprise all product-related
greenhouse gas emissions that occur until the BASF product leaves
the factory gate for the customer: from the purchased raw material
to the use of energy in production processes (Scope 1-3).
Calculating PCFs creates transparency for our customers and
partners, enabling us to develop plans together to reduce CO2
emissions along the value chain up to the end product.
To achieve this, we need to continually improve our understanding
of how our actions impact society and the environment. We already
have many years of experience of this from evaluating our products
and processes using methods such as Eco-Efficiency Analyses, the
SEEbalance® Socio-Eco-Efficiency Analysis, our Sustainable Solu-
tion Steering portfolio analysis, or BASF's corporate carbon foot-
print.
1 Our stakeholders also confirmed the materiality of the nonfinancial topics that the Value to Society approach identified as having an impact along the value chain.
2 Quantitative thresholds for defining material topics have not been set due to the complexity of the assessment methods used for each dimension of materiality. The final list of topics is based on an expert comparison of the
results of all the assessment approaches described.
or relevant under the Global
Reporting Initiative)
Material topics
(according to the CSR
Directive Implementation Act
confirmed by surveys and interviews
with external experts
- Results complemented and
- Big data analysis based on
external publications
- Positive and negative effects of
individual sustainability trends on
the businesses analysed based
on meta-study
- Business units surveyed as part
of strategy development
- Monetization of positive and
negative effects along the value chain
- Topics with impacts that cannot be
expressed in monetary terms included
based on expert assessments
Value to Society approach
Relevance for our
stakeholders
Impact on BASF
Impact of BASF
BASF evaluation approach
We want to measure the value proposition of our actions along the
entire value chain. We are aware that our business activities have an
impact on the environment and society, and so we strive to increase
42
BASF Report 2020
We also established an external, independent Stakeholder Advisory
Council (SAC) in 2013 and a Human Rights Advisory Council (HRAC)
in 2020. In the SAC, international experts from academia and society
The Board of Executive Directors and the Supervisory Board are
regularly briefed on the current status of individual sustainability
topics. In addition, the Board of Executive Directors is informed
about sustainability evaluations in business processes, for example,
in the case of proposed investments and acquisitions. It makes
decisions with strategic relevance for the Group and monitors the
implementation of strategic plans and target achievement. The
Corporate Sustainability Board, which is composed of heads of
business and Corporate Center units and regions, supports the
Board of Executive Directors on sustainability topics and discusses
operational matters. A member of the Board of Executive Directors
serves as chair.
41
BASF Report 2020
1 R&D expenses reported under Other
BASF joined the AGROS program in 2020, a collaboration between
the Netherlands-based Wageningen University & Research and 26
private partners looking into autonomous vegetable growing. The
aim is to make best use of technology and accelerate innovation in
order to meet the growing demand for food, while preserving natural
resources. We are focusing even more strongly on the needs of our
consumers with the joint development of a connected, data-driven,
automated and sustainable production system. Further research
relates to optimized cultivation methods for growing cucumbers
based on sensors, plant physiology and artificial intelligence.
Various innovative crop protection products, such as the recently
acquired L-glufosinate ammonium herbicide technology and seed
treatment in combination with digital products, help farmers to
manage weeds, pests and diseases and also enable higher yield.
BASF's InvigorⓇ hybrid canola pod shatter reduction and clubroot
resistant trait technologies help to protect yield potential from
clubroot and deliver more flexibility for growers at harvest. In
addition, we launched the 300 series of InVigor hybrid canola for the
2020 growing season, featuring three new hybrids that offer growers
improvements in yield, pod shatter reduction protection, or clubroot
resistance.
More flexibility at harvest
For pod shatter reduction and resistance
to plant diseases
InVigor® technologies for hybrid canola
With market entry expected by mid-decade, we will introduce
hybrid wheat, supporting the nutritional needs of a growing world
population. Hybrid wheat will bring much needed innovation to
wheat production and start a journey to transform this crop for long-
term success to deliver high performance in yield, quality and
stability to meet the agronomic needs of farmers and the value chain
in North America and Europe. The hybrid approach will give breeders
new opportunities to adapt and improve plant characteristics and
will play an important role in addressing the environmental challenges
of the future.
- Improved harvest quality and stability
- Securing high yield in the long term
Hybrid wheat
Our recently launched fungicide RevysolⓇ will also play a crucial role
in future resistance management in wheat, helping growers to better
protect their crops, manage resistances and increase their yield in a
sustainable way.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Innovation
1 To Our Shareholders
About This Report
+1
About This Report
About This Report
2 Management's Report
Integration of Sustainability
We are constantly working to broaden our positive impact on key
sustainability topics and reduce the negative impact of our business
activities. The Corporate Development unit, which is part of the
Corporate Center, has steered the integration of sustainability into
core business activities and decision-making processes since 2020
(see page 21). Global steering of climate-related matters is also
bundled in this unit, such as coordinating measures to reach our
climate protection target and steering the target on making our
product portfolio more sustainable.
Our organizational and management structures
For more information on our Value to Society approach, see basf.com/en/value-to-society
For more information on the metastudy on sustainability trends, see basf.com/sustainability-trends
For more information on our materiality analysis, see basf.com/materiality
The relevant topics identified based on the three dimensions of
materiality include climate and energy, resource efficiency and
waste, health and safety / product stewardship, emissions to air and
soil, and responsibility along the value chain.
We evaluate key sustainability topics with our comprehensive
materiality analysis. The graphic on page 43 shows how we identify
and assess relevant topics. Here, we take into account topics that
we have an impact on, topics that have an impact on us, and topics
that our stakeholders consider important.
As a co-founder of the U.N. Global Compact and a recognized
LEAD company, we contribute to the implementation of the United
Nations' Agenda 2030 on an ongoing basis. Our products, solutions
and technologies help to achieve the U.N. Sustainable Development
Goals (SDGs), especially SDG 2 (Zero hunger), SDG 5 (Gender
equality), SDG 6 (Clean water and sanitation), SDG 8 (Decent work
and economic growth), SDG 9 (Industry, innovation and infrastruc-
ture), SDG 12 (Responsible consumption and production) and
SDG 13 (Climate action). The SDG focus areas are prioritized by
internal experts. In doing so, they assess the impacts and positive
contributions of our products, our corporate targets and strategic
action areas. The contribution of our activities is measured using the
Value to Society approach. This assesses our positive and negative
impacts on the environment, society and the economy (see
page 44).
In addition to the two climate protection and Accelerator sales
targets, we have also set ourselves further sustainability targets on
responsible procurement, engaged employees, women in leader-
ship positions, occupational health and safety, process safety and
water management.
tion in the value chain (Accelerator products), we regularly reassess
our product portfolio.
Based on our corporate strategy and the global targets derived from
this, we steer the sustainability targets (CO2-neutral growth until
2030 and achieve €22 billion in Accelerator sales by 2025) as most
important key performance indicators. We have established the
necessary steering mechanisms and control systems at Group level.
Carbon management bundles our global activities to reduce green-
house gas emissions (see page 135). We use the Sustainable
Solution Steering method to manage our product portfolio (see
page 45). To assess the sustainability performance of our products
and identify solutions that make a substantial sustainability contribu-
We achieve long-term business success by creating value added for
the environment, society and the economy. Sustainability is at the
core of what we do, a driver for growth and value as well as an
element of our risk management. That is why sustainability is firmly
anchored into the organization as part of governance, compensation
systems and business models.
■ Sustainability further integrated into governance,
compensation systems and business models
Strategy
We are successful in the long term when we create value
added for the environment, society and the economy with
products, solutions and technologies. Sustainability is firmly
anchored in our strategy and corporate governance. We
carry out the company purpose "We create chemistry for a
sustainable future" using the various tools of our sustainability
management. We systematically incorporate sustainability
into our business and our assessment, steering and compen-
sation systems. We identify sustainability trends at an early
stage and derive appropriate measures for our business to
seize new business opportunities and minimize risks along
the value chain.
[Integration of Sustainability]
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
1 To Our Shareholders
Specific sustainability
issues which are being
actively addressed
1 To Our Shareholders
3 Corporate Governance
For more information on our sustainability tools, see basf.com/en/measurement-methods
For more information on this method and the results of Value to Society, see
basf.com/en/value-to-society
comparable. The aim is to present the financial, ecological, and
social impacts of business activities on the basis of a standardized
framework. The vba is supported by the E.U., major auditing firms,
the Organisation for Economic Co-operation and Development
(OECD), leading universities and other partners. BASF is currently
one of the pilot companies testing the method using its own
business data. The vba receives the results of our evaluation to
enhance and refine the Value to Society method.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Integration of Sustainability
1 To Our Shareholders
For more information on value balancing alliance e.V., see value-balancing.com
About This Report
BASF Report 2020
We share our experiences in networks and initiatives such as the
Impact Valuation Roundtable and are involved in the corresponding
standardization processes within the International Organization for
Standardization (ISO). We are also a founding member of the value
balancing alliance e.V. (vba), a cross-industry initiative. The vba is
working to develop an accounting and reporting standard that
makes the value companies provide to society transparent and
existing concepts for assessing risks and business opportunities by
providing a macro perspective.
The results illustrate the positive contributions and negative effects,
both at BASF and in our value chains. Positive factors include taxes
paid, wages, social benefits, employee training and our net income.²
Negative contributions include environmental impacts such as
carbon emissions, land use and emissions to air, soil and water, as
well as health and safety incidents. We aim to increase the positive
contributions of our business activities along the value chain and
minimize the negative impacts. The Value to Society approach also
enables us to continually monitor our progress. It complements
We want to understand the value we contribute to society and make
this transparent. However, there are still no uniform, global standards
for measuring and reporting on companies' overall impact that
cover economic, environmental and social aspects of business
activities along the value chain. This is why we developed the Value
to Society approach in 2013 together with external experts. It allows
us to better understand our contribution to a sustainable future. In
addition, we can use it to compare the significance of financial and
nonfinancial impacts of our business activities on society and show
their interdependencies.
1 Value to Society results are calculated annually following the publication of the BASF Report. Consequently, the results shown in the BASF Report 2020 are based on the figures for the 2019 business year ("human capital" category currently only assessed for BASF production).
2 The net income of BASF's production presented in the Value to Society is calculated using the BASF Group's net income, adjusted for the interest result, the other financial result and noncontrolling interests.
Environmental
30
44
Classification of relevant portfolio² according to the Sustainable Solution Steering method
Substantial sustainability
contribution in the
value chain
Meets basic sustainability
standards on the market
■ Increase sales from Accelerator products
Steering of product portfolio based on sustainability
performance
32,148
2019
30,519
2020
15,017
16,740
2019
2020
Million €
Sales
Year
Transitioner
Performer
Steering
Solution
Sustainable
Accelerator
15
0
-15
30
Depreciation and amortization
Net income²
Economic
12
6 AND SAMTATION
CLEAN WATER
M
FCENEME ERENTH
13 QIMATE
E
2 HUNGER
5 EQUALITY
DECENT WORK AND
8 ECONOMIC GROWTH
DECENT WORK AND
Our Value to Society approach' (figures in billion €)
5 Overviews
Consolidated Financial Statements
4
Taxes
2 Management's Report
Integration of Sustainability
Wages & benefits
Health & safety
15
0
-15
30
15
0
-15
Direct customers in industries supplied by BASF
Customer industries
Indirect suppliers → Direct suppliers
Own operations
Full supply chain
Water emissions
Water consumption
Waste
Land use
GHG
Air emissions
Social
Human capital
Materiality
dimension
Investors
+ Assets of disposal groups
Total change in sales
For more information on the development of CO2 emissions, see page 131
For more information on the development of Accelerator sales, see page 45 onward
a Sales for 2018 were reduced by the share attributable to construction chemicals activities due to their
presentation as discontinued operations. Figures for the years 2016 to 2017 have not been restated.
b Sales for 2017 were reduced by the share attributable to oil and gas activities due to their presentation as
discontinued operations. Figures for 2016 have not been restated.
57,550
61,223
60,220
59,316
59,149
2016
2017
2018
2019
2020
Million €
Salesa, b
Sales amounted to €59,149 million in 2020, on a level with 2019.
The sales performance was positively impacted by higher price
levels overall, mainly as a result of higher precious metal prices in the
Surface Technologies segment and portfolio effects in the Materials
segment from the acquisition of Solvay's integrated polyamide busi-
ness. This was offset by negative currency effects and lower vol-
umes, especially in the Materials and Industrial Solutions segments.
■ Sales of €59,149 million at prior-year level
Sales
Income from operations
-167
■ Considerable decline in EBIT before special items, EBIT
and ROCE
Income from operations (EBIT) before special items decreased
by €1,083 million to €3,560 million, mainly due to significantly lower
contributions from the Chemicals and Surface Technologies seg-
ments. In the Chemicals segment, this was primarily attributable to
lower margins. In the Surface Technologies segment, it was mostly
the result of lower volumes in the Coatings division. EBIT before
special items also declined considerably in Other and in the Materi-
als and Agricultural Solutions segments. The decrease in the Mate-
rials segment was mainly due to lower polyamide margins and vol-
umes. EBIT before special items was lower in the Agricultural Solu-
tions segment, largely from currency effects. In the Nutrition & Care
segment, EBIT before special items declined slightly as a result of
the sales performance and a one-off payment in the Care Chemicals
division in the previous year. In the Industrial Solutions segment,
EBIT before special items was on a level with the previous year.
For an explanation of the indicator EBIT before special items, see page 34
2019
2020
Million €
Million €
EBIT a, b, c
Special items
5 Overviews
Consolidated Financial Statements
4
6,309
3 Corporate Governance
1 To Our Shareholders
About This Report
99
56
BASF Report 2020
For the definition of special items, see page 34
Special items in EBIT totaled -€3,751 million in 2020, compared
with -€442 million in the previous year. The increase in special items
is primarily attributable to the impairments of €2.9 billion on property,
plant and equipment and intangible assets, which were mainly
reported under other charges and income. Expenses of €76 million
arose in connection with divestitures, mainly from the carve-out of
our global pigments business. We recorded a positive earnings
contribution of €286 million in the previous year, in particular from the
transfer of BASF's paper and water chemicals business to the Solenis
group and the sale of businesses in the Agricultural Solutions seg-
ment in accordance with the conditions imposed by antitrust author-
ities in connection with the acquisition of the Bayer businesses. In
addition, expenses from restructuring measures rose by €325 million
compared with the previous year to €952 million. These largely
related to expenses for measures to streamline the global glufosinate-
ammonium production network and provisions in connection with
the realignment of the Global Business Services unit. Integration
costs amounted to €157 million in 2020, mainly for the integrated
polyamide business acquired from Solvay. In the previous year, we
recorded integration costs of €303 million, primarily for the integration
of the businesses acquired from Bayer in the Agricultural Solutions
segment.
b EBIT before special items for 2018 was reduced by the share attributable to construction chemicals activities due to
their presentation as discontinued operations. Figures for the years 2016 and 2017 have not been restated.
C EBIT before special items for 2017 was reduced by the share attributable to oil and gas activities due to their
presentation as discontinued operations. Figures for 2016 have not been restated.
a EBIT before special items for 2019 has been restated to reflect the reclassification of income from non-integral
companies accounted for using the equity method to net income from shareholdings. Figures for the years
2016 to 2018 have not been restated.
2 Management's Report
Results of Operations
7,645
6,281
4,643
Divestitures
On September 30, 2020,1 we closed the divestiture of our construc-
tion chemicals business to an affiliate of Lone Star, a global private
equity firm, as agreed in December 2019. The purchase price on a
cash and debt-free basis was €3.17 billion. The divested construc-
tion chemicals business had around 7,500 employees and operated
production sites and sales offices in more than 60 countries. It
generated sales of around €2.6 billion in 2019.
For more information on this divestiture, see the Notes to the Consolidated Financial Statements
from page 237 onward
1 The construction chemicals business was transferred in two steps, on September 30, 2020, and on November 30, 2020.
BASF Report 2020
51
54
About This Report
1
On August 29, 2019, we reached an agreement with DIC, Tokyo,
Japan, on the acquisition of BASF's global pigments business. The
purchase price on a cash and debt-free basis is €1.15 billion. The
assets and liabilities to be divested were reclassified to a disposal
group in the Dispersions & Pigments division as of this date. The
transaction is expected to close in the first half of 2021, subject to
the approval of the relevant competition authorities.
To Our Shareholders
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Economic Environment
Economic Environment¹
Global economic growth in 2020 was much weaker than we
had forecast at the beginning of the year. In the first half of
2020, the coronavirus pandemic led to the worst economic
slump since the Second World War. Following a recovery in
the third quarter, economic activity in the fourth quarter was
again disrupted by rising infection rates and government
restrictions in many countries. Global gross domestic product
(GDP) fell by 3.7% year on year (2019: +2.5%). Industrial
production contracted by 4.0% (2019: +1.8%). Global chemi-
cal production declined by 0.4% (2019: +1.9%). The average
price for a barrel of Brent crude oil decreased to $42 per
barrel (2019: $64 per barrel).
For the outlook on the economic environment in 2021, see page 152 onward
Gross domestic product
2 Management's Report
2020
Agreed transactions
On January 31, 2020, BASF closed the acquisition of Solvay's
integrated polyamide business, which was agreed in September
2017. The acquisition broadens BASF's polyamide capabilities with
innovative and well-known products and enhances access to
growth markets in Asia as well as in North and South America.
Through the backward integration into the key raw material
adiponitrile (ADN), BASF now has production plants along the entire
value chain for polyamide 6.6. The transaction includes production
sites in Germany, France, China, India, South Korea, Brazil
and Mexico; research and development centers and technical
consultation centers; and shares in Butachimie SNC and
Alsachimie S.A.S. BASF acquired the polyamide business for a
purchase price of €1.3 billion (on a cash and debt-free basis) and
integrated it into the Performance Materials and Monomers divi-
sions within the Materials segment.
3,560
of consolidation
0
-3
Changes in the scope
0
-91
Divestitures
1
For more information on this acquisition, see the Notes to the Consolidated Financial Statements
from page 235 onward
683
About This Report
1 To Our Shareholders
2 Management's Report
Material Investments and Portfolio Measures
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Acquisitions
We added €559 million worth of property, plant and equipment
through acquisitions in 2020. Additions to intangible assets including
goodwill amounted to €691 million.
For more information on acquisitions, see the Notes to the Consolidated Financial Statements from
page 235 onward
Acquisitions
Real change compared with previous year
-191
-952
9,379
+ Accounts receivable, trade
11,593
10,469
+ Inventories
1,527
1,395
+ Integral investments accounted for using the equity
method
20,472
20,210
14,832
14,249
2019
2020
7.7
1.7
%
60,900
60,111
10,061
+ Current and noncurrent other receivables and other
assetsa
3,149
-3
8,421
Earnings per share
€
1.53
6.48
1.00
0.16
9.17
€
4,719
1.64
0.89
0.64
4.00
Adjusted earnings per share.
a Quarterly results not audited
b Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
BASF Report 2020
60
60
0.83
1,012
-518
-1,203
-3,751
Total special items in EBIT
6,275
2016
202
-2,566
Other charges and income
7,587
2017
-442
286
Divestitures
5,974
2018
-303
-157
Integration costs
4,201
2019
-627
-76
Restructuring measures
ROCE
EBIT of BASF Group
4,201
-191
2019
2020
BASF Report 2020
1 For more information on net assets, see page 61 onward
+ Property, plant and equipment
Intangible assets
Capital employed
Million €
Million €
ROCE
For more information on the determination of ROCE, see page 33
We use the indicator return on capital employed (ROCE). It mea-
sures the profitability of the capital employed by the segments.
ROCE was 1.7%, after 7.7% in the previous year. The decline in
ROCE was primarily due to considerably lower EBIT. Capital
employed declined, mainly due to the impairments recognized as a
consequence of the coronavirus pandemic, and currency effects.1
b EBIT for 2018 was reduced by the share attributable to construction chemicals activities due to their
presentation as discontinued operations. Figures for the years 2016 and 2017 have not been restated.
C EBIT for 2017 was reduced by the share attributable to oil and gas activities due to their presentation as
discontinued operations. Figures for 2016 have not been restated.
a EBIT for 2019 has been restated to reflect the reclassification of income from non-integral companies
accounted for using the equity method to net income from shareholdings. Figures for the years 2016 to 2018
have not been restated.
At -€191 million, EBIT for the BASF Group in 2020 was consider-
ably below the previous year's level (2019: €4,201 million). This
figure includes income from integral companies accounted for using
the equity method, which declined from €265 million to €220 million.
Cost of capital basis of segments, average of
month-end figures
EBIT of the segments
1,913
- EBIT of Other
The calculation of EBIT as part of our statement of income is shown in the Consolidated Financial
Statements on page 222
150
World
2020 -3.7%
2 Management's Report
Economic Environment
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Price trends for key commodities
■ Sharp decline in prices for crude oil and naphtha
■ Year-on-year decrease in gas prices, but with wide
regional variance
The average price for a barrel of Brent crude oil decreased to
$42 per barrel (2019: $64 per barrel) and fluctuated over the course
of the year between around $64 per barrel in January and around
$18 per barrel in April.
Over the course of the year, the average monthly price for the
chemical raw material naphtha ranged between $528 per metric ton
in January and $140 per metric ton in April. At $355 per metric ton,
the annualized average price of naphtha in 2020 was lower than in
2019 ($505 per metric ton).
The average price of gas in the United States was $1.99 per mmBtu,
below the level of the previous year ($2.56 per mmBtu). In Europe,
the average price of gas on the spot market was also significantly
lower than in 2019, at $3.17 per mmBtu (2019: $4.46 per mmBtu).
Gas prices in China averaged around $6.29 per mmBtu nationally
(2019: $6.39 per mmBtu), while the average price in the coastal
provinces was $7.48 per mmBtu (2019: $7.59 per mmBtu).
Price trends for crude oil (Brent) and naphtha
$/barrel, $/metric ton
$/t
1,100
1,000
900
800
700
600
To Our Shareholders
1
About This Report
54
2019 -0.1%
2020 2.3%
Emerging markets of Asia
2019 4.0%
2020 -9.8%
Japan
2019 -0.2%
2020
-1.1%
500
South America
-1.3%
returned to pre-crisis levels over the course of the year, average
production for the year was down 20.1% and 22.4% from the previ-
ous year, respectively. In the global construction industry, output
decreased by 3.3% (2019: +2.4%). Overall, non-residential con-
struction contracted at a slightly stronger rate than the residential
and infrastructure segment. Developments varied from region to
region: Construction volumes fell by 7.1% in western Europe and by
7.6% in eastern Europe, while North America posted a decrease of
only 1.3%. The United States saw an upturn in the housing market,
which partially offset developments in non-residential building. In
Asia, construction activity declined only slightly by 0.6%. Construc-
tion activity grew by 3.5% in China, but shrank by 3.1% in Japan,
1.5% in South Korea and 18.7% in India. The construction industry
also contracted significantly by 13.2% in South America. Consumer
durables production, for example in the textile and furniture indus-
tries, fell by almost 8% on average. Production also decreased by
around 4% (2019: +1.5%) in the energy and resources sector due
to weaker demand for energy and industrial commodities. Agricul-
tural production was more stable and grew by 2.1% (2019: 2.1%).
The U.S. market achieved considerable growth of 2.8%, benefiting
from rising exports to China and unfavorable weather conditions in
parts of South America. In western and eastern Europe, by contrast,
production declined by 0.8% overall. This was attributable to both
dry weather conditions and regional shortages of harvest workers.
In South America, agricultural production declined slightly by 0.5%.
Production increased by 1.9% in Brazil but decreased by 8.4% in
Argentina due to drought. In Asia, production rose by 2.7% com-
pared with the previous years.
Trends in the chemical industry
■ Global growth much weaker than in prior year and below
expectations
Contrary to our expectations, global chemical production contracted
by 0.4% in 2020 (2019: +1.9%). As a result, the decline was much
less pronounced than in global industrial production. This was
because less cyclical customer sectors have a higher weighting in
the chemical industry and because demand temporarily rose for
disinfectants and cleaning products, protective clothing, single-use
packaging and plexiglass.
However, there were significant regional differences. In the E.U.,
chemical production decreased by around 2%, with significant
differences between the major production locations. While produc-
tion only declined by between 1% and 3% in Belgium, Germany and
Spain, and was virtually unchanged in the Netherlands, it fell by
around 8% in Italy and by around 9% in France. Chemical produc-
tion decreased by 4.6% in North America and by 1.1% in South
America.
By contrast, China, the world's largest chemical market, increased
volumes by 3.4%. In the rest of Asia, on the other hand, chemical
production declined, in some countries significantly (Japan: -9.8%;
Malaysia: -6.2%; India: -5.4%; South Korea: -3.2%). As a result,
chemical production in Asia only increased by around 1%.
BASF Report 2020
54
2019
400
300
200
Factors influencing sales of the BASF Group
Results of Operations
The world economy saw much weaker growth in 2020 than in
2019 as a result of the coronavirus pandemic. Growth in
global industrial production and in the global chemical
industry (excluding pharmaceuticals) was also below the
prior-year level. In this market environment, BASF's business
did not perform as well as we expected: Sales were on a level
with the previous year and earnings declined considerably.
Business reviews by segment can be found from page 69 onward
Volumes
Prices
Currencies
EBIT before special items a, b, c
Million €
Change in
million €
5 Overviews
Change
in %
2019
-298
-1
2018
1,487
3
2017
-1,945
2020
United States
Consolidated Financial Statements
3 Corporate Governance
100
0
$/bbl
130
120
Naphtha
2020: $355/t
2019: $505/t
Crude oil
110
2020: $42/bbl
4
100
90
80
285432
55
BASF Report 2020
About This Report
1
To Our Shareholders
2 Management's Report
Results of Operations
2019: $64/bbl
United States
2020 -4.3%
European Union
Economic developments in the United States were very volatile.
The crisis left its mark on the unemployment rate here, which jumped
from 3.5% at the beginning of the year to 14.8% in April 2020. Per-
sonal incomes rose overall as unemployment benefits were signifi-
cantly bolstered by state aid. As a result, spending on consumer
goods remained largely stable, while there was a clear, temporary
1 All information relating to past years in this section can deviate from the previous year's report due to statistical revisions. Where available, macroeconomic growth rates are adjusted for calendar effects. Figures for 2020 not yet available in full are estimated.
2 In the rest of this chapter, "E.U." refers to the E.U. 27.
3 We define the emerging markets of Asia as Greater China, the ASEAN countries (Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos, the Philippines, Singapore, Thailand, Vietnam), India, Pakistan and Bangladesh.
BASF Report 2020
52
42
About This Report
1 To Our Shareholders
2 Management's Report
Economic Environment
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
drop in consumption of services. In the second half of 2020, the
easing of restrictions in many states led to a significant recovery and
saw the unemployment rate halve. Overall, U.S. GDP fell by 3.5%
(2019: +2.2%).
In the emerging markets of Asia, the impact of the coronavirus
pandemic was mixed. Economic output in China dropped consid-
erably as early as the first quarter of 2020. However, a dynamic
economic recovery was already underway in the second quarter of
2020 and continued in the second half of the year. Industrial produc-
tion and export demand recovered particularly quickly, while
domestic consumer demand reacted only after a delay. China was
the only major global economy to report growth in 2020, of 2.3%
(2019: +6.0%). In India, by contrast, GDP fell by 8.0% after a lock-
down lasting several months (2019: +4.2%). Here, too, a strong
decline was followed by a clear upturn in the second half of the year.
GDP in the remaining emerging markets of Asia declined by an
average of 3%. There was considerable variation from country to
country.
Japan and South Korea recorded comparatively low infection rates
overall. However, these also saw a significant temporary drop in
domestic and foreign demand. In Japan, GDP sank by 4.8% (2019:
+0.3%). In South Korea, higher government spending and invest-
ment cushioned the decline in GDP to only -1.0% (2019: +2.0%).
South America was severely affected by the coronavirus pandemic.
The Brazilian economy was bolstered by strong fiscal stimulus mea-
sures. Economic growth started to recover in the second half of the
year after restrictions were eased in some regions. The increase in
public debt and rising inflation rates led to a significant depreciation
of the Brazilian real. Brazilian GDP decreased by 4.6% (2019:
+1.4%). Argentina saw a much stronger decline in economic output
in 2020, falling by 10.4% as a result of a strict lockdown in the spring
(2019: -2.1%). The country's renewed debt crisis left little room for
government aid. Inflation rates of over 40% negatively impacted
private consumption and the Argentine peso lost around half of its
value. Exchange rates in the rest of South America remained more
stable. GDP losses due to lockdowns and weaker export demand
varied significantly and were between -4.8% in Uruguay and -11.9%
in Peru. Overall, GDP in South America fell by 6.6% (2019: +0.9%).1
Trends in key customer industries
■ Strong decline in global industrial production
In the European Union (E.U.), GDP contracted by 6.4% (2019:
+1.6%). Europe's southwest was especially hard hit: Hard lock-
downs were ordered in response to high infection rates. GDP fell by
8.3% in France, 8.8% in Italy and even shrank by 11.0% in Spain.
German GDP also declined significantly, but less sharply, by 5.3%.
The smaller decrease reflected the fact that the export industry
benefited from the recovery in China and that the downturn in private
consumption was less pronounced. GDP declined by 9.9% (2019:
+1.4%) in the United Kingdom as measures to contain infection
rates were taken late, but were stricter and continued for longer.
Following an economic slump in the spring and a dynamic recovery
in the third quarter, the eastern E.U. countries again recorded a
strong rise in infection rates. As a result, governments imposed new
partial lockdowns, which negatively impacted the services sector in
particular. Overall, GDP in the eastern E.U. countries decreased by
4.4% in 2020 (2019: +3.8%). In Russia, GDP declined by 3.1%
(2019: +1.3%). Industrial production in Russia was weighed down
by rising infection rates from mid-September onward, weak demand
for energy commodities and cuts to oil production. This dampened
the economic recovery that began in the third quarter, largely driven
by private consumption.
■ Depreciation of exchange rates in emerging markets
■ Deep recessions in the E.U. and North America,
slight growth in China
■ Strongest post-war decline in GDP
2019 2.5%
2020 -6.4%
European Union²
2019 1.6%
2020 -3.5%
2019 2.2%
2020 -0.1%
Emerging markets of Asia³
2019
■ Weak momentum and partial recovery in the automotive
industry
5.3%
2019 0.3%
2020
-6.6%
South America
Japan
Trends in the global economy in 2020
Global gross domestic product declined by 3.7% in 2020 due to
supply-side disruptions and weaker demand as a consequence of
the coronavirus pandemic. A sharp decline in economic activity in
China in January and February was followed by similar downturns in
the rest of the world from March onward. Many companies saw
production impacted by government orders and disruptions in inter-
connected global value chains. Online purchases could not fully
compensate for the drop in offline demand. Turnover also temporarily
slumped in the tourism, hospitality and cultural sectors. The result-
ing losses led to a decline in income and intermediate demand in
this sector. Swift and strong intervention by central banks and gov-
ernments in this exceptional situation prevented the global economy
and financial markets from collapsing. Following a dynamic upturn in
the third quarter of 2020, rising infection rates from October onward
again made restrictions on economic activity necessary, especially
in Europe.
2019 0.9%
Economic trends by region
2020 -4.8%
■ Stable trend in agriculture
Global industrial production contracted by 4.0% in 2020 (2019:
+1.8). The advanced economies saw much stronger decreases of
6.5% overall compared with the emerging markets, which only
declined by 1.8%. The emerging markets performed better primarily
due to the recovery of industrial production in China (2020: +2.6%;
2019: +5.7%). In the remaining emerging markets of Asia, by con-
trast, industrial production fell by 7.1% overall (2019: +2.1%). Indus-
trial production decreased by 7.8% in the E.U. (2019: -0.2%) and by
10.5% in the United Kingdom (2019: -0.4%). North America (2020:
-5.7%; 2019: +1.0%) and South America (2020: -7.5%; 2019:
-0.6%) reported similar declines.
Growth in key customer industries
Real change compared with previous year
2019
2.1%
Construction
Electronics
Agriculture
Global automotive production decreased by 16% after already
declining by 5.7% in 2019. After a strong slowdown in China in the
first quarter of 2020, followed by massive declines in the rest of the
world in the second quarter, the rest of the year saw a dynamic
recovery. Growth was particularly strong in China, where automotive
production already exceeded the prior-year level in the third quarter.
However, average annual production in China was still 4.3% below
the previous year. The remaining emerging markets of Asia posted
much stronger declines in production of around one-quarter. Japan
and South Korea recorded more moderate decreases of 15.8%
and 11.6%, respectively. Although North America and Europe also
1 Not including Venezuela
BASF Report 2020
53
2020 2.1%
About This Report
2 Management's Report
Economic Environment
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Chemical production (excluding pharmaceuticals)
Real change compared with previous year
2020 -0.4%
World
2019 1.9%
2020 -1.9%
1 To Our Shareholders
2019 -1.2%
2019 3.4%
2020 1.0%
Industry total
Transportation
2020
-4.0%
2019 1.8%
2020 -15.0%
2019
-3.0%
2020 -16.0%
Of which: automotive industry
Health and nutrition
2019 -5.7%
Energy and resources
2019 1.5%
2020 -3.3%
2019 2.4%
2020 -4.4%
Consumer goods
2019 1.1%
2020 3.5%
2019 3.0%
2020 -3.9%
911
2016
1,406
72
Adjusted net income
2,945
3,670
Weighted average number of outstanding shares (in thousands)
918,479
918,479
Adjusted earnings per share
€
3.21
4.00
54
a Includes special items in net income from shareholdings of €855 million for 2020 and €42 million for 2019
59
59
About This Report
1
To Our Shareholders
2 Management's Report
Results of Operations
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Sales and earnings
BASF Report 2020
- Adjusted noncontrolling interests
3,742
2,999
2020
2019
Income after taxes
-1,075
8,491
EBITDA before special items
7,435
8,324
- Special itemsa
-4,606
-484
a Excluding depreciation, amortization, impairments and reversals of impairments attributable to the
discontinued construction chemicals business
+ Amortization, impairments and reversals of impairments on
intangible assets
1,496
652
- Amortization, impairments and reversals of impairments on
intangible assets contained in special items
819
8
- Adjustments to income taxes
958
318
- Adjustments to income after taxes from discontinued
operations
251
5,559
Adjusted income after taxes
Million €
Million €
Sales and earnings by quarter in 2020ª
2020
1,952
6,494
Income from operations before depreciation
and amortization (EBITDA)
Depreciation and amortization
972
1,011
3,682
1,020
6,685
6,494
8,185
1,044
-20.7
1,456
59
-2,638
932
-191
EBITDA margin
%
11.0
13.8
Special items
-184
Income from operations (EBIT)
1,070
2,428
7,435
2019
+/-
Q1
Q2
22
Q3
Q4
Sales
59,149 59,316
-0.3
Sales
16,753
12,680
13,811
15,905
Full year
59,149
Income from operations before depreciation,
amortization and special items
7,435
8,324
-10.7
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
2,579
1,229
1,542
2,085
Million €
3,681
3,875
reversals of impairments on property, plant and
equipment and intangible assets before special
items
■ Earnings per share of -€1.15 after €9.17 in the previous
year
At-€909 million, net income from shareholdings¹ was €715 million
below the prior-year figure. The decrease was primarily due to
impairments of assets at the Wintershall Dea group, Kassel/Ham-
burg, Germany, in the amount of €791 million, mainly as a result of
lower oil and gas price forecasts and changed reserve estimates.
This reduced Wintershall Dea's earnings contribution from -€86 mil-
lion in the previous year to -€890 million. The contribution from
Solenis UK International Ltd., London, United Kingdom, improved
by €25 million year on year to -€46 million. Higher income from
other shareholdings, primarily due to write-ups, had a positive
impact on net income from shareholdings.
The financial result amounted to -€462 million in 2020, compared
with -€705 million in the previous year.
The interest result improved by €92 million to -€373 million, due in
part to lower interest expenses for financial indebtedness. The other
financial result improved by €151 million to -€89 million, primarily
driven by lower expenses in connection with bonds in foreign cur-
rency and the corresponding hedging instruments, as well as by
lower net interest expenses from pension and similar obligations.
Higher interest income on income taxes also contributed here.
Income before income taxes decreased from €3,302 million in the
previous year to -€1,562 million in 2020, mainly as a result of the
impairments described above.
The negative income before income taxes led to tax income of
€91 million, after a tax expense of €756 million in 2019. As not all
impairments were tax deductible, the BASF Group's tax rate was
only 5.8% in 2020 (previous year: 22.9%).
Income after taxes from continuing operations declined from
€2,546 million to -€1,471 million. Income after taxes from discon-
tinued operations decreased from €5,945 million in 2019 to
€396 million in 2020. The 2020 figure includes the book gain of
€358 million from the sale of the construction chemicals business
and the income after taxes of the former Construction Chemicals
division until November 30, 2020.2 This amounted to €38 million,
€14 million above the figure for the full year 2019. In the previous
year, income after taxes from discontinued operations included the
book gain of €5,684 million on the deconsolidation of the Wintershall
companies and their income after taxes until deconsolidation on
April 30, 2019.
Noncontrolling interests generated income of €15 million, after
expenses of €70 million in 2019. This was due to higher losses at
BASF Petronas Chemicals Sdn. Bhd., Kuala Lumpur, Malaysia, as a
result of impairments, as well as from lower earnings at BASF Total
Petrochemicals in Port Arthur, Texas, owing to an unplanned outage
of the steam cracker. The prior-year figure also included the shares
in the gas transportation companies until deconsolidation on
April 30, 2019.
Net income amounted to -€1,060 million, considerably below the
prior-year figure of €8,421 million. This was primarily attributable to
the impairments recognized in 2020 as described above. The
prior-year figure included the book gain from the deconsolidation of
the Wintershall companies. Earnings per share were -€1.15, com-
pared with €9.17 in 2019.
For information on the items in the statement of income, see the Notes to the Consolidated Financial
Statements from page 228 onward
■ Net income from shareholdings of -€909 million negatively
impacted by impairments at the shareholding in
Wintershall Dea
For information on the tax rate, see the Notes to the Consolidated Financial Statements from page 259
onward
Additional indicators for results of operations
Adjusted earnings per share decline from €4.00 to €3.21
■ EBITDA before special items and EBITDA considerably
below previous year
We also use alternative performance measures (APMs) to steer the
BASF Group. Investors, analysts and rating agencies use them to
assess our performance. These are not defined by IFRS. As such,
the methods of calculation can differ from those used by other
companies. Alternative performance measures for the results of
operations are EBIT before special items, EBITDA before special
items, EBITDA, the EBITDA margin and adjusted earnings per share.
Other APMs are net debt, ³ free cash flow³ and capital expenditure
(capex).4
Income from operations before depreciation, amortization and
special items (EBITDA before special items) and income from
operations before depreciation and amortization (EBITDA) are
indicators that describe operational performance independent of
age-related depreciation and amortization of assets and any impair-
ment or reversal of impairment. Both figures are therefore particularly
useful in cross-company comparisons. EBITDA before special items is
also highly useful in making comparisons over time. The EBITDA
margin is a relative indicator and is calculated as the ratio of EBITDA
to sales revenue, enabling operational performance to be compared
independent of the size of the underlying business.
1 To increase reporting transparency, as of January 1, 2020, companies accounted for using the equity method that are not an integral part of the BASF Group are classified as purely financial investments and presented under net income from shareholdings. For more information, see the Notes to the Consolidated Financial Statements on page 228.
2 The construction chemicals business was transferred in two steps, on September 30, 2020, and on November 30, 2020.
3 For more information on these indicators, see the Financial Position from page 63 onward
4 For more information on capex, see Value-Based Management on page 34 and Material Investments and Portfolio Measures on page 50
BASF Report 2020
58
59
About This Report
1
For more information on the results of operations of discontinued operations, see the Notes to the
Consolidated Financial Statements on page 239
Net income from shareholdings, financial result and income
after taxes
5 Overviews
Consolidated Financial Statements
1,260
502
Cost of capital basis of segments, average of
month-end figures
60,111
60,900
+ Deviation from cost of capital basis at closing rates
as of December 31
-3,948
-1,534
+ Assets not included in cost of capital
24,129
27,584
of which disposal group for the construction
chemicals business
2,706
Assets of the BASF Group as of December 31
80,292
86,950
a Including customer/supplier financing and other adjustments
57
440
About This Report
1
To Our Shareholders
2 Management's Report
Results of Operations
3 Corporate Governance
4
To Our Shareholders
2 Management's Report
Results of Operations
3 Corporate Governance
4
4.201
EBITDA
6,494
8,185
-3,751
-442
Sales revenue
59,149
59,316
EBIT before special items
3,560
4,643
EBITDA margin
%
11.0
13.8
+ Depreciation and amortizationa
3,805
3,660
+Impairments and reversals of impairments on
property, plant and equipment and intangible
assets before special itemsa
a Excluding depreciation, amortization, impairments and reversals of impairments attributable to the
discontinued construction chemicals business
70
21
Adjusted earnings per share
Depreciation, amortization, impairments and
-191
-167
- Special items
3,984
Consolidated Financial Statements
5 Overviews
2019
324
Compared with earnings per share, adjusted earnings per share is
firstly adjusted for special items. Amortization, impairment and
reversal of impairment on intangible assets are then eliminated.
Amortization of intangible assets primarily results from the purchase
price allocation following acquisitions and is therefore of a temporary
nature. The effects of these adjustments on income taxes and on
noncontrolling interests are also considered. This makes adjusted
earnings per share a suitable measure for making comparisons over
time and predicting future profitability.
In 2020, adjusted earnings per share amounted to €3.21, compared
with €4.00 in the previous year.
For information on the earnings per share according to IFRS, see the Notes to the Consolidated
Financial Statements on page 248
EBITDA before special items declined by €889 million year on year
to €7,435 million in 2020. At €6,494 million, EBITDA was down
€1,691 million from the prior-year figure. The EBITDA margin was
11.0% in 2020, compared with 13.8% in the previous year.
EBITDA
Million €
EBIT
2020
-191
4,201
+ Depreciation and amortizationa
3,805
3,660
EBITDA before special items
+ Impairments and reversals of impairments on
intangible assets and property, plant and
equipmenta
2,880
Million €
2020
2019
Depreciation, amortization, impairments and
reversals of impairments on intangible assets
and property, plant and equipment
6,685
EBIT
5,954
-3,219
-3,751
2,642
1,885
1,980
1,817
8,324
2,770
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
Depreciation and amortization
1,546
1,610
8,185
991
1,039
923
1,031
2,259
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments
and reversals of impairments)
59,316
14,686
Million €
Q1
Q2
Q3
Q4
Full year
Adjusted earnings per share
€
3.21
4.00
-19.8
Sales
15,596
14,478
14,556
3,984
Income from operations (EBIT)
Special items
-181
1,177
276
3,302
1,163
243
917
223
2,546
Income after taxes from discontinued operations
Net income
277
5,686
18
-36
5,945
293
9.17
1,556
842
Income before income taxes
Income after taxes from continuing operations
1,779
507
1,336
579
4,201
29
-488
280
-263
-442
1,750
995
1,056
4,643
-1.15
EBIT before special items
Sales and earnings by quarter in 2019ª
67.8
3,984
-1,562 3,302
-1,471
2,546
Income before income taxes
EBIT before special items.
Income after taxes from continuing operations
Earnings per share
Adjusted earnings per share
1,200
-923
-2,786
947
Income after taxes from discontinued operations
1,640
226
581
Income before income taxes
€
Net income
-23.3
4,643
3,560
EBIT before special items
-442
-3,751
4,201
-191
Special items
Income from operations (EBIT)
3,560
1,113
-1,562
881
Income after taxes from continuing operations
-2,177
0.25
0.60
6,685
1.10
-1.15
3.21
Depreciation and amortization
Income after taxes from discontinued
396
5,945
-93.3
-888
Net income
Earnings per share
-1,060
8,421
1.26
€
operations
-2.31
713
1.15
-1,471
14
13
347
396
885
22
-2,122
1,055
-1,060
-0.96
0.97
-878
€
€19,214 million
3,735 Liabilities to banks
14,189 Bonds and other
liabilities to the capital market
BASF Group's most important financial contracts contain no side
agreements with regard to specific financial ratios (financial cove-
nants) or compliance with a specific rating (rating trigger).
To minimize risks and leverage internal optimization potential within
the Group, we bundle the financing, financial investments and
foreign currency hedging of BASF SE's subsidiaries within the BASF
Group where possible. Foreign currency risks are primarily hedged
centrally using derivative financial instruments in the market.
For more information on the financing tools and hedging instruments used, see Note 21 from
page 279 onward and Note 26 from page 291 onward in the Notes to the Consolidated Financial
Statements
Statement of cash flows
■ Cash flows from operating activities and free cash flow
lower year on year
Million €
Cash flows from operating activities amounted to €5,413 million,
compared with €7,474 million in the previous year. The decrease in
cash flows from operating activities was largely due to the cash tied
up in receivables, especially in trade accounts receivable. The devel-
opment of trade accounts receivable tied up cash of €994 million in
2020, compared with cash released of €1,208 million in the previous
year. This could not be offset by the €370 million increase in cash
released from reduction in inventories.
Our interest risk management generally pursues the goal of reducing
interest expenses for the BASF Group and limiting interest risks.
Interest rate hedging transactions are therefore conducted with
banks in order to turn selected liabilities to the capital market from
fixed to variable interest rates or vice versa.
Financing instruments
59
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Financial Position
1 To Our Shareholders
About This Report
64
BASF Report 2020
For short-term financing, we use BASF SE's global commercial
paper program, which has an issuing volume of up to $12.5 billion.
As of December 31, 2020, commercial paper with a carrying amount
of €1,290 million was outstanding under this program. A firmly
committed, syndicated credit line of €6 billion was taken out in
January 2019 to cover the repayment of outstanding commercial
paper. It can also be used for general company purposes. In the
second quarter of 2020, we took out a one-year credit line with
several banks with a total volume of €3 billion. Neither credit line was
used at any point in 2020. Our external financing is therefore largely
independent of short-term fluctuations in the credit markets.
We have solid financing. Corporate bonds form the basis of our
medium to long-term debt financing. These are issued in euros and
other currencies with different maturities as part of our €20 billion
debt issuance program. The goal is to create a balanced maturity
profile, diversify our investor base and optimize our debt capital
financing conditions.
BASF enjoys good credit ratings, especially compared with compet-
itors in the chemical industry. On December 8, 2020, Standard &
Poor's confirmed its long and short-term ratings for BASF of
A/A-1/outlook negative. Fitch confirmed its rating for BASF of
A/F1/outlook stable on February 12, 2021. Moody's confirmed its
rating for BASF of A3/P-2/outlook stable on February 12, 2021.
We strive to maintain a solid A rating, which ensures unrestricted
access to financial and capital markets. Our financing measures are
aligned with our operational business planning as well as the
company's strategic direction and also ensure the financial flexibility
to take advantage of strategic options.
At €1,060 million, net income was down €9,481 million from the
prior-year figure in 2020. However, the main causes of the decline in
earnings did not affect cash flows from operating activities: net
divestiture and disposal gains, which were €6,060 million higher
in the previous year, were reclassified using miscellaneous items
to cash flows from investing activities. Moreover, depreciation
and amortization of property, plant and equipment and intangible
assets exceeded the prior-year figure by €2,533 million due to
higher impairments. In addition, negative income from companies
accounted for using the equity method reduced earnings by
€821 million in 2020 compared with the previous year. This likewise
I did not have any effect on cash.
5 Overviews
Cash flows from investing activities amounted to -€1,904 million
in 2020, meaning that cash outflows were €714 million higher than
in the previous year. This was mainly attributable to the €1,001 mil-
lion increase in payments made for acquisitions. In 2020, €1,240 mil-
lion was paid for the polyamide business acquired from Solvay.
Payments received from divestitures were at the prior-year level. In
addition, cash inflows from the disposal of property, plant and
equipment and intangible assets in 2020 was €677 million lower
than in the previous year. This was offset by the €695 million
Changes in financial and similar liabilities
Cash flows from financing activities amounted to -€1,556 million,
compared with -€6,405 million in the previous year. Dividend pay-
ments of €3,139 million were partially offset by the net cash inflow of
€1,580 million from the change in financial and similar liabilities. The
total cash outflow of €6,405 million in the previous year was due in
particular to the net cash outflow from the change in financial and
similar liabilities and dividend payments of €3,064 million.
Free cash flow
Million €
2020
2019
2020
2019
-1,060
8,421
Cash flows from operating activities
5,413
Cash and cash equivalents at the beginning of the period and other changes
7,474
4,218
- Payments made for property, plant and
equipment and intangible assets
3,129
3,824
-400
1,410
Free cash flow
2,284
Our financing policy aims to ensure our solvency at all times, limiting
the risks associated with financing and optimizing our cost of capital.
We preferably meet our external financing needs on the international
capital markets.
■ Rated A by Moody's, Standard & Poor's and Fitch
6,751
Cash-effective changes in cash and cash equivalents
Cash flows from financing activities
Dividends
Cash and cash equivalents amounted to €4,335 million as of
December 31, 2020. They rose by a cash-effective amount of
€1,953 million in 2020.
Free cash flow, which remains after deducting payments made for
property, plant and equipment and intangible assets from cash
flows from operating activities, represents the financial resources
remaining after investments. It declined to €2,284 million compared
with €3,650 million in the previous year due to the decrease in cash
flows from operating activities.
BASF Report 2020
65
89
About This Report
1 To Our Shareholders
2 Management's Report
Financial Position
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Statement of cash flows
Million €
Net income
Depreciation and amortization of property, plant and equipment and intangible assets
Changes in net working capital
Miscellaneous items
Cash flows from operating activities
Payments made for property, plant and equipment and intangible assets
Acquisitions/divestitures
Changes in financial assets and miscellaneous items
Cash flows from investing activities
Capital increases/repayments and other equity transactions
decrease to €3,129 million in payments made for property, plant
and equipment and intangible assets.
Commercial paper 1,290
considerable decline
122
(EBITDA)
Income from operations (EBIT)
before special items
Chemicals
14%
Materials
18%
2020
2019
2020
2019
Sales
2020
Industrial Solutions
13%
Chemicals
8,071
9,532
1,237
1,545
445
791
Surface Technologies
2019
Income from operations before
depreciation and amortization
Contributions to total sales by segment
Million €
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Actual Development Compared With Outlook for 2020
mainly for goodwill impairments in the surface treatments cash-
generating unit, and for property, plant and equipment in the Cata-
lysts division.
In the Nutrition & Care segment, sales declined slightly instead of
rising considerably as forecast. Although both divisions increased
sales volumes as forecast, this was unable to compensate for nega-
tive currency effects and the expected decrease in price levels. EBIT
before special items also declined slightly instead of rising slightly,
mainly as a result of sales developments. Rather than increasing
considerably as expected, ROCE rose only slightly, primarily due to
impairments in connection with the optimization of production sites
within the Nutrition & Health division.
In 2020, we invested a total of €2.9 billion in capital expenditures
(capex), excluding additions from acquisitions, IT investments, res-
toration obligations and right-of-use assets arising from leases. The
figure forecast in February 2020 was €3.4 billion and the figure
forecast in April 2020 was €2.8 billion.
For information on our expectations for 2021, see page 155 onward
For information on investments, see page 50
Contrary to our forecast at the beginning of the year of a consider-
able increase, sales in the Agricultural Solutions segment declined
slightly in a continued challenging market environment. We only
increased sales volumes slightly, not considerably, which meant that
significantly negative currency effects could not be offset. EBIT
before special items declined considerably as a result. We had
anticipated a slight increase at the beginning of 2020. ROCE also
declined considerably, contrary to our assumption of a slight
increase. This was primarily due to special charges for streamlining
the global glufosinate-ammonium production network.
Sales in Other were considerably below the previous year in 2020,
instead of being at the 2019 level as expected. This was mainly due
to the sales decrease in commodity trading and the remaining activi-
ties of BASF's paper and water chemicals business, which were not
part of the transfer to Solenis and are reported under Other. We
were unable to considerably increase EBIT before special items as
forecast. Instead, EBIT before special items declined considerably
due to lower contributions from other businesses.
BASF Report 2020
68
About This Report
1 To Our Shareholders
2 Management's Report
Business Review by Segment
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Business Review by Segment
Segment overview
28%
Materials
10,736
11,466
1,152
1,189
773
793
Agricultural Solutions
7,660
7,814
1,582
1,647
970
1,095
Contributions to EBITDA by segment
Other
2,360
2,898
-1,032
-334
-769
-581
BASF Group
59,149
59,316
■ Financing principles remain unchanged
6,075
About This Report
6,019
4%
1,556
1,691
835
1,003
Nutrition & Care
10%
Industrial Solutions
7,644
8,389
1,099
1,327
822
820
Agricultural Solutions
13%
Surface Technologies
16,659
13,142
900
1,120
484
722
Other
Nutrition & Care
3,650
67
BASF Report 2020
-3,139
-3,064
Cash flows from operating activities
-1,556
-6,405
Payments made for property, plant and equipment and intangible assets
Free cash flow
1,953
-121
2,382
2,576
2020
4,335
2,455
a In 2020 and 2019, cash and cash equivalents presented in the statement of cash flows deviated from the figures in the balance sheet due to the reclassification of cash and cash equivalents to disposal groups: €5 million for the
pigments business as of December 31, 2020, and €21 million for the construction chemicals business and €7 million for the pigments business as of December 31, 2019.
BASF Report 2020
66
99
About This Report
1
To Our Shareholders
2 Management's Report
3 Corporate Governance
Actual Development Compared With Outlook for 2020
Cash and cash equivalents at the end of the yeara
2019
2018
2017
-6,575
5,413
7,474
Cash flow
-3,129
-3,824
Billion €
1,280
2,361
10
-55
273
8
-1,904
-1,190
6
4
3
1
0
1,580
-3,342
2016
4
Consolidated Financial Statements
5 Overviews
Actual Development Compared With
Outlook for 2020
slight increase
slight increase
slight increase
at prior-year level
considerable decline
slight decline
considerable decline
2020 forecast
slight increase
considerable decline
considerable decline.
2020 actual
considerable decline
considerable decline
at prior-year level
considerable increase
slight increase
considerable decline
at prior-year level
€60 billion-€63 billionb
considerable decline
considerable increase
considerable decline
€3,560 million
€59,149 million €4.2 billion-€4.8 billionb
6.7%-7.7%b
slight increase
considerable decline
1.7%
a For sales, "slight" represents a change of 1-5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/-0%). For earnings, "slight" means a change of 1-10%, while "considerable"
is used for changes of 11% and higher. "At prior-year level" indicates no change (+/-0%). At a cost of capital percentage of 9% for 2020, we define a change in ROCE of 0.1 to 1.0 percentage points as "slight," a change of more
than 1.0 percentage points as "considerable" and no change (+/-0 percentage points) as "at prior-year level."
b We withdrew our outlook in April 2020 and updated it in October 2020, forecasting sales of between €57 billion and €58 billion, EBIT before special items of between €3.0 billion and €3.3 billion, and a ROCE of between 0.0%
and 1.0%.
instead of rising slightly as expected. This was due to lower margins
in both divisions as a result of the effects of the coronavirus pan-
demic and special charges, mainly for impairments on property,
plant and equipment.
Sales in the Materials segment declined considerably, contrary
to our forecast of considerable sales growth. Lower prices and
negative currency effects exceeded the positive contribution from
the acquisition of Solvay's integrated polyamide business. Volumes
did not meet expectations either and were lower rather than higher.
This was mainly attributable to weaker demand from our customer
industries as a result of the coronavirus pandemic, especially from
the automotive industry. EBIT before special items and ROCE
declined considerably as expected.
Sales in the Industrial Solutions segment declined considerably,
falling short of our expectations of slight growth. This was primarily
due to lower price levels in both divisions. Contrary to our forecast,
we recorded lower volumes in the Performance Chemicals division.
In the Dispersions & Pigments division, too, sales volumes were
merely on a level with the previous year. In a continued challenging
market environment, the segment's EBIT before special items was
at the prior-year level, after we had forecast a considerable increase.
This was mainly driven by volumes development. ROCE was con-
siderably below the prior-year level, as expected.
We considerably improved sales in the Surface Technologies
segment, outperforming our forecast of a slight increase. The
increase was primarily attributable to considerably higher sales in
the Catalysts division as a result of higher precious metal prices.
This more than offset the sales decrease in the Coatings division,
which declined considerably rather than slightly. EBIT before special
items declined considerably, contrary to our expectations of a
slight increase. This was mainly due to volumes development in the
Coatings division and higher fixed costs in the Catalysts division.
Improved earnings in precious metal trading were unable to com-
pensate for this. ROCE declined considerably and was thus below
our expectations. This was largely the result of special charges,
slight decline
slight decline
20
considerable increase
considerable decline
BASF Group sales in 2020 were at the prior-year level, contrary to
our forecast at the beginning of the year of sales growth to between
€60 billion and €63 billion. Sales development in the Chemicals,
Industrial Solutions and Materials segments in particular was weaker
than expected at the beginning of 2020. Lower demand as a conse-
quence of the coronavirus pandemic led to a slight overall decline in
volumes in the BASF Group, contrary to our assumptions. After
forecasting lower prices, we were able to slightly increase price
levels as a result of significantly higher precious metal prices. EBIT
before special items amounted to €3,560 million, falling short of the
€4.2 billion to €4.8 billion range we had forecast in February 2020.
Earnings developments did not meet our expectations, especially in
the Surface Technologies and Agricultural Solutions segments and
in Other. The BASF Group's return on capital employed (ROCE)
declined considerably rather than slightly compared with 2019.
ROCE was also considerably below the cost of capital percentage.
In April 2020, we withdrew the outlook provided in February 2020
due to the uncertainty surrounding the length and spread of the
coronavirus pandemic, as well as the measures to contain it. In
October 2020, we forecast sales of between €57 billion and €58 bil-
lion. We expected EBIT before special items of between €3.0 billion
and €3.3 billion and a ROCE of between 0.0% and 1.0%.
Sales in the Chemicals segment declined considerably in 2020,
after we had expected slight growth at the beginning of the year.
This was largely the result of lower prices than expected in both
divisions. Also, volumes were at the prior-year level overall, contrary
to our forecast of volume growth. We were able to increase volumes
in the Intermediates division as planned. By contrast, sales volumes
in the Petrochemicals division remained at the prior-year level. This
was primarily due to the effects of the coronavirus pandemic and
lower product availability owing to the unplanned outage at the
steam cracker in Port Arthur, Texas. EBIT before special items
declined considerably as expected. ROCE declined considerably
Forecast/actual comparisona
Chemicals
Materials
Industrial Solutions
Surface Technologies
Nutrition & Care
Agricultural Solutions
Other
BASF Group
EBIT before special items
Sales
ROCE
2020 forecast
slight increase
considerable increase
2020 actual
2020 forecast
2020 actual
considerable decline
considerable decline
considerable decline
considerable decline
considerable decline
considerable decline
slight increase
slight increase
considerable increase
considerable increase
considerable increase
15,506
2020
2026 and beyond
62
BASF Report 2020
For more information on the composition and development of individual asset items, see the Notes
to the Consolidated Financial Statements from page 228 onward
The €373 million increase in trade accounts receivable to €9,466 mil-
lion was largely attributable to strong business developments in the
fourth quarter.
Other receivables and miscellaneous assets rose by €3,790 million
to €4,673 million, driven mainly by an increase in precious metal
trading positions due to higher prices, as well as higher tax refund
claims.
This was partially offset by the €1,903 million increase in cash and
cash equivalents compared with the previous year. At €4,330 mil-
lion, this safeguards the BASF Group's liquidity in times of crisis.
62
Current assets declined by €1,122 million to €29,868 million. This
was largely the result of the derecognition of the disposal group for
the construction chemicals business (€2,831 million). We recorded
a €1,213 million decrease in inventories to €10,010 million, mainly
due to the reduction in inventories in all segments and currency
effects. Marketable securities declined by €237 million to €207 mil-
lion.
Other financial assets were slightly below the prior-year level,
declining by €54 million to €582 million. Other receivables and mis-
cellaneous assets decreased by €200 million compared with the
previous year to €912 million. This was mainly due to the lower
positive fair values of derivatives and the decline in loans and interest
receivables.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Net Assets
1 To Our Shareholders
Deferred tax assets rose by €499 million to €3,386 million, primarily
as a result of higher pension provisions and the recognition of
deferred tax assets for tax loss carryforwards.
About This Report
1
To Our Shareholders
%
Million €
December 31, 2019
December 31, 2020
Equity
Noncontrolling interests
Other comprehensive income
Retained earnings
Paid-in capital
Equity and liabilities
Financial Position
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Financial Position
About This Report
Million €
199
BASF Report 2020
207
4.4
3,790
5.8
4,673
10.5
0.3
9,093
9,466
Assets of disposal groups
Cash and cash equivalents
Marketable securities
Other receivables and miscellaneous assets
Accounts receivable, trade
11.8
444
0.5
4,330
a To increase reporting transparency, as of January 1, 2020, companies accounted for using the equity method that are not an integral part of the BASF Group are classified as purely financial investments and presented separately
in the balance sheet. For more information, see the Notes to the Consolidated Financial Statements on page 228.
86,950
100.0
80,292
Total assets
30,990
37.3
29,868
Current assets
4,013
1.5
1,182
2.8
2,427
5.4
61
12.9
%
5.3
15,015
19.7
15,819
Noncurrent liabilities
Other liabilities
Financial indebtedness
17.3
1.5
1.9
1,484
Other provisions
0.6
516
0.7
1,340
1,711
2.1
1,678
6,494
2,938
3.5
2,825
Provisions
5.9
5,087
6.6
5,291
Accounts payable, trade
32.2
27,996
36.9
29,614
1.9
587
4,291
Tax provisions
1,764
1.0
853
0.8
670
-5.6
-4,850
34,398
-10.5
48.4
42,056
47.2
37,911
4.9
4,291
-8,474
42.8
42,350
48.7
1.8
1,447
Deferred tax liabilities
8.8
7,683
10.7
8,566
Provisions for pensions and similar obligations
In addition, noncurrent financial indebtedness rose by €804 million
to €15,819 million. This was mainly due to the issue of two euro-
bonds (including one green bond) in the amount of €1 billion each,
as well as new bank loans taken out for approximately €500 million.
The reclassification of a eurobond with a carrying amount of around
€1 billion to current financial indebtedness and the early repayment
of U.S. bonds worth around €400 million had an offsetting effect. At
€1,484 million, other provisions were €144 million below the figure
as of December 31, 2019.
Compared with the end of 2019, noncurrent liabilities rose by
€1,618 million to €29,614 million. This was primarily attributable to
the increase in provisions for pensions and similar obligations from
€7,683 million to €8,566 million, mainly as a result of slightly lower
discount rates in all relevant currency zones.
The equity ratio decreased from 48.7% to 42.8%.
Equity decreased by €7,952 million compared with the previous
year to €34,398 million. Retained earnings declined by €4,145 mil-
lion to €37,911 million. This was the result of dividend payments for
2019 and negative net income for 2020. Other comprehensive
income amounted to -€8,474 million, after -€4,850 million in the
previous year. The decrease was primarily due to currency effects
and actuarial losses.
■ Net debt declines to €14,677 million
■ Equity ratio of 42.8%, compared with 48.7% in previous
year
Equity and liabilities
2.0
11,223
12.5
10,010
63
63
About This Report
1 To Our Shareholders
2 Management's Report
Financial Position
3 Corporate Governance
BASF Report 2020
4
5 Overviews
Deferred tax liabilities declined from €1,764 million in the previous
year to €1,447 million, while tax provisions were up €71 million from
the 2019 year-end figure, at €587 million.
Current liabilities declined by €324 million to €16,280 million,
primarily due to the derecognition of the disposal group for the
construction chemicals business.
The €113 million year-on-year decrease in current provisions to
€2,825 million largely resulted from lower personnel obligations. This
was partially offset by higher provisions for restructuring measures.
Tax liabilities rose by €232 million compared with the previous year
to €988 million. Trade accounts payable increased by €204 million
to €5,291 million.
At €3,395 million, current financial indebtedness was €33 million
above the prior-year figure. This was mainly due to the above-
mentioned reclassification of the eurobond from noncurrent to
current financial indebtedness and the issue of commercial paper.
The increase was largely offset by the planned repayment of euro-
bonds worth around €1,300 million.
Net debt declined by €829 million compared with December 31,
2019, to €14,677 million as cash and cash equivalents rose at a
faster rate than financial indebtedness.
Consolidated Financial Statements
100.0
86,950
100.0
4.3
3,427
3.9
Liabilities of disposal groups
341
0.4
1,034
1.2
Current liabilities
16,280
20.3
16,604
19.1
Total equity and liabilities
80,292
For more information on the composition and development of individual balance sheet items, see the
Notes to the Consolidated Financial Statements from page 228 onward
3,440
For more information on the development of the balance sheet, see the Ten-Year Summary on pages
314 to 317
Million €
3,395
3,362
2023
2,121
2024
1,351
2,310
19,214
2025
1,787
207
444
4,330
14,677
2,427
18,377
15,015
15,819
2022
Noncurrent financial indebtedness
+ Current financial indebtedness
Financial indebtedness
- Marketable securities
- Cash and cash equivalents
Net debt
Financing policy and credit ratings
Maturities of financial indebtedness
Million €
December 31,
December 31,
2021
2020
2019
3,395
Net debt
Other liabilities
3.9
3,362
1.1
912
Other receivables and miscellaneous assets
3.3
2,887
4.2
1,112
3,386
636
0.7
582
Other financial assets
15.1
13,123
Deferred tax assets
Noncurrent assets
50,424
62.7
Inventories
More information on the above transactions can be found on page 51 of this Management's Report
and in the Notes to the Consolidated Financial Statements from page 235 onward
Intangible assets declined by €1,380 million to €13,145 million. This
was likewise primarily attributable to impairments, amortization and
currency effects. Additions of €691 million, mainly in connection with
the acquisition of the integrated polyamide business from Solvay,
had an offsetting effect.
Noncurrent assets declined by €5,536 million to €50,424 million. All
items except deferred tax assets contributed here. The main driver
was the €2,145 million decrease in property, plant and equipment to
€19,647 million, primarily due to the impairments recognized as a
consequence of the coronavirus pandemic. Negative currency
effects of €934 million also contributed to the decline. Additions to
property, plant and equipment amounted to €4,075 million. This
figure included additions of €559 million from the acquisition of the
integrated polyamide business from Solvay. Depreciation amounted
to €3,130 million. At €10,874 million, non-integral investments
accounted for using the equity method were also considerably
below the prior-year level (€13,123 million), mainly as a result of
impairments and currency effects relating to the shareholding in
Wintershall Dea. Integral investments accounted for using the equity
method were on a level with the prior year, at €1,878 million.
Total assets amounted to €80,292 million as of December 31, 2020,
significantly below the prior-year level (€86,950 million).
■ Decline in total assets due to impairments and divestiture
of the construction chemicals business
100.0
35.6
4.6
1.3
0.7
2.2
Assets
64.4
55,960
13.5
10,874
Non-integral investments accounted for using the equity methodª
1,885
Assets
Net Assets
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Net Assets
1 To Our Shareholders
About This Report
988
1.2
756
0.9
Financial indebtedness
3,395
4.3
December 31, 2020
8,250
December 31, 2019
%
2.3
1,878
Integral investments accounted for using the equity method
25.1
21,792
24.5
19,647
16.7
14,525
16.4
13,145
Property, plant and equipment
Intangible assets
%
Million €
Million €
8,185
Tax liabilities
4,643
14,686
15,905
14,556
13,811
14,478
12,680
Income from operations (EBIT) before special itemsa
15,596
BASF Group
757
667
698
484
744
16,753
507
Million €
22
306
174
Chemicals
2019
2020
2019
Q1
2020
2020
2019
3.4
Q4
Q3
Q2
2019
-2
699
Other
1,582
Nutrition & Care
27%
Agricultural Solutions
3,634
5,090
1,561
3,325
3,161
3,099
3,022
4,328
Surface Technologies
22%
4,142
702
1,555
1,427
1,808
1,601
1,561
1,474
1,796
1,766
1,495
2,649
Agricultural Solutions
-22%
Other
1,500
1,455
1,519
2,819
119
46
251
-171
-80
-256
-299
Other
161
-237
73
121
120
740
809
Agricultural Solutions
126
26
120
-170
16
3,560
10
70
BASF Report 2020
a Quarterly results not audited
842
-153
1,113
581
995
226
1,750
1,640
BASF Group
1,056
225
143
220
264
273
Industrial Solutions
80
489
266
163
217
-80
323
209
Materials
115
227
334
243
186
205
256
222
254
Nutrition & Care
236
215
206
200
129
-151
151
220
Surface Technologies
108
200
Nutrition & Care
1,932
15
2,130
663
-587
Surface Technologies
426
331
6,903
11,691
6,402
630
Industrial Solutions
784
1,957
8,782
9,118
889
973
11,773
565
320
459
16,530
14,840
928
582
585
Agricultural Solutions
510
6,399
6,214
644
688
Nutrition & Care
595
Other
-109
1,108
18%
Investments including
Income from operations
(EBIT)
Million €
14%
Surface Technologies
Assets
17%
Segment overview
24%
Materials
19%
1,883
Chemicals
Industrial Solutions
Materials
acquisitionsa
24%
871
8,978
7,896
622
-192
Chemicals
Agricultural Solutions
-16%
2019
2020
2019
2020
2019
2020
Other
-1,203
Nutrition & Care
24,131
Industrial Solutions
2,375
2,147
2,429
1,783
2,180
23%
1,791
2,350
Chemicals
23%
Materials
2019
2020
2,548
2019
Materials
2,931
2,141
1,844
-518
1,819
2,186
2,098
2,874
Industrial Solutions
Surface Technologies
3,062
2,894
2,657
2,961
2,143
14%
2020
2,680
2020
About This Report
69
69
BASF Report 2020
a Additions to property, plant and equipment (of which from acquisitions: €559 million in 2020 and €3 million in 2019) and intangible assets (of which from acquisitions: €691 million in 2020 and -€37 million in 2019)
4,097
4,869
86,950
4,201
-191
BASF Group
27,585
2019
156
299
1 To Our Shareholders
2 Management's Report
80,292
4
3 Corporate Governance
Chemicals
2020
Q4
Q2
Q1
Contributions to EBIT before special items by segment
Q3
2019
Consolidated Financial Statements
5 Overviews
Business Review by Segment
13%
Salesa
Million €
6.8
-2.2
0%
%
Volumes
-44%
791
445
-169
-637
0%
16.2
-192
55%
923
1,429
15.3
%
-20%
1,545
1%
1,237
1,574
-17%
622
Assets
Research and development expenses
8,978
Sales development was mainly driven by significantly lower prices.
In the Petrochemicals division, prices declined in almost all value
chains as a result of lower raw materials prices and higher product
availability on the market. Higher product availability on the market
also led to lower prices in the Intermediates division, particularly in
the acids and polyalcohols business and in the butanediol and
derivatives business. Sales were also negatively impacted by
currency effects.
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
1,305
-8%
-19%
-15%
Sales
-2%
-2%
-2%
Currencies
-11%
108
96
0%
0%
0%
Portfolio
-21%
1,108
871
Investments including acquisitionsb
-7%
-17%
-13%
Prices
-12%
7,896
-16%
Million €
10,932
Segment data - Chemicals
Business review
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Chemicals
1 To Our Shareholders
About This Report
75
BASF Report 2020
595,000
590,000
Chemicals
545,000
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Plasticizers
Superabsorbents
StyroporⓇ/NeoporⓇ
Propylene
180,000
350,000
1,625,000
255,000
1,445,000
Volumes matched the prior-year level. The Intermediates division
recorded slightly higher volumes in Asia, mainly in the amines busi-
ness. This was offset by lower sales volumes, especially in the
amines business in Europe and in the butanediol and derivatives
business in North America. In the Petrochemicals division, volumes
were at the level of the previous year. Sales volumes declined,
primarily due to the effects of the coronavirus pandemic and the
unplanned outage at the steam cracker in Port Arthur, Texas. The
main offsetting factor was higher volumes of steam cracker prod-
ucts in Europe.
3,480,000
2,630,000
Petrochemicals
Intermediates
■ Sales down 15% to €8,071 million, mainly due to lower
prices
-17%
3,428
2,861
-8%
2,862
2,645
-19%
6,670
5,426
-15%
9,532
8,071
+/-
2019
2020
Return on capital employed (ROCE)
EBIT before special items
Depreciation and amortizationa
Income from operations (EBIT)
Special items
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Sales including transfers
Intersegment transfers
Intermediates
of which Petrochemicals
Sales to third parties
Factors influencing sales - Chemicals
Sales to third parties in the Chemicals segment declined by
€1,461 million year on year to €8,071 million in 2020. This was
primarily due to the considerable decrease in the Petrochemicals
division, where sales declined by €1,244 million to €5,426 million. At
€2,645 million, sales in the Intermediates division decreased by
€217 million compared with the prior-year figure.
■ EBIT before special items declines 44% to €445 million as
a result of considerably lower contributions from both
divisions
12,960
Petrochemicals - Sales by region
1 To Our Shareholders
South America, Africa, Middle East 6%
Asia Pacific 11%
On January 31, 2020, BASF closed the acquisition of Solvay's
integrated polyamide business, which was agreed in September
2017. The transaction broadens BASF's polyamide capabilities,
allowing us to support our customers with even better engineering
plastics solutions for applications such as autonomous driving
and e-mobility. It also enhances access to growth markets in Asia
as well as in North and South America. Through the backward inte-
gration into the key raw material adiponitrile (ADN), BASF now has
The synthesis of adipic acid is a very complex process in
which nitrous oxide is produced. BASF re-uses the nitrous
oxide in the Verbund instead of decomposing it, as is usual in
the chemicals industry. Most of the nitrous oxide is isolated
and used as a feedstock in the Intermediates division. BASF
avoids 100,000 metric tons of CO2 per year through investments
in our production plants and the strength of our Verbund in
Ludwigshafen, Germany. The carbon footprint can be further
reduced with additional measures such as using the mass
balance approach, electricity from renewable sources and the
ChemCycling TM method.
100,000
metric tons
Value for the environment
CO2 avoided per year
More sustainable adipic acid production in Ludwigshafen reduces carbon footprint
Adipic acid
How we create value - an example
Differentiated service and product offerings enable us to continu-
ously expand the application horizon of our portfolio. The segment's
global production network allows us to operate close to our
customers.
Additional differentiators, which continue to gain importance, are our
products that enable a circular economy and our sustainable pro-
duction approaches. BASF plays a vital role in substantial parts of
plastic value chains, from monomers to polymers and their
formulated specialties. This offers us the unique opportunity to
shape and close cycles with our technological capabilities. One
example is a recent development of a chemical recycling process for
used mattresses.
We cater to the growing needs of consumers in all key markets by
developing new applications, high-performance materials, systems
and digital solutions. Application know-how, industry knowledge
and customer proximity are key differentiators. BASF's competence
in this field is extended by advanced material simulation capabilities,
which are a unique selling proposition in the industry.
The Materials segment provides a toolbox of high-performance
materials that is unique in the industry. Our major integrated isocya-
nate and polyamide value chains are complemented by a number of
specialties for the plastics and plastics processing industries. The
Materials segment offers specially developed polymers and solu-
tions to customer industries such as automotive, construction,
electrical and electronics, and consumer goods.
■ Differentiated products and solutions for the automotive,
construction and consumer goods industries
Value for BASF
■Industry-leading portfolio of high-performance materials
and their precursors, leveraging two integrated value
chains
Materials
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
About This Report
78
Change: -€168 million
1,003
835
BASF Report 2020
-6%
Strategy
Sales
Annual production volume
Adipic acid is a monomer used in the production of polyamides
and polyesters. It is also used as a chemical intermediate, for
example to produce plastics for the automotive industry. BASF
produces around 720,000 metric tons of adipic acid per year
at its sites in Ludwigshafen, Germany; Chalampé, France; and
Onsan, South Korea.
430,000
Ammonia
Product
Production capacities of selected productsa
Monomers
Performance Materials
Division
Products, customers and applications
In May 2020, BASF started construction of the first plants at its
smart Verbund site in Zhanjiang in the southern Chinese province of
Guangdong. This came as another milestone in the development of
the company's investment project since its official commencement
in November 2019. The plants will produce engineering plastics and
thermoplastic polyurethane (TPU) to serve the increasing needs of
various growth industries in the southern China market and in other
Asian markets.
Industries such as plastics, woodworking, furniture, packaging,
textile, construction and automotive
Isocyanates (MDI, TDI), ammonia, caprolactam, adipic acid, chlo- Use in the BASF Verbund
rine, urea, glues and impregnating resins, caustic soda, polyam-
ides 6 and 6.6, standard alcoholates, sulfuric and nitric acid
Automotive manufacture, electrical engineering, packaging,
games, sports and leisure, household, mechanical engineering,
construction, agriculture, medical technology, sanitation and
water industry, solar thermal energy and photovoltaics
720,000 metric tons
Customer industries and applications
Products
Materials
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
79
19
BASF Report 2020
production plants along the entire value chain for polyamide 6.6.
At closing, approximately 700 Solvay employees joined BASF.
For more information on the transaction with Solvay, see page 51
Engineering plastics, biodegradable plastics, foam specialties,
polyurethanes
-2%
Currencies
6%
1 To Our Shareholders
About This Report
77
BASF Report 2020
See page 155 for the outlook for 2021
EBIT declined by €814 million year on year to -€192 million. This
included special charges of €637 million, mainly for impairments on
property, plant and equipment in North America, Asia and Europe.
These primarily reflected expectations of a prolonged oversupply of
basic chemicals and the resulting decrease in prices and margins.
Income from operations (EBIT) before special items was
€445 million, €346 million below the 2019 figure. The considerable
decrease affected both divisions, but in particular the Petrochemicals
division, and was primarily attributable to lower margins.
North America 16%
€2,645 million
Asia Pacific 40%
40% Europe
South America, Africa, Middle East 4%
2 Management's Report
Location of customer
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Chemicals
To Our Shareholders
1
About This Report
76
€5,426 million
57% Europe
BASF Report 2020
North America 26%
Intermediates - Sales by region
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Portfolio
2019
-5%
Prices
2020
-5%
Volumes
Million €
Income from operations before special items
Change: -7%
Percentage of sales: 52%
Performance Materials €5,635 million
Factors influencing sales
€11,466 million
2019:
Change:
-6%
€10,736 million
2020:
Percentage of sales: 48%
Monomers €5,101 million
Change: -6%
Isocyanates and polyamides as well as inorganic basic products
and specialties for sectors such as the plastics, automotive and
construction industries
Polyurethanes, thermoplastics and foam specialties for sectors such
as the transportation, construction and consumer goods industries,
as well as for industrial applications
Performance Materials
Divisions
Sales
The Materials segment is composed of the Performance
Materials division and the Monomers division. The Materials
segment's portfolio comprises advanced materials and their
precursors for new applications and systems. These include
isocyanates and polyamides as well as inorganic basic
products and specialties for the plastics and plastics
processing industries. We want to focus primarily on organic
growth through differentiation via specific technological
expertise, industry know-how and customer proximity to
maximize value in the isocyanate and polyamide value chains.
Materials
Materials
Location of customer
645,000
About This Report
910,000
1,456
BASF Group
-23
-109
160
-645
-364
-128
-291
-321
Other
84
1,779
4
-304
29
95
772
787
Agricultural Solutions
89
103
224
86
207
255
43
124
59
-2,638
€9,532 million
2019:
Change:
-15%
2020:
€8,071 million
Percentage of sales: 33%
Intermediates €2,645 million
Change: -8%
Sales
Comprehensive portfolio of intermediates and specialties, which are
used as precursors for products such as coatings, plastics, textile
fibers, pharmaceuticals and crop protection products
Intermediates
Broad portfolio of high-quality basic chemicals and specialties
tailored to the needs of internal and external customers that serve as
starting materials for products such as dispersions, paints, coatings,
plastics, insulating materials and hygiene products
Petrochemicals
Divisions
507
The Chemicals segment consists of the Petrochemicals
and Intermediates divisions. It supplies the other segments
with basic chemicals and intermediates, contributing to the
organic growth of our key value chains. Alongside internal
transfers, our customers mainly come from the chemical and
plastics industries. We aim to expand our competitiveness
through technological leadership and operational excellence.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Chemicals
1 To Our Shareholders
Chlorine
71
BASF Report 2020
a Quarterly results not audited
579
932
1,336
Chemicals
244
Nutrition & Care
202
-18
302
170
Chemicals
2019
2020
2019
2020
2019
2020
2019
2020
-37
Q4
Q2
22
Q1
Million €
Income from operations (EBIT)ª
Business Review by Segment
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
1 To Our Shareholders
About This Report
Q3
-504
248
160
175
192
-803
125
-176
144
217
Surface Technologies
47
179
207
78
228
133
407
240
Industrial Solutions
71
420
262
-546
319
-102
321
119
Materials
109
Factors influencing sales
Petrochemicals €5,426 million
Change: -19%
Percentage of sales: 67%
Income from operations before special items
1 To Our Shareholders
About This Report
BASF Report 2020
74
2022
30% increase
2020
80,000
40,000
2022
n/a
n/a
2 Management's Report
Chemicals
Startup
Additional annual capacity
through expansion (metric tons)
Chemical, plastics, coatings, construction,
automotive, textile, pharmaceutical and
agricultural industries; production of detergents
and cleaners as well as crop protection products
and textile fibers
Use in the BASF Verbund
Chemical and plastics industry, construction,
detergent, hygiene, automotive, packaging and
textile industries; production of paints, coatings,
cosmetics, oilfield and paper chemicals
Customer industries and applications
Use in the BASF Verbund
Specialties: specialty amines such as tertiary
butylamine and polyetheramine, gas treatment
chemicals, vinyl monomers, acid chlorides,
chloroformates, chiral intermediates
Basic products: butanediol and derivatives,
alkylamines and alkanolamines, neopentyl glycol,
formic and propionic acid
Ethylene, propylene, butadiene, benzene,
alcohols, solvents, plasticizers, alkylene oxides,
glycols, acrylic monomers, styrene and
polystyrene, styrenic foams, superabsorbents
Products
a Operated by a joint venture with Sinopec
Expansion: ethylene oxide plant
Expansion: neopentyl glycol planta
Expansion: tertiary butylamine plant
Antwerp, Belgium
Nanjing, China
Total annual capacity
(metric tons)
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
305,000
250,000
1,510,000
(metric tons):
Annual capacity
■
-
South America,
Africa, Middle East
Asia Pacific
North America
Europe
Sites
Propionic acid
PolyTHF®
Oxo-C4 alcohols (calculated as butyraldehyde)
Neopentyl glycol
Ethylene oxide
Ethylene
Ethanolamines and derivatives
Butanediol equivalents
Butadiene
Benzene
Formic acid
Alkylamines
Acrylic acid
Product
Production capacities of selected products³
Project
680,000
Location
Intermediates
Strategy
5 Overviews
Consolidated Financial Statements
4
3 Corporate Governance
2 Management's Report
Chemicals
1 To Our Shareholders
About This Report
72
Change: -€346 million
791
445
■ Integrated production facilities form core of Verbund
BASF Report 2020
Sales
-2%
Currencies
0%
Portfolio
2019
-13%
Prices
2020
0%
Volumes
Million €
-15%
■ Technological leadership and operational excellence
provide most important competitive edge
The Chemicals segment is at the heart of the Verbund. Its produc-
tion facilities supply BASF's segments with basic chemicals and
intermediates to produce higher value-added products. In this way,
the segment makes a significant contribution to BASF's organic
growth. The Chemicals segment is also a reliable supplier
and provides chemicals of consistently high quality and markets
them to customers in downstream industries.
We create value through process and product innovation and invest
in research and development to implement new, sustainable
technologies and to make our existing technologies even more
efficient. Technological leadership, operational excellence and a
clear focus on individual value chains are among our most important
competitive advantages. We concentrate on the critical success
factors of the classic chemicals business: leveraging economies of
scale and the advantages of our Verbund, high asset reliability,
continuous optimization of access to raw materials, lean and energy
efficient processes, and reliable, cost-effective logistics. Further-
more, we are constantly improving our global production structures
and aligning these with regional market requirements. We continu-
ously improve our value chains and are expanding our market
position - especially in Asia – with investments and collaborations in
growth markets.
Petrochemicals
Division
Products, customers and applications
As part of the global optimization of production structures, BASF
Idemitsu Co. Ltd, a joint venture between BASF and Idemitsu Kosan
Co. Ltd., closed a production plant for butanediol in Chiba, Japan,
in 2020. Another butanediol plant operated by our joint venture
BASF Petronas Chemicals Sdn. Bhd. in Kuantan, Malaysia, will be
closed in 2021.
At our Verbund site in Antwerp, Belgium, we are expanding our
ethylene oxide plant. The project also includes several downstream
plants, for example, to produce surfactants. After completing the
multi-stage startup process for the new, highly efficient acetylene
plant in Ludwigshafen, Germany, we have improved our competi-
tiveness and strengthened the product line's sustainability.
In our existing 50:50 joint venture BASF-YPC Company Limited
(BYC) in Nanjing, China, BASF and Sinopec plan to further expand
the site to strengthen the joint production of chemical products in
China. In addition, in 2020 we increased the production capacity for
neopentyl glycol at the Nanjing site to further support the growth of
our customers in China. Strategically, we continue to invest in
growth markets, such as the planned expansion of production
capacities for tertiary butylamines in Nanjing, China, by 2022.
As part of a memorandum of understanding signed in October
2019, the Abu Dhabi National Oil Company, the Adani group, BASF
and Borealis AG have completed a joint feasibility study for a
chemical complex in Mundra, India. The global economic uncertain-
ties caused by the coronavirus pandemic led the partners to put the
project on hold in November 2020. The partners remain convinced
of the strong fundamentals represented by the Indian market and
have agreed to re-examine market conditions in the future.
There is continued focus on the construction of an integrated
Verbund site in Zhanjiang in the southern Chinese province of
Guangdong.
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Chemicals
1 To Our Shareholders
About This Report
73
BASF Report 2020
As part of its ChemCycling TM project, BASF uses pyrolysis oil
produced by partners from post-consumer plastic waste as a
feedstock in its Verbund production. We manufacture virgin-grade
plastics from the pyrolysis oil according to a mass balance
approach. Currently, BASF already has 40 independently certi-
fied sales products with an allocated share of recycled raw
materials in its portfolio. These products have the same properties
as those produced from fossil raw materials. This means that our
customers can process them in the same way as conventionally
produced products and use them in demanding applications
such as food packaging or automotive parts. Our customers
commercially marketed the first applications based on chemically
recycled plastic waste in 2020.
40 products
Value for BASF and for our customers
Number of sales products using recycled raw materials
ChemCycling™ is a vital lever in creating a circular economy for
plastics. The project covers plastic waste for which high-value
processing is not yet available and makes it possible to produce
virgin-grade chemical products from recycled feedstocks. At the
same time, greenhouse gas emissions are lower than for conven-
tional products made from primary fossil resources as the waste
is no longer incinerated. In 2020, we processed around
1,000 metric tons of recycled raw materials in the Verbund,
saving the same amount of fossil resources. We plan to succes-
sively increase the use of recycled feedstocks over the coming
years. The Chem Cycling TM project will play a significant part in
achieving BASF's target of using 250,000 metric tons of recycled
and waste-based feedstocks annually from 2025 onward.
For more information on ChemCycling™, see page 116 onward
250,000 metric tons
KASK
Recycled raw materials used in the Verbund from 2025
onward
Value for the environment
An innovative approach to recycling plastic waste
ChemCycling™
How we create value - an example
Material investments
Urea
Monomers
Polyamides 6 and 6.6
Location
Geismar, Louisiana
Project
Startup
Guaratinguetá, Brazil
Construction: MDI synthesis unit
Capacity expansion: sodium methylate
920,000
2020
Zhanjiang, China
Construction: engineering plastics plant
2022
BASF Report 2020
80
Isocyanates
2020
675,000
00
925,000
1,420,000
Polyamide precursors
Sites
Europe
North America
Asia Pacific
Annual capacity
(metric tons)
South America,
Africa, Middle East
Sulfuric acid
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Material investments
1,765,000
595,000
545,000
2,610,000
Propylene oxide
Prices
-7%
-4%
-5%
4%
10.7
9,118
-4%
-6%
-5%
Volumes
Investments including acquisitionsb
8,782
1,957
182
150%
-1.1
-6%
Sales
-2%
-2%
-2%
784
Currencies
193
Research and development expenses
7%
5%
6%
Portfolio
-6%
%
1,665
1,003
-6%
720
849
-15%
11,456
12,315
-7%
1,714
1,719
0%
1,556
1,691
-8%
%
-17%
14.5
-7%
718
132%
-109
973
Special items
-944
-30
Materials
Performance
Materials
Monomers
EBIT before special items
Return on capital employed (ROCE)
835
14.7
-6%
Fuel and refinery additives, polyisobutene, brake fluids and
engine coolants, lubricant additives and basestocks,
components for metalworking fluids and compounded lubricants
The sales decrease was due in part to lower prices. In the Mono-
mers division, prices levels declined for polyamides in particular due
to lower raw materials prices and higher product availability on the
market. Isocyanate prices also decreased. In the Performance
Materials division, prices declined for engineering plastics and
polyurethane systems in particular as a result of lower raw materials
prices.
5 Overviews
Production capacities of selected productsa
Product
Sites
Europe
North America
Asia Pacific
South America,
Africa, Middle East
Acrylics dispersions
Formulation additives
Polyisobutene
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Material investments
Location
Castellbisbal, Spain
Cincinnati, Ohio
Huizhou, China
Capacity expansion: dispersions for packaging
2020
2020
Capacity expansion: water-based polyurethane dispersions
Construction: production plant for engine coolants
Startup
Project
4 Consolidated Financial Statements
265,000
1,742,000
Annual capacity
(metric tons)
Pontecchio Marconi, Italy
Pasir Gudang, Malaysia
Jurong, Singapore
Jinshan, China
66,000
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
3 Corporate Governance
1 To Our Shareholders
Sales were also reduced by lower volumes in both divisions due to
the effects of the coronavirus pandemic. In the Performance Materi-
als division, volumes declined for engineering plastics, polyurethane
systems and Cellasto, primarily as a result of weaker demand from
To continue to provide a reliable supply of high-quality dispersions
solutions in the growing ASEAN, Australian and New Zealand
markets, we have doubled the production capacity for acrylics
dispersions in Pasir Gudang, Malaysia. The additional capacities
started up in January 2021.
BASF Report 2020
84
About This Report
1
To Our Shareholders
2 Management's Report
Industrial Solutions
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Products
Polymer dispersions, resins, additives, pigments, electronic
materials
Antioxidants, light stabilizers and flame retardants for plastic
applications
5,402
Process chemicals for the extraction of oil, gas, metals and
minerals; chemicals for enhanced oil recovery
Kaolin minerals
About This Report
85
59
BASF Report 2020
Performance Chemicals
Dispersions & Pigments
2 Management's Report
Industrial Solutions
Division
On August 29, 2019, we reached an agreement with DIC, Tokyo,
Japan, on the acquisition of BASF's global pigments business. The
purchase price on a cash and debt-free basis is €1.15 billion. The
assets and liabilities to be divested were reclassified to a disposal
group in the Dispersions & Pigments division as of this date. The
transaction is expected to close in the first half of 2021, subject to
the approval of the relevant competition authorities.
In July and August 2020, we announced a strategic partnership with
IntelliSense.io and a strategic investment by BASF in the company
to combine expertise in mineral processing, ore beneficiation
chemistry and industrial Al technology.
We expanded our dispersions portfolio at our site in Huizhou, China,
to better serve the fast-growing packaging industry in southern
China. The expansion complements our production capacities in
Shanghai, China, reduces lead times and improves raw material
supply for our customers. Production capacities for water-based
polyurethane dispersions at our Castellbisbal site in Spain were also
expanded to meet rising demand.
Chemicals, plastics, consumer goods, automotive and
transportation industries, as well as energy and resources
Coatings, construction, paper, printing and packaging, adhesives
and electronics industries
Customer industries and applications
Products, customers and applications
5,101
Sales to third parties
6.064
82
About This Report
1
To Our Shareholders
2 Management's Report
Industrial Solutions
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Industrial Solutions
The Industrial Solutions segment consists of the Disper-
sions & Pigments and the Performance Chemicals divisions.
It develops and markets ingredients and additives for
industrial applications, such as fuel and lubricant solutions,
polymer dispersions, pigments, resins, electronic materials,
antioxidants, light stabilizers, oilfield chemicals, and mineral
processing and hydrometallurgical chemicals. We aim to
grow organically in key industries such as automotive,
plastics, electronics, and energy and resources, and expand
our position in value-enhancing additives and solutions by
leveraging our comprehensive industry expertise and appli-
cation know-how.
Sales
Divisions
Dispersions & Pigments
Raw materials used to formulate products in the coatings,
construction, paper, printing and packaging, adhesives and elec-
tronics industries
62
Performance Chemicals
Performance Chemicals €2,775 million
Change: -14%
2020:
€7,644 million
Percentage of sales: 36%
Factors influencing sales
Change:
-9%
2019:
€8,389 million
Dispersions & Pigments €4,869 million
Change: -6%
Percentage of sales: 64%
Income from operations before special items
Million €
Volumes
-2%
2020
Customized products for various customer industries such as
chemicals, plastics, consumer goods, energy and resources, as well
as automotive and transportation
BASF Report 2020
In the Performance Materials division, EBIT before special items was
slightly above the prior-year level, primarily as a result of improved
margins.
Income from operations (EBIT) before special items declined by
€168 million compared with the previous year to €835 million. This
was attributable to a considerable decrease in the Monomers
division, mainly due to lower polyamide margins and volumes.
the automotive industry in Europe and North America in particular.
The Monomers division recorded lower volumes, especially of
toluene diisocyanates (TDI) and polyamides.
Currency effects had a slightly negative impact on sales.
Sales in both divisions were positively impacted by portfolio effects
from the acquisition of Solvay's integrated polyamide business.
In the Performance Materials division, sales to the automotive indus-
try were considerably below the previous year due mainly to lower
volumes. In Asia, sales volumes grew in 2020 after a weak first half
of the year, driven by strong demand in China, while volumes in
Europe and North America remained below the prior-year level.
Sales in the consumer goods industry declined, primarily due to
lower prices, while volumes were only slightly below the level of the
previous year. Higher volumes in Asia, especially in the appliances
segment, were able to partially offset lower sales volumes in Europe
and North America. Sales also decreased considerably in the
construction industry due to lower volumes and prices. Significantly
higher sales volumes in Asia, especially in China, were unable to
offset lower volumes in Europe and North America.
BASF Report 2020
81
54
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Materials
Performance Materials - Sales by region
Location of customer
North America 19%
€5,101 million
44% Europe
Asia Pacific 31%
See page 155 for the outlook for 2021
EBIT declined by €1,082 million year on year to -€109 million. This
included special charges of €944 million, mainly for impairments on
property, plant and equipment in Europe due to a continued over-
supply and the resulting pressure on prices and margins.
Prices
South America, Africa, Middle East 6%
Monomers - Sales by region
€5,635 million
36% Europe
North America 24%
Asia Pacific 36%
South America, Africa, Middle East 4%
Location of customer
-7%
-4%
Portfolio
>15,000 metric tons
BASF has been marketing and developing polyisobutene for
almost 90 years, setting standards on the market for this unique
product. Since being launched in 1931, OPPANOLⓇ has been a
key competitive differentiator in our customers' products, helping
them to meet their targets. OPPANOL® offers solutions for a wide
range of different applications. Formulations that provide a
steam barrier, electrical insulation, good adhesion and flexibility
at low temperatures (cold flow) are possible, depending on
the requirements. The new and improved OPPANOL® B 12
BMBcert™ makes BASF the first company to use the biomass
balance approach to produce and offer this product based on
100% renewable resources. The European market for OPPANOL®
B 12 BMBcert TM has a volume of over 15,000 metric tons per
year.
About This Report
1 To Our Shareholders
2 Management's Report
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Materials
Business review
Segment data - Materials
Million €
■ EBIT before special items down 17% at €835 million,
primarily due to lower polyamide margins and volumes
Sales to third parties in the Materials segment declined by
€730 million compared with 2019 to €10,736 million. The decline
was mostly attributable to the Performance Materials division, where
sales decreased by €429 million year on year to €5,635 million. The
Monomers division recorded a sales decrease of €301 million to
€5,101 million.
Annual volume of the relevant market in Europe
Factors influencing sales - Materials
of which Performance Materials
Monomers
Intersegment transfers
Sales including transfers
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Depreciation and amortizationa
Income from operations (EBIT)
2020
2019
+/-
10,736
11,466
-6%
5,635
2020
Value for BASF
of production in Kaisten in 2019 and Jurong in 2021, BASF aims to
better serve the growing demand from customers in Asia and
Europe, the Middle East and Africa. In addition, we plan to increase
production capacities for the antioxidant Irganox® 1520L by 20% at
the Pontecchio Marconi site in Italy. The expansion is scheduled to
come on stream in the first quarter of 2021.
More and more industrial businesses are actively working to
reduce their carbon footprint, and sustainable production is also
playing an increasingly important role for customers when
choosing which product to buy. Its properties make OPPANOL®
a key building block for applications such as chewing gum,
window sealants and adhesives. OPPANOL® improves product
processing for our customers and makes their end products
more efficient. BASF offers a sustainable alternative to con-
ventional, fossil-based products with the new-generation poly-
isobutene OPPANOL® B 12 BMBcert TM. By using 100% renew-
able resources like biogas in the production of OPPANOL® B 12
BMBcert TM, BASF reduces greenhouse gas emissions by up to
85% compared with conventional production processes - with-
out affecting product performance.
-1%
Currencies
-2%
Sales
-9%
BASF Report 2020
822
820
Change: €2 million
83
883
About This Report
1 To Our Shareholders
2 Management's Report
Industrial Solutions
3 Corporate Governance
4
Consolidated Financial Statements
85%
up to
Reduces greenhouse gas
emissions by
First polyisobutene derived from 100% renewable resources
Value for the environment
OPPANOL® B12 BMBcert™
How we create value - an example
2019
We are increasing global production capacity for the antioxidant
IrganoxⓇ 1010 by 40% through projects to expand production at our
sites in Jurong, Singapore, and Kaisten, Switzerland. With the start
Through our focus on the development of sustainable solutions, our
products create additional value for our customers and enable
differentiation. We develop new solutions together with our custom-
ers and strive for long-term partnerships that create profitable
growth opportunities for both parties. To achieve this, we draw on
our innovative strength and our many years of experience and
in-depth industry expertise. Efficient production setups, backward
integration in our Production Verbund's value chains, capacity
management, and technology and cost leadership are also essential.
We take on the challenges posed by important future issues,
especially those resulting from population growth: scarce resources,
environmental and climatic stressors, as well as the desire for better
quality of life. To achieve this, we focus on research and develop-
ment and maintain close relationships with leading companies in our
customer industries. We position ourselves globally to reliably supply
customers in all regions. We invest in the development of innovations
that enable our products and processes – as well as our customers'
applications and processes – to make a contribution to sustainability,
for example, by allowing resources to be used more efficiently.
■ Global presence ensures reliable supply to customers in
all regions
■ Tailor-made products and solutions improve our
customers' applications and processes
Strategy
5 Overviews
We support our customers by serving as a reliable supplier with
consistently high product quality, good value offerings and lean
processes. Through our in-depth application knowledge and
technological innovations, we strengthen customer relationships in
key industries.
Capacity expansion: synthetic esters
■ Sales 6% below previous year at €10,736 million, mainly as
a result of lower prices and volumes
Capacity expansion: antioxidants (IrganoxⓇ)
Compared with 2019, EBIT declined by €259 million to €630 million.
EBIT included special charges of €192 million, mainly in connection
with the carve-out of the pigments business and for impairments
on property, plant and equipment in all regions. This primarily
reflected the decline in production in the automotive industry as well
as the expected slow recovery due to the effects of the coronavirus
pandemic.
See page 155 for the outlook for 2021
BASF Report 2020
88
About This Report
1
To Our Shareholders
2 Management's Report
Surface Technologies
3 Corporate Governance
4
Consolidated Financial Statements
5 Overviews
Surface Technologies
The Surface Technologies segment comprises the Catalysts
and Coatings divisions, which offer chemical solutions for
surfaces. Its portfolio serves the automotive and chemical
industries and includes automotive OEM and refinish coat-
ings, surface treatment, catalysts, battery materials, and
precious and base metal services. We improve our cus-
tomers' applications and processes with tailored products,
technologies and solutions, and support them through
geographical proximity and supply reliability across all
regions. The aim is to drive BASF's growth by leveraging our
portfolio of technologies and expanding our position as a
leading and innovative provider of battery materials and
surface coatings solutions.
TEPL88
Sales
Divisions
Catalysts
Mobile emissions catalysts, chemical catalysts and adsorbents,
refining catalysts, battery materials, precious and base metal
products and services, precious metal trading, recycling, clean air
technologies
Coatings
Automotive OEM coatings, automotive refinish coatings and
services, decorative paints, surface-applied treatments for metal,
plastic and glass substrates for a wide range of industries
Coatings €3,089 million
Change: -18%
Percentage of sales: 19%
The decline in the Performance Chemicals division was mainly
driven by lower volumes.
2020:
The increase in the Dispersions & Pigments division was largely attri-
butable to lower fixed costs, mainly as a result of cost optimization
measures. This more than offset lower margins, primarily from the
price-related decrease in sales.
North America 24%
The sales performance was driven by lower price levels, especially in
the Dispersions & Pigments division due to the decrease in raw
materials prices.
Lower volumes overall also contributed to the sales decrease. In the
Performance Chemicals division, the decline in sales volumes was
most pronounced in the fuel and lubricant solutions and oilfield
chemicals businesses. In the Dispersions & Pigments division, vol-
umes were at the level of the previous year.
Sales were additionally reduced by negative currency effects in
both divisions as well as portfolio effects from the transfer of BASF's
paper and water chemicals business, which was previously reported
under the Performance Chemicals division, to the Solenis group as
of January 31, 2019.
Dispersions & Pigments - Sales by region
Location of customer
South America, Africa, Middle East 5%
Asia Pacific 31%
€4,869 million
BASF Report 2020
North America 26%
38% Europe
40
87
About This Report
1 To Our Shareholders
2 Management's Report
Industrial Solutions
3 Corporate Governance
4 Consolidated Financial Statements
5 Overviews
Performance Chemicals - Sales by region
Location of customer
South America, Africa, Middle East 11%
38% Europe
Asia Pacific 27%
€2,775 million
Income from operations (EBIT) before special items was on a
level with the previous year at €822 million. Considerably higher
EBIT before special items in the Dispersions & Pigments division
was offset by a considerably lower contribution from the Perfor-
mance Chemicals division.
€16,659 million
Change:
27%
2019:
4
Consolidated Financial Statements
5 Overviews
Strategy
■ Development of chemical solutions for surfaces in close
collaboration with our customers and partners
■ Expanding growth and a leading market position in battery
materials
In the Surface Technologies segment, our focus is on the protection,
modification and development of surfaces. We develop innovative
products and technologies in close collaboration with our customers
from the catalysts, coatings and battery materials sectors, and offer
precious and base metal as well as surface treatment services. Our
aim is to drive growth by leveraging our portfolio of technologies to
find the best solution for our customers in terms of functionality and
cost. This helps our customers to drive forward innovation in their
industries and contribute to sustainable development.
Key growth drivers for us are the positive medium-term develop-
ment of the automotive market, especially in Asia, the trend toward
sustainable, low-emission mobility in the automotive industry, and
the associated rise in demand for battery materials for electromobility.
Together with our customers, we are developing customized,
sustainable solutions in these growth areas for battery materials,
emission control, lightweight engineering concepts and functional
coatings. Our specialties and system solutions enable customers to
stand out from their competition.
We aim to expand our position as a leading and innovative provider
of battery materials and benefit from the strong growth in this market
segment. A global, customer-focused production network for
battery materials is crucial here. In 2020, BASF announced plans to
invest in a new production plant for cathode active materials in
Schwarzheide, Germany. The new plant will use precursors from the
precursor plant for cathode active materials in Harjavalta, Finland,
which was announced in 2018. The two plants are scheduled for
startup in 2022 and will produce cathode active materials for around
400,000 fully electric mid-size vehicles per year. With these invest-
How we create value - an example
FWC+ catalyst
Next generation of BASF's four-way conversion catalyst for highly efficient particulate removal
Value for our customers
Significantly reduces particulates in
exhaust gas emissions by
up to 95%
Our automotive customers are increasingly interested in develop-
ing environmentally friendly engines with lower exhaust emis-
sions. We support them with highly efficient catalysts and filters
and also help them to meet strict regulatory requirements. The
FWC+ catalyst for gasoline engines is an example of BASF's
expertise in mobile emissions control. The FWC+ catalyst is a
highly efficient filter that reduces particulates in exhaust gas
emissions by up to 95%. This reduces the environmental impact
and significantly improves air quality.
ments in Finland and Germany, BASF aims to become the first
cathode active materials supplier with local production capacities in
what are currently the three main markets: Asia, the United States
and Europe.
Value for BASF
Estimated annual sales potential from 2022
>€20 million
The conventional four-way conversion catalysts used in gasoline
engines filter out ultra-fine particles and chemically remove
substances such as carbon monoxide (CO), unburned hydrocar-
bons (HC) and nitrogen oxides (NOx) in exhaust gas. This exhaust
purification technology was significantly improved with the
development of the FWC+ catalyst - the next generation of the
four-way conversion catalyst. These new, additional components
in the exhaust system now filter particulates much more efficiently
than in the past. The technology was initially introduced to the
Chinese passenger car market in 2019 before being launched in
Europe in 2020. It has an estimated annual sales potential of
more than €20 million from 2022 onward.
BASF Report 2020
00
90
3 Corporate Governance
2 Management's Report
Surface Technologies
1 To Our Shareholders
About This Report
€13,142 million
Catalysts €13,570 million
Change: 44%
Percentage of sales: 81%
Factors influencing sales
Income from operations before special items
Million €
2022
Volumes
-1%
2020
Prices
32%
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
2019
0%
Currencies
-4%
Sales
27%
BASF Report 2020
484
722
Change: -€238 million
89
88
Portfolio
-14%
Assets
-9%
■ Sales down 9% to €7,644 million, mainly due to lower
prices
Million €
Segment data - Industrial Solutions
Business review
5 Overviews
4 Consolidated Financial Statements
3 Corporate Governance
2 Management's Report
Industrial Solutions
To Our Shareholders
1
About This Report
86
98
BASF Report 2020
-14%
2021
2022
2021
2021
375
524
-28%
8,019
■ EBIT before special items of €822 million, on a level with
the previous year
8,913
At €7,644 million, sales to third parties in the Industrial Solutions
segment were €745 million below the prior-year figure in 2020. This
was due to considerably lower sales in both divisions. Sales declined
by €436 million to €2,775 million in the Performance Chemicals divi-
sion and decreased by €309 million to €4,869 million in the Disper-
sions & Pigments division.
Sales to third parties
3,211
2,775
-6%
5,178
4,869
-9%
8,389
7,644
+/-
2019
2020
Sales
Currencies
Portfolio
Prices
Volumes
-6%
Income from operations (EBIT)
Depreciation and amortizationa
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Sales including transfers
Intersegment transfers
of which Dispersions & Pigments
Performance Chemicals
Factors influencing sales - Industrial Solutions
-10%
Capacity expansion: production plant for acrylics dispersions
Capacity expansion: light stabilizers (TinuvinⓇ NOR® 356)
Capacity expansion: antioxidants (IrganoxⓇ)
1,249
331
426
-22%
177
192
-8%
Special items
Industrial
Solutions
1,189
Performance
Chemicals
EBIT before special items
Return on capital employed (ROCE)
-2%
0%
-5%
Assets
-4%
-5%
-3%
Investments including acquisitionsb
-1%
0%
-4%
Research and development expenses
-2%
-1%
-2%
-7%
6,903
Dispersions &
Pigments
12.5
-5%
1,099
6,402
-17%
%
14.4
15.8
469
438
7%
1,327
889
-29%
-192
69
630
9.3
%
0%
822
820
< >
To Our Shareholders - Letter from the Chairman of the Board of Executive Directors
BASF Report 2021
regulations driven by policymakers and society do
present a tremendous challenge to industry in general
and particularly to the chemical industry. At the same time, however, they lead to
new business opportunities. The dynamic development from the combustion
engine to electromobility is a good example of this. As a leading chemical supplier
to the automotive industry and producer of innovative cathode active materials
for electric vehicle batteries, we are able to profit from this development. Growth
and climate protection go hand in hand: Our materials not only support the
dynamic growth of this market, but their low carbon footprint also paves the way
for climate-neutral mobility.
CO2-free chemical
production is the future.
And BASF wants to be
among the first there.
industry and innovative chemical products. Extensive
neutrality is possible without a competitive chemical
tion is the foundation for a wide range of growth
opportunities! Neither future prosperity nor climate
Profitable growth lays the foundation for a success-
ful transformation. This is why we continue to focus
our portfolio and business activities on organic
growth. And the reverse is also true: The transforma-
CO2-free chemical production is the future. And BASF wants to be among the
first there. It all starts with transparency, which is why we provide our customers
with Product Carbon Footprints (PCF) - the carbon footprint associated with
production per kilogram of sales product – for each of our 45,000 sales products.
Furthermore, we help our customers develop strategies to reduce their carbon
footprint, to use resources more efficiently, and to manufacture products in a
more environmentally friendly way. We expect that demand for such emission-free
or emission-reduced products will exceed supply in the medium term, and that
their market value will more than compensate for the higher production costs. It
therefore also makes good economic sense to take a leading role here. That is
why we want to be among the first to provide as many products as possible from
our portfolio with a reduced carbon footprint in large volumes by the end of the
decade. This differentiates us, increases our competitiveness and enables growth
above market.
Electricity from renewable sources in great quantities and at favorable prices
would enable us to achieve a climate-neutral future. This is made possible by the
electrification of entire value chains. To achieve this, we need to massively expand
renewable energies worldwide. Currently, this is not happening fast enough. That
is why we are leading the way and securing access to green power. We already
announced several projects in 2021 as part of the implementation of our
Make & Buy strategy: We have secured a half share in a 1.5 gigawatt offshore
wind park from Vattenfall in the North Sea off the coast of the Netherlands. It
should be connected to the grid in 2023. It will be the world's biggest offshore
wind farm - and all this without any public subsidies. We are taking a different
approach with Ørsted and Engie: We have concluded attractive electricity supply
contracts with both energy companies for a term of 25 years. In other regions
as well, for example, in the United States and China, we are securing access to
green power. In this way, we are planning proactively and laying the foundation to
ensure a long-term supply of electricity from renewable resources.
We are also redefining raw material cycles through
recycling. Good examples of this are the chemical
recycling process in which a new raw material,
pyrolysis oil, is obtained from plastic waste; the recycling of mattresses, which
are broken down into polyurethane precursors; and the use of bio-based raw
materials. There is a great feeling of excitement in the BASF team! With our inno-
vation power, creativity and entrepreneurial courage, we look to the future with
optimism.
>>>
China is already the largest chemical market in the world and has high growth
potential in the long term. With the construction of our new Verbund site in
Zhanjiang in the southern Chinese province of Guangdong, we want to further
accelerate our profitable growth in the region. We are setting new standards in
energy transformation there as well. By taking advantage of a new regulatory
Master Bedenüller
framework and signing a supply agreement for
electricity from renewable sources with China
Resources Power in June 2021, we will be able
to operate the first plants at the new Verbund
site in Zhanjiang completely with green power.
Sustainable solutions and innovative products
across our entire portfolio enable us to remain on
our growth path and systematically drive the
transformation to greater sustainability.
We act swiftly and systematically in the imple-
mentation of our long-term strategy for profitable
growth. I am convinced that climate neutrality and sustainable resource use are
not possible without a competitive chemical industry. Our company is very well
positioned. We make our contribution to society and at the same time, secure our
long-term competitiveness. I am pleased that you support us on our path to a
sustainable future. Many thanks for your trust.
Yours,
Martin Brudermüller
10
10
177
Report of the Supervisory Board
174
Management and Supervisory Boards
12
BASF on the Capital Market
289
With our innovation power,
creativity and entrepre-
neurial courage, we look
to the future with
optimism.
Climate neutrality and
sustainable resource use
are not possible without a
competitive chemical
industry.
courage to think in new directions. It will involve converting the big steam
crackers from heating based on fossil fuels to electrical heating. In these plants,
at the beginning of the value chains, steam is used to split naphtha into basic
chemicals at about 850 degrees Celsius. Other
examples include the CO2-free production of hydro-
gen by water electrolysis and methane pyrolysis, and
using waste heat recovered with heat pumps instead
of conventional steam generation in gas-fired power
plants. We will invest roughly €4 billion to reach our
2030 emission reduction targets.
reported in full. Unless otherwise indicated, data on social responsi-
bility and transportation safety refers to BASF SE and its consolidated
subsidiaries.
To Our Shareholders - Letter from the Chairman of the Board of Executive Directors
Q< >= 7
Shareholders
To Our
BASF Report 2021
1
2021
COMMUNITY MEMBER
Contents
GRI
LEAD
Global Compact
COMPAC
UN GLOBAL
COMPACT
UN BALC
WE SUPPORT
2021 PARTICIPANT
This report contains forward-looking statements. These statements
are based on current estimates and projections of the Board of
Executive Directors and currently available information. Forward-
looking statements are not guarantees of the future developments
and results outlined therein. These are dependent on a number of
factors; they involve various risks and uncertainties; and they are
based on assumptions that may not prove to be accurate. Such risk
factors include those discussed in Opportunities and Risks on
pages 151 to 160. We do not assume any obligation to update the
forward-looking statements contained in this report above and
beyond the legal requirements.
To Our Shareholders
Management's Report
Corporate Governance
Consolidated Financial Statements
Letter from the Chairman of the Board of Executive
Directors
policy.
ambitious dividend
on January 4, 2022, to buy back own shares in the
amount of up to €3 billion.
cantly undervalued on the capital market, we decided
opment. Given that we believe that BASF is signifi- At BASF, we have an
The development of our share price in 2021 remained
well below our expectations, despite our very good
operating performance and targeted strategic devel-
At BASF, we have an ambitious dividend policy. Our free cash flow of €3.7 billion
reflects our financial strength. Therefore, we will propose to the Annual Share-
holders' Meeting a dividend of €3.40 per share, representing an increase of
10 euro cents compared with the previous year. We want to be an attractive
investment and reliably create value for you, our shareholders.
Overviews
2021 was a very successful business year for BASF. Despite the ongoing
coronavirus pandemic, widespread supply bottlenecks, and increasingly higher
energy and raw materials prices, we achieved record levels of sales and earnings.
We achieved an EBIT before special items of €7.8 billion. Our sales volumes were
five percentage points above the 6% growth in the global chemical industry and
we raised prices by 25%. This enabled us to once again earn a premium on our
cost of capital in 2021. Our economic development confirms that we are on the
right path with our strategic direction, our adapted organizational structure and
our ongoing cost discipline.
To Our Shareholders - Letter from the Chairman of the Board of Executive Directors
BASF Report 2021
12
11
8
BASF on the Capital Market
The Board of Executive Directors of BASF SE
Dear shareholder,
Forward-looking statements and forecasts
An assurance statement of the NFS can be found at basf.com/nfs-audit-2021
An assurance statement on the sustainability information in the BASF Report 2021 can be found at
basf.com/sustainability_information
For more information on our sustainability reporting, see from page 45 and 96 onward
Material topics along the value chain form the focal points of report-
ing and define the limits of this report. We take three dimensions into
account in identifying and evaluating material topics: the impact on
BASF, the impact of BASF and relevance for our stakeholders.
The information on the financial position and performance of the
BASF Group comply with the requirements of International Financial
Reporting Standards (IFRS), and, where applicable, the German
Commercial Code (HGB), German Accounting Standards (GAS) and
the guidelines on alternative performance measures from the Euro-
pean Securities and Markets Authority (ESMA). Internal control
mechanisms ensure the reliability of the information presented in this
report. BASF's Board of Executive Directors confirmed the effective-
ness of the internal control measures and compliance with the regu-
lations for financial reporting.
The GRI and Global Compact Index can be found in the online
report. It provides an overview of all relevant information to fulfill the
GRI indicators and shows how we contribute to the United Nations'
Sustainable Development Goals (SDGs) and the principles of the
U.N. Global Compact. The results of the limited assurance of this
information conducted by KPMG AG Wirtschaftsprüfungsgesell-
schaft can also be found there. We also publish online additional
information on sustainability in accordance with the industry-specific
requirements of the SASB.
progress report on BASF's implementation of the 10 principles of the
U.N. Global Compact.
We have been active in the International Integrated Reporting Council
(IIRC) since 2014 and have supported the work of the Value Report-
ing Foundation, formed by the merger of the IIRC and the Sustain-
ability Accounting Standards Board (SASB), since 2021. This involve-
ment gives us the opportunity to discuss our experiences of
integrated reporting with stakeholders and at the same time, receive
inspiration for enhancing our reporting. BASF's report addresses ele-
ments of the IIRC framework by illustrating how we create value, for
example. The information contained in this report also serves as a
Our sustainability reporting has been based on Global Reporting
Initiative (GRI) guidelines and standards since 2003. We have applied
the "Comprehensive" option since 2017.
Our value creation based on the IIRC framework can be found on page 24 and in the online report
For more information on our control and risk management system, see page 151 onward
The 2021 BASF Online Report can be found at basf.com/report
The BASF Report, which is published each year in English and
German, combines the major financial and sustainability-related
information necessary to comprehensively evaluate our performance.
We select the report's topics based on the following principles:
materiality, sustainability context, completeness, balance and stake-
holder inclusion. In addition to this report, we publish further informa-
tion online. The relevant links can be found at the end of each chapter.
External audit by KPMG AG Wirtschaftsprüfungsgesellschaft
Financial reporting in accordance with IFRS, HGB and GAS
Editorial deadline: February 21, 2022
Nonfinancial reporting in accordance with HGB and additional
sustainability reporting in accordance with GRI
Effective climate protection and scarce resources are the central challenges
of our time. We want to reduce our CO2 emissions worldwide by 25% by 2030
compared with 2018. Our 2050 target is net zero emissions. These are very
ambitious goals. It is the biggest transformation in the history of the chemical
industry and for BASF, considering that our production is energy intensive and
that we want to continue to grow at the same time. The energy transformation will
make great demands on us. But we are confident that we will succeed!
We can only reach climate neutrality if we completely transform our production by
replacing energy sources based on fossil fuels with electricity from renewable
resources. That will require entirely new processes and technologies and the
8
BASF Report 2021
Content and structure
The GRI and Global Compact Index can be found at basf.com/en/gri-gc
The SASB index can be found at basf.com/sasb
BASF Report 2021
About This Report
The Independent Auditor's Report can be found on page 188 onward
KPMG also conducted a limited assurance of the nonfinancial group
statement (NFS).
steering target in 2022. The links and additional content provided on
linked internet sites are not part of the audited information.
The limited assurance of the sustainability information contained in
the Management's Report was conducted in accordance with
ISAE 3000 (Assurance Engagements other than Audits or Reviews
of Historical Financial Information) and ISAE 3410 (Assurance
Engagements on Greenhouse Gas Statements), the relevant inter-
national assurance standards for sustainability reporting. KPMG
conducted a reasonable assurance of all disclosures on the most
important nonfinancial key performance indicators, accelerator
sales and CO2 emissions. The forecast for the key performance
indicator CO2 emissions is also part of the Management's Report
and is covered by the annual audit. No forecast has been made for
the previous Accelerator target as we plan to update our portfolio
Our reporting is audited by a third party. KPMG AG Wirtschafts-
prüfungsgesellschaft has audited the BASF Group Consolidated
Financial Statements and the Management's Report and has
approved themn free of qualification.
External audit
The list of shares held can be found at basf.com/en/corporate governance
For more information on companies accounted for in the Consolidated Financial Statements, see the
Notes from page 205 onward
The divested pigments business is included in the disclosures and
indicators on employees, the environment, and health and safety on
a pro rata basis until June 30, 2021. Sales from the divested pig-
ments business are no longer integrated in the portfolio to be evalu-
ated under the Sustainable Solution Steering method for 2021.
BASF Shanshan Battery Materials Co., Ltd., which was formed on
August 31, 2021, is included in the sustainability disclosures and
indicators on a pro rata basis. The company's sales to third parties
are already included in the sum of relevant sales according to
the Sustainable Solution Steering method. They are listed as "not
assessed." We will start classification in 2022.
Declaration of Conformity Pursuant to Section 161 AktG
Our data collection methods for environmental protection and safety
are based on the recommendations of the International Council of
Chemical Associations (ICCA) and the European Chemical Industry
Council (CEFIC). In the section "We Produce Safely and Efficiently,"
we report all data of the worldwide production sites of BASF SE, its
fully consolidated subsidiaries, and proportionally consolidated joint
operations. BASF SE subsidiaries that are fully consolidated in the
Group financial statements in which BASF holds an interest of less
than 100% are included in full in environmental reporting. The emis-
sions of proportionally consolidated joint operations are disclosed
pro rata according to our interest. Work-related accidents at all sites
of BASF SE and its subsidiaries as well as joint operations and joint
ventures in which we have sufficient authority in terms of safety
management are compiled worldwide regardless of our interest and
The section "Employees" refers to employees active in a company
within the BASF Group scope of consolidation as of December 31,
2021.
BASF Group's scope of consolidation for its financial reporting com-
prises BASF SE, with its headquarters in Ludwigshafen, Germany,
and all of its fully consolidated subsidiaries and proportionally con-
solidated joint operations. Shares in joint ventures and associated
companies are accounted for, if material, using the equity method in
the BASF Group Consolidated Financial Statements and are thus
not included in the scope of consolidation.
The reporting period is the 2021 business year. Relevant information
is included up to the editorial deadline of February 21, 2022.
All information and bases for calculation in this report are founded
on national and international standards for financial and sustain-
ability reporting. The data and information for the reporting period
were sourced from the expert units responsible using representative
methods. Due to rounding, individual figures may not add up exactly
to the totals shown and percentages may not correspond exactly to
the figures shown.
Data
60
>>>
184
198
185
31.6
Sales (billion €)
20.6
Sales (billion €)
67,532
Employees
19,976
Employees
Employees
emissions
(million metric tons of CO2
equivalents)
40.1
Accelerator sales
€24.1 billion
(2020: €16.7 billion)
Employees
at year-end
Greenhouse gas
111,047
(2020: 110,302)
6,786
4.4
NORTH AMERICA
SOUTH AMERICA,
AFRICA, MIDDLE
EAST
Surface Technologies
€22.7 billion
(2020: €16.7 billion)
Nutrition & Care
€6.4 billion
(2020: €6.0 billion)
Agricultural Solutions
Sales (billion €)
€8.2 billion
(2020: €7.7 billion)
€3.7 billion
(2020: €2.4 billion)
EUROPE
ASIA PACIFIC
21.9
Sales (billion €)
16,753
Employees
Other
Sales and employees by region (by location of company)
21.9 20.8 20.2
€2.2 billion
1 | To Our Shareholders
7
3| Corporate Governance
161
5| Overviews
286
Letter from the Chairman of the Board of Executive Directors
The Board of Executive Directors of BASF SE
To Our Shareholders
Management's Report
Corporate Governance
Consolidated Financial Statements
Overviews
8
162
Ten-Year Summary
287
11
Compliance
171
Glossary and Trademarks
Corporate Governance Report
Research and development
expenses
Contents
5
1990 2018 2020 2021
(2020: €2.1 billion)
Personnel expenses
€11.1 billion
(2020: €10.6 billion)
Our journey to climate neutrality
Climate change calls for fast, decisive action. That is why we
set ourselves even more ambitious climate protection targets
in 2021: By 2030, we want to reduce the greenhouse gas
emissions from our production sites and our energy purchases
(Scope 1 and Scope 2) by 25% compared with 2018 - while
growing production volumes. We aim to achieve net zero
emissions by 2050. To achieve these targets, we have set up
comprehensive carbon management and created effective
structures for its implementation.
For more information, see pages 27 and 126
Q< >= 4
BASF Report 2021
Our integrated corporate
report combines financial and
sustainability reporting. It shows
how we are developing as a
company and how we create
value for our shareholders with
what we do.
On the cover and this page:
BASF is one of the leading manufacturers of battery materials for
electric vehicles and continues to invest in this important growth
market. For example, we are building a new production plant for
cathode materials in Schwarzheide, Germany, which will start
operation in 2022. Both photos show Ina Homann. As an assistant
process manager, her responsibilities include monitoring the progress
of construction at her future workplace. After working in analytics and
process optimization and obtaining further technical qualifications, she
is now part of BASF's team to help shape the future of climate-smart
mobility.
For more information on battery materials and electromobility, see weloveevs.basf.com
BASF Report 2021
Contents
About This Report.
Welcome
to BASF
(2020: €59.1 billion)
€78.6 billion
(2020: €7.6 billion)
Statement of Income
194
Statement of Income and Expense Recognized in Equity
195
Balance Sheet
196
Statement of Cash Flows
145
What makes us so confident about the value of BASF? What are our
priorities for the transformation to climate neutrality and the further
development of our company?
199
Notes
200
BASF Report 2021
About This Report
About This Report]
GRI
Statement of Changes in Equity
102, 305
188
96
2❘ Management's Report.
Overview
The BASF Group
Our Strategy
16
17
20
Independent Auditor's Report
4| Consolidated Financial Statements
26
The BASF Group's Business Year
Forecast
52
Statement by the Board of Executive Directors
187
Sustainability Along the Value Chain
186
LQ
5
Integrated reporting and online services
€78.6 billion
EBIT before special items
ROCE
€7.8 billion
(2020: €59.1 billion)
(2020: €3.6 billion)
13.5%
(2020: 1.7%)
Sales
Sales by segment and Other
€13.6 billion
(2020: €8.1 billion)
Materials
€15.2 billion
(2020: €10.7 billion)
Industrial Solutions
€8.9 billion
Chemicals
At a glance
21
20 BASF Group
This integrated report documents BASF's economic, environmental
and social performance in 2021. We show how sustainability con-
tributes to BASF's long-term success as an integral part of our cor-
porate purpose and our strategy, and how we as a company create
value for our stakeholders.
Symbols
You can find more information in this report.
You can find more information online. The content of these
links are voluntary disclosures that were not audited by the
auditor.
[ ] The content of this section is not part of the statutory audit but
has undergone a separate limited assurance by our auditor.
☐☐ The content of this section is voluntary, unaudited information,
which was critically read by the auditor.
At a glance
■
■
Integrated BASF Report serves as U.N. Global Compact progress
report
FELD
O-BASF
We create chemistry
D-BASE
We create chemistry
BASF Report 2021
Integrated corporate report on
economic, environmental and
social performance
Declaration of Corporate Governance
As the largest chemical company in the world, we are leaders in our industry. We
are ambitious. This applies especially to the transformation to climate neutrality.
We want to show that this transformation and competitiveness are not mutually
exclusive. Our global responsibility for sustainable development is anchored in
our corporate purpose: We create chemistry for a sustainable future.
[BASF can rely on the engagement of its employees. This is shown
by a passion for the job, a dedication to top performance and a
strong commitment to BASF. Global employee surveys and pulse
checks are established feedback tools in the BASF Group and are
used to actively involve employees in shaping their working environ-
ment. The results are communicated to employees, the Board of
Executive Directors, the Supervisory Board and stakeholders. We
have performed regular global employee surveys since 2008. We
aim to keep the high level of employee engagement determined by
these surveys and increase it even further as far as possible. As part
of the BASF strategy, we therefore set ourselves the following goal
in 2018: More than 80% of our employees feel that at BASF, they
Employees
see page 167 onward
For more information on diversity in the Board of Executive Directors and the Supervisory Board,
25.6
Of which women (%)
9,006
40,030
b Specialists without disciplinary leadership responsibilities
a Employees with disciplinary leadership responsibilities
We also promote diversity in the selection and development of our
leaders. We have set a global target to promote female leadership
and aim to increase the proportion of women in leadership posi-
tions to 30% by 2030. We have made important progress toward
this and continuously review our target. In the BASF Group, the
global proportion of female leaders with disciplinary responsibility
was 25.6% at the end of 2021 (2020: 24.3%).
Professionalsb
(Senior) executivesa
55 years
and up
40-54 years
26-39 years
Leaders and professionals in the BASF Group
December 31, 2021
For more information on diversity and inclusion, see basf.com/diversity
As a signatory to the United Nations' Women's Empowerment Prin-
ciples (WEPS), we are committed to promoting gender equality. We
are also involved in other external initiatives to promote inclusion of
diversity at work, such as the Chefsache initiative and the European
Round Table. Employees from all regions took International
Women's Day 2021 as an opportunity to reflect on the current situa-
tion of women at BASF, celebrate successes and campaign for
greater equality.]
30%
Proportion of women in
leadership positions with
disciplinary responsibility
2030 target
Up to and
including 25 years
74.1%
25.9%
82.0%
69.7%
8,207
73.6%
18.0%
21,511
42,531
26.4%
38,798
30.3%
In order to continuously monitor our progress toward this target,
we have developed a global dashboard, which is used to regularly
review the implementation status. The systematic advancement of
women is also an integral part of our process for selecting senior
executives.
BASF Report 2021
Management's Report - We Value People and Treat Them with Respect
<>= 100
Digital learning formats play an important role in our development
offerings. Even before the coronavirus pandemic, training for leaders
and employees was updated to meet the challenges of the digital
transformation and modern working life with appropriate learning
formats and content. For example, platforms such as the Digital
Campus, Digitalization & Me and the Ways of Working portal were
enhanced and refined to support employees in all aspects of virtual
collaboration and in building their digital skills. The continuous
31.9
Total
10,293
48.4
900
South America, Africa, Middle East
31.0
2,797
Asia Pacific
2,551
North America
4,045
2021
30.4
In our understanding, there is more to development than a promo-
tion or a job change - it encompasses the development of personal
experience and abilities. In regular development meetings, which are
held as part of our annual employee dialogs, employees outline
ideas for their individual development together with their leaders and
determine specific measures for further training and development,
which focus on personal and professional competencies. Our learn-
ing activities follow the "70-20-10" philosophy: We apply the
elements "learning from experience” (70%), “learning from others"
(20%) and "learning through courses and media" (10%). Our learn-
Of which women (%) ing and development offerings cover a range of learning goals:
Starting a career, expanding knowledge, personal growth and
leadership development.
[Learning and development are essential success factors for a
strong company culture. The skills and competencies of our
employees are critical for profitable growth and lasting success. For
this reason, we want to further modernize our learning culture and
step up our efforts to promote continuous, self-directed learning
and learning from others. Employee development at BASF is guided
by the belief that talent is in everyone. This means that development
opportunities and support are open to all employees.
Competition for talent
[Attracting and retaining the best employees is crucial to our
success. Having an attractive and compelling total offer package
for employees is becoming increasingly important given the strong
global competition for the best qualified employees and leaders. This
is why we are constantly working on measures to increase BASF's
attractiveness in the global labor markets.
We are increasingly using digital platforms such as our country-
specific career websites as well as global and regional social net-
works to reach potential candidates. This enables us to appro-
priately address different target groups.
In light of the coronavirus pandemic, we primarily used digital solu-
tions for our talent search activities in 2021 and participated in a
few in-person events. To also provide the best possible information
on BASF as an employer virtually, we are continuously developing
our digital presence. For example, we are represented at digital trade
fairs and conferences, conduct digital excursions for students from
various universities of sites in Germany, and organize expert lectures
for future talent. This virtual contact enables a demand-oriented,
flexible and location-independent approach. As a result, we were
able to continue to attract and recruit talented employees.
In addition, we consistently take part in specific career events to
directly reach and attract talent from various disciplines, especially
female candidates. We focus in particular on our female employees
as role models with various initiatives such as podcasts, career fairs
and networking events aimed specifically at women, or on our social
media channels.
In 2021, we established a digital onboarding process at some sites
for new employees and their managers in the period up to the first
day of work and beyond. The aim is to ensure a successful first day
at work and to build an early bond between the new colleagues and
their future team at BASF, for example by sending video messages
and information about the division and team. We want to continue
to drive forward global implementation in 2022.
Women
To combat the shortage of skilled workers in production and techni-
cal areas, due among other factors to demographic-related declines
in Ludwigshafen, Germany, we have strengthened our social media
presence, for example, to alert qualified specialists to new career
prospects at BASF. In addition, we cooperate with local radio
stations and the German employment agency to target skilled
workers at informational events.
The BASF Group hired 10,293 new employees in 2021. The
percentage of employees who resigned during their first three
years of employment - the early turnover rate - was 1.5% worldwide
in 2021. This turnover rate was 0.6% in Europe, 2.4% in North
America, 3.4% in Asia Pacific and 2.5% in South America, Africa,
Middle East. Our early turnover rate is therefore at a desirable low
level.
BASF Group new hires in 2021
Europe
As of December 31, 2021, the BASF Group was training 3,028 peo-
ple in 12 countries and around 50 occupations. We spent a total of
around €119 million on vocational training in 2021.]
For more information on careers at BASF, see basf.com/careers
Learning and development
We once again achieved high scores in a number of employer rank-
ings in 2021. For example, in a study conducted by Universum,
young scientists ranked BASF as the second most attractive
employer in Germany (2020: fifth). In North America, DiversityInc
named BASF as one of the top 50 companies for diversity in recruit-
ing for the ninth consecutive year. In Asia, Top Employer recognized
BASF China as one of the best employers for the twelfth time in
succession. In South America, LinkedIn ranked BASF second in its
list of top companies in Brazil.
Stakeholder Engagement
Societal Engagement
Men
BASF Group employee age structure
66.6%
75.1%
33.4%
(= 6.1%)
6,786
South America,
Africa,
Middle East
Europe¹
67,532
(€ 60.8%)
24.9%
72.7%
(= 15.1%)
North America
16,753
27.3%
Our employees are key to the successful implementation of BASF's
strategy. We are convinced of the value of excellent employees,
leaders and working conditions, and strive to give our employees
Strategy
26.7%
■ Further expansion of virtual learning and digitalization
■ Employee engagement and leadership impact on center stage
Employees around the world
111,047
At a glance
changing environment, demographic change and the digital work-
place. In everything we do, we are committed to complying with
internationally recognized labor and social standards. We want to
further strengthen our innovative power with attractive working
conditions and through the inclusion of diversity. Lifelong learning
and individual employee development lay the foundation for this.
(Total: 111,047, of which 26.1% women, as of December 31, 2021)
BASF Group employees by region
the tools and skills necessary to be able to offer our customers
products and services with an even greater level of differentiation
and customization. Our corporate strategy promotes a working
atmosphere based on mutual trust, in which employees are given
the space to optimally develop their individual skills and potential.
This positions us to meet the challenges of an increasingly rapidly
[Our employees make a significant contribution to BASF's
success. We want to attract and retain talented people for
our company and support them in their development. To do
so, we cultivate a working environment that inspires and
connects people. It is founded on inclusive leadership based
on mutual trust, respect and dedication to top performance.
CUSTOMERS
BASF
SUPPLIERS
102, 103, 201, 202, 203, 401, 402, 404, 405, 406, 407, 408, 409, 412, 413
GRI
■ Promoting diversity and mutual respect
Asia
Pacific
19,976
(€ 18.0%)
Diversity also relates to the company's demographic profile, which
varies widely by region within the BASF Group. Our aim is to create
a suitable framework to help maintain the employability of our per-
sonnel at all stages of life and ensure the availability of qualified
employees over the long term.
BASF is one of approximately 150 companies that support the
United Nations Global LGBTI (lesbian, gay, bi, trans and intersex)
Standards of Conduct for business and has done so since 2018.
Employees again promoted openness, acceptance and tolerance
with many activities to support the LGBTI movement at various sites
around the world in 2021.
Integrating different perspectives is very important to BASF. There
are a number of Employee Resource Groups around the world
dedicated to different aspects of diversity. In addition, we want to
create a greater awareness of diversity in our organization with vari-
ous activities. BASF supports the German Diversity Charter and has
participated in German Diversity Day and European Diversity Month
with various virtual initiatives and offerings. At our Ludwigshafen site
in Germany, we campaigned against racism and discrimination as
part of the International Weeks Against Racism.
Our leaders play an important role in promoting diversity and creat-
ing an inclusive work environment. We support them with various
offerings, for example as part of leadership development. A toolbox
with a wide range of content inspires a change of perspective and a
podcast series from leaders shows the importance of appreciative,
fair and inclusive leadership.
Promoting and valuing diversity across all hierarchical levels is an
integral part of our strategy and is also embedded in our corporate
values. BASF strives to foster a working environment based on
mutual respect, trust and appreciation. We expect inclusive conduct
from all employees and our leaders. By this, we mean creating an
environment in which different aspects of diversity and individual
strengths are valued.
[The global character of our markets translates into different cus-
tomer requirements. We want to reflect this diversity among our
employees, too, because it enables them to better meet our
customers' needs. For us, diversity means, among other things,
having people from different backgrounds working at our company
who can draw on their individual perspectives and skills to grow
our business. By valuing and promoting employee diversity, we
boost our teams' performance and power of innovation, and
increase creativity, motivation and employees' identification with
the company.
Inclusion of diversity
99
99
Management's Report - We Value People and Treat Them with Respect
BASF Report 2021
1 At BASF, the apprenticeship program trains students for technical, scientific and business vocations as well as for trade and craft professions.
Since 2020, various existing leadership development tools have
been converted to virtual formats to optimally support our leaders -
including during the challenging times of the coronavirus pandemic.]
Regular feedback plays an important role in the development of
leaders. We have therefore adapted our global feedback tool to
enable leaders to, in the future, even better reflect on how these
values are anchored in their leadership behavior.
In order to anchor the CORE Leadership Values in day-to-day life,
an in-depth training course - CORE Leadership Upskilling - was
offered in 2021. The virtual training comprised a series of modules
that encouraged self-reflection and provided opportunities for
global dialog. The training modules were initially completed by all
senior executives worldwide. Work in small, mixed groups aimed
to deepen participants' understanding of the CORE Leadership
Values, enable in-depth discussion of these and expand global
networks. Since the fall of 2021, additional leadership levels have
undergone training and activities modeled on CORE Leadership
Upskilling.
We offer our leaders a wide variety of learning and development
opportunities for each phase of their career as well as various
formats that enable them to learn from one another and external
experts. Global, regional and local offerings are optimally coordi-
nated. We aim to develop leaders who lead their teams with
optimism, empathy and trust, and in this way, create a competitive
advantage for BASF.
Our specific expectations of leaders' conduct are derived from
these: The CORE Leadership Values serve as the guiding
principles for all leaders and set out BASF's expectations of leader-
ship behavior. They are aligned with BASF's strategic goals and
reflect our company's leadership vision (see also page 31).
73.3%
1 Of which Germany
Of which BASF SE
51,026 (45.9%) 24.5% 75.5%
34,405 (31.0%) 21.9% $ 78.1%
BASF Report 2021
Management's Report - We Value People and Treat Them with Respect
98
(Total: 111,047, of which 26.1% women, as of December 31, 2021)
Compensation and benefits as well as offerings to balance personal
and professional life complete our diverse total offer package. In
order to continue to attract talented people to our company in
the future, we work continuously on BASF's attractiveness as an
employer. Our employees play an important role here as ambassa-
dors for BASF.J
As of December 31, 2021, the number of employees increased
to 111,047 employees compared with 110,302 employees as of
December 31, 2020. The rise was primarily due to staff increases
in Asia Pacific, especially in connection with the formation of
BASF Shanshan Battery Materials Co., Ltd., as well as for our new
Verbund site in Zhanjiang, China. The divestiture of the pigments
business, which affected around 2,500 employees, had an off-
setting impact. We employed 3,028 apprentices¹ (2020: 3,120).
2,329 employees were on temporary contracts (of which 47.6%
were women).
Employee engagement
can thrive and perform at their best. We regularly calculate the
employee engagement level as an index score based on five ques-
tions on set topics in our employee surveys. The most recent survey
from 2020 revealed an engagement index of 82% (2019: 79%). Our
aim is to keep this score above 80%. We support our leaders with a
range of follow-up measures to decentrally address individual action
areas and in this way, help to further strengthen employee engage-
ment together with their employees.
Pulse checks were carried out to identify and address employees'
specific needs in 2021. In North and South America, for example,
surveys were conducted on the inclusion of diversity. These
revealed a desire to further embed inclusive behavior in the work-
ing environment, among other things. Employees in Germany and
Europe were surveyed about their current work situation, flexible
working, stresses caused by the coronavirus pandemic and team
sentiment. Among other things, the results showed that employees
feel safe working at our sites and that employees who have been
working flexibly since the start of the pandemic are coping well with
it. Regular global employee surveys remain a focus, and we plan to
conduct the next survey in spring 2022. ]
What we expect from our leaders
[ Our leaders and their teams should contribute to BASF's success.
This is why we promote high-quality leadership and measure its
impact. We understand impactful leadership as leaders that serve
as role models by having a positive influence on the engagement
and development of their employees, and developing and imple-
menting business strategies in line with our corporate values.
These expectations are part of the standard global nomination
criteria for leadership positions. Our leadership culture is based on
BASF's corporate values: creative, open, responsible and entrepre-
neurial - CORE.
Number of employees
32.5
29.3
BASF Report 2021
Asia Pacific
Sales at companies headquartered in the Asia Pacific region were
38.5% above the 2020 figure, at €20,632 million. In local currency
terms, sales likewise rose by 38.5%. The increase in sales was
primarily driven by growth in Greater China, where sales rose by
42.5% in euros to €12,018 million. All segments improved sales in
the region compared with the prior year, but especially the Surface
Technologies, Materials and Chemicals segments.
The sales performance was primarily the result of higher prices,
particularly in the Surface Technologies, Chemicals and Materials
segments. Higher volumes in all segments contributed to the
increase in sales. Raw material shortages, the semiconductor deficit
in the automotive market and the associated production and supply
chain disruptions also hampered sales performance in Asia Pacific.
Overall, portfolio measures had a positive impact on sales develop-
ment, especially in Greater China and in the Surface Technologies
segment following the formation of BASF Shanshan Battery Mate-
rials Co., Ltd.
South America, Africa, Middle East
Sales at companies located in South America, Africa, Middle East
rose by 23.5% to €4,437 million. In local currency terms, they were
31.0% above the prior-year level. Sales growth was primarily attri-
butable to considerably higher sales in the Agricultural Solutions,
Surface Technologies, Chemicals and Materials segments. The
Industrial Solutions and Nutrition & Care segments also recorded
higher sales.
The sales increase was mainly driven by higher prices, especially
in the Surface Technologies, Agricultural Solutions and Chemicals
segments. All segments significantly increased volumes despite
supply chain disruptions caused by raw materials shortages. Nega-
tive currency effects had an offsetting impact in all segments.
BASF Report 2021
Management's Report - E.U. Taxonomy
95
TE.U. Taxonomy]
Sales growth was mainly due to significantly higher price levels,
especially in the Surface Technologies segment due to a significant
increase in precious metal prices, and in the Chemicals segment,
particularly for propylene and butadiene. Higher volumes supported
sales performance in all segments. Volume development was how-
ever negatively impacted by extreme weather conditions, the semi-
conductor shortage in the automotive market and the resulting
production and supply chain disruptions. Negative currency effects
had an offsetting effect. Sales were reduced by portfolio effects,
mainly driven by the divestiture of the global pigments business in
the Industrial Solutions segment.
In accordance with the E.U. Taxonomy Regulation and the supplementary delegated acts, the Nonfinancial Statement includes, for the first time, the share of the Group's taxonomy-
eligible sales, investments and operating expenses for the 2021 business year relating to the environmental objectives of "climate change mitigation" and "adaptation to climate
change." BASF activities that are not currently covered by the E.U. taxonomy, and as such, are not relevant from a taxonomy perspective are generally reported as taxonomy-non-
eligible in accordance with the delegated acts. These include large parts of BASF's activities that may nevertheless be in line with the E.U.'s environmental objectives.
-
-
Manufacture of hydrogen
Manufacture of carbon black
Manufacture of soda ash
Manufacture of chlorine
Manufacture of organic basic chemicals
Manufacture of anhydrous ammonia
Manufacture of nitric acid
Manufacture of plastics in primary form
We additionally assessed the following enabling activities in the E.U.
taxonomy to take into account solutions that contribute to climate
change mitigation at our customers: "manufacture of batteries" and
"manufacture of energy efficiency equipment for buildings." To avoid
double counting, assignment to an enabling activitiy is only made if
a taxonomy-eligible product or project had not already been
included under another activity. BASF also contributes solutions
used to produce technologies for renewable energy or low-carbon
mobility. Since the E.U. taxonomy focuses on the manufacture of
technologies and thus excludes precursors, we have classified
these as taxonomy-non-eligible.
In addition to our core business, the production of chemical prod-
ucts, we have identified further BASF activities that can be allocated
to the following activities presented in the E.U. taxonomy:
1 The production of heat/cool using waste heat was also partially covered by other activities.
To determine taxonomy eligibility, we first identified the activities
relevant to BASF. The entire portfolio of products manufactured by
BASF as well as production plants and investment projects were
then reviewed to determine whether they belong to one of the
following activities in the manufacturing sector that had been identi-
fied as relevant:
Sales at companies located in North America rose by 33.4% to
€21,935 million in 2021. In local currency terms, they were 38.5%
above the prior-year figure. Sales growth was mainly driven by con-
siderably higher sales in the Surface Technologies and Chemicals
segments. The Materials segment, Other and the Industrial Solu-
tions segment also achieved considerably higher sales. Sales rose
slightly in the Agricultural Solutions and Nutrition & Care segments.
North America
mainly in the Surface Technologies segment. Sales performance
was also weighed down by portfolio effects, particularly in the Indus-
trial Solutions segment following the divestiture of the global pig-
ments business.
As part of its climate strategy, which was communicated in Novem-
ber 2020, Wintershall Dea aims to achieve net zero emissions² from
upstream activities by 2030 and reduce methane intensity³ to 0.1%
by 2025. Wintershall Dea is involved in the Greensand CCS project4
in the Danish North Sea, which aims to store up to 8 million metric
tons of CO2 per year.
As planned, in 2021 Wintershall Dea completed the integration that
began with the merger and was able to realize the intended syner-
gies. The IPO targeted for 2021 was postponed due to the market
environment.
Management's Report - Regional Results
Regional Results
Κ Σ 94
94
Regions
Million €
Sales
Sales
by location of company by location of customer
Europe
North America
Asia Pacific
of which Greater China
South America, Africa,
Middle East
BASF Group
Europe
2021
2020
+/- 2021 2020
+/-
31,594 24,223 30.4% 30,531 23,129 32.0%
21,935 16,440 33.4% 20,867 15,709 32.8%
20,632 14,895 38.5% 21,234 15,406 37.8%
12,018 8,433 42.5% 12,036 8,463 42.2%
4,437 3,591 23.5% 5,965 4,905 21.6%
78,598 59,149 32.9% 78,598 59,149 32.9%
Sales at companies located in Europe rose by 30.4% year on year
to €31,594 million. This was primarily due to considerably higher
sales in the Chemicals and Materials segments. The Surface Tech-
nologies segment, Other and the Industrial Solutions and Nutrition &
Care segments also posted considerable sales growth, while the
Agricultural Solutions segment saw a slight increase in sales.
Sales growth was driven by higher prices and volumes in all
segments and in Other. Prices rose especially for steam cracker
products in the Chemicals segment, for isocyanates in the Materials
segment, and as a result of higher precious metal prices in the
Surface Technologies segment. Sales volumes increased, especially
in the Materials, Surface Technologies, Industrial Solutions and
Chemicals segments. Volume development was however negatively
impacted by raw materials shortages, the semiconductor deficit
in the automotive market and the associated production and supply
chain disruptions. Sales were reduced by negative currency effects,
-
- Afforestation
Electricity generation using solar photovoltaic technology
- Production of heat/cool from bioenergy
504
11
3,920
89
BASF Report 2021
Management's Report - Sustainability Along the Value Chain
Sustainability Along the Value Chain
[We want to contribute to a better world with enhanced quality of life for everyone. That is why the three pillars of sustainability are firmly anchored in our
corporate purpose, our strategy, our targets and our operating business. They are at the core of what we do, a driver for growth and an element of our
risk management. We pursue a holistic approach that covers the entire value chain.
We contribute to a sustainable development and to the United
Nations' Sustainable Development Goals (SDGs) in many ways
(see page 36). For instance, our innovations, products and tech-
nologies help to use natural resources more efficiently, meet the
demand for food, enable climate-smart mobility, reduce emissions
and waste, and increase the capabilities of renewable energy.
Alongside these positive contributions, our business activities also
have negative impacts. For example, we create CO2 emissions, use
water and procure raw materials from suppliers, which may involve
a potential risk of human rights violations. This is why we are con-
stantly working to broaden our positive contributions to key sustain-
ability topics (see page 45) along our value chains and reduce the
negative impacts.
We are committed to doing business in a responsible, safe,
resource-efficient and respectful way. Our actions are guided by
our corporate values and our global Code of Conduct. We comply
with and in some cases exceed the applicable laws and regulations
with voluntary commitments. We stipulate binding rules for our
employees with standards and guidelines that apply throughout the
Group. In doing so, we consider, respect and promote interna-
tionally recognized principles such as the 10 principles of the U.N.
Global Compact and the Core Labor Standards of the International
Labor Organization (ILO).
We want to ensure that we act in line with the applicable laws and
uphold our responsibility to the environment and society with
our comprehensive management and monitoring systems. Our
Responsible Care Management System does this for environmental
SUPPLIERS
We source responsibly
We value people and treat them with respect
BASF
CUSTOMERS
We produce safely and efficiently
protection, health and safety (see page 117). We meet our respon-
sibilities with respect to international labor and social standards
chiefly through three elements: the Compliance Program, close
dialog with our stakeholders and the guideline on compliance with
international labor norms, which applies Group-wide.
Our business partners are also expected to comply with prevailing
laws and regulations and to align their actions with internationally
recognized principles. We have established appropriate manage-
ment and control systems, for example, for working with our
suppliers (see page 109).
We seek dialog with our stakeholders to discuss critical issues
and, if necessary, develop solutions together. Through our societal
engagement, we want to create a positive impact, particularly in
the communities surrounding our sites and help solve global
challenges.
We are involved in numerous sustainability initiatives to drive
forward sustainability in general and, specifically, as this relates
to our value chains. These include the World Business Council
for Sustainable Development (WBCSD) as well as networks with
-
We drive sustainable solutions
-
thematic focus like the Alliance to End Plastic Waste (AEPW) or the
Global Battery Alliance (GBA). In addition, we realize a wide range of
projects often together with partners for example, to improve
sustainability in the supply chain or to promote circularity in the
economy.]
4,424
Wintershall Dea is also active in gas transportation. This includes
interests in GASCADE Gastransport GmbH and OPAL Gas
transport GmbH & Co. KG held by WIGA Transport Beteiligungs-
GmbH & Co. KG, and the interest in Nord Stream AG held directly
by Wintershall Dea. Wintershall Dea is one of five financial investors
for the Nord Stream 2 pipeline project. It is not a shareholder of
Nord Stream 2 AG. The laying of Nord Stream 2 was successfully
completed, the pipelines have been filled with gas and Nord
Stream 2 AG has applied to the relevant authorities for certification
to operate the pipeline.
Operating expenses
3,287
- Production of heat/cool using waste heat
Close to market research, development and innovation
These activities made no material contribution to our overall tax-
onomy eligibility and were generally classified as taxonomy-non-
eligible.1
Buildings constructed and operated by BASF, traffic facilities and
central water supply and wastewater management systems, i.e., the
infrastructure that supports our core activities, may also fall under
the E.U. taxonomy's description of activities in the areas "Water
supply, sewerage, waste management and remediation," "Trans-
port," and "Construction and real estate activities." In assessing
taxonomy eligibility, we focused in 2021 on activities in the manufac-
turing sector and closely related activities in the energy and research
and development sectors. We generally classified potential contri-
butions from infrastructure-related activities as taxonomy-non-
eligible.
We assessed the taxonomy eligibility of our sales based on sales
revenue as defined and reported in the Consolidated Financial
Statements of the BASF Group. Taxonomy-eligible sales revenue
accounted for 11% of total sales revenue in 2021. The largest con-
tributions were from the activities “manufacture of plastics in primary
form" and "manufacture of organic basic chemicals." Taxonomy-
eligible investments (including acquisitions and excluding goodwill in
accordance with the E.U. taxonomy) accounted for 29% of the total
2 The criteria for the activity "close to market research, development and innovation" (for example, a technology readiness level of at least six) were used to determine taxonomy-eligible research and development costs.
investments reported in the Consolidated Financial Statements.
Investments in the "manufacture of organic basic chemicals" and in
the "manufacture of batteries" made the greatest contribution.
Operating expenses include non-capitalized costs that relate to
research and development, 2 and maintenance and repair. They are
not reported in the Consolidated Financial Statements in this form.
All of the investments and operating expenses of a production
facility with a taxonomy-eligible activity are counted as taxonomy-
eligible. Taxonomy-eligible operating expenses accounted for 11%
of total operating expenses. The largest contributions were from the
activities "manufacture of organic basic chemicals" and "manufac-
ture of plastics in primary form."
BASF entered into several partnerships to transform energy supply
in 2021 (see page 128). The resulting investments are not included
in the analysis of taxonomy eligibility, as investments in joint ventures
and associated companies do not have to be reported under the
taxonomy.
For more information on sales revenue, see Note 7 to the Consolidated Financial Statements from
page 221 onward
For more information on investments, see Notes 14 and 15 to the Consolidated Financial Statements
from page 236 onward
Sales, investments and operating expenses in 2021
Million €
Sales
Total
78,598
Taxonomy-
eligible
8,881
Taxonomy-
% non-eligible
%
11
69,717
89
Investments
4,627
1,340
29
71
Wintershall Dea drilled 12 exploration wells in 2021. Of these,
around 58% were successful.
4 Carbon capture and storage
3 100% volume of methane emissions of Wintershall Dea's operated assets divided by the volume of the own operated gas marketed
3
46.8%
-1,203
-641
-8.2%
171
157
53.1%
-1,032
-484
19.7%
-609
-489
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
Depreciation and amortization
Income from operations (EBIT)
Special items
55.3%
2,360
3,666
Sales
+/-
2020
2021
42
92
Other
Management's Report - Other
-434
BASF Report 2021
-643
16.4%
a Information on the composition of Other can be found in Note 5 to the Consolidated Financial Statements from page 213 onward.
Research and development expenses
Investments including acquisitionsd
-4.2%
24,131
23,121
Assets
45.3%
-276
-151
-6.9%
-58
-62
foreign currency results, hedging and other measurement effects
miscellaneous income and expenses
25.9%
143
180
other businesses
-19.2%
-214
-255
2.5%
-364
-355
of which costs for cross-divisional corporate research
costs of corporate headquarters
-769
For more information on how we value people and treat them with respect, see page 97 onward
For more information on responsible procurement, see page 109 onward
For more information on safe and efficient production, see page 117 onward
For more information on sustainable solutions, see page 141 onward
1 Corporate research and development expenses, sales, earnings and all other data for BASF's Bioscience Research division are not reported in the Agricultural Solutions segment; they continue to be reported under Other.
€904 million
Research and development
expenses in the Agricultural
Solutions segment in 2021
33
93
BASF holds 67% of the ordinary shares in Wintershall Dea AG; 33%
are held by LetterOne. This reflects the value of the exploration and
production businesses contributed by Wintershall and DEA. BASF
additionally holds preference shares for the contribution of Winters-
hall's gas transportation business. Including preference shares,
BASF has a shareholding of 72.7% in Wintershall Dea.
Macroeconomic environment
The price of a barrel of reference Brent crude oil averaged $71 in
2021 (2020: $42). Gas prices on European spot markets rose
sharply and were at an all-time high at the end of 2021. The signifi-
cant price increases in the second half of 2021 were driven by the
very strong recovery in global macroeconomic demand.
Equity-accounted income of the oil and gas business
Wintershall Dea AG contributed -€344 million to net income from
shareholdings in 2021 (2020: -€890 million). This included impair-
ments and reversals of impairments totaling -€581 million, mainly
in connection with the planned divestiture of assets in Argentina
and due to adjusted price expectations. In the previous year, lower
oil and gas price forecasts and changed reserve estimates led to
impairments of €791 million.
Germany (production, development, exploration)
Libya (production)
Mexico (production, development, exploration)
Netherlands (production, development, exploration)
- Norway (production, development, exploration)
- Russia (production, development)
· United Arab Emirates (development)
- United Kingdom (production, development, exploration)
Wintershall Dea's activities in 2021
Wintershall Dea produced 231 million BOE (barrels of oil equivalent)
in 2021 (2020: 227 million BOE), of which around 165 million BOE
of gas (2020: 162 million BOE of gas). This corresponded to a daily
production of 634 thousand BOE (2020: 623 thousand BOE).
Several development projects were successfully completed in 2021,
including the Norwegian projects Ærfugl Phase 2, Gråsel, and the
field development of Solveig. The Achim Development joint venture
operated by Gazprom in Russia, in which Wintershall Dea holds
a 25.01% interest, started production in the first quarter of 2021.
In Egypt, production at the Raven field started at the beginning of
the year.
The Norwegian Njord and Nova projects continued and are expected
to come on stream in 2022. The start of production for the Dvalin
Wintershall Dea conducts production, development¹ and explora- project in Norway was postponed to the second half of 2022. At the
tion activities in the following countries:
-
- Egypt (production, development, exploration)
- Algeria (production)
- Argentina (production, development, exploration)
Denmark (production, exploration)
1 Development activities include projects before and after the FID (final investment decision)
2 Scope 1 and 2 emissions from upstream activities operated and non-operated by Wintershall Dea at an equity basis
beginning of 2022, Wintershall Dea reached an agreement on the
sale of its 50% interest in the unconventional oil blocks it operates in
Argentina and decided to terminate its operations in Brazil.
Non-Integral Oil and Gas Business
>€7.5 billion
Peak sales potential of our
innovation pipeline with
products to be launched
between 2021 and 2031
Management's Report - Non-Integral Oil and Gas Business
EBIT before special items
At a glance
better quality, disease resistance and tolerance of environmental
factors, such as drought. We apply state-of-the-art scientific methods
such as genetic engineering and selective genome editing. These
biotechnology activities are part of BASF's Bioscience Research
division.1
Our biotechnology activities and our research and development
capabilities comprise advanced breeding techniques, analytics,
technology platforms and trait validation. To offer tailor-made, more
sustainable crop solutions, our research platform on gene identifica-
tion focuses on plant characteristics that enable higher yield and
Our research and development facilities are a global network of
research sites, seed production and breeding stations. Proximity to
our customers and the crops they grow enables us to seize future
market opportunities and increase our competitiveness.
Our research and development activities innovate for farmers'
success in strategically relevant crops in major markets around the
world. They range from seed, biological and chemistry innovations
to digital solutions that protect plants against fungal diseases, insect
pests and weeds, and improve soil management and plant health.
In 2021, we spent €904 million on research and development in the
Agricultural Solutions segment, representing around 11% of the
segment's sales. By 2031, we will launch major pipeline projects
across all business areas. Our well-stocked innovation pipeline has
a peak sales potential totaling more than €7.5 billion with products
to be launched between 2021 and 2031. BASF's solutions help
farmers achieve better yield and promote healthy eating, balancing
economic, environment and societal demands.
We create chemistry
-BASF
91
For BASF, sustainability begins in research and development. Farmers in particular face major
challenges: feeding a growing world population, changing weather conditions due to climate
change, and limited natural resources and arable land.
Research and Development for the Right
Balance in Agriculture
In focus:
Management's Report - In Focus: Research and Development for the Right Balance in Agriculture
BASF Report 2021
d Additions to property, plant and equipment and intangible assets
183
156
17.0%
378
385
-1.8%
Sales in Other rose by €1,306 million compared with 2020 to
€3,666 million. This was primarily the result of higher sales in com-
modity trading.
At -€643 million, income from operations before special items in
Other was €126 million above the prior-year figure. This was largely
attributable to lower miscellaneous income and expenses, as well as
a higher contribution from other businesses.
EBIT rose by €562 million to -€641 million. This included special
income, mainly from the partial release of provisions for the restruc-
turing of the Global Business Services unit. In the previous year,
special charges arose for their recognition.
Financial data - Othera
Million €
BASF Report 2021
b Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
96
BASF Report 2021
96
Responsibility for Human Rights
In this section:
Employees
c Contains assets of businesses recognized under Other as well as reconciliation to assets of the BASF Group
Employee engagement and empowerment are key to our success. We build networks across our business
and industry to establish good relationships with our partners and stakeholders. With our solutions, our
responsible business conduct and our societal engagement, we want to contribute to a better quality of
life for everyone.
Management's Report - We Value People and Treat Them with Respect
97
We Value People and Treat Them with Respect
In South America, BASF initiated the Connect to Transform open call
and has so far supported 48 social and environmental projects,
such as the Geração Futura Institute's Mão na Massa project near
our local site in the São Bernardo do Campo region. The project
trains women as bakers to promote their financial and personal
autonomy.
We aim to create long-term value for BASF and society with new
business models and cross-sector partnerships. Our Starting
Ventures program helps people from low-income areas to improve
their economic opportunities and their quality of life. The program
also provides access to new markets and partners, and contributes
to reaching the SDGs. A new internal application round for Starting
Ventures projects was launched in October 2021. The projects,
BASF Report 2021
Management's Report - We Value People and Treat Them with Respect
which aim to help improve local living conditions, then enter the
implementation phase. BASF contributes both technical expertise
and resources to the projects to address local challenges and
contribute to the SDGs. One project under our Starting Ventures
program is the Waste-2-Chemicals project in Lagos, Nigeria. Under
the project, plastic waste is collected by local residents, sorted
and then converted into pyrolysis oil. This pyrolysis oil is used as
feedstock in the production of high-quality chemical products. In
cooperation with nonprofit organizations, this will enable local waste
collectors and their families to earn a regular income.
BASF Group expenses for
societal engagement activities¹
~€30 million
German sites (€702,668 in total) to around €1.4 million. BASF
Stiftung distributed the donations to affected private households
and charitable institutions. In September, BASF donated $500,000
to disaster relief following Hurricane Ida and for long-term recovery
efforts in Louisiana. Local nonprofit organizations used $300,000 of
this amount for emergency relief and reconstruction. In addition,
$200,000 went to supporting BASF employees who were directly
impacted by the effects of the hurricane.
For more information on Starting Ventures, see basf.com/en/starting-ventures
For more information on societal engagement at our sites, see ludwigshafen.basf.de
For more information on our societal engagement around the world, see basf.com/en/engagement
In the area of international development cooperation, we
support the independent charitable BASF Stiftung with donations
for its projects in cooperation with various organizations. The 2021
year-end donation campaign in favor of BASF Stiftung supported
the United Nations Children's Fund, UNICEF, which celebrated its
75th anniversary. Together with the Indian organization ChildLine
and other partners, UNICEF is working to provide psychosocial care
for children in India who have had difficulty accessing important
services as a result of the pandemic. BASF doubled the donations
made by employees of participating German Group companies to a
total of around €600,000.
BASF also made donations to support those affected by natural
disasters in 2021. In July, BASF donated €1 million to flood relief in
Germany, which hit the states of North Rhine-Westphalia and
Rhineland-Palatinate particularly hard. The donation went to the
German Red Cross, which was active in these crisis regions. In
August, BASF doubled the amount donated by employees at its
1 As of 2020, we report a total figure for our societal engagement activities. The figure includes all consolidated companies with employees, including joint operations.
<>= 107
BASF Report 2021
Management's Report - In Focus: Aid Measures During the Coronavirus Pandemic
In focus:
Continuation of Global Aid Measures
During the Coronavirus Pandemic
BASF launched the Helping Hands aid campaign in 2020 to help fight the coronavirus and its effects.
In 2021, we continued to use our expertise in research, production, procurement and logistics to
support people affected by the pandemic around the world.
<>= 108
3M
With Wissensfabrik Unternehmen für Deutschland e.V., we
promote a network of around 130 companies and corporate
foundations that sponsor educational institutions and start-ups to
support children, young people, students and young entrepreneurs.
The focus is on school projects that provide hands-on experience
with STEM (science, technology, engineering and mathematics).
Due to the coronavirus pandemic, the project's initiatives (such
as IT2School - Gemeinsam IT entdecken and KiTec - Kinder
entdecken Technik) were also offered in digital formats, allowing
these educational programs to continue even as school operations
were restricted. In the new City4Future project launched in early
2022, schoolchildren explore topics related to energy, climate
change and sustainability through play and can develop ideas for
the urban living space of the future.
-
As a responsible neighbor and a partner in the Rhine-Neckar
metropolitan region in Germany, our societal engagement strategy
strengthens the participation and integration of disadvantaged
groups, and promotes research and discovery.
Dr. Sung Min Pyo, a pharmacist in the Nutrition & Health division and part of BASF's
interdisciplinary team at the coronavirus vaccination center, is responsible for
ensuring that the vaccines are used as required, among other things.
For more information on our production standards, see page 119 onward
For more information on systems for monitoring labor and social standards, see page 103 onward
For more information on corporate governance and compliance, see page 161 onward
See basf.com/humanrights for more information on the human rights position and a comprehensive
report on the implementation of due diligence in human rights in accordance with the requirements of
the National Action Plan developed by the German government, and in accordance with the
U.N. Guiding Principles on Business and Human Rights
For more information on the Human Rights Advisory Council, see basf.com/human-rights-council
BASF Report 2021
Management's Report - We Value People and Treat Them with Respect
<>= 106
[Stakeholder Engagement]
GRI 102, 103, 413, 415
At a glance
■ Dialog with various stakeholder groups with a focus on the
integration of the U.N. Sustainable Development Goals (SDGs)
The Stakeholder Advisory Council's focus areas: climate
protection, the energy transformation and food security
For more information on standards in our supply chain, see page 109 onward
For more information on raw materials, see page 112 onward
We leverage the expertise of global initiatives and networks and
actively engage in dialog with various stakeholder groups, contrib-
uting our expertise
In 2021, we again discussed relevant sustainability topics with the
Stakeholder Advisory Council. Focus topics included climate
protection, the energy transformation and food security. Topics dis-
cussed by the Human Rights Advisory Council, which is chaired by
our Chief Compliance Officer, included particular challenges in the
battery materials value chain.
We promote digital dialog on sustainability topics. In November
2021, we held the second hackathon as part of the Climathon
initiative in North and South America, where employees developed
digital solutions for sustainability topics.
For more information on stakeholder dialog, see basf.com/en/stakeholder-dialog
For more information on our guidelines for responsible lobbying, see
basf.com/guidelines_political_communication
For more information on the Industry Associations Review, see basf.com/corporategovernance
[Societal Engagement]
GRI 203, 413
At a glance
■ BASF a responsible neighbor at sites worldwide
New business models improve local living conditions
Through our societal engagement, we want to address the needs of
the communities surrounding our production sites worldwide, help
achieve the SDGs, and have a positive long-term impact on the
environment and society. This is why societal engagement is a
cornerstone of our corporate social responsibility. It encompasses
the focus areas of health, skills and resources.
We work with partners worldwide to promote public health, for
example, to combat malaria. Through our New Nets project in coop-
eration with The Global Fund, Unitaid and other financial partners,
approximately 25 million of our Interceptor® G2 mosquito nets had
been distributed in African countries as of December 2021. These
were specially developed to counter insecticide resistance in the
fight against malaria and contain two different insecticides. The
project goal is to distribute a total of around 35 million nets by the
end of 2022.
At the U.N. Food Systems Summit 2021, BASF signed the Zero
Hunger Private Sector Pledge and announced that it would invest
$11 million in initiatives in Africa, Asia, Central and South America,
such as for seed production, malaria prevention and food fortification
For instance, we have been a member of the U.N. Global Compact
(UNGC) since its establishment in 2000. As a recognized LEAD
company, we contribute to the implementation of the Agenda 2030
and the associated goals. For example, we support the UNGC
action platforms, including the Sustainable Finance platform in the
form of the CFO Taskforce for the SDGs, and the Decent Work in
Global Supply Chains action platform, in which company represen-
tatives and experts discuss how respecting human and labor rights
is crucial to achieving the SDGs. With the six-month SDG Ambition
program, the UNGC and the German Global Compact Network
(DGCN) support participating companies in aligning their sustain-
ability targets more closely with the SDGs and deriving specific
measures from them. BASF is also active in 13 local Global Compact
networks.
as well as smallholder projects. The projects aim to help achieve
SDG 2 by 2030 (Zero hunger). Forty-three companies signed the
pledge, which is implemented by the Global Alliance for Improved
Nutrition (GAIN) and other international organizations.
A global working group in our Pharma Solutions business unit
has supported pharmaceutical companies in their research on vac-
cines and therapies to combat COVID-19 since March 2020. The
task force reviews patent applications, clinical trials and scientific
publications to identify potential collaborations with companies.
BASF is currently supporting the global development of more than
80 therapies with its ingredients and expertise.
BASF products were used to cool coronavirus vaccines. For
instance, ElastopirⓇ insulation panels were produced in cooperation
with a partner in Malaysia and used to equip refrigerated ware-
houses in Asia. In cooperation with various partners in Germany,
NeoporⓇ and StyroporⓇ®, BASF's expandable polystyrenes (EPS),
were used to produce boxes to transport COVID-19 vaccines due to
their good insulating and shock-absorbing properties.
Our more than 70,000 suppliers make an important contribution to
our value creation. We work in long-term partnership with compa-
nies from different industries around the world. They supply us with
raw materials, precursors, investment goods and consumables,
perform a range of services and are innovation partners.
1 We understand relevant spend as procurement volumes with relevant suppliers. We define relevant suppliers as Tier 1 suppliers showing an elevated sustainability risk potential as identified by our risk matrices, our purchasers' assessments or other sources.
2 BASF considers all direct suppliers of the BASF Group in the business year concerned as Tier 1 suppliers. These are suppliers that provide us with raw materials, investment goods, consumables and services. Suppliers can be natural persons, companies or legal persons under public law.
BASF Report 2021
Management's Report - Supplier Management
<>= 110
2025 target
90%
Share of relevant spend covered
by sustainability evaluations
80%
Percentage of suppliers
with improved sustainability
performance upon re-evaluation
We acquired raw materials, goods and services for our own produc-
tion worth approximately €43.5 billion in 2021. Of this, around 90%
was procured locally.1 There were no substantial changes to our
supplier structure.
Worldwide procurement
What we expect from our suppliers
― or to demonstrate and ensure their commitment to the principles
specified in the Code of Conduct, for example in their own code of
conduct.
Our global Supplier Code of Conduct is founded on internationally
recognized guidelines, such as the principles of the United Nations'
Global Compact, the U.N. Guiding Principles on Business and
Human Rights, the International Labor Organization (ILO) conven-
tions and the topic areas of the Responsible Care initiative. Topics
covered by the Code of Conduct include compliance with human
rights, the exclusion of child and forced labor, safeguarding labor
and social standards, antidiscrimination and anticorruption policies,
and protecting the environment. The Code of Conduct is available in
the most relevant languages for our suppliers and integrated into
electronic ordering systems and purchasing conditions across the
Group. We revised our Supplier Code of Conduct in 2021 and
added our expectations around the procurement of conflict minerals
(tin, tantalum, tungsten, their ores and gold). Around 5,900 new
suppliers committed to the Code of Conduct in 2021.
BASF conducts audits and assessments to ensure that suppliers
comply with the applicable laws, rules and standards. BASF reserves
the right to discontinue business relationships for non-adherence to
international principles. The same applies to failure to correct viola-
tions, or for displaying patterns of non-compliance with these stan-
dards. Our Code of Conduct expressly points out that potential
violations of laws, rules or standards can be reported - including
anonymously to our compliance hotlines. Each case is docu-
mented and investigated, and appropriate measures are taken as
necessary.
-
Selection and evaluation of our suppliers
New suppliers are selected and existing suppliers are evaluated not
only on the basis of economic criteria, but also ESG standards. As
such, selection, evaluation and auditing is an important part of our
sustainable supply chain management. Processes and responsi-
bilities are defined in a global guideline. Due to the large number of
suppliers, they are evaluated based on risk. We take into account
the materiality of the supply relationship and country and industry-
specific risks. We also use observations from our employees in
procurement and information from internal and external databases,
such as TfS assessments.
We have suppliers with a high potential sustainability risk evaluated
by third parties, either through sustainability evaluations or on-site
audits. The list of suppliers to be assessed is updated every year.
Sustainability evaluations and on-site audits are mainly conducted
according to the TfS framework. A total of 86 raw material supplier
sites were audited on sustainability standards on our behalf in 2021.
Good to know
TOGETHER FOR
SUSTAINABILITY
Together for Sustainability (TFS)
Together with our suppliers, we want to improve sustainability in the
supply chain. Consequently, we expect our suppliers to comply with
the applicable laws in full and to adhere to internationally recognized
environmental, social and corporate governance (ESG) standards.
We also expect our suppliers to make an effort to enforce these
standards at their suppliers. In addition, we ask our suppliers to
acknowledge, support and abide by our Supplier Code of Conduct
We actively promote sustainability in the supply chain and have set
ourselves ambitious targets for this: By 2025, we aim to have con-
ducted sustainability evaluations for 90% of the BASF Group's
relevant spend² and will develop action plans where improvement is
necessary. In addition, we aim to have 80% of suppliers improve
their sustainability performance upon re-evaluation by 2025. In
2021, 85% of the relevant spend had been evaluated. Of the sup-
pliers re-evaluated in 2021, 74% had improved. Both global targets
are embedded in the target agreements of persons responsible for
procurement.
Global targets
this program, we want to systematically gather data on upstream
Scope 3 emissions to identify medium-term measures for opti-
mization (see page 130). We make our suppliers' contribution to
sustainable development transparent for us and for our stakeholders.
For more information on suppliers, see basf.com/suppliers
In 2021, BASF also provided in-kind support around the world to
overcome the challenges posed by the coronavirus pandemic. For
example, BASF donated molecular sieves to the Indian government
to facilitate the production of medical oxygen. Medical equipment,
including ventilators, was also donated, and acute care units were
set up in Mumbai together with partners. We donated medical
equipment to Malaysian hospitals for the treatment of COVID-19
patients. In South America, BASF launched a food drive and
donated food packages to communities around BASF sites. The
food was distributed there to those in need with the help of
employees who volunteered their time. ]
For more information on the Helping Hands aid campaign, see basf.com/en/helping-hands
BASF Report 2021
Management's Report - We Source Responsibly
"We Source Responsibly]
As a global business, we have a responsibility to manage our supply chain carefully. We connect with our
suppliers to source responsibly. Our partnerships with suppliers are based on mutual value creation, as
well as a reliable supply of raw materials, technical goods and services at competitive prices.
<>= 109
In this section:
Supplier Management
Raw Materials
[Supplier Management]
GRI
102, 103, 204, 308, 403, 407, 408, 409, 414
SUPPLIERS
BASF
CUSTOMERS
BASF sources a wide range of raw materials, precursors,
technical goods and services. Our suppliers are an important
part of our value chain. Our objective is to secure competitive
advantages through our professional procurement struc-
tures, to establish stable and reliable supply chains, and at
the same time, meet high ethical and environmental stan-
dards. Together with our suppliers, we want to improve
sustainability in the supply chain and minimize risks.
At a glance
€43.5 billion
global procurement spend
85%
of relevant spend¹ covered by
sustainability evaluations
■ Sustainability-oriented supply chain management
Global targets to increase sustainability in the supply chain
Supplier Code of Conduct creates transparency
Risk-based approach with clearly defined follow-up processes
Strategy
Our partnerships with suppliers are based on mutual value creation,
as well as a reliable supply of raw materials, precursors, technical
goods and services at competitive prices.2 In doing so, we want to
generate long-term benefits for both sides. Our sustainability-
oriented supply chain management is an integral part of our
risk management. We have defined our standards and processes in
a global guideline. We are continually refining and optimizing this to
respond to changes in the regulatory environment and new require-
ments resulting, for example, from new laws and initiatives at national
and international level. Procurement management systems such as
guidelines and targets are set centrally and are binding for all
employees with procurement responsibility worldwide.
Our risk-based approach aims to identify and evaluate sustainability
matters in our value chains as best possible to improve sustainability
together with our suppliers. We regularly review and document
progress based on the risk level. Employees with procurement
responsibility receive ongoing training in sustainability-oriented
supplier management and responsible procurement. In 2021,
250 BASF employees received such training.
Our expectations of our suppliers are laid down in the global
Supplier Code of Conduct. This creates clarity around the standards
to be met. We count on reliable supplier relationships and
support our suppliers in implementing our requirements. In 2021,
we also launched the Supplier CO2 Management Program. With
[In April 2021, BASF opened the first accredited corporate
coronavirus vaccination center in Germany at its Ludwigshafen
site. More than 22,000 primary vaccinations and more than
21,000 secondary vaccinations were administered there from
April to August and more than 10,000 booster vaccinations were
administered there in December to BASF employees, contractors
and site partners. The coronavirus vaccination center was estab-
lished and operated by an interdisciplinary team from various BASF
units, coordinated by Corporate Health Management.
We report on our global targets, monitoring systems and measures
to integrate human rights topics into our business activities in publi-
cations such as this report and online.
In 2021, BASF established a Battery Minerals Task Force to meet
the specific challenges associated with the growing demand for
battery materials. It bundles the expertise of the Catalysts division
and various functional units. The initiative was formed to address
the risks and opportunities of our global raw material supply
chains for battery materials from a sustainability viewpoint and
steer the resulting activities. The aim is to ensure the responsible
procurement of battery materials. The task force is also respon-
sible for the ongoing development of our internal guidelines to
ensure their continuous improvement and adaptation to new
regulatory requirements, as well as to take account of develop-
ments in our business areas.
Battery Minerals Task Force
Personnel expenses
The BASF Group's expenses for wages and salaries, social security
contributions and assistance, as well as for pensions in 2021 totaled
€11,097 million. In 2020, these expenses amounted to €10,576 mil-
lion and included personnel expenses from the disposal group for
the construction chemicals business in the amount of €291 million
until the date of the divestiture. The rise in personnel expenses in
2021 was mainly due to higher bonus provisions. Particularly the
lower average number of employees had an offsetting impact.
BASF Group personnel expenses
Million €
2021
2020
+/-
Wages and salaries
8,847
8,416
+5.1%
For more information on the compensation of the Board of Executive Directors and the Supervisory
Board, see the Compensation Report at basf.com/compensationreport
Social security contributions and assistance
expenses
1,424
+6.7%
Pension expenses
732
736
-0.5%
11,097
10,576
Total personnel expenses
Balancing personal and professional life
+4.9%
1,519
Regional initiatives specifically address the needs of our employees
at a local level. For example, flexible co-working spaces in the
Rhine-Neckar region in Germany were tested in pilot projects and a
framework for potential future uses was developed.
For more information on share-price based compensation programs and BASF's share programs, see
the Notes to the Consolidated Financial Statements from page 280 onward
and takes into account the development of the total shareholder
return. It incentivizes the achievement of strategic growth, profit-
ability and sustainability targets. To take part in this program, partici-
pants must hold BASF shares, the amount of which is based on
their individual fixed compensation. In 2021, around 91% of the
people eligible to participate in the LTI around the world did so,
holding between 30% and 70% of their fixed annual compensation
in BASF shares.
1 "Local" means that a supplier is located in the same region (according to BASF's definition) as the procuring company.
For more information on Together for Sustainability, see tfs-initiative.com
At the end of 2021, TfS had 34 members with a combined
procurement spend of around €267 billion. A total of 284 audits
and 5,817 online assessments were performed. As a TfS mem-
ber, BASF itself is assessed and in 2021 was ranked among the
top 1% companies worldwide in the sustainable procurement
category.
BASF Report 2021
Management's Report - We Value People and Treat Them with Respect
ΚΣΕ 101
Good to know
Future of Work @ BASF
The coronavirus pandemic has fundamentally changed how we
work. That is why our Future of Work @ BASF initiative addresses
the question of how our teams can find the right balance between
on-site and remote working to continue to perform at their best
in the future. Connectedness and close dialog remain our number
one priorities - both are key to team spirit, creativity and innova-
tion. The wide range of jobs, tasks and local conditions make
different working models necessary. To reflect this, our local
teams are developing tailored solutions within global guidelines
that meet individual requirements. Workshop concepts and
training support the process.
-
One example is the Flex Work @ LU project at the Ludwigshafen
site in Germany. The focus is on the shift toward greater flexibility
as well as practical solutions on how to maintain and strengthen
connectedness in an increasingly hybrid working environment -
from new office concepts to IT solutions and tips for teamwork.
The ideas are tested together with pilot units. Successful con-
cepts are made available to all units at the site in the form of a
toolbox.
The share price-based compensation program (BASF Option Pro-
gram, BOP), which had existed since 1999, was offered for the last
time in 2020. Around 87% of the people eligible to participate in the
program around the world did so, investing up to 30% of their
actual variable compensation (for the 2019 business year) in BASF
shares.]
development of our employees' digital skills will remain crucial going
forward. The portfolio includes offerings for self-directed learning, as
well as individual consulting and support for teams and leaders
around the digital transformation. Employees and leaders can also
hold joint workshops in an avatar-based 3D working and learning
environment. In addition, the many academies in the divisions and
service units also offer training on specific professional content.
Against the backdrop of the digital transformation, we support our
leaders in questions about shaping the working world of the
future. For example, the #liveitleadit program provides insights into
various areas of the organization and the opportunity to discuss
topics such as hybrid working or living a failure culture.]
Compensation and benefits
[We want to attract and retain engaged and qualified employees,
and motivate them to achieve top performance with a total offer
package that includes market-oriented compensation, individual
development opportunities and a good working environment so that
they contribute to the company's long-term success. Our employ-
ees' compensation is based on global compensation principles
according to position, market and performance. As a rule, compen-
sation comprises fixed and variable components as well as benefits
that often exceed legal requirements. In many countries, these
benefits include company pension benefits, supplementary health
insurance and share programs. We regularly review our compensa-
tion systems at the global and local levels.
We want our employees to contribute to the company's long-term
success. This is why the compensation granted to the vast majority
of our employees includes variable compensation components, with
which they participate in the success of the BASF Group as a whole
and are recognized for their individual performance. The same prin-
ciples basically apply for all employees worldwide. The amount of
the variable component is determined by economic success as well
as the employee's individual performance. We use the BASF Group's
return on capital employed (ROCE) to measure economic success
for the purposes of variable compensation. This links variable
compensation to our ROCE target.1 Individual performance is
assessed as part of a globally consistent performance management
process. In numerous Group companies, our "plus" share program
ensures employees' long-term participation in the company's
success through incentive shares. In 2021, for example, around
23,600 employees worldwide (2020: around 27,600) participated in
the "plus" share program.
Since 2020, BASF has offered senior executives the opportunity to
participate in a long-term incentive (LTI) program² in the form of
a performance share plan. The LTI program has a term of four years
1 In calculating ROCE, adjustments are made for negative and positive special items resulting from acquisitions and divestitures (for example, integration costs in connection with acquisitions and gains or losses from the divestiture of businesses) when these exceed a corridor of +/-1% of the average cost of capital basis. An adjustment of the
ROCE (in the first 12 months after closing) therefore only occurs in cases of exceptionally high special items resulting from acquisitions and divestitures.
2 The LTI program referred to here is aimed at management levels 2 to 4 as well as individual employees who have attained senior executive status by virtue of special expertise. For more information on the compensation of the Board of Executive Directors and the Supervisory Board, see the Compensation Report at basf.com/compensationreport
BASF Report 2021
Management's Report - We Value People and Treat Them with Respect
<>= 102
We enable our employees to take responsibility for their own
professional development within the company with digital and novel
offerings. To support multidisciplinary teams in the development
of products, services or business models, workshops on design
thinking empower participants to find creative and innovative
solutions to complex problems. By providing interactive spaces, the
concept also lends itself to hybrid working methods. This fosters an
agile learning and working culture, which will ultimately also help us
to master the digital transformation.
For more information on supplier management, see page 109 onward
For more information on mineral raw materials, see page 115 onward
Our Work-Life Management employee center in Ludwigshafen,
Germany, (LuMit) offers a number of services under one roof: child-
care, fitness and health, and social counseling and coaching offered
by BASF Stiftung. Services were adapted so they could continue
during the coronavirus pandemic based on the current coronavirus
laws and local restrictions. We also provide employee assistance
programs at other sites in Germany and around the world to help
employees overcome difficult life situations and maintain and restore
their employability. Social counseling and coaching also enabled
employees and their families to receive extensive support during
the coronavirus pandemic, for example by expanding telephone
services. ]
Our flexible tools proved helpful during the coronavirus pandemic.
They help our employees to master the increased challenges around
work and personal life during the pandemic and will continue to
provide flexibility. To integrate the positive experiences from the
surge in remote working into our working culture, we have devel-
oped global guiding principles and a framework for the future of
work (see box on page 101).
Human rights due diligence as a Group-wide task
Systematic and extensive anchoring of human rights topics in
company processes and culture
We see human rights due diligence as an important, all-encom-
passing task that we can only perform by working together as
a team throughout the entire organization. That is why we have
embedded our responsibility for human rights into our Code of
Conduct and set this out in our human rights position. We uphold
our standards worldwide, including where they exceed local legal
requirements. All employees and leaders are responsible for ensur-
ing that we act in accordance with our Code of Conduct and our
human rights position.
We rely on a systematic, integrated, risk-based approach and
established monitoring and management systems. BASF is
also active in initiatives such as Together for Sustainability (TFS) and
Responsible CareⓇ, which promote sustainability in the supply chain.
Our measures and criteria for monitoring and observing human
rights are integrated into supplier assessment processes and our
global monitoring systems for environmental protection, safety and
security, health protection and product stewardship. They are also
part of the evaluation of investment, acquisition and divestiture
projects, assessments along the entire product life cycle, and sys-
tems to monitor labor and social standards. In addition, aspects of
human rights topics are part of the global qualification requirements
for our security personnel and are incorporated into agreements
with contractors.
Our compliance unit is responsible for steering human rights top-
ics and coordinates the work of the cross-unit Human Rights Expert
Working Group, which we established in 2020. In it, employees from
specialist units - procurement, legal, HR, environmental protection,
health and safety, sustainability strategy, site security, supply chain,
communications and government relations - and the operating divi-
sions work closely together. The expert working group provides
support and advice in challenging and critical situations, on the
development of internal processes, and on the creation of informa-
tion and training offerings, among other things. This is how we
ensure that we approach our human rights responsibility holistically
and that we can continually improve our performance.
In 2020, we conducted a comprehensive review of our human
rights management system and the related processes. This
showed that we have achieved important milestones regarding
our due diligence obligations. However, the analysis, which was
discussed by the Board of Executive Directors, also identified poten-
tial for improvement, for example with regard to awareness of human
rights topics within our organization and relating to the integration of
these topics in our guidelines and processes.
We therefore launched a global, internal campaign in April 2021 to
raise awareness on the topic of human rights. Externally, we were
involved in the U.N.'s International Year for the Elimination of Child
Labour through two initiatives and together with other partners,
and committed to specific joint measures in the fight against child
labor. Together with other DAX-listed companies, we also partici-
pated in the study "Moving with responsibility toward success:
practical implementation of human rights due diligence in
10 companies" commissioned by the German Federal Ministry for
Economic Cooperation and Development (BMZ) and the German
Agency for International Cooperation (GIZ).
We strengthened awareness of our due diligence obligations in
procurement by including additional information on human rights
topics in training. In addition, the human rights risk assessment is
more systematically incorporated into strategy development in our
procurement segments (see page 109).
We also further improved our grievance mechanisms and intro-
duced a standardized global external and internal hotline and
reporting system in 2021. For example, we expanded the number of
languages available. A new website provides information about the
hotline and the grievance procedure, and now also offers the option
of contacting the company anonymously online in addition to local
telephone numbers. Employees can also contact specialists directly
via an internal online platform or the corresponding app. The pro-
cessing status of a submitted report can be tracked anonymously.
Moreover, submitted cases will be able to be recorded and evalu-
ated more systematically in the future (see page 171 onward). In
2021, 206 human rights-related complaints were received by phone
as well as by post and e-mail. All complaints were reviewed and
forwarded to the relevant departments for in-depth investigation. If
justified, appropriate measures were taken.
We see assuming our human rights responsibilities as a continuous
process. That is why we continuously review our policies and pro-
cesses and update them whenever necessary. We are currently
examining further development measures in various working groups
against the backdrop of new regulations such as the German Act on
Corporate Due Diligence Obligations in Supply Chains (LKSG) and
the forthcoming E.U. legislation on due diligence in the supply chain.
■
We established a Human Rights Advisory Council in 2020 to
systematically integrate external expertise. Its members include
independent international human rights experts. The trust-based
dialog on human rights topics helps us to better understand different
Management's Report - We Value People and Treat Them with Respect
< >
105
perspectives and to deal more openly with critical situations. At the
same time, the renowned external experts show us where we have
potential for improvement and help us to build on our strengths in
how we handle human rights. The meetings, which are chaired by
our Chief Compliance Officer, are also attended by employees from
the sustainability strategy and compliance units. Other representa-
tives, for example, from the operating divisions or procurement, are
invited depending on the focus topics. In this way, the Human
Rights Advisory Council provides an external perspective on estab-
lishing and improving our processes, and contributes this in discus-
sions with the leadership team.
We maintained our dialog with the Human Rights Advisory Council
throughout 2021, both with the body as a whole and in small groups,
and with individual experts. The topics discussed included respon-
sible supply chain management, for example in challenging supplier
relationships or in high-risk regions. Our contribution to the respon-
sible use of our solutions and products was also discussed.
In 2021, we stepped up our commitment to action areas with
increased risk potential, such as battery materials (see box on the
right). Where conflict minerals (tin, tantalum, tungsten, their ores
and gold) are used, we pay attention to the implementation of the
relevant E.U. regulation in our supply and value chains. We also
set store on certified sustainable supply chains and fair working
conditions in the procurement of raw materials such as palm oil,
palm kernel oil and castor oil. We maintain dialog with national and
international NGOs and are involved in numerous networks and
partnerships (see page 113 onward). These include the Cobalt for
Development initiative in the Democratic Republic of Congo, the
Responsible Lithium Partnership in Chile, the Global Battery Alliance
and the Roundtable on Sustainable Palm Oil (RSPO).
BASF is a founding member of Together for Sustainability (TFS).
The initiative was established in 2011 to improve sustainability in
the supply chain. The focus is on standardizing and simplifying
supplier audits and evaluations globally. This increases trans-
parency and creates synergies: Suppliers only have to complete
an assessment process once. The results are then made available
to all TfS members and are mutually recognized - saving time and
money for both parties. Suppliers are evaluated by independent
experts either in on-site audits or online assessments. The latter
are conducted by EcoVadis, a ratings agency specialized in sus-
tainability analyses.
As an international company, we are a part of society in the coun-
tries in which we operate and have business relationships with
partners around the world. We are confronted by the fact that there
are states that do not honor their obligation to protect human rights.
People are particularly at risk in such countries and companies'
ability to act is often limited. We are committed to our values -
including and especially there - and contribute to the respect of
human rights.
We have trustful working relationships with our partners (customers,
suppliers, joint venture partners, contractors), expect them to com-
ply with internationally recognized human rights standards and to
demand the same of their partners further along the value chain. We
support our partners in their efforts to meet their respective
responsibilities.
We can only meet our goal of eradicating human rights abuses
along our value chains if we work together. We have defined our
expectations in a binding Supplier Code of Conduct. We are in
close contact with our business partners, especially in higher-risk
areas and regions, and monitor the implementation of required
standards and measures for improvement. We use recognized
assessments and audits to verify this.
BASF Report 2021
[Our identity as an employer includes our belief in supporting our
employees in balancing their personal and professional lives. We
want to strengthen their identification with the company and our
position in the global competition for qualified personnel. To achieve
this, we have a wide range of offerings aimed at employees
in different phases of life that accommodate the growing demand
for flexibility in when and where they work. These include flexible
working hours, part-time employment, remote working, and time off Dialog with employee representatives
options that provide the necessary flexibility to care for children or
family members. We are constantly working to expand these options
and increasingly support the effective use of digital solutions here.
■
BASF acknowledges its responsibility to respect interna-
tionally recognized human rights. For many years now, we
have engaged in constructive dialog on human rights with
other companies, nongovernmental organizations, interna-
tional organizations and multi-stakeholder initiatives to bet-
ter understand different perspectives and address conflict-
ing goals. BASF is a founding member of the U.N. Global
Compact and a member of the Global Business Initiative
on Human Rights (GBI), a group of globally operating com-
panies from various sectors. The initiative aims to ensure
implementation of the U.N. Guiding Principles on Business
and Human Rights.
[Trust-based cooperation with employee representatives is an
important component of our corporate culture. Our open and con-
tinual dialog lays the foundation for balancing the interests of the
company and its employees, even in challenging situations. In the
case of organizational changes or if restructuring leads to staff
downsizing, for example, or in the case of codetermination-relevant
topics, we involve employee representatives at an early stage to
develop socially responsible implementation measures. In 2021, this
happened in connection with the planned organizational realign-
ment of research, for example. Our actions are aligned with the
respective legal regulations and the agreements reached, as well
as operational conditions. The organizational protective measures
taken during the coronavirus pandemic to date are backed by our
employee representatives.
BASF Report 2021
Management's Report - We Value People and Treat Them with Respect
By focusing our discussions on the local and regional situations, we
aim to find tailored solutions to the different challenges and legal
conditions for each site. The BASF Europa Betriebsrat (European
Works Council) addresses cross-border matters in Europe. In South
America, we foster dialog with the Diálogo Social. In China, we work
together with trade unions that have been organized locally within
the framework of legal possibilities.]
For more information, see basf.com/employeerepresentation
International labor and social standards
[We act responsibly toward our employees. Part of this is our volun-
tary commitment to respecting international labor and social stan-
dards, which we have embedded in our global Code of Conduct.
This encompasses internationally recognized labor norms as stipu-
lated in the United Nations' Universal Declaration of Human Rights,
the OECD Guidelines for Multinational Enterprises, and the Tripartite
Declaration of Principles Concerning Multinational Enterprises and
Social Policy of the International Labour Organization (ILO). BASF is
committed to complying with these standards worldwide. We
mainly approach our adherence to international labor and social
standards using three elements: the Compliance Program (including
compliance hotlines), close dialog with our stakeholders (such as
with employee representatives or international organizations) and
the BASF guideline on compliance with international labor norms,
which applies Group-wide. This guideline makes concrete the topics
in our global Code of Conduct under "Human rights, labor and
social standards" as these relate to our employees.
It forms the basis for our global, risk-based management process:
We regularly monitor changes to the national law of all the countries
in which BASF operates and evaluate our adherence to international
labor and social standards. If the national law contains no or lower
requirements, action plans are drawn up to successively close these
gaps in a reasonable time frame. If conflicts with national law or
practices arise, we strive to act in accordance with our values
and internationally recognized principles without violating the law of
the country concerned. As part of the management process, we
regularly follow up on and document the results of the comparison
between national law and our guideline, as well as measures to
implement the guideline. This is part of our central due diligence
system. An additional component of our corporate due diligence is
our training concept, which was enhanced and refined in 2021. It
includes target group-specific training and e-learning modules as
well as a global platform for internal dialog.
We monitor our voluntary commitment to international labor and
social standards as part of our management process. As before,
individual elements of the guideline are also reviewed as part of
internal control processes such as Responsible Care audits at
BASF Group companies. In addition to these quality assurance
measures, compliance with international labor and social standards
is an integral part of the standard questionnaire in the compli-
ance management audits conducted by BASF's Corporate Audit
department. ]
For more information on global standards, see page 31
At a glance
For more information on our responsibility for human rights, see page 104
For more information on standards in our supply chain, see page 109 onward
For more information on labor and social standards, see basf.com/labor_social_standards
<>= 103
BASF Report 2021
Management's Report - We Value People and Treat Them with Respect
<>= 104
[Responsibility for Human Rights]
GRI
102, 103, 406, 410, 411, 412, 413
SUPPLIERS
BASF
CUSTOMERS
For more information on compliance, see page 171 onward
Good to know
A new program on Scope 3 emissions was launched in 2021. The
aim is to develop a methodology for the chemical industry to
calculate upstream greenhouse gas emissions in particular. Tfs
members can use this data to implement and manage emissions
reduction programs.
The mass balance approach
Leaders are important role models for employees, which is why
environmental protection, health, safety and security are discussed
with newly appointed senior executives. Senior executives with a
particular responsibility for such topics, for example, in production,
also receive specific further training to be able to meet their respon-
sibilities. Due to the restrictions caused by the coronavirus pan-
demic, the seminars for senior executives were held virtually in 2021.
Other events and initiatives in 2021 also focused on the high rele-
vance of safety topics and dialog among our leaders. These included
regular town halls for senior executives, the Lead with Safety initia-
tive in North America and the Visible Leadership in EHS @ CP
initiative in the Petrochemicals division.
Numerous digital solutions and applications are used in BASF's
production plants to further increase safety, security, planning capa-
bility and availability. For example, we had introduced augmented
reality solutions at around 340 plants worldwide as of the end of
2021. We plan to implement these at more than 80 other plants by
the end of 2022. At many sites, our employees already use mobile
end devices and special apps for day-to-day tasks such as safety
inspections, which continuously improves the efficiency and quality
of our processes. Other areas of application for digital solutions
include efficiently simulating maintenance and production processes
in digital plant models and predictive maintenance. At the Lud-
wigshafen site in Germany, for example, over 40 plants already use
predictive maintenance models to monitor plant components such
as compressors, pumps and heat exchangers.
Occupational safety
Our aim is to reduce the worldwide lost-time injury rate to no more
than 0.1 per 200,00 working hours¹ by 2025. To prevent work-
related accidents, we encourage and promote risk-conscious
behavior and safe working practices, learning from incidents and
regular dialog. We are constantly refining and enhancing our require-
ments and training.
2025 target
Reduce the worldwide
lost-time injury rate per
200,000 working hours
≤0.1
In addition to the legally required briefings, BASF requires new
employees and contractors to complete compulsory health and
safety training, as well as regular training on the safe handling of
chemicals and the correct use of personal protective equipment for
employees at our production sites. Due to the coronavirus pan-
demic, there was a greater focus on the safety aspects of remote
working in 2021.
In 2021, 0.3 work-related accidents per 200,000 working hours¹
occurred at BASF sites worldwide (2020: 0.3). The share of chemi-
cal-related accidents declined slightly to 4% (2020: 6%).
1 Hours worked by BASF employees, temporary employees and contractors
BASF Report 2021
Management's Report - Health and Safety, Emergency Response
<>= 120
Unfortunately, there was one fatal work-related accident in 2021
(2020: 1). At the Geismar site in Louisiana, an employee of a con-
tractor died while performing maintenance work. The accident is still
being investigated by the local authorities. BASF is assisting the
inquiry into the circumstances and cause of the accident. We use
the findings to take appropriate measures to prevent this from hap-
pening again. Such measures include regular informational events
and awareness-raising campaigns.
We actively share insights to further increase occupational safety
and continually improve our processes and methods. For example,
we evaluate trends in data, analyze accidents and potential inci-
dents, and share knowledge and best practices within our global
network of experts and as part of safety initiatives. We also seek
dialog with government institutions and are actively involved in
external occupational safety initiatives and networks around the
world led, for example, by the European Chemical Industry Council
(CEFIC) or national associations such as the German Chemical
Industry Association or the American Chemistry Council.
For more information on occupational safety, see basf.com/occupational_safety
Process safety
Process safety is a core part of safe, effective and thus sustainable
production. We meet high safety standards in the planning, construc-
tion and operation of our plants around the world. These meet and,
in some cases, go beyond local legal requirements.
Our global guidelines provide the framework for the safe construc-
tion and operation of our plants as well as the protection of people
and the environment. Our experts have developed a safety concept
for every plant that considers the key aspects of safety, health and
environmental protection - from plant design to the end of the pro-
duction phase - and that sets out specific safety measures. Regular
implementation checks ensure that all aspects of process safety
comply with the safety concept and are always up to date.
2025 target
Reduction of worldwide
process safety incidents
per 200,000 working hours
≤0.1
We promote risk awareness for every individual with measures
such as systematic hazard assessments, specific and ongoing
qualification measures and a wide range of safety initiatives. We
analyze accidents and incidents as well as their causes and conse-
quences in detail at a global level to learn from these. Hazard
assessments and the risk minimization measures derived from them
are an important prevention tool. We also promote regular dialog
across different sites to strengthen risk awareness among our
employees and contractors, to learn from examples of good prac-
tice and in this way, continually develop our safety culture.
In order to maintain the highest level of safety at our plants across their
entire life cycles, we verify that our protection concepts, safety reviews
and resulting safety measures have been carried out in all our plants
at timely intervals based on risk potential. We regularly update our
plants' safety and security concepts, taking into particular account
new technological opportunities and regulatory developments.
requirements. The Environmental Protection, Health & Safety unit in
the Corporate Center conducts regular audits to monitor this. As
part of our continuous improvement process, we regularly monitor
progress toward our goals. We have defined our reporting indicators
in accordance with the reporting standard developed by the Interna-
tional Council of Chemical Associations.
Strategy
a Investments comprise end-of-pipe measures as well as integrated environmental protection measures.
b Values shown refer to December 31 of the respective year.
For more information, see Notes 9 and 23 on pages 224 and 260
<>= 118
BASF Report 2021
Management's Report - Health and Safety, Emergency Response
<>= 119
[Health and Safety, Emergency Response ]
GRI 102, 103, 403, 410, 413, 418
SUPPLIERS
BASF
CUSTOMERS
For occupational and process safety as well as corporate
security and health and environmental protection, we rely
on comprehensive preventive measures and expect the
cooperation of all employees and contractors. Our safety and
security concepts serve to protect our employees, contrac-
tors and neighbors, to prevent property and environmental
damage, and to protect information and company assets.
At a glance
0.3
Lost-time injuries
per 200,000 working hours
0.3
Process safety incidents
per 200,000 working hours
Global health and safety standards
Strengthening risk awareness and mindful behavior
Intensive dialog on safety topics
■ Regular review of safety concepts, emergency systems and crisis
management structures
■ Comprehensive protection measures against third-party
interference
The safety of our employees, contractors and neighbors, and pro-
tecting the environment is our top priority. This is why we have set
ourselves ambitious goals for occupational and process safety as
well as health protection. We stipulate mandatory global standards
for occupational and process safety, emergency response and
health protection. Our sites and subsidiaries are responsible for
implementing and complying with internal guidelines and legal
We use the number of process safety incidents (PSI) per
200,000 working hours¹ as a reporting indicator. We have set our-
selves the goal of reducing process safety incidents to a rate of no
more than 0.1 per 200,000 working hours by 2025. In 2021, we
recorded 0.3 process safety incidents per 200,000 working hours
worldwide (2020: 0.3). We investigate every incident in detail, even
under the constraints of the coronavirus pandemic, analyze causes
and use the findings to derive suitable measures. We share the find-
ings in our global network in the interest of continuous improvement.
Around the world, we promote the reduction of process safety inci-
dents and improve risk awareness with a culture of dealing openly
with mistakes and initiatives to foster dialog around safety risks. To
reduce process safety incidents, we focus in particular on technical
measures and on a leadership culture that places even greater
emphasis on process safety, such as in the PM Global Safety Relay
Race initiative in the Performance Materials division. Avoiding and
detecting all leaks was again a key priority in 2021 with the Zero
Loss of Containment Mindset initiative in North America and the
Zero Leakage initiative in South America.
In addition, we are continually refining and expanding our training
methods and offerings to increase risk awareness. Due to the
1 In 2012, an extended strike at a platinum mine in Marikana, South Africa, culminated in a violent confrontation between mine workers and armed South African police. Employees of the former mine operator, Lonmin, were among the fatalities. Ownership of the Marikana mine was transferred to Sibanye-Stillwater in 2019.
For more information on the supplier relationship with the Sibanye-Stillwater mine, see basf.com/en/marikana
We review our suppliers' progress according to a defined timeframe
based on the sustainability risk identified, or after five years at the
latest. In the case of ongoing, serious violations of the standards
defined in our Supplier Code of Conduct or international principles,
we reserve the right to impose commercial sanctions. These can go
as far as termination of the business relationship. In 2021, this hap-
pened in three cases.
As part of TfS, training was also developed for suppliers undergoing
a sustainability evaluation for the first time and for suppliers that
already have a sustainability rating but have potential for improve-
ment in ESG performance. In 2021, more than 1,800 participants
attended online TfS training on this topic in different languages. TfS
is also developing a global learning platform for buyers and sup-
pliers, which will provide various (online) training opportunities on
specific sustainability topics. It is scheduled for launch in 2022.
We use TFS evaluations to pursue a risk-based approach with clearly
defined, BASF-specific follow-up processes. If we identify deviations
from standards, we ask suppliers to develop and implement
corrective measures within a reasonable time frame. We support
them in their efforts, for example by training employees from 31 sup-
pliers in China on ESG topics in 2021 as part of a partnership with
the East China University of Science and Technology. In South
America, around 190 suppliers took part in a diversity talk on gender
equality in the supply chain, and around 340 suppliers attended a
webinar on ethical principles, legislation and human rights in the
supply chain.
Supplier development
We discuss sustainability matters with our supplier Nornickel and
other aspects relevant to our cooperation on a monthly basis. These
include current events and the findings from the mining-specific TfS
audits. In 2021, TfS audits were carried out at Nornickel's site in
Polar, Russia. Nornickel seeks to join various industry initiatives that
provide third-party verification of mining and responsible procure-
ment standards, such as the International Council on Mining and
Metals (ICMM) or the Initiative for Responsible Mining Assurance
(IRMA). In addition, topics relevant to stakeholders were discussed in
meetings with interest groups. The dialogs continue in various forms.
groups in 2021. It also facilitated direct dialog between Sibanye-
Stillwater and nongovernmental organizations active in this area.
We maintained close dialog with our South African platinum supplier
Sibanye-Stillwater¹ in 2021 on the results of the audit from 2020, the
implementation of the resulting action plan, and other relevant
topics. This includes working with all stakeholders, including local
authorities, to take a unified approach to community development.
Almost all the needs for adjustment identified by the audit had been
implemented by the end of 2021. BASF and Sibanye-Stillwater
continue to discuss the progress made four times a year and also
use this as a platform for dialog on other sustainability topics.
Sibanye-Stillwater is a member and supporter of the International
Platinum Group Metals Association (IPA) sustainability initiative that
was co-founded by BASF. The initiative's measures include con-
ducting comprehensive sustainability audits and sharing factors for
success. BASF continued its regular dialog with local stakeholder
We carefully analyze the results of our assessments and document
them in a central database. The on-site supplier audits conducted
over the past few years have identified some need for adjustment
with respect to environmental, social and corporate governance
standards, for example in waste management or deviations in occu-
pational health and safety measures and standards under labor law.
Follow-up audits in 2021 identified improvements, for example, a
reduction in health and safety risks following the implementation of
appropriate measures and compliance with labor law requirements.
In 2021, none of our audits identified any instances of child labor or
dangerous work and overtime performed by persons under 18.
Audit results
We received sustainability evaluations for 701 suppliers. We also
take into account other certification systems and external audits,
such as from the Roundtable on Sustainable Palm Oil, when
assessing our suppliers. Depending on business requirements, we
additionally conduct our own Responsible Care audits at selected
suppliers (see page 117).
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Management's Report - Supplier Management
BASF Report 2021
We play an active role in improving process safety around the world
in internal and external networks, through our involvement in organi-
zations such as the International Council of Chemical Associations
(ICCA), the European Process Safety Centre (EPSC) or the Center
for Chemical Process Safety (CCPS), and by fostering dialog with
government institutions.
For more information on process safety, see basf.com/process_safety
Health protection
Our global corporate health management serves to promote and
maintain the health and productivity of our employees. Our occupa-
tional health standards are specified in a binding global requirement,
the implementation of which is the responsibility of our sites and
subsidiaries. They are supported in this task by a global network of
experts. The Environmental Protection, Health & Safety unit in the
Corporate Center conducts regular audits to monitor compliance
with the standards.
We raise employee awareness of health topics with offerings tailored
to specific target groups. The BASF health checks form the founda-
tion of our global health promotion program and are offered to
employees at regular intervals.
We measure our performance in health protection using the
Health Performance Index (HPI). This has five components: recog-
nized occupational diseases, medical emergency drills, first aid,
preventive medicine and health promotion. Each component con-
tributes a maximum of 0.2 to the total score, meaning that the
highest possible score is 1.0. We aim to reach a value of more than
0.9 every year. With an HPI of 0.96, we once again reached this
target in 2021 (2020: 0.92). As in 2020, the figure is slightly lower
1 Hours worked by BASF employees, temporary employees and contractors
Good to know
BASF Report 2021
Management's Report - Raw Materials
[Raw Materials]
GRI 102, 103, 203, 301, 304, 308, 413, 414
restrictions associated with the coronavirus pandemic, in-person
seminars were again held as virtual meetings or taught using web-
based applications in 2021.
ΚΣΕΙ 113
Management's Report - Raw Materials
BASF Report 2021
As part of our efforts to improve sustainability, we are continuously
investigating whether fossil and petrochemical resources can be
replaced with non-fossil alternatives. We carefully consider eco-
nomic, environmental and social aspects, as well as other important
criteria like supply security and product safety. Our aim is to increase
the share of renewable and recycled feedstocks in our value chains.
This brings with it challenges and compromises in the supply of both
energy and resources for carbon-based organic chemistry. For
example, the use of renewable energy can involve additional costs,
which can have an impact on competitiveness. Another area of
conflict arises, for example, when the increased consumption of
renewable raw materials leads to greater land use. We raise aware-
ness of these trade-offs through close dialog with our stakeholders.
We are also involved in sustainability initiatives to develop and imple-
ment solutions in cooperation with partners.
BASF's most important raw materials (based on volume) include gas
and crude oil-based petrochemical products such as naphtha and
benzene. We mainly use liquid gas and natural gas to generate
energy and steam, and to produce key basic chemicals such as
ammonia or acetylene. Naphtha is mainly fed into our steam cracker,
where it is split into products such as ethylene and propylene - both
important feedstocks for numerous value chains. We use aromatics
such as benzene or toluene to manufacture engineering plastics,
among other products. Thanks to a high degree of forward and
backward integration, we can produce many feedstocks for our
value chains efficiently while conserving resources within the BASF
Verbund. This increases supply security and reduces dependence
on external supply sources to just a few key raw materials. We
source these from different suppliers to minimize supply risks.
Fossil and petrochemical resources
For more information on our supplier management, see page 109 onward
For more information on the circular economy, see page 44
recyclability of plastics, which saves fossil resources and avoids CO2
emissions.
Resource efficiency and stewardship are also becoming increasingly
important topics for our customers. That is why we are constantly
working to reduce the resources consumed in the manufacturing of
our products, for example through more efficient processes, inno-
vative technologies and the use of renewable and recycled raw
materials. This enables us to offer our customers solutions that
make a greater contribution to sustainability, like a smaller carbon
footprint and better biodegradability. Our products also improve our
customers' resource efficiency and sustainability in many areas. For
example, BASF additives increase the service life and mechanical
BASF's Verbund concept is key to making the use of raw materi-
als in our own processes as efficient as possible: Intelligently linking
and steering our plants and processes creates efficient value chains.
By-products from one facility are used as feedstocks elsewhere.
This saves raw materials and energy (see page 128). At the same
time, the Verbund offers many opportunities to use renewable and
recycled raw materials. We want to better leverage this potential
going forward. For example, we are driving forward chemical recy-
cling of mixed plastic waste and used tires in our ChemCycling™
project (see page 115).
693
Our expectations of our suppliers are laid down in our Supplier Code
of Conduct (see page 109). We take a closer look at suppliers in
critical supply chains, for example mineral raw materials, renewable
resources such as palm kernel oil, a number of pigments and highly
toxic substances. Upstream stages of the value chain are assessed
for serious sustainability risks and, if necessary, suitable remedial
measures are identified. In addition, we develop and test approaches
to make the supply of raw materials more sustainable in joint
initiatives with suppliers and other partners. Examples include our
cooperative ventures and investments to recycle batteries (see
page 30) and our joint activities on certified sustainable supply
chains for renewable raw materials such as palm, palm kernel and
castor oil.
from responsible
Strategy
BASF's Verbund concept enables the efficient use of resources
Recycled and renewable raw materials are gaining in importance
Numerous projects to improve supply chain sustainability
1.3 million
metric tons
renewable raw materials
purchased
different raw materials
purchased
35,000
At a glance
In 2021, BASF purchased a total of around 35,000 different
raw materials from more than 6,500 suppliers. Using resources
as efficiently and responsibly as possible and the concept of
the circular economy are firmly embedded in our strategy
and our actions, for example, by our Verbund structure and
the increased use of renewable and recycled feedstocks. We
expect our suppliers to source and produce raw materials
responsibly.
CUSTOMERS
BASF
SUPPLIERS
Our strategy covers the entire value chain
procurement and the efficient use and recycling of raw materials in
our processes to developing resource-saving solutions for our cus-
tomers. We want to decouple growth from resource consump-
tion with process and product innovations to accelerate the shift
toward closed-loop value creation systems. Alongside economic,
environmental and social criteria, we also consider aspects such as
product safety and supply security when selecting suppliers and raw
materials.
926
<>=112
231
A focal point of our activities here is chemically recycling plastic
waste. This technology complements mechanical recycling and can
help to reduce the amount of plastic waste that is disposed of in
landfill or thermally recovered. Chemical recycling breaks down
plastics into their building blocks or converts them into basic chemi-
cals. Different methods are used to achieve this.
In our ChemCycling TM project, our technology partners use the
pyrolysis process to extract pyrolysis oil from mixed plastic waste or
used tires, which were not previously recycled. We can feed this
pyrolysis oil into our Verbund as an alternative to fossil raw materials
and use it to make new products. These have exactly the same
properties as products manufactured from fossil feedstocks. We
use a certified mass balance approach to allocate the percentage
of recycled content to the end product (see page 113). In 2021,
we were able to further expand our portfolio of these Ccycled™
products. It now comprises around 50 products that our customers
use, for example to manufacture transport cases for medicine,
high-performance plastics for the automotive industry, packaging
materials and functional textiles. We also signed a memorandum of
understanding in 2021 with our technology partner Quantafuel and
Remondis, a global leader in waste and water management. Its
subject matter is the assessment of a joint investment in a pyrolysis
plant for plastic waste.
We have also made further progress with the chemical recycling of
used mattresses made of flexible polyurethane. It is based on a wet
chemical process developed by BASF. After initial successful trials,
our teams continued developing the process in 2021. Precursors
recovered from old mattresses can now be used to produce new
mattress-sized blocks of flexible polyurethane foam. The new pro-
cess is currently being optimized and tested on a larger scale.
We have many years of experience and a high degree of specializa-
tion in recycling precious metals such as platinum, palladium
and rhodium. They are used in automotive catalysts as well as in
process and chemical catalysts. We primarily use the precious
metals recovered in this way as feedstocks in catalyst production.
With the expansion of our refinery plant in Seneca, South Carolina,
and the acquisition of assets from Zodiac Enterprises in Caldwell,
Texas, we are further expanding our leading position in platinum
group metal recycling.
The growing demand for electromobility is also increasing the need
for lithium-ion battery recycling. As a leading producer of battery
materials with future local production capacities in the three main
markets - Asia, Europe and North America - BASF has in-depth
expertise in battery chemistry and process technology. We are
utilizing these competencies to address battery recycling as an
additional growth market in cooperation with partners along the
value chain (see page 30). In this way, we want to ensure that valu-
able metals remain in the production cycle for as long as possible.
This conserves resources while enabling production of cathode
active materials in Europe with a significantly lower carbon footprint
compared with the industrial standard. At the Schwarzheide site in
Germany, where a cathode active materials plant is already under
construction, we will also build a prototype plant for battery recycling
by 2023. The prototype plant will allow for the development of new
operating procedures and optimization of technology to deliver
superior recovery rates of lithium, nickel, cobalt and manganese
from end-of-life lithium-ion batteries. The plant will also recycle
metals from scrap of cell manufacturers and battery material pro-
ducers that do not meet product specifications.
For more information on the circular economy, see page 44
Mineral raw materials
We procure a number of mineral raw materials, which we use to
produce automotive and process catalysts or battery materials,
among other products. We are continually improving our products
and processes to minimize the use of primary mineral raw materials.
At the same time, we are driving forward the recycling of mineral raw
materials, for example, by recovering platinum metals from auto-
motive and process catalysts and using these as secondary
resources (see "Recycled feedstocks").
Sourcing mineral raw materials responsibly is important to BASF. We
implemented measures to meet the requirements of the E.U. Conflict
Minerals Regulation by the January 1, 2021 deadline. This defines
supply chain due diligence for tin, tantalum, tungsten, their ores and
gold (3TG) imported into the E.U. from conflict-affected and high-
risk areas (CAHRAs). To supplement our Supplier Code of Conduct
(see page 109), we introduced a Group-wide Supply Chain Policy
for Conflict Minerals in 2021. It contains expectations for our
suppliers from CAHRAS and outlines voluntary commitments.
In addition to responsible procurement of the 3TG minerals, BASF is
committed to responsible and sustainable global supply chains for
other mineral raw materials as well. These include cobalt, a key
component in the production of battery materials for electric vehi-
cles, among other applications. Our cobalt supply chain is organized
according to special sustainability criteria. Our goal is to not purchase
cobalt from artisanal mines and to exclude this in supply chains as
long as responsible artisanal production cannot be verified.
Together with BMW, Samsung SDI, Samsung Electronics, Volks-
wagen and the German Agency for International Cooperation (GIZ),
we have been involved in the cross-industry Cobalt for Develop-
ment initiative since 2018. It aims to improve working and living
BASF Report 2021
Management's Report - Raw Materials
conditions for artisanal miners in the Democratic Republic of Congo.
To achieve this, the initiative offers programs such as training on
important environmental, social and governance aspects of respon-
sible mining practices. Since October 2020, 14 mining cooperatives
in Kolwezi have participated in training on topics such as occupa-
tional safety and environmental management. Cobalt for Develop-
ment also works closely with local NGOs and the Good Shepherd
International Foundation to create additional income opportunities
for families and improve access to education. The joint activities are
beginning to show results according to an evaluation of the initiative:
Participants of the program since its launch have seen an increase
in average income and savings. Since construction of the new pub-
lic primary and secondary schools in Kisote, the majority of children
have enrolled in school. Overall, several thousand members of the
participating communities are already benefiting. In 2021, the initia-
tive also made an action pledge to eliminate child labor as part of a
global campaign by the International Labor Organization (ILO). Three
mining cooperatives around Kolwezi are receiving assistance to
implement occupational safety measures and a zero-tolerance
policy against child labor.
We signed a long-term supply agreement with Nornickel for nickel
and cobalt from a metal refinery in Finland. The agreement ensures
locally sourced and secure supply of raw materials for battery mate-
rial production in Europe. In cooperation with Eramet, we are also
assessing the development of a state-of-the-art hydrometallurgical
refining complex in Indonesia, which is expected to secure access
to more sustainably sourced nickel and cobalt as of the mid-2020s.
We are also involved in various international initiatives to strengthen
sustainability and innovation in the value chain for batteries. These
include the Global Battery Alliance (GBA), which we co-founded
in 2017. It promotes dialog between business, government and
civil society and develops standards and tools to create a socially
responsible, ecological and economically sustainable, and inno-
vative value chain for batteries. For instance, BASF is working with
the GBA on the GBA Battery Passport. In the future, this "digital twin"
will contain information on the sustainability of a battery to increase
transparency in the value chain. The GBA, as well, made an action
pledge with the ILO campaign against child labor, also focusing on
the Democratic Republic of Congo. BASF is also an active member
of the Responsible Minerals Initiative.
Furthermore, together with Daimler, Fairphone, and Volkswagen, we
launched the Responsible Lithium Partnership in 2021. It advo-
cates for the responsible use of natural resources in Chile's Salar de
Atacama, home to the world's largest lithium reserves and a signifi-
cant portion of global production. As a first step, the German
Agency for International Cooperation (GIZ) was commissioned to
organize a local multi-stakeholder platform on the opportunities and
risks of lithium mining and other economic activities such as copper
mining and tourism. The goal of the platform is to reach a common
understanding on the status quo and to jointly develop a vision for
the future of the Salar de Atacama watershed. In addition, potential
risks are to be mitigated and opportunities promoted through the
development and implementation of joint action plans.
Another mineral raw material that BASF processes is mica. We use
both raw mica and effect pigments derived from mica, mainly in the
production of coatings. BASF is conscious of its social responsibility
with regard to mica sourcing and applies high standards which,
among other things, exclude child labor. Suppliers are asked to
source mica in accordance with our Supplier Code of Conduct. As
a member of the Responsible Mica Initiative (RMI), we advocate for
the eradication of child labor and unacceptable working conditions,
specifically in India's mica supply chain. The initiative focuses on
labor standards, strengthening local communities and legal frame-
works. According to an RMI study, activities in the relevant regions
of India have already led to improved income and living conditions.
These include improved access to clean drinking water through the
installation of pumps and filtration systems and improved access to
health care through doctors' visits in villages and enrollment in public
health insurance plans.
For more information on the Cobalt for Development project, see basf.com/cobalt-initiative and
cobalt4development.com/
For more information on the Global Battery Alliance, see globalbattery.org
Recycling is becoming increasingly important due to limited resources,
growing sustainability requirements in the markets and regulatory
developments. We want to increase the use of recycled feedstocks
with our Circular Economy Program: From 2025 onward, we aim to
process around 250,000 metric tons of recycled and waste-based
raw materials every year worldwide, replacing fossil raw materials
(see page 44).
Recycled feedstocks
For more information on our voluntary commitment to palm oil products and the Palm Progress
Report, see basf.com/en/palm-dialog
For more information on biodiversity, see page 138 onward
Many BASF value chains start in syngas plants or steam crackers,
where fossil resources, mostly natural gas and naphtha, are con-
verted into hydrogen and carbon monoxide or important basic
chemicals such as ethylene and propylene. These are used to
create thousands of products in the BASF Verbund. Alongside fossil
resources, bio-based and recycled raw materials such as biometh-
ane, bio-naphtha or pyrolysis oil can be used as feedstocks in our
plants. Due to the simultaneous processing of fossil, bio-based and
recycled feedstocks, the raw materials cannot be directly assigned
to resulting derivatives. The share of bio-based or recycled raw
materials can however be allocated to derivatives using the mass
balance approach, which is audited by a third party, and certifica-
tion (such as the REDcert2 standard for the chemical industry). It is
similar in principle to green power, which has been established for
many years: Energy from renewable sources is fed into the grid and
then charged to individual customers.
Provisions for environmental protection
measures and remediation
Mass balance products are identical in quality to conventionally
produced products but have a better sustainability balance due to
the use of bio-based or recycled raw materials. This method has
already been applied to over 700 BASF products (2020: ~200 prod-
ucts), for example, engineering plastics such as polyamide, super-
absorbents, dispersions and intermediates. We share our expertise
in numerous stakeholder platforms, such as the European Commis-
sion's Circular Plastics Alliance, to harmonize and standardize
different allocation methods and certification schemes for mass
balance products.
For more information, see basf.com/massbalance
Renewable resources
In addition to fossil resources, we employ renewable raw materials,
mainly based on vegetable oils, fats, grains, sugar and wood. In
2021, we purchased around 1.3 million metric tons of renewable
raw materials. For instance, we use renewable resources to produce
ingredients for the detergent and cleaner industry, or to source natu-
ral active ingredients for the cosmetics industry. We also use renew-
able feedstocks such as biomethane and bio-naphtha in our
Verbund as an alternative to fossil resources. The mass balance
approach allows us to allocate the amount of renewable resources
used to a wide variety of end products (see box at left). Examples
include the Acronal® Eco and JoncrylⓇ MB biomass balance binders
for solvent-free paints and coatings, the HySorbⓇ Biomass Balanced
superabsorbent, various biomass balance versions from the Trilon®,
SokalanⓇ and Protectol® product lines for the detergent and cleaner
industry, and the biomass balance versions of our StyroporⓇ,
NeoporⓇ and StyrodurⓇ insulation materials.
As for fossil raw materials, we also consider how renewable
resources impact sustainability topics along the value chain.
Alongside positive effects like saving greenhouse gas emissions,
these can also have negative effects on areas such as biodiversity,
land use or working conditions, depending on the raw material. This
is why we carefully weigh the advantages and disadvantages of
using renewable resources, for example using Eco-Efficiency Ana-
lyses. We also take recognized certification standards such as the
Roundtable on Sustainable Palm Oil into account in our decisions.
We want to minimize raw material-specific risks and increase sus-
tainability in our supply chains with measures, projects and targeted
involvement in initiatives. Our activities here concentrate on value
chains that are relevant quantitatively or that do not yet have certifi-
cation standards. We are also working on product innovations and
on enhancing our production processes to improve the profitability
and competitiveness of renewable resources. For example, we are
developing innovative processes such as biocatalysis and fermen-
tation for the production of vitamins and enzymes; and we are
BASF Report 2021
Management's Report - Raw Materials
< > 114
For more information on the Responsible Mica Initiative, see responsible-mica-initiative.com
driving forward white biotechnology for the production of chemical
components from renewable resources.
We purchased 242,946 metric tons of palm oil and palm kernel oil in
2021 (2020: 227,213 metric tons). We again met our own voluntary
commitment to source only RSPO-certified palm oil and palm kernel
oil. This avoided more than 330,000 metric tons of CO2 emissions
compared with the procurement of conventional palm oil and palm
kernel oil. By 2025, we aim to extend our voluntary commitment
to sustainable procurement to the main intermediate products¹
based on palm oil and palm kernel oil. We were able to trace 96%
of our global palm footprint to oil mill level as of the end of 2021
(2020: 95%). In addition, we continued to drive forward the RSPO
supply chain certification of our sites for cosmetic ingredients. At the
end of 2021, 26 production sites worldwide were certified by the
RSPO (2020: 25). In line with raised awareness for sustainability,
we continue to see growing demand for certified palm-based prod-
ucts from our customers. We are expanding our range of certified
We source most of our palm-based raw materials from Malaysia and
Indonesia. Smallholders account for around one-third of the total
volumes produced there. We have worked together with The Estée
Lauder Companies, the RSPO and Solidaridad in Indonesia since
2019 to expand our supplier base for RSPO-certified palm oil prod-
ucts while strengthening smallholder structures and sustainable
production methods at local level. The project in the province
of Lampung supports around 1,000 independent smallholders in
improving their livelihoods and the sustainable production of palm oil
and palm kernel oil. The focus is on efficient and sustainable farming
practices and health and safety standards. The goal is for at least
one-third of program participants to become certified according to
the RSPO Smallholder Standard in three years.
Also important for BASF, albeit at a much smaller scale, is castor
oil. We use castor oil to manufacture products such as plastics and
ingredients for paints and coatings, as well as products for the
cosmetics and pharmaceutical industries. With the aim of estab-
lishing a certified sustainable supply chain for castor oil, we launched
the Sustainable Castor Initiative - Pragati in 2016 together with the
companies Arkema and Jayant Agro and the NGO Solidaridad. The
initiative is intended to improve the economic situation of castor
bean farmers in India and, at the same time, raise awareness of
sustainable farming methods. Around 80% of the world's castor
beans are produced in India, mainly by smallholders. As part of
Pragati, smallholder farmers receive training on topics such as culti-
vation methods, efficient water use, health and the safe use of crop
protection products based on a specially developed sustain-
ability code, SUCCESS. Since the project was initiated, more than
5,800 smallholders and over 13,300 hectares of land have been
certified for sustainable castor cultivation. Yields from this land were
35% higher than average amounts for the region published by the
local government for the 2020/2021 harvest cycle. In addition to
SUCCESS, the Sustainable Castor Association (SCA), which was
launched in 2019 by the founders of the Pragati initiative, has also
developed a sustainability code for the wider supply chain. This will
allow castor beans obtained from the program to be further pro-
cessed into certified castor oil and derivatives and to be introduced
into the downstream supply chain. We were able to source the first
certified sustainable castor oil from the program in 2021 following
the successful audit of our supply chain by an independent certifica-
tion body. In the coming years, we want to increase the share of this
oil in our total demand.
Our bioactives for cosmetics are based on plants. Through sus-
tainable sourcing practices, we aim to preserve ecosystems and
enable sustainable management for those who depend on them. To
this end, we have set up various programs that unite economic,
ecological and social aspects in holistic approaches. One example
is our rambutan program in Vietnam's Dong Nai province. We have
been collaborating since 2014 with two local small plantations which
supply us with sustainably produced, organically certified raw mate-
rials. Upcycling the rambutan tree's shells, leaves and seeds, previ-
ously disposed of as waste, creates new income streams for farmers
and expands our portfolio of natural active ingredients. The partner-
ship focuses in particular on responsible farming practices and
social inclusion, including gender equality, safe working conditions
and fair incomes.
Another example of sustainable supply chains and responsible inno-
vation is our Castaline TM product, derived from the leaves of chest-
nut trees. These are harvested in late summer by forest owners in
France. The chestnut forests are organically certified and are mainly
used for the cultivation of chestnuts. By upcycling the leaves as a
by-product of chestnut extraction, we generate additional income
opportunities for forest owners and provide our customers with a
product of completely natural origin. We are pursuing other similar
1 Fractions and primary oleochemical derivatives as well as vegetable oil esters
2 The figure for 2020 was adjusted from 96% to 95% due to a data correction.
BASF Report 2021
Management's Report - Raw Materials
<>= 115
initiatives, for example, in Morocco for our argan-based products,
and in India for our active ingredients based on the moringa tree.
Palm oil, palm kernel oil and their derivatives are some of our
most important renewable raw materials. We mainly use these raw
materials to produce ingredients for the cosmetics, detergent,
cleaner and food industries. We aim to ensure that palm-based raw
materials come from certified sustainable sources. To this end, we
have endorsed the Roundtable on Sustainable Palm Oil (RSPO)
since 2004 and are engaged in other national and international ini-
tiatives, such as the German Forum for Sustainable Palm Oil, the
Polish coalition Polska Koalicja ds. Zrównowazonego Oleju
Palmowego and the High Carbon Stock Approach organization.
Based on our Group-wide Supplier Code of Conduct (see page 109),
we have outlined our expectations of suppliers in the palm-based
value chain in an additional sourcing policy (BASF Palm Sourcing
Policy). This addresses aspects such as forest and peat conserva-
tion, respect of human and labor rights, smallholder inclusion, and
certification and traceability standards. The annual BASF Palm
Progress Report reports on our measures and progress toward
more sustainability and transparency in the value chain.
<>=116
sustainable products in accordance with the RSPO's mass balance
supply chain model. This helps our customers meet their obligations
to customers, consumers and stakeholders.
Management's Report - Our Management Systems
Our Quality Management System comprises our EHSQ policy as
well as further standards, guidelines and processes for quality man-
agement along the value chain. Our Quality Management System is
risk-based, process-oriented and focused on customer satisfaction.
Its mandatory elements are set out in a Corporate Requirement.
These include core processes such as nonconformance manage-
ment, change management and the performance of internal audits.
Local implementation of the requirements is the responsibility of our
business units and sites.
Responsible Care audits
Regular audits help ensure that our safety, security, health and envi-
ronmental protection standards are met. We conduct regular audits
every three to six years at all BASF sites and at companies in which
BASF is a majority shareholder. We take a risk-based approach
and use an audit database to ensure that all sites and plants world-
wide are regularly audited. We have defined our regulations for
Responsible Care audits in a global Corporate Requirement.
Newly acquired sites and companies are audited after the integra-
tion phase is complete, generally within one to two years depending
on complexity and size.
BASF Report 2021
Management's Report - Our Management Systems
During our audits, we create a safety and environmental profile Costs and provisions
that shows if we are properly addressing the existing hazard poten-
tial. If this is not the case, we agree on measures and monitor their
implementation, for example, with follow-up audits.
In the BASF Group in 2021, 143 environmental and safety audits
were conducted at 71 sites (2020: 112 audits at 60 sites). The sites
were audited based on their individual risk profile. Auditing of the
sites acquired from Solvay could not start in late 2021 as planned
due to the coronavirus pandemic. These audits will be performed
in 2022.
We continuously invest in reducing the impact of our actions on
the environment. We also establish appropriate provisions for envi-
ronmental protection measures and the remediation of active and
former sites.]
Costs and provisions for environmental protection in the BASF Group
Million €
2021
Quality Management System
2020
For more information on occupational health and safety, see page 119 onward
For more information on Responsible Care®, see basf.com/en/responsible-care
External certification
Our Responsible Care audit system complies with the ISO 19011
standard and is certified according to ISO 9001. Worldwide, 130
BASF production sites are certified in accordance with ISO 14001
and EMAS (Eco-Management and Audit Scheme) (2020: 128). In
addition, 54 sites worldwide are certified in accordance with
OHSAS 18001 or ISO 45001 (2020: 51). Several BASF sites also
have an ISO 17020 accredited inspection body for user inspection
or an ISO 17025 accredited analytical laboratory for environmental
emissions analyses.
Based on our customers' requirements, quality management at our
production sites is generally certified according to external interna-
tional standards such as ISO 9001, GMP, FAMI QS or IATF 16949.
Operating costs for environmental
protection
1,133
1,125
Investments in new and improved
BASF Report 2021
239
environmental protection plants and
facilitiesa
In 2021, 13 sites were audited on occupational medicine and
health protection (2020: 1). Online audits were conducted for 10
of these sites. These remote audits focused on documented
processes and management systems.
-
We pursue a decentralized certification approach for our busi-
ness units and subsidiaries. This takes into account local needs,
internal and legal requirements, and our customers' requirements.
EHSQ Management Systems
Our EHS management approach covers the different stages of our
value chain - from the transportation of raw materials to production
at our plants, activities at our sites and warehouses, and distribution
of our products down to our customers' application of our products.
The Environmental Protection, Health & Safety unit in the Corporate
Center defines Group-wide management and control systems and
monitors compliance with internal requirements and legal regula-
tions, while the sites and legal entities implement these requirements
locally. Our global network ensures that information and insights
are shared across the BASF Group on an ongoing basis. Our poli-
cies and requirements are continuously updated. We also maintain
dialog with government institutions, associations and international
organizations for this reason. We set ourselves ambitious goals for
environmental protection, health and safety (see page 36) and regu-
larly review our performance and progress with audits. We assess
the potential risks and weaknesses of all our activities from
research and production to logistics - and the potential effects of
these on the safety and security of our employees, the environment
or our surroundings. We use databases to document accidents,
near misses and safety-related incidents at our sites as well as along
our transportation routes to learn from these; appropriate measures
are derived according to specific cause analyses.
< >
We Produce Safely and Efficiently
Protecting people and the environment is our top priority. Our core business - the development, production,
processing and transportation of chemicals - demands a responsible approach. We address environmental,
health and safety risks with a comprehensive Responsible Care Management System. We expect our employees
and partners to know the risks of working with our products, substances and plants and to handle these
responsibly.
In this section:
Health and Safety, Emergency Response
Product Safety
Transportation Safety
Energy and Climate Protection
Emissions to Air, Waste and Remediation
Water
Biodiversity
Our Management Systems
GRI
102, 103, 303, 305, 306, 307, 403, 410, 418
SUPPLIERS
BASF
117
CUSTOMERS
Global EHS guidelines and standards
Quality management with a focus on customer satisfaction
Risk-based site audits
to monitor performance and
progress
invested in environmental
protection plants and facilities
☐
143 audits
At a glance
[BASF is actively involved in the International Council of
Chemical Associations' global Responsible Care® initiative.
We reaffirmed our commitment to the guiding principles of
the initiative and the Responsible Care® Global Charter in
2021. Our Responsible Care Management System comprises
the global directives, standards and procedures for environ-
mental protection, health and safety (EHS). At the same time,
our Quality Management System ensures the high quality
of our products, processes and services, and enables our
employees to best meet our customers' needs.
€239 million
Responsible Care Management System
CO2
Use of biomass
CO₂
2021
2020
2018
(baseline)
17.234
16.860
0.677
0.418
0.609
0.031f
0.034
0.023f
0.027
Total
0.034
17.025
1 The goal includes greenhouse gases according to the Greenhouse Gas Protocol, which are converted into CO2 equivalents (CO₂e).
2 In March 2021, we replaced our previous target of CO2-neutral growth until 2030 (baseline 2018: 21.9 million metric tons of CO₂e) with a new, more ambitious climate protection target to reduce absolute CO2 emissions by 25% compared with 2018 (new target: 16.4 million metric tons of CO₂e).
BASF operations
Total after offsetting
BASF Report 2021
0.091
Management's Report - Energy and Climate Protection
<>=127
We offer our customers solutions that help prevent greenhouse gas
emissions and improve energy and resource efficiency. More than
60% of our annual research and development spending¹ goes
toward developing these products, optimizing our processes, and
toward research projects to make our processes more energy and
resource-efficient and to prevent greenhouse gas emissions.
We continuously analyze potential risks to our business operations
arising in connection with the topics of energy and climate protection
and derive appropriate measures. We support the recommenda-
tions of the Task Force on Climate-related Financial Disclo-
sures (TCFD). Since the 2019 reporting year, BASF's annual report
has included an overview showing the sections and subsections in
which TCFD-relevant information can be found (see page 19). We
also participate in the program established by the international
nonprofit organization CDP for reporting on data relevant to climate
protection and have done so since 2004. BASF achieved a score of
A in CDP's 2021 climate change questionnaire, again attaining
Leadership status. Companies on the Leadership level are distin-
guished by factors such as the completeness and transparency of
their reporting. They also pursue comprehensive approaches in
managing the opportunities and risks associated with climate change
as well as strategies to achieve company-wide emission reduction
goals.
We report on greenhouse gas emissions in accordance with the
Greenhouse Gas Protocol as well as the sector-specific standard for
the chemical industry.
Climate protection is a shared task. This is why we support various
national and international initiatives and are involved in partnerships.
For instance, in 2021 we worked with Together for Sustainability
(TFS), the World Business Council for Sustainable Development
(WBCSD) and the World Economic Forum's Low-Carbon Emitting
Technologies Initiative (LCET) to harmonize the methodological
approaches used to calculate Scope 3 emissions. This will help
increase the transparency of greenhouse gas emissions along the
BASF Group's greenhouse gas emissions according to the Greenhouse Gas Protocola
Million metric tons CO2 equivalents
Scope 1b
CO2 (carbon dioxide)
N2O (nitrous oxide)
CH4 (methane)
HFC (hydrofluorocarbons)
SF6 (sulfur hexafluoride)
Scope 2°
Total
CO2
We are gradually integrating our suppliers into the management of
greenhouse gas emissions along the value chain. To this end, we
launched our Supplier CO₂ Management Program in 2021 (see
page 130).
Offsetting
Sale of energy to third parties (Scope 1)d
0.001
■
0
■ High regulatory requirements and safety standards for crop
protection products and seeds
At a glance
Crop protection products and seeds are highly regulated at
national and international level, which brings with it strict
requirements for registering and re-registering active ingre-
dients and crop systems. Regulatory approval is only granted
when extensive documentation can be provided showing that
our products are safe for people, animals and the environ-
ment when used in the manner intended.
0.091
0.024
n/a
a BASF reports separately on direct and indirect emissions from the purchase of energy. Scope 1 emissions encompass both direct emissions from production and generation of steam and electricity, as well as direct emissions
from the generation of steam and electricity for sale. Scope 2 emissions comprise indirect emissions from the purchase of energy for BASF's use.
b Emissions of N₂O, CH4 and HFC have been translated into CO2 emissions using the Global Warming Potential, or GWP, factor. GWP factors are based on the Intergovernmental Panel on Climate Change (IPCC) 2007, errata
table 2012 for the 2018 and 2020 reporting years, and IPCC 2014 for the 2021 reporting year. HFC (hydrofluorocarbons) are calculated using the GWP factors of the individual components.
c Market-based approach. Under the location-based approach, Scope 2 emissions were 3.362 million metric tons of CO2 in 2020 and 3.670 million metric tons of CO2 in 2021.
d Includes sales to BASF Group companies; as a result, emissions reported under Scope 2 can be considered twice in some cases.
e Emissions are reported separately from Scope 1 and Scope 2 in accordance with the Greenhouse Gas Protocol.
f The comparative figure for 2020 has been adjusted to reflect updated data.
supply chain and will provide the basis for a Scope 3 target-setting
methodology for the chemical sector.
For more information on climate protection, see basf.com/climate_protection
We consistently align our actions with our climate protection targets,
based on a comprehensive analysis of our emissions. Group-wide
CO2 emissions are anchored in the BASF Group's steering and
compensation systems as a most important nonfinancial key perfor-
mance indicator, giving them even more weight. Investments and
acquisitions are assessed with regard to their impact on our climate
protection targets.
1 Costs not relevant to the calculation of this share include research expenses in early innovation stages of the phase-gate process, patent costs and expenses for supporting services.
BASF Report 2021
Wide range of training on the safe and proper handling of our
products
Potential risks are assessed and minimized throughout the research,
development and registration process, and on an ongoing basis
following market registration. We regularly perform a large number
of scientific studies and tests to ensure that, as far as possible, our
registration dossiers address all questions on potential environ-
mental and health effects.
We adapt our portfolio to the specific requirements of regional mar-
kets as crops, soils, climate conditions, plant diseases and farming
practices vary around the world. Consequently, product approvals
differ from country to country.
Crop protection
2.464
3.279
4.067
20.185
20.802
21.887
0
0
0
0
20.802'
21.887
0.947
0.845
0.773
21.132
21.6471
22.660
20.185
ensures that climate protection-relevant aspects are integrated into
strategic decision-making processes as well as into core business
activities (see page 46). In parallel, our operating divisions are work-
ing on division-specific projects to reduce emissions, supported by
the global service units.
To evaluate transportation safety, we systematically record trans-
portation incidents according to defined criteria. We use the number
of transportation incidents¹ as a reporting indicator. In 2021, we
recorded 21 transportation incidents worldwide (2020: 19).
2018 2019 2020 2021
■Risk minimization along the entire transportation chain
◉ Risk assessment based on national and international
dangerous goods regulations
◉ Regular review of logistics service providers
Strategy
We want our products to be loaded, transported and handled
safely. This is why we depend on global standards, an effective
organization and reliable logistics partners. Our goal is to minimize
risks along the entire transportation chain - from loading and trans-
portation to unloading. The transportation of dangerous goods is
subject to mandatory national and international dangerous goods
regulations as well as our global guidelines. The sites and subsidi-
aries are responsible for implementing transportation safety regula-
tions and guidelines. Compliance is regularly monitored by the
Environmental Protection, Health & Safety unit in the Corporate
Center using globally standardized transportation safety reviews.
External logistics partners are evaluated based risk either through Transportation incidents
assessments or on-site audits. BASF's global network of experts
ensures that information, insights and best practices are shared on
an ongoing basis.
Preventive safety measures
National and international dangerous goods regulations are based
on an assessment of transportation risks and set out rules and
measures for safely transporting dangerous goods. We use various
tools to minimize transportation risks. For example, for every dan-
gerous good to be transported, we check in each case whether the
packaging is suitable for the type of transport. We conduct digital
dangerous goods checks before shipping orders are released. In
addition, vehicles are subjected to a thorough dangerous goods
check prior to loading and rejected if there are any issues.
Above and beyond this, we use our global requirement to specifi-
cally assess the safety and environmental risks of transporting
and handling raw materials and sales products with high hazard
potential. This is based on the Guidance on Safety Risk Assessment
for Chemical Transport Operations published by the European
Chemical Industry Council (CEFIC).
We stipulate worldwide requirements for our logistics service pro-
viders and assess them in terms of safety and quality. Our experts
use our own evaluation and monitoring tools as well as internation-
ally approved schemes such as the ship inspection reports issued
by the Chemical Distribution Institute (CDI) and the Oil Companies
International Marine Forum (OCIMF).
A particular focus is incidents involving goods spillages that could
lead to significant environmental impacts. These include dangerous
goods leaks of BASF products in excess of 200 kilograms on public
traffic routes, provided BASF arranged the transport. We recorded
three incidents in 2021 with spillage of more than 200 kilograms of
dangerous goods² (2020: 2). None of these transportation incidents
had a significant impact on the environment (2020: 0).
For more information on transportation safety, see basf.com/distribution_safety
1 Data is collected based on the International Council of Chemical Association's (ICCA) guidance for reporting performance and includes road, rail and container shipping incidents.
2 Hazardous goods are classified in accordance with national and international hazardous goods regulations.
BASF Report 2021
Management's Report - Energy and Climate Protection
[Energy and Climate Protection]
on the environment
GRI 102, 103, 201,301,302,305
transportation incidents with significant impact
At a glance
One of the ways we meet our commitment to product stewardship
is by offering a wide range of courses and training on the safe
storage and safe use of our products. In India, for example, BASF
launched the Suraksha Hamesha program. Suraksha Hamesha
means "safety all the time." The program creates a platform for edu-
cating farmers and agricultural workers about the nine steps of
responsible use of crop protection products and personal protec-
tion. Through Suraksha Hamesha, BASF has engaged with over
162,600 agricultural workers and around 33,200 users across India
since 2016. BASF also involves government agencies and the cen-
tral government's farm extension teams in these meetings to support
and promote farm safety.
Management's Report - Energy and Climate Protection
We also work closely together with associations such as CropLife
International and CropLife Europe to promote the safe and proper
use of crop protection products. For example, we support steward-
ship initiatives of both associations and various programs on the
proper disposal and recycling of product containers. Technological
innovations developed together with industry partners such as the
easyconnect closed transfer system in Europe or the Wisdom sys-
tem in South America also help to make using crop protection
products easier and safer.
Seeds
BASF is a member of Excellence Through Stewardship, a global
industry initiative for seeds. This initiative promotes the adoption of
quality management systems for seeds and product stewardship
programs covering the entire life cycle. It also has independent
ETS-certified auditors verify members' compliance with its guide-
lines. In 2021, BASF successfully passed ETS audits in the areas of
laboratory operations, contained biotech plants, general steward-
ship, incident response management and product handling at our
Ghent and Astene sites in Belgium.
For more information on our Agricultural Solutions segment, see page 88 onward
For more information on biodiversity, see page 138 onward
For more information on risks from litigation and claims, see the Notes to the Consolidated Financial
Statements on page 262
BASF Report 2021
Management's Report - Transportation Safety
<>=125
[Transportation Safety ]
GRI
102, 103, 306
SUPPLIERS
BASF
CUSTOMERS
Our regulations and measures for transportation safety cover
the delivery of raw materials, the handling and distribution
of chemical products between BASF sites, warehouses and
customers, and the transportation of waste.
Zero
SUPPLIERS
BASF
CUSTOMERS
-7.8%
<>=126
2030 target
16.4
20.2 million
metric tons
Greenhouse gas emissions in 2021
2.4 TWh
Renewable
energy
Even more ambitious emission reduction targets
New Net Zero Accelerator unit bundles and accelerates projects
to achieve targets
Corporate and product carbon footprints create transparency
Supplier CO₂ Management Program
Strategy
Climate protection is very important to us and is an important part of
our corporate strategy. We significantly raised our climate protec-
tion targets in 2021: As a leading chemical company, we want to
reduce total greenhouse gas emissions¹ from our production sites
and our energy purchases by 25% by 2030 compared with 2018 -
despite targeted growth and the construction of a large Verbund site
in southern China.2 By 2050, we aim to achieve net zero emissions
from our production sites and our energy purchases.
0
1990 2018 2030 2050
We have bundled our global activities to reduce greenhouse gas
emissions in our carbon management (see "Global targets and
measures"). We only consider external offsetting measures as a
temporary stop-gap if our activities do not make the desired con-
tribution to reducing emissions. By 2025, we plan to invest up to
€1 billion to achieve our climate protection targets. Additional invest-
ments of up to €3 billion are to follow by 2030.
Our new organizational structure aims to drive forward our
climate protection targets and carbon management activities with
even greater focus and speed: The Corporate Strategy & Sustain-
ability unit in the Corporate Center will continue to develop targets
and track global target achievement, while the Net Zero Accelerator
unit, which was launched at the beginning of 2022, will focus on
accelerating the implementation of existing and new cross-company
projects to reduce emissions. The emphasis is on low-carbon
production technologies (see page 132), the circular economy (see
page 44) and renewable energies (see page 128). Both units report
directly to the Chairman of the Board of Executive Directors. This
20.1
20.2
20.8
Net zero greenhouse
gas emissions
Schematic overview: development of the BASF Group's greenhouse gas emissions (Scope 1 and 2)
Million metric tons of CO2 equivalents
40.1
2030 target
Baseline 2018
21.9
As an energy-intensive company, we take responsibility
for the efficient use of energy and global climate protection.
We are committed to the Paris Climate Agreement. Our
innovative products enable a reduction in greenhouse gas
emissions in many areas. At the same time, we are working
to significantly reduce our own carbon footprint with our
carbon management.
21.9
At a glance
-25% greenhouse gas emissions compared with 2018
2030
Five levers to reduce greenhouse
- Gray-to-green
-Power-to-steam
- New technologies
Carbon management
- Bio-based feedstocks
- Continuous opex
16.4
2050 target
gas emissions:
<>= 128
CUSTOMERS
Compared with baseline 2018, we want reduce greenhouse gas
emissions from our production sites (excluding emissions from the
sale of energy to third parties) and our energy purchases by 25% by
2030, i.e., from 21.9 million metric tons to 16.4 million metric tons.
This corresponds to a reduction of around 60% compared with
1990. Our long-term goal is net zero greenhouse gas emissions by
2050 (Scope 1 and 2).
BASF
SUPPLIERS
GRI 102, 103, 416, 417
[Product Stewardship for Crop Protection Products
and Seeds]
<>=124
Management's Report - Product Stewardship for Crop Protection Products and Seeds
BASF Report 2021
Nanotechnology and biotechnology offer solutions for key societal
challenges such as environmental and climate protection or health
and nutrition. For example, nanomaterials can improve battery per-
formance and biocatalytic methods can improve process resource
efficiency. We want to harness the potential of both technologies.
Using them safely and responsibly is our top priority. Safe handling
of nanomaterials is stipulated in our Nanotechnology Code of Con-
duct, for instance. We produce a range of products with the help of
biotechnological methods, including natural fragrances and flavors,
enzymes, vitamins or seeds for agriculture. This provides us with
extensive experience in their safe use in research, development and
production. We are guided by the code of conduct set out by
EuropaBio, the European biotechnology association, and want to
adhere to all relevant standards and legal regulations governing
production and marketing in our use of biotechnology.
Management of nano- and biotechnology
and are continuously optimizing alternative methods to experi-
mentally assess the safety and tolerance of our products without
animal studies. Our aim is to replace, reduce and refine animal
studies to minimize the impact on them. We made great progress
toward this goal in 2021. For example, an animal-free toxicological
testing strategy jointly developed by BASF and Givaudan was
approved by the OECD - the first of its kind worldwide. The strategy
comprises three individual alternative methods. By combining these
methods, it is possible to test more precisely than in animal studies
whether a substance causes allergic skin reactions.
Before launching products on the market, we subject them to a
variety of environmental and toxicological tests using state-of-the-
art knowledge and technology. If we employ animal studies, we
adhere to the specifications laid down by the German Animal
Welfare Act as well as the requirements of the Association for
Assessment and Accreditation of Laboratory Animal Care - the
highest standard for laboratory animals in the world. We develop
Environmental and toxicological testing
Most of the products we manufacture are subject to statutory
chemicals regulations. We want to ensure compliance with these.
We are bound by the relevant regional and national chemicals regu-
lations, which continue to grow in number worldwide. Examples
include REACH in the E.U., TSCA in the United States and KKDIK in
Turkey. BASF Group companies work closely together with a global
network of experts to ensure that BASF complies with the applicable
regulations.
Global chemicals regulations
We train our employees, customers and logistics partners world-
wide on the proper handling and optimal use of selected products
with particular hazard potential. Furthermore, in associations and
together with other manufacturers, BASF is pushing for the estab-
lishment of voluntary global commitments to prevent the misuse of
chemicals.
aid measures, measures to be taken in the case of accidental
release, and disposal. Our global emergency hotline network
enables us to provide information around the clock. In order to help
users to quickly find out about our products and the risks associated
with them, we use the Globally Harmonized System (GHS) to classify
and label our products around the world, provided this is legally
permissible in the country concerned. We take into account any
national or regional modifications within the GHS framework, such
as the E.U.'s CLP Regulation.
We maintain and evaluate environmental, health and safety data for
all of our substances and products in a global database. This infor-
mation is continuously updated. The database forms the basis for
substance and product assessments and for our safety data sheets,
which we make available to our customers in around 40 languages.
These include information on the physical/chemical, toxicological
and ecotoxicological properties of products, potential hazards, first
3 Calculated in accordance with internationally recognized rules, including the use of values from general databases and industry averages.
We are committed to continuously minimizing the negative effects of
our products on the environment, health and safety and to the
ongoing optimization of our products. This commitment to product
safety is enshrined in our Responsible Care® charter and the initia-
tives of the International Council of Chemical Associations (ICCA).
Our products should not pose any risk to humans or the environ-
ment when used responsibly and in the manner intended. We aim to
comply with all relevant national and international laws and regula-
tions. Our global requirements define rules, processes and
responsibilities, for example, to ensure uniformly high product safety
standards worldwide. Our sites and subsidiaries are responsible for
implementing and complying with internal guidelines and legal
requirements. The Environmental Protection, Health & Safety unit in
the Corporate Center conducts regular audits to monitor this.
BASF's global network of experts shares information, insights and
best practices around product safety on an ongoing basis.
2 Relevant sites are selected based on the amount of primary energy used and local energy prices.
Our climate protection products offer our customers solutions to
avoid greenhouse gas emissions over their entire life cycle com-
pared with reference products. The systematic analysis we conduct
on our portfolio - Sustainable Solution Steering (see page 141) -
Energy use and greenhouse gas emissions are closely linked to
capacity utilization and production volumes at our plants. Specific
greenhouse gas emissions in 2021 amounted to 0.564 metric tons
of CO2 equivalents per metric ton of sales product,' a decrease of
11.7% compared with the previous year (2020: 0.639 metric tons of
CO2 equivalents per metric ton of sales product). This was mainly
due to higher demand compared with the previous year and conse-
quently, better and more stable capacity utilization at our plants. In
addition, the increased use of renewable energy had a positive
impact on specific greenhouse gas emissions. Since 1990, we have
been able to lower our overall greenhouse gas emissions from BASF
operations by 49.7% and even reduce specific emissions by 75.4%.
As part of our carbon management, we aim to make our plants and
processes even more efficient and resource saving. An important
component of this is the introduction and ongoing maintenance of
certified energy management systems according to DIN EN ISO
50001 at all relevant production sites.2 These help us to identify and
implement further potential for improvement in energy efficiency.
This not only reduces greenhouse gas emissions and saves valuable
energy resources but also increases our competitiveness. In 2021,
76 production sites worldwide had certified energy management
systems, representing 90% of our primary energy demand.
A global working group provides ongoing support to the sites and
Group companies in implementing and maintaining certified energy
management systems. All energy efficiency measures are recorded
in a global database, analyzed and made available to BASF sites as
best practices.
Certified energy management systems (ISO 50001) at BASF Group sites
worldwide, in terms of primary energy demand
%
42.3
91.0 90.2
85.1
69.9
54.3
2016 2017 2018 2019 2020 2021
We are currently pursuing more than 250 technical and organiza-
tional measures to reduce energy consumption and increase com-
petitiveness. Our employees are an important source of optimization
ideas in this regard. For instance, suggestions for improvement sub-
Imitted by our employees in 2021 enabled us to avoid around
12,000 metric tons of CO2 at the Ludwigshafen site in Germany alone.
We further improved energy and resource consumption in produc-
tion with numerous projects around the world in 2021. At the Lud-
wigshafen site in Germany, for example, a multi-stage evaporation
system set up at one plant saves over 60,000 metric tons of steam
per year. At another plant, additional heat integration made it
possible to supply other users with higher-pressure steam, reducing
fuel consumption on the power plant side. At the Shanghai-Caojing
site in China, a modernized control concept reduced the fuel
demand of a heat recovery unit, and at another plant, steam demand
was reduced by additional heat integration using a cooler. At the
Geismar Verbund site in Louisiana, steam demand was reduced by
the use of optimized condensate separators. In total, these mea-
sures save more than 23,000 metric tons of CO2 annually. We also
achieved additional savings in steam, electricity and fuel through
process improvements at many other sites.
Carbon footprint, product carbon footprint and climate
protection products
BASF has published a comprehensive corporate carbon footprint
every year since 2008. This reports on all emissions along the value
chain - from raw materials extraction to production and disposal.
The Scope 3 greenhouse gas emissions arising before and
after BASF's activities in the value chain (in accordance with the
Greenhouse Gas Protocol's definition) were determined as around
101 million metric tons of CO2 equivalents for 2021 (2020: 92 million
metric tons of CO2 equivalents).³ We are continually working to
reduce greenhouse gas emissions from our business activities - in
our own production and, together with our partners, along the value
chain.
BASF was able to reduce emissions in the Scope 3 category
"customers" by 2 million metric tons in 2021, primarily through the
use of new blowing agents in polyurethane (PU) foams. Until now,
the main blowing agents used were hydrofluorocarbons. These are
used in the production of PU insulation materials to create foams
with excellent insulation properties. The use of these hydrofluoro-
carbons in PU products will be prohibited in the European Union
from 2023 due to their high climate impact. We are therefore
gradually replacing them with hydrofluoroolefins, which have a much
lower climate impact (measured by global warming potential, GWP).
BASF began rolling out PU spray foams based on this new genera-
tion of blowing agents on the European market back in 2017. By the
end of 2021, we will have almost completely converted our European
PU spray foam production and will continue to systematically drive
this forward in other regions as well.
1 Sales product volumes include sales between BASF Group companies; merchandise is not taken into account.
Strategy
We see product safety as an integral part of all business
processes, as an element of our risk management, and as an
important pillar of our commitment to Responsible CareⓇ. We
continuously work to ensure that our products pose no risk
to people or the environment when they are used responsibly
and in the manner intended. We aim to comply with all rele-
vant national and international laws and regulations.
CUSTOMERS
Safety and emergency drills are also conducted regularly at site and
Group level. The number of employees and partners involved varies
depending on the type of exercise.
For example, the Global Crisis Management Support Team (GCMS),
led by a member of the Board of Executive Directors, was activated
in connection with the coronavirus pandemic. It provides the strate-
gic direction for crisis management and is supported by issue-
specific and specialist working groups.
authorities or neighboring companies. Additional teams may be
called in depending on the extent of the damage and how
it develops.
Incidents are initially handled by the local crisis organization or local
emergency response team. We have implemented precautionary
organizational measures with clearly defined responsibilities and
procedures at all sites for this purpose. The responsible persons
receive regular training. Depending on the situation, we also involve
business partners and our sites' communities, such as local
We create working conditions and an environment in which our
employees can work safely. The focus of our emergency and
crisis management is therefore on the safety of our employees,
plants and sites as well as our communities. We are well prepared at
global, regional and local level for exceptional situations such as
major incidents or pandemics thanks to our extensive regulations
and measures for emergency preparedness, emergency response
and crisis management. All incidents are carefully followed up on to
identify potential for improvement, which is integrated into existing
concepts as needed. Unusual incidents are recorded and reported
centrally in accordance with a standard Group-wide procedure
(e-Rapid Incident Report). This enables us to identify risks at an
early stage and, if necessary, initiate appropriate relief and commu-
nication measures.
Emergency response, corporate and cyber security
For more information on occupational medicine, health campaigns and the HPI, see basf.com/health
In October 2021, BASF SE's Corporate Health Management unit
received the European Responsible Care® Award from the European
Chemical Industry Council (CEFIC) in the category "Supporting
health in COVID-19 times" for its wide-ranging activities and inno-
vative approaches to fight the coronavirus pandemic bundled
under the motto of "Protect yourself and others.'
seminars and interactive events on regeneration under the banner
of "Recharge yourself." Focus topics were physical activity, nutrition
and relaxation. Over 444 sites worldwide took part, offering events
such as workshops, courses, lectures or exercises.
In light of the coronavirus pandemic, the Global Health Campaign
2021 was again devoted to the personal health of our employees.
The program included a wide range of in-person and virtual
In 2021, we continued the measures to fight the coronavirus
pandemic developed and successfully implemented at our sites
in 2020, adapted to the local infection situation in each case. By
sharing information in our BASF medical network and working
closely together with the authorities, employee representatives and
our partners at BASF sites, we were able to make and implement
sound and timely decisions according to the situation. Our actions
focused on the health of all of our employees, contractors and third
parties. Measures included providing information to and raising
awareness among employees, tracing and breaking infection chains,
and vaccination services. For example, we set up our own corona-
virus vaccination center at our largest site in Ludwigshafen,
Germany. More than 22,000 primary vaccinations and more than
21,000 secondary vaccinations were administered there from April
to August 2021, and more than 10,000 booster vaccinations were
administered in December to BASF employees, contractors and site
partners. Another focus in 2021 was on influenza prevention. BASF
employees could be vaccinated against the seasonal flu at many
sites around the world, an offer that was very well received. At the
Ludwigshafen site in Germany, for example, around 6,800 employ-
ees participated in the influenza vaccination campaign.
In 2021, 36 work-related illnesses among BASF employees world-
wide were documented as recognized occupational diseases
(2020: 26). The main recognized occupational diseases are
occupational asthma, hearing loss, skin diseases, musculoskeletal
disorders and cancer.
than in previous years due to the coronavirus pandemic. Conse-
quently, a number of criteria crucial to the HPI could not be fully met
or measures could not be performed as usual in the reporting year.
These included activities that required physical participation such as
emergency drills, examinations or first aider training.
ΚΣΕΙ 121
Management's Report - Health and Safety, Emergency Response
BASF Report 2021
All of BASF's crop protection products can be used safely under
local farming conditions if the information and directions on the label
are followed. Customers can contact us directly if they have any
questions, complaints or issues, for example, by calling the tele-
phone number printed on product labels, using the contact forms
on our websites or by approaching our sales employees directly. We
record all products incidents relating to health or the environment
that come to our attention in a global database. If necessary, we
take appropriate measures on the basis of this information, such as
updating the instructions for use on the product label to minimize
preventable incidents in the future. We communicate changes to
instructions for use and general recommendations on the safe use
of our products through channels such as our Farmer Field School
initiatives in Asia and in training programs such as the On Target
Application Academy in the United States.
We are actively involved in external networks, which quickly provide
information and assistance in emergencies. These include the Inter-
national Chemical and Environmental (ICE) initiative and the German
Transport Accident Information and Emergency Response System
(TUIS), in which BASF plays a coordinating role. In 2021, we pro-
vided assistance to public emergency response agencies and other
companies in 138 cases (2020: 112). This included information on
chemicals and their proper disposal, on-site operational support for
transportation accidents involving hazardous goods, or information
on human biomonitoring. We apply the experience we have gath-
ered to improve our own processes and set up similar systems in
other countries.
The corporate security requirements for site security are set out in
a global guideline. Local implementation by our sites and subsidi-
aries is regularly audited and continuously improved. Respect for
human rights is a mandatory element of our requirements. Aspects
of human rights relevant to site security are a component of the
global code of conduct and qualification requirements for our inter-
nal and external security personnel. We analyze the potential safety
and security risks associated with investment projects and strategic
plans, and define appropriate safety and security concepts. Our
BASF Report 2021
Management's Report - Health and Safety, Emergency Response
BASF
SUPPLIERS
GRI 102, 103, 416, 417
[Product Safety]
<>=123
Management's Report - Product Safety
BASF Report 2021
The advance of digitalization increases the risk of cyberattacks
on IT systems such as online stores or servers. At the same time,
automation technology (operational technology) is increasingly
being used in production plants, buildings, laboratories and in
logistics, which is also connected to the internet via various
protection levels. An interdisciplinary team with experts from
information and automation technology developed the Auto-
mation Security Roadmap to reduce risk in these areas. It serves
as a guide for facilities to protect themselves against cyber-
attacks. Part of the concept is training Officers for Automation
Security (OAS). BASF now has over 300 OASs. They provide
advice and support on cybersecurity in automation technology
at all BASF sites worldwide - for example, on risk analysis,
protecting sensitive data and access control.
Specific greenhouse gas emissions and energy efficiency
Automation Security Roadmap
Good to know
For more information on emergency response, see basf.com/emergency_response
Our worldwide network of information protection officers comprises
around 650 employees. They support the implementation of our
uniform requirements and hold events and seminars on secure
behaviors. Around 100,000 employees had been trained on the
basics of cybersecurity and information protection in 2021. Our
standardized Group-wide recommendations for the protection of
information and knowledge were expanded to include additional
guidance for employees and updated in line with current
developments.
Around the world, we work to sensitize our employees about pro-
tecting information and know-how. We further strengthened our
employees' awareness of risks in 2021 with mandatory, regular
online training for all employees and complementary offerings such
as seminars, case studies and interactive training. These increas-
ingly addressed aspects of working practices that have changed as
a result of the coronavirus pandemic, such as cybersecurity when
working from home.
We protect our employees, sites, plants and company know-how
against third-party interference. This includes addressing in depth
the issue of cybersecurity and information security. BASF
applies the "security by design” principle to critically review and
optimize IT applications from a cybersecurity perspective as early as
the design phase. We are continually improving our ability to prevent,
detect and react to security incidents with various measures and
training programs. Our global cybersecurity team monitors and pro-
tects our IT systems against hacker attacks. We cooperate with
experts and partners in a global network to ensure that we can
protect ourselves against cyberattacks as far as possible. Our IT
security management system is certified according to DIN EN
ISO/IEC 27001:2017. It also supports, in particular, our critical infra-
structures in meeting additional compliance requirements such as
DIN EN ISO/IEC 27019:2020, IT security catalog and corresponding
industry-specific standards (B3S).
We inform business travelers and transferees about appropriate
protection measures prior to and during travel in countries with ele-
vated security risks. We updated our travel recommendations in line
with the coronavirus pandemic. After any major incident, we can use
a standardized global travel system to locate and contact employ-
ees in the affected regions.
guiding principle is to identify risks for the company at an early
stage, assess them properly and derive appropriate safeguards.
<>=122
D-BAS
Global targets and measures
<>= 130
BASF Report 2021
0.8 million MWh
Steam supplya
44%
17.4%
Substitute fuels
6.7 million MWh
Waste heat
13%
Reduction in our absolute
Greenhouse gas emissions
45.0 million
MWhb
Total:
38.5 million MWh
Purchased (nonrenewable)
greenhouse gas emissions
by 2030 compared with 2018a
(Scope 1 and 2)
by 2050a
43%
Coal
(Scope 1 and 2)
2.1%
Heating oil
2030 and 2050 targets
-25%
Net zero
Energy supply of the BASF Group 2021
Electricity supplya
26%
Purchased (nonrenewable)
16%
Purchased (renewable)
58%
Internally generated
Fossil fuels and residual fuels used in the BASF Group's
central power and steam generation plants
15.3 million
MWh
80.3%
Natural gas
30.9 million MWh
0.2%
0.1 million MWh
Management's Report - Energy and Climate Protection
Internally generated
The BASF Group's emissions reported under these targets in 2021
amounted to 20.2 million metric tons of CO2 equivalents (2020:
20.8 million metric tons of CO2 equivalents). We were able to reduce
emissions by around 3% year on year despite significantly higher
production volumes due to the increased use of renewable energy
and measures to improve energy efficiency and optimize processes.
Lower ammonia production due to the high price of natural gas also
reduced emissions.
60.256
60.586
540
57.627
621
a Scope 1 and Scope 2 (market-based) according to the GHG Protocol, excluding emissions from the generation of steam and electricity for sale to third parties, including offsetting
b Sales product volumes include sales between BASF Group companies; merchandise is not taken into account.
c Primary energy used in BASF's plants as well as in the plants of our energy suppliers to cover energy demand for production processes Purchased renewable energy has a primary energy conversion efficiency rate of 100%.
Compared with separate methods of generating steam and elec-
tricity, we saved 15.0 million MWh of fossil fuels and avoided
3.0 million metric tons of carbon emissions in 2021. In 2021, inter-
nally generated power in the BASF Group had a carbon footprint of
around 0.24 metric tons of CO2 per MWh of electricity and was
below the national grid factor at most BASF Group locations.
Another important component of carbon-optimized energy supply
at our sites is the Verbund system. It helps us realize synergies and
manage value chains in a resource-efficient way. For example,
waste heat from one plant's production process is used as energy in
other plants. The Verbund saved us around 21.4 million MWh in
2021, which translates to 4.3 million metric tons less CO2 released
into the environment. With combined power and steam generation
as well as our optimized Energy Verbund, we were thus able to
avoid a total of 7.3 million metric tons of carbon emissions in 2021.
That is why we will continue to invest in the creation and optimization
of Verbund structures and drive forward the consolidation of pro-
duction at highly efficient sites.
A central component of reducing greenhouse gas emissions as part
of our carbon management is gradually shifting our energy sup-
ply to renewable sources. This applies to both our electricity
and steam supply and our production processes, where we will
increasingly replace fossil fuels with energy from renewable sources.
The electrification of our processes will significantly increase the
BASF Group's green power demand over the coming years (see
page 27).
626
To ensure access to energy from renewable sources, we are pursu-
ing a make and buy approach. Firstly, BASF is investing in its own
renewable power assets, particularly offshore wind farms. Secondly,
BASF will purchase green power on the market through long-term
supply agreements with plant operators, green power agreements
or renewable energy certificates, depending on the region and mar-
ket regulations. A key purchasing criterion is the "additionality" of the
energy purchased. This means that power is primarily generated by
new wind and solar farms.
In 2021, we entered into pioneering cooperative agreements to
transform our energy supply. For instance, we currently hold a
49.5% share in Vattenfall's Hollandse Kust Zuid (HKZ) offshore wind
farm. Pending approval of the relevant merger control authorities,
we plan to sell shares in HKZ to Allianz Capital Partners in the first
quarter of 2022. This will reduce our interest to 24.3%. The originally
agreed power purchase volumes remain unaffected by the trans-
action on the basis of a long-term fixed-price power purchasing
agreement. Once fully operational, expected in 2023, HKZ will have
a total capacity of 1.5 gigawatts. We will use part of the electricity
generated there at the Verbund site in Antwerp and at other
European production sites. Under a letter of intent, together with
RWE we are developing a project concept for an offshore wind farm
in the German North Sea with a capacity of 2 gigawatts. Provided
the regulatory framework is adapted by the authorities, this wind
farm could supply the Verbund site in Ludwigshafen, Germany, with
green electricity before 2030. Together with enviaM, we are also
planning to build and operate a solar park with a total installed
capacity of 24 megawatts peak (MWp) to supply the Schwarzheide
site in Germany.
In addition to these cooperative ventures, in 2021 we concluded
further long-term supply agreements for green power. In Europe,
these include a power purchase agreement for wind energy with the
Engie group (volume: up to 20.7 TWh / term: 25 years) and an off-
shore wind power purchase agreement with Ørsted (installed
capacity: 186 MW/ term: 25 years). We will procure energy for our
new Verbund site in Zhanjiang, China, from a wind and solar park
with a capacity of 400 megawatts. Further long-term supply agree-
ments for wind and solar power were concluded in the United States
for the Freeport and Pasadena sites (both in Texas).
In addition, we have converted existing agreements to green power
and have acquired renewable energy certificates in a number of
regions. The aim is to gradually replace these temporary measures
with our own power assets or long-term supply agreements.
In total, over 88 sites worldwide (2020: 19) were already partially or
fully powered by emission-free electricity at the end of 2021. The
carbon footprint of purchased electricity in 2021 was around
0.21 metric tons of CO2/MWh (market-based approach), significantly
lower than in the previous year (0.41 metric tons CO2/MWh).
0.639
a BASF operations excluding sale of energy to third parties, including offsetting
0.564
2020
To achieve our ambitious climate protection goals, we have adopted
comprehensive carbon management. This has five levers to
reduce greenhouse gas emissions: Using renewable energies
for both electricity and steam production (gray-to-green and power-
to-steam levers), developing and applying new carbon-free and
low-carbon production processes (new technologies lever, see
page 132), using alternative raw materials (bio-based feedstocks
a Adjusted method for recognizing import/export of electricity and steam
b Conversion factor: 0.75 MWh per metric ton of steam
lever), and ongoing measures to further increase energy and
resource efficiency in our production (continuous opex lever).
For more information on climate protection, see page 27
A projection of greenhouse gas emissions in 2022 can be found in the forecast from page 148 onward
Energy supply
Our total energy consumption, comprising fuel demand in our own
central power and steam generation plants, primary energy require-
ments in our process plants, and net power and steam imports, was
58.8 million MWh in 2021.
To generate our own steam and power, we mainly use natural
gas (80.3%) and substitute fuels (17.4%). These are residues from
chemical production plants that cannot be reused in the BASF
Verbund. We cover more than 58% of our electricity demand with
our own gas and steam turbines in highly efficient combined heat
and power plants. To achieve the highest possible energy yield with
the lowest possible greenhouse gas emissions, we continuously
invest in our combined heat and power plants. One example is our
gas and steam turbine power plant at the Schwarzheide site in
Germany, which is undergoing a €73 million modernization. Once it
is started up in 2022, it will produce 10% more electricity and the
CO2 emissions factor of the power generated will be around 10%
lower thanks to higher fuel efficiency.
(baseline)
BASF Report 2021
<>= 129
Additional key indicators for energy and climate protection in BASF operations
Specific greenhouse gas emissionsa (metric tons of CO2 equivalents per metric ton of sales product)
Primary energy demand (million MWh)
Energy efficiency (kilograms of sales product per MWh)
2018
0.577
2021
Management's Report - Energy and Climate Protection
BASF adheres to the International Code of Conduct issued by the
World Health Organization (WHO) and the Food and Agriculture
Organization (FAO) for the distribution of crop protection products.
These are only marketed once they have been approved by the rele-
vant authorities. We no longer sell WHO Class 1A or 1B products
(high acute oral and dermal toxicity). Depending on availability, we
offer our customers alternatives.
The extraction of the raw materials we require and the production of
purchased precursors account for the largest share of the PCF. We
currently use industrial averages and values from commercial data-
bases as the basis for calculating these upstream emissions.
We calculate carbon footprints for around 45,000 sales products
to increase carbon transparency for our customers (see box
on the right). These Product Carbon Footprints (PCF) include all
product-related greenhouse gas emissions generated until a BASF
product leaves the factory gates ("cradle-to-gate").
BASF Report 2021
Water used in cooling processes
6,881
Use
Water from raw materials
Reusable wastewater from third parties
Drinking water
Groundwater
Discharge
Of which in water stress areas: 1% 87%
Abstraction / supply
Water in the BASF Group 2021
Million cubic meters per year
Another important part of our sustainable water management is the
continuous analysis and implementation of measures for improve-
ment. For instance, we use wastewater from municipal wastewater
treatment plants to reduce our demand for freshwater at our sites in
Tarragona, Spain (since 2013) and Freeport, Texas (since 2019). At
the Pontecchio site in Italy, we partially use rainwater, which reduced
our demand for river and groundwater by 22,200 cubic meters in
2021. In Belgium, our Verbund site in Antwerp is a member of the
Lerend Netwerk Water network of the Belgian chemical association
Essenscia together with other chemical and pharmaceutical compa-
nies. The aim is to facilitate dialog on the responsible use of water
and to develop action plans for water conservation and circular
water use. At the Verbund site in Ludwigshafen, Germany, we have
continually optimized cooling water needs over the past few years
Introduction of sustainable water management at our
production sites in water stress areas and at our
Verbund sites
2030 target
As part of sustainable water management, our sites regularly assess
the water situation in the catchment area. This raises awareness
of potential risks and impacts for the population such as water
scarcity. Based on the assessments conducted until the end of
2021, we did not identify any activities with a significant impact on
water availability and quality at any site.
Our goal is to introduce sustainable water management at our
Verbund sites and at all production sites in water stress areas
by 2030, covering 89% of BASF's total water abstraction. We
achieved 53.5% of our target in 2021 (2020: 46.2%).¹ Sustainable
water management was introduced at seven additional sites in 2021
(2020: 6).
1,695
Global target and measures
1,503
Of which wastewater from production: 177
Percentage of
water reused
5
Consumption
3 13%
Water used in production
20
External treatment plant
Of which cooling water: 1,326
229
Groundwater
259
Surface water / freshwater
recirculating 81%)
cooling systems
1,308
Percentage in
Brackish water / seawater
100
10%
ΚΣΕΙ 136
BASF Report 2021
CUSTOMERS
BASF
SUPPLIERS
102, 103, 303
GRI
[Water]
<>=135
Water is of fundamental importance in chemical production.
It is used as a coolant, solvent and cleaning agent, and to
make our products. Our goods are transported via water-
ways. At the same time, water is a scarce commodity in more
and more regions. That is why we promote the responsible
use of this resource with sustainable water management.
Management's Report - Water
1 Heavy metals are included in the figure for dust (see the table "Emissions to air").
For more information on the Alliance to End Plastic Waste, see endplasticwaste.org
In 2019, we co-founded the Alliance to End Plastic Waste (AEPW)
with other companies along the value chain - from plastics pro-
ducers and consumer goods manufacturers to waste disposal
companies. The AEPW now has around 65 members, who
together aim to develop solutions that stop plastic waste from
entering the environment, especially the ocean. There are four
main focus areas: developing infrastructure for waste collection,
promoting innovative recycling methods, education and engage-
ment of various stakeholders, and cleanup of areas heavily
impacted by plastic waste. The initiative aims to invest up to
$1.5 billion by 2023. For instance, BASF supports the AEPW's
goal of establishing a circular economy for plastics with its
ChemCycling TM project.
Alliance to End Plastic Waste
Good to know
We have global standards for managing contaminated sites. A
worldwide network of experts ensures these are implemented. We
develop remediation solutions that balance nature conservation,
climate protection concerns, costs and social responsibility. This
means making differentiated decisions on a case-by-case basis,
founded on the legal framework and current technological stan-
dards. Contaminated sites are documented in a database. Ongoing
remediation work around the world continued on schedule in 2021
and planning was concluded for future remediation projects.
For more information on provisions for environmental protection, see the Notes to the Consolidated
Financial Statements on pages 224 and 260
Contaminated sites
BASF Report 2021
Management's Report - Water
At a glance
Cubic meters
1 We define water stress areas as regions in which more than 40% of available water is used by industry, households and agriculture. Our definition is based on the Water Risk Atlas (Aqueduct 3.0) published by the World Resources Institute. For more information, see wri.org/aqueduct.
For more information on our position paper on water protection, see basf.com/water
For more information on the CDP water survey, see basf.com/en/cdp
We report transparently and comprehensively on water. For instance,
we again provided detailed answers to the 2021 water survey from
the nonprofit organization CDP. BASF again achieved leadership
status with an A- rating in the final assessment. CDP evaluates how
transparently companies report on their water management activi-
ties and how they reduce risks such as water scarcity. The assess-
ment also considers the extent to which product developments can
also contribute to sustainable water management at the customers
of the evaluated companies.
We work with numerous partners along the value chain and from
civil society to protect water as a resource. For instance, BASF is
a member of the Alliance for Water Stewardship, a global multi-
stakeholder organization that promotes the responsible use of water.
We are co-founders of the Alliance to End Plastic Waste (AEPW) and
are also involved in other global networks such as the World Plastics
Council or Operation Clean Sweep to effectively reduce and prevent
plastic waste, especially in water bodies.
We offer our customers solutions that help purify water and use
it more efficiently while minimizing pollution. These include high-
performance plastics to produce ultrafiltration membranes, seeds
with higher drought and heat tolerance, or water-saving thin-film
processes for metal pretreatment.
We advocate the responsible use of water as a resource along
the entire value chain. We audit supplier compliance with envi-
ronmental standards in our regular supplier assessments (see
page 110). Where improvement is necessary, we support suppliers
in developing and implementing appropriate measures, such as the
correct handling of wastewater. In addition, we are involved in a wide
range of initiatives to promote sustainability in the supply chain
(see page 113). For example, efficient water use is a core part of the
Pragati project to improve sustainability in castor bean farming, the
source of the castor oil we use.
We pursue our goal by applying the European Water Stewardship
standard, which rests on four principles: sustainable water abstrac-
tion, maintaining good water quality, preserving conservation areas,
and ensuring continuous improvement processes.
1,695 million
Introducing and implementing sustainable water management
has been a cornerstone of our strategy for many years now. Our
focus here is on our Verbund sites and on production sites in water
stress areas. The aim is to protect water as a resource, to use it as
efficiently as possible through recirculation, and to continuously
reduce wastewater and emissions. We consider the quantitative,
qualitative and social aspects of water use.
Our global standards and requirements for water are defined in
Group-wide guidelines. Among other things, these stipulate that
water protection concepts must be implemented at all production
sites. The guidelines also cover aspects such as process and
transportation safety (see pages 120 and 125) in order to prevent
production and transportation-related product spillages into water
The responsible use of water as a resource is a core element of our
Responsible Care Management System and an important part of
our commitment to the United Nations' Sustainable Development
Goals (SDGs). This is also reflected in our position paper on water
protection, which we published in 2021.
Strategy
Responsible use a core part of our strategy
Global water target 53.5% achieved
Demand and utilization continuously optimized
of water demand covered
by reuse
78.5%
total water abstraction
bodies as far as possible. Our sites and subsidiaries are responsible
for implementing and complying with internal guidelines and legal
requirements. The Environmental Protection, Health & Safety unit in
the Corporate Center conducts regular audits to monitor this.
BASF's global network of experts shares information, insights and
best practices around the responsible use of water on an ongoing
basis.
with various technical improvements. One example is the ethylene
oxide plant, where a change in the pipeline route implemented in
2020 reduces the river water used for cooling purposes by around
4.7 million cubic meters compared with the reference period (June
2019 to June 2020). Since then, the cooling system has operated
without pumps. This also saves around 360,000 kilowatt hours of
electricity compared with the reference period.
Depending on the local situation, we also implement measures for
improvement at our sites' catchment areas together with other
stakeholders. One example is the Incentivo ao Produtor de Água
program that we launched at the Guaratinguetá site in Brazil in
2011 together with local authorities, the Espaço ECO Foundation
and other partners. Measures such as better soil management or
the reforestation of riverbank woodlands have since significantly
reduced surface runoff and soil erosion in the Ribeirão Guaratinguetá
catchment area.
Water balance
to optimize our products on an ongoing basis. It is important to con-
sider the potential impacts of product use on biodiversity, for example,
with regard to the biodiversity loss driver of pollution.
BASF offers products and solutions for a wide range of industries. We
want to ensure that our products meet our customers' standards in
quality and, through appropriate use, pose no risk to humans, animals
or the environment. Our commitment to the objectives set forth by the
Responsible Care® charter of the International Council of Chemical
Associations (ICCA) obligates us to continuously minimize the nega-
tive effects of our products on the environment, health and safety and
Management of our product impact
We also take biodiversity conservation into account in our produc-
tion. We are committed to complying with the provisions of interna-
tional environmental agreements such as the Nagoya Protocol. The
supplementary agreement to the U.N.'s Convention on Biological
Diversity regulates access to genetic resources and access and
benefit sharing. It sets out obligations (for example, compensation
payments) for the users of genetic resources such as plant-based
raw materials. We use internal control mechanisms to monitor com-
pliance with standards.
We are implementing local measures to protect biodiversity at a
number of sites. In Clermont, France, for example, grassed areas
were converted into biodiversity-friendly spaces, nesting boxes for
swallows and other bird species were installed, and their population
sizes were measured and documented. In addition, training was
held to raise employees' awareness of biodiversity.
We have adopted biodiversity as a criterion in decision-making
processes. In addition, we systematically consider sustainability
aspects when deciding whether to invest in the construction of new
sites or expand existing ones. Aspects assessed include the poten-
tial impacts on forests and biodiversity.
III protected area as defined by the International Union for Conser-
vation of Nature. 1 None of our production sites are adjacent to a
UNESCO protected area.
For example, we evaluate our products and solutions in crop pro-
tection and seeds throughout the entire research, development
and registration process. After they have been approved for the
market, we continue assessing them regularly for potential risks and
impact to the ecosystems in which they are used. We have initiated
various projects and offer training to prevent misuse of our products
(see page 124).
<>= 139
BASF Report 2021
Our site management measures consider our impact on the bio-
diversity loss driver of land-use change. For example, given the
relevance of conservation areas to preserving diversity, we check
how close our production sites are to internationally recognized
conservation areas. In 2021, we included this indicator in our
environmental database. This allows us to raise awareness of bio-
diversity at local level and draw attention to potential impacts of our
sites on these areas. Four percent of our production sites are
adjacent to a Ramsar site and 1% are adjacent to a category I, II or
Preservation of biodiversity is taken into consideration in the
management of our sites. We operate our facilities in a responsible
manner and minimize negative effects on the environment (bio-
diversity loss driver: pollution) by keeping air, water and soil emissions
as low as possible and reducing and avoiding waste (see page 133
for more information).
Responsibility to our sites and production
BASF procures a variety of renewable raw materials. In the procure-
ment of palm and palm kernel oil in particular, there is an elevated
risk that forest areas are cleared to create farmland. To improve
sustainability in procurement, we established the BASF Palm Com-
mitment in 2011, which was updated in 2015 and is implemented
with our Palm Sourcing Policy. Third-party certification with stan-
dards such as the Roundtable on Sustainable Palm Oil (RSPO)
standard enables us to take biodiversity criteria into account when
purchasing raw materials (see page 113). We are also committed to
the environmental sustainability of other supply chains through our
Some of the business activities of our raw material suppliers involve
land uses that can influence biodiversity (biodiversity loss driver:
land-use change). We have laid down our expectations of our sup-
pliers with regard to environmental, labor and social standards in the
supply chain in the Supplier Code of Conduct (see page 109).
Responsibility to our supply chains
Management's Report - Biodiversity
We align our biodiversity measures with the impact of our business
activities along the value chain. Our focus here is on three impact
areas: supply chains, sites and production, and product impact. We
analyzed these in an internal workshop according to the five drivers
of biodiversity loss as defined by the Intergovernmental Science-
Policy Platform on Biodiversity and Ecosystem Services. These are
All types of land development, such as agriculture and forestry,
play a role in changing biodiversity (biodiversity loss driver: land-use
change). Activities such as tillage, drainage, fertilization and the use
of crop protection products can affect flora and fauna, for example,
by influencing food sources. Minimizing these impacts while ensur-
ing the necessary productivity is one of the biggest challenges
farmers are facing. Our Agricultural Solutions segment focuses on
four areas to help farmers to find the right balance: climate-smart
farming, sustainable solutions, digital farming and smart steward-
ship (see page 90). In this context, we work with farmers to create
balanced agricultural systems which enable productive and efficient
farming of high-quality food products and at the same time promote
biodiversity in the field. For example, we advise them on soil cultiva-
tion and look for suitable ways to improve biodiversity in farmlands.
Our many years of experience in sustainability measurement and
evaluation in agriculture are particularly useful here.
Good to know
<>= 140
For more information on our commitment to biodiversity, see basf.com/biodiversity
For more information on our position on forest protection, see basf.com/forestprotection
Since 2013, we have also been working with different farmers
and experts from the BASF Farm Network Sustainability, an
association of farms in Europe, to integrate more connected bio-
diversity areas into agricultural production. Based on the insights
gained from working together, an advisory board of experts from
agriculture, nature conservation and environmental protection
developed a biodiversity checklist and published it in 2021. This
summarizes 10 ecologically effective and practicable measures to
promote biodiversity. Since 2021, BASF has supported farmers
participating in its #wirzahlenBiodiversität ("We pay biodiversity")
program financially and with professional advice. Our initiatives to
preserve biodiversity help farmers to achieve the right balance
between economic and environmental factors and help them make
an important societal contribution to the preservation of ecosystems.
For more information on our responsible management of resources, see page 44
For more information on product stewardship, see pages 123 and 124
which aims to achieve healthy honey bee populations and support
healthy populations of native and managed pollinators in productive
agricultural systems and thriving ecosystems. BASF France is part
of the Entreprises pour l'environnement (EpE) network, which
launched the Act4nature campaign with the main objective of pro-
tecting and enhancing biodiversity.
Together with international partners and based on dialog with stake-
holders in the food value chain, we are driving forward measures to
promote sustainable agriculture. In the United States, for
We cooperate with a number of organizations including the Round-
table on Sustainable Palm Oil, the Sustainable Palm Oil Forum,
the Brazilian Coalition on Climate, Forests and Agriculture and the
High Carbon Stock Approach Steering Group. The Taskforce on
Nature-related Financial Disclosures (TNFD) is working to provide a
framework for reporting on nature-related risks and related activities.
In 2021, BASF joined the newly established TNFD Forum, a consul-
tative network, to support this development. Our involvement in
organizations such as the Alliance to End Plastic Waste and the
Alliance for Water Stewardship (see page 135) help to preserve
biodiversity in bodies of water.
Engaging in ongoing dialog with a variety of stakeholders is import-
ant to BASF. That is why we seek out partnerships with relevant
interest groups and organizations worldwide to raise awareness of
biodiversity and drive forward the action needed to preserve natural
habitats. This enables us to firstly share the knowledge gained from
our biodiversity activities and secondly learn from others to improve
our own practices.
Our AgBalanceⓇ method and the biodiversity calculator, which
has been available since 2020, enable a scientifically sound
assessment of the impact of agricultural practices on biodiversity.
Based on these assessments, we issue recommendations for
measures such as planting flower strips or establishing nesting
places to benefit pollinators like wild bees and farmland birds.
Our modern seed solutions also enable better yield on existing
farmlands and thus help protect natural habitats.
Strategic partnerships to promote biodiversity
farmers in balancing agricultural productivity, environmental protec- example, BASF is a member of the Honey Bee Health Coalition,
tion and societal demands.
Management's Report - Biodiversity
BASF Report 2021
1 We have defined "adjacent" as the area within a 3 km radius.
BASF started the global registration for a new, more environmentally
friendly insecticide active ingredient in 2021. The active ingredient,
Axalion TM, enables farmers to control a wide range of piercing and
sucking pests that are harmful to crops. At the same time, it is highly
compatible with beneficial insects such as pollinators. This supports
The Alas para el Campo cooperation between the German
Agency for International Cooperation (GIZ), BASF and partners
from politics, academia, distributors and local communities was
launched in Mexico in 2019. The aim is to restore the natural
habitat of the monarch butterfly along its migration route. This
also protects other pollinators. The focus of the initiative is on
introducing sustainable farming measures, good agricultural
practices and ecosystem conservation strategies, for the protec-
tion of pollinators and other beneficial insects. This enables
farmers in Mexico, Central America and the Caribbean to restore
natural habitats to promote biodiversity while laying the founda-
tion for sustainable yields and prosperity in their communities.
Initiative to preserve the habitat of
the monarch butterfly
Animal farming is essential to meeting growing global demand for
products of animal origin such as meat, eggs and milk. Industrialized
livestock production also requires large areas of agricultural land for
growing feed, which has implications for the share of forest areas
and biodiversity. BASF offers a range of feed additives such as
enzymes, vitamins, glycinates and organic acids that improve nutri-
ent utilization from feed. Better feed conversion and more sustain-
able livestock production mean that less land is needed, preserving
natural ecosystems.
BASF sees the United Nations' Convention on Biological Diversity
and the Sustainable Development Goals (SDGs) - including Life
below water (SDG 14) and Life on land (SDG 15) - as important
orientation and reference frameworks. Our measures help to pre-
serve biodiversity and meet our responsibility to maintaining the
wellbeing of the environment and society. Our corporate sustain-
ability goals on climate protection, product portfolio, circular eco-
nomy, water management and responsible procurement also help
to protect biodiversity.
Strategy
Our position on forest protection sets out our commitment to
preserving biodiversity in areas of High Conservation Value such as
High Carbon Stock forest areas and peatlands in the procurement
of renewable raw materials. BASF participated in the "Forests"
assessment conducted by the international organization CDP for
the second time in 2021 and achieved a score of A-, again giving it
Leadership status. CPD is a nonprofit organization that evaluates
companies' management of the environmental risks and opportuni-
ties relating to forests, among other things. The assessment is
conducted based on detailed insights into the palm value chain and
activities that impact ecosystems and natural habitats.
A total of 1,503 million cubic meters of water were discharged from
BASF production sites in 2021 (2020: 1,429), including 177 million
cubic meters of wastewater from production.
The supply, treatment, transportation and recooling of water is
associated with a considerable energy demand. We are constantly
working to optimize our energy consumption and the amount of
water we use, and to adapt to the needs of our business and the
environment.
In 2021, around 25% of our production sites were located in
water stress areas (2020: 25%). These sites accounted for 1% of
BASF's total water abstraction (2020: 1%).1 In water stress areas,
we mainly source water from third parties (81%) and largely cover
our demand with freshwater. Water consumption in water stress
areas accounted for 16% of BASF's total water consumption in
2021 (2020: 11%) and was primarily attributable to evaporation in
cooling processes. Wastewater in water stress areas accounted for
less than 1% of BASF's total wastewater. The share of wastewater
from cooling processes in water stress areas is lower than for the
BASF Group as a whole. Cooling water is rarely used for once-
through cooling here. Instead, it is generally recirculated to reduce
water demand. Production wastewater in water stress areas is pri-
marily treated at third-party facilities.
The BASF Group's water consumption describes the amount of
water that is not discharged to a water body, meaning that it is no
longer available to other users. Consumption is mainly attributable
to the evaporation of water in recirculating cooling systems. A
smaller amount is from the water contained in our products. Water
consumption in 2021 amounted to around 72 million cubic meters
(2020: 63 million cubic meters).
example, for extraction or dissolution processes or for cleaning. Emissions to water
Here, too, we reduce our demand for water by recycling waste-
water. Most of the water used for production purposes is discharged
back to water bodies after being treated in our own or third-party
plants. Overall, 78.5% of the water we use in cooling or production
is reused several times.
Management's Report - Water
BASF Report 2021
Our wastewater is subject to strict controls and we carefully assess
the impact of wastewater discharge in accordance with the applica-
ble laws and regulations. Both internal audits and the responsible
local authorities regularly assess whether the analyses and safety
precautions at our sites comply with internal guidelines and legal
requirements.
1 Our water target also continues to take into account the sites that we identified as water stress sites in accordance with Pfister et al. (2009) prior to 2019.
Our water abstraction totaled 1,695 million cubic meters in 2021
(2020: 1,728). This demand was covered for the most part by fresh-
water such as rivers and lakes (84% of water abstraction). At some
sites, we use alternative sources such as treated municipal waste-
water, brackish water or seawater. A small part of the water we use
reaches our sites as part of raw materials and steam, or is released
in our production processes. We abstract most of the water we
need for cooling and production ourselves. In 2021, 5% of our total
water demand was covered by third parties (2020: 5%).
Of which in water stress areas: 16%
72
18
1
245
1,239
We predominantly use water for cooling purposes (87% of water
abstraction), after which we discharge it back to our supply sources
with no product contact. We reduce our demand for cooling water
by recirculating as much of it as possible. To do this, we use recool-
ing plants that allow water to be reused several times. Around 13%
of our total water abstraction is used in production plants, for
Emissions of nitrogen to water amounted to 3,000 metric tons in
2021 (2020: 2,900). Around 12,500 metric tons of organic sub-
stances were emitted in wastewater (2020: 11,500). Our wastewater
contained 17 metric tons of heavy metals (2020: 22). Phosphorus
emissions amounted to 340 metric tons (2020: 270).
Our approach is to reduce wastewater volumes and contaminant
loads at the source in our production processes and to reuse
wastewater and material flows internally as far as possible. To treat
wastewater, we use both central measures in wastewater treatment
plants and the selective pretreatment of individual wastewater
streams before these are sent to the wastewater treatment plant.
We use different methods depending on the type and degree of
contamination including biological processes, chemical oxidation,
membrane technologies, precipitation or adsorption.
In order to avoid unanticipated emissions and the pollution of sur-
face or groundwater, we have water protection concepts for our
production sites in place. This is mandatory for all production plants
as part of our Responsible Care Management System. The waste-
water protection plans involve evaluating wastewater in terms of risk
and drawing up suitable monitoring approaches. We use audits to
check that these measures are being implemented and complied with.
For more information, see basf.com/water
own initiatives, such as our rambutan program. This was launched
in 2014 in close collaboration with partners in Vietnam to source
botanical ingredients for cosmetic products from certified organic
rambutan gardens. In cooperation with local farmers and NGOs,
BASF's program promotes the preservation of biodiverse habitats,
as well as good agricultural practices, gender equity and fair working
conditions.
We use various methods to measure our sustainability perfor-
mance that implicitly and explicitly consider relevant risks and
opportunities for biodiversity. These include the Eco-Efficiency
Analysis, SEEbalance®, Sustainable Solution Steering, Value to
Society, AgBalanceⓇ and the corresponding biodiversity calculator.
Under Value to Society, we assess land use along value chains,
among other things. Newly developed assessment methods help us
to understand further influences on biodiversity. On the basis of this
understanding, we seek dialog with partners and enter into strategic
partnerships, through which we drive forward measures to protect
biodiversity around the world.
land-use change, climate change, invasive species, overexploitation
and pollution. Our analysis showed that our impacts along the value
chain mainly relate to the drivers of climate change, land-use change
and pollution. We counteract the climate change driver of bio-
diversity loss and in this way, help to preserve biodiversity - with
our climate protection measures, which play an integral role in all our
impact areas (see page 126).
■ Commitment to preserving biodiversity along the entire value
chain with strategic partnerships
■ Strategic alignment of our biodiversity measures based on
impact assessments
At a glance
Biodiversity describes the variety of life forms on Earth. Low
flora and fauna diversity weakens ecosystems' ability to
withstand changes such as climate change. As a chemical
company, we depend on ecosystem services like the avail-
ability of renewable resources and high air, water and soil
quality, while also influencing them. Protecting biodiversity is
a key element of our commitment to sustainability.
CUSTOMERS
BASF
SUPPLIERS
102, 103, 304
GRI
[Biodiversity]
<>=138
Management's Report - Biodiversity
<>=137
1 Aqueduct 3.0 was used to identify sites in water stress areas to determine pro rata water abstraction and water consumption.
a Waste is classified as hazardous or nonhazardous waste according to local regulations.
b Physical/chemical and biological treatment, underground disposal
Total waste generation
Surface water/freshwater
Brackish water / seawater
Otherb
tons
At a glance
26,358 metric
We want to minimize the impact of our activities on people
and the environment by continually reducing emissions to
air, preventing waste and protecting the soil. Our plants are
operated safely and efficiently. We use resources responsibly
and are continually reducing the environmental impact of
our plants and processes with our Operational Excellence
Program.
BASF
CUSTOMERS
SUPPLIERS
GRI 102, 103, 305, 306
Air pollutants
[Emissions to Air, Waste and Remediation]
Management's Report - Emissions to Air, Waste and Remediation
BASF Report 2021
For more information on carbon management, see basf.com/carbon-management
In addition to new, low-carbon production processes, we are also
investigating the use of innovative carbon storage methods.
At the Antwerp site in Belgium, BASF plans to invest in one of the
largest carbon capture and storage (CCS) projects under the North
Sea together with its Antwerp@C consortium partners. The project
can potentially avoid more than one million metric tons of CO2
emissions per year from the production of basic chemicals. A final
investment decision is targeted for 2022.]
Another focus area is alternative heating concepts for our steam
cracker furnaces (see page 72). We use these plants to split
petroleum into olefins and aromatics. This requires temperatures of
around 850 degrees Celsius, which are normally achieved by burning
fossil fuels - which emits high levels of CO2. A fundamentally new
heating concept based on electric resistance heating (eFurnace) and
the use of renewable energy could eliminate up to 90% of process-
related emissions in the future. To develop and pilot the concept, we
signed a cooperation agreement with SABIC and Linde in 2021 and
jointly applied for funding to build a demonstration plant.
It will provide insights into the heating concept, as well as the use of
new types of materials.
In parallel, we are developing methane pyrolysis technology
together with partners from academia and industry in a project spon-
sored by the German Federal Ministry of Education and Research.
In this innovative process, (bio)methane is split directly into hydrogen
and solid carbon. The process requires around 80% less electricity
than water electrolysis and is virtually carbon-free if renewable energy
is used. Following extensive groundwork, we started up a test plant
for methane pyrolysis at the Ludwigshafen site in Germany in 2021.
<>=133
[Our focus here is on the production of basic chemicals such as
hydrogen. The element is needed as a reaction partner in many
processes. The processes currently used to produce hydrogen, such
as steam reforming, produce high levels of CO2 emissions. That is
why BASF is open to different technologies and is driving forward
two alternative processes for climate-smart hydrogen production:
water electrolysis and methane pyrolysis. In water electrolysis,
water is split directly into its two components, hydrogen and oxygen.
If the required energy comes from renewable sources, the process is
carbon-free. We intend to use the hydrogen generated by water
electrolysis primarily as a material in the BASF Verbund and also, to
a limited extent, for hydrogen model region projects in Germany's
Rhine-Neckar region. We are currently working with Siemens Energy
on initial concepts for the construction of a PEM (proton exchange
membrane) water electrolyzer with a capacity of 50 megawatts at the
Ludwigshafen site in Germany. We are also exploring various options
for project funding.
from BASF operations
Share of our waste recycled
or thermally recovered
134
< >
Management's Report - Emissions to Air, Waste and Remediation
BASF Report 2021
For more information on the circular economy, see page 44
We are increasingly aligning our actions with the circular economy
principle. For example, we are increasingly using recycled and
waste-based raw materials in our production, recycling operating
supplies, and expanding our capacities for recovering precious
metals from spent automotive and industrial catalysts. We are also
developing product-specific recycling technologies, often together
with partners along our value chains. For instance, we are driving
forward the chemical recycling of mixed plastic waste and disposed
foam mattresses and are working on new concepts for recycling
battery materials. We are also involved in cross-industry networks
and initiatives to avoid waste and strengthen the circular economy.
These include the Alliance to End Plastic Waste (see box on
page 134) and the Ellen MacArthur Foundation.
supply chain management. We support our suppliers in developing
and implementing measures for improvement, for example in waste
management (see page 111). We offer our customers a wide range
of products that can reduce air pollutants or waste - from industrial
process catalysts, fuel additives and catalysts for the automotive
sector to additives and track-and-trace technologies to extend the
useful life of plastics or improve mechanical recycling of plastic
waste.
47.0%
In addition to optimizing our own processes, we are committed to
reducing the impact on air and soil and minimizing our disposal
volumes and material consumption along our value chains. We
expect our suppliers to comply with internationally recognized envi-
ronmental standards. This is assessed as part of our sustainable
Our waste management is based on the systematic tracking of
material flows and follows a clear hierarchy: We aim to avoid waste
as far as possible, for example, by continuously optimizing our pro-
cesses or developing new production methods. BASF's Verbund
structure with its networked plants and value chains is key here. We
use it to efficiently manage our material flows. The by-products of
one plant serve as feedstock for other plants and processes else-
where in the BASF Verbund, avoiding waste and enabling us to use
raw materials as efficiently as possible.
Continuous documentation and monitoring of emissions to air,
waste streams and contaminated sites as well as the implementa-
tion of measures for improvement are an integral part of our environ-
mental management. In addition to greenhouse gases (see page
126 onward), we also measure and analyze emissions of air pollut-
ants to avoid potentially harmful substances as best possible.
guidelines. BASF's global network of experts regularly shares infor-
mation, insights and best practices to further reduce our emissions
to air, manage waste and responsibly handle contaminated sites.
The safe and efficient operation of our plants and the responsible
management of resources and waste are core components of our
Responsible Care Management system. We have defined our global
standards for emissions to air, waste and contaminated sites in
Group-wide guidelines, the implementation of which is the responsi-
bility of the sites and subsidiaries. The Environmental Protection,
Health & Safety unit in the Corporate Center conducts regular
audits to monitor compliance with legal requirements and internal
Strategy
Circular concepts an important part of our activities
Systematic management of contaminated sites
■ Improvements based on continuous monitoring of emissions
to air and waste streams
If these cannot be used within BASF's Verbund structures, we
assess whether they can be recycled or thermally recovered. Non-
recyclable materials are disposed of safely, appropriately and in an
environmentally responsible manner. If we use external waste
disposal companies, we conduct regular audits to ensure that
waste is disposed of properly. In this way, we also contribute to
preventive soil protection and keep today's waste from becoming
tomorrow's contamination. If soil and groundwater contamination
occurs at active or former sites, appropriate remediation measures
are reviewed and implemented.
Hydrogen is a key element on the journey to climate neutrality. BASF
is developing a process - methane pyrolysis - that significantly
reduces carbon emissions in the production of hydrogen. Find out
more about what drives project manager Dieter Flick and which
groundbreaking technologies are still being researched in the online
report at report.basf.com.
D-BASF
<>=132
Emissions from the use of
end products (C 11)
21
4 4
Transport
Transport of products,
employees' commuting and
business travel (C 4, 6, 7, 9)
Disposal
Incineration with energy
recovery, landfilling (C 12)
Production (including generation
of steam and electricity)
28
Other
(C 3b, 3c, 5,
8, 13, 15)
Good to know
ΚΣΕΙ 131
a According to Greenhouse Gas Protocol; Scope 1, 2 and 3; categories within Scope 3 are shown in parentheses. Scope 3 emissions in category 10 ("Processing of sold products") are not reported according to the standard for
the chemical sector. Only direct use phase emissions are reported in the customer category (Scope 3.11). For more information on our Scope 3 emissions reporting, see basf.com/corporate_carbon footprint
rates the use of these Accelerator solutions as particularly good with
respect to climate protection and energy.
6
Customers
BASF
Purchased products, services and
capital goods (C 1, 2, 3a)
Most of our production processes are already highly optimized. This makes it increasingly difficult to
implement further improvements to reduce CO2. Completely new technologies are needed to reduce
greenhouse gas emissions over the long term and on a large scale. Different teams are working on
this in our Carbon Management R&D Program.
Climate-Smart Chemistry
Innovative Processes for
In focus:
Management's Report - In Focus: Innovative Processes
BASF Report 2021
We also started to make the automated PCF calculation
approach available to interested industry players by way of
partnerships. In a first step, IT companies will be able to trans-
late BASF's methodology and in-house solution into a market-
able software through licensing agreements.
We used the new method to calculate PCFs for around
45,000 sales products in 2021. The transparency this creates
enables us to target our CO2 reduction measures to those
areas where our customers can later achieve the greatest
value added from lower carbon emissions in the value chain.
In 2021, we were able to offer the first products with a certified
reduced carbon footprint through the use of renewable energy.
Waste disposed of
Product Carbon Footprint
For more information on our emissions reporting, see basf.com/corporate_carbon_footprint
For more information on Product Carbon Footprints, see basf.com/pcf
In 2021, we introduced a global Supplier CO2 Management Pro-
gram to create transparency and better steer and, in the long term,
reduce upstream emissions. In a first step, we ask our suppliers
to provide PCFs for our raw materials. We support them by sharing
our knowledge of evaluation and calculation methods. In this way,
we are also contributing to the standardization of PCF calculation.
In a second step, we want to work with our suppliers on solutions
to reduce product-related emissions and establish the PCF as a
criterion for our purchasing decisions.
BASF Report 2021
Management's Report - Energy and Climate Protection
Scope 3 emissions along the BASF value chain in 2021a
Million metric tons CO2 equivalents
59
Suppliers
Emissions to air
Total emissions of air pollutants from our production plants
amounted to 26,358 metric tons in 2021 (2020: 24,496 metric
tons). Emissions of ozone-depleting substances as defined by the
Montreal Protocol totaled 17 metric tons in 2021 (2020: 14 metric
tons). We significantly reduced these emissions compared with
2002 (229 metric tons) by successively shifting to alternative cool-
ants. Emissions of heavy metals' in 2021 amounted to 2 metric tons
(2020: 2 metric tons²).
We use an in-house digital solution to calculate the carbon
footprint of our products (PCF). In 2021, this was recognized
by organizations such as the German chemical industry asso-
ciation (VCI) with the Responsible Care Award for digitalization.
The methodology follows general standards for life cycle
analysis such as ISO 14044 and ISO 14067, as well as the
Greenhouse Gas Protocol Product Standard, and has been
certified by TÜV Rheinland.
Metric tons
0.64
0.75
Through incineration
0.40
0.50
0.56
0.66
0.10
Waste recovered
0.09
0.13
0.43
0.52
Thermally recovered
24,496a
26,358
a The comparative figure for 2020 has been adjusted to reflect updated data.
0.10
(without energy recovery)
0.12
Emissions to air
In surface landfills
We want to further reduce our emissions with various measures. For
instance, we use catalysts to reduce nitrogen oxides or feed waste
gases back into the production process. One example is the nitrous
oxide generated in the production of adipic acid at the Ludwigshafen
site in Germany: 99% of this by-product is already decomposed or
used in the BASF Verbund. In the future, it will even be 99.9%. This
will be made possible by an automation project implemented
in 2021 to optimally control processes based on important plant
parameters and using predictive model calculations. The aim is to
avoid around 550 metric tons of nitrous oxide emissions annually,
corresponding to around 145,000 metric tons of CO2 equivalents.
0.78
0.84
1.43
1.63
0.38
0.34
0.87
0.97
0.05
0.02
0.10
0.10
0.22
0.13
Total
0.31
0.23
0.13
4,532a
4,988
NMVOC
10,646ª
11,450
NOx (total nitrogen oxides)
3,951
(nonmethane volatile organic compounds)
CO (carbon monoxide)
2021
Waste generation in the BASF Group
Million metric tons
BASF generated 2.47 million metric tons of waste in 2021 (2020:
2.21 million metric tons). Of this, 53.0% was disposed of. Hazard-
ous waste accounted for 73.9% of the total disposed waste (2020:
69.6%). Based on the concept of the circular economy, we are
continuously examining options for material or thermal recycling for
all waste (see "Strategy"). In this way, we were able to find new uses
for 47.0% of our waste in 2021. We continuously identify and evalu-
ate the safest and most environmentally sound disposal routes for
non-recyclable waste. In 2021, most of our hazardous waste was
incinerated (77.7%), where possible with energy recovery. 7.6% of
hazardous waste was disposed of in landfill. This is mainly contami-
nated construction waste that cannot be reused or recycled due to
legal requirements.
Waste
NH3 (ammonia) and other inorganic substances
0.37
Air pollutants from BASF operations
2020
Hazardous
3,731a
SOx (total sulfur oxides)
0.14
Recycled
Nonhazardous
1,711
1,951
2020
2021
2020
2,000
2021
2,154
1,864
1,861
Dust
wastea
wastea
4.1%
European Union
United States
Emerging markets of Asia
Japan
South America
In the E.U., we expect chemical production to increase by 2.8%
(2021: 6.0%). We anticipate a significant recovery in the automotive
industry, which will strengthen growth in demand for chemicals. For
the other customer industries, we are forecasting growth slightly
above the long-term average. However, momentum in chemical
production already slowed over the course of 2021. As a result, the
European chemical industry will presumably grow below the average
2.1%
2.7%
1.7%
BASF Report 2021
2.0%
2.8%
Trends in chemical production 2022-2024 (excluding pharmaceuticals)
Average annual real change
World
1.5%
2.5%
3.9%
4.5%
3.5%
European Union
Management's Report - Outlook 2022
South America
United States
Emerging markets of Asia.
Japan
3.3%
Outlook 2022
CO2 emissions forecast for the BASF Group
<>= 148
Chemicals
Sales
Outlook for chemical production 2022 (excluding pharmaceuticals)
Real change compared with previous year
World
Forecast by segmenta
Million €
<>=149
Management's Report - Outlook 2022
BASF Report 2021
1 For sales, "slight" represents a change of 0.1%-5.0%, while "considerable" applies to changes of 5.1% and higher. "At prior-year level" indicates no change (+/-0.0%). For earnings, "slight" means a change of 0.1% -10.0%, while "considerable" is used for changes of 10.1% and higher. "At prior-year level" indicates no change (+/-0.0%).
At a cost of capital percentage of 9% for 2022, we define a change in ROCE of 0.1 to 1.0 percentage points as "slight," a change of more than 1.0 percentage points as "considerable" and no change (+/-0.0 percentage points) as "at prior-year level."
CO2 emissions are expected to be between 19.6 million metric tons
and 20.6 million metric tons in 2022. We will take specific emission
reduction measures to limit the additional emissions from moderate
growth and the expected higher capacity utilization of the ammonia
plants following low capacity utilization in 2021. These include mea-
sures to increase energy efficiency and process optimization, as well
as the continued shift to renewable energy. In addition, the reductions
in emissions from divestitures, including the agreed sale of the kaolin
business, will slightly more than compensate for the additional emis-
sions from the formation of BASF Shanshan Battery Materials Co.,
Ltd. in 2022.
Based on the forecast for global economic development and expected
business development in the BASF Group in 2022, we expect a
ROCE of between 11.4% and 12.6%. Compared with the previous
year, we anticipate a considerable decrease in ROCE in the Chemi-
cals, Materials and Surface Technologies segments. The Agricultural
Solutions and Nutrition & Care segments are expected to consid-
erably increase ROCE, while the Industrial Solutions segment will see
a slight increase.
the Industrial Solutions and Surface Technologies segments. The
Agricultural Solutions and Nutrition & Care segments plan to consid-
erably increase EBIT before special items.
The BASF Group's EBIT before special items is expected to decline to
between €6.6 billion and €7.2 billion. We anticipate significantly lower
contributions from the Chemicals and Materials segments and from
Other. We are forecasting slightly lower EBIT before special items in
The BASF Group is expected to generate sales of between €74 billion
and €77 billion in 2022. Contributing factors will include the volume
growth expected in all segments and slightly positive portfolio effects
from the formation of BASF Shanshan Battery Materials Co., Ltd. We
anticipate lower price levels, mainly from lower commodity and pre-
cious metal prices, which will lead to a significant decrease in sales in
the Surface Technologies and Chemicals segments. We expect
slightly lower sales in the Industrial Solutions segment due to negative
portfolio effects from the sale of the pigments and kaolin businesses.
By contrast, we are forecasting considerable sales growth in the
Agricultural Solutions and Nutrition & Care segments following signifi-
cant price increases. We expect slightly higher sales in the Materials
segment and in Other.
Sales, earnings and ROCE forecast for the BASF Group¹
For more information on our expectations for the economic environment in 2022, see page 145 onward
For more information on our opportunities and risks, see page 151 onward
Our CO2 emissions are expected to be between 19.6 million metric
tons and 20.6 million metric tons in 2022 (2021: 20.2 million metric
tons). No forecast has been made for the previous Accelerator
sales target as we plan to update our portfolio steering target in
2022.
Based on these assumptions, we are forecasting sales of between
€74 billion and €77 billion (2021: €78.6 billion). The BASF Group's
income from operations (EBIT) before special items is expected to
be between €6.6 billion and €7.2 billion (2021: €7.8 billion). ROCE
should be between 11.4% and 12.6% (2021: 13.5%).
Our forecast assumes moderate growth in the majority of our cus-
tomer industries, while the automotive industry is expected to see a
stronger recovery. Our forecast range takes into account uncertainty
resulting in particular from the effects of ongoing supply chain dis-
ruptions, the further course of the coronavirus pandemic and the
development of energy prices. The global economy is expected to
grow by 3.8% in 2022 (2021: 5.8%). As order backlogs in industry
are high, we expect global industrial production to grow by 3.8%
(2021: 6.5%) and chemical production by 3.5% (2021: 6.1%). We
anticipate an average oil price of $75 for a barrel of Brent crude and
an exchange rate of $1.15 per euro.
Capex of around €4.6 billion planned for 2022
■
Projected ROCE of between 11.4% and 12.6%
Forecast sales of between €74 billion and €77 billion
Expected EBIT before special items of between €6.6 billion and
€7.2 billion
At a glance
We expect global economic growth to be somewhat more moderate in 2022 following the very strong recovery in 2021. Global growth should be
supported by the gradual containment of the coronavirus pandemic. Nevertheless, a full recovery of the market environment is still not yet
expected in 2022 as uncertainty remains exceptionally high.
Chemical production in South America will presumably grow at
around the same rate as the economy as a whole (2022: 1.5%;
2021: 4.6%). This will be primarily driven by the significant recovery
in automotive production and continued moderate growth in
demand from agriculture and the raw materials sector.
Japan
For the United States, we are forecasting significantly stronger
growth in chemical production (2022: 4.5%; 2021: 1.8%) following
the weather-related production outages in the previous year. In
addition to statistical base effects, we expect growing demand
above all from the automotive industry, the energy sector and the
consumer goods industry.
2.0%
1.7%
South America
United States
Emerging markets of Asia
Japan
European Union
Trends in gross domestic product 2022-2024
Average annual real change
World
1.6%
2.5%
South America
Emerging markets of Asia
United States
European Union
Real change compared with previous year
World
Outlook for gross domestic product 2022
In South America, growth is expected to weaken significantly in
2022. High net exports of industrial and agricultural commodities will
continue to support the Brazilian economy but will no longer provide
strong growth impetus. Growth in domestic demand will be curbed
by high inflation rates, increased debt and rising interest rates. Over-
all, we are forecasting growth of only 0.4% for Brazil in 2022 (2021:
4.7%). In Argentina, too, growth will slow significantly against the
backdrop of continued very high inflation and increasing fiscal con-
solidation requirements (2022: 2.3%; 2021: 9.0%). For the other
emerging markets in South America, we expect growth to be slightly
higher compared with other countries, but likewise significantly
weaker year on year (2022: 3.2%; 2021: 9.5%), as the positive base
effects from the previous year also level off in these countries.
In Japan, we expect growth momentum to pick up only slightly in
the coming year (+2.5%) after weak growth of just 1.7% in 2021.
Growth will be supported by private consumption and investment,
while the slowdown in China is expected to have a dampening
effect on exports. Government stimulus measures could however
accelerate growth more strongly than assumed in our forecast.
environment, we expect slightly higher GDP growth of 4.6% (2021:
4.2%) for the other emerging Asian economies. This is anticipated
due to positive base effects and a gradual recovery in tourism.
<>=146
Management's Report - Economic Environment in 2022
BASF Report 2021
We expect growth in the emerging markets of Asia to slow
overall. In China, the real estate sector will cool. In addition, the
zero-tolerance policy toward the coronavirus pandemic will likely
curb the recovery in private consumption. We also assume that
selective measures to contain new coronavirus outbreaks will con-
tinue to negatively impact industrial value chains and logistics.
Overall, we expect Chinese GDP to grow by 4.5% in 2022 (2021:
8.1%). Economic development in India remains uncertain given
the still low vaccination rate. We expect growth there to be slightly
lower than in the previous year (2022: 7.0%; 2021: 8.1%). This will
be driven in particular by a recovery in private consumption. In this
EBIT before special items
1 Our assumptions account for current estimates by external institutions, including economic research institutes, banks, multinational organizations and consulting firms.
Outlook for key customer industries
In Japan, we expect growth in chemical production to track the
growth rate for GDP. The strongest growth stimulus will be provided
by the electronics industry and the automotive sector (2022: 2.5%;
2021: 3.7%).
3.8%
3.8%
for the manufacturing sector. We are assuming growth of 2.0% in
the United Kingdom (2021: 2.5%).
In China, the world's largest chemical market, we are forecasting
much weaker growth in chemical production of 4.0% as base effects
from the previous year level off (2021: 7.7%). Growth in demand for
chemicals in the consumer goods industries and from the electron-
ics industry is expected to weaken. We anticipate continued growth
in demand from the Chinese automotive industry. In the other
emerging markets of Asia, we expect chemical growth to be slightly
weaker than in China.
Global chemical production (excluding pharmaceuticals) is expected
to grow by 3.5% in 2022, slower than in the previous year (2021:
6.1%) but still above the average for the years prior to the corona-
virus pandemic. In the advanced economies, we anticipate growth
of 3.1% (2021: 3.9%), which is above the average for the pre-crisis
years. Growth in the emerging markets is expected to slow at a
much stronger rate (2022: +3.7%; 2021: 7.2%). Based on these
forecasts, global chemical production at the end of the year will be
almost 10% above the 2019 level.
Outlook for the chemical industry
Under normal weather conditions, growth in agricultural produc-
tion in 2022 will presumably be similar to the long-term average.
Production in industrialized countries will grow only weakly. By
contrast, we anticipate solid production growth in emerging markets
such as Argentina, China, India and Ukraine.
industry is also likely to return to its long-term growth path after the
gradual reopening of the hospitality sector following the lockdowns
in the previous year provided above-average growth in 2021.
<>=147
Management's Report - Economic Environment in 2022
BASF Report 2021
1 The transportation industry includes the production of motor vehicles, motor vehicle parts and the construction of other vehicles (especially ships and boats, trains, air and spacecraft, and two-wheelers).
In the health and nutrition sector, we are forecasting lower growth
compared with 2021, as the exceptionally strong growth in the
pharmaceutical industry is expected to level off. Growth in the food
In the electronics industry, demand is likely to remain high and
benefit from the ongoing trend toward digitalization and automation
in many areas of application, both in industry and in private house-
holds. Nevertheless, we expect weaker growth compared with the
exceptionally strong prior year.
Consumer goods production is expected to grow slightly faster
than global GDP. We expect growth in textiles and consumer dura-
bles to decline. Production of care products will presumably likewise
grow at a slightly slower rate than in the previous year.
Growth in the construction industry is expected to weaken some-
what. More so than in 2021, commercial construction and infra-
structure investment will be a stronger driver than new residential
construction. Residential construction activity is expected to cool
sharply, especially in China. However, the infrastructure program
in the United States, projects under the European Recovery and
Resilience Facility, further government programs to support the
energetic renovation of existing buildings and still low interest rates
will continue to support growth in the construction industry.
In the energy and raw materials sector, we are forecasting slightly
higher production growth than in 2021 due to strong demand and
higher raw materials prices. We expect the OPEC+ countries to
continue to gradually step up oil production. Oil and gas production
in the United States should increase as well.
Automotive production there fell by around one-fifth overall in the
past two years, compared with around 7% in Asia. Accordingly, we
anticipate the strongest catch-up effects in Europe, followed by
North America and Asia. However, the supply of precursors, espe-
cially semiconductors, will remain a problem and will continue to
limit growth.
We are forecasting higher growth in the transportation industry¹ in
2022 compared with our other customer industries on average.
Based on the current, exceptionally low level, we expect production
in the automotive industry to return to strong growth. Overall, pro-
duction volumes will however still remain well below pre-coronavirus
pandemic levels. Growth should pick up again in Europe in particu-
lar, after automotive production declined by 26% overall in 2020
and 2021. North America also has a lot of ground to make up.
Overall, we anticipate growth of 3.8% (2021: 6.5%) in global indus-
trial production. Growth in the advanced economies (2022: 3.4%;
2021: 5.3%) is likely to be weaker than growth in the emerging
markets (2022: 4.1%; 2021: 7.4%).
4.9%
2.8%
2.6%
3.2%
4.8%
3.6%
2021
Dividend
2021
Geismar, Louisiana
Construction: production plant for hexamethylenediamine
Chalampé, France
Europe
Capacity expansion: integrated ethylene oxide complex
Gradual capacity expansion: alkoxylates
Antwerp, Belgium
37%
Project
Location
Asia Pacific
45%
Capex by region 2022-2026
Surface Technologies
18%
Industrial Solutions
3%
11%
Materials
Capex: selected projects
Projects currently being planned or underway include:
We are planning capital expenditures (additions to property, plant
and equipment excluding acquisitions, IT investments, restoration
obligations and right-of-use assets arising from leases) of around
€4.6 billion for the BASF Group in 2022. For the period from 2022 to
2026, we have planned capital expenditures totaling €25.6 billion,
including €12.9 billion for our major growth projects. The investment
volume in the next five years will thus be above that of the planning
period 2021 to 2025 (€22.9 billion). Focus areas will be our invest-
ment project in Zhanjiang, China, to expand our businesses in Asia,
as well as investments in battery materials.
Capital expenditures (capex)
Chemicals
27%
Capacity expansion: MDI plant
Capex by segment 2022-2026
Harjavalta, Finland, and
Schwarzheide, Germany
Alternative sites currently being investigated
For the United States, we are forecasting growth of 3.8% (2021:
5.7%). Growth will be supported by government spending on infra-
structure, social and climate programs. A continued revival of the
labor market should partially compensate for the phasing out of
extended unemployment benefits under the COVID relief package.
Delays in the clearance of goods at U.S. ports should gradually
become less relevant as growth in demand for goods slows and
shifts toward the services sector. In addition, congestion at ports
should gradually ease. Labor shortages will prevent a stronger
upturn, which will dampen the recovery in the services sector in
particular.
South America, Africa,
Middle East
2%
€25.6 billion
On January 4, 2022, the Board of Executive Directors resolved on a
share buyback program with a volume of up to €3 billion, which shall
be concluded by December 31, 2023, at the latest.1 The share buy-
back program started on January 11, 2022.
Events after the reporting period
1%
15%
North America
In 2022, we expect cash outflows in the equivalent amount of
around €2.0 billion from the scheduled repayment of bonds. To
refinance maturing bonds and to optimize our maturity profile, we
continue to have medium to long-term corporate bonds and our
global commercial paper program at our disposal.
Information on our financing policies can be found on page 64
Financing
Other (infrastructure, R&D)
28%
4%
Agricultural Solutions
€25.6 billion
Information on the proposed dividend can be found on page 13
We have an ambitious dividend policy and offer our shareholders an
attractive dividend yield. We aim to increase our per-share dividend
each year.
Nutrition & Care
9%
150
< >
1 Subject to a renewed authorization to purchase own shares by the Annual Shareholders' Meeting on April 29, 2022.
Planned construction: integrated Verbund site
Investment: battery materials
Zhanjiang, China
Forecast 2022
trading. Despite lower corporate research expenses, we anticipate
considerably lower EBIT before special items for 2022 compared
with the previous year.
BASF Report 2021
715
8,162
8.2%
497
6,442
Nutrition & Care
5.6%
800
22,659
Surface Technologies
15.2%
1,006
8,876
Industrial Solutions
22.8%
2,418
15,214
Materials
32.9%
2,974
13,579
2021
Forecast 2022
4.5%
Management's Report - Outlook 2022
3,666
Agricultural Solutions
Sales in Other are expected to be slightly above the 2021 level in
2022. This will be mainly attributable to sales growth in commodity
We are forecasting considerable sales growth in the Agricultural
Solutions segment. We will raise our sales prices and volumes in a
continued challenging market environment, characterized by supply
bottlenecks and high energy and raw materials prices. Based on the
positive development of sales, we anticipate a strong improvement
in EBIT before special items. In 2022, we will continue to invest in
research and development and digitalization at a high level.
For the Nutrition & Care segment, we expect considerable sales
growth compared with 2021. We anticipate higher volumes in both
divisions and higher price levels overall, primarily due to the passing
on of higher raw materials prices and logistics and energy costs.
This will be partly offset by portfolio effects from the sale of the pro-
duction site in Kankakee, Illinois. The segment's EBIT before special
items should be significantly above the prior-year level. We expect
significantly higher earnings contributions from both divisions, mainly
due to higher margins on the back of strong volume growth.
In the Surface Technologies segment, we are forecasting consid-
erably lower sales in 2022, primarily as a result of lower precious
metal prices in the Catalysts division. This will be partly offset by
higher volumes in both divisions. The segment's EBIT before special
items is expected to decline slightly. We anticipate considerably
higher EBIT before special items in the Coatings division but a con-
siderable year-on-year decrease in EBIT before special items in the
Catalysts division due to lower contributions from precious metal
trading.
forecasting a slight decline in the segment's EBIT before special
items compared with 2021. This will primarily result from the
decrease in the Dispersions & Resins division, largely due to the
divestiture of the pigments business. The Performance Chemicals
division will likely see significant growth in EBIT before special items
I mainly as a result of higher sales volumes and stronger margins.
However, this will not be able to fully compensate for lower earnings
in the Dispersions & Resins division.
We expect sales in the Industrial Solutions segment to be slightly
below the prior-year level. Higher volumes and continuing high price
levels in both operating divisions will presumably not be able to
completely offset the negative portfolio effects from the divestiture
of the global pigments business as of June 30, 2021. We are
For the Materials segment, we are forecasting slight sales growth in
2022. Despite the strong recovery in 2021, this will be largely attri-
butable to further volume growth in both divisions. Increased infla-
tionary pressures will be offset by efficiency gains. We anticipate
lower prices due to a normalization of the market environment. EBIT
before special items in the Monomers division is expected to
decrease considerably after strong margins in 2021 as a result of
lower price levels and higher raw materials prices. In the Perfor-
mance Materials division, by contrast, we anticipate a considerable
increase in EBIT before special items due to the positive develop-
ment of sales volumes. However, this will only be able to partly
compensate for the decline in the Monomers division.
For the Chemicals segment in 2022, we expect sales to decline
considerably following very high prices in 2021 due to supply short-
ages in the market. The decrease in 2022 will be driven by consid-
erably lower sales in the Petrochemicals division. We expect a
normalization of the market situation, particularly in the United
States, following the supply disruption caused by Winter Storm Uri
in January 2021. In the Intermediates division, we anticipate higher
sales volumes driven mainly by amines and polyalcohols. Prices in
the segment are expected to decline to a lower level while higher
raw materials prices will put pressure on margins. For both divisions,
we therefore anticipate a considerable decline in EBIT before special
items.
Sales and earnings forecast for the segments
The material opportunities and risks that could affect our forecast are
described under Opportunities and Risks on pages 151 to 160.
a For sales, "slight" represents a change of 0.1%-5.0%, while "considerable" applies to changes of 5.1% and higher. "At prior-year level" indicates no change (+/-0.0%). For earnings, "slight" means a change of 0.1%-10.0%,
while "considerable" is used for changes of 10.1% and higher. "At prior-year level" indicates no change (+/-0.0%). At a cost of capital percentage of 9% for 2022, we define a change in ROCE of 0.1 to 1.0 percentage points as
"slight," a change of more than 1.0 percentage points as "considerable" and no change (+/-0.0 percentage points) as "at prior-year level."
Considerable increase/decrease: "considerable" represents a change of 5.1% or higher for sales; 10.1% or higher for earnings; more than 1.0 percentage points for ROCE.
Slight increase/decrease: "slight" represents a change of 0.1% -5.0% for sales; 0.1%-10.0% for earnings; 0.1 to 1.0 percentage points for ROCE
11.4%-12.6%
13.5%
7,768 €6.6 billion-€7.2 billion
-643
Forecast 2022
ROCE
At prior-year level: no change (+/-0.0%)
+
BASF Group
Other
78,598 €74 billion-€77 billion
We expect the recovery to continue in the United Kingdom,
although this is subject to considerable uncertainty. In particular,
labor shortages in logistics and hospitality may slow further recov-
ery. Overall, we anticipate GDP growth of 3.8% there (2021: 7.5%).
In line with increasingly ambitious climate protection targets, CO₂
transparency is becoming more and more important for us and our
customers. We have published a comprehensive corporate carbon
footprint along our value chain every year since 2008. In addition,
we already calculated carbon footprints for individual products in the
past. To further increase transparency, we developed a digital solu-
tion to determine product-specific greenhouse gas emissions in
2020 and have since calculated the carbon footprints of around
45,000 sales products. These Product Carbon Footprints include all
greenhouse gas emissions from raw material extraction to the
finished BASF product leaving the factory gates ("cradle-to-gate").
Trends in the global economy in 2022
Significant sustainability concern identified and
action plan in development or implementation
Assessed
portfolio
€71,041 million
enables us to systematically improve them. We review the cate-
gorization of the portfolio at least every four years. This includes
analyzing the portfolio in workshops.
If, during reassessment of our portfolio, we identify products with
significant sustainability concerns, we classify these as "challenged."
We develop and systematically implement action plans for all
products in this category. These include research projects and
reformulations to optimize products, or even replacing the product
with an alternative. To systematically align our portfolio with con-
Performer sales
2021 €39,033 million
2020: €30,519 million
Transitioner sales
2021: €7,879 million
2020: €6,799 million
Challenged sales
2021 €26 million
2020: €72 million
tributions to sustainability, in 2018 we started phasing out all
Challenged products within five years of their initial classification at
the latest. We strive to offer products that make a greater contribu-
tion to sustainability in their area of application to live up to our own
commitments and meet our customers' demands. That is why an
adapted version of our Sustainable Solution Steering method is
used in areas such as our research and development pipeline, and
in merger and acquisition projects. The results and any measures
required are part of our business strategies.
BASF Report 2021
Management's Report - Circular Economy
Challenged
<>= 142
In 2021, we generated sales of €24.1 billion with Accelerator
products (2020: €16.7 billion) - already reaching our target for 2025.
Accelerator products account for 33.9% of the assessed relevant
portfolio. Sales of Accelerator products rose by 44.3% compared
with the previous year. This is primarily attributable to the positive
development of Accelerator sales in the Surface Technologies
and Chemicals segments. Performer products account for 54.9%,
Transitioner products for 11.1% and Challenged products for 0.1%
of the solutions assessed.
New market requirements arise as a result of the continuous develop-
ment of new product solutions in the industry or changing regulatory
frameworks. This has an effect on the comparative assessment,
which is why we regularly reassess our product portfolio.
For more information on Sustainable Solution Steering, see basf.com/en/sustainable-solution-steering
[Circular economy]
Circularity is a particular focus in the continued development of our
product portfolio. This enables us to help our customers achieve
their sustainability goals while improving the resource and carbon
footprint of our products.
By 2030, we aim to generate sales of €17 billion with solutions for
the circular economy. These include products based on renewable
or recycled raw materials that close material cycles ("close the loop")
or increase the resource efficiency or life of materials ("extend the
loop").
In addition, we want to increasingly use alternative raw materials in
the manufacturing of our products. These include bio-based raw
materials such as bionaphtha and biogas, and renewable raw
materials such as RSPO-certified palm oil, which we have been
using for many years as a substitute for fossil resources. To expand
our supply base for alternative raw materials and at the same time,
contribute to the circular economy, we are also developing new,
waste-based sources of raw materials. To achieve this, we develop
innovative technologies, usually in cooperation with partners, for
example for the chemical recycling of plastic waste or disposed
mattresses made of polyurethane. We aim to process 250,000 met-
ric tons of recycled and waste-based raw materials in our production
plants annually from 2025.
One of the steps we have taken to achieve our goals is establishing
a company-wide Circular Economy Program. As part of this pro-
gram, BASF teams are currently developing new approaches to the
three main action areas in more than 35 initiatives: alternative raw
material pathways, innovative material cycles and new business
models for the circular economy which also include digital and
service-based concepts.
-
For more information on the circular economy, see page 44
For more information on raw materials, see page 112 onward
By the end of the 2021 business year, we had evaluated 98.7% of
the relevant portfolio¹ (2020: 98.4%). This refers to the BASF Group's
sales from products in its strategic portfolio to third parties in the
business year concerned. By the end of 2021, sustainability
analyses and assessments had been conducted for more than
56,000 specific product applications (2020: >57,000), accounting
for €71 billion in sales (2020: €54.1 billion).
Specific sustainability issues which are
being actively addressed
Transitioner
Meets basic sustainability standards
on the market
Overall, we anticipate moderate GDP growth of 3.6% (2021: 5.2%)
in the European Union (E.U.). This will be driven in part by the
economic upturn in the services sector and the gradual overcoming
of supply difficulties that we anticipate for the industrial sector.
Growth will also be supported by payments from the European
Recovery and Resilience Facility. We expect the differences in
growth rates between the E.U. member states to be less pro-
nounced than in the previous year. The dynamic recovery in the
western European countries that grew particularly strongly in 2021
(France, Italy) is expected to weaken somewhat, while Germany
should see slightly stronger growth. In the eastern E.U. countries,
we expect growth rates to converge at a similar level.
BASF Report 2021
Management's Report - We Drive Sustainable Solutions
"We Drive Sustainable Solutions]
Innovations based on chemistry are key to solving global challenges such as climate change or resource scarcity.
They can play a pivotal role in reducing emissions or decoupling growth and resource consumption, for example.
Targeted research and development is the foundation for sustainable solutions and an important growth driver for
BASF.
Steering Our Product Portfolio
GRI
102, 416, 417
SUPPLIERS
BASF
CUSTOMERS
Classification of assessed portfolio according to the Sustainable Solution Steering method
Accelerator
Substantial sustainability contribution
Accelerator sales
2021 €24,103 million
2020: €16,740 million
In this section:
Steering Our Product Portfolio
Circular Economy
Product Carbon Footprint
We take advantage of business opportunities by offering our cus-
tomers innovative products and solutions that support their sustain-
ability goals. We ensure that the business units follow standard
processes to evaluate and take into account relevant sustainability
criteria when they develop and implement strategies, research
projects and innovation processes.
Accelerator products make a substantial sustainability contribution
in the value chain. These include catalysts that reduce emissions to
the environment, biodegradable mulch films for agricultural applica-
tions, and high-performance insulation materials for higher energy
savings and reduced material use in building construction.
Based on our corporate strategy, we have set ourselves a global
target: We aim to make sustainability an even greater part of our
innovation power and achieve €22 billion in Accelerator sales by
2025. We met this target already in 2021. Consequently, we will
update our product portfolio steering target over the course of 2022.
A significant steering tool for the product portfolio, based on the
sustainability performance of our products, is the Sustainable Solu-
tion Steering method. It considers our products' applications in
various markets and customer industries. Transparently classifying
our products on the basis of their contribution to sustainability
in the value chain
Performer
[Product Carbon Footprint]
1 The definition of the relevant portfolio and further information can be found in the Sustainable Solution Steering manual at basf.com/en/sustainable-solution-steering
ΚΣΕΙ 141
To determine the carbon footprint of our purchased raw materials
(upstream Scope 3 emissions), we have until now worked with
industry averages and values from external databases. To obtain a
more accurate data base and reduce emissions in the supply chain,
we launched our Supplier CO2 Management Program in 2021. The
aim of the program is to, in a first step, determine the carbon foot-
prints of raw materials as accurately as possible. We support our
suppliers here by sharing our knowledge of valuation and calculation
methods, for example. In the second step, we then want to work
with our suppliers to identify levers and targets to continuously
reduce greenhouse gas emissions along the supply chain.
Natural ingredients for industrial and consumer goods
Both industrial users and end consumers are increasingly interested
in nature-based ingredients. We are addressing this trend with a
growing portfolio of plant-based solutions. One example is
DisponilⓇ APG 215 for the wood processing industry. Used as an
adjuvant in production, this surfactant increases the bond strength
of medium-density fiberboard (MDF). This enables manufacturers to
achieve a denser and smoother surface and with it, improved
water-repellent properties compared with conventional manufactur-
ing processes. DisponilⓇ APG 215 also offers energy saving potential
in the production process and is 100% based on natural, renewable
plant-based raw materials.
Alongside the natural trend, sensory characteristics such as consis-
tency and texture play an important role in skin and hair care. That is
why we are researching and developing alternatives to synthetic
ingredients and excipients for cosmetics and personal care prod-
ucts. One example is Hydagen® Clean. Launched on the market in
2021, the biopolymer is characterized by its ease of use and high
quality. It can be processed in both cold and hot water and is bio-
degradable. It is extracted from the tuber of the konjac plant native
to southwest China and is suitable for applications such as gels and
fluids, as well as novel products such as patches and jelly cosmetics.
Reducing the environmental impacts of agriculture
The demand for food, feed and energy is increasing, while natural
resources are limited. Agriculture is a key enabler in providing
enough healthy, affordable food. Our innovative solutions help farm-
ers find the right balance between productive and sustainable
cultivation. One example is RevysolⓇ. The new fungicidal active
ingredient controls several economically important fungal diseases
in several key crops globally. Its enhanced efficacy, improved selec-
tivity and favorable regulatory profile allows farmers to maximize
yield and to reduce the need to convert more natural habitat to
farmland. RevysolⓇ's performance and its formulation innovation,
which provides long-lasting protection under critical weather condi-
tions, avoids the need for repeated fungicide applications. RevysolⓇ
helps to significantly reduce CO2 emissions per ton of crop.
BASF tapped the Brazilian market with Pingo Doce™ watermelons,
introducing not only high-quality seeds but also a new business
model. BASF provides technical support to farmers and demon-
strates best practices in efficient water management, fertilization
and traceability to establish sustainable production. Regular quality
controls are carried out to check the sweetness, color and size of
the watermelons in order to reduce the amount of fruit rejected by
supermarkets. This new approach delivers a product that benefits
farmers, consumers and the environment alike.
BASF Report 2021
Management's Report - Economic Environment in 2022
Forecast
We expect the global economic recovery to continue in 2022. As a result, we anticipate global GDP growth of 3.8%
(2021: +5.8%). Global growth should be supported by the gradual containment of the coronavirus pandemic. In the
advanced economies in particular, demand will increasingly shift from goods to services. However, the bottlenecks
in global supply chains will ease only slowly. As order backlogs in industry are high, we expect global industrial
production to grow at an above-average rate of 3.8% and chemical production at 3.5%.
<>=145
In this section:
Economic Environment 2022
Outlook 2022
Opportunities and Risks
At a glance
Moderate GDP growth expected in Europe and the United States
■ Strong growth assumed in Asia
■Moderate growth in global industrial production
Fragile recovery in the automotive industry
■ Slower but still above-average growth forecast for the chemical
industry
For Europe and the United States, we expect a moderate weaken-
ing of growth momentum compared with the previous year. For
China, however, - which made an earlier start to its economic recov-
ery following the downturn in 2020 - we anticipate much slower but
still solid growth. Growth in the other emerging markets in Asia will
likely be slightly stronger than in the previous year.
However, uncertainty about future developments remains high. The
further course of the coronavirus pandemic could impact demand
more severely than expected. Supply difficulties in the global value
chains could continue for longer than assumed in our outlook. High
The data helps us to target our CO2 reduction measures to those
areas where our customers can later achieve the greatest value
added from lower carbon emissions in the value chain.
energy prices and higher inflation rates could dampen consumer
purchasing power more strongly than expected in our forecast.
We also have sustainable solutions for packaging and food contain-
ers made of cardboard, such as cups or boxes. Until now, these
have typically been coated with a thin layer of polyethylene, which
provides a protective barrier to liquids. However, this plastic layer
makes recycling difficult. With its Joncryl HPB 4K range, BASF has
developed a dispersion system that provides an excellent liquid
barrier. Unlike conventional solutions, it is water-based. This makes
it possible to efficiently recycle coated cardboard.
Materials such as Infinergy® can be recycled. The expanded poly-
urethane is used in products such as shoe soles thanks to its out-
standing spring and cushioning properties. Through a combination
of mechanical processing and finishing, Infinergy can be recycled
and regenerated with its original level of material quality.
Economic Environment in 2022¹
Our innovative technologies and solutions help to reduce waste
generation and increase the amount of waste that can be recycled.
One example is our portfolio of plastics additives. Among other
things, these additives help to reduce waste by improving the dura-
bility of materials. Additives also enable improved mechanical recy-
cling. For example, the IrgaCycleTM product series launched in 2021
helps our customers avoid certain quality problems in mechanically
recycled plastics. This means that recycled plastics can also be
used for higher-value applications and recycled content can be
increased in the manufacture of new products.
For more information on our corporate carbon footprint and Supplier CO₂ Management Program,
see page 130 onward
In addition to our mechanical recycling solutions, we are driving
forward chemical recycling (see page 115). In our ChemCycling™
project, our technology partners convert waste such as used tires or
mixed plastic waste, which was not previously recycled, into pyroly-
sis oil. We can feed this pyrolysis oil into our Verbund structure in
place of fossil raw materials and use it to make new products based
on a certified mass balance approach. This reduces waste, saves
resources and simultaneously reduces the carbon footprint of our
products. One example is StyroporⓇ Ccycled TM, which is used to
manufacture products like insulated transport boxes for temperature-
sensitive goods such as coronavirus vaccines. Another application
is functional textiles. For example, VAUDE will be launching outdoor
pants made using our UltramidⓇ Ccycled TM polyamide from 2022.
BASF Report 2021
Management's Report - In Focus: Sustainable Solutions
In focus:
BASF Solutions for a
Solutions based on chemistry are fundamental to a sustainable future. Every day, around
111,000 employees at BASF work to turn good ideas into innovative products that help solve
global challenges such as climate change, resource scarcity or food supply.
ΚΣΕ 143
Although one of BASF's oldest products, sodium nitrate is also used
for innovative applications: Its excellent heat storage properties
makes the technical salt ideal for solar thermal plants. BASF supplies
it to one of the largest solar projects in the world - Noor Energy 1 in
Dubai.
Enabling climate-smart mobility
The transportation sector is one of the largest sources of green-
house gases. In Europe, for example, around one-quarter of all
CO2 emissions are caused by road traffic. BASF helps to reduce
exhaust emissions and vehicle fuel consumption with innovative
solutions to treat exhaust gases such as zeolite SCR catalysts
or tri-metal catalyst technology (see page 82), KeropurⓇ fuel addi-
tives or lightweight high-performance plastics such as UltramidⓇ,
UltradurⓇ or Elastoflex®.
At the same time, as a leading supplier of battery materials for
lithium-ion batteries, we are paving the way for the age of electro-
mobility. Here, too, the focus is on sustainability – from the respon-
sible procurement of mineral raw materials and the most economical
use in production to recycling at the end of the life cycle. In the future,
the carbon footprint of our European production will be significantly
below the industry standard thanks to our efficient manufacturing
processes, the high share of renewable energy, and regional pro-
curement and recycling of key raw materials.
Sustainable Future
expects to save around 3,700 metric tons of kerosene and reduce
CO2 by around 11,700 metric tons every year.
In aviation, the Novaflex Sharkskin surface film developed jointly with
Lufthansa Technik leads to noticeable CO2 reductions. Its structure
is modeled on sharkskin and optimizes aerodynamics at the flow-
related parts of the aircraft. The sharkskin technology will be used
on Lufthansa Cargo's entire freighter fleet from 2022. Through its
use on the 10 Boeing 777F freighters alone, Lufthansa Technik
Avoiding CO₂ through efficient thermal insulation
<>=144
An important lever in reducing CO2 is the energy efficiency of build-
ings. For a number of years now, we have also offered biomass
balance versions of our proven insulating materials StyroporⓇ,
NeoporⓇ, StyrodurⓇ and ElastopirⓇ. Under a certified mass balance
method, we replace 100% of the fossil raw materials used in the
production of these product lines with renewable feedstocks. This
significantly reduces the carbon footprint of the end product - in the
case of NeoporⓇ BMB, by 66% per cubic meter of insulation panel
compared with conventional NeoporⓇ.
BASF Report 2021
Management's Report - In Focus: Sustainable Solutions
Other examples are the amine-based hardeners Baxxodur® EC 301
and EC 201. Both have proven effective in processing epoxy resins
for the manufacture of rotor blades for modern wind turbines.
BaxxodurⓇ hardeners contribute significantly to the advantageous
properties of the cured epoxy resin, such as low weight, high
mechanical strength, and high chemical and thermal resistance - all
of which are key to the longevity of rotor blades.
BASF products enable renewable energies to be used more effi-
ciently. One example is solar salt. This mixture of sodium nitrate and
potassium nitrate is used in concentrated solar power (CSP) plants
(image left). As a heat transfer fluid at high temperatures of over
550 degrees Celsius, molten solar salt allows solar energy to be
stored and thus used even in bad weather or at night.
Making better use of sun and wind
Creating new products from waste
For more information on innovation, see page 49 onward
Procurement, supply chain and infrastructure
Supply security for raw materials, energy and services is increas-
ingly affected by trade disputes, protectionism and geopolitical
conflict. In addition, supply chains are increasingly threatened by
disruptions such as suppliers' production bottlenecks, interrupted
logistics chains, extreme weather events, and longer-lasting
effects from the coronavirus pandemic. Climate change and extreme
weather events are impacting the availability of renewable
resources.
We expect that the digital disruption of established processes will
lead to a sharp increase in efficiency and effectiveness in some
fields. BASF is therefore committed to taking a leading role in the
digital transformation of the chemical industry. Possible applications
of digital technologies and solutions are evaluated along the entire
value chain and implemented throughout the company, for exam-
ple, in production, logistics, research and development, business
models and corporate governance.
These risks, as well as the introduction of new environmental regu-
lations (for example, carbon fees), can have an impact on purchas-
ing prices. Transportation costs are significantly affected by capacity
constraints (for example, a lack of truck drivers, traffic jams due to
inadequate logistics infrastructure).
Most employees are granted company pension benefits from either
defined contribution or defined benefit plans. We predominantly
finance company pension obligations externally through separate
plan assets. This particularly includes BASF Pensionskasse WaG
and BASF Pensionstreuhand e.V. in Germany, in addition to the
large pension plans of our Group companies in North America, the
United Kingdom and Switzerland. To address the risk of underfund-
ing due to market-related fluctuations in plan assets, we have
investment strategies that align return and risk optimization to the
structure of the pension obligations. Stress scenarios are also simu-
lated regularly by means of portfolio analyses. An adjustment to the
We are seeing an ongoing expansion of the regulatory framework
affecting us and our suppliers. Potential non-compliance by our
suppliers may lead to a reduced supplier base. Moreover, the avail-
ability of renewable energies depends largely on favorable prices
and framework conditions.
Management's Report - Opportunities and Risks
To assess the changing risks for our sites from climate change,
climate data based on the latest scenarios of the Intergovernmental
Panel on Climate Change (IPCC) were compiled for our sites in
cooperation with an external partner. This enables the sites to
BASF Report 2021
< >
159
Further risks may arise from increasing state protectionism and the
demand for localization of intellectual property in order to achieve
technological independence. Through our Know-how Verbund in
research and development, we ensure that critical intellectual prop-
erty is generated and protected in countries with high intellectual-
property standards.
assess the potential impact of climate change in the coming
decades. Here, we focus on a climate protection scenario, supple-
mented by two scenarios with medium and high levels of global
warming. The most common potential impact is an increase in heat
and drought. The findings can be considered in the development of
site strategies.
The availability of our infrastructure, production plants and supply
chains can be negatively affected by system downtime, confiden-
tiality breaches, or manipulation of data in critical IT systems and
applications. The threat environment has changed in recent years,
as attackers have become better organized, use more sophisticated
technology, and have far more resources available.
These risks are continuously analyzed and appropriate strategies
and measures developed to minimize the impact on BASF.
There are technical and commercial risks of failure associated
with every single research and development project. We also
address this by maintaining a balanced and comprehensive project
portfolio as well as through professional, milestone-based project
management.
BASF Report 2021
Innovation
interest rates used in discounting pension obligations leads immedi-
ately to changes in equity. To limit the risks of changing financial
market conditions as well as demographic developments,
employees have, for a number of years now, been almost exclu-
sively offered defined contribution plans for future years of service.
Some of these contribution plans include minimum interest
guarantees. If the pension fund cannot generate this, it must be
provided by the employer. A permanent continuation of the low
interest rate environment could make it necessary to recognize
pension obligations and plan assets for these plans as well.
Portfolio development through investments
Strategic opportunities and risks
Long-term demand development
We assume that growth in chemical production (excluding pharma-
ceuticals) will be about as strong as that of the global gross
domestic product over the next five years and stronger than the
five-year average prior to the coronavirus pandemic. Through our
market-oriented and broad portfolio, which we will continue to
strengthen in the years ahead through investments in new produc-
tion capacities, research and development activities and acquisi-
tions, we aim to achieve volume growth that slightly exceeds this
market growth. Should global economic growth see unexpected,
considerable deceleration because of prolonged restrictions due
to the coronavirus pandemic, an ongoing weak period in the
emerging markets, protectionist tendencies or geopolitical crises,
the expected growth rates could prove too ambitious.
For more information on the corporate strategy, see page 26 onward
Development of competitive and customer landscape
We expect competitors from Asia and the Middle East in particular
to gain increasing significance in the years ahead. Furthermore, we
predict that many producers in countries rich in raw materials will
expand their value chains in consumer-oriented sectors. In addition,
the proliferation of large-scale digital marketplaces for chemicals
could impact existing customer and supplier relationships.
We expect the trend toward increased sustainability requirements in
our customer industries to continue. Our aim is to leverage the
resulting opportunities in a growing market with even more sustain-
able innovations. The key areas are products with a lower or even
net zero carbon footprint, circular economy solutions, and safe and
sustainable products. To be successful in these fields, we have
launched specific research and investment programs for the
sustainable transformation of BASF. Furthermore, we began apply-
ing the Sustainable Solution Steering method to the evaluation of
innovation projects and integrated it at an early stage of our research
and development processes. In this way, we are steering our inno-
vation portfolio toward increased sustainability, which leads to
higher profitability while reducing reputational and financial risks as
well.
Management's Report - Opportunities and Risks
We expect a continuous rise in customer demand for sustainable
solutions, for example, products with a low carbon footprint, made
from recycled, circular, or bio-based raw materials that are bio-
degradable, or products with other measurable sustainability
benefits. We are therefore addressing these topics in research and
investment programs for the sustainable transformation of BASF.
Companies with a proven track record of providing more sustainable
solutions will be able to achieve higher growth and profitability as a
result. The expansion of sharing economy business models could
have a long-term impact on demand in individual customer indus-
tries. At the same time, higher demands on product features can
also create opportunities for innovation.
To maintain our competitiveness, we are continuously improving our
production processes, streamlining our administration and simplify-
ing workflows and processes as part of our excellence programs.
Our research and business focus is on highly innovative businesses
and differentiation through sustainability advantages to make our
customers and BASF more successful.
For more information on the Excellence Program, see page 21
Regulation/policy
We expect to achieve continued regulatory and societal pressure,
climate-neutral energy production, climate-neutral energy consump-
tion, and a climate-neutral resource and raw material base. The
political approaches to address these issues will vary greatly from
region to region. However, based on Europe in particular, we expect
measures with a high level of regulation and detail that will have
the potential to significantly impact the competitiveness of BASF's
operations and product portfolio.
Furthermore, we see the risk of the current geopolitical shift in bal-
ance of power leading to the establishment of uncoordinated or
divergent global legislative standards and regulatory systems, not
just in relation to chemicals, but also to environmental, social and
corporate governance criteria and the regulatory framework for
digitalization.
We counter these risks as part of our corporate strategy. We explain
our strategy in meetings with political decision-makers and social
stakeholders. In doing so, we also inform ourselves of the changes
we must undergo and advocate for a favorable and stable regu-
latory framework at both the national and international level. We
consider BASF to be in a strong position to contribute solutions
toward achieving U.N. development goals, particularly regarding
climate neutrality, through new technologies, innovative products
and processes and our broad product portfolio.
< > 158
We expect growth in chemical production in emerging markets
to remain above the global average in the years to come. This will
create opportunities that we want to exploit by expanding our local
presence. In addition, regional value chains help mitigate risks from
trade conflicts and barriers that pose a challenge to global markets
and supply chains.
Evaluation of the control environment
Investments in more sustainable technologies represent a long-term
opportunity, even though they may not be competitive or profitable
in the short term, depending on the market and the prevailing regu-
latory framework.
For more information on our positions on and contributions to climate protection, see
basf.com/en/sustainable-solution-steering
160
-
The process for identifying, evaluating, managing and controlling
risks related to preparing the Consolidated Financial Statements as
well as monitoring these processes in the selected companies com-
prises the following steps:
Moreover, a centralized selection process identifies companies that
are exposed to particular risks, that are material to the Consolidated
Financial Statements of the BASF Group, or that provide service
processes. The selection process is conducted annually. Persons
responsible for implementing the requirements for an effective con-
trol system in financial reporting are appointed at the relevant
companies.
Material risks for the BASF Group regarding a reliable control envi-
ronment for proper financial reporting are reviewed and updated on
an annual basis. Risks are compiled into a central risk catalog.
An internal control system for financial reporting continuously moni-
tors these principles. To this end, methods are provided to ensure
that evaluation of the internal control system in financial reporting is
structured and uniform across the BASF Group. They also work in
accordance with the international risk management standard,
COSO II Enterprise Risk Management - Integrated Framework.
For more information on opportunities and risks from energy policies, see page 155
<>=154
BASF Report 2021
Employees involved in the accounting and reporting process meet
the qualitative requirements and participate in training on a regular
basis. There is a clear assignment of responsibilities between the
specialist units, companies and service units involved. We strictly
adhere to the principles of segregation of duties and dual control, or
the "four-eyes principle." Complex actuarial reports and evaluations
are produced by specialized service providers or specially qualified
employees.
applicable in the European Union, defines the significant processes
and deadlines for the Group. There are binding directives for the
internal reconciliations and other accounting operations within the
Group. Standard software is used to carry out the accounting pro-
cesses for the preparation of the individual financial statements as
well as for the Consolidated Financial Statements. There are clear
rules for the access rights of each participant in these processes.
Research units
Service units
Risks from pension obligations
The Consolidated Financial Statements are prepared by a unit in the
Corporate Finance department. The Consolidated Financial State-
ments are derived from the separate financial statements of the
subsidiaries and joint operations, taking into account the relevant
data for the joint ventures and associated companies accounted for
using the equity method. The BASF Group's accounting process is
based on a uniform accounting guideline that, alongside accounting
policies based on the International Financial Reporting Standards
Management's Report - Opportunities and Risks
Decisions on the type, scope and location of our investment
projects are made on the basis of established comprehensive
assessment processes. They take into account long-term forecasts
for market, margin and cost development, raw material availability
as well as country, currency, sustainability and technology risks.
Opportunities and risks arise from potential deviations in actual
developments from our assumptions.
For more information on energy and climate protection, see page 126 onward
Our decentralized specialists use a central decision tree to docu-
ment reportable sustainability risks within the meaning of sec-
tion 289b et seq. of the German Commercial Code. No reportable
residual net risks within the meaning of section 289b et seq. of the
German Commercial Code were identified for 2021.
For more information on our investment projects, see page 150 onward
Acquisitions, divestitures and cooperations
In the future, we will continue to expand and refine our portfolio
through acquisitions that promise above-average profitable growth,
are innovation-driven or offer a technological differentiation and help
achieve a relevant market position, and make new, sustainable busi-
ness models possible.
The evaluation of opportunities and risks plays a significant role
during the assessment of acquisition targets. A detailed analysis
and quantification is conducted as part of due diligence. Examples
of risks include increased staff turnover, delayed realization of syner-
gies, or the assumption of obligations that were not precisely
quantifiable in advance. If our expectations in this regard are not
met, risks could arise, such as the need to impair intangible assets;
however, there could also be opportunities, for example, from
additional synergies.
Divestitures also play a key role in the development of our portfolio.
Risks could arise from divestitures as a result of potential warranty
claims or other contractual obligations, such as long-term supply
agreements.
For more information on our acquisitions and divestitures, see page 41
Recruitment and long-term retention of qualified employees
BASF anticipates growing challenges in attracting qualified employ-
ees in the medium and long term due to demographic change,
especially in North America and Europe. As a result, there is an
increased risk that job vacancies may not be filled, or only after a
delay. We address these risks with measures to integrate diversity,
employee and leadership development, and intensified employer
branding. At local level, demographic management includes succes-
sion planning, knowledge management and offerings to improve the
balance between personal and professional life, and promote healthy
living. This increases BASF's appeal as an employer and retains our
employees in the long term.
For more information on individual initiatives and our targets, see page 97 onward
For more information on sustainability management, see page 45 onward
Sustainability
We reduce potential risks in the areas of environmental protection,
safety and security, health protection, product stewardship, com-
pliance, supplier relationships and labor and social standards by
setting ourselves globally uniform requirements. These sometimes
go beyond local legal requirements. Our globally applicable Code of
Conduct defines a binding framework for the activities of all BASF
employees, leaders and members of the Board of Executive Direc-
tors. To ensure compliance with our internal standards, we have
global management systems in place and monitor their implementa-
tion internally by means such as global surveys and audits. Expec-
tations of suppliers are laid down in our global Supplier Code of
Conduct. We have suppliers with a high potential sustainability risk
evaluated by third parties, either through sustainability evaluations
or on-site audits. The monitoring systems are complemented by
grievance mechanisms such as our compliance hotlines.
Furthermore, ongoing climate change poses both opportunities and
risks for BASF. As an energy-intensive company, climate-related
risks arise particularly from regulatory changes, such as in carbon
prices through emissions trading systems, taxes or energy legisla-
tion. In addition, BASF's emissions footprint and intensity could lead
to a negative perception and reduced appeal among external stake-
holders such as customers or investors. We counter these risks with
our carbon management measures and by transparently disclosing
our positions on and contributions to climate protection (such as
political demands, progress in the implementation of our climate
strategy and how our products help to protect the environment) in
publicly accessible sources (such as this annual report or on the
BASF website) and in direct dialog with external stakeholders.
1 The assessment model was based on the IPCC climate change scenario SSP1-2.6, supplemented by SSP2-4.5 (medium global warming scenario) and SSP5-8.5 (high global warming scenario).
BASF Report 2021
Management's Report - Opportunities and Risks
< >
In addition to climate-related risks, there are also opportunities. Our
broad product portfolio includes, among other things, solutions for
the circular economy and climate protection (such as insulation
foams for buildings, materials for electromobility and bio-based
products). Increased social awareness offers additional market
opportunities for these products. We are working with numerous
scientific and public organizations and initiatives on solutions for
sustainable agriculture that meet economic, environmental, and
social demands over the long term.
Opportunities and risks that could arise from material sustainability
topics can only rarely be measured in specific financial terms and
have an impact on business activities, especially in the medium to
long term.
Until 2020, BASF offered leaders the opportunity to participate in a
share price-based compensation program. The need for provisions
for this program varies according to the development of the BASF
share price and the MSCI World Chemicals Index; this leads to a
corresponding increase or decrease in personnel costs.
We implemented a package of climate resilience measures for our
Verbund site in Ludwigshafen, Germany, to address low water levels
on the Rhine River: We developed an early warning system for low
water, created multimodal transportation concepts, chartered more
ships that can navigate low water levels and, in cooperation with
projects are suspended. Following the impairments recognized in
the third quarter of 2020, we currently consider the risk of further
impairment for assets such as property, plant and equipment,
goodwill, technologies and trademarks to be immaterial. The same
applies to investments accounted for using the equity method, with
the exception of Wintershall Dea, which was remeasured at fair
value in 2019. As the value of the shareholding is dependent on
expected oil and gas price developments, impairments of the share-
holding and of the assets held by the company are possible.
<>=155
Regulation/policy
Risks for us can arise from intensified geopolitical tensions, new
trade sanctions, stricter emissions limits for plants, and energy and
climate laws. In addition, changes in chemical regulations can affect
both the BASF Group's product portfolio and that of our customers,
for example, on the use or registration of agrochemicals.
Political measures could also give rise to opportunities. For example,
we view measures around the world to increase energy effi-
ciency and reduce greenhouse gas emissions as an opportunity for
increased demand for our products, such as our insulation foams
for buildings, catalysts, battery materials for electromobility, or our
solutions for wind turbines. Our broad product portfolio enables us
to, in some cases, offer alternatives if new chemicals have to be
developed as a result of restrictions in connection with the REACH
chemicals regulation or new standards in our customers' industries.
Procurement and supply chain
We minimize procurement risks through our broad portfolio, global
purchasing activities and the purchase of raw materials on spot
markets. If possible, we avoid procuring raw materials from a single
supplier. When this cannot be avoided, we try to foster competition
or we knowingly enter into this relationship and assess the conse-
quences of potential nondelivery. We continuously monitor the
credit risk of important business partners.
Around the world, the frequency and intensity of extreme weather
conditions (such as high/low water levels on rivers, heat/cold waves
and hurricanes) are increasing as a result of climate change. We
address the risk of supply interruptions on the procurement and
sales side caused by extreme weather conditions by switching to
alternative logistics carriers and the possibility of falling back on
unaffected sites within our global Verbund.
Management's Report - Opportunities and Risks
Significant features of the internal control and risk
management system with regard to the Group
financial reporting process
Investments and production
We try to prevent unscheduled plant shutdowns by adhering to high
technical standards and by continuously improving our plants. We
reduce the effects of an unscheduled shutdown on the supply of
intermediate and end products through diversification within our
global production Verbund.
-
In the event of a production outage caused by an accident, for
example - our global, regional or local emergency response plans
and crisis management structures are engaged, depending on the
impact scope. Every region has crisis management teams on a local
and regional level. They not only coordinate the necessary emer-
gency response measures, they also initiate immediate measures
for damage control and resumption of normal operations as quickly
as possible.
Crisis management also includes dealing with extreme weather
conditions such as hurricanes (for example, at the sites on the Gulf
of Mexico in Freeport, Texas, and Geismar, Louisiana) or signifi-
cantly elevated water temperatures in rivers due to extended heat
waves, which limit the available cooling capacity (for example, at the
Ludwigshafen site in Germany). Appropriate precautions are taken
at the sites in the case of a potential change in risk in connection
with climate change. For example, over the past few years, the
Verbund site in Ludwigshafen, Germany, has implemented several
measures to increase cooling capacity, including expanding and
optimizing the central recooling plants and optimizing cooling water
flows. These are capable of preventing production outages due to
extreme heatwaves.
Short-term risks from investments can result from, for example,
technical malfunctions or schedule and budget overruns. We
counter these risks with highly experienced project management
and controlling.
Acquisitions, divestitures and cooperations
partners, developed a special type of ship designed for extreme
low-water situations. These measures are already making longer
periods of low water on the Rhine River more manageable.
We constantly monitor the market in order to identify possible acqui-
sition targets and develop our portfolio appropriately. In addition, we
collaborate with customers and partners to jointly develop new,
competitive products and applications.
BASF Report 2021
Competition
In order to mitigate the risks to the financial reporting processes
listed in our central risk catalog, critical processes and control
activities are documented.
Assessment of control activities
After documentation, a review is performed to verify whether the
described controls are capable of adequately covering the risks.
In the subsequent test phase, spot checks are carried out to test
whether, in practice, the controls were executed as described and
effective.
Monitoring of control weaknesses
The responsible managers receive reports on any control weak-
nesses identified and their resolution; and an interdisciplinary
committee investigates their relevance to the BASF Group. The
Board of Executive Directors and the Audit Committee are
informed if control weaknesses with a considerable impact on
financial reporting are identified. Only after material control weak-
nesses have been resolved does the company's managing direc-
tor confirm the effectiveness of the internal control system.
Internal confirmation of the internal control system
All managing directors and chief financial officers of each consoli-
dated Group company must confirm to the Board of Executive
Directors of BASF SE every half-year and at the end of the annual
cycle, in writing, that the internal control system is effective with
regard to accounting and reporting.
Operational opportunities and risks
We continuously enhance our products and solutions in order to
maintain competitive ability. We monitor the market and the compe-
tition, and try to take targeted advantage of opportunities and
counter emerging risks with suitable measures. Aside from inno-
vation, key components of our competitiveness are our ongoing
cost management and continuous process optimization.
Market growth
We also consider opportunities and risks caused by deviations in
assumptions. Stronger demand resulting from faster eradication of
the coronavirus pandemic, for example through sustained efficacy
and growing acceptance of coronavirus vaccines and drugs, will
give rise to macroeconomic opportunities. A significant macro-
economic risk arises from the possibility that measures to contain
the coronavirus are kept in place for a longer period of time or aug-
mented, and, as a result, negatively affect global supply chains and
slow global economic growth. Further increases in energy prices,
caused, for example by an escalation of the conflict between Russia
and Ukraine, and the resulting higher inflation rates for manufacturer
and consumer prices also pose a risk to the economy. Additional
macroeconomic risks result from the escalation of other geopolitical
conflicts and a renewed intensification of the trade conflict between
the United States and China. Both can have a considerable impact
on global demand for intermediate goods for industrial production
and demand for investment goods.
Weather-related influences can result in positive or negative effects
on our business, particularly in the Agricultural Solutions segment.
Margins
Opportunities and risks for the BASF Group primarily result from
higher or lower margins in the Chemicals and Materials segments.
Opportunities arise here if the positive margin trend continues for
longer than expected. However, further increases in energy and raw
materials prices in particular, new capacities and raw materials
shortages could increase margin pressure on a number of products
and value chains. This would have a negative effect on our EBIT.
Moreover, if oil and gas prices rise, Wintershall Dea does not have
a compensating effect on the BASF Group's EBIT because this
shareholding is no longer reported in EBIT, but in net income from
shareholdings.
The year's average oil price for Brent crude was $71 per barrel in
2021, compared with $42 per barrel in the previous year. For 2022,
we anticipate an average oil price of $75 per barrel. We therefore
expect price levels for the raw materials and petrochemical basic
products that are important to our business to rise.
The development of our sales markets is one of the strongest
sources of opportunities and risks. For more details on our assump-
tions regarding short-term growth rates for the global economy,
regions and key customer industries, such as the chemicals, auto-
motive and construction sectors, see Economic Environment in
2022 on pages 145 to 147.
Opportunities and risks arise in connection with acquisitions and
divestitures from the conclusion of a transaction, or it being com-
pleted earlier or later than expected. They relate to the regular
earnings contributions gained or lost as well as the realization of
gains or losses from divestitures if these deviate from our planning
assumptions.
For more information on opportunities and risks from agreed transactions, see page 41
Personnel
Our competitiveness on global markets is influenced by fluctuations
in exchange rates. For BASF's sales, opportunities and risks arise in
particular when the U.S. dollar exchange rate fluctuates. A full-year
appreciation of the U.S. dollar against the euro by $0.01, which
could result from a macroeconomic slowdown, would increase the
BASF Group's EBIT by around €30 million, assuming other condi-
tions remain the same. On the production side, we counter exchange
rate risks by producing in the respective currency zones.
Financial currency risks result from the translation of receivables,
liabilities and other monetary items in accordance with IAS 21 at the
closing rate into the functional currency of the respective Group
company. In addition, we incorporate planned purchase and sales
transactions in foreign currencies into our financial foreign currency
risk management. These risks are hedged using derivative instru-
ments, if necessary.
Interest rate risks
Interest rate risks result from potential changes in prevailing market
interest rates. These can cause a change in the fair value of fixed-
rate instruments and fluctuations in the interest payments for
variable-rate financial instruments, which would positively or nega-
tively affect earnings. To hedge these risks, interest rate swaps
and combined interest rate and currency derivatives are used in
individual cases.
In addition to market interest rates, BASF's financing costs are
determined by the credit risk premiums to be paid. These are
mainly influenced by our credit rating and the market conditions at
the time of issue. In the short to medium term, BASF is largely pro-
tected from the possible effects on its interest result thanks to the
balanced maturity profile of its financial indebtedness.
BASF Report 2021
Management's Report - Opportunities and Risks
Exchange rate volatility
<>=157
In the catalysts business, BASF employs commodity derivatives for
precious metals and trades precious metals on behalf of third parties
and on its own account. Appropriate commodity derivatives are also
traded to optimize BASF's supply of refinery products, gas and
other petrochemical raw materials. To address specific risks associ-
ated with these non-operating trades, we set and continuously
monitor limits with regard to the type and volume of the deals
concluded.
Liquidity risks
Risks from fluctuating cash flows are recognized in a timely manner
as part of our liquidity planning. We have access to extensive
liquidity at any time thanks to our good ratings, our unrestricted
access to the commercial paper market and committed bank credit
lines. In the short to medium term, BASF is largely protected against
potential refinancing risks by the balanced maturity profile of its
financial indebtedness as well as through diversification in various
financial markets.
Risk of asset losses
We limit country-specific risks with measures based on internally
determined country ratings, which are continuously updated to
reflect changing environment conditions. We selectively use invest-
ment guarantees to limit specific country-related risks. We lower
credit risks for our financial investments by engaging in transactions
only with banks with good credit ratings and by adhering to fixed
limits. Creditworthiness is continuously monitored and the limits are
adjusted accordingly. We reduce the risk of default on receivables
by continuously monitoring the creditworthiness and payment
behavior of our customers and by setting appropriate credit limits.
Risks are also limited through the use of credit insurance and indi-
vidual hedging strategies, such as guarantees. Due to the global
activities and diversified customer structure of the BASF Group,
there are no major concentrations of credit default risk.
Impairment risks
Asset impairment risk arises if the assumed interest rate in an impair-
ment test increases, the predicted cash flows decline, or investment
Risks from metal and raw materials trading
The chief aim is the management of counterparty, transfer and
currency risks for the BASF Group.
As a part of risk management, activities in countries with transfer
restrictions are continuously monitored. This includes, for example,
regular analysis of the macroeconomic and legal environment,
shareholders' equity and the business models of the operating units.
Detailed guidelines and procedures exist for dealing with financial
risks. Among other things, they provide for the segregation of finan-
cial instrument trading and back office functions.
Due to BASF's worldwide compensation principles, the develop-
ment of personnel expenses is partly dependent on the amount of
variable compensation, which is linked to the company's success,
among other factors. The correlation between variable compen-
sation and the success of the company has the effect of minimizing
risk. Another factor is the development of interest rates for discount-
ing pension obligations. Furthermore, changes to the legal environ-
ment of a particular country can have an impact on the development
of personnel expenses for the BASF Group. For countries in which
BASF is active, relevant developments are therefore constantly
monitored in order to recognize risks at an early stage and enable
BASF to carry out suitable measures.
For more information on our compensation system, see page 102
For more information on risks from pension obligations, see page 157
Information technology risks
BASF employs on a large number of IT systems. We use tech-
nologies such as big data and the Internet of Things to develop new
business models, corporate concepts and strategies and to respond
appropriately to changing customer behavior. IT system downtime,
confidentiality breaches and the manipulation of data stored
in critical IT systems and applications can all have a direct impact
on production and logistics processes. The threat environment
has changed in recent years, as attackers have become better
BASF Report 2021
Management's Report - Opportunities and Risks
< > 156
organized, use more sophisticated technology, and have far more
resources available. If data are lost or manipulated, this can, for
example, negatively affect plant availability, delivery quality or the
accuracy of our financial reporting. Unauthorized access to sensitive
data, such as personnel records or customer data, competition-
related information or research results, can result in legal conse-
quences or jeopardize our competitive position. This would also be
accompanied by the associated loss of reputation.
To minimize such risks, BASF uses globally uniform processes and
systems to ensure IT availability and IT security. These include stable
and redundantly designed IT systems, backup processes, virus and
access protection, encryption systems as well as integrated, Group-
wide standardized IT infrastructure and applications. The systems
used for information security are constantly tested, continuously
updated, and expanded if necessary. In addition, our employees
receive regular training on information and data protection. IT-related
risk management is conducted using Group-wide regulations for
organization and application, as well as an internal control system
based on these regulations.
The Cyber Defense Center was established in 2015 and is continu-
ously being expanded in line with the growth in current
requirements. BASF is also a member of Cyber Security Sharing
and Analytics e.V. (CSSA) and a founding member of the Ger-
man Cybersecurity Organization (DCSO) together with Allianz SE,
Bayer AG and Volkswagen AG. BASF has also established an
information security management system and is internationally
certified according to IDIN EN ISO/IEC 27001:2017.
Legal disputes and proceedings
We constantly monitor current and potential legal disputes and
proceedings, and regularly report on these to the Board of Executive
Directors and Supervisory Board. In order to assess the risks from
current legal disputes and proceedings and any potential need to
recognize provisions, we prepare our own analyses and assess-
ments of the circumstances and claims considered. In addition, in
individual cases, we consider the results of comparable proceedings
and, if needed, independent legal opinions. Risk assessment is
particularly based on estimates as to the probability of occurrence
and the range of possible claims. These estimates are the result of
close cooperation between the relevant operating and service units
together with Corporate Finance and Corporate Legal. If sufficient
probability of occurrence is identified, a provision is recognized
accordingly for each proceeding. Should a provision be unneces-
sary, general risk management continues to assess whether these
litigations nevertheless represent a risk for the BASF Group's EBIT.
We use our internal control system to limit risks from potential
infringements of rights or laws. For example, we try to avoid patent
and licensing disputes whenever possible through extensive clear-
ance research. As part of our Group-wide Compliance Program, our
employees receive regular training.
Tax
The recognized tax-related opportunities and risks only concern
taxes that impact the BASF Group's EBIT in the short term. These
arise when BASF has taken a position that differs from the opinion
of a competent administrative authority. If a tax payment has already
been made and could be reclaimed, this is presented as an oppor-
tunity. If, on the other hand, a potential payment is outstanding in
accordance with the administrative opinion, this is a risk. We
primarily evaluate opportunities and risks with regard to their proba-
bility of occurrence and, if necessary, set up a provision for the rele-
vant risk. If a provision is not necessary, this is taken into account in
determining EBIT-relevant risks of the BASF Group.
Financial opportunities and risks
Long-term incentive program for senior executives
Since 2020, BASF has offered its leaders the opportunity to partici-
pate in a long-term incentive program (LTI program) in the form or a
performance share plan. The LTI plan incentivizes the achievement
of strategic growth, profitability and sustainability targets and takes
into account the development of the BASF share price and the
dividend. The need for provisions for this program varies according
to assumptions on the degree of strategic target achievement, the
development of the BASF share price and the dividend. This leads
to a corresponding increase or decrease in personnel costs.
For more information on our Group-wide Compliance Program, see page 171 onward
Adherence to internal and external guidelines that are relevant to
the maintenance of a reliable control environment is checked by
means of a standardized questionnaire.
Regions
Business environment and sector
Market growth
Margins
Competition
Regulation/policy
Company-specific opportunities and risks
Procurement
Supply chain
Investments/production
Personnel
Possible variations related to:
Acquisitions/divestitures/cooperations
2022 +
Compliance/legal
Tax
Financial
Exchange rate volatility
Other financial opportunities and risks
<
€100 million
≥ €100 million < €500 million
> €500 million < €1,000 million
Information technology
€1,000 million < €1,500 million
Potential short-term effects on EBIT of key opportunity and risk factors
subsequent to measures taken
Executive Directors are also expressly obligated to follow these
principles.
Opportunities and Risks
GRI
102, 201
The goal of BASF's risk management is to identify and evaluate opportunities and risks as early as possible and to take appropriate measures in order to
seize opportunities and limit risks. The aim is to avoid risks that pose a threat to BASF's continued existence and to make improved managerial decisions
to create value. We define opportunities as potential successes that exceed our defined goals. We understand risk to be any event that can negatively
impact the achievement of our short-term operational or long-term strategic goals.
ΚΣΕ 151
At a glance
■ Integrated process for opportunity and risk identification,
assessment and reporting
■
■
Decentralized management of specific opportunities and risks:
aggregate reporting at Group level
<>=152
Material opportunities and risks for 2022 arise from overall
economic developments and margin volatility
Overall assessment
For 2022, we expect the overall economic recovery to continue and
the coronavirus pandemic to weaken as the population becomes
increasingly immunized. General economic uncertainty will never-
theless remain high. The course of the pandemic is difficult to
predict; in particular, mutations of the coronavirus may lead to
further waves of infection. This can result in production stoppages
and supply chain disruptions in our customer industries, with our
suppliers and in our own production plants. Moreover, restricted
economic activity resulting from further lockdowns can have a sig-
nificant negative impact on aggregate demand. In addition, an
ongoing low supply of energy and raw materials and the resulting
high prices could cause inflation rates to rise further. This could
dampen the production of energy-intensive products and consumer
demand beyond our assumed level of slowed growth.
An escalation of geopolitical conflicts as well as the ongoing trade
conflicts between the United States and China and the associated
slowdown of the economy also pose significant risks.
Opportunities will arise from stronger demand growth, in particular
from a greater reduction in pandemic-related risks than assumed by
our forecasts. Rapidly increasing global vaccination rates and the
approval of effective antiviral drugs against COVID-19 could be
contributing factors.
In addition to the uncertainties surrounding market growth and the
development of key customer industries, material opportunities and
risks for our earnings arise from margin volatility.
According to our assessment, there continue to be no significant
individual risks that pose a threat to the continued existence of the
BASF Group. The same applies to the sum of individual risks, even
in the case of a global economic crisis like the coronavirus crisis.
Ultimately, however, residual risks (net risks) remain in all entrepre-
neurial activities that cannot be ruled out, even by comprehensive
risk management.
As a non-integral shareholding, income from Wintershall Dea is
reported in net income from shareholdings. The opportunities and
risks resulting from the shareholding in Wintershall Dea are therefore
not included in the outlook for the EBIT of the BASF Group. Oppor-
tunities and risks that have an impact on net income from share-
holdings and cash flow from the shares in Wintershall Dea are
monitored and tracked through BASF's involvement in the relevant
governing bodies.
BASF Report 2021
Management's Report - Opportunities and Risks
In order to effectively measure and manage identified opportunities
and risks, we quantify these where appropriate in terms of proba-
bility and economic impact in the event they occur. Where possible,
we use statistical methods to aggregate opportunities and risks into
risk factors. In addition, we use a qualitative evaluation scale for
opportunities and risks if quantification is not possible. This enables
us to not only evaluate economic impact but sustainability-related
aspects as well. In this way, we achieve an overall view of opportu-
nities and risks allowing us to aggregate risks at Group level and
take effective risk management measures.
≥ €1,500 million < €2,000 million
≥ €2,000 million
Outlook
Identification and documentation of control activities
We use standardized evaluation and reporting tools for the identi-
fication and assessment of risks. The aggregation of opportuni-
ties, risks and sensitivities at division and Group level using a
Monte Carlo simulation helps us to identify effects and trends
across the Group. We also aggregate qualitatively assessed risks
at Group level using a risk portfolio.
Our Group-wide Compliance Program aims to ensure adherence
to legal regulations and the company's internal guidelines. Our
global employee Code of Conduct firmly embeds these manda-
tory standards into everyday business. Members of the Board of
Organization of BASF Group's risk management
Supervisory Board
Corporate Audita
Chief Compliance Officer
External auditors
Board of Executive Directors
Risk Committee
Corporate Center
For more information on our sustainability management processes, see page 45 onward
Corporate
Development
Corporate Legal,
Compliance &
Insurance
Corporate
Taxes &
Duties
Corporate
Environmental
Protection,
Health & Safety
Corporate
Human
Resources
Corporate
Communications &
Government
Relations
Corporate
Investor Relations
Divisions
a The Corporate Audit unit is part of the Corporate Center.
Corporate
Finance
A catalog of opportunity and risk categories helps to identify all
relevant financial and sustainability-related opportunities and risks
as comprehensively as possible. We also systematically assess
opportunities and risks with effects that cannot yet be measured in
monetary terms, such as reputational and climate risks. To
reflect these, risks for companies in connection with the transition
to a low-carbon economy (transition risks) as well as physical risks
as defined by the Task Force on Climate-related Financial Disclo-
sures (TCFD), among others, were added to the catalog.
Because global climate policy ambitions and the implementation
of the relevant measures play a decisive role in the ongoing growth
of the chemical industry and its customer industries, global long-
term scenarios (up to 2050) with various global warming paths
were defined. To assess the impact of different global climate
policy approaches on our business units, the scenarios were
discussed by the business units in workshops. Their feedback
will be incorporated into the further development of scenario
assumptions and outcomes. A dataset of scenario-specific
macroeconomic parameters will be provided to test the eco-
nomic feasibility of investments and business strategies.
The Governance, Risk Management, Compliance (GRC) Policy,
applicable throughout the Group, forms the framework for risk
management and is implemented by the operating divisions, the
service and research units and the regions according to their spe-
cific business conditions.
-
BASF Report 2021
a Using a 95% confidence interval per risk factor based on planned values; summation is not permissible
Risk management process
The BASF Group's risk management process is based on the inter-
national risk management standard, COSO II Enterprise Risk
Management - Integrated Framework, and has the following key
features:
Organization and responsibilities
Risk management is the responsibility of the Board of Executive
Directors, which also determines the processes for approving
investments, acquisitions and divestitures.
The Board of Executive Directors is supported by the Corporate
Center. Corporate Finance and Corporate Development, which
are units within the Corporate Center, and the Chief Compliance
Officer coordinate the risk management process at a Group level,
examine financial and sustainability-related opportunities and
risks, and provide the structure and appropriate methodology.
Opportunity and risk management is thus integrated into the
strategy, planning and budgeting processes.
BASF's risk committee reviews the BASF Group's risk portfolio at
least twice a year to evaluate any adjustments to risk-manage-
ment measures and informs the Board of Executive Directors of
these. Members of the risk committee are the president of
Corporate Finance, the president of Corporate Development, the
president of Corporate Legal, Compliance & Insurance and the
heads of the Corporate Audit, Corporate Environmental Protec-
tion, Health & Safety, Corporate Treasury, and Group Reporting &
Performance Management units.
- The management of specific opportunities and risks is largely
delegated to the divisions, the service and research units and the
regions, and is steered at a regional or local level. This also applies
to sustainability-related topics relevant to BASF including the
impact of climate change on BASF. A network of risk managers in
the divisions, service and research units as well as in the regions
advances the implementation of appropriate risk management
practices in daily operations. Financial risks are an exception. The
management of liquidity, currency and interest rate risks is con-
ducted in the Corporate Finance department. The management
-
-
-
of commodity price risks takes place in the Global Procurement
unit or in authorized Group companies.
The BASF Group's management is informed of short-term opera-
tional opportunities and risks that fall within an observation period
of up to one year in the monthly management report produced by
Corporate Finance. In addition, Corporate Finance provides infor-
mation twice a year on the aggregated opportunity/risk exposure
of the BASF Group. Furthermore, any arising individual risks which
have an impact of more than €10 million on earnings or risks
qualitatively evaluated to have a material impact, for example,
reputational risks, must be reported immediately.
As part of strategy development, the Corporate Development unit
additionally conducts strategic opportunity/risk analyses with a
10-year assessment period. These analyses are annually reviewed
as part of strategic controlling and are adapted if necessary.
Scenarios were also developed to map possible developments
beyond the ten-year horizon.
BASF's Chief Compliance Officer (CCO) manages the imple-
mentation of our Compliance Management System, supported by
additional compliance officers worldwide. The CCO regularly
reports to the Board of Executive Directors on the status of imple-
mentation as well as on any significant results and provides a
status report to the Supervisory Board's Audit Committee at least
once a year, including any major developments. The Board of
Executive Directors immediately informs the Audit Committee
about significant incidents.
The internal audit unit (Corporate Audit) is responsible for regu-
larly auditing the risk management system established by the
Board of Executive Directors in accordance with section 91(2) of
the German Stock Corporation Act. Furthermore, as part of its
monitoring of the Board of Executive Directors, the Supervisory
Board considers the effectiveness of the risk management
system. The suitability of the early detection system we set up for
risks is evaluated by our external auditor.
BASF Report 2021
Management's Report - Opportunities and Risks
<>=153
Tools
-
-
-
Management's Report - Opportunities and Risks
Supervisory Board
The fundamental elements of BASF SE's corporate governance
system are: its two-tier system, with a transparent and effective
separation of company management and supervision between
BASF's Board of Executive Directors and the Supervisory Board; the
equal representation of shareholders and employees on the Super-
visory Board; and the shareholders' rights of co-administration and
supervision at the Annual Shareholders' Meeting.
advises the Board of Executive Directors
BASF Report 2021
185
Declaration of Corporate Governance
184
Declaration of Conformity Pursuant to
Section 161 AktG
177
Report of the Supervisory Board
175
Supervisory Board.
174
Board of Executive Directors
174
Management and Supervisory Boards
171
Compliance
162
Corporate Governance Report.
Overviews
To Our Shareholders
Management's Report
Corporate Governance
Consolidated Financial Statements
Contents
Q< >= 161
Corporate
Governance
BASF Report 2021
Corporate Governance - Corporate Governance Report
Corporate Governance Report
Corporate governance refers to the entire system for managing and supervising a company. This includes its organization, values,
corporate principles and guidelines as well as internal and external control and monitoring mechanisms. Effective and transparent
corporate governance ensures that BASF is managed and supervised responsibly with a focus on value creation. It fosters the
confidence of our investors, the financial markets, our customers and other business partners, employees, and the public in BASF.
< >
monitors the Board of Executive Directors
appoints the Board of Executive Directors
Board of Executive Directors
Two-tier management system of BASF SE
The members of the Board of Executive Directors, including their areas of responsibility and
memberships on the supervisory bodies of other companies, are listed from page 174 onward
Compensation of the Board of Executive Directors is described in the Compensation Report at
basf.com/compensationreport
For more information on risk management, see the Forecast from page 151 onward
parts of enterprises, as well as the issue of bonds or comparable
financial instruments. However, this is only necessary if the acquisi-
tion or disposal price or the amount of the issue in an individual case
exceeds 3% of the equity reported in the last approved Consoli-
dated Financial Statements of the BASF Group.
Corporate Governance - Corporate Governance Report
BASF Report 2021
The Statutes of BASF SE and the Supervisory Board have defined
certain transactions that require the Board of Executive Directors to
obtain the Supervisory Board's approval prior to their conclusion.
Such cases include the acquisition and disposal of enterprises and
The Board of Executive Directors informs the Supervisory Board
regularly, without delay and comprehensively, of all issues important
to the company with regard to planning, business development, risk
situation, risk management and compliance. Furthermore, the Board
of Executive Directors coordinates the company's strategic orienta-
tion with the Supervisory Board.
< > 163
The Board can set up Board committees to consult and decide on
individual issues such as proposed material acquisitions or dives-
titures; these must include at least three members of the Board of
Executive Directors. For the preparation of important decisions,
such as those on acquisitions, divestitures, investments and
personnel, the Board has various commissions at the level below
the Board. Independently of the affected business area, these com-
missions carefully assess the planned measures and evaluate the
associated opportunities and risks. Based on this information, they
report and make recommendations to the Board.
Decisions that are reserved for the Board as a whole by law, through
the Board of Executive Directors' Rules of Procedure or through
resolutions adopted by the Board, are made at regularly held Board
meetings called by the chair of the Board of Executive Directors.
Board decisions are based on detailed information and analyses
provided by the business areas and specialist units, and, if deemed
necessary, by external consultants. Board decisions can generally
The Board's actions and decisions are geared toward the com-
pany's best interests. It is committed to the goal of sustainably
increasing the company's value. Among the Board's responsibilities
is the preparation of the Consolidated and Separate Financial State-
ments of BASF SE and reporting on the company's financial and
nonfinancial performance. Furthermore, it must ensure that the
company's activities comply with the applicable legislation and
regulatory requirements, as well as internal corporate directives. This
includes the establishment of appropriate systems for control, com-
pliance and risk management as well as establishing a company-wide
compliance culture with undisputed standards.
of company management, the Board of Executive Directors agrees
on the corporate goals and strategic direction of the BASF Group as
well as its individual business areas; determines the company's
internal organization; and decides on the composition of manage-
ment on the levels below the Board. It also manages and monitors
BASF Group business by planning and setting the corporate
budget, allocating resources and management capacities, monitor-
ing and making decisions on significant individual measures, and
supervising operational management.
The Board of Executive Directors is responsible for the management
of the company, and represents BASF SE in business undertakings
with third parties. BASF's Board of Executive Directors is strictly
separated from the Supervisory Board, which monitors the Board of
Executive Directors' activities and decides on its composition.
A member of the Board of Executive Directors cannot simulta-
neously be a member of the Supervisory Board. As the central duty
Direction and management by the Board of Executive
Directors
■ Strictly separate from the Supervisory Board
Sets goals and strategic direction
Responsible for company management and represents BASF SE
in business with third parties
At a glance
Board of Executive Directors
162
be made via a simple majority. In the case of a tied vote, the casting
vote is given by the chair of the Board. However, the chair of the
Board does not have the right to veto the decisions of the Board of
Executive Directors. Members of the Board of Executive Directors
are authorized to make decisions individually in their assigned areas
of responsibility.
3
Disclosures according to section 315a of the
German Commercial Code (HGB) and explanatory
report of the Board of Executive Directors
according to section 176(1) sentence 1 of
the German Stock Corporation Act (AktG)
< >
The Rules of Procedure for the Supervisory Board and its committees can be found at
basf.com/supervisoryboard
Competence profile, diversity concept and objectives for the
composition of the Supervisory Board
One important concern of good corporate governance is to ensure
that seats on the responsible corporate bodies, the Board of
Executive Directors and the Supervisory Board, are appropriately
filled. On December 21, 2017, the Supervisory Board therefore
agreed on objectives for the composition, the competence profile
and the diversity concept of the Supervisory Board in accordance
with section 5.4.1 of the German Corporate Governance Code in
the version dated February 7, 2017, and section 289f(2) no. 6 of the
German Commercial Code (HGB). These were expanded on
December 19, 2019, in particular with respect to the criteria for
assessing independence, based on the new recommendations of
the German Corporate Governance Code, which was revised and
amended in 2019 (2020 Code). The guiding principle for the compo-
sition of the Supervisory Board is to ensure qualified supervision and
guidance for the Board of Executive Directors of BASF SE. For the
election of shareholder representatives to the Supervisory Board,
individuals shall be nominated to the Annual Shareholders' Meeting
who can, based on their professional expertise and experience,
integrity, commitment, independence and character, successfully
perform the work of a supervisory board member at an international
chemical company.
Competence profile
The following requirements and objectives are considered essential
to the composition of the Supervisory Board as a collective body:
- Leadership experience in managing companies, associations and
networks
· Members' collective knowledge of the chemical sector and the
related value chains
- Appropriate knowledge within the body as a whole of finance,
accounting, financial reporting, law and compliance as well as
one independent member with accounting and auditing expertise
("financial expert”) within the meaning of section 100(5) of the
German Stock Corporation Act (AktG)
- At least one member with in-depth experience in innovation,
research & development and technology
- At least one member with in-depth experience in digitalization,
information technology, business models and start-ups
- At least one member with in-depth experience in human resources,
society, communications and the media
Specialist knowledge and experience in sectors outside of the
chemical industry
For more information on the Supervisory Board's competence profile, see
basf.com/competence-profile/supervisoryboard
Diversity concept
The Supervisory Board strives to achieve a reasonable level of diver-
sity with respect to character, gender, international representation,
professional background, specialist knowledge and experience as
well as age distribution, and takes the following composition criteria
into account:
- At least 30% women and 30% men
At least 30% of members have international experience based on
their background or professional experience
- At least 50% of members have different educational backgrounds
and professional experience
At least 30% under the age of 60
Further composition objectives
· Character and integrity: All members of the Supervisory Board
must be personally reliable and have the knowledge and experi-
ence required to diligently and independently perform the work of
a supervisory board member.
-
Availability: Each member of the Supervisory Board ensures that
they invest the time needed to properly perform their role as a
member of the Supervisory Board of BASF SE. The statutory
limits on appointments to governing bodies and the recommen-
dations of the German Corporate Governance Code must be
complied with when accepting further appointments.
Age limit and period of membership: Persons who have
reached the age of 72 on the day of election by the Annual Share-
holders' Meeting should generally not be nominated for election.
Membership on the Supervisory Board should generally not exceed
three regular statutory periods in office, which will correspond to
12 years in the future.
Independence: To ensure the independent monitoring and con-
sultation of the Board of Executive Directors, the Supervisory
Board should have an appropriate number of independent mem-
bers on the board as a whole, and an appropriate number of
independent shareholder representatives. The Supervisory Board
deems this to be the case if more than half of the shareholder
representatives and at least eight members of the Supervisory
Board as a whole can be considered independent. The Supervi-
sory Board's assessment of independence is based on the criteria
in the current version of the German Corporate Governance Code
(2020 Code). Among other things, this means that members of
the Supervisory Board are no longer considered independent if
they have been a member of the board for 12 years or longer. The
Supervisory Board has additionally defined the following principles
to clarify the meaning of independence: The independence of
employee representatives is not compromised by their role as an
employee representative or employment by BASF SE or a Group
company. Prior membership of the Board of Executive Directors
of BASF SE does not preclude independence following the expiry
of the statutory cooling-off period of two years. Material trans-
actions between a Supervisory Board member or a related party
or undertaking of the Supervisory Board member on the one
hand, and BASF SE or a BASF Group company on the other,
exclude a member of the Supervisory Board from being qualified
as independent. A material transaction is defined as one or more
BASF Report 2021
Corporate Governance - Corporate Governance Report
For an overview of meeting attendance, see basf.com/supervisoryboard/meetings
For more information on the Supervisory Board's activities and resolutions in the 2021 business year,
see the Report of the Supervisory Board from page 177 onward
with the additional option of virtual attendance via electronic
communication.
166
Prof. Dr. Thomas Carell*
Dame Alison Carnwath DBE*
Liming Chen*
Franz Fehrenbach
Anke Schäferkordt*
Duties
- Identifies suitable individuals for the Supervisory Board based on
objectives for the composition decided on by the Supervisory
Board
Prepares the recommendations made by the Supervisory Board
for the election of Supervisory Board members for the Annual
Shareholders' Meeting
Strategy Committee
Members
Dr. Kurt Bock* (chair)
Dame Alison Carnwath DBE*
Franz Fehrenbach
Waldemar Helber*
Sinischa Horvat*
Michael Vassiliadis
Duties
-
- Handles the further development of the company's strategy
Prepares resolutions of the Supervisory Board on the company's
major acquisitions and divestitures
Meetings and meeting attendance
< >
In the 2021 business year, meetings were held as follows:
The Supervisory Board met five times.
- The Personnel Committee met three times.
-
- The Audit Committee met five times.
- The Nomination Committee met twice.
-
- The Strategy Committee did not meet.
All members attended all meetings of the Supervisory Board. The
meetings of the Supervisory Board committees were also attended
by all relevant committee members.
Due to the coronavirus pandemic, the meetings of the Supervisory
Board and its committees in the 2021 business year were held in
accordance with appropriate safety measures and in compliance
with restrictions on assembly and travel as per the applicable
infection prevention laws. They took place as in-person meetings
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 166 for the criteria used to determine independence)
BASF Report 2021
Corporate Governance - Corporate Governance Report
< >
-
For more information, see Note 32 to the Consolidated Financial Statements on page 285
167
Status of implementation
As of December 31, 2021, the subscribed capital of BASF SE was
€1,175,652,728.32, divided into 918,478,694 registered shares
with no par value. Each share entitles the holder to one vote at the
Annual Shareholders' Meeting. Restrictions on the right to vote or
transfer shares do not exist. The same rights and duties apply to all
shares. According to the Statutes, shareholders are not entitled to
receive share certificates. There are neither different classes of
shares nor shares with preferential voting rights (golden shares).
The appointment and dismissal of members of the Board of Execu-
tive Directors is legally governed by the regulations in Article 39 of
the SE Council Regulation, section 16 of the SE Implementation Act
and sections 84 and 85 AktG as well as Article 7 of the Statutes of
BASF SE. Accordingly, the Supervisory Board determines the num-
ber of members of the Board of Executive Directors (at least two),
appoints the members of the Board of Executive Directors, and can
nominate a chair, as well as one or more vice chairs. The members
of the Board of Executive Directors are appointed for a maximum of
five years. The maximum initial term of appointment is three years.
Reappointments are permissible. The Supervisory Board can dis-
miss a member of the Board of Executive Directors if there is serious
cause to do so. Serious cause includes, in particular, a gross breach
of the duties pertaining to the Board of Executive Directors and a
vote of no confidence by the Annual Shareholders' Meeting.
The Supervisory Board decides on appointments and dismissals
according to its own best judgment.
BASF Report 2021
Corporate Governance - Corporate Governance Report
< >
169
According to Article 59(1) of the SE Council Regulation, amend-
ments to the Statutes of BASF SE require a resolution of the Annual
Shareholders' Meeting adopted with at least a two-thirds majority of
the votes cast, provided that the legal provisions applicable to Ger-
man stock corporations under the German Stock Corporation Act
do not stipulate or allow for larger majority requirements. In the case
of amendments to the Statutes, section 179(2) of the German Stock
Corporation Act requires a majority of at least three-quarters of the
subscribed capital represented. Pursuant to Article 12(6) of the
Statutes of BASF SE, the Supervisory Board is authorized to resolve
on amendments to the Statutes that merely concern their wording.
This applies in particular to the adjustment of the share capital and
the number of shares after the redemption of repurchased BASF
shares and after an issue of shares from authorized capital.
By way of a resolution of the Annual Shareholders' Meeting on
May 3, 2019, the Board of Executive Directors is authorized, with
the consent of the Supervisory Board, to increase, until May 2,
2024, on a one-off basis or in portions on a number of occasions,
the company's share capital by a total of up to €470 million by issu-
ing new shares against contributions in cash or in kind (authorized
capital). A right to subscribe to the new shares shall be granted to
shareholders. This can also be achieved by a credit institution
acquiring the new shares with the obligation to offer these to share-
holders (indirect subscription right). The Board of Executive Directors
is authorized to exclude the statutory subscription right of share-
holders to a maximum amount of a total of 10% of share capital in
certain exceptional cases that are defined in Article 5(8) of the
BASF SE Statutes. This applies in particular if, for capital increases
in return for cash contributions, the issue price of the new shares is
not substantially lower than the stock market price of BASF shares
and the total number of shares issued under this authorization does
not exceed 10% of the shares currently in issue or, in eligible indi-
vidual cases, to acquire companies or shares in companies in
exchange for surrendering BASF shares.
By way of a resolution of the Annual Shareholders' Meeting on
May 12, 2017, the share capital was increased conditionally by up
to €117,565,184 by issuing up to 91,847,800 new shares. The
contingent capital increase serves to grant shares to the holders of
convertible bonds or warrants attached to bonds with warrants of
BASF SE or a subsidiary, which the Board of Executive Directors is
authorized to issue up to May 11, 2022, by way of a resolution of the
Annual Shareholders' Meeting on May 12, 2017. A right to subscribe
to the bonds shall be granted to shareholders. The Board of Execu-
tive Directors is authorized to exclude the shareholders' subscription
right in certain exceptional cases - as defined in Article 5(9) of the
BASF SE Statutes.
At the Annual Shareholders' Meeting on May 12, 2017, the Board of
Executive Directors was authorized to purchase up to 10% of the
shares in issue at the time of the resolution (10% of the company's
share capital) until May 11, 2022. At the discretion of the Board of
Executive Directors, the purchase can take place on the stock
exchange or by way of a public purchase offer directed to all share-
holders. The Board of Executive Directors is authorized to sell the
repurchased company shares (a) through a stock exchange,
(b) through a public offer directed to all shareholders and - with the
approval of the Supervisory Board - to third parties, (c) for a cash
payment that is not significantly lower than the stock exchange price
at the time of sale and (d) for contributions in kind, particularly in
connection with the acquisition of companies, parts of companies
or shares in companies or in connection with mergers. In the cases
specified under (c) and (d), the shareholders' subscription right is
excluded. The Board of Executive Directors is furthermore autho-
rized to retire the shares bought back and to reduce the share capital
by the proportion of the share capital accounted for by the retired
shares.
Bonds issued by BASF SE and its subsidiaries grant the bearer the
right to request early repayment of the bonds at nominal value if,
after the date of issue of the bond, one person - or several persons
acting together - hold or acquire a volume of BASF SE shares that
corresponds to more than 50% of the voting rights (change of con-
trol), and one of the rating agencies named in the bond's terms and
conditions withdraws its rating of BASF SE or the bond, or reduces
it to a noninvestment grade rating within 120 days of the change of
control event.
An exceptional change of control compensation awarded to out-
going members of the Board of Executive Directors has not existed
since January 1, 2020, as of the introduction of the amended com-
pensation system for the Board of Executive Directors, which was
approved by the Annual Shareholders' Meeting on June 18, 2020.
The general rule for severance payments granted for premature
terminations of appointments to the Board of Executive Directors
applies, which states that the maximum severance payment may
not exceed the amount of two years' compensation; however, this
may not exceed the compensation for the remaining period of the
contract.
By contrast, employees of BASF SE and its subsidiaries who are
classed as senior executives will still receive a severance payment if
their contract of employment is terminated by BASF within
18 months of a change of control event, provided the employee has
not given cause for the termination. The employee whose service
contract has been terminated in such a case will receive a maximum
severance payment of 1.5 times the annual salary (fixed component)
depending on the number of months that have passed since the
change of control event. A change of control is assumed when a
shareholder informs BASF of a shareholding of at least 25% or the
increase of such a holding. The remaining specifications stipulated
in section 315a HGB refer to situations that are not applicable to
BASF SE.
For more information on bonds issued by BASF SE, see basf.com/bonds
Directors' and officers' liability insurance
BASF SE has taken out liability insurance that covers the activities of
members of the Board of Executive Directors and the Supervisory
Board (directors' and officers' liability insurance). This policy pro-
vides for the level of deductibles for the Board of Executive Directors
as prescribed by section 93(2) sentence 3 AktG (10% of damages
up to 1.5 times the fixed annual compensation).
BASF Report 2021
Corporate Governance - Corporate Governance Report
Share ownership by members of the Board of
Executive Directors and the Supervisory Board
No member of the Board of Executive Directors or the Supervisory
Board owns shares in BASF SE and related options or other deriva-
tives that account for 1% or more of the share capital. Furthermore,
the total volume of BASF SE shares and related financial instruments
held by members of the Board of Executive Directors and the
Supervisory Board accounts for less than 1% of the shares issued
by the company.
Share dealings of the Board of Executive Directors
and Supervisory Board
(Obligatory reportable and publishable directors' dealings
under Article 19(1) of the E.U. Market Abuse Regulation
596/2014 (MAR))
As legally stipulated by Article 19(1) MAR, all members of the Board
of Executive Directors and the Supervisory Board as well as certain
members of their families are required to disclose the purchase or
sale of financial instruments of BASF SE (for example, shares,
bonds, options, forward contracts, swaps) to the German Federal
Financial Supervisory Authority (Bundesanstalt für Finanzdienst-
leistungsaufsicht) and to the company if transactions within the
calendar year exceed the threshold of €20,000. In 2021, a total of
26 purchases by members of the Board of Executive Directors and
the Supervisory Board and members of their families subject to
disclosure were reported as directors' dealings, involving between
18 and 2,500 BASF shares or BASF ADRS (American Depositary
Receipts). The price per share was between €61.08 and €72.00.
The volume of the individual trades was between €1,217.41 and
€171,694.75. The disclosed share transactions are published on
BASF SE's website.
For more information on securities transactions reported in 2021, see basf.com/en/directorsdealings
Information on the auditor
The Annual Shareholders' Meeting of April 29, 2021, once again
elected KPMG AG Wirtschaftsprüfungsgesellschaft as the auditor of
the BASF Group Consolidated Financial Statements and Separate
Financial Statements of BASF SE for the 2021 business year, as well
as the corresponding management's reports. KPMG member firms
also audit the majority of BASF Group companies included in the
Consolidated Financial Statements. KPMG has been the continuous
auditor of BASF SE since the 2006 Financial Statements. A public
call to tender was issued in 2015 to all auditors for the audit of the
2016 Consolidated and Separate Financial Statements, in line with
the E.U. Regulation 537/2014 of April 16, 2014. Based on the
results of the tendering process, the Audit Committee recom-
mended to the Supervisory Board that it once again propose KPMG
for election. Owing to the German Financial Market Integrity
Strengthening Act (FISG), KPMG can only be proposed for election
by the Annual Shareholders' Meeting as BASF's auditor without
further tendering processes up to and including the 2023 business
year. Dr. Stephanie Dietz has been the auditor responsible for the
Consolidated Financial Statements since auditing the 2020 Financial
Statements. Since the 2020 Financial Statements, the auditor
responsible for the Separate Financial Statements has been
Dr. Stephan Kaiser. The total fee paid to KPMG and auditing firms
of the KPMG group by BASF SE and other BASF Group com-
panies for non-audit services, in addition to the auditing fee, was
€0.9 million in 2021. This represents around 4.7% of the fees for
auditing the financial statements.
For more information on the Declaration of Conformity 2021, the implementation of the Code's
suggestions and the German Corporate Governance Code, see basf.com/en/corporate governance
The joint Declaration of Conformity 2021 by the Board of Executive Directors and Supervisory Board of
BASF SE is rendered on page 184
the same manner, BASF follows all of the nonobligatory suggestions
of the German Corporate Governance Code.
BASF advocates responsible corporate governance that focuses on
sustainably increasing the value of the company. BASF SE follows
all of the recommendations of the German Corporate Governance
Code in the version dated December 16, 2019 (Code 2020), the
version in force on submission of the Declaration of Conformity. In
According to the Supervisory Board's own assessment, its current
composition meets all of the requirements of the competence
profile: Nine (five shareholder representatives and four employee
representatives) of the 12 current members are considered indepen-
dent based on the above criteria. As of January 2020, shareholder
representative Franz Fehrenbach is no longer classified as indepen-
dent, because he has been a member of the Supervisory Board
since January 2008 and no longer meets the criterion of a member-
ship duration of less than 12 years. Franz Fehrenbach will retire from
the Supervisory Board on conclusion of the Annual Shareholders'
Meeting on April 29, 2022. Employee representative Denise
Schellemans, who has also been a member of the Supervisory
Board since January 2008, and employee representative Michael
Vassiliadis, who has been a member of the Supervisory Board since
August 2004, are likewise no longer considered independent.
For more information on the statutory minimum quotas for the number of women and men on the
Supervisory Board, see the section after next on this page
The independent Supervisory Board members are named under Management and Supervisory Boards
from page 175 onward
An overview of the fulfillment of the competence profile is available at basf.com/supervisoryboard
Compensation of the Board of Executive Directors
and the Supervisory Board
The Compensation Report in accordance with section 162 of the
German Stock Corporation Act (AktG) and the assurance statement
of the substantive and formal audit issued by the auditor, the effec-
tive compensation system for the Board of Executive Directors in
accordance with section 87a AktG, as well as the most recent reso-
lution of the Annual Shareholders' Meeting on the compensation of
the Supervisory Board in accordance with section 113(3) AktG
I have been made publicly available on the BASF website at
basf.com/compensationreport.
Commitments to promote the participation of
women in leadership positions at BASF SE
The supervisory board of a publicly listed European stock corpora-
tion (SE) that is composed of the same number of shareholder and
employee representatives must, according to section 17(2) of the
SE Implementation Act, consist of at least 30% women and 30%
men. Since the 2018 Annual Shareholders' Meeting, the Super-
visory Board of BASF SE comprises four women, of whom two are
shareholder representatives and two are employee representatives,
and eight men. The Supervisory Board's composition meets the
statutory requirements.
As a target figure for the Board of Executive Directors according to
section 111(5) AktG, the Supervisory Board determined that for the
target-attainment period under the German Act on Equal Participa-
tion of Men and Women in Management Positions (FüPoG I&II) from
January 1, 2017, to December 31, 2021, the Board of Executive
Directors of BASF SE should continue to have at least one female
member. This represented 12.5% on the date the target was set
(based on eight members of the Board of Executive Directors).
Following the entry into force of the German Second Act on Equal
Participation of Men and Women in Management Positions (FüPoG II),
if the management board of a listed company consists of more than
three persons, at least one woman and one man must be members
of the management board (section 76(3a) AktG). There have been
two female Board members since the appointment of Dr. Melanie
Maas-Brunner to the Board of Executive Directors, effective as of
February 1, 2021. Since Wayne T. Smith's departure from the Board
of Executive Directors on May 31, 2021, the proportion of women
has been 33.3%.
The Board of Executive Directors also decided on new target figures
for the proportion of women in the two management levels below
the Board of Executive Directors of BASF SE: For the second
target-attainment period that ended on December 31, 2021, these
targets were 12.1% for the proportion of women in the management
level directly below the Board, and 7.3% for the level below that.
This corresponded to the status at the time these target figures were
determined. At the end of the concluded target-attainment period,
women made up 20.0% of the management level directly below
the Board and 23.2% of the level below that. Both targets were
therefore significantly exceeded. For the next target-attainment
period from January 1, 2022, to December 31, 2026, the Board of
Executive Directors resolved as targets the quotas achieved as of
December 31, 2021: 20.0% for the proportion of women in the
management level directly below the Board and 23.2% for the level
below that.
BASF views the further development and promotion of women as a
global duty independent of individual Group companies. It has com-
mitted to ambitious targets that were further raised in 2020. The
new target is to increase the proportion of women in leadership
worldwide to 30% by 2030. BASF will continue to work system-
atically on expanding the percentage of women in its leadership
team. To achieve this, global measures will be implemented and
enhanced continuously.
For more information on women in leadership positions in the BASF Group worldwide, see page 99
For more information on the inclusion of diversity, including promotion of women, see the chapter on
Employees in the Management's Report on page 99
transactions in a single calendar year with a total volume of 1% or
more of the sales of the companies involved in each case. In the
same way, if a Supervisory Board member or a related party of a
Supervisory Board member has a personal service or consulting
agreement with BASF SE or one of its Group companies with an
annual compensation of over 50% of the Supervisory Board
compensation, they do not qualify as independent. Furthermore,
if a Supervisory Board member or a related party of a Supervisory
Board member holds more than 20% of the shares in a company
in which BASF SE is indirectly or directly the majority shareholder,
the necessary independence is also not met.
The November 2015 Employee Participation Agreement relevant to the composition of the Supervisory
Board is available at basf.com/en/corporate governance
Corporate Governance - Corporate Governance Report
< > 168
Shareholders' rights
At a glance
·
■
Shareholders exercise rights of co-administration and
supervision at Annual Shareholders' Meeting
One share, one vote
Shareholders exercise their rights of co-administration and super-
vision at the Annual Shareholders' Meeting, which usually takes
place within the first five months of the business year. The Annual
Shareholders' Meeting elects half of the members of the Super-
visory Board and, in particular, resolves on the formal discharge of
the Board of Executive Directors and the Supervisory Board, the
distribution of profits, capital measures, the authorization of share
buybacks, changes to the Statutes and the selection of the auditor.
Each BASF SE share represents one vote. All of BASF SE's shares
are registered shares. Shareholders are obliged to have themselves
entered with their shares into the company share register and to
provide the information necessary for registration in the share regis-
ter according to the German Stock Corporation Act. There are no
registration restrictions and there is no limit to the number of shares
that can be registered to one shareholder. Only the persons listed in
the share register are entitled to vote as shareholders. Listed share-
holders may exercise their voting rights at the Annual Shareholders'
Meeting either personally, through a representative of their choice or
through a company-appointed proxy authorized by the share-
holders to vote according to their instructions. Individual instructions
are only forwarded to the company on the morning of the day of the
Annual Shareholders' Meeting. Voting rights can be exercised
according to shareholders' instructions by company-appointed
proxies until the beginning of the voting process during the Annual
Shareholders' Meeting. There are neither voting caps to limit the
number of votes a shareholder may cast nor special voting rights.
BASF has fully implemented the principle of "one share, one vote."
All shareholders entered in the share register are entitled to partici-
pate in the Annual Shareholders' Meetings, to have their say con-
cerning any item on the agenda and to request information about
company issues insofar as this is necessary to make an informed
judgment about the item on the agenda under discussion. Regis-
tered shareholders are also entitled to file motions pertaining to
proposals for resolutions made by the Board of Executive Directors
and Supervisory Board at the Annual Shareholders' Meeting and to
contest resolutions of the Meeting and have them evaluated for their
lawfulness in court. Shareholders who hold at least €500,000 of the
company's share capital, a quota corresponding to 390,625 shares,
are furthermore entitled to request that additional items be added to
the agenda of the Annual Shareholders' Meeting.
Due to assembly restrictions resulting from the coronavirus pan-
demic, the 2021 Annual Shareholders' Meeting again took place
virtually without the physical presence of shareholders in accordance
with special regulations prescribed by the German Act on Measures
in Corporate Law, the Law of Cooperatives, Associations and Foun-
dations and Residential Property Law to Combat the Effects of the
COVID-19 Pandemic (GesRuaCOVBeKG), which was passed by the
lower house of the German parliament (Bundestag) in March 2020
and extended until the end of 2021 with few amendments. To
ensure legally compliant execution of this special Annual Share-
holders' Meeting format, whereby shareholders participated solely
via electronic communication, some of the aforementioned share-
holder rights and options for action were limited or handled in an
exceptional manner at this virtual meeting. After again being extended
by the Bundestag, these special provisions are valid for Annual
Shareholders' Meetings until August 31, 2022, as well.
Implementation of the German Corporate
Governance Code (GCGC)
BASF Report 2021
Members
Dr. Kurt Bock* (chair)
Pursuant to the German Corporate Governance Code, Dame Alison
Carnwath DBE, chair of the Audit Committee, has special knowl-
edge of, and experience in, applying accounting and reporting stan-
dards and internal control methods and is familiar with the annual
audit. A further financial expert on the Supervisory Board is the vice
chair of the Supervisory Board, Franz Fehrenbach.
Chair
elected by the Supervisory Board
The number of members on the Board of Executive Directors is
determined by the Supervisory Board. It is guided by insights gained
by BASF as a company with an integrated leadership culture and is
determined by the needs arising from cooperation within the Board
of Executive Directors. The Supervisory Board considers six to be
an appropriate number of Board members given the current busi-
ness composition, future responsibilities associated with develop-
ment and the fundamental organizational structure of the
BASF Group.
The current composition of the Board of Executive Directors meets
the competence profile and the requirements of the diversity
concept in full.
BASF Report 2021
Corporate Governance - Corporate Governance Report
< >
6 employee representatives
164
At a glance
■ Appoints, monitors and advises Board of Executive Directors
Four Supervisory Board committees
■
Composition criteria: professional and personal qualifications,
diversity, and independence
Supervision of company management by the Supervisory
Board
The Supervisory Board appoints the members of the Board of
Executive Directors and supervises and advises the Board of Execu-
tive Directors on management issues. As members of the Supervi-
sory Board may not simultaneously be on the Board of Executive
Directors, a high level of autonomy is already structurally ensured
with regard to the supervision of the Board of Executive Directors.
In addition to the SE Council Regulation, the relevant legal basis for
the size and composition of the Supervisory Board is provided by
the Statutes of BASF SE and the Agreement Concerning the
Involvement of Employees in BASF SE (Employee Participation
Agreement), which also includes the regulations applicable to
BASF for implementing the statutory gender quota for the Super-
visory Board. The German Codetermination Act does not apply to
BASF SE as a European stock corporation (Societas Europaea, SE).
Supervisory Board
6 shareholder representatives elected by the
Annual Shareholders' Meeting and
12 members
The first appointment of members of the Board of Executive Direc-
tors is for a term of no more than three years. The standard age
limit for members of the Board of Executive Directors is 63.
Competence profile, diversity concept and succession
planning for the Board of Executive Directors
The Supervisory Board works hand in hand with the Board of
Executive Directors to ensure long-term succession planning for the
composition of the Board of Executive Directors. BASF aims to fill
most Board positions with leaders from within the company. It is the
task of the Board of Executive Directors to propose a sufficient
number of suitable individuals to the Supervisory Board.
BASF's long-term succession planning is guided by the corporate
strategy. It is based on systematic management development
characterized by the following:
Early identification of suitable leaders of different professional
backgrounds, nationalities and genders
- Systematic development of leaders through the successful
assumption of tasks with increasing responsibility, where possible
in different business areas, regions and functions
-
Desire to shape strategic and operational decisions, and proven
success in doing so, as well as leadership skills, especially under
challenging business conditions
Role model function in putting corporate values into practice
The aim is to enable the Supervisory Board to ensure a reasonable
level of diversity with respect to education and professional experi-
ence, cultural background, international representation, gender and
age when appointing members of the Board of Executive Directors.
6 members
appointed by the Supervisory Board
Chair
appointed by the Supervisory Board
reports to Supervisory Board
Irrespective of these individual criteria, a holistic approach will ulti-
mately determine a person's suitability for appointment to the Board
of Executive Directors of BASF SE. Both systematic succession
planning and the selection process aim to ensure that the Board of
Executive Directors as a whole has the following profile, which
serves as a diversity concept:
Many years of management experience in scientific, technical and
commercial fields
International experience based on background and/or profes-
sional experience
At least one female Board member
Nomination Committee
The Supervisory Board of BASF SE comprises 12 members. Six
members are elected by the shareholders at the Annual Share-
holders' Meeting. Six members are elected by the BASF Europa
Betriebsrat (BASF Works Council Europe), the European employee
representation body of the BASF Group. In accordance with the
resolution of the Annual Shareholders' Meeting on June 18, 2020,
the period of appointment for newly elected members of the Super-
visory Board was reduced from five to four years; and the Statutes
were amended accordingly. This ensures that the maximum mem-
bership duration of 12 years up to which a Supervisory Board
member can be classified as independent corresponds to a total of
three election terms. In accordance with the German Corporate
Governance Code (Code 2020), the Supervisory Board reduced the
membership duration used as a basis for its independence rating
from 15 to 12 years in December 2019.
A balanced age distribution to ensure the continuity of the Board's
work and enable seamless succession planning
The Board of Executive Directors regularly informs the Supervisory
Board about matters such as the course of business and expected
developments, the financial position and results of operations,
corporate planning, the implementation of the corporate strategy,
business opportunities and risks, as well as risk compliance
management. The Supervisory Board has embedded the main
reporting requirements in an information policy. The chair of the
Michael Vassiliadis
Duties
-
―
-
-
-
Prepares the negotiations and resolutions of the Supervisory
Board for the approval of the Financial Statements, the Consoli-
dated Financial Statements and the Management's Reports
including the Nonfinancial Statements and discusses the quar-
terly statements and the half-year financial report with the Board
of Executive Directors prior to their publication
Deals with monitoring the financial reporting process, the annual
audit, the effectiveness of the internal control system, the risk
management system, and the internal auditing system as well as
compliance issues
Is responsible for business relations with the company's external
auditor: prepares the Supervisory Board's proposal to the Annual
Shareholders' Meeting regarding the selection of an auditor,
monitors the auditor's independence, defines the focus areas of
the audit together with the auditor, negotiates auditing fees, evalu-
ates the quality of the audit, and establishes the conditions for the
provision of the auditor's nonaudit services; the chair of the Audit
Committee regularly discusses this with the auditor outside of
meetings as well
Deals with follow-up assessments of key acquisition and invest-
ment projects
Is responsible for monitoring the internal process of identifying
related party transactions and ensuring adherence to statutory
approval and disclosure requirements; grants approval of related
party transactions
- Is authorized to request any information that it deems necessary
from the auditor or from the Board of Executive Directors and has
a direct right to information from the heads of central departments
such as Corporate Audit or Compliance; can also view all of
BASF's business documents and examine these and all other
assets belonging to BASF. The Audit Committee can also engage
experts such as auditors or lawyers to carry out these inspections
Financial experts
The meetings of the Supervisory Board and its four committees are
called by their respective chairs and, independently, at the request
of one of their members or the Board of Executive Directors. The
shareholder and employee representatives of the Supervisory Board
prepare for Supervisory Board meetings in separate preliminary
discussions in each case. Resolutions of the Supervisory Board are
passed by a simple majority vote of the participating members. In
the event of a tie, the vote of the chair of the Supervisory Board, who
must always be a shareholder representative, shall be the casting
vote. This resolution process is also applicable for the appointment
and dismissal of members of the Board of Executive Directors by the
Supervisory Board. Resolutions can, as needed, also be made in
writing or through communication outside of the meetings, as long
as no Supervisory Board member objects to this form of passing a
resolution.
Anke Schäferkordt*
Tatjana Diether*
170
Members
Dame Alison Carnwath DBE* (chair)
Supervisory Board is in regular contact with the Board of Executive
Directors, especially with its chair, outside of meetings as well.
A list of the members of the Supervisory Board of BASF SE indicating which members are shareholder
or employee representatives and their appointments to the supervisory bodies of other companies
can be found from page 175 onward
Compensation of the Supervisory Board is described in the Compensation Report at
basf.com/compensationreport
The Statutes of BASF SE and the Employee Participation Agreement can be found at
basf.com/statutes and basf.com/en/corporate governance
Members
Dr. Kurt Bock* (chair)
Franz Fehrenbach
Sinischa Horvat*
Michael Vassiliadis
Duties
-
Personnel Committee
• Prepares the appointment of members to the Board of Executive
Directors by the Supervisory Board as well as the service con-
tracts to be entered into with members of the Board of Executive
Directors
When making recommendations for appointments to the Board of
Executive Directors, considers professional qualifications, interna-
tional experience and leadership skills as well as long-term
succession planning, diversity, and especially the appropriate
consideration of women
Prepares the resolutions made by the Supervisory Board with
regard to the system and amount of compensation paid to mem-
bers of the Board of Executive Directors
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 166 for the criteria used to determine independence)
BASF Report 2021
Corporate Governance - Corporate Governance Report
Audit Committee
-
< > 165
At its meeting on February 24, 2021, the Supervisory Board deliberated and agreed
on the 2021 targets for the Board of Executive Directors based on the preparations of
the Personnel Committee. It also discussed and resolved on the final performance
factors for the Board of Executive Directors' short-term and long-term incentives
for 2020. At its meeting on December 16, 2021, the Supervisory Board evaluated,
based on the discussions and the corresponding recommendation of the Personnel
Committee, the Board of Executive Directors' performance in 2021 and set the
performance factor for the short-term incentive 2021 and the strategic performance
factors for the deferral compensation components for 2018-2021 and 2019-2022.
The Chairman of the Supervisory Board abstained from the resolution on the factor for
the performance bonus for 2018-2021 as this affected him personally.
In several meetings over the 2021 business year, the Supervisory Board discussed
and passed resolutions on the compensation of the Board of Executive Directors.
Matters relating to the composition of the Board of Executive Directors did not arise
in 2021.
Compensation and composition of the Board of Executive Directors
- Climate change and the European Green Deal and their effects on BASF, as well as
the resulting development paths, opportunities and risks
- The status, development and prospects of selected BASF business areas
Market prospects and growth opportunities in China as the largest regional market
for chemical products; growth projects such as the Verbund site in southern China
and the further expansion of the battery materials business
For more information on the compensation of the Board of Executive Directors and the Supervisory Board, see the Compensation
Report, which has been made publicly available on the company's website at basf.com/compensationreport
At its meeting on December 16, 2021, the Supervisory Board discussed and approved
the Board of Executive Directors' operational and financial planning, including the
investment budget for 2022, and, as in previous years, authorized the Board of Execu-
tive Directors to procure the necessary financing in 2022 within a set limit. In addition,
the Supervisory Board discussed the Board of Executive Directors' recommendation
that, given the uncertainty surrounding the further development of the coronavirus
pandemic and potential restrictions, the Annual Shareholders' Meeting on April 29,
2022, is also held as a virtual event. The Supervisory Board agreed to this following
extensive deliberation and consideration of the resulting, unavoidable restrictions of
shareholder rights compared with a physical meeting.
Committees
At the meeting on February 22, 2022, the auditor reported in detail on its audits of
BASF SE's Separate and Consolidated Financial Statements for the 2021 business
year, including the corresponding management's reports, and discussed the results of
its audit with the Audit Committee. The committee's audit also included the Non-
financial Statements of BASF SE and the BASF Group, as well as the Compensation
Report of BASF SE in accordance with section 162 AktG, which had been audited by
the external auditor. In preparation for the audit of the Nonfinancial Statements, the
Audit Committee had, following a corresponding resolution by the Supervisory Board,
additionally engaged KPMG to perform a limited assurance and issue an assurance
report on it. KPMG also reported in detail on the focus, the procedure and the key
findings of this audit.
For information on the composition of the committees and the tasks assigned to them by the Supervisory Board, see the
Corporate Governance Report from page 164 onward
BASF Report 2021
Corporate Governance - Report of the Supervisory Board
< > 180
The Personnel Committee met three times during the reporting period. All commit-
tee members attended all meetings. At its meeting on February 24, 2021, the Person-
nel Committee discussed the targets for the Board of Executive Directors for the 2021
business year and the 2020 Compensation Report. At its meeting on July 21, 2021,
the Personnel Committee addressed the status of leadership development at the top
levels of management below the Board of Executive Directors and long-term succes-
sion planning for the Board of Executive Directors. At its meeting on December 16,
2021, the Personnel Committee discussed the appropriateness of the compensation
of the Board of Executive Directors, the assessment of the Board's performance in
2021 and a proposal for the performance-related variable compensation of the Board
of Executive Directors.
The Audit Committee met five times during the reporting period. All committee
members attended all meetings. The Audit Committee is responsible for all the tasks
listed in section 107(3) sentence 2 of the German Stock Corporation Act (AktG) and
the recommendations of the German Corporate Governance Code. The Audit Com-
mittee is also responsible for monitoring the internal process for identifying related
party transactions and adopting resolutions to approve related party transactions.
- E-mobility and the transformation of the automotive industry as factors influencing
the development of the BASF Group
At the meeting on July 21, 2021, the Audit Committee engaged KPMG AG Wirtschafts-
prüfungsgesellschaft - the auditor elected by the Annual Shareholders' Meeting on
April 29, 2021 - with the audit for the 2021 reporting year and auditing fees were
agreed upon. The focus areas and scope of the annual audit were discussed and
defined together with the auditor. The Audit Committee excluded in principle the
engagement of the auditor to perform any services outside of the audit of the annual
financial statements, including beyond prevailing legal limitations. For certain nonaudit
services, the Audit Committee authorized the Board of Executive Directors to engage
KPMG for such services to a very limited extent, or granted approval in individual
cases. At the meeting on December 15, 2021, the auditors responsible reported
on the status of the annual audit, as well as the focus areas of the audit and the
most important individual items. The Audit Committee also addressed the effects of
the German Financial Market Integrity Strengthening Act on appointing KPMG as
an auditor in the future. Due to the change in the rules on auditor rotation, it is now
possible to last appoint KPMG for the 2023 business year.
The Supervisory Board of BASF SE has four committees: 1. the committee for
personnel matters of the Board of Executive Directors and the granting of loans in
accordance with section 89(4) of the German Stock Corporation Act (Personnel
Committee); 2. the Audit Committee; 3. the Nomination Committee; and 4. the
Strategy Committee. Following each Committee meeting, the chairs of the Commit-
tees reported in detail about the meetings and the activities of the Committees at the
subsequent meeting of the Supervisory Board.
- The development of research and development activities
At its meeting on February 24, 2021, the Supervisory Board reviewed and approved
the Consolidated Financial Statements, Management's Report and the proposal for
the appropriation of profit for the 2020 business year as presented by the Board
of Executive Directors. It also discussed the agenda for the Annual Shareholders'
Meeting on April 29, 2021, and adopted its proposals for resolutions. Since, due to
the continuing effects of the coronavirus pandemic, the Supervisory Board considered
it impossible to hold a physical meeting, it agreed to again hold the Annual Share-
holders' Meeting as a virtual event without the physical presence of shareholders.
Other topics discussed at the meeting were business conditions and development
as well as opportunities and risks for BASF's business in China, the world's largest
The main agenda items at the meeting on July 22, 2021, were BASF's leadership
development and personnel concept, the development and management of pension
obligations, the development of the Global Business Services unit, and market oppor-
tunities and risks in connection with the European Green Deal.
The Chairman of the Supervisory Board and the Chairman of the Board of Executive
Directors were also in regular contact outside of Supervisory Board meetings. The
Chairman of the Supervisory Board was always promptly and comprehensively
informed of current developments and significant individual issues. The Supervisory
Board was involved at an early stage in decisions of major importance. The Super-
visory Board passed resolutions on all of those individual measures taken by the
Board of Executive Directors which by law or the Statutes required the approval of the
Supervisory Board.
Supervisory Board meetings
The Supervisory Board held five meetings in the 2021 business year, each of which
was attended by all members. The meetings were held in person with most Super-
visory Board members physically present. Only at the meeting prior to the virtual
Annual Shareholders' Meeting did the majority of members also participate virtually.
The members of the Supervisory Board elected by shareholders and those elected by
the employees prepared for the meetings in separate preliminary discussions in each
case, which were also attended by members of the Board of Executive Directors.
An individual overview of attendance at meetings of the Supervisory Board and its committees will be made available on the
company website at basf.com/supervisoryboard/meetings
A significant component of all Supervisory Board meetings was the Board of Executive
Directors' reports on the current business situation with detailed information on sales
and earnings development, as well as on opportunities and risks for business develop-
ment, the status of important investment projects (current and planned), operational
excellence, important aspects of economic, environmental and social sustainability,
developments on the capital markets, significant managerial measures taken by the
Board of Executive Directors, and innovation projects.
In all meetings held in 2021, the Supervisory Board also discussed the progress of
major investments and ongoing portfolio projects. Discussions focused on:
-
-
The development of the joint venture Wintershall Dea created by the merger of the
oil and gas businesses of BASF and LetterOne
At the strategy meeting on October 21/22, 2021, the Board of Executive Directors
and the Supervisory Board discussed at length the status of implementation of the
corporate strategy with a particular focus on growth, strengthening profitability and
portfolio development, as well as key aspects of BASF's strategic development. These
included:
The investment in a joint venture with Shanshan to produce battery materials in
China
The progress and completion of the sale of the pigments business
Important topics addressed by the Supervisory Board, which were discussed with the
Board of Executive Directors at all meetings, were the effects, challenges and oppor-
tunities of climate change and, in particular, the European Green Deal and the resulting
changes in the regulatory environment. The Supervisory Board is convinced that the
successful management of the necessary, fundamental transformation process,
which affects all stages of the value chain, is key to BASF's future and long-term
success, not least with regard to society's and investors' likely expectations. These
topics were also the main focus of the Supervisory Board's strategy meeting in
October 2021.
BASF Report 2021
development. Regular topics of discussion were occupational and process safety and
matters relating to sustainability, the environmental and social impact of the com-
pany's activities and the challenges of climate change for the future development of
BASF's business. The Supervisory Board discussed in detail the reports from the
Board of Executive Directors, and also deliberated on prospects for the company and
its individual business areas with the Board of Executive Directors. It was convinced
of the lawfulness, expediency and propriety of the Board of Executive Director's
company leadership.
178
Corporate Governance - Report of the Supervisory Board
< > 179
chemical market, the project to construct a new Verbund site in southern China, and
current business developments, opportunities and challenges in the Petrochemicals
division.
The Supervisory Board met on April 28, 2021, one day before the virtual Annual
Shareholders' Meeting, primarily to prepare for the Annual Shareholders' Meeting.
Another topic was the shareholding in the Wintershall Dea joint venture.
- The progress and opportunities and risks of the investment project to establish a
new Verbund site in southern China
All members of the Board of Executive Directors attended the Supervisory Board
meetings unless it was deemed appropriate that the Supervisory Board discuss
individual topics - such as personnel matters relating to the Board of Executive
Directors - without them being present. In addition, each Supervisory Board meeting
includes an agenda item that provides an opportunity for discussion without the
Board of Executive Directors (executive session).
Degree: Business, 50 years old
< >
We Play Fair
We Respect
internal audits on adherence to
our compliance standards
Our Code of Conduct
How We Make
Decisions
- Anti-Corruption
- Trade Control
- Anti-Money Laundering
We Always Speak Up
Code of Conduct as the core of our Compliance Program
Systematic further development of our compliance management
system
- We Lead Integrity
< > 171
We Protect
Antitrust Laws
- Gifts and Entertainment
- Conflicts of Interest
Human Rights, Labor
and Social Standards
Environmental
Protection, Health and
Safety
Sensitive Company
Information
Personal Data
- Digital Responsibility
- Company Property
- Accurate Books and
Records
BASF's Compliance Program is based on our corporate values
and voluntary commitments, as well as international standards. It
describes our commitment to responsible conduct and expectations
around how all BASF employees interact with business partners,
officials, coworkers and the community. At the core of our Compli-
ance Program is the global, standardized Code of Conduct. All
employees and managers are obligated to adhere to its guidelines,
which cover topics ranging from corruption and antitrust laws to
human rights, labor and social standards, conflicts of interest and
trade control, and protection of data privacy.
The revised 2020 version also offers our employees user-friendly
features such as case studies, FAQs and additional references. The
corresponding internal online platform and app are available to
employees worldwide, providing them continuously with up-to-date
content such as videos and links to other specialist units and guide-
lines as well as direct contact to subject specialists.
A new platform for publishing binding Group-wide governance docu-
ments (policies, corporate requirements) provides a more effective
search function to make it easier for employees to find relevant regu-
lations. In addition, the managing directors of BASF Group compa-
nies can now find important information and assistance on ensuring
compliance in their Group companies on an internal website set up
especially for them.
Abiding by compliance standards is the foundation of responsible
leadership. This has also been embedded in our values. We are
convinced that compliance with these standards will play a key role
in securing our company's long-term success. Our efforts are princi-
pally aimed at preventing violations from the outset.
We perform a systematic risk assessment to identify the risk of
compliance violations, including corruption risks. These are con-
ducted at divisional, regional and country levels, with an additional
focus on Group companies in 2021. The regular compliance audits
performed by the Corporate Audit department are another source of
information for the systematic identification of risks. These risks are
documented in the relevant risk or audit report. The same applies to
specific risk minimization measures as well as the time frame for
their implementation.
One key element in the prevention of compliance violations is
compulsory training and workshops held as classroom or online
courses. All employees are required within a prescribed time frame
to take part in basic compliance training, refresher courses and
special tutorials dealing with, for example, antitrust legislation, taxes
or trade control regulations. Newly appointed senior executives also
receive special training on leading with integrity. Course materials
and formats are constantly updated, taking into account the spe-
cific risks of individual target groups and business areas. In total,
BASF Report 2021
The Nomination Committee is responsible for preparing candidate proposals for the
Supervisory Board members to be elected by the Annual Shareholders' Meeting. The
Nomination Committee is guided by the objectives for the composition of the Super-
visory Board adopted by the Supervisory Board as well as the competence profile and
diversity concept for the Supervisory Board resolved at the meeting on December 21,
2017. The Nomination Committee met twice in 2021. Both meetings were attended
by all committee members. Items discussed at the meetings were the current compe-
tence profile and diversity concept for the Supervisory Board, the selection of candi-
dates to succeed Franz Fehrenbach and Anke Schäferkordt, who had announced at
an early stage that they would resign from the Supervisory Board on conclusion of the
Annual Shareholders' Meeting 2022. In 2022, they will have been members of BASF's
Supervisory Board for 14 and 12 years, respectively, meaning that both will no longer
be independent within the meaning of the criteria of the German Corporate Gover-
nance Code and the criteria for the independence of Supervisory Board members set
by the Supervisory Board. The committee identified successor candidates in a struc-
tured process and with external support, and evaluated them according to set criteria.
Based on the recommendation of the Nomination Committee, the Supervisory Board
resolved on December 16, 2021, to propose Alessandra Genco, Chief Financial
Officer of Leonardo SpA, and Prof. Dr. Stefan Asenkerschbaumer, Deputy Chairman
of the Board of Management and Chief Financial Officer of Robert Bosch GmbH until
We Earn Trust
We care
compliance training
participants in
Degree: MBA, 57 years old
Michael Heinz
25 years at BASF
Saori Dubourg
(member of the Supervisory Board)b
Wintershall Dea AG
2025
2017
(member of the Supervisory Board)
Wintershall Dea AG
2024
2011
Monomers; Performance Materials; Petrochemicals; Intermediates;
North America; South America
Corporate Governance - Compliance
17 years at BASF
(until May 31, 2021)
Wayne T. Smith
25 years at BASF
Degree: Chemistry, 53 years old
BASF Report 2021
Corporate Governance - Compliance
Compliance
GRI 102, 103, 205, 206, 406, 407, 408, 409, 412, 413, 418, 419
Our Group-wide Compliance Program aims to ensure adherence to legal regulations, the company's
internal guidelines and ethical business practices. Our Code of Conduct firmly embeds these mandatory
standards into our employees' day-to-day business. Members of the Board of Executive Directors are
also expressly obligated to follow these principles.
Compliance Program and Code of Conduct
At a glance
>53,000
77
Degrees: Chemical Engineering, MBA, 61 years old
< > 172
more than 53,000 participants worldwide received over 79,000 hours compliance officers. The internal platform and the corresponding
of compliance training in 2021.
For more information on the BASF Code of Conduct, see basf.com/code_of_conduct
First
appointed
Term
expires
Corporate Legal, Compliance & Insurance;
2006
2023
Corporate Development;
Corporate Communications & Government Relations;
Corporate Human Resources;
Corporate Investor Relations
Supervisory board mandates within the meaning of
section 100(2) of the German Stock Corporation Act
Mercedes-Benz Group AG (until March 31, 2022: Daimler AG)
(member of the Supervisory Board since March 31, 2021)
Mercedes-Benz AG (Mercedes-Benz Group AG group company)
(member of the Supervisory Board since April 22, 2021)
Wintershall Dea AG
(Chairman of the Supervisory Board since November 2, 2021;
Deputy Chairman of the Supervisory Board until
November 1, 2021)b
Comparable German and
non-German supervisory bodies
Responsibilities (as of February 21, 2022)
Nord Stream AG (member of the
Shareholders' Committee)
Vice Chairman of the Board of Executive Directors
Degree: Law, 62 years old
34 years at BASF
Corporate Finance;
Corporate Audit;
Global Business Services;
2008
2023
Corporate Taxes & Duties;
Global Digital Services;
Wintershall AG
Global Procurement
(Chairman of the Supervisory Board) b
Dr. Hans-Ulrich Engel
38 years at BASF
34 years at BASF
Dr. Martin Brudermüller
Compliance culture at BASF
We firmly believe that for corporate responsibility to be a success,
there must be an active culture of living these guidelines within the
company. Our compliance standards were consolidated in the
global Code of Conduct in 2013 and republished in June 2020 in
our currently applicable global Code of Conduct. They are firmly
established and recognized. We expect all employees to act in line
with these compliance principles. Managers play a key role here -
they serve as an example of and communicate our values and cul-
ture both internally and externally. To specifically address compli-
ance and integrity as a leadership task, a workshop series was held
in 2021 with more than 130 senior executives.
Monitoring adherence to our compliance principles
BASF's Chief Compliance Officer (CCO) reports directly to the Chair-
man of the Board of Executive Directors and manages the further
development of our global compliance organization and our Compli-
ance Management System. The CCO is supported in this task by
the Compliance unit and more than 100 compliance officers world-
wide in the regions and countries as well as in the divisions, service
units and in the Corporate Center. Material compliance topics are
regularly discussed in the compliance committees established at
global and regional level. The CCO reports to the Supervisory
Board's Audit Committee in at least one of its meetings each year on
the status of the Compliance Program as well as any major develop-
ments. In the event of significant incidents, the Audit Committee is
immediately informed by the Board of Executive Directors.
We particularly encourage our employees to actively and promptly
seek guidance if in doubt. They can consult their supervisors, spe-
cialist departments, such as the Legal department, and company
app also help employees to access advice by enabling direct con-
tact. In addition, we have set up more than 50 external hotlines
worldwide that our employees can use - including anonymously - to
report potential violations of laws or company guidelines. We
enhanced and standardized these hotlines in 2021. An independent
external company was engaged to manage all hotlines. In the future,
the cases reported will be recorded and processed in one global
system. In addition to local phone numbers, a new website now also
makes it possible to get in contact online using a computer or
smartphone. All hotlines and the website are also open to the public.
Each concern is documented according to specific criteria, properly
investigated in line with standard internal procedures and answered
as quickly as possible. The outcome of the investigation as well as
any measures taken are documented accordingly and included in
internal reports.
In 2021, 277 reports were received by our external hotlines (2020:
387). The information received related to all categories of our Code
of Conduct, including environmental and human rights issues, cor-
ruption and handling of company property. We carefully investigated
all cases of suspected misconduct that came to our attention and,
when necessary, took countermeasures on a case-by-case basis.
These included, for example, improved control mechanisms, addi-
tional informational and training measures, clarification and expan-
sion of the relevant internal regulations, as well as disciplinary
measures as appropriate. Most of the justified cases related to
personal misconduct in connection with the protection of company
property, inappropriate handling of conflicts of interests or gifts and
invitations. In such isolated cases, we took disciplinary measures in
accordance with uniform internal standards and also pursued claims
for damages where there were sufficient prospects of success.
In 2021, violations of our Code of Conduct led to termination of
employment in a total of 32 cases (2020: 31). This relates to diverse
employee groups, including executives.
BASF's Corporate Audit department monitors adherence to
compliance principles, covering all areas in which compliance viola-
tions could occur. They check that employees uphold regulations
and make sure that the established processes, procedures and
monitoring tools are appropriate and sufficient to minimize potential
risks or preclude violations in the first place. In 2021, 77 audits of
this kind were performed Group-wide (2020: 61). Our compliance
management system itself is also regularly audited by the internal
Corporate Audit department, most recently in November 2018.
Overall, the audits confirmed the effectiveness of the compliance
management system. In cooperation with an external consulting
firm, we developed a comprehensive action plan in 2021 to ensure
the systematic, continuous optimization of the compliance manage-
ment system.
We monitor our business partners in sales for potential compliance
risks based on the global Guideline on Business Partner Due
Diligence using a checklist, a questionnaire and an internet-based
analysis. The results are then documented. If business partners are
not prepared to answer the questionnaire, we do not enter into a
business relationship with them. A dedicated global Supplier Code
of Conduct applies to our suppliers, which covers compliance with
environmental, social and corporate governance standards, among
other requirements. As part of our trade control processes, we also
check whether persons, companies or organizations appear on
sanction lists due to suspicious or illegal activities, and whether
there are business processes with business partners from or in
countries under embargo.
We support the United Nations' Guiding Principles on Business and
Human Rights and are constantly working to enhance our internal
guidelines and processes in keeping with these principles. For
example, there is an internal guideline to respect international
labor and social standards that is applicable throughout the
Group. Outside of our company, too, we support respect for human
rights and the fight against corruption. We are a founding member
of the United Nations Global Compact. As a member of Transparency
International Deutschland and the Partnering Against Corruption
Initiative (PACI) of the World Economic Forum, we assist in the
implementation of these organizations' objectives.
BASF Report 2021
Corporate Governance - Compliance
Chairman of the Board of Executive Directors
Degree: Chemistry, 60 years old
As prescribed by BASF's Code of Conduct and corporate values,
we adhere to uniformly high standards and integrity regarding
tax-related issues. To aid in the achievement of the U.N. SDGs and
to meet our own standards for the creation of economic and social
value, we contribute to public finances in accordance with legal
requirements and our corporate values. BASF's Value to Society
method considers taxes paid by BASF to be a social advantage. In
2020, we developed and published the BASF tax principles, which
are binding for all Group entities.
For more information on the Code of Conduct, see basf.com/code_of_conduct
For more information on human rights and labor and social standards, see
basf.com/human_rights
For more information on on tax principles, see basf.com/en/corporate governance
< >
173
BASF Report 2021
Corporate Governance - Board of Executive Directors
Management and Supervisory Boards
Board of Executive Directors
< >
174
There were six members on the Board of Executive Directors of BASF SE as of December 31, 2021. As part of its long-term succession planning and in line with its diversity concept, the Supervisory Board
appointed Dr. Melanie Maas-Brunner as a member of the Board of Executive Directors on December 17, 2020. The Board of Executive Directors therefore temporarily comprised seven members from
February 1, 2021, until the departure of Wayne T. Smith as of May 31, 2021. Some of the responsibilities within the Board of Executive Directors were reallocated effective June 1, 2021, as a result of this change.
The composition of the Board of Executive Directors and the responsibilities of individual members are as follows:
For more information on the Supplier Code of Conduct and supplier assessments,
see page 109 onward
Agricultural Solutions; Care Chemicals; Nutrition & Health;
Europe
Dr. Markus Kamieth
Catalysts; Coatings; Dispersions & Resins; Performance Chemicals;
Greater China; South & East Asia, ASEAN & Australia/New Zealand;
Mega Projects Asia
January 14, 2008
(partner with unlimited liability of Serviceplan Group SE & Co. KG)
(member)
Wayfair Inc.3 (non-executive director)
Serviceplan Group Management SE4
December 17, 2010
IBM Financing and Leasing Company Ltd.4 (chair, intragroup membership)
IBM Factoring (China) Company Ltd.4 (chair, intragroup membership)
Inspur Power Commercial Systems Company Ltd.4 (chair, intragroup membership)
IBM Global Services (Dalian) Company Limited (chair, intragroup membership)
IBM Solution and Services (ShenZhen) Company Ltd.4 (chair, intragroup membership)
IBM (China) Company Ltd.4 (chair, intragroup membership)
IBM China Investment Company Ltd.4 (chair, intragroup membership)
Memberships of comparable domestic and foreign supervisory bodies
of commercial enterprises
Memberships of statutory supervisory boards
in Germany
176
< >
April 29, 2016
May 4, 2018
October 8, 2020
Member of the Super-
visory Board since
Full-time trade union delegate
Denise Schellemans, Brecht, Belgium²
Member of the Supervisory Board
Anke Schäferkordt, Cologne, Germany*1
Member of the Works Council of BASF SE, Ludwigshafen Site
Waldemar Helber, Otterbach, Germany*2
Deputy Chairwoman of the Works Council of BASF SE, Ludwigshafen
Site, and member of the BASF Works Council Europe
Tatjana Diether, Limburgerhof, Germany*2
Chairman IBM Greater China Group
Liming Chen, Beijing, China*1
Bayerische Motoren Werke Aktiengesellschaft³ (member)
Roland Strasser, Riedstadt, Germany*2
May 4, 2018
AbbVie Komplementär GmbH (member)
Corporate Governance - Report of the Supervisory Board
BASF Report 2021
In 2021, the Supervisory Board of BASF SE exercised its duties as required by law and
the Statutes with the utmost care. It regularly monitored the management of the Board
of Executive Directors and provided advice on the company's strategic development
and important individual measures, about which the Supervisory Board was regularly
and thoroughly informed by the Board of Executive Directors. This occurred both
during and outside of the meetings of the Supervisory Board and its committees in the
form of written and oral reports on, for example, all of the major financial key perfor-
mance indicators (KPIs) of the BASF Group and its segments, the economic situation
in the main sales and procurement markets, and on deviations in business develop-
ments from original plans. Furthermore, the Supervisory Board tackled fundamental
questions of corporate planning, including financial, investment, sales volumes and
personnel planning, as well as measures for designing the future of research and
Monitoring and consultation in an ongoing dialog with the Board of
Executive Directors
The Board of Executive Directors has enhanced and refined the portfolio and driven
forward important investments for profitable growth. Above all, it defined ambitious
targets to further reduce CO2 emissions at an early stage and presented a package
of measures aimed at increasing sustainability in the BASF Group. The underlying
BASF's business developed extremely well in 2021. Growth and earnings were
considerably higher than expected at the beginning of the year. The Board of Execu-
tive Directors decisively seized the opportunities that arose, strengthened BASF's
overall competitiveness and laid important groundwork for the future. They did so in
an exceptionally challenging environment, including a sharp rise in raw materials and
energy prices, strained conditions in many international supply chains, and problems
with production and volumes in the automotive industry, which is particularly impor-
tant for BASF. In addition, political tensions have increased and global economic
activity has become even more demanding overall. Most of these factors will continue
to challenge us in 2022.
Dear Shareholder,
Unfortunately, the new shareholder representatives will again not be able to be elected
at a physical Annual Shareholders' Meeting in 2022. The Supervisory Board deeply
regrets this, as it believes that it is the ideal place to discuss BASF's development with
you. However, after intensive consultation, the Supervisory Board concurred with the
Board of Executive Directors' assessment that, from today's perspective, it will not be
possible to hold a physical Annual Shareholders' Meeting in a responsible manner at
the end of April this year given the current situation.
We will drive forward change in the Supervisory Board, too. Anke Schäferkordt, Franz
Fehrenbach, Denise Schellemans, Waldemar Helber and Roland Strasser will resign
from the Supervisory Board on conclusion of the Annual Shareholders' Meeting on
April 29, 2022. As a result, its composition will once again change quite significantly
compared with the start of the current term of office in 2019.
The Supervisory Board expressly supports this approach and is following it closely,
both in an advisory capacity and through regular and critical monitoring. It would like
to thank the Board of Executive Directors and all employees worldwide for their dedi-
cation, extraordinary work and outstanding results in the 2021 business year.
conditions vital to this, such as the European Green Deal and upcoming regulation of
the chemical industry in the E.U., are currently difficult to assess and were the subject
of in-depth discussion.
Report of the
Supervisory Board
< > 177
Continued from previous page
Corporate Governance - Report of the Supervisory Board
4 Not publicly listed
3 Publicly listed
2 Employee representative
1 Shareholder representative
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 166 for the criteria used to determine independence)
*
RAG Aktiengesellschaft³ (vice chair)
Henkel AG & Co. KGaA³ (member)
Vivawest GmbH (member)
Steag GmbH (member)
Chairman of the Mining, Chemical and Energy Industries Union
August 1, 2004
Michael Vassiliadis, Hannover, Germany²
V & B Fliesen GmbH4 (member)
Villeroy & Boch AG³ (member)
Regional Manager of the Rhineland-Palatinate/Saarland branch of IG BCE
BASF Report 2021
Corporate Governance - Supervisory Board
BASF Report 2021
EG Group Holdings Limited (non-executive member of the Board of Directors and
chair of the audit committee since March 1, 2021)
Vice Chairman of the Supervisory Board of BASF SE
Franz Fehrenbach, Stuttgart, Germany¹
Former Chairman of the Board of Executive Directors of BASF SE
(until May 2018)
Dr. Kurt Bock, Heidelberg, Germany*1
Chairman of the Supervisory Board of BASF SE
Member of the Super-
visory Board since
The Supervisory Board comprises the following members (as of February 21, 2022):
In accordance with the Statutes, the Supervisory Board of BASF SE comprises 12 members. The term of office of the Supervisory Board commenced following the Annual Shareholders' Meeting on May 3, 2019,
in which the shareholder representatives on the Supervisory Board were elected. In accordance with the applicable article of the Statutes as of the date of election, it terminates upon conclusion of the Annual
Shareholders' Meeting that resolves on the discharge of members of the Supervisory Board for the fourth complete business year after the term of office commenced; this is the Annual Shareholders' Meeting
on April 25, 2024.
Supervisory Board
175
< >
Corporate Governance - Supervisory Board
BASF Report 2021
(member of the Board of Directors)
Former Chairman of the Supervisory Board of Robert Bosch GmbH
(until December 31, 2021)
Inter Pipeline Ltd.
(Chairwoman of the Administrative
Council since June 1, 2021)
BASF Antwerpen N.V.
Solenis UK International Ltd.
(member of the Board of Directors
until December 31, 2021)
BASF Antwerpen N.V.
(Chairman of the Administrative
Council until May 31, 2021)
b Internal membership within the meaning of section 100(2) sentence 2 of the German Stock Corporation Act
a Publicly listed
2021
2012
2024
2021
Corporate Environmental Protection, Health & Safety;
European Site & Verbund Management; Global Engineering Services;
Advanced Materials & Systems Research; Bioscience Research;
Process Research & Chemical Engineering; BASF New Business
2025
2017
23 years at BASF
Degree: Chemistry, 51 years old
June 18, 2020
Sinischa Horvat, Limburgerhof, Germany*2
Asda Group Limited (non-executive member of the Board of Directors since December 1,
2021)
Broadwell Capital Limited (non-executive member of the Board of Directors)
Coller Capital Ltd.4 (non-executive member of the Board of Directors)
PACCAR Inc.³ (independent member of the Board of Directors)
Zurich Insurance Group AG³ (independent, non-executive member of the Board of Directors)
Zürich Versicherungs-Gesellschaft AG (Zurich Insurance Group AG group company)4
(independent, non-executive member of the Board of Directors)
4 Not publicly listed
3 Publicly listed
2 Employee representative
1 Shareholder representative
Classified by the Supervisory Board as an "independent" member of the Supervisory Board (see page 166 for the criteria used to determine independence)
*
Stihl Holding AG & Co. KG4 (member of the Advisory Board)
Linde plc (member of the Board of Directors)
Robert Bosch GmbH4 (chair until December 31, 2021)
Stihl AG (Stihl Holding AG & Co. KG group company)³
(vice chair)
January 14, 2008
Memberships of comparable domestic and foreign supervisory bodies
of commercial enterprises
Fuchs Petrolub SE³ (chair)
Memberships of statutory supervisory boards
in Germany
May 2, 2014
Dame Alison Carnwath DBE, Exeter, England*1
Senior Advisor Evercore Partners
May 3, 2019
Ludwig Maximilians University Munich
Professor of Organic Chemistry at
Prof. Dr. Thomas Carell, Munich, Germany*1
BASF Works Council Europe
Chairman of BASF's Joint Works Council and of the
Chairman of the Works Council of BASF SE, Ludwigshafen Site;
Vice Chairman of the Supervisory Board of BASF SE
May 12, 2017
Bayerische Motoren Werke Aktiengesellschaft³ (member)
Other important agenda items included providing guidance to the Board of Executive
Directors on accounting issues, the control system established by the Board of
Executive Directors, and follow-up assessments of acquisition and investment
projects. At its meeting on April 27, 2021, the Audit Committee addressed risk man-
agement in the BASF Group and the organization of internal environmental, health and
safety audits. Its meetings on July 21, 2021, and December 15, 2021, focused on
internal auditing and compliance, respectively. In these meetings, the head of the
Corporate Audit department and the head of the Corporate Compliance unit reported
to the Audit Committee and answered its questions. In all meetings, the Audit Com-
mittee also received information on the development of risks from litigation.
(since February 1, 2021)
Dr. Melanie Maas-Brunner
If we conclude, based on the work we have conducted, that there is
14 Intangible assets
236
Statement of Changes in Equity.
199
15 Property, plant and equipment
240
30 Compensation of the Board of Executive Directors and
Supervisory Board
283
2 Scope of consolidation
Notes
1 Summary of accounting policies
3 Acquisitions and divestitures
200 16 Leases
244
31 Related party transactions
283
200
17 Inventories
280
incentive share program
235
13 Noncontrolling interests
194
Statement of Income and Expense Recognized
in Equity
10 Investments accounted for using the equity method
and other financial assets
225
26 Supplementary information on financial instruments
27 Statement of cash flows and capital
structure management
263
277
195
246
11 Financial result
28 Personnel expenses and employees
279
Balance Sheet
196 12 Income taxes
231
29 Share price-based compensation programs and BASF
Statement of Cash Flows
198
230
32 Services provided by the external auditor
285
.205
Consolidated Financial Statements - Statement by the Board of Executive Directors
Statement by the Board of
Executive Directors
and assurance pursuant to sections 297(2)
and 315(1) of the German Commercial Code
(HGB)
The Board of Executive Directors of BASF SE is responsible for preparing the Consoli-
dated Financial Statements and Management's Report of the BASF Group.
The BASF Group Consolidated Financial Statements for 2021 were prepared accord-
ing to the International Financial Reporting Standards (IFRS), which are published
by the International Accounting Standards Board (IASB), London, and have been
endorsed by the European Union.
We have established effective internal control and steering systems in order to ensure
that the BASF Group's Management's Report and Consolidated Financial Statements
comply with applicable accounting rules and to ensure proper corporate reporting.
The risk management system we have set up is designed such that the Board of
Executive Directors can identify material risks early on and take appropriate defensive
measures as necessary. The reliability and effectiveness of the internal control and risk
management system are continually audited throughout the Group by our internal
audit department.
To the best of our knowledge, and in accordance with the applicable reporting rules,
the Consolidated Financial Statements of the BASF Group give a true and fair view
of the net assets, financial position and results of operations of the Group, and the
Management's Report of the BASF Group includes a fair review of the development
and performance of the business as well as position of the BASF Group, together with
a description of the principal opportunities and risks associated with the expected
development of the BASF Group.
BASF Report 2021
Ludwigshafen am Rhein, February 23, 2022
Dr. Hans-Ulrich Engel
Vice Chairman and Chief Financial Officer
Saori Dubourg
Michael Heinz
Dr. Markus Kamieth
Dr. Melanie Maas-Brunner
< > 187
BASF Report 2021
Dr. Martin Brudermüller
Chairman of the Board of Executive Directors
Statement of Income
260
22 Provisions for pensions and similar obligations
23 Other provisions
18 Receivables and miscellaneous assets
247
207
4 BASF Group list of shares held pursuant to
19 Capital, reserves and retained earnings.
20 Other comprehensive income
249
33 Declaration of Conformity with the German Corporate
Governance Code
285
254
250
285
section 313(2) of the German Commercial Code (HGB) 213
21 Liabilities
251
5 Reporting by segment and region.
213
6 Earnings per share
220
34 Non-adjusting events after the balance sheet date
223
9 Other operating income and expenses
263
KPMG AG Wirtschaftsprüfungsgesellschaft, the auditor elected by the Annual Share-
holders' Meeting for the 2021 reporting year, has audited the Financial Statements of
BASF SE and the BASF Group Consolidated Financial Statements, which were
prepared in accordance with the International Financial Reporting Standards (IFRS) as
adopted by the European Union, and the additional requirements that must be applied
in accordance with section 315e(1) of the German Commercial Code (HGB), including
the Management's Report and the accounting records from which they were prepared,
and have approved them free of qualification. Furthermore, the auditor certified that
the Board of Executive Directors had taken the measures incumbent on it under
section 91(2) of the German Stock Corporation Act (AktG) in an appropriate manner.
In particular, it had instituted an appropriate early risk detection system that fulfilled the
requirements of the company and is applicable for the early identification of develop-
ments that could pose a risk to the continued existence of the BASF Group. The
results of the audit as well as the procedure and material findings of the audit of the
financial statements are presented in the Auditor's Report.
The Auditor's Report is rendered from page 188 onward
For more information on the auditor, see the Corporate Governance Report on page 170
Beyond the statutory audit of the Financial Statements, KPMG also conducted, on
behalf of the Supervisory Board, a limited assurance of the Nonfinancial Statements
(NFSs) for BASF SE and the BASF Group, which are integral parts of the respective
management's reports. On the basis of its audit, KPMG did not raise any objections
to reporting and the satisfaction of the relevant statutory requirements. Above and
beyond the statutory requirements, the auditor also conducted a limited assurance
of the Compensation Report that is to be prepared by the Board of Executive Directors
and Supervisory Board in accordance with section 162 AktG.
The assurance report issued by KPMG on the substantive audit of the NFS can be found at basf.com/nfs-audit-2021
The assurance report issued by KPMG on the audit of the Compensation Report can be found at basf.com/compensationreport
The auditor's reports were sent in a timely manner to every member of the Supervisory
Board. The auditor attended the accounts review meeting of the Audit Committee on
February 22, 2022, as well as the accounts meeting of the Supervisory Board on
February 23, 2022, and reported on the procedure and material findings of its audit,
including the key audit matters described in the Auditor's Report. The auditor also
provided the Supervisory Board with detailed explanations of the reports on the day
before the accounts meeting.
The Audit Committee reviewed the Financial Statements, the Management's Report
and the Compensation Report at its meeting on February 22, 2022, including the
reports prepared by the auditor and the key audit matters specified in the Auditor's
Report, and discussed them in detail with the auditor. The chair of the Audit
Committee gave a detailed account of the preliminary review at the Supervisory Board
meeting on February 23, 2022. On this basis, the Supervisory Board examined the
Financial Statements and Management's Report of BASF SE for 2021, the proposal
by the Board of Executive Directors for the appropriation of profit, and the Consoli-
dated Financial Statements and Management's Report for 2021. The results of the
preliminary review by the Audit Committee and the results of the Supervisory Board's
own examination fully concur with those of the audit. The Supervisory Board sees no
grounds for objection to the management or the reports submitted.
Separate and Consolidated Financial Statements; Compensation Report
At its accounts meeting on February 23, 2022, the Supervisory Board approved the
Financial Statements of BASF SE and the Consolidated Financial Statements of the
BASF Group prepared by the Board of Executive Directors, making the 2021 Financial
Statements final. The Supervisory Board concurred with the proposal of the Board of
Executive Directors regarding the appropriation of profit and the payment of a dividend
of €3.40 per share.
The Compensation Report is publicly available on the company's website at basf.com/compensationreport
BASF Report 2021
Corporate Governance - Report of the Supervisory Board
Composition of the Supervisory Board
Liming Chen, the Supervisory Board member appointed by the Ludwigshafen am
Rhein local court (Amtsgericht) effective October 8, 2020, was elected to the Super-
visory Board as a shareholder representative by the Annual Shareholders' Meeting on
April 29, 2021, and was thus confirmed as a member of the Supervisory Board with a
term of office until the end of the current Supervisory Board period in 2024.
In addition, the Supervisory Board members Anke Schäferkordt and Franz Fehrenbach
announced in 2021 that they will resign from the Supervisory Board on conclusion of
the Annual Shareholders' Meeting on April 29, 2022. In light of this, the Supervisory
Board selected Alessandra Genco and Prof. Dr. Stefan Asenkerschbaumer as candi-
dates to succeed them on the Supervisory Board based on a selection process
managed by the Nomination Committee. Details of the two candidates proposed for
election will be published in the invitation to the Annual Shareholders' Meeting and
made available on the company's website at basf.com/annualmeeting.
According to the Supervisory Board's assessment, the current and proposed future
composition of the Supervisory Board meet in full the objectives with respect to its
competence profile and diversity concept.
Ludwigshafen, February 23, 2022
Also at the meeting on February 23, 2022, the Supervisory Board discussed with the
Board of Executive Directors the joint Compensation Report of the Board of Executive
Directors and the Supervisory Board in accordance with section 162 AktG and
approved it.
The Supervisory Board
Independent of the efficiency review of the Supervisory Board, the Audit Committee
also conducted a self-assessment of its activities in 2021 based on individual discus-
sions between the chair of the Audit Committee and all members of the Audit
Committee. Material subjects were the organization and content of meetings, meeting
documents and reports, participants and quality of discussion at meetings, and the
implementation of the recommendations of the 2020 efficiency review. The Audit
Committee discussed the results of the questionnaire and detailed suggestions at its
meeting on December 15, 2021. On this basis, the members judged the Audit
Committee's work to be efficient and appropriate.
< >
a material misstatement of this other information, we are obligated
to report on this fact. We do not have anything to report in this
regard.
BASF Report 2021
Corporate Governance - Report of the Supervisory Board
< >
181
December 31, 2021, for election to the Supervisory Board at the Annual Shareholders'
Meeting on April 29, 2022.
The Strategy Committee, which was established to discuss strategic options for the
further development of the BASF Group, did not meet in 2021.
Corporate governance and Declaration of Conformity
182
The Supervisory Board places great value on ensuring good corporate governance: In
2021, it was therefore once again intensely occupied with the corporate governance
standards practiced in the company and the implementation of the recommendations
and suggestions of the German Corporate Governance Code in the current version
dated December 16, 2019.
Special onboarding events are held for new members of the Supervisory Board to
familiarize them with the basics of corporate governance at BASF, the organization
and internal structures of the BASF Group, and the composition of its businesses.
Above and beyond this, the company also supports the members of the Supervisory
Board with training for their activities on the Supervisory Board, whether through
external offerings such as topic-specific seminars or internal information offerings
such as site and plant visits.
At its meeting of December 16, 2021, the Supervisory Board approved the joint
Declaration of Conformity by the Supervisory Board and the Board of Executive Direc-
tors in accordance with section 161 of the German Stock Corporation Act (AktG).
BASF complies with all recommendations of the German Corporate Governance
Code in the version dated December 16, 2019. The Corporate Governance Report
provides extensive information on the BASF Group's corporate governance.
The full Declaration of Conformity is rendered on page 184 and is available to shareholders on the company website at
basf.com/en/corporate governance
Independence and efficiency review
An important aspect of good corporate governance is the independence of Super-
visory Board members and their freedom from conflicts of interest. The Supervisory
Board based the assessment of the independence of its members on the recommen-
dations of the German Corporate Governance Code and the additional criteria for
assessing the independence of Supervisory Board members contained in the Rules of
Procedure of the Supervisory Board, which were revised in the Supervisory Board
meeting on December 19, 2019. The criteria used to assess independence are pres-
ented in the Corporate Governance Report on page 166. According to the Super-
visory Board's assessment, on the basis of these criteria, five of the six shareholder
representatives and four of the six employee representatives - 9 of the 12 members
of the Supervisory Board in total - are considered to be independent as of the end
of 2021. All three non-independent Supervisory Board members were classified as
such due to the length of their membership on the Supervisory Board, which exceeds
12 years in each case. Franz Fehrenbach and Denise Schellemans, two of the mem-
bers to be classified as non-independent, will leave the Supervisory Board on conclu-
sion of the Annual Shareholders' Meeting on April 29, 2022; this increases the number
of independent members to 11 of 12 members. Above and beyond this, however, the
Supervisory Board does not see any indications that the Supervisory Board role is not
performed completely independently. In cases where Supervisory Board members
hold supervisory or management positions at companies with which BASF has busi-
ness relations, we see no impairment of their independence. The scope of these
businesses is marginal and furthermore takes place under conditions similar to those
of a third party.
The Supervisory Board reviews the efficiency of its activities every year in the form of
a self-assessment. To this end, the Chairman of the Supervisory Board conducted a
written survey of all Supervisory Board members in the fourth quarter of 2021 on the
basis of a detailed questionnaire covering the entire range of relevant Supervisory
Board topics. These included, in particular, the preparation and conduct of Super-
visory Board meetings, the content and topics of the meetings, cooperation within the
Supervisory Board, and cooperation with the Board of Executive Directors and the
auditor. The results of these dialogs, including suggestions to further improve the
Supervisory Board's work, were presented by the Chairman of the Supervisory Board
at the Supervisory Board meeting on December 16, 2021, and thoroughly discussed
by the members of the Supervisory Board. Overall, its members again rated the
Supervisory Board's activity as efficient.
BASF Report 2021
Corporate Governance - Report of the Supervisory Board
In accordance with the recommendations of the German Corporate Governance
Code and the Guiding principles for the dialog between investors and German super-
visory boards, the Chairman of the Supervisory Board again sought dialog with invest-
ors where appropriate in 2021.
West bank
Dr. Kurt Bock
Chairman of the Supervisory Board
4
BASF Report 2021
Consolidated
Financial
Statements
Q<>=186
Contents
To Our Shareholders
Management's Report
Corporate Governance
Consolidated Financial Statements
Overviews
Statement by the Board of Executive Directors
Pursuant to section 317(2) sentence 6 HGB, the auditor checked
that the disclosures according to section 315d HGB were made.
187
221
24 Risks from litigation and claims
262
8 Functional costs
222
Independent Auditor's Report
188
25 Other financial obligations
7 Sales revenue
The Declaration of Corporate Governance, pursuant to section
315d HGB in connection with section 289f HGB, comprises the
subchapters Corporate Governance Report including the descrip-
tion of the diversity concept for the composition of the Board of
Executive Directors and the Supervisory Board (except for the
disclosures pursuant to section 315a HGB), Compliance and
Declaration of Conformity as per section 161 of the German Stock
Corporation Act (AktG) in the Corporate Governance chapter. It is a
component of the Management's Report.
Declaration of Corporate Governance in accordance with
section 315d HGB in connection with section 289f HGB
Corporate Governance
< >
183
BASF Report 2021
Corporate Governance - Declaration of Conformity Pursuant to Section 161 AktG
< >
184
Declaration of
Conformity Pursuant to
Section 161 AktG
Declaration of Conformity 2021 of the Board of
Executive Directors and the Supervisory Board of
BASF SE
The Board of Executive Directors and the Supervisory Board
of BASF SE hereby declare pursuant to section 161 AktG
(German Stock Corporation Act)
The recommendations of the Government Commission on the
German Corporate Governance Code as amended on Decem-
ber 16, 2019, published by the Federal Ministry of Justice on
March 20, 2020, in the official section of the Federal Gazette are
complied with and have been complied with since the submission of
the last Declaration of Conformity of December 2020.
Ludwigshafen, December 2021
The Supervisory Board
of BASF SE
The Board of Executive Directors
of BASF SE
BASF Report 2021
Corporate Governance - Declaration of Corporate Governance
< >
185
Declaration of
Consolidated Financial Statements - Independent Auditor's Report
< >
In accordance with German legal requirements we have not audited
the content of those components of the Group Management
Report specified in the "Other Information" section of our auditor's
report.
Intangible assets in the Consolidated Financial Statements of
BASF SE include goodwill in the amount of €7,520 million. Good-
will accounts for 8.6% of total assets and thus has a material impact
on the company's net assets. Goodwill must be tested for impairment
annually and whenever there is an indication that goodwill may be
impaired.
Our observations
The assumptions and data underlying the calculations of the Board
of Executive Directors are acceptable. The disclosures in the Notes
on the key assumptions are appropriate and complete.
Recoverability of the shareholding in Wintershall Dea
For information on the accounting principles applied and the under-
lying assumptions used in the calculation, please refer to Note 10.2
to the Consolidated Financial Statements on page 227.
Financial statement risk
In the Consolidated Financial Statements of BASF SE, shares in
Wintershall Dea in the amount of €9,583 million are reported under
non-integral shareholdings accounted for using the equity method.
The shareholding in Wintershall Dea accounts for 11% of total
assets and thus has a material influence on the company's net
assets.
If there are indicators for an impairment of an equity-accounted
shareholding the company determines the recoverable amount as of
the reporting date and compares this with the carrying amount. The
recoverable amount is the higher of fair value less costs to sell and
the value in use of the shareholding. The higher value in use deter-
mined for the shareholding as the recoverable amount is determined
using the discounted cash flow method. If the carrying amount is
higher than the recoverable amount, this results in an impairment.
BASF Report 2021
Consolidated Financial Statements - Independent Auditor's Report
< > 190
The determination of the recoverable amount of the shareholding in
the Wintershall Dea is complex and based on discretionary assump-
tions. These include, in particular, the estimates made by BASF's
Board of Executive Directors on the long-term development of oil and
gas prices, the forecast production volumes of Wintershall Dea's oil
and gas fields based on expected license terms and production
profiles, and the cost of capital. The development of future oil and
gas prices is subject to increased uncertainty, particularly in view of
the timing of the implementation of international climate targets.
In addition to the impairments and reversals of impairments of
€161 million after tax recognized by Wintershall Dea, as a result of the
impairment test performed, the company recognized impairments of
€420 million on fair value adjustments of assets of Wintershall Dea
that are carried forward in income from non-integral companies
accounted for using the equity method.
There is the risk for the financial statements that a decline in the value
of the shareholding as of the balance sheet date was not identified. In
addition, there is also the risk that the associated disclosures in the
Notes are not appropriate and complete.
Our audit approach
From explanations provided by employees in accounting, we gained
an understanding of the company's process to identify indicators for
impairment and to determine the recoverable amount. In doing so,
we assessed, among other things, whether the calculation of the
recoverable amount of the shareholding in Wintershall Dea is con-
sistent with the relevant accounting principles and whether the key
assumptions made in this calculation are appropriate.
We discussed the projected development of production volumes
and oil and gas prices with the persons responsible for planning. We
evaluated the production profiles used in the measurement of the
exploration and production business's assets, taking into account
assessments by experts contracted by Wintershall Dea. In order to
assess its suitability as a basis for calculation, we had the oil and gas
price scenario used by the company explained to us. To assess its
appropriateness, we compared the oil and gas price scenario used
by BASF with the published forecasts of competitors, analysts,
international institutions and other market participants. Due to the
increased estimation uncertainties regarding future oil and gas price
developments, we evaluated the impact of alternative price sce-
narios on the carrying amount of the shareholding and assessed the
appropriateness of the valuation.
In consultation with our valuation specialists, we furthermore
satisfied ourselves of the methodological appropriateness of the
calculation and the appropriateness of the weighted cost of capital
rates. We compared the assumptions and data underlying the cost
of capital, in particular the risk-free rate, the market risk premium
and the beta factor, with our own assumptions and publicly available
data.
In order to assess the accuracy of the measurement of the interest
in Wintershall Dea, we reproduced selected calculations taking into
account risk-based considerations.
Finally, we assessed whether the disclosures in the Notes on the
recoverability of the shareholding in Wintershall Dea are appropriate
and complete.
Our observations
The underlying calculation method for the impairment test of the
shareholding in Wintershall Dea is appropriate and consistent with
the applicable accounting principles.
The company's assumptions and data underlying the measurement
are appropriate. The associated disclosures in the notes are appro-
priate and complete.
The Board of Executive Directors and the Supervisory Board are
responsible for the other information. The other information com-
prises the following components of the Group Management Report,
whose content was not audited:
-
Finally, we assessed whether the disclosures in the Notes on the key
assumptions are appropriate and complete.
the information of the integrated non-financial statement which is
identified as unaudited
We assessed the appropriateness of the assumed growth rate for
the period following the detailed planning period on the basis of
industry-specific and macroeconomic studies. We evaluated the
methodological appropriateness of the calculation and the appro-
priateness of the weighted cost of capital rates. To this end, we
calculated our own expected values for the assumptions and data
underlying the weighted cost of capital rates and compared these
with the assumptions and data used.
We consulted our valuation specialists in order to assess, among
other things, the appropriateness of the key assumptions as well as
the Group's methods of calculation.
188
Independent Auditor's
Report¹
TO BASF SE, Ludwigshafen am Rhein
Report on the Audit of the Consolidated Financial
Statements and of the Group Management Report
Opinions
We have audited the Consolidated Financial Statements of BASF SE
and its subsidiaries (the Group), which comprise the balance sheet
as at December 31, 2021, statement of income, statement of
income and expense recognized in equity, statement of cash flows,
statement of equity for the financial year from January 1, 2021 to
December 31, 2021 and Notes to the Consolidated Financial
Statements, including a summary of significant accounting policies.
In addition, we have audited the Group Management Report of
BASF SE for the financial year from January 1, 2021 to Decem-
ber 31, 2021.
The Group Management Report contains cross-references which
are not intended to use by law and are identified as unaudited. In
accordance with the German legal requirements we have not
audited the content of those cross-references and the related refer-
enced information.
In our opinion, on the basis of the knowledge obtained in the audit,
- the accompanying Consolidated Financial Statements comply, in
all material respects, with the IFRSS as adopted by the EU, and
the additional requirements of German commercial law pursuant
to Section 315e (1) of the German Commercial Code (HGB) and
full IFRS and, in compliance with these requirements, give a true
and fair view of the assets, liabilities, and financial position of the
Group as at December 31, 2021, and of its financial performance
for the financial year from January 1, 2021 to December 31, 2021,
and
- the accompanying Group Management Report as a whole pro-
vides an appropriate view of the Group's position. In all material
respects, this Group Management Report is consistent with the
Consolidated Financial Statements, complies with German legal
requirements and appropriately presents the opportunities and
risks of future development. Our opinion on the Group Manage-
ment Report does not cover the content of those parts of the
Group Management Report specified in the "Other Information"
section of our auditor's report. The Group Management Report
contains cross-references which are not legally required and are
identified as unaudited. Our opinion does not cover those
cross-references and the referenced information.
Pursuant to Section 322 (3) sentence 1 HGB, we declare that our
audit has not led to any reservations relating to the legal compliance
of the Consolidated Financial Statements and of the Group Manage-
ment Report.
Basis for the Opinions
We conducted our audit of the Consolidated Financial Statements
and of the Group Management Report in accordance with Section
317 HGB and the EU Audit Regulation No. 537/2014 (referred to
subsequently as "EU Audit Regulation") and in compliance with
German Generally Accepted Standards for Financial Statement
Audits promulgated by the Institute of Public Auditors in Germany
(Institut der Wirtschaftsprüfer, IDW). Our responsibilities under those
requirements and principles are further described in the "Auditor's
Responsibilities for the Audit of the Consolidated Financial State-
ments and of the Group Management Report" section of our audi-
tor's report. We are independent of the group entities in accordance
with the requirements of European law and German commercial and
professional law, and we have fulfilled our other German professional
responsibilities in accordance with these requirements. In addition,
in accordance with Article 10 (2) point (f) of the EU Audit Regulation,
we declare that we have not provided non-audit services prohibited
under Article 5 (1) of the EU Audit Regulation. We believe that the
evidence we have obtained is sufficient and appropriate to provide a
basis for our opinions on the Consolidated Financial Statements and
on the Group Management Report.
Key Audit Matters in the Audit of the Consolidated Financial
Statements
Key audit matters are those matters that, in our professional judg-
ment, were of most significance in our audit of the Consolidated
Financial Statements for the financial year from January 1, 2021 to
December 31, 2021. These matters were addressed in the context
of our audit of the Consolidated Financial Statements as a whole,
and in forming our opinion thereon, we do not provide a separate
opinion on these matters.
1 This is a translation of the German original. Solely the original text in German language is authoritative.
BASF Report 2021
Consolidated Financial Statements - Independent Auditor's Report
< >
189
Recoverability of goodwill
For information on the accounting principles applied, please refer to
Note 1.4 to the Consolidated Financial Statements on page 204.
The underlying assumptions used in the calculation and the disclo-
sures on the impairment tests performed are included in Note 14 to
the Consolidated Financial Statements from page 236 onward.
Financial statement risk
Goodwill impairment testing is complex and is based on a range of
discretionary assumptions. These include the forecasts for future
cash inflows in the detailed planning period, the assumed growth
rate for subsequent periods and the cost of capital. These assump-
tions have a material impact on the recoverability of goodwill. The
growth forecasts of the Board of Executive Directors are associated
with risks and can be revised in light of volatile raw materials prices
and an instable macroeconomic environment.
There is the risk for the financial statements that an impairment as of
the balance sheet date is not identified or that an impairment as of
the balance sheet date is not recognized with an appropriate
amount. In addition, there is also a risk that the disclosures in the
Notes on the key assumptions are not appropriate and complete.
Our audit approach
We examined the forecast for the expected business and earnings
development and the resulting cash flows in the detailed planning
period, in particular with respect to whether the expected develop-
ment of the relevant sales markets were given appropriate consider-
ation and are consistent with the current budgets adopted by the
Board of Executive Directors and the Supervisory Board. We
compared internal growth forecasts with industry expectations and
those of significant competitors and we assessed whether assump-
tions contained in the planning regarding the future development of
margins and the amount of investments are appropriate. Our review
of the appropriateness of the budgets adopted by the Board of
Executive Directors and the Supervisory Board also included a
comparison of planning in past business years with the results
actually achieved. For selected units, we examined whether
reasons for not reaching planned values in the past were given
appropriate consideration in current planning, to the extent that this
was relevant.
- the corporate governance statement in the section Corporate
Governance of the Group Management Report, and
Other Information
Additionally, the other Information comprises the remaining parts of
the BASF Report 2021.
The other information does not comprise the Consolidated Financial
Statements, the audited parts of the Group Management Report
and our auditor's report.
Our opinions on the Consolidated Financial Statements and on the
Group Management Report do not cover the other information, and
consequently we do not express an opinion or any other form of
assurance conclusion thereon.
In connection with our audit, our responsibility is to read the
other information and, in so doing, to consider whether the other
information
the disclosures which are not normally part of the Group Manage-
ment Report and which are identified as unaudited.
-
is materially inconsistent with the Consolidated Financial State-
ments, with the Group Management Report information audited
for content or our knowledge obtained in the audit, or
- otherwise appears to be materially misstated.
Product stewardship
Emissions to air
Supplier management
Biodiversity
Energy and climate protection
Resource efficiency
Process safety
Employee-related matters
Environmental matters
Page 95
Emergency response and corporate security
Steering of product portfolio
Water
Management of waste and contaminated sites
Occupational safety
Dialog with employee representatives
Inclusion of diversity
What we expect from our leaders
Health protection
International labor and social standards
-
The table on the following page shows the sections and subsections
in which the individual disclosures can be found. In addition to a
description of the business model, the NFS includes disclosures on
the following matters, to the extent that they are required to under-
stand the development and performance of the business, the
Group's position and the impact of business development on the
following matters:
The NFS disclosures can be found in the relevant sections of the
Management's Report and have been prepared in accordance with
the appropriate frameworks: the Global Reporting Initiative Stan-
dards ("Comprehensive" application option) and the reporting
requirements of the U.N. Global Compact.
Nonfinancial Statement (NFS) in accordance with
sections 315b and 315c of the German Commercial Code
(HGB)
The Management's Report comprises the chapter of the
same name on pages 16 to 160, as well as the disclosures
required by takeover law and the Declaration of Corporate
Governance, which are presented in the Corporate Gover-
nance chapter. The Nonfinancial Statement (NFS) is integrated
into the Management's Report.
Overview
17
Transportation and storage
Pages 20-25
E.U. taxonomy
Concepts and results
Κ Σ
Environmental matters
- Employee-related matters
Social matters
- Respect for human rights
Anti-corruption and bribery matters
In accordance with the E.U. Taxonomy Regulation and the supple-
mentary delegated acts, the NFS includes, for the first time, the
share of the Group's taxonomy-eligible sales, investments (including
acquisitions) and operating expenses for the 2021 business year
relating to the environmental objectives of "climate change miti-
gation" and "adaptation to climate change."
Within the scope of the annual audit, KPMG checked pursuant to
section 317(2) sentence 4 HGB that the NFS was presented in
accordance with the statutory requirements. KPMG also conducted
a limited assurance of the NFS. An assurance statement of the
limited assurance can be found online at basf.com/nfs-audit-2021.
The assurance was conducted in accordance with ISAE 3000
(Assurance Engagements other than Audits or Reviews of Historical
Financial Information) and ISAE 3410 (Assurance Engagements on
Greenhouse Gas Statements), the relevant international assurance
standards for sustainability reporting.
Disclosures required by takeover law in accordance with
section 315a HGB
The disclosures required by takeover law in accordance with sec-
tion 315a of the German Commercial Code (HGB) can be found in
the Corporate Governance chapter starting on page 161. They form
part of the Management's Report, which is audited as part of the
annual audit.
Consolidated Declaration of Corporate Governance in
accordance with section 315d HGB in connection with
section 289f HGB
The Consolidated Declaration of Corporate Governance in accor-
dance with section 315d HGB in connection with section 289f HGB
can be found in the Corporate Governance chapter from page 185
onward and is a component of the Management's Report. It com-
prises the Corporate Governance Report including the description
of the diversity concept for the composition of the Board of Executive
Directors and the Supervisory Board (excluding the disclosures
required by takeover law in accordance with section 315a HGB),
compliance reporting and the Declaration of Conformity pursuant to
section 161 of the German Stock Corporation Act. Pursuant to
section 317(2) sentence 6 HGB, the auditor checked that the disclo-
sures according to section 315d HGB were made.
-
Compensation Report
Content and structure of the Management's Report
An overview of the segments' business models is provided in a
separate chapter. Material investments and portfolio measures by
our segments have also been integrated into the chapter of the
same name. This improves the clarity of the information on our
segments.
Recommendations of the Task Force on Climate-related
Financial Disclosures
BASF supports the recommendations of the Task Force on Climate-
related Financial Disclosures (TCFD). Disclosures recommended by
the TCFD are presented in a number of places throughout this
report. The table on page 19 shows the sections and subsections in
which the relevant information can be found. The table is divided
into four key areas in line with the TCFD recommendations: gover-
nance, strategy, risk management, and metrics and targets.
BASF Report 2021
Management's Report - Overview
Nonfinancial Statement (NFS) disclosures in the relevant chapters of the integrated report
NFS disclosure
Business model
E.U. taxonomy
Topics
BASF Group
The Compensation Report is no longer a component of the
Management's Report. The Compensation Report in accordance
with section 162 of the German Stock Corporation Act (AktG) and
the assurance statement of the substantive and formal audit issued
by the auditor have been made publicly available on the BASF
website at basf.com/compensationreport.
Management's Report - Overview
Dividend yieldb
95
Our Values and Global Standards
148
Outlook 2022
76
Materials
28
145
Economic Environment in 2022
72
Chemicals
26
145
Forecast
69
Business Review by Segment
Actual Development Compared With Outlook for 2021
24
141
Sustainable Solutions
63
Financial Position
20
20
117
Safe and Efficient Production
61
Net Assets
31
BASF Report 2021
Industrial Solutions
Opportunities and Risks
E.U. Taxonomy.
.94
Regional Results
49
Innovation
93
Non-Integral Oil and Gas Business
45
Learning and development
Our Sustainability Concept
.92
Other
42
Our Steering Concept.
88
Agricultural Solutions
38
Material Investments and Portfolio Measures
85
Nutrition & Care
36
Targets and Target Achievement 2021
_82
Surface Technologies.
33
Business Models of the Segments
151
79
Supplier management
Anti-corruption and bribery matters
Competition for talent
Pages 128-129
Pages 126-127
Page 136
Pages 141-142
Pages 128-129
Pages 152-154
Pages 158-160
Pages 152-154
Pages 152-154
c Climate-related risks are identified, assessed and managed as part of the general risk management process.
b Refers to the Board of Executive Directors and senior executives
a Refers to the Supervisory Board
We Drive Sustainable Solutions - Steering Our Product Portfolio
Pages 126-127
Page 135
Energy and Climate Protection - Global targets and measures
Energy and Climate Protection - Strategy
Water - Strategy
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas Energy and Climate Protection - Strategy
(GHG) emissions, and the related risks.
We Drive Sustainable Solutions - Steering Our Product Portfolio
Energy and Climate Protection - Global targets and measures
Water Global target and measures
Disclose the metrics used by the organization to assess climate-related
risks and opportunities in line with its strategy and risk management
process.
Disclose the metrics and targets used to
assess and manage relevant climate-related
risks and opportunities where such information
is material.
Metrics and targets
Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organization's overall risk management.
Describe the organization's processes for managing climate-related risks. Opportunities and Risks - Risk management process
Opportunities and Risks - Strategic opportunities and risks
Opportunities and Risks - Risk management process
Opportunities and Risks - Risk management process
Describe the organization's processes for identifying and assessing
climate-related risks.c
Disclose how the organization identifies,
assesses, and manages climate-related
risks.
Risk management
Describe the targets used by the organization to manage climate-related
risks and opportunities and performance against targets.
Pages 141-142
19
BASF Report 2021
Nutrition & Care
■Investments including acquisitions¹: €709 million
■ R&D expenses: €193 million
The Materials segment is composed of the Perfor-
mance Materials and Monomers divisions. The seg-
ment offers advanced materials and their precursors
for the plastics and plastics processing industries.
■Share of sales: 19%
Materials
■Investments including acquisitions¹: €1,469 million
■R&D expenses: €296 million
■Share of sales: 29%
The Surface Technologies segment comprises the
Catalysts and Coatings divisions. The segment
offers chemical solutions for surfaces such as
battery materials and automotive coatings.
Surface Technologies
■Investments including acquisitions¹: €1,157 million
■ R&D expenses: €97 million
The Chemicals segment consists of the Petrochemi-
cals and Intermediates divisions. The segment
supplies BASF's other segments and third-party
customers with basic chemicals and intermediates.
■Share of sales: 17%
Chemicals
The BASF Group's segments in 2021
1 Additions to property, plant and equipment and intangible assets
For more information on the Verbund concept, see basf.com/en/verbund
We also make use of the Verbund principle for more than produc-
tion, applying it for technologies, the market and digitalization as
well. Expert knowledge is pooled in our global research.
The Verbund system is one of BASF's great strengths. We add value
by using our resources efficiently. The Production Verbund intelli-
gently links production units and their energy supply so that, for
example, the waste heat of one plant provides energy to others.
Furthermore, one facility's by-products can serve as feedstocks
elsewhere. This not only saves us raw materials and energy - it also
avoids emissions, lowers logistics costs and leverages synergies.
BASF has companies in 90 countries. We operate six Verbund
sites and 232 additional production sites worldwide.
Our Verbund site in Ludwigshafen, Germany, is the world's largest
integrated chemical complex owned by a single company. The
Verbund concept was developed and optimized here and later
applied to other sites around the world. Construction of the first
plants continued at our planned new smart Verbund site in
Zhanjiang, China.
Sites and Verbund
20
< > 20
At BASF, we create chemistry for a sustainable future. We combine economic success with environmental protection and social responsibility.
Around 111,000 employees contribute to the success of our customers in nearly all sectors and almost every country in the world. Our portfolio
is divided into the Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care and Agricultural Solutions segments.
GRI 102, 201, 202, 203, 301
BASF Group
Management's Report - BASF Group
Pages 158-160
Pages 152-154
Pages 141-142
Pages 154-158
Pages 158-160
Pages 158-160
Supplier management
International labor and social standards
Pages 48 and 106-107 (targets, measures, results)
Societal engagement
Respect for human rights
Social matters
Page 102 (targets, measures, results)
Page 100 (targets, measures, results)
Page 37 (targets) / page 98 (targets, measures, results)
Page 37 (targets) /pages 109-111 (targets, measures, results)
Page 101 (targets, measures, results)
Page 103 (targets, measures, results)
Pages 117 and 120 (targets, measures, results)
Page 98 (targets, measures, results)
Page 37 (targets) / page 99 (targets, measures, results)
Page 103 (targets, measures, results)
Page 37 (targets) /pages 117 and 119 (targets, measures, results)
Page 37 (targets) /pages 117 and 135-137 (targets, measures, results)
Pages 44 and 133-134 (targets, measures, results)
Page 36 (targets) /pages 45 and 141 (targets, measures, results)
Pages 117 and 125 (targets, measures, results)
Pages 44, 133 and 142 (targets, measures, results)
Pages 117 and 123-124 (targets, measures, results)
Pages 117 and 133 (targets, measures, results)
Page 37 (targets) /pages 109-111 (targets, measures, results)
Page 36 (targets) /pages 117 and 126-132 (targets, measures, results)
Pages 117 and 121 (targets, measures, results)
Page 37 (targets) /pages 117 and 119–120 (targets, measures, results)
Pages 138-140 (targets, measures, results)
Compensation and benefits
Responsibility for human rights
Employee engagement
Page 103 (targets, measures, results)
109
Pages 154-158
Pages 126-127
We Drive Sustainable Solutions - Steering Our Product Portfolio
Opportunities and Risks - Operational opportunities and risks
Opportunities and Risks - Strategic opportunities and risks
Opportunities and Risks - Risk management process
Opportunities and Risks - Strategic opportunities and risks
Opportunities and Risks - Operational opportunities and risks
Opportunities and Risks - Strategic opportunities and risks
Describe the resilience of the organization's strategy, taking into
consideration different climate-related scenarios, including a 2°C or
lower scenario.
Describe the impact of climate-related risks and opportunities on
the organization's businesses, strategy, and financial planning.
Describe the climate-related risks and opportunities the organization has Energy and Climate Protection - Strategy
identified over the short, medium, and long term.
Disclose the actual and potential impacts of
climate-related risks and opportunities on the
organization's businesses, strategy, and financial
planning where such information is material.
Strategy
Describe management's role in assessing and managing climate-related Our Sustainability Concept - Our organizational and management structures
risks and opportunities.
Pages 162-163
Pages 177-183
Page 46
Describe the board's oversight of climate-related risks and opportunities. Corporate Governance Report - Direction and management by the Board of Executive Directors
Report of the Supervisory Board
Page
Section/explanation
Recommended disclosures
Disclose the organization's governance around
climate-related risks and opportunities.
Governance
Topic
Recommendations of the Task Force on Climate-related Financial Disclosures in the relevant chapters of the integrated report
Management's Report - Overview
BASF Report 2021
18
< >
Page 37 (targets) /pages 109-111 (targets, measures, results)
Pages 171-173 (targets, measures, results)
Supplier management
Compliance
Page 37 (targets) /pages 109-111 (targets, measures, results)
Pages 104-105 (targets, measures, results)
Responsible Procurement
56
Results of Operations
13
2021
Broad base of international shareholders
With over 800,000 shareholders, BASF is one of the largest publicly
owned companies with a high free float. An analysis of the share-
holder structure carried out at the end of 2021 showed that, at
around 19% of share capital, the United States and Canada made
up the largest regional group of institutional investors. Institutional
investors from Germany accounted for around 9%. Institutional
investors from the United Kingdom and Ireland hold 6% of BASF
shares, while investors from the rest of Europe hold a further 13% of
capital. Approximately 39% of the company's share capital is held
by private investors, nearly all of whom reside in Germany. BASF is
therefore one of the DAX companies with the largest percentage of
private shareholders.
German and European stock markets
-
the DAX 40 and the
EURO STOXX 50 - rose by 15.8% and 23.3% over the same period,
respectively. The global industry index MSCI World Chemicals
gained 21.7%.
The assets of an investor who invested €1,000 in BASF shares
at the end of 2011 and reinvested the dividends in additional
BASF shares would have increased to €1,733 by the end of 2021.
This represents an average annual yield of 5.7%.
Proposed dividend of €3.40 per share
The Board of Executive Directors and the Supervisory Board will
propose a dividend payment of €3.40 per share to the Annual
Shareholders' Meeting. BASF stands by its ambitious dividend
policy of increasing the per-share dividend each year and plans to
pay out €3.1 billion¹ to the shareholders of BASF SE.
Based on the year-end share price for 2021, BASF shares offer a
high dividend yield of around 5.5%. BASF is part of the DivDAX
share index, which contains the 15 companies with the highest
dividend yield in the DAX 40.
Share buyback program of up to €3 billion
In light of the positive business development and the gains on dives-
titures in the course of 2021, the Board of Executive Directors of
BASF SE resolved on a share buyback program on January 4, 2022.
The program amounts to up to €3 billion, started on January 11,
2022, and shall be concluded by December 31, 2023, at the latest,
subject to a renewed authorization to repurchase own shares by the
Annual Shareholders' Meeting of BASF SE on April 29, 2022.
BASF SE will cancel all repurchased shares and reduce the share
capital accordingly.
Shareholder structure
By region, rounded
19%
< >
United States/Canada
2020
2018
3.20
3.10
3.00
2.90
2.80
2.70
2.60
2.50
2011
2012
2013
2014
2015
2016
2017
2019
48%
Germany
The share buyback program is based on the authorization by
the Annual Shareholders' Meeting of BASF SE on May 12, 2017 Employees becoming shareholders
authorizing the Board of Executive Directors to purchase up to 10%
of the issued shares at the time of the resolution until May 11, 2022.
BASF plans to propose to the 2022 Annual Shareholders' Meeting a
renewed authorization to buy back own shares.
In addition to its progressive dividend policy, share buybacks are
another tool that BASF uses to create value for its shareholders.
BASF was rated A- in the CDP assessment for sustainable water
management. The assessment takes into account how transpar-
ently companies report on their water management activities and
how they reduce risks such as water scarcity. CDP also evaluates
the extent to which product developments can contribute to
sustainable water management for customers of the companies
assessed. BASF continues to implement its sustainable water
management target at all relevant production sites (Verbund sites
and sites in water stress areas).
BASF participated in the CDP's "Forests" assessment for the sec-
ond time in 2021 and was ranked A-, as in the previous year. As a
participant in various value chains, BASF is committed to ending
deforestation in these supply chains. Consequently, BASF is one of
Key BASF share data
Year-end price
Year high
Year low
Year average
Daily trade in sharesa
the companies with Leadership status, as for climate protection and
water management.
BASF maintained its Prime status in the ISS ESG rating developed
by Institutional Shareholder Services and is among the top 7% of
the companies assessed. BASF received special recognition for
addressing key sustainability issues such as environmental man-
agement, energy efficiency and business ethics with a comprehen-
sive set of measures and processes.
2017
2018
2019
2020
2021
BASF has participated in the program established by the interna-
tional organization CDP (formerly the Carbon Disclosure Project) for
reporting on data relevant to climate protection since 2004. CDP
represents over 590 investors with over $110 trillion in assets and
more than 200 major organizations with $5.5 trillion in purchasing
power. In 2021, BASF again scored an A- on CDP's Climate List,
giving it Leadership status. In the scoring framework used by CDP
in 2021, BASF was ranked among the top third of participating
chemical companies.
BASF recognized as a Global Compact LEAD company
■
■ BASF maintains "Prime" status in ISS ESG rating
6%
United Kingdom/Ireland
13%
Rest of Europe
4%
Rest of world
10%
Not identified
3.40
In many countries, we offer share purchase programs that turn our
employees into BASF shareholders. In 2021, for example, around
23,600 employees (2020: around 27,600) purchased BASF shares
worth €38.2 million (2020: €61.1 million).
1 Based on the number of outstanding shares as of December 31, 2021 (918,478,694)
BASF Report 2021
To Our Shareholders - BASF on the Capital Market
14
BASF - a sustainable investment
At a glance
CDP again awards BASF Leadership status
For more information on employee share purchase programs, see page 97
3.30
3.30
To Our Shareholders - BASF on the Capital Market
Change in value of an investment in BASF shares in 2021
With dividends reinvested; indexed
140
130
120
110
100
90
Long-term performance of BASF shares compared with indexes
Average annual increase with dividends reinvested
140
2016-2021
130
-2.4%
6.7%
8.0%
12.3%
Assuming that dividends were reinvested, BASF's share perfor-
Imance rose by 0.2% in 2021. The benchmark indexes of the
positive business performance. This was due to factors such as the
composition of the segments' earnings contributions. Share price
development was also negatively impacted by market expectations
regarding the future development of margins in the basic chemicals
business.
BASF's share price reached an annual high of €72.61 in March
2021 before declining over the course of the year despite continued
The BASF share closed the 2021 stock market year at €61.78, a
decrease of 4.5% compared with the previous year's closing price
(€64.72).
BASF Report 2021
To Our Shareholders - The Board of Executive Directors of BASF SE
The Board of Executive Directors of BASF SE
W
< >
11
From left: Dr. Markus Kamieth, Saori Dubourg, Dr. Hans-Ulrich Engel (Vice Chairman of the Board of Executive Directors), Dr. Martin Brudermüller (Chairman of the Board of Executive Directors), Dr. Melanie Maas-Brunner, Michael Heinz
Group photo taken in compliance with the applicable coronavirus prevention measures
120
BASF Report 2021
BASF on the Capital Market
In 2021, the stock markets were characterized by a significant recovery of the global economy. This was due in particular to the approval and increasing
availability of effective coronavirus vaccines. BASF stands by its ambitious dividend policy and will propose a dividend of €3.40 per share to the Annual
Shareholders' Meeting – an increase of 10 euro cents compared with the previous year. Based on the year-end share price for 2021, BASF shares offer a
high dividend yield of around 5.5%.
12
At a glance
BASF share price declines 4.5% in 2021
■ Assuming that dividends were reinvested, BASF's share
performance rose by 0.2%
BASF share performance
To Our Shareholders - BASF on the Capital Market
€
2011-2021
5.7%
Nov
Dec
DAX 40
EURO STOXX 50
― BASF share 0.2%
- DAX 40 15.8%
EURO STOXX 50 23.3%
MSCI World Chemicals 21.7%
MSCI World Chemicals.
4.0%
1.8%
4.6%
BASF Report 2021
Dividend per share
€ per share
Oct
Sep
Aug
Jul
10.4%
8.9%
12.1%
100
■BASF share ■ DAX 40
■ EURO STOXX 50 ■ MSCI World Chemicals
90
110
Weighting of BASF shares in important indexes as of December 31, 2021
80
Jan
Feb
Mar
Apr
May
Jun
80
91.74
60.40
67.35
10.3
BAS GY
a Average, Xetra trading
BASFn.DE
b Based on year-end share price
BASF Report 2021
To Our Shareholders - BASF on the Capital Market
15
In Sustainalytics" ESG Risk Ratings, BASF is ranked among the top
10% of companies in diversified chemicals. It was commended for
the fact that its sustainability targets are reflected in the compensa-
tion for the Board of Executive Directors, underlining strong overall
management of environmental, social and governance matters.
BASF was again recognized as a Global Compact LEAD company
by the U.N. Global Compact in 2021. BASF consistently supports
the U.N. Global Compact and its 10 principles of responsible busi-
ness conduct and the Sustainable Development Goals.
BASF was among the top 10% in the World Benchmarking Alliance's
(WBA) Food and Agriculture Benchmark, which assessed 350 com-
panies from the food and agricultural sector on sustainable business
practices.
For more information on the key sustainability indexes, see basf.com/sustainabilityindexes
For more information on energy and climate protection, see page 126 onward
For more information on air and soil, see page 133
For more information on the procurement of certified palm oil and palm kernel oil, see page 112
onward
7.3
11.8
13.9
Price-earnings ratio (P/E ratio) b
3.30
3.40
%
3.38
5.30
4.90
5.10
Analysts' recommendations
5.50
Payout ratio
%
47
63
36
57
BASFY (ADR)
BAS
3.30
Around 30 financial analysts regularly publish studies on BASF. The
latest analyst recommendations for our shares as well as the
average target share price ascribed to BASF by analysts can be
found online at basf.com/analystestimates.
At a glance
Nonfinancial Statement Disclosures
TCFD Recommendations Index
The BASF Group
How We Create Value
Our Strategy
Our Strategic Action Areas
17
The BASF Group's Business Year
52 Sustainability Along the Value Chain
96
18
Economic Environment
52
We Value People and Treat Them with Respect
97
19
Overview
Overviews
To Our Shareholders
Management's Report
Corporate Governance
Consolidated Financial Statements
Contents
■
Virtual formats facilitate dialog during coronavirus pandemic
Capital Markets Day in March 2021, Investor Update in
September 2021 and R&D Webcast in December 2021
Our corporate strategy aims to create long-term value. We support
this strategy through regular and transparent communication with
the capital market. In light of the coronavirus pandemic, we almost
exclusively used virtual formats such as video or conference calls for
dialog in 2021. We engage with institutional investors and rating
agencies in numerous one-on-one meetings, as well as at road-
shows and conferences worldwide, and give private investors an
insight into BASF at informational events.
In March 2021, Dr. Martin Brudermüller presented our path and our
ambitious climate neutrality targets at a virtual Capital Markets Day.
BASF aims to achieve net zero CO2 emissions² by 2050. Based on
its progress in developing low-emission and carbon-free technolo-
gies, BASF is also setting an ambitious medium-term 2030 target
for reductions in greenhouse gas emissions: BASF now wants to
reduce its greenhouse gas emissions worldwide by 25% compared
with 2018 - and to achieve this despite targeted growth and the
construction of a large Verbund site in Zhanjiang, China. Dr. Markus
Kamieth and Saori Dubourg also presented the Industrial Solutions
and Nutrition & Care segments in more detail during the virtual
Capital Markets Day.
At a virtual Investor Update in September 2021, Dr. Martin
Brudermüller and Dr. Markus Kamieth informed investors about
the BASF Group's two major growth projects: our future Verbund
site in Zhanjiang, China, and our battery materials activities.
Finally, Dr. Melanie Maas-Brunner offered analysts and investors an
insight into the BASF Group's research and development in Decem-
ber 2021. In a webcast, she presented, among other topics, contri-
butions of research to sustainability in the field of electromobility.
Analysts and investors have confirmed the quality of our financial
market communications. For instance, we were again named "Best
IR" in the materials sector in the annual survey conducted by Britain's
IR Magazine.
Close dialog with the capital market
For more information about BASF stock, see basf.com/share
1 Sustainalytics provides institutional investors and companies with ESG and corporate governance research, ratings and analytics.
2 Based on the BASF Group's Scope 1 and Scope 2 emissions; other greenhouse gases are converted into CO₂ equivalents in accordance with the Greenhouse Gas Protocol
2
BASF Report 2021
Management's
Report
Q< >= 16
For more information on the 2022-2023 share buyback program, see basf.com/sharebuyback
For more information on the Capital Markets Day 2021, see basf.com/CMD21
For more information on the Investor Update 2021, see basf.com/investor-update
For more information on the R&D Webcast 2021, see basf.com/rd-webcast-2021
Register for the newsletter with current topics and dates at basf.com/share/newsletter
Contact the Investor Relations team by phone at +49 621 60-48230 or email ir@basf.com
The Nutrition & Care segment comprises the Care
Chemicals division and the Nutrition & Health
division. The segment produces ingredients and
solutions for consumer applications such as nutrition
and personal care.
3.20
€
Further information on BASF stock
Securities code numbers
Germany
United States (CUSIP number)
ISIN International Securities Identification Number
International ticker symbols
Deutsche Börse
Pink Sheets / OTCQX
Bloomberg (Xetra trading)
Reuters (Xetra trading)
million €
185.7
229.6
187.6
219.2
66.20
53.31
64.77
80.38
64.72
61.78
€
97.46
97.67
74.49
68.29
170.8
72.61
79.64
58.40
56.20
39.04
57.88
€
88.16
€
3.10
million shares
2.9
€
6.62
5.12
9.17
-1.15
6.01
DE000BASF111
Adjusted earnings per share
€
6.44
5.87
4.00
3.21
6.76
Dividend per share
Earnings per share
055262505
BASF11
56.7
2.9
4.1
2.6
Number of shares December 31
million shares
918.5
918.5
2.1
918.5
918.5
Market capitalization December 31
billion €
84.3
55.5
61.9
59.4
918.5
■Share of sales: 8%
67
■Investments including acquisitions': €654 million
Industrial Solutions
The Industrial Solutions segment consists of the
Dispersions & Resins and the Performance Chemi-
cals divisions. The segment develops and markets
ingredients and additives for industrial applications.
■Share of sales: 11%
■R&D expenses: €175 million
■Investments including acquisitions¹: €361 million
Agricultural Solutions
The Agricultural Solutions segment is an integrated
provider of seeds, crop protection and digital
technologies and solutions.
■Share of sales: 11%
■R&D expenses: €904 million
■Investments including acquisitions': €347 million
■R&D expenses: €172 million
2,825
[12]
1,161
988
[21]
3,420
3,440
Other liabilities
[21]
3,679
3,935
Liabilities of disposal groups
[3]
61
3,395
[23]
Financial indebtedness
7,826
1,782
1,484
[21]
13,764
15,819
[21]
1,600
1,711
25,220
29,614
Accounts payable, trade
Provisions
Tax liabilities
341
[21]
5,291
Current liabilities
80,292
16,280
5,523
3,687
2020
-1,060
6,751
-3,304
849
-1,272
2021
-2,176
927
213
137
-611
-15
7,245
3,010
198
< >
Gains (-)/losses (+) from the disposal of noncurrent assets and securities
Cash flows from operating activities
Total equity and liabilities
87,383
[23]
BASF Report 2021
Consolidated Financial Statements - Statement of Cash Flows
Statement of Cash Flows
BASF Group
Statement of cash flowsa
Million €
Net income
Depreciation and amortization of property, plant and equipment and intangible assets
Changes in inventories
Changes in receivables
Changes in operating liabilities and other provisions
Changes in pension provisions, defined benefit assets and other items
20,081
587
8,566
1,447
840
1,182
35,051
29,868
87,383
80,292
[3]
BASF Report 2021
Equity and liabilities
Million €
Subscribed capital
Capital reserves
Retained earnings
Other comprehensive income
Consolidated Financial Statements - Balance Sheet
4,330
2,624
[1]
1,722
912
52,332
50,424
[17]
13,868
10,010
[18]
11,942
9,466
[18]
5,568
4,673
208
207
Equity attributable to shareholders of BASF SE
Noncontrolling interests
Equity
Provisions for pensions and similar obligations
[20]
-3,855
-8,474
40,792
33,728
[13]
1,289
670
42,081
34,398
[22]
6,160
5,413
[12]
1,499
37,911
415
40,365
3,115
Deferred tax liabilities
Tax provisions
Other provisions
Financial indebtedness
Other liabilities
Noncurrent liabilities
ΚΣΕ 197
Explanations in Note
December 31, 2021
December 31, 2020
[19]
1,176
1,176
[19]
3,106
[19]
Payments made for property, plant and equipment and intangible assets
Payments made for financial assets and securities
-877
-3,532
5,523
459
5,982
Other comprehensive income after taxes
2,709
2,205
5,523
-2
4,583
4,583
90
4,673
Changes in scope of consolidation and other changes
-10d
-329
Income after taxes
-3,312
-281c
37,911
-6,538
-1,800
7
-143
Other com-
prehensive
incomeb
-8,474
Equity
attributable to
shareholders
of BASF SE
Non-
controlling
interests
Equity
33,728
670
34,398
-3,031
-3,031
-37
3,115
36
-11
Changes in scope of consolidation and other changes
As of December 31, 2020
a For more information on the items relating to equity, see Notes 19 and 20 from page 249 onward
b Details are provided in the Statement of Income and Expense Recognized in Equity on page 195
c Including profit and loss transfers
d Valuation adjustment BASF "plus" share program
Other comprehensive income after taxes
Remeasure-
Measurement
Subscribed
capital
Capital
reserves
Retained
earnings
benefit
plans
ment of
defined
Income after taxes
Dividends paid
As of January 1, 2020
351
340
As of December 31, 2021
1,176
3,106
40,365
-3,793
406
-472
-3,855
40,792
1,289
42,081
Statement of changes in equitya
Million €
36
1,176
Dividends paid
As of January 1, 2021
noncontrolling interests
Cash flows from financing activities
Cash-effective changes in cash and cash equivalents
Changes in cash and cash equivalents
From foreign exchange rates
changes in the scope of consolidation
To shareholders of BASF SE
Cash and cash equivalents at the beginning of the yearb
a The statement of cash flows is explained in the Management's Report (Financial Position) on page 65.
b In 2021 and 2020, cash and cash equivalents presented in the statement of cash flows deviate from the figures in the balance sheet. For explanations and other disclosures on the statement of cash flows, see Note 27 from page 277 onward.
3
7,627
15,135
-10,772
Cash and cash equivalents at the end of the yearb
Dividends paid
Repayment of financial and similar liabilities
Additions to financial and similar liabilities
-3,129
-994
[18]
-600
-1,240
Payments received for divestitures
1,030
2,520
Payments received from the disposal of noncurrent assets and securities
1,474
822
Cash flows from investing activities
-2,622
-1,904
Capital increases/repayments and other equity transactions
-13,555
-3,031
-3,031
-281
< >
199
Subscribed
Capital
capital
reserves
Retained
earnings
plans
Remeasure-
ment of
defined
benefit
Currency
translation
Measurement
of securities
Cash flow
at fair value
hedges
Million €
Payments made for acquisitions
Statement of changes in equitya
Statement of Changes in Equity
-108
-6,457
-1,556
-1,834
1,953
131
-81
-7
8
4,335
2,455
2,624
4,335
BASF Report 2021
Consolidated Financial Statements - Statement of Changes in Equity
BASF Group
3,386
575
[12]
Earnings per share from continuing operations (€)
Earnings per share from discontinued operations (€)
Earnings per share (€)
Dilution effect (€)
Diluted earnings per share (€)
< >
of which attributable to noncontrolling interests
194
2021
[7]
78,598
[8]
-58,801
19,797
Explanations in Note
of which attributable to shareholders of BASF SE (net income)
Income after taxes from discontinued operations
Income after taxes
Income after taxes from continuing operations
Income from integral companies accounted for using the equity method
Income from operations
Income from non-integral companies accounted for using the equity method
Income from other shareholdings
Expenses from other shareholdings
Net income from shareholdings
Interest income
Interest expenses
Interest result
Other financial income
Other financial expenses
Other financial result
Financial result
Income before income taxes
Income taxes
2020
59,149
-44,040
15,109
Other operating expenses
[8]
-7,497
285
-925
[10]
47
157
[10]
[10]
-125
207
-909
168
164
-482
-537
-141
-191
7,677
[5]
[8]
-1,408
-1,228
[8]
-2,216
-2,086
[9]
1,894
1,399
[9]
-2,650
-6,108
[10]
675
220
-8,414
Other operating income
Research and development expenses
General administrative expenses
Evaluate the consistency of the Group Management Report with
the Consolidated Financial Statements, its conformity with law,
and the view of the Group's position it provides.
Perform audit procedures on the prospective information
presented by the Board of Executive Directors in the Group
Management Report. On the basis of sufficient appropriate audit
evidence we evaluate, in particular, the significant assumptions
used by the Board of Executive Directors as a basis for the pro-
spective information, and evaluate the proper derivation of the
prospective information from these assumptions. We do not
express a separate opinion on the prospective information and on
the assumptions used as a basis. There is a substantial
unavoidable risk that future events will differ materially from the
prospective information.
We communicate with the audit committee regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the audit committee with a statement that we have
complied with the relevant independence requirements, and com-
municate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where
applicable, the related safeguards.
From the matters communicated with those charged with gover-
nance, we determine those matters that were of most significance in
the audit of the Consolidated Financial Statements of the current
period and are therefore the key audit matters. We describe these
matters in our auditor's report unless law or regulation precludes
public disclosure about the matter.
Other Legal and Regulatory Requirements
-
Report on the Assurance in accordance with Section 317 (3a)
HGB on the Electronic Reproduction of the Consolidated
Financial Statements and the Group Management Report
Prepared for Publication Purposes
In our opinion, the reproduction of the Consolidated Financial
Statements and the Group Management Report contained in the
above-mentioned electronic file provided and prepared for
publication purposes complies in all material respects with the
requirements of Section 328 (1) HGB for the electronic reporting
format. We do not express any opinion on the information contained
in this reproduction nor on any other information contained in the
above-mentioned file beyond this reasonable assurance opinion
and our audit opinion on the accompanying Consolidated Financial
Statements and the accompanying Group Management Report for
the financial year from January 1, 2021 to December 31, 2021
contained in the "Report on the Audit of the Consolidated Financial
Statements and the Group Management Report" above.
We conducted our assurance work on the reproduction of the
Consolidated Financial Statements and the Group Management
Report contained in the above-mentioned electronic file provided in
accordance with Section 317 (3a) HGB and the IDW Assurance
Standard: Assurance in accordance with Section 317 (3a) HGB on
the Electronic Reproduction of Financial Statements and Manage-
ment Reports Prepared for Publication Purposes (ED IDW ASS 410)
(October 2021). Accordingly, our responsibilities are further
described below. Our audit firm has applied the IDW Standard on
Quality Management 1: Requirements for Quality Management in
Audit Firms (IDW QS 1).
The company's Board of Executive Directors is responsible for the
preparation of the ESEF documents including the electronic repro-
duction of the Consolidated Financial Statements and the Group
Management Report in accordance with Section 328 (1) sentence 4
item 1 HGB and for the tagging of the Consolidated Financial State-
ments in accordance with Section 328 (1) sentence 4 item 2 HGB.
In addition, the company's Board of Executive Directors is responsi-
ble for the internal controls they consider necessary to enable the
preparation of ESEF documents that are free from material intentional
or unintentional non-compliance with the requirements of Section
328 (1) HGB for the electronic reporting format.
The supervisory board is responsible for overseeing the preparation
process for the ESEF documents as part of the financial reporting
process.
Our objective is to obtain reasonable assurance about whether the
ESEF documents are free from material intentional or unintentional
non-compliance with the requirements of Section 328 (1) HGB.
We have performed assurance work in accordance with Sec-
tion 317 (3a) HGB to obtain reasonable assurance about whether
the reproduction of the Consolidated Financial Statements and the
Group Management Report (hereinafter the "ESEF documents")
contained in the file provided that can be downloaded by the issuer
from the electronic client portal with access protection,
"basf-gruppe-2021-12-31.zip" (SHA256 hash value: 9cb0551f9c637
4988409b15ddd 8d688c5ff4b423a4708d1d2768a220841d4d3a)
and prepared for publication purposes complies in all material
respects with the requirements of Section 328 (1) HGB for the elec-
tronic reporting format ("ESEF format"). In accordance with German
legal requirements, this assurance only extends to the conversion of
the information contained in the Consolidated Financial Statements
and the Group Management Report into the ESEF format and
therefore relates neither to the information contained in this repro-
duction nor any other information contained in the above-mentioned
electronic file.
<>=192
Consolidated Financial Statements - Independent Auditor's Report
BASF Report 2021
BASF Report 2021
Consolidated Financial Statements - Independent Auditor's Report
< > 191
Responsibilities of the Board of Executive Directors and
the Supervisory Board for the Consolidated Financial
Statements and the Group Management Report
The Board of Executive Directors is responsible for the prepara-
tion of the Consolidated Financial Statements that comply, in all
material respects, with IFRSSs as adopted by the EU and the
additional requirements of German commercial law pursuant to
Section 315e (1) HGB and full IFRS and that the Consolidated
Financial Statements, in compliance with these requirements, give a
true and fair view of the assets, liabilities, financial position, and
financial performance of the Group. In addition, the Board of Execu-
tive Directors is responsible for such internal control as they have
determined necessary to enable the preparation of Consolidated
Financial Statements that are free from material misstatement,
whether due to fraud or error.
In preparing the Consolidated Financial Statements, the Board of
Executive Directors is responsible for assessing the Group's ability
to continue as a going concern. They also have the responsibility for
disclosing, as applicable, matters related to going concern. In
addition, they are responsible for financial reporting based on the
going concern basis of accounting unless there is an intention to
liquidate the Group or to cease operations, or there is no realistic
alternative but to do so.
Furthermore, the Board of Executive Directors is responsible for the
preparation of the Group Management Report that, as a whole,
provides an appropriate view of the Group's position and is, in all
material respects, consistent with the Consolidated Financial
Statements complies with German legal requirements, and appro-
priately presents the opportunities and risks of future development.
In addition, the Board of Executive Directors is responsible for
such arrangements and measures (systems) as they have consid-
ered necessary to enable the preparation of a Group Management
Report that is in accordance with the applicable German legal
requirements, and to be able to provide sufficient appropriate
evidence for the assertions in the Group Management Report.
The Supervisory Board is responsible for overseeing the Group's
financial reporting process for the preparation of the Consolidated
Financial Statements and of the Group Management Report.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements and of the Group Management Report
Our objectives are to obtain reasonable assurance about whether
the Consolidated Financial Statements as a whole are free from
material misstatement, whether due to fraud or error, and whether
the Group Management Report as a whole provides an appropriate
view of the Group's position and, in all material respects, is consis-
tent with the Consolidated Financial Statements and the knowledge
obtained in the audit, complies with the German legal requirements
and appropriately presents the opportunities and risks of future
development, as well as to issue an auditor's report that includes our
opinions on the Consolidated Financial Statements and on the
Group Management Report.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Sec-
tion 317 HGB and the EU Audit Regulation and in compliance with
German Generally Accepted Standards for Financial Statement
Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will
always detect a material misstatement. Misstatements can arise
from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
Consolidated Financial Statements and this Group Management
Report.
We exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the
Consolidated Financial Statements and of the Group Manage-
ment Report, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for
our opinions. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as
-
-
fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit of
the Consolidated Financial Statements and of arrangements and
measures (systems) relevant to the audit of the Group Manage-
ment Report in order to design audit procedures that are appro-
priate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of these systems.
Evaluate the appropriateness of accounting policies used by the
Board of Executive Directors and the reasonableness of estimates
made by the Board of Executive Directors and related disclosures.
Conclude on the appropriateness of the Board of Executive
Directors' use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are
required to draw attention in the auditor's report to the related
disclosures in the Consolidated Financial Statements and in the
Group Management Report or, if such disclosures are inade-
quate, to modify our respective opinions. Our conclusions are
based on the audit evidence obtained up to the date of our
auditor's report. However, future events or conditions may cause
the Group to cease to be able to continue as a going concern.
- Evaluate the overall presentation, structure and content of the
Consolidated Financial Statements, including the disclosures, and
whether the Consolidated Financial Statements present the
underlying transactions and events in a manner that the
Consolidated Financial Statements give a true and fair view of the
assets, liabilities, financial position and financial performance of
the Group in compliance with IFRSS as adopted by the EU and
the additional requirements of German commercial law pursuant
to Section 315e (1) HGB and full IFRS.
- Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group
to express opinions on the Consolidated Financial Statements
and on the Group Management Report. We are responsible for
the direction, supervision and performance of the group audit. We
remain solely responsible for our opinions.
BASF Report 2021
Consolidated Financial Statements - Independent Auditor's Report
ΚΣΕ 193
We exercise professional judgement and maintain professional
skepticism throughout the assurance work. We also:
Sailer
Wirtschaftsprüfer
[German Public Auditor]
Dr. Dietz
Wirtschaftsprüferin
[German Public Auditor]
BASF Report 2021
Consolidated Financial Statements - Statement of Income
Statement of Income
BASF Group
Statement of income
Million €
Sales revenue
Cost of sales
Gross profit on sales
Selling expenses
Wirtschaftsprüfungsgesellschaft
[Original German version signed by:]
-314
KPMG AG
The German Public Auditor responsible for the engagement is
Dr. Stephanie Dietz.
- Identify and assess the risks of material intentional or unintentional
non-compliance with the requirements of Section 328 (1) HGB,
design and perform assurance procedures responsive to those
risks, and obtain assurance evidence that is sufficient and appro-
priate to provide a basis for our assurance opinion.
-
-
-
-
Obtain an understanding of internal control relevant to the
assurance of the ESEF documents in order to design assurance
procedures that are appropriate in the circumstances, but not for
the purpose of expressing an assurance opinion on the effective-
ness of these controls.
Evaluate the technical validity of the ESEF documents, i.e. whether
the electronic file containing the ESEF documents provided
meets the requirements of Commission Delegated Regulation
(EU) 2019/815 on the technical specification for this electronic file.
Evaluate whether the ESEF documents enable an XHTML repro-
duction with content equivalent to the audited Consolidated
Financial Statements and the audited Group Management Report.
Evaluate whether the tagging of the ESEF documents with Inline
XBRL technology (iXBRL) in accordance with Articles 4 and 6 of
Commission Delegated Regulation (EU) 2019/815 in the version
in force on the balance sheet date enables an appropriate
and complete machine-readable XBRL copy of the XHTML
reproduction.
Further Information pursuant to Article 10 of the EU Audit
Regulation
We were elected as group auditor by the annual general meeting on
April 29, 2021. We were engaged by the chair of the audit commit-
tee on July 21, 2021. We have been the group auditor of BASF SE
without interruption since the financial year 2006.
We declare that the opinions expressed in this auditor's report are
consistent with the additional report to the audit committee pursuant
to Article 11 of the EU Audit Regulation (long-form audit report).
Other matters - use of the auditor's report
-
-
Our auditor's report should always be read in conjunction with the
audited Consolidated Financial Statements and the audited Group
Management Report as well as the audited ESEF documents. The
Consolidated Financial Statements and the Group Management
Report converted to ESEF format including the versions to be
published in the Federal Gazette (Bundesanzeiger) are merely
electronic reproductions of the audited Consolidated Financial
Statements and the audited Group Management Report and do not
replace them. In particular, the ESEF report and our assurance
opinion contained therein can only be used in conjunction with the
audited ESEF documentation provided in electronic form.
German Public Auditor Responsible for the Engagement
Frankfurt am Main, February 22, 2022
-373
94
118
-3,677
90
-49
10,655
-4,801
10,106
4,583
-4,737
-64
BASF Report 2021
Consolidated Financial Statements - Balance Sheet
Balance Sheet
BASF Group
Assets
549
-3,726
4,673
b For more information on the remeasurement of defined benefit plans, see Note 22 from page 254 onward
71
-29
-5
Investments accounted for using the equity method - share of reclassifiable gains/losses (after taxes)
Reclassifiable gains/losses
313
-1,286
1,964
-2,753
Other comprehensive income after taxes
of which attributable to shareholders of BASF SE
attributable to noncontrolling interests
Comprehensive income
of which attributable to shareholders of BASF SE
attributable to noncontrolling interests
a For more information on other comprehensive income, see Note 20 on page 250 of the Notes
Million €
Intangible assets
Property, plant and equipment
Integral investments accounted for using the equity method
[14]
13,499
13,145
[15]
21,553
19,647
[10]
2,540
1,878
[10]
9,843
10,874
[10]
Currency
translation
582
December 31, 2020
52
December 31, 2021
196
Non-integral investments accounted for using the equity method
Other financial assets
Deferred tax assets
Other receivables and miscellaneous assets
Noncurrent assets
Inventories
Accounts receivable, trade
Other receivables and miscellaneous assets
Marketable securities
Cash and cash equivalentsa
Assets of disposal groups
Current assets
Total assets
a For a reconciliation of the amounts in the statement of cash flows with the balance sheet item cash and cash equivalents, see page 198
< >
Explanations in Note
2,600
Reclassification of realized gains/losses from currency translation recognized in the statement of income
Deferred taxes on reclassifiable gains/losses
1,566
5,523
-1,060
[13]
459
-15
[6]
-1,075
6.05
[6]
-0.04
0.43
[6]
6.01
-1.15
-1.58
5,982
396
-36
-215
-207
-122
-89
[11]
-436
-462
7,448
-1,562
[12]
-1,430
91
6,018
-1,471
[3]
[6]
-0.01
[6]
6.00
-811
422
Investments accounted for using the equity method - share of nonreclassifiable gains/losses (after taxes)
44
-19
Nonreclassifiable gains/losses
2,709
-973
Unrealized gains/losses in connection with cash flow hedges
284
14
Reclassification of realized gains/losses recognized in the statement of income in connection with cash flow hedges
-222
65
Unrealized gains/losses from currency translation
-1,376
-1,612
3,476
Remeasurement of defined benefit plansb
-1.15
BASF Report 2021
Consolidated Financial Statements - Statement of Income and Expense Recognized in Equity
Statement of Income and Expense Recognized in Equity
BASF Group
Statement of comprehensive incomea
Million €
Income after taxes
< >
195
BASF Group
2021
2020
5,982
-1,075
Deferred taxes on the remeasurement of defined benefit plans
of securities
5
Cash flow
hedges
Name of standard/interpretation
or amendments
Amendments to IFRS 4
Standard/interpretation
Accounting policies applied for the first time in 2021
The amendments shown in the table had no material effect on
BASF SE's Consolidated Financial Statements.
Accounting policies applied for the first time in 2021
1.2 Changes in accounting principles
On February 22, 2022, the Board of Executive Directors prepared
the Consolidated Financial Statements, submitted them to the
Supervisory Board for review and approval, and released them for
publication.
For more information, see Note 1.3 from page 202 onward and Note 10 from page 225 onward
The individual financial statements of the consolidated companies
are prepared as of the balance sheet date of the Consolidated
Financial Statements. Business continuity is assumed. The company
is equipping itself for the challenges posed by the economic impact
of the coronavirus pandemic and of climate change. The accounting
policies applied are largely the same as those used in 2020.
The Consolidated Financial Statements of BASF SE as of Decem-
ber 31, 2021, have been prepared in accordance with the Inter-
national Financial Reporting Standards (IFRS) of the International
Accounting Standards Board (IASB), and section 315e (1) of the
German Commercial Code (HGB). IFRSS are generally only applied
after they have been endorsed by the European Union. For the 2021
fiscal year, all of the binding IFRSS and pronouncements of the
International Financial Reporting Interpretations Committee (IFRIC)
were applied. The Consolidated Financial Statements are for the
period from January 1, 2021 to December 31, 2021, and are
presented in euros. They are written in German and translated into
English. All amounts, including the figures for previous years, are
given in million euros unless otherwise indicated. Due to rounding,
individual figures in this report may not add up to the totals shown
and percentages may not correspond exactly to the figures shown.
BASF SE (registered at the district trade register, or Amtsgericht, for
Ludwigshafen am Rhein, number HRB 6000) is a publicly listed
corporation headquartered in Ludwigshafen am Rhein, Germany. Its
official address is Carl-Bosch-Str. 38, 67056 Ludwigshafen am
Rhein, Germany.
1.1 General information
1 Summary of accounting policies
Notes
ΚΣΕ 200
Consolidated Financial Statements - Notes
BASF Report 2021
34,398
Insurance Contracts (Extension of Temporary Exemption from
Application of IFRS 9)
670
Amendments to
IAS 39
August 30, 2021
March 31, 2021
Leases: Covid-19-Related Rent Concessions beyond June 30, 2021
Amendments to IFRS 16
(Interest Rate Benchmark Reform - Phase 2)
Leases
January 13, 2021
August 27, 2020
December 15, 2020
Date of endorsement by
the E.U.
June 25, 2020
Date of publication
Insurance Contracts
Financial Instruments: Disclosures
Financial Instruments: Recognition and Measurement
Financial Instruments
IFRS 16
IFRS 4
IFRS 7
IFRS 9
33,728
at fair value
-143
-1,060
-3,139
-108c
-3,031
-3,031
42,350
853
41,497
Equity
Non-
controlling
interests
Equity
attributable to
shareholders
of BASF SE
-35
5
798
-5,618
42,056
3,115
1,176
-8,474
-1,060
-15
Other com-
prehensive
incomeb
-4,850
-973
-1,075
7
-1,800
-6,538
3,115
1,176
-12
-11
-1
37,911
53
-54
-3,726
-49
-3,677
-3,677
-108
2
53
-2,598
BASF Report 2021
Capital consolidation is conducted at the acquisition date according
to the purchase method. Initially, all assets, liabilities and additional
intangible assets that are to be capitalized are measured at fair value
regardless of the scope of any noncontrolling interests. Subse-
quently, the cost of acquiring the company is compared with the
proportional share of the fair value of the net assets acquired. The
resulting positive differences are capitalized as goodwill. Negative
differences are reviewed once more, then recognized directly in the
income statement.
Amendments to IAS 12
January 1, 2023
December 9, 2021
Insurance Contracts (Initial Application of IFRS 17 and IFRS 9 -
Comparative Information)
February 12, 2021
January 1, 2023
January 1, 2023
Making Materiality Judgements (Presentation of Key Accounting Policies)
Accounting Policies, Changes in Accounting Estimates and Errors
(Definition of Changes in Accounting Policies and Accounting Estimates)
Income Taxes (Deferred Tax Related to Assets and Liabilities Arising from May 7, 2021
a Single Transaction)
Consolidated Financial Statements - Notes
January 1, 2023
Amendments to IFRS 17
< > 202
In addition to BASF SE, the Consolidated Financial Statements
include all material subsidiaries on a fully consolidated and all
material joint operations on a proportionally consolidated basis.
Companies whose business is dormant or of low volume, and are of
minor importance for the presentation of a true and fair view of the
net assets, financial position and results of operations, are not
consolidated, but rather are reported under other shareholdings.
These companies are carried at amortized cost and are written
down in the case of an impairment. The aggregate assets and equity
of these companies amount to less than 1% of the corresponding
value at Group level.
Scope of consolidation: The scope of consolidation is based on
the application of the standards IFRS 10 and 11.
According to IFRS 10, a group consists of a parent entity and the
subsidiaries controlled by the parent. “Control” of an investee
assumes the simultaneous fulfillment of the following three criteria:
The parent company holds decision-making power over the
relevant activities of the investee
-
The parent company has rights to variable returns from the
investee
The parent company can use its decision-making power to affect
the variable returns
Based on corporate governance structures and any additional
agreements, companies are analyzed for their relevant activities and
variable returns, and the link between the variable returns and the
extent to which their relevant activities could be influenced.
According to IFRS 11, which regulates the accounting of joint
arrangements, a distinction must be made between joint ventures
and joint operations. In the case of a joint venture, the parties that
I have joint control of a legally independent company have rights to
the net assets of that arrangement. In joint operations, the parties
that have joint control have direct rights to the assets and obligations
for the liabilities relating to the arrangement. This requirement is
particularly fulfilled if the production output of the joint arrangement
is almost entirely transferred to the partners, through which the
partners guarantee the joint arrangements' ongoing financing.
Companies whose corporate governance structures classify them
as joint arrangements are analyzed to determine if they meet the
criteria for joint ventures or joint operations in accordance with
IFRS 11. Should the arrangement be structured through a separate
vehicle, its legal form, contractual arrangements and all other facts
and circumstances are reviewed.
Joint ventures and associated companies are accounted for using
the equity method in the Consolidated Financial Statements.
Associated companies are entities that are not subsidiaries, joint
ventures or joint operations, and over whose operating and financial
policies significant influence can be exercised. In general, this
applies to companies in which BASF has an investment of between
20% and 50%. Associated companies and joint ventures that are
fully or predominantly allocated to operating divisions are classified
as integral because they are integrated into the value chain of the
respective division; are controlled by the divisions; and they generate
their income in close cooperation with the other assets of the BASF
Group and/or of these divisions. Equity-accounted income from
integral joint ventures or associated companies is reported as part of
income from operations (EBIT).
Equity-accounted income from non-integral joint ventures or
associated companies is reported in net income from shareholdings.
For more information, see Note 10 from page 225 onward
Consolidation methods: Assets and liabilities of consolidated
companies are uniformly recognized and measured in accordance
with the principles described herein. For companies accounted for
using the equity method, material deviations in measurement
resulting from the application of other accounting principles are
adjusted.
Transactions between consolidated companies as well as
intercompany profits resulting from trade between consolidated
companies are eliminated in full. Sales and material other balances
and transactions between joint operations and fully consolidated
Group companies are also eliminated. Material intercompany profits
related to companies accounted for using the equity method are
eliminated.
February 12, 2021
1.3 Group accounting principles
Presentation of Financial Statements and
Amendments to
January 1, 2023
Property, Plant and Equipment (Proceeds before
Intended Use)
May 14, 2020
June 28, 2021
January 1, 2022
Provisions, Contingent Liabilities and Contingent Assets May 14, 2020
(Onerous Contracts, Settlement Costs from Contracts)
June 28, 2021
January 1, 2022
May 14, 2020
June 28, 2021
January 1, 2022
Noncontrolling interests are measured at fair value at the date of
acquisition proportional to the assets acquired and liabilities
assumed (partial goodwill method).
IFRS 1 (Subsidiary as a First-Time Adopter)
IFRS 9 (Fees in the "10% Test" Regarding Derecognition
of Financial Liabilities)
IFRS 16 (Lease Incentives)
IAS 41 (Taxation in Fair Value Measurements)
Insurance Contracts (including amendments to the
standard)
June 25, 2020
November 19, 2021
January 1, 2023
IFRSS and IFRICS not yet to be considered and not yet
endorsed by the E.U.
The IASB issued further amendments to standards and
interpretations which are still subject to E.U. endorsement and
whose application is not yet mandatory. The amendments to IAS 12,
which serve to clarify how companies account for deferred taxes on
transactions such as leases and decommissioning obligations, are
already being applied in BASF's financial statements. All other
amendments are unlikely to have a material impact on the reporting
of BASF. BASF does not plan on early adoption of these
amendments.
IFRSS and IFRICS not yet to be considered and not yet endorsed by the E.U.
Standard/interpretation
Amendments to IAS 1
Amendments to IAS 1 and
IFRS Practice Statement 2
Amendments to IAS 8
Name of standard/interpretation or amendments
Date of publication
Expected date of initial
application
Presentation of Financial Statements (Classification of Liabilities as
Current or Noncurrent)
(including Deferral of Effective Date)
January 23, 2020
(July 15, 2020)
The incidental acquisition costs of a business combination are
recognized in the income statement under other operating
expenses.
5.89
BASF Report 2021
4.93
4.90
23.14
24.42
23.99
121.85
4.80
24.52
9.99
10.47
Mandatory date of
initial application
January 1, 2022
10.16
85.30
91.47
87.15
1.03
1.08
1.08
1,346.38
1.13
1,336.00
1.23
1,354.06
1.18
Mexico (MXN)
Norway (NOK)
Russia (RUB)
Switzerland (CHF)
South Korea (KRW)
United States (USD)
1.4 Accounting policies
10.72
82.72
1.07
1,345.58
1.14
The accounting policies for the individual items in the Balance Sheet
and the Statement of Income are presented in the respective
sections of the Notes.
Business combinations: In business combinations, the acquired
assets and liabilities are recognized at fair value on the date the
acquirer effectively obtains control. The fair value of acquired assets
and assumed liabilities at the date of acquisition, as well as the
useful lives of the acquired assets, are largely based on projected
cash flows. Actual cash flows can deviate significantly from those.
Independent external appraisals are typically used for the purchase
price allocation of material business combinations. Valuations in the
course of business combinations are based on existing information
as of the acquisition date.
Groups of assets and liabilities held for sale (disposal groups):
These comprise those assets and directly associated liabilities
shown separately on the balance sheet whose sale in the context of
a single transaction is highly probable. A transaction is assumed to
be highly probable if there are no significant risks of completion of
the transaction, which usually requires the conclusion of binding
contracts. The assets and liabilities of disposal groups are recog-
nized at the lower of the sum of their carrying amounts or fair value
less costs to sell; this does not apply to assets that do not fall under
the valuation principles of IFRS 5. Depreciation of noncurrent assets
and the use of the equity method are suspended.
4.72
For more information, see Note 13 on page 235
Malaysia (MYR)
126.49
Consolidated Financial Statements - Notes
< >
203
Foreign currency translation: The cost of assets acquired in
foreign currencies and revenue from sales in foreign currencies are
determined by the exchange rate on the date the transaction is
recognized. Foreign currency receivables and liabilities are valued at
the exchange rates on the balance sheet date. Changes in assets
and liabilities arising from foreign currency translation are recognized
in the income statement and reported under other operating income
or expenses, other financial result, and in the case of financial assets
measured at fair value through other comprehensive income, in
other comprehensive income.
Translation of foreign currency financial statements: The
translation of foreign currency financial statements depends on the
functional currency of the consolidated companies. For companies
whose functional currency is not the euro, translation into the
reporting currency is based on the closing rate method: Balance
sheet items are translated into euros using closing rates on the
balance sheet date; expenses and income are translated into euros
at monthly average rates and accumulated for the year. The
difference between a company's translated equity at historical rates
at the time of acquisition or retention and its equity at closing rates
on the balance sheet date is reported under other comprehensive
income (translation adjustments) and is recognized in the income
statement only upon the company's disposal.
For certain companies outside the eurozone or U.S. dollar zone, the
euro or U.S. dollar is the functional currency. In such cases, financial
statements prepared in the local currency are translated into the
functional currency using the temporal method: All nonmonetary
assets and related depreciation and amortization as well as equity
are translated at the exchange rate applying to the respective trans-
actions. All other balance sheet items are translated using closing
rates on the balance sheet date; other expenses and income are
translated at monthly average rates. The resulting translation differ-
ences are recognized in the income statement under other operating
income or expenses. If necessary, financial statements in the func-
tional currency are translated into the presentation currency accord-
ing to the closing rate method.
Selected exchange rates
EUR 1 equals
Closing rates
Average rates
Dec. 31,
Dec. 31,
2021
2020
2021
2020
Brazil (BRL)
China (CNY)
6.31
6.37
6.38
7.19
8.02
7.63
7.87
United Kingdom (GBP)
Japan (JPY)
0.84
0.90
0.86
0.89
130.38
129.88
June 28, 2021
BASF Report 2021
by the E.U.
436
0.5
598
0.7
Payments made for acquisitions
Additions of cash and cash equivalents
652
1,308
-52
-68
Payments made for acquisitions according to statement of
cash flows
600
1,240
a Proportional share in relation to the BASF Group
Consolidated Financial Statements - Notes
Total equity and liabilities
BASF Report 2021
Consolidated Financial Statements - Notes
<>=209
Divestitures
In 2021, BASF sold the following activities:
-
On May 31, 2021, BASF completed the sale of its production site
in Kankakee, Illinois, to a subsidiary of One Rock Capital
Partners, LLC. The transaction also included the vegetable-oil-
based sterols and natural vitamin E business as well as the
anionic surfactants and esters produced at the Kankakee site.
The purchase price was €177 million. The transaction affected the
Nutrition & Health and Care Chemicals divisions.
- Following the fulfillment of clearance conditions, BASF closed the
divestiture of its global pigments business to DIC, Tokyo, Japan,
on June 30, 2021. The business' assets and liabilities have been
reported as a disposal group since the business transfer
agreement was signed in August 2019. The purchase price on a
cash and debt-free basis was €1.15 billion. The transaction
affected approximately 2,500 employees in the Dispersions &
Pigments division. The division was renamed Dispersions &
Resins following the transaction closing. The disposal group of
the pigments business was derecognized when BASF's global
pigments business was sold to DIC, Tokyo, Japan, on
June 30, 2021. The calculation of the disposal loss on the global
pigments business is presented in the following table:
Calculation of disposal loss on the global pigments business
Million €
June 30, 2021
Purchase price on a cash and debt-free basis
Purchase price adjustments
Purchase price
Disposed net assets
1,150
0.0
-140
8
91
%a
52
2.0
68
1.6
Assets
1,436
1.6
1,906
2.4
Other noncurrent assets
of which financial indebtedness
Current liabilities
of which financial indebtedness
Equity
348
0.8
of which noncontrolling interests
Noncurrent liabilities
348
27.0
65
0.3
264
0.9
5
371
1.8
334
2.1
2.7
1,010
-938
Assets of the disposal group
0.3
11
0.1
8
2.8
559
1.5
332
10.8
670
2.3
139
0.3
21
BASF Report 2021
Consolidated Financial Statements - Notes
<>=201
IFRSS and IFRICS not yet to be considered but already
endorsed by the E.U.
The effects on the BASF Group financial statements of the IFRSS
and IFRICS not yet in force in 2021 but already endorsed by the
European Union were reviewed. The amendments to IAS 16,
whereby specific income is to be recognized with the associated
costs in profit or loss, as well as the amendments to IAS 37 regarding
cost calculation for onerous contracts are already being taken into
account. BASF currently assumes that all other amendments will
have no material effect. It does not plan on early adoption.
IFRSS and IFRICS not yet to be considered but already endorsed by the E.U.
Standard/interpretation
Amendments to IFRS 3
Amendments to IAS 16
Amendments to IAS 37
Annual improvements to
IFRS 2018-2020
Amendments to IFRS 17
Name of standard/interpretation or amendments
Business Combinations (Amendment to References to
the Conceptual Framework)
Date of endorsement
Date of publication
108
2.5
Noncurrent assets
744
-1,281
Reinstated receivables
30
Liabilities of the disposal group
Reinstated liabilities
338
-25
Other
-89
-17
-63
-80
Disposal loss before taxes
Tax expense
Disposal loss after taxes
May 14, 2020
a Purchase price adjustments take into account, among other things, cash, financial indebtedness and pension
obligations.
The following overview shows the effects of the divestitures in 2021
and 2020 on the Consolidated Financial Statements. The sales line
item showed the year-on-year decline resulting from divestitures.
The impact on equity related mainly to gains and losses from
divestitures.
On November 30, 2021, BASF completed the sale of the precision
microchemicals business to Entegris, Billerica, Massachusetts.
The transaction included fixed assets and inventories; the
purchase price was €78 million. The precision microchemicals
business was part of the Surface Treatment business unit of
BASF's Coatings division, operating under the Chemetall brand.
In 2020, BASF sold the following activity:
- On September 30, 2020, and on November 30, 2020, BASF
closed the divestiture of its construction chemicals business to an
affiliate of Lone Star, Dallas, Texas, a global private equity firm.
The purchase price on a cash and debt-free basis was €3.17 bil-
lion. The sale covered approximately 7,500 employees as well as
production sites and sales offices in more than 60 countries of the
former Construction Chemicals division. From the signing of the
agreement on December 21, 2019, until the closing of the
transaction, BASF's construction chemicals business was
reported as a discontinued operation. Purchase price adjustments
were reported in income from discontinued operations in the
amount of €36 million after taxes in 2021.
Discontinued operations: These are classified as held for sale and
are presented as discontinued operations in BASF's Consolidated
Financial Statements in accordance with IFRS 5. Until closing, the
income after taxes of discontinued operations is shown in income
after taxes of the BASF Group as a separate item (income after
taxes from discontinued operations). In addition, the assets and
liabilities of the discontinued operations are reclassified to a disposal
group (assets or liabilities of disposal groups). The statement of cash
flows is not adjusted. The activities of discontinued operations are
not allocated to any reportable segment in financial reporting.
of which cash and cash equivalents
1.8
548
2.0
692
Current assets
2.7
1,358
1.4
· On November 9, 2021, BASF and Clayton, Dubilier & Rice sold
their shares in Solenis to Platinum Equity, Beverly Hills, California.
With over 5,200 employees, Solenis serves customers in
water-intensive industries by helping them solve complex water
treatment and process improvement challenges. BASF held a
49% share in Solenis after having transferred its wet-end paper
and water chemicals business to the company in February 2019.
This was accounted for using the equity method. The remaining
51% of the shares were held by funds managed by Clayton,
Dubilier & Rice, and by Solenis management. The purchase price
allocated to BASF was €1.1 billion. The investment was classified
as non-integral. Its earnings and the gain on the disposal in the
amount of €589 million were reported under net income from
shareholdings.
For more information, see Note 3 from page 207 onward and Note 5 from page 213 onward
Two newly established companies with headquarters in Europe
(one of those in Germany)
Consolidated Financial Statements - Notes
of which financial indebtedness
Current liabilities
of which financial indebtedness
Total equity and liabilities
794
1.9
607
1.8
8
-338
-1.7
-883
-5.4
464
0.5
Noncurrent liabilities
-276
Equity
-3,035
-0.1
of which property, plant and equipment
-50
-0.2
Current assets
-1,730
-4.9
-3,035
-10.2
of which cash and cash equivalentsb
-33
-89
Assets
-1,761
-2.0
-3.8
-31
-0.3
2,225
Property, plant and equipment
Other intangible assets
Goodwill
Million €
Preliminary purchase price allocation for the acquisition of assets and
liabilities of the BASF Shanshan companies
The gross amounts of contractual trade accounts receivable were
€290 million, of which €52 million is expected to be uncollectible.
The gross amounts of Other receivables were €160 million.
The following table shows the fair values for the assets and liabilities
of the BASF Shanshan companies, which were used on a preliminary
basis until a complete independent valuation is carried out. The
purchase price allocation considers all the facts and circumstances
prevailing as of the date of acquisition that were known prior to the
preparation of these financial statements. If further facts and
circumstances become known within the 12-month valuation period
pursuant to IFRS 3, the purchase price allocation will be recalculated
accordingly.
suitable for forecasting future developments or events. The
goodwill is not tax deductible.
Since August 31, 2021, BASF and Shanshan, a lithium-ion battery
materials provider in China, have held shares in BASF Shanshan
Battery Materials Co., Ltd. The company is majority-owned by
BASF (BASF 51%; Shanshan 49%). It already occupies a very
strong position in the value chain for battery materials including
raw materials, precursors for cathode active materials, cathode
active materials and battery recycling. It focuses primarily on the
electric vehicle market as well as the consumer electronics and
energy storage segments. Through this investment, BASF is
further strengthening its position in Asia to create an integrated
global supply chain for battery materials for customers in China
and worldwide. The investment strengthens the Catalysts division.
The transaction includes four companies and approximately
1,600 employees. One of the companies is classified as an
investment accounted for using the equity method, but for
reasons of materiality, was consolidated in BASF's financial
statements at amortized cost. The purchase price was €616 mil-
lion and was cash-effective in full. A separate transaction valued
at €36 million was connected to the purchase in accordance with
IFRS 3.51 and was reported under other receivables. It contains a
compensation component which is coupled with employees
remaining at BASF Shanshan Battery Materials Co., Ltd. It affects
a period of one to two years and will be disbursed in two tranches.
Goodwill of €254 million resulted in particular from sales and cost
synergies. The businesses acquired accounted for €354 million in
sales revenue and -€36 million in income from operations in the
2021 fiscal year. Including the businesses and assets of the BASF
Shanshan companies in BASF's Consolidated Financial State-
ments since January 1, 2021, would have resulted in a sales
revenue contribution of €821 million and income from operations
of €13 million. These pro forma data are for comparison purposes.
They are not necessarily values that would have resulted had the
transaction taken place as of January 1, 2021, and are not
-
In 2021, BASF acquired the following activity:
Acquisitions
3 Acquisitions and divestitures
<>=207
Consolidated Financial Statements - Notes
Integral investments accounted for using the equity method
Non-integral investments accounted for using the equity method
Other financial assets
Payments received from divestitures
Deferred tax assets
Noncurrent assets
2,759
Further effects in connection with divestitures
-1,195
-239
Payments received from divestitures according to statement of
cash flows
1,030
2,520
a Proportional share in relation to the BASF Group
8
332
139
254
Fair value as of
date of
acquisition
Accounts receivable, trade
Inventories
Other receivables and miscellaneous assets
Noncurrent assets
-0.2
-91
Total purchase price
Total liabilities
Other liabilities
Current liabilities
Financial indebtedness
Tax liabilities
616
348
Noncontrolling interests
436
371
15
91
1
2
Provisions
BASF Report 2021
262
Consolidated Financial Statements - Notes
208
Million €
%a
Million €
2020
2021
Property, plant and equipment
Financial assets
Other intangible assets
Goodwill
Effects of acquisitions
The following overview shows the effects of acquisitions in 2021 and
2020 on the Consolidated Financial Statements. When acquisitions
resulted in the transfer of assets or the assumption of additional
liabilities, the effects were shown as net amounts.
BASF closed the acquisition of Solvay's polyamide business
(PA 6.6) on January 31, 2020. Domo Chemicals, Leuna, Germany,
was approved by the E.U. Commission as the buyer of the
European polyamide business, which could not be acquired by
BASF under the conditions imposed by the authorities. The trans-
action broadened BASF's polyamide capabilities with innovative
products. It also enhanced the company's access to growth
markets in Asia as well as in North and South America. Through
backward integration into the key raw material adiponitrile (ADN),
BASF was integrated along the entire polyamide 6.6 value chain
and was able to improve supply reliability. The purchase price of
the business acquired by BASF was €1,319 million on a cash and
debt-free basis. Of that amount, €1,308 million was already cash
effective in 2020. The remaining purchase price should be paid in
2022. The business was integrated into the Performance Materials
and Monomers divisions. The transaction between Solvay and
BASF included eight production sites in Germany, France, China,
India, South Korea, Brazil and Mexico, as well as research and
development and technical consultation centers in Asia and the
Americas. It also included two shareholdings in France, which are
accounted for as joint operations: The 50% interest in
Butachimie SNC, Chalampé, France, to produce ADN and
hexamethylenediamine, and the 51% interest in the newly
established Alsachimie S.A.S., Chalampé, France, to produce
adipic acid. With the acquisition, around 700 Solvay employees
were transferred to BASF. Furthermore, some 1,000 employees of
the Alsachimie S.A.S. and Butachimie SNC joint operations are to
be included on a pro rata basis by BASF. Goodwill of €20 million
resulted in particular from sales synergies. The majority of total
goodwill was not tax deductible.
-
In 2020, BASF acquired the following activity:
Furthermore, BASF completed the purchase of 49.5% of
Vattenfall's Hollandse Kust Zuid wind farm on September 1, 2021.
The transaction is not being reported as an acquisition because
the acquired assets do not constitute a business in accordance
with IFRS 3.2b, so it is not within the IFRS 3 scope of application.
The transaction is therefore not included in the table to the right.
-
< >
Accounts payable, trade
65
Noncurrent liabilities
238
207
744
11
Effects of divestitures
Sales
ΚΣΕ 210
2021
2020
Million €
%a
Million €
%a
-495
-0.8
Other receivables and miscellaneous assets
160
Marketable securities
Cash and cash equivalents
8
Other liabilities
5
Financial indebtedness
18
Other provisions
2
BASF Report 2021
Tax provisions
1,401
657
52
Deferred tax liabilities
Provisions for pensions and similar obligations
Total assets
Current assets
32
For more information, see basf.com/en/corporate governance
For more information, see Note 4 on page 213
A list of the companies included in the Consolidated Financial
Statements and of all companies in which BASF SE has a
shareholding as required by section 313(2) of the German
Commercial Code (HGB) is provided in the list of shares held.
7
9
302
282
24
2020
2021
Africa,
Middle East
3
2
76
39
45
Asia Pacific
North America
9
Germany
43
of which proportionally consolidated
21
71
35
43
140
As of December 31
of which proportionally consolidated
63
24
3
8
4
3
9
Deconsolidations
2
Of which
6
First-time consolidations
Consolidated Financial Statements - Notes
BASF Report 2021
For more information on climate and sustainability, see Wintershall Dea's annual report at
wintershalldea.com/en/investor-relations
Climate policies are also causing fundamental changes in the
automotive industry, one of BASF's key customer industries. The
transition to electromobility will have a long-term negative impact
on the emissions catalyst business. This development was
accounted for in the adjustment of the growth rate for the goodwill
impairment test and did not lead to an impairment. Other BASF
businesses will benefit from this transformation; for example,
demand for innovative lightweight materials and battery materials
will grow. Furthermore, climate policies can influence the business
of oil and gas producers such as Wintershall Dea, which BASF
accounts for using the equity method. Nevertheless, given the large
share of gas in Wintershall Dea's production and reserves as well as
the acceptance of gas as a bridge technology, it can be assumed
that these assets are fundamentally recoverable. The price
assumptions applied for the impairment test reflected current
developments regarding climate neutrality as well as a possible oil
and gas shortage due to lack of investment in this industry.
Climate and sustainability-related developments: The chemical
industry is resource-intensive. BASF is committed to the Paris
Climate Agreement: Using resources as efficiently and responsibly
as possible and the concept of a circular economy are firmly
embedded in BASF's strategy and its actions, supported by the
Verbund structure, clearly defined ambitious targets for reducing
CO2, and the use of renewable and recycled feedstocks. BASF
always strives to employ raw materials more efficiently and improve
production processes as well as to continuously seek ways to use
non-fossil, renewable or recycled feedstocks. For this reason,
current developments and measures relating to climate change and
sustainability do not lead to fundamentally changed expectations
with regard to useful lives or recoverability of the majority of
noncurrent assets. There is also no material need for adjustments to
provisions for environmental and restoration obligations. In individual
cases, however, plants may be shut down if necessary for reasons
of environmental protection.
The goodwill impairment test is based on cash-generating units. At
BASF, these largely correspond to the business units, or in individual
cases the divisions. If there is a need for impairment, the existing
goodwill is, if necessary, completely written off as a first step. If there
is further need for impairment, this is allocated to the remaining
assets of the cash-generating unit. Goodwill impairments are
reported under other operating expenses.
An impairment is recognized if the recoverable amount of the asset
is lower than the carrying amount. The impaired asset (excluding
goodwill) is written down by the amount of the difference between
these amounts.
3.4
For more information, see Note 3 from page 207 onward and Note 14 from page 236 onward
testing. It comprises a risk-free interest rate, the market risk premium
and an industry-specific spread for the credit risk. Additional
important assumptions are the forecasts for the detailed planning
period and the terminal growth rates used. Fair value less costs to
sell must be determined for the impairment test of disposal groups;
specific assumptions relating to the respective transaction must be
made for this determination.
Impairment tests on assets are carried out whenever certain
triggering events indicate potential impairment. External triggering
events include, for example, changes in customer industries,
technologies used and economic downturns. Internal triggering
events for an impairment test include lower product profitability,
planned restructuring measures or physical damage to assets.
Impairment tests entail a comparison of the carrying amount and the
recoverable amount. The recoverable amount is the higher of fair
value less costs to sell and the value in use. As a rule, value in use is
determined using the discounted cash flow method. The estimation
of cash flows and the assumptions used consider all information
available on the respective balance sheet date on the future
development of the operating business. Actual future developments
may vary. Impairment testing relies upon the cash-generating unit's
long-term earnings forecasts, which are based on macroeconomic
trends. The weighted average cost of capital (WACC) based on the
capital asset pricing model plays an important role in impairment
The carrying amount of assets, liabilities and provisions, contingent
liabilities and other financial obligations reported in the Consolidated
Financial Statements depends on the use of estimates, assumptions
and discretionary scope. Specific estimates or assumptions used in
individual accounting or valuation methods are disclosed in their
respective sections of the Notes to the Consolidated Financial
Statements. They are based on the circumstances and estimates on
the balance sheet date and thus affect the amounts of income and
expenses shown for the reporting periods presented. These
assumptions primarily relate to the determination of discounted
cash flows in the context of impairment tests and purchase price
allocations; the useful lives of depreciable property, plant and
equipment and intangible assets; the carrying amount of
shareholdings; and the measurement of provisions for items such as
employee benefits, warranties, trade discounts, environmental
protection and taxes. Although uncertainty is appropriately
incorporated in the valuation factors, actual results can differ from
these estimates.
Use of estimates and assumptions in preparing the
Consolidated Financial Statements
204
< >
< > 205
2 Scope of consolidation
As of December 31, 2021, a total of 267 companies were included,
either proportionally or fully, in the scope of consolidation of the
Consolidated Financial Statements (December 31, 2020: 282). Of
these, nine companies were first-time consolidations (2020: 43).
Since the beginning of 2021, a total of 24 companies (2020: 63)
were deconsolidated due to divestiture, merger, liquidation or
immateriality.
First-time consolidations in 2021 comprised:
7
of which proportionally consolidated
143
As of January 1
Europe
South America,
Number of companies
267
Scope of consolidation
Three of the nine first-time consolidations in 2021 were companies
added as part of the formation of BASF Shanshan Battery
Materials Co., Ltd. Five companies were added to the scope of
consolidation as acquired or newly formed companies as part of the
purchase of 49.5% of the Hollandse Kust Zuid offshore wind park
from Vattenfall.
· Eleven companies that had not been consolidated at the time of
initial inclusion in the Consolidated Financial Statements in
Europe, six in North America, 11 in Asia Pacific and two in South
America, Africa, Middle East
- One newly established company with headquarters in Europe,
two newly established companies in Asia Pacific, and one newly
established company with headquarters in South America, Africa,
Middle East
- Four acquired companies with headquarters in Europe (one of
those in Germany), one in North America, one in South America,
Africa, Middle East, and three in Asia Pacific
First-time consolidations in 2020 comprised:
Four acquired companies with headquarters in Europe and three
in Asia Pacific
-
Eleven companies were deconsolidated as a result of the divestiture
of the global pigments business in 2021. Additionally, seven
companies merged with BASF companies due to the integration of
the polyamide business (PA 6.6) which had been acquired in 2020.
BASF Report 2021
282
9
-5
0.0
1
0.0
-11
0.0
-7
0.2
7
0.3
-8
0.1
-23
0.0
-28
0.0
0.2
0
0.0
In addition to the fully and proportionally consolidated companies,
27 joint ventures and/or associated companies (2020: 25) were
consolidated using the equity method.
Alsachimie S.A.S., Chalampé, France, which is jointly operated
with Domo Chemicals for the production of adipic acid
Ellba C.V., Rotterdam, Netherlands, which is jointly operated with
Shell for the production of propylene oxide and styrene monomer
BASF DOW HPPO Production BVBA, Antwerp, Belgium, which is
jointly operated with Dow for the production of propylene oxide
Butachimie SNC, Chalampé, France, which is jointly operated
with Invista for the production of adiponitrile (ADN) and
hexamethylenediamine (HMD)
-
The proportionally consolidated joint operations include, in
particular:
0.0
-11
0.0
-7
0.0
1
0.0
-7
0.0
-8
0.0
39
0.0
-1
of which financial indebtedness
Noncurrent liabilities
Equity
Assets
of which cash and cash equivalents
Current assets
of which property, plant and equipment
Noncurrent assets
Sales
Overview of impact of changes to the scope of consolidation (excluding acquisitions and divestitures)
Consolidated Financial Statements - Notes
BASF Report 2021
7
of which proportionally consolidated
9
Current liabilities
of which financial indebtedness
Total equity and liabilities
Other financial obligations
0.0
12
0.0
21
0.0
-3
0.0
2
-1
Million €
%a
Million €
2020
2021
ΚΣΕ 206
a Proportional share in relation to the BASF Group
%a
254
c Includes project-related tax payments and derecognition of cash and cash equivalents. The divestiture of the investment accounted for using the equity method to Solenis in 2021, is not shown under divestitures in the statement
of cash flows, but as a disposal of financial assets.
b Includes €33 million from the divested disposal group of the pigments business in 2021, and €89 million from the discontinued construction chemicals business in 2020.
Consolidated Financial Statements - Notes
6
94
9
20
409
Income from integral companies accounted for using the equity method
85,358
3,786
8,202
6,933
22,831
9,296
16,464
17,848
Sales including transfers
6,761
120
40
136
675
Income from operations (EBIT)
2,997
property, plant and equipment
other intangible assets
of which goodwill
87,383
23,121
15,305
7,231
13,769
6,302
11,286
10,369
Assets
7,677
-641
696
554
761
965
2,345
491
171
420
1,250
BASF Report 2021
215
< >
-1,562
7,448
-462
-436
-909
207
-191
7,677
-1,203
-641
1,012
8,317
-3,751
-91
-434
3
Consolidated Financial Statements - Notes
199
Segments 2021
<>=216
4,269
78,598
3,666
8,162
6,442
22,659
8,876
15,214
13,579
Intersegment transfers
Sales
BASF Group
Other
Agricultural
Solutions
Nutrition &
Care
Surface
Technologies
Industrial
Solutions
Materials
Chemicals
Million €
189
631
2,373
33
31
of which impairments and reversals of impairmentsa
3,678
157
662
413
483
380
817
4,881
183
347
654
1,469
361
709
1,157
Additions to property, plant and equipment and intangible assets (including acquisitions)
Depreciation and amortization of property, plant and equipment and intangible assets
43
2,216
9
8
8,071
Intersegment transfers
Sales
BASF Group
Other
Agricultural
Solutions
Nutrition &
Care
Surface
Technologies
Industrial
Solutions
Materials
Chemicals
<>= 217
Million €
Segments 2020
Consolidated Financial Statements - Notes
BASF Report 2021
a Impairments and reversals of impairments included reversals of impairments of €12 million in Industrial Solutions in 2021.
144
14
6
-3,317
378
172
959
2,570
2,716
3,817
2,025
4,732
4,734
5,980
41
3,596
379
1,104
172
632
55
7,520
66
3,187
874
21,553
904
integral investments accounted for using the equity method
212
296
175
193
97
Research and development expenses
45,301
23,573
4,091
3,146
3,678
2,621
4,372
3,820
Liabilities
2,540
582
42
484
21
1,199
-93
3,560
7,768
-17
-37
-17
-17
-20
638
202
-2
-44
-2
-44
-71
-636
-158
-565
-153
-5
Wind farm investment
December 31, 2021
Kaolin minerals business
December 31, 2021
ΚΣΕ 212
-2
Net assets
-4
-4
- Agricultural Solutions: Agricultural Solutions
Nutrition & Care: Care Chemicals, Nutrition & Health
· Surface Technologies: Catalysts, Coatings
· Industrial Solutions: Dispersions & Resins, Performance
Chemicals
· Materials: Performance Materials, Monomers
Chemicals: Petrochemicals, Intermediates
The BASF Group's business is operated by 11 divisions, grouped
into six segments:
5 Reporting by segment and region
For more information, see basf.com/en/corporate governance
The list of consolidated companies and the complete list of all
companies in which BASF SE holds shares as required by
section 313(2) HGB as well as information on the exemption of
subsidiaries from accounting and disclosure obligations are an
integral component of the audited Consolidated Financial
Statements submitted to the electronic Federal Gazette (Bundes-
anzeiger). The list of shares held is also published online.
BASF Group list of shares held pursuant to
section 313(2) of the German Commercial Code
(HGB)
4
<>=213
Consolidated Financial Statements - Notes
BASF Report 2021
617
163
21
39
-2
The divisions are allocated to the segments based on their business
models and according to their focal points, customer groups, the
focus of their innovations, their investment relevance and
sustainability aspects.
Liabilities of the disposal group
Other liabilities
Integral investments accounted for using the equity method
Property, plant and equipment
Other intangible assets
Goodwill
Balance Sheet
Million €
Disposal groups
The values of the disposal groups are presented in the following
table.
Other comprehensive income as of December 31, 2021, included
€52 million, which resulted from the change in the fair value of
physical power purchase agreements (PPAs) and is fully attributable
to the wind farm investment disposal group.
Consolidated Financial Statements - Notes
BASF Report 2021
211
< >
· On December 28, 2021, BASF reached an agreement with
Clariant Corporation, Louisville, Kentucky, to sell its production
site in Quincy, Florida, and the associated attapulgite business in
the Dispersion & Resins division. The Quincy site employs around
75 employees and manufactures clay-based mineral products
used in a variety of industrial applications. The purchase price
amounts to $60 million. The transaction is expected to close in
the summer of 2022, subject to the approval of the relevant
antitrust authorities.
-
On December 6, 2021, BASF and Allianz Capital Partners, acting
as party to the contract on behalf of Allianz Insurance Companies
(Allianz), agreed to the purchase by Allianz of 25.2% of the
investment in the Hollandse Kust Zuid (HKZ) offshore wind farm.
This follows a transaction between Vattenfall and BASF under
which BASF acquired 49.5% of HKZ from Vattenfall on Septem-
ber 1, 2021. The transaction is expected to close in the first
quarter of 2022, subject to the approval of the relevant antitrust
authorities. The assets and liabilities were reclassified to a disposal
group upon agreement to the investment by Allianz.
On November 18, 2021, BASF and KaMin LLC./CADAM S.A.
(KaMin) signed an agreement to sell BASF's kaolin minerals
business to KaMin, a global performance minerals company
headquartered in Macon, Georgia. Currently, the kaolin minerals
business is part of BASF's Performance Chemicals division.
Pending approval by the relevant antitrust authorities, the
transaction is expected to close in the second half of 2022. The
kaolin minerals business has approximately 440 employees in
North America, Europe and Asia. The divestiture comprises the
production hub with sites in Daveyville, Toddville, Edgar, Gordon
and related mines, reserves and mills in Toomsboro and
Sandersville, Georgia. The refinery catalysts operations located at
the same site are not part of the divestiture. With the agreement
on the sale of the kaolin minerals business to KaMin, the affected
assets and liabilities were reclassified to a disposal group, and an
impairment test was performed as of December 31, 2021. In
accordance with IFRS 5, the fair value less expected disposal
costs was used as the recoverable amount and compared with
the carrying amount. This resulted in the need for impairment in
the amount of €9 million as of December 31, 2021, which was
allocated to the goodwill of the disposal group for the kaolin
minerals business.
Agreed transactions and groups of assets and liabilities held
for sale (disposal groups)
BASF Report 2021
Non-integral investments accounted for using the equity method
Current liabilities
Other financial assets
Other receivables and miscellaneous assets
Financial indebtedness
Tax liabilities
Provisions
Accounts payable, trade
Noncurrent liabilities
Other liabilities
Financial indebtedness
Other provisions
Tax provisions
Deferred tax liabilities
Provisions for pensions and similar obligations
Assets of the disposal group
Current assets
Cash and cash equivalents
Marketable securities
Other receivables and miscellaneous assets
Accounts receivable, trade.
Inventories
Noncurrent assets
Deferred tax assets
10,736
The Chemicals segment comprises the Petrochemicals and
Intermediates divisions and is the cornerstone of BASF's Verbund
structure. It supplies the other segments with basic chemicals and
intermediates, contributing to the organic growth of the key value
chains. In addition to internal transfers, the segment mainly serves
customers in downstream industries, especially in the chemical and
plastics industries. The segment's competitiveness is strengthened
by technological leadership and operational excellence, process
and product innovations as well as the development of sustainable
technologies.
and customer proximity, particularly products that contribute to the
circular economy as well as sustainable production methods help
differentiate BASF from its competitors.
December 31, 2020
64,262
December 31, 2021
Income before income taxes
Financial result
Net income from shareholdings
EBIT
EBIT of Other
EBIT of the segments
Special items
Special items of Other
Special items of the segments
EBIT before special items
EBIT before special items of Other
EBIT before special items of the segments
Reconciliation of segment income to income before income taxes
Million €
Assets of the BASF Group
Assets of Other
Other receivables/prepaid expenses
56,161
Defined benefit assets
3,202
10,418
-769
-643
4,329
8,411
2020
2021
80,292
87,383
24,131
23,121
2,375
3,407
126
661
4,537
2,832
3,386
2,600
11,456
2,251
The Materials segment is composed of the Performance Materials
and the Monomers divisions. The segment offers advanced materials
and their precursors for new applications and systems. Its product
portfolio includes isocyanates and polyamides as well as inorganic
basic products and specialties for plastics and plastics processing.
In addition to specific technological knowledge, industry expertise
Cash and cash equivalents / marketable securities
Other financial assets and non-integral investments accounted for using the equity method
2020
2021
Income from operations (EBIT) of Other
Million €
-364
Remanent fixed costs resulting from organizational changes or
restructuring; function and region-related restructuring costs not
allocated to a division; idle capacity costs from internal human
resource platforms; and consolidation effects that cannot be
allocated to the divisions.
Results from currency translation that are not allocated to the
segments; earnings from the hedging of raw materials prices and
foreign currency exchange risks; and gains and losses from the
long-term incentive programs (LTI programs).
-
- The steering of the BASF Group by corporate headquarters.
Cross-divisional corporate research, which includes plant
biotechnology research, works on long-term topics of strategic
importance to the BASF Group. Furthermore, it focuses on the
development of specific key technologies, which are of central
importance for the divisions.
-
The following activities are also presented under Other:
Activities that are not allocated to any of the divisions are recorded
under Other. These include other businesses which comprise
commodity trading, engineering and other services, as well as rental
income and leases. Discontinued operations and certain activities
remaining after divestitures are also reported here.
The Agricultural Solutions segment consists of the division of the
same name. As an integrated provider, its portfolio comprises
fungicides, herbicides, insecticides and biological crop protection
products, as well as seeds and seed treatment products.
Furthermore, Agricultural Solutions offers farmers innovative and
sustainable solutions, including those based on digital technologies,
combined with practical advice.
214
< >
Consolidated Financial Statements - Notes
BASF Report 2021
The Nutrition & Care segment comprises the Care Chemicals
division and the Nutrition & Health division. This segment produces
ingredients and solutions for consumer applications in the areas of
nutrition, home and personal care. Its customers include food and
feed producers as well as the pharmaceutical, cosmetics, and the
detergent and cleaner industries. The segment's competitiveness is
strengthened, among other things, by focusing on new business
models and sustainability trends in the consumer goods markets,
for instance expanding the portfolio with bio-based and bio-
degradable products.
The Surface Technologies segment bundles chemical solutions for
surfaces in the Catalysts and Coatings divisions. Its portfolio range
serves the automotive and chemical industries and includes
catalysts, battery materials, automotive OEM and refinish coatings,
surface treatment, and precious and base metal services.
Innovations and solutions customized in collaboration with our
customers in the field of sustainable mobility are a key growth driver
for this segment.
The Industrial Solutions segment consists of the Dispersions &
Resins and the Performance Chemicals divisions. The segment
develops and markets ingredients and additives for industrial
applications, such as polymer dispersions, resins, electronic
materials, antioxidants and additives. Its customers come from key
industries such as automotive, plastics and electronics as well as
energy and resources. The pigments business was part of the
Dispersions & Pigments division until June 30, 2021. The division
was renamed Dispersions & Resins as of July 1, 2021, following the
divestiture of the global pigments business.
Costs for cross-divisional corporate research
Costs of corporate headquarters
Deferred tax assets
-355
-214
Assets of businesses included in Other
Segment assets
Reconciliation of the assets of Other to the assets of the BASF Group
Million €
Consolidated Financial Statements - Notes
BASF Report 2021
Income from operations (EBIT) before special items is used for the
internal steering of the segments and complements the key
management indicator, return on capital employed (ROCE). It is
determined based on EBIT, which is calculated from gross profit on
sales, selling expenses, general administrative expenses, research
and development expenses, other operating income and expenses,
and income from integral companies accounted for using the equity
method. To calculate EBIT before special items, this figure is then
adjusted for special items. Special items arise from the integration of
acquired businesses, restructuring costs, impairments and reversals
of impairments, gains or losses on divestitures and sales of integral
investments accounted for using the equity method, as well as other
expenses and income that arise outside of ordinary business
activities. EBIT and EBIT before special items are alternative
performance measures that are not defined under IFRS and are to
be considered as being complementary to the indicators defined
by IFRS.
The same accounting rules are used for segment reporting as those
used for the Group, which are presented in these Notes. Transfers
between the segments are generally executed at adjusted
market-based prices, taking into account the higher cost efficiency
and lower risk of intragroup transactions. Assets, as well as their
depreciation and amortization, are allocated to the segments based
on economic control. Assets used by more than one segment are
allocated based on the percentage of usage.
Income from operations of Other improved by €562 million year
on year, from -€1,203 million to -€641 million. This resulted mainly
from miscellaneous income and expenses, which included
special income from the partial release of provisions for the
restructuring of the Global Business Services unit. In the previous
year, special charges had been recognized. The costs of corporate
headquarters rose by €41 million year on year to €255 million.
Income from other businesses increased by €11 million to
€180 million. The costs for cross-divisional corporate research
decreased by €9 million to €355 million.
-1,203
-641
-735
-149
Miscellaneous income and expenses
Income from operations of Other
-59
-62
Foreign currency results, hedging and other measurement
effects
169
180
Other businesses
-255
7,644
767
6,019
of which intangible assets
80,292
3,388
13,725
17,628
32,270
45,551
Assets
59,149
3,591
14,895
16,440
10,296
24,223
100.0
8.3
26.0
26.6
9.3
property, plant and equipment
39.1
integral investments accounted for using the equity method
3,588
1,044
932
3,019
Additions to property, plant and equipment and intangible assets (including acquisitions)
1,878
1,350
105
391
423
19,647
602
4,220
5,275
6,192
9,550
13,145
306
1,013
5,126
6,700
690
%
4,905
3,678
105
663
1,146
1,138
1,764
4,881
83
1,468
845
1,512
2,484
Additions to property, plant and equipment and intangible assets (including acquisitions)
Depreciation and amortization of property, plant and equipment and intangible assets including impairments and reversals of
impairments
2,540
1,943
118
400
479
21,553
In the United States, sales to third parties in 2021 amounted to
€19,583 million (2020: €14,352 million) according to location of
companies and €18,277 million (2020: €13,414 million) according to
location of customers. On December 31, 2021, intangible assets,
property, plant and equipment, and investments accounted for
using the equity method amounted to €10,466 million (2020:
€9,967 million) in the United States.
59,149
In China, sales to third parties in 2021 amounted to €11,380 million
(2020: €7,839 million) according to location of companies and
€11,408 million (2020: €7,877 million) according to location of
customers. On December 31, 2021, intangible assets, property,
plant and equipment, and investments accounted for using the
equity method amounted to €5,613 million (2020: €3,799 million)
in China.
Consolidated Financial Statements - Notes
15,406
15,709
5,510
23,129
BASF Group
Africa,
Middle East
ΚΣΕ 210
South America,
16,659
North America
Of which
Germany
Europe
Sales
Location of company
Share
Sales
Location of customer
Million €
Regions 2020
BASF Report 2021
592
116
Depreciation and amortization of property, plant and equipment and intangible assets including impairments and reversals of
impairments
920,486
1,000
2,008
1,000
918,479
918,479
1,000
-1,060
5,523
million €
-15
459
million €
-1,075
394
5,982
million €
-36
million €
1,759
2
920,238
€
part of BASF's "plus" share program. This applies regardless of the
fact that the necessary shares are acquired on the market by third
parties on behalf of BASF and that there are no plans to issue new
shares. A dilutive effect from the issue of "plus" shares arose in the
amount of €0.01 in 2021 (2020: no dilutive effect).
In accordance with IAS 33, earnings per share are determined by
dividing earnings attributable to shareholders of BASF SE by the
weighted average of outstanding shares. Pursuant to IAS 33, a
potential dilutive effect must be considered in the diluted earnings
per share for those BASF shares that will be granted in the future as
-1.15
6.00
€
-1.15
6.01
€
0.43
-0.04
€
0.43
-0.04
€
-1.58
6.04
€
-1.58
6.05
€
4,869
396
-36
Net income
of which noncontrolling interests
Income after taxes
Net income from discontinued operations
of which noncontrolling interests
Income after taxes from discontinued operations
Net income from continuing operations
of which noncontrolling interests
Income after taxes from continuing operations
Earnings per share
6 Earnings per share
Consolidated Financial Statements - Notes
BASF Report 2021
6,685
122
1,133
2,124
2,305
3,306
Weighted average number of outstanding shares
million €
Dilution effect from BASF's "plus" incentive share program
Earnings per share
million €
-1,454
5,559
million €
-17
459
million €
-1,471
2020
6,018
million €
2021
220
< >
From continuing and discontinued operations
Diluted
Diluted
From discontinued operations
Diluted
From continuing operations
Weighted average number of shares for diluted earnings per share
5,336
Asia Pacific
6,394
51
3,716
453
1,018
197
698
53
6,959
6,186
64
5,415
2,019
628
179
186
property, plant and equipment
other intangible assets
of which goodwill
3,039
4,362
4,498
2,040
2,948
2,905
2,734
3,893
3,435
Liabilities
1,878
464
34
414
48
208
710
integral investments accounted for using the equity method
19,647
893
2,528
2,353
2,973
80,292
24,131
14,840
6,214
2,433
7,751
6,448
16,862
8,019
11,456
10,932
Sales including transfers
4,752
73
91
429
203
375
720
2,861
59,149
2,360
7,660
63,901
3,556
Income from integral companies accounted for using the equity method
16
11,691
6,402
9,118
7,896
Assets
-191
-1,203
582
688
-587
630
-109
-192
Income from operations (EBIT)
220
82
4
55
17
46
26,423
844
Research and development expenses
100.0
7.6
27.0
26.5
9.3
38.8
%
78,598
5,965
21,234
20,867
7,300
30,531
BASF Group
Africa,
Middle East
ΚΣΕ 218
South America,
Asia Pacific
North America
31,594
Of which
Germany
12,722
20,632
10,209
13,499
292
1,187
5,348
3,675
6,674
integral investments accounted for using the equity method
property, plant and equipment
45,894
87,383
4,026
18,020
19,324
30,837
46,012
Assets
78,598
4,437
21,935
Europe
of which intangible assets
Location of company
1,665
1,429
4,869
156
459
510
585
331
1,957
871
Additions to property, plant and equipment and intangible assets (including acquisitions)
Depreciation and amortization of property, plant and equipment and intangible assets
2,086
385
840
246
177
182
96
Sales
469
1,487
160
1,000
Share
464
Sales
Location of customer
Regions 2021
Consolidated Financial Statements - Notes
BASF Report 2021
a In 2020, impairments and reversals of impairments only included impairments.
2,880
Million €
592
20
of which impairments and reversals of impairmentsa
800
171
6,685
1,013
53
296
106
514
575
Miscellaneous financial expenses
61
49
Other financial expenses
158
< >
Other financial result
Financial result
230
2021
Dec. 31, 2021 Dec. 31, 2020
2020
582
Other financial assets
16
Other shareholdings
Income from the capitalization of borrowing costs
146
Expenses from other shareholdings
-125
-141
Interest income on income taxes
Net income from other shareholdings
-78
Miscellaneous financial income
Net income from other shareholdings in 2021 decreased year on
year by €94 million due primarily to lower income from the
measurement of shareholdings at fair value.
Carrying amounts of other financial assets
Million €
Other financial income
Write-downs on / losses from securities and loans
Net interest expense from underfunded pension plans and similar obligations
Net interest expense from other long-term personnel obligations
Unwinding the discount on other noncurrent liabilities
Interest expenses on income taxes.
Long-term securities
10
-108
168
-2
-9
-11
-24
-20
-96
-82
-10
-207
-122
-89
-436
-462
shareholdings
-215
-56
-5
118
164
-482
-537
-314
-373
16
22
2
29
30
42
35
6
31
94
18
-78
533
Net interest income from other long-term personnel obligations
69
290
343
714
1,086
2,650
6,108
a Losses from foreign currency transactions were reported with losses from the translation of financial statements in foreign currencies for the first time; they had previously been combined with expenses from hedging transactions
and LTI programs. The prior-year figures have been restated accordingly.
In 2021 and 2020, expenses from restructuring and integration
measures were largely attributable to global restructuring activities
to improve competitiveness in various operating divisions and site
closures in Europe and North America (2021: €401 million, 2020:
€435 million). In 2020, this item additionally contained expenses
associated with the restructuring of the Global Business Services
unit and site closures in Asia Pacific.
Expenses from integration measures in the amount of €21 million in
2021 related to the integration of the global polyamide business,
which had been acquired from Solvay in 2020. In 2020, these
expenses were €90 million. Furthermore, expenses of €7 million
arose in 2021 from the integration of the battery materials business
which was acquired in 2021 in China.
For more information, see Note 3 from page 207 onward
Environmental protection and safety measures, costs of
demolition and removal, and project costs not subject to
mandatory capitalization were expensed if requirements for
mandatory capitalization pursuant to IFRS were not met. Expenses
for demolition, removal and project planning totaled €257 million in
2021 and €218 million in 2020. In both years, these mainly related
to the Ludwigshafen site in Germany. Furthermore, expenses of
€266 million in 2021 and €138 million in 2020 arose from the addition
to environmental provisions. In both years, these concerned several
discontinued sites in North America and, in 2020, additionally a site
in Germany.
BASF Report 2021
Consolidated Financial Statements - Notes
<>225
Depreciation, amortization and impairments of noncurrent
assets and of the disposal groups were €135 million in 2021 and
included impairments in the amount of €116 million resulting
primarily from the closure of a plant in North America, impairments
of plants in Asia, and impairments of construction in progress due to
discontinued investment projects. In 2020, this item amounted to
€2,968 million, primarily due to impairments of €2,368 million, which
resulted from the economic impact of the coronavirus pandemic
and affected all segments. In 2020, there were also impairments in
the amount of €377 million because of restructuring in North
America, Europe and Asia Pacific.
For more information, see Note 14 from page 236 onward and Note 15 from page 240 onward
Reconciliation of the carrying amounts of integral shareholdings accounted for using the equity method
Million €
ΚΣΕ 226
Stahl Lux 2 S.A., Luxembourg (BASF interest: 16.32%),
Quantafuel ASA, Oslo, Norway (BASF interest: 10.59%), and CIMO
Compagnie industrielle de Monthey S.A., Monthey, Switzerland
(BASF interest: 15%), are classified as associated companies as
BASF is represented in the relevant boards and can thus exercise
significant influence over the companies.
Consolidated Financial Statements - Notes
BASF Report 2021
Income from integral companies accounted for using the equity
method is presented in EBIT, and income from non-integral
companies accounted for using the equity method is presented
together with income from other financial assets in net income from
shareholdings. Similarly, integral and non-integral shareholdings
accounted for using the equity method are also shown separately in
the balance sheet. The material equity-accounted shareholding that
is classified as integral is BASF-YPC Company Ltd., Nanjing, China,
in which BASF and Sinopec each hold 50%, and which operates the
Verbund site in Nanjing, China. The material non-integral sharehold-
ing is the Wintershall Dea AG oil and gas company, which operated
as a GmbH until July 2021, and in which BASF holds a 72.7% share
of equity (voting right share 67%). Wintershall Dea was operated
jointly as a joint venture by partners BASF and LetterOne until
October 2021. Through the instatement of independent members
to the main body responsible for decisions about relevant activities,
BASF has exercised significant influence since November 1, 2021.
Accordingly, Wintershall Dea has been classified as an associated
company since that date.
107
Exploration and development expenses in the oil and gas business,
for which the equity method is applied, are accounted for using the
successful efforts method. Under this method, costs of successful
exploratory drilling as well as successful and dry development wells
are capitalized.
10 Investments accounted for using the equity
method and other financial assets
In both years, other expenses included expenses for litigation, for
REACH, for the provision of services, for warranties and for activities
related to the BASF 4.0 project and for planning the new Verbund
site in Guangdong, China. Other expenses arose in connection with
the coronavirus pandemic in both years, but especially due to
BASF's "Helping Hands" aid campaign in 2020.
The rise in expenses from the addition of valuation allowances
on business-related receivables resulted mainly from a trans-
action tax in Brazil.
As in the previous year, losses from divestitures and the disposal
of noncurrent assets were mainly in connection with the divestiture
of the global pigments business.
Expenses from hedging transactions and LTI programs related
to expenses from LTI programs in the amount of €37 million in 2021
and €35 million in 2020. Further expenses resulted from changes in
the fair value of currency derivatives and other hedging transactions.
Costs from other miscellaneous revenue-generating activities
relate to the items presented in other operating income.
Joint ventures and associated companies are accounted for using
the equity method. The carrying amounts of shareholdings are
adjusted annually based on the pro rata share of net income,
dividends and other changes in equity. Should there be indications
of a reduction in the value of an investment, an impairment test is
conducted and, if necessary, an impairment is recognized in the
income statement. Furthermore, earnings and the carrying amount
are adjusted when accounting policies deviate or as a result of
purchase price allocations, which primarily affects Wintershall
Dea AG, Kassel/Hamburg, Germany.
Joint ventures
51
165
Consolidated Financial Statements - Notes
<>=224
Reversals of impairment losses on noncurrent assets arose in
2021 in connection with the planned divestiture of the production
site in Quincy, Florida, and the associated attapulgite business.
Income from the reversal of valuation allowances for business-
related receivables resulted both from the reversal of impairments
for settled customer receivables for which impairments had been
recorded previously as well as from adjusted expectations regarding
default on individual customer receivables.
Other operating expensesa
Million €
2021
2020
Restructuring and integration measures
461
809
Environmental protection and safety measures, costs of demolition and removal, and project costs not subject to mandatory
capitalization
523
356
Depreciation, amortization and impairments of noncurrent assets and of the disposal groups
Costs from miscellaneous revenue-generating activities
Expenses from hedging transactions and LTI programs
163
48
62
213
150
2,968
46
135
Other
Expenses for derecognition of obsolete inventory
Expenses from the addition of valuation allowances on business-related receivables
Losses from divestitures and the disposal of noncurrent assets
Losses from foreign currency transactions and the translation of financial statements in foreign currencies
Other income included refunds in the amount of €211 million in
2021 and €151 million in 2020. This was due in both years to
government grants in multiple countries, regional business
development subsidies in China, and transaction tax refunds in
Brazil. Additional income resulted in 2021 from compensation for
environmental impact in the amount of €165 million and from special
income from the sale of non-capitalized know-how in the amount of
€50 million. In 2020, income was recognized in connection with the
premature termination of a long-term supply agreement in North
America in the amount of €103 million and from insurance refunds.
Other operating expenses
BASF Report 2021
Associated companies
2020
2021
2020
Carrying amounts according to the equity method as of the end of the year
1,839
1,297
701
581
Proportional income after taxes
of which joint ventures
669
234
593
193
associated companies
76
41
Other adjustments to income and expenses
Proportional changes of other comprehensive income included
income and expense recognized directly in equity and related
primarily to currency effects.
Proportional income after taxes and other adjustments to
income and expenses for the joint ventures increased mainly
because of the improved earnings contribution of BASF-YPC
Company Ltd.
Income from integral companies accounted for using the equity
method increased by €455 million in 2021. Of the increase,
€343 million related to the shareholding in BASF-YPC
Company Ltd., primarily due to higher prices and volumes. In
addition, the previous year had also been burdened by scheduled
turnarounds of production plants.
220
675
Income from integral companies accounted for using
the equity method
-7
associated companies
-2
-5
8
of which joint ventures
-14
6
-9
2021
-573
-180
2021
2020
Carrying amounts according to the equity method as of the beginning of the year
Proportional income after taxes and other adjustments to income and expenses
Proportional changes in other comprehensive income
1,297
1,309
581
576
601
188
74
32
109
-35
18
-12
710
153
Transfers
Income from integral companies accounted for using the equity method
Million €
-8
-13
-6
Disposals
-159
614
Additions
Changes in the scope of consolidation
Total comprehensive income
10.1 Integral companies accounted for using the equity
method
20
92
12
Gains on divestitures and the disposal of noncurrent assets in
2021 resulted from the sale of a production site in Kankakee, Illinois,
the sale of the share in the condensate splitter in Port Arthur, Texas,
and the sale of the precision microchemicals business. In 2020, this
item included primarily income from the sale of fixed assets in the
amount of €44 million.
Income from foreign currency transactions and the translation
of financial statements in foreign currencies related to the
translation of receivables and liabilities in foreign currencies and
included income from the translation of companies' financial
statements whose local currency is different from the functional
currency.
Income from hedging transactions and LTI programs resulted
exclusively from currency derivatives and other hedging trans-
actions. No income from the release of provisions for the long-term
incentive (LTI) program was recognized in 2021 or 2020.
8 Functional costs
Under the cost of sales method, functional costs incurred by the
operating functions are determined on the basis of cost center
accounting. The functional costs particularly contain the personnel
costs, depreciation and amortization accumulated on the underlying
final cost centers as well as allocated costs within the cost
accounting cycle. Operating expenses that cannot be allocated to
the functional costs are reported as other operating expenses.
For more information on other operating expenses, see Note 9 from page 223 onward
Dispersions & Resins
Performance Chemicals
Industrial Solutions
Catalysts
5,681
4,869
3,195
2,775
8,876
7,644
19,219
13,570
Coatings
Surface Technologies
2,030
2,449
Fungicides
6,442
Nutrition & Care
2,003
5,101
Nutrition & Health
4,439
Care Chemicals
16,659
22,659
3,089
3,440
3,989
Cost of sales
5,635
5,426
2,645
BASF Report 2021
Consolidated Financial Statements - Notes
< > 221
7 Sales revenue
Sales revenue from contracts with customers is recognized in the
amount of the consideration BASF expects to receive in exchange
for the goods or services when the customer obtains control of the
goods or services. Control is considered to be transferred when the
customer can direct the use of the goods or services and can obtain
all substantial remaining benefits from them.
BASF primarily generates income from the sale of goods. Because
the customer obtains control of the goods at a specific point in time,
the corresponding sales revenue is recognized based on a given
point in time. Determination of this point in time occurs in the context
of an overall assessment of the circumstances which considers the
existence of a present claim to payment, the legal title to the goods,
actual physical possession of the goods, the transfer of risks and
rewards as well as customer acceptance. The transfer of risks and
rewards takes into account the underlying terms of delivery
(especially Incoterms) and is of particular practical significance.
According to these principles, sales revenue from the sale of goods
is generally recognized upon delivery. If products are delivered to a
consignment warehouse, BASF normally retains control of the
goods. Accordingly, sales revenue is not recognized until the
customer collects the goods from the consignment warehouse.
Long-term supply agreements usually contain variable prices,
dependent on the development of raw materials prices and variable
volumes.
Services rendered to customers by BASF are invoiced according to
work completed and recognized as revenue accordingly.
BASF generates a portion of its sales revenue from license
agreements. Sales revenue from license agreements is recognized
based on a point in time or a period of time depending on whether
the licensee is being granted a right to use (revenue recognized at a
point in time) or a right to access (revenue recognized over time) the
intellectual property of BASF. Sales revenue from sales and
usage-based royalties is recognized in accordance with the
underlying settlement agreements.
Sales revenue from the sale of precious metals to industrial
customers is recognized on delivery and the corresponding
purchase prices are recorded as cost of sales. In the trading of
precious metals and their derivatives with traders, where there is
usually no physical delivery, revenues are netted against the
corresponding costs.
If a consideration that is contractually agreed upon by a customer
includes variable components, BASF estimates the amount of the
consideration. Variable components are recognized as revenue only
to the extent that it is highly probable that previously recognized
sales revenue will not have to be cancelled as soon as there is no
longer uncertainty about the actual amount of the consideration.
Primarily rebates and other discounts are recognized as a reduction
in revenue in accordance with the principle of individual measure-
ment. BASF grants customers rebates if the goods purchased by
the customer exceed a contractually defined threshold within the
period specified. Rebates are usually deducted from amounts
payable by the customer. Taking into account the specific terms of
the underlying contract, BASF uses the expected value method or
the most likely amount to estimate a variable consideration amount.
The method is selected based primarily on number of possible
results such as the number of volume thresholds with rebates. All
available information, particularly historical values, is used for making
estimates.
In some contracts, BASF grants the customer the right to return
goods within a specific period of time, even if they meet the agreed
specifications (sale with right of return). The actual expected amount
of the consideration BASF is entitled to receive in this case is
estimated using the expected value method. Refund liabilities are
recognized in the amount of considerations paid by the customer for
goods that are expected to be returned.
BASF opts to apply the practical expedient in IFRS 15.63 to not
adjust the amount of the agreed consideration for the effects of a
material financing component if, at the beginning of a contract, no
more than one year is expected to lapse between the transfer of
control of the goods or services and payment by the customer.
BASF also applies the practical expedient in IFRS 15.121 of not
reporting information on remaining performance obligations result-
ing from a contract with a maximum expected original term of one
year. Furthermore, information on performance obligations is not
reported if the resulting revenue is recognized in accordance with
IFRS 15.B16.
BASF Report 2021
Consolidated Financial Statements - Notes
<>=222
Sales by division and by indication and sector
Million €
10,736
15,214
7,292
7,922
13,579
3,904
9,674
8,071
Materials
Performance Materials
Chemicals
Intermediates
Petrochemicals
2020
2021
Monomers
Cost of sales includes all production and purchase costs of the
company's own products as well as merchandise that has been sold
in the period, particularly plant, energy and personnel costs.
Selling expenses
6,019 Selling expenses primarily include marketing and advertising costs,
freight costs, packaging costs, distribution management costs,
commissions and licensing costs.
<>=223
2021
2020
241
54
180
244
Income from hedging transactions and LTI programs
30
11
Income from foreign currency transactions and the translation of financial statements in foreign currencies
Gains on divestitures and the disposal of noncurrent assets
49
47
175
62
Reversals of impairment losses on noncurrent assets
Income from the reversal of valuation allowances for business-related receivables
Gains/losses from precious metal trading
As in the previous year, revenue from miscellaneous other
activities primarily included income from rentals, catering
operations, cultural events and logistics services. In 2020, €24 mil-
lion in revenue from finance leases was also recognized.
Income from the adjustment and release of provisions
recognized in other operating expenses in 2021 resulted primarily
from the release of provisions in connection with the restructuring of
the Global Business Services unit. In both years, income also
resulted from risks from lawsuits and damage claims, closures and
restructuring measures, employee obligations, and various other
individual items as part of the normal course of business. Provisions
were reversed or adjusted if, based on the circumstances on the
balance sheet date, utilization was no longer expected, or expected
to a lesser extent.
a Income from foreign currency transactions was reported with income from the translation of financial statements in foreign currencies for the first time; it had previously been combined with income from hedging transactions and
LTI programs. Furthermore, gains/expenses from precious metal trading, which had previously been recognized under Other, were reported separately. The prior-year figures have been restated accordingly.
1,399
1,894
655
Income from the adjustment and release of provisions recognized in other operating expenses
Revenue from miscellaneous other activities
784
Other
304
388
22
32
13
Other operating income
Million €
Other operating incomea
Other operating income and expenses
-53
General administrative expenses
825
926
2,464
2,526
609
BASF Group
Agricultural Solutions
Seeds & Traits
Seed Treatment
Insecticides
Herbicides
2,267
Other
Additions for associated companies in 2021 related primarily to the
purchase of 49.5% of Vattenfall's Hollandse Kust Zuid offshore wind
farm. The total investment has been reported as a disposal group
since December 2021 due to the agreement to sell shares in the
wind farm to Allianz Capital Partners.
1,641
8,162
9
For more information on research and development expenses by segment, see Note 5 from page 213
onward
Research and development expenses include the costs resulting
from research projects as well as the necessary license fees for
research activities.
Research and development expenses
Consolidated Financial Statements - Notes
BASF Report 2021
1,495
Sales revenue for the 2021 fiscal year includes €234 million from
performance obligations fulfilled in prior periods in connection with
sales and usage-dependent licenses.
General administrative expenses include the costs of the Corporate
Center, of general management, the Board of Executive Directors
and the Supervisory Board. They also include the costs of managing
operating divisions and business units as well as the costs of the
supporting services in departments such as accounting, legal, taxes
and controlling.
2,360
59,149
78,598
3,666
7,660
Sales revenue of €59 million, that was included in contract liabilities
as of January 1, 2021, was recognized in 2021.
Disposals in 2021 related to decreases in capital of the associated
company, Yara Freeport LLC, Wilmington, Delaware.
620
BASF Report 2021
10,199
12,402
-344
-890
27,216
27,881
2,740
2,740
Proportional changes in other comprehensive income
Dividends received
216
-1,256
488
57
4,666
2,459
Carrying amount as of the end of the year
9,583
Noncurrent liabilities
14,029
14,707
Equity
1,525
Subordinate bonds issued by Wintershall Dea
Carrying amount as of the beginning of the year
Proportional income after taxes and other adjustments to
income and expenses
14,029
Equity attributable to shareholders of Wintershall Dea AG
30,340
31,882
821
2,106
10,199
13,182
of which financial indebtedness
December 31, 2020
72.7%
Only the shareholding in Wintershall Dea was included in joint
ventures in 2020. For 2021, proportional income after taxes and
other adjustments to income and expenses as well as the
proportional changes in other comprehensive income for
Wintershall Dea are reported in full under associated companies.
Until November 1, 2021, when Wintershall Dea became an
associated company, proportional income after taxes and other
adjustments to income and expenses amounted to €258 million;
proportional changes in other comprehensive income amounted to
-€757 million until that date.
The proportional changes of other comprehensive income in
2021 predominantly included changes in the fair value of derivatives
used to hedge gas prices and currency effects of Wintershall Dea.
Changes in the scope of consolidation included the shareholding
in Solenis UK International Ltd, London, United Kingdom. The
former Solenis group holding company will be reported under other
financial assets until its complete liquidation.
-10
-10,199
-57
10,199
9,274
9,843
675
Disposals in 2020 included a capital decrease in Solenis UK
International Ltd. in the amount of €10 million.
Transfers in 2021 contained primarily the reclassification of
Wintershall Dea from joint ventures to associated companies. In
addition, transfers regarding associated companies related to
dividend payments by Wintershall Dea GmbH as well as to the
reclassification of Solenis shares to the disposal group.
BASF Report 2021
Consolidated Financial Statements - Notes
Additional information on the Wintershall Dea material non-integral investment accounted for using the equity method
The following table contains financial information on the Wintershall Dea material non-integral shareholding accounted for using the equity
method, including adjustments for fair value made at initial recognition and the resulting effects on earnings.
Financial information on Wintershall Dea, Kassel/Hamburg, Germany (100%)
Million €
72.7%
BASF interest in equity attributable to shareholders of
Wintershall Dea AG
2020
2021
Million €
Reconciliation of the carrying amount of the shareholding in
Wintershall Dea
December 31, 2021
229
Assets
of which marketable securities, cash and cash equivalents
Current assets
of which goodwill from fair value adjustments
Noncurrent assets
Balance Sheet
< >
Carrying amounts according to the equity method as of the end of the year
Current liabilities
Total equity and liabilities
10.3 Other shareholdings and financial assets
11 Financial result
Net income from other shareholdings
Million €
Financial result
Million €
2021
2020
Interest income from cash and cash equivalents
Dividends and similar income
32
18
Interest and dividend income from securities and loans
Income from the disposal of /write-up of
shareholdings
14
136
Interest income
Interest expenses
In 2021, transfers regarding joint ventures included dividend
payments and regarding associated companies they included
dividend payments as well as the reclassification of the shareholding
in the Hollandse Kust Zuid wind farm in the amount of €565 million
to the disposal group.
Write-downs on / losses from the sale of
Reversals of write-downs on / income from securities and loans
-63
-72
Expenses from loss transfer agreements
Consolidated Financial Statements - Notes
157
Income from other shareholdings
Interest result
allocation to shareholdings
3
1
Income from profit transfer agreements / tax
47
of which financial indebtedness
BASF Report 2021
296
12,039
14,343
4,055
5,886
5,136
1,968
575
471
31,882
30,340
Statement of income
Sales revenue
2021
2020
7,804
3,642
Amortization/impairment and reversals of impairments
Changes in other comprehensive income
-1,224
-473
Income after taxes and other adjustments to income and expenses
-424
-1,498
-1,728
Income taxes
Interest expenses
122
135
Interest income
-3,080
-2,765
-39
Transfers
-39
Changes in the scope of consolidation
Additions
229
Carrying amount as of the end of the year
103
-17
74
110
1,148
710
2,662
1,751
2,296
1,419
3
3
10.2 Non-integral companies accounted for using the
equity method
363
Statement of income
2020
2021
-643
435
Proportional income after taxes
747
2020
1,751
2,662
Million €
54
Income from non-integral companies accounted for using the equity
method
329
2021
Proportional changes in other comprehensive income
Dividends received
820
1,702
of which financial indebtedness
Current liabilities
of which financial indebtedness
Noncurrent liabilities
Equity
Assets
Total equity and liabilities
of which marketable securities, cash and cash equivalents
Noncurrent assets
Balance Sheet
Financial information on BASF-YPC Company Ltd., Nanjing, China (100%)
Million €
Additional information on the BASF-YPC Company Ltd. material integral investment accounted for using the equity method
Disposals
Consolidated Financial Statements - Notes
Current assets
Sales revenue
ΣΕ 227
Million €
931
960
66
409
Proportional income after taxes and other adjustments to
income and expenses
771
Reconciliation of the carrying amount of the shareholding in
BASF-YPC Company Ltd.
710
December 31, 2020
50%
50%
BASF interest
2020
2021
Carrying amount as of the beginning of the year
of which joint ventures
December 31, 2021
3,615
2020
2021
Associated companies
Joint ventures
Reconciliation of the carrying amounts of non-integral investments accounted for using the equity method
Million €
For more information on Wintershall Dea, see the chapter on Non-Integral Oil and Gas Business in the
Management's Report from page 93 onward
2021
Values in use were determined for the impairment test as of
December 31, 2021. The underlying assumptions for production
and cost trends as well as the price assumptions for 2023 to 2040
correspond with Wintershall Dea's. For 2022, BASF anticipates an
oil price of $75 per bbl of Brent crude and a gas price (TTF) of
$17.2 per mmBtu. After a decline in oil prices to approximately
$71 per bbl in 2023, and in gas prices to around $8 per mmBtu in
2023 and 2024, a subsequent increase is assumed at a nominal
rate of 2% p.a. for both oil and gas. The expected cash flows were
discounted using country-specific cost of capital rates, which reflect
the relevant country risks and tax rates. The cost of capital rates in
euros, calculated using the capital asset pricing model, were
between 3.4% and 14.3% (2021: between 3.4% and 14.4%). A
decrease of 10% in oil and gas price assumptions for the entire
planning period would result in the need for an impairment of about
€613 million of the shareholding in Wintershall Dea as a whole. An
increase in capital cost rates of one percentage point would lead to
additional proportional impairments of approximately €200 million
before tax which would burden net income from shareholdings by
€70 million and reduce the carrying amount accordingly.
228
< >
Consolidated Financial Statements - Notes
BASF Report 2021
Income from non-integral companies accounted for using the
equity method increased by €1,210 million in 2021 due primarily to
income from the divestiture of the shares in Solenis as well as to the
improvement in the earnings contribution of Wintershall Dea. The
improvement in Wintershall Dea's earnings in the amount of
€545 million was largely the result of higher oil and gas prices as well
as lower impairments of assets. In addition to impairments and
Changes in other comprehensive income
reversals of impairments recorded for Wintershall Dea (€161 million
after tax reported in BASF's net income from shareholdings),
proportional impairments arose in the amount of €680 million before
taxes on the amortized fair value adjustments from 2019, which
reduced the carrying amount by €420 million. Of that amount,
€408 million was attributable to Argentina, and was caused by the
planned disposal of operated unconventional oil activities, the
increase in the corporate tax rate, an increased country risk, the
implementation of a regulated gas price scheme by the Argentine
government until 2028, as well as updated price assumptions.
Furthermore, the latter led to minor impairments in Norway and
Libya. In the previous year, impairments amounting to €791 million
after taxes resulted from lower oil and gas price forecasts as well as
from changed reserve estimates. The shareholding as a whole is
recoverable.
-34
2020
12,401
Total comprehensive income
Carrying amounts according to the equity method as of the beginning of the year
Proportional income after taxes and other adjustments to income and expenses
Proportional changes in other comprehensive income
-610
-18
-37
-88
10,199
-2,145
216
-1,255
-35
-304
-890
722
-2
205
675
285
of which joint ventures
Interest income
3
7
-282
-739
-280
Amortization/impairment and reversals of impairments
179
-33
435
1,995
-925
associated companies
202
1
Other adjustments to income and expenses
Interest expenses
132
818
2
Income from non-integral companies accounted for
using the equity method
Income after taxes and other adjustments to income and expenses
Income taxes
Income from the divestiture of shares in Solenis
589
44
273
-2
-739
associated companies
Accumulated amortization
-7
0
Transfers
-249
-34
-28
-6
-67
691
-147
Disposals
21
376
0
Additions from acquisitions
8
123
171
0
24
-798
Transfers to disposal groups
17,241
7,734
103
973
234
4,182
1,387
2,731
As of December 31, 2020
-392
-20
0
-201
-46
-139
Currency effects
6
-14
13
0
7
-8
24
2.0%
Other cash-generating units
338
6.51%
2.0%
63
6.76%
507
5.54%
2.0%
493
5.21%
2.0%
712
6.67%
2.0%
696
6.42%
2.0%
1,470
7,520
As of January 1, 2020
5.51%-6.67%
0.0-2.0%
2.0%
37
6.43%
-0.7%
Goodwill as of December 31
a Growth rates used in impairment tests to determine terminal values in accordance with IAS 36
<>=237
2021
2020
Weighted
cost of capital
Weighted
cost of capital
Goodwill
after taxes
Growth ratea
Goodwill
after taxes
Growth rateª
3,187
5.54%
2.0%
3,039
4.86%
2.0%
1,306
6.63%
1,244
1,323
13,145
1,072
239
< >
a Including licenses to such rights and values
December 31, 2020
6,959
592
94
2,997
1,112
BASF Report 2021
1,391
4,096
775
381
140
1,185
275
1,340
As of December 31, 2020
-138
Net carrying amount as of
Consolidated Financial Statements - Notes
<>=240
15 Property, plant and equipment
For more information on the value in use and the weighted cost of capital rate, see Note 1 from
page 200 onward
1,424
If there is indication of a possible cause for impairment, an impairment
test is performed. Impairments to property, plant and equipment are
recognized if the recoverable amount of the asset is lower than the
carrying amount. The measurement is based on fair value less costs
to sell or the value in use. An impairment is recognized for the
difference between the carrying amount and the recoverable
amount. If the reasons for an impairment no longer exist, the
write-downs are reversed up to the value of the asset, had an
impairment not been recognized. Impairments and reversals of
impairments are reported in other operating income and expenses.
6
7
10
11
16
18
2020
2021
Buildings and structural installations
Machinery and technical equipment
Miscellaneous equipment and fixtures
Weighted average depreciation in years
The weighted average depreciation periods of continuing operations
were as follows:
Both movable and immovable fixed assets are principally depreciated
using the straight-line method. The estimated useful lives and
depreciation methods of property, plant and equipment are based
on historical values, plans and estimates. The depreciation methods,
useful lives and residual values are reviewed at each balance sheet
date.
Investment properties held to realize capital gains or rental income
are immaterial. They are valued at the lower of fair value or cost less
depreciation.
As lessee, BASF generally recognizes all leases in the balance sheet.
The right-of-use assets from leases and lease liabilities are measured
at the present value of the financial commitments entered.
For more information, see Note 16 from page 244 onward
Expenses related to the scheduled maintenance of large-scale
plants are capitalized separately and depreciated using the
straight-line method over the period until the next planned
turnaround. Costs for the replacement of components are
recognized as assets if an additional future benefit is expected. The
carrying amount of the replaced components is derecognized.
Costs for maintenance and repair as part of normal business
operations are recognized as an expense.
The cost of self-constructed plants includes direct costs, appropriate
allocations of material and production overhead costs, and a share
of the general administrative costs of the divisions involved in the
construction of the plants.
Property, plant and equipment are measured at cost less
depreciation and impairment over their useful lives. The revaluation
method is not applied. Low-value assets are fully expensed in the
year of acquisition.
Accounting policies
-11
-11
0
-51
786
0
3
15
2
15
of which impairments
1,496
786
135
33
281
44
217
Additions
-57
-57
Changes in the scope of consolidation
3,030
285
112
821
238
Disposals
0
-7
-58
Currency effects
-4
1
0
0
0
-5
Transfers to disposal groups
4
-2
1
-1
0
6
Transfers
-235
-27
-6
-59
-143
5.21%-6.92%
Currency effects
6,959
-26
-581
Transfers
0
0
0
0
0
Transfers to disposal groups
-74
0
0
0
52
7
52
0
10
45
167
0
-3
-142
-17
Changes in the scope of consolidation
0
7
0
0
0
7
Additions
171
44
260
26
113
614
of which impairments
0
1
1
2
Disposals
-320
As of December 31, 2021
1,243
316
1,356
production
technologies
intangible
assets
Other
rights and
valuesa
Goodwill
Total
Cost
As of January 1, 2020
Changes in the scope of consolidation
2,891
1,433
4,319
196
611
8,105
17,555
-59
-59
Additions
2
40
Personal Care Ingredients in the Care Chemicals division
licenses and
trademarks
4,096
Distribution and
similar rights
patents and
164
430
794
4,303
Net carrying amount as of
1,304
1,103
2,949
104
520
7,520
13,499
December 31, 2021
a Including licenses to such rights and values
BASF Report 2021
Consolidated Financial Statements - Notes
Development of intangible assets 2020
Million €
Know-how,
Internally
Product rights,
generated
0.0-2.0%
775
140
Disposals of intangible assets amounting to €638 million primarily
concerned fully amortized distribution and similar rights in the
Industrial Solutions and Nutrition & Care segments. Furthermore,
customer relationships in the amount of €72 million and goodwill in
the amount of €8 million were derecognized in connection with a
divestiture in the Nutrition & Care segment. In addition, goodwill was
derecognized through a divestiture in the Surface Technologies
segment.
Transfers to disposal groups related to the adjustment of
reclassified amounts of the divested pigments business and good-
will of the kaolin minerals business held for sale.
In 2021, additions to accumulated amortization contained
impairments of €2 million. They primarily related to unrealized IT
projects not allocated to an operational segment.
Cost
As of January 1, 2021
Changes in the scope of consolidation
2,731
1,387
4,182
-4
234
7,734
17,241
0
6
0
0
Additions
2
1
973
6
For more information on acquisitions, see Note 3 from page 207 onward
Additions from acquisitions resulted in the amount of €392 mil-
lion from the acquisition of the 51% share in BASF Shanshan
Battery Materials Co., Ltd., Changsha, China. It is allocated to the
Surface Technologies segment.
The annual impairment tests of the 20 cash-generating units were
performed in the fourth quarter of 2021. The calculation also takes
into account capital structure and the beta factor of the respective
peer group as well as the average tax rate of each cash-generating
unit. Impairment tests were performed on the units assuming a
weighted average cost of capital rate after taxes of between 5.51%
and 6.67% (2020: between 4.86% and 6.92%). This corresponds to
a weighted average cost of capital rate before taxes of between
6.53% and 8.94% (2020: between 6.50% and 8.85%).
After determining the recoverable amounts for the cash-generating
units, the conclusion was that reasonable possible deviations from
the key assumptions would not lead to the carrying amount of any
unit except the Surface Treatments unit exceeding the respective
recoverable amounts.
In 2020, a goodwill impairment for the cash-generating Surface
Treatment unit was recognized in the amount of €786 million in
other expenses due to the significant drop in demand from effects of
the coronavirus pandemic and expectations for slow recovery. The
outcome of the annual impairment test in 2021 was that the
recoverable amount for the cash-generating unit exceeded the
carrying amount by €408 million. The recoverable amount would be
equal to the carrying amount if the weighted average cost of capital
rate rose by 1.05 percentage points or the growth rate were
1.46 percentage points lower.
BASF Report 2021
Consolidated Financial Statements - Notes
Development of intangible assets
Development of intangible assets 2021
Million €
Know-how,
Internally
Distribution and
similar rights
Product rights,
licenses and
trademarks
patents and
generated
production
intangible
technologies
assets
Other
rights and
valuesa
Goodwill
Total
<>=238
16
32
28
78
Currency effects
105
42
176
1
16
400
739
As of December 31, 2021
2,547
1,419
4,304
268
949
8,314
17,802
Accumulated amortization
As of January 1, 2021
1,340
275
1,185
-13
381
-13
0
Additions from acquisitions
45
89
5
254
392
Disposals
-335
-17
-142
-3
-82
-60
-638
Transfers
0
0
-17
5
8
Transfers to disposal groups
0
Surface Treatment in the Coatings division
Government grants: Government grants related to the acquisition
or construction of property, plant and equipment reduce the
acquisition or construction cost of the respective assets. Other
government grants or government assistance are recognized
immediately as other operating income or treated as deferred
income and released over the underlying period.
489
-64
82
18
-4
2
-9
14
15
505
505
-10
1,123
1
332
193
-155
986
831
36
3
-91
42
841
Deferred tax assets (liabilities) after netting
-11
489
381
-61
Noncontrolling interests in profits and losses
Million €
Noncontrolling interests
13
Consolidated Financial Statements - Notes
BASF Report 2021
Tax liabilities primarily include assessed income taxes and other
taxes as well as estimated income taxes not yet assessed for the
current year.
Tax liabilities
Surpluses of deferred tax assets for companies that reported tax
losses in 2021 or 2020 totaled €2,379 million as of Decem-
ber 31, 2021 (December 31, 2020: €2,645 million). Deferred taxes
were recognized because, due to planned earnings, the use of
temporary differences or loss carryforwards is expected.
No deferred tax assets were recognized for tax loss carryforwards of
€172 million in 2021 (2020: €257 million). Of these, €3 million will
expire in 2022, €4 million in 2023, €2 million in 2024, €12 million in
2025, €52 million in 2026, and €20 million in 2027 and thereafter.
The remaining €79 million will not expire.
Tax loss carryforwards
Undistributed earnings of subsidiaries resulted in temporary
differences of €11,587 million in 2021 (2020: €10,398 million) for
which deferred tax liabilities were not recognized, as they are either
not subject to taxation on payout or they are expected to be
reinvested for an indefinite period of time.
Deferred tax assets on deductible temporary differences in the
amount of €245 million were not recognized in 2021 (2020:
€182 million), as their utilization at reversal was not reasonably
certain.
-1,447
3,386
1,939
7
-61
381
1,123
2,140
-2,140
-3,587
5,526
1,939
7
Deferred tax assets (liabilities) before netting
Netting
<>=235
Other
Other provisions and liabilities
101
-65
-1,081
-1,044
89
-955
-4
-42
33
-8
-934
-36
Financial assets
Intangible assets
Deferred tax
liabilities
Deferred tax
assets
2020, net
Other
combinations
December 31,
Business
January 1, 2020, Effects recognized Effects recognized
net
in income in equity (OCI)
ΚΣΕ 234
Million €
Property, plant and equipment
13
-1,068
246
-491
3,342
2,851
1
14
384
28
2,424
Provisions for pensions and similar obligations
232
-169
-18
-3
-31
82
-199
Inventories and accounts receivable
-118
44
-74
-7
5
64
-136
-1,314
Tax loss carryforwards
2020
Noncontrolling interests in profits rose year on year in 2021,
especially at BASF PETRONAS Chemicals Sdn. Bhd., Petaling
Jaya, Malaysia, and BASF TotalEnergies Petrochemicals LLC,
Wilmington, Delaware, resulting mainly from considerably higher
sales prices and volumes.
Noncontrolling interests in losses were recognized in 2020,
primarily at BASF PETRONAS Chemicals Sdn. Bhd. due to the
impairments of assets.
Product rights, licenses and trademarks
Know-how, patents and production technologies
Internally generated intangible assets
Distribution and similar rights
Weighted average amortization in years
The expected useful lives and amortization methods of intangible
assets are based on historical values, plans and estimates. The
weighted average amortization periods of intangible assets were as
follows:
Internally generated intangible assets primarily comprise
internally developed software. Such software and other internally
generated intangible assets are measured at cost and amortized
over their estimated useful lives. Impairments are recognized if the
carrying amount of an asset exceeds the recoverable amount. In
addition to those costs directly attributable to the asset, costs of
internally generated intangible assets also include an appropriate
portion of overhead costs.
Intangible assets with indefinite useful lives are trade names and
trademarks that have been acquired as part of acquisitions. These
are measured at cost and tested for impairment annually, or if there
is an indication that their value has declined.
Impairments are recognized if the recoverable amount of the asset
is lower than the carrying amount. The recoverable amount is the
higher of either the fair value less costs to sell or the value in use. The
value in use is determined on the basis of future cash inflows and
outflows, and the weighted average cost of capital after taxes,
depending on tax rates and country-related risks. If the reasons for
an impairment no longer exist, the write-downs are reversed up to
the value of the asset, had an impairment not been recognized.
Depending on the type of intangible asset, amortization is reported
under cost of sales, selling expenses, research and development
expenses or other operating expenses.
Acquired intangible assets (excluding goodwill) with defined
useful lives are generally measured at cost less straight-line
amortization. The useful life is determined using the period of the
underlying contract or the period of time over which the intangible
asset can be expected to be used.
Accounting policies
14 Intangible assets
<>=236
Other rights and values
Consolidated Financial Statements - Notes
Total
670
76
1,289
Other
153
98
30.00
146
30.00
Shanghai Hua Yi (Group) Co (SHYG), Schanghai, China, and Sinopec
Shanghai Gaoqiao Petrochemical Company Limited, Beijing, China
BASF Report 2021
2020
2021
15
Borrowing costs: If borrowing costs are directly incurred as part of
the acquisition, construction or production of a qualifying asset, they
are capitalized as part of the acquisition or production cost of that
asset. A qualifying asset is an asset for which the process necessary
to make it ready for its intended use or sale is longer than one year.
Borrowing costs are capitalized up to the date the asset is ready for
its intended use. Borrowing costs were calculated based on a rate
of 1.25% (previous year: 1.5%) and adjusted on a country-specific
basis, if necessary. All other borrowing costs are recognized as an
expense in the period in which they are incurred.
Catalysts division (battery materials)
Catalysts division (excluding battery materials)
Agricultural Solutions division
Cash-generating unit
Million €
Goodwill of cash-generating units
Consolidated Financial Statements - Notes
BASF Report 2021
For more information on the weighted cost of capital rate, see Note 1 from page 200 onward
For more information on the Surface Technologies segment, which the cash-generating Catalysts
(excluding battery materials) unit is allocated to, see the Management's Report from page 82 onward
The required discounting of cash flows for impairment testing is
calculated using the weighted average cost of capital rate after tax,
which is determined using the capital asset pricing model.
The fundamental transformation of the automotive industry will have
a significant impact on the emissions catalyst business, which
belongs to the Catalysts (excluding battery materials) cash-
generating unit. In the planning period, the demand for catalysts is
initially expected to remain stable as a result of higher environmental
standards. In the medium term, the transition from combustion
engines to electromobility will lead to a steady decline in demand.
For this reason, the growth rate for perpetual annuity was adjusted
from 2.0% in 2020 to -0.7% in 2021.
The respective recoverable amounts were determined using the
value in use. Plans approved by company management and their
respective cash flows for the next five years were used. For the
period thereafter, a terminal value was calculated using a forward
projection from the last detailed planning year as a perpetual annuity.
Planning is based on experience, current performance and
management's best possible estimates on the future development
of individual parameters, such as raw materials prices and profit
margins. Market assumptions regarding, for example, economic
development, inflation expectations and market growth are included
based on external macroeconomic and industry-specific sources.
BASF's goodwill is allocated to 20 cash-generating units (2020: 20),
which are defined either on the basis of business units or at a higher
level.
Goodwill is only written down in the case of an impairment.
Impairment testing for goodwill is performed once a year and
whenever there is an indication of impairment. Goodwill impairments
are not reversed.
Emission rights: Emission certificates, which are granted free of
charge by the German Emissions Trading Authority (Deutsche
Emissionshandelsstelle) or a similar authority in other countries, are
recognized in the balance sheet with a value of zero. Emission rights
purchased on the market are capitalized at cost as intangible assets.
Emissions generated create an obligation to surrender the emission
certificates. Intangible assets purchased on the market are
subsequently measured at fair value, up to a maximum of the
amount of the acquisition costs. If the fair value is lower than the
carrying amount on the balance sheet date, the emission rights are
impaired.
5
8
4
5
16
16
30
25
14
Shanghai BASF Polyurethane Company Ltd.,
Shanghai, China
342
49.00
Ningbo Yongxiang Investment Co., Ltd., Ningbo, China
BASF TotalEnergies Petrochemicals LLC,
Wilmington, Delaware
BASF TODA Battery Materials, LLC, Yamaguchi, Japan
BASF Shanghai Coatings Co., Ltd., Shanghai, China
BASF PETRONAS Chemicals Sdn. Bhd.,
Petaling Jaya, Malaysia
BASF India Limited, Mumbai, India
Group company
%
Million €
%
Equity interest
Equity interest
December 31, 2020
December 31, 2021
Noncontrolling interests
-15
459
Total
-105
-21
Noncontrolling interests in losses
90
480
Noncontrolling interests in profits
2021
Income and expenses recognized in equity that were attributable to
noncontrolling interests totaled €90 million in 2021 and -€49 million
in 2020. These effects resulted from currency translation in both
years.
BASF Shanshan Battery Materials Co., Ltd.,
Changsha, China
Deferred tax assets and liabilities 2020
Partner
26.67
256
40.00
265
40.00
Total Petrochemicals & Refining USA, Inc., Houston, Texas
29
34.00
32
34.00
TODA KOGYO CORP., Hiroshima, Japan
78
40.00
96
40.00
Shanghai Huayi Fine Chemical Co., Ltd, Shanghai, China
Kuala Lumpur, Malaysia
81
40.00
184
40.00
PETRONAS Chemicals Group Berhad,
52
Million €
26.67
71
Free float
Consolidated Financial Statements - Notes
-401
-1,499
548
16.3
-255
1.1
78
-0.1
2
0.0
0
15.0
-234
15.0
1,117
Foreign tax rate differential
Trade taxes
BASF Report 2021
Expected tax based on German corporate income tax rate (15%)
-1,562
7,448
Income before income taxes
%
Million €
%
Million €
2020
7.4
2021
55
Tax-exempt income
Changes in the tax rate
4.2
-66
-0.1
-6
Deferred tax liabilities for the future reversal of temporary differences associated with shares in
participating interests
6.6
-103
-2.4
-176
Taxes for prior years (current and deferred taxes)
-6.8
106
-0.7
-56
Income of companies accounted for using the equity method (income after taxes)
-21.7
339
1.9
140
Nondeductible expenses
4.1
-64
-2.8
-211
-3.5
-2
Reconciliation of income taxes and the effective tax rate
1,430
2021
<>=232
Million €
Tax expense
tax rates. Particularly higher tax-exempt income, mainly in
connection with the divestiture of the share in Solenis, had an
offsetting impact.
Consolidated Financial Statements - Notes
BASF Report 2021
The BASF Group tax rate amounted to 19.2% in 2021 (2020: 5.8%).
The relatively high tax rate in relation to 2020 resulted primarily from
lower nondeductible operating expenses, caused largely in the
previous year by non-tax-effective impairments of goodwill, and
from the increased earnings contributions of countries with higher
Tax expense and tax rate
IFRIC 23 clarifies the application of the recognition and measurement
policies from IAS 12 when there is uncertainty regarding income
tax-related treatment of individual transactions. They are accounted
for with the assumption that tax authorities will examine the
questionable transaction and have all relevant information. The
amount of risk provisions is calculated and reviewed with
consideration for the results of past tax audits as well as the legal
assessment of not yet audited transactions and the risk of a deviating
tax-related interpretation by the tax authorities. The most probable
value of the individual risks is recognized.
Provisions for German trade tax, corporate income tax and similar
income taxes are calculated and recognized based on the expected
taxable income of the consolidated companies less any prepay-
ments that have been made. Provisions are set up for interest
accrued. This interest is reported under other financial result, not tax
expense. Other taxes to be assessed are considered accordingly.
Deferred tax liabilities are recognized for differences between the
proportional IFRS equity and the tax base of the investment in a
consolidated subsidiary if a reversal of these differences is expected
in the foreseeable future. Deferred tax liabilities are recognized for
dividend distributions planned for the following year if these
distributions lead to a reversal of temporary differences.
Changes in deferred taxes in the balance sheet are recorded as
deferred tax expense or income unless the underlying transaction is
recognized directly in equity or in income and expenses recognized
in equity. For those effects which have been recognized in equity,
changes to deferred tax assets and tax liabilities are also recognized
directly in equity.
Deferred tax assets are offset against deferred tax liabilities provided
they are related to the same taxation authority. Surpluses of deferred
tax assets are only recognized provided that the tax benefits are
likely to be realized. The valuation of deferred tax assets is based on
the probability of a reversal of the differences and the assessment of
the ability to utilize tax loss carryforwards and unused tax credits.
This depends on whether future taxable profits will exist during the
period in which temporary differences are reversed and in which tax
loss carryforwards and unused tax credits can be claimed. The
assessment of recoverability of deferred tax assets is based on
internal projections of the future earnings of the particular Group
company.
Deferred taxes are recorded for temporary differences between the
carrying amount of assets and liabilities in the financial statements
according to IFRS and the carrying amounts for tax purposes as
well as for tax loss carryforwards and unused tax credits. These also
comprise temporary differences arising from business combinations,
with the exception of goodwill. Deferred tax assets and liabilities are
calculated using the respective country-specific tax rates applicable
for the period in which the asset or liability is realized or settled. Tax
rate changes enacted or substantively enacted on or before the
balance sheet date are taken into consideration.
In Germany, a uniform corporate income tax rate of 15.0% as well
as a solidarity surcharge of 5.5% thereon are levied on all distributed
and retained earnings. In addition to corporate income tax, income
generated in Germany is subject to a trade tax. It varies depending
on the municipality in which the company is represented. The
weighted average tax rate was 14.6% in 2021 (2020: 14.5%). The
30% rate used to calculate deferred taxes for German Group
companies remained unchanged in 2021. The income of foreign
Group companies is assessed using the tax rates applicable in their
respective countries.
Accounting policies
12 Income taxes
The rise in other financial expenses was primarily due to higher net
expenses associated with the translation of bonds and the valuation
of the corresponding hedging instruments against interest and
currency risks.
The net interest expense from underfunded pension plans and
similar obligations declined year on year as a result of the lower
interest rate used to determine expenses for pension benefits
compared with the previous year.
Write-downs on / losses from securities and loans declined
mainly due to lower impairments on loans to nonconsolidated Group
companies.
Interest expenses decreased primarily because of the lower
balance of financial indebtedness.
ΚΣΕ 231
Consolidated Financial Statements - Notes
BASF Report 2021
2020
-91
Current tax expense
398
-20
14
32
-2
Income taxes
From valuation allowances on deferred tax assets
From changes in the tax rate
-372
-67
From changes in tax loss carryforwards/unused tax credits
-129
49
From changes in temporary differences
-489
-6
Deferred tax expense (+) / income (-)
-414
-176
Taxes for prior years
739
1,575
Foreign income tax
73
38
Corporate income tax, solidarity surcharge and trade taxes (Germany)
1,436
0.0
Solidarity surcharge
-2.1
505
Deferred tax assets (liabilities) after netting
Deferred tax assets (liabilities) before netting
Netting
Other
Tax loss carryforwards
-106
1,168
1,062
3
2
78
69
148
Other provisions and liabilities
-695
2,781
2,085
6
-790
18
2,851
Provisions for pensions and similar obligations
-664
292
831
4
1
580
2,600
1,101
57
-23
-878
6
1,939
2,670
-2,670
32
5,270
1,101
57
-23
-878
6
1,939
-75
63
-11
-31
-3
4
18
580
-372
37
-4,169
-187
in equity (OCI)
-26
-37
-955
Financial assets
Property, plant and equipment
Intangible assets
January 1, 2021, Effects recognized Effects recognized
net
in income
233
< >
Deferred tax assets and liabilities 2021
Million €
Deferred taxes
acquisitions according to IFRS 3 has resulted in significant deviations
between fair values and the values in the tax accounts. This primarily
leads to deferred tax liabilities.
Deferred taxes result from temporary differences between tax
balances and the measurement of assets and liabilities according to
IFRS as well as from tax loss carryforwards and unused tax credits.
The remeasurement of all the assets and liabilities associated with
Consolidated Financial Statements - Notes
BASF Report 2021
5.8
-91
19.2
1,430
Other
-6.2
97
0.0
-3
-53
Business
combinations
December 31,
Income taxes / effective tax rate
2021, net
-169
Other
Inventories and accounts receivable
-109
43
25
-26
8
-74
-1,434
303
-1,131
-67
-3
22
-22
-6
41
-1,086
-1,045
Deferred tax
assets
-18
-64
-1,068
Deferred tax
liabilities
High/medium credit
from AAA to BBB-
Gross carrying amounts
The following table presents the gross values and credit risks for
trade accounts receivable measured at amortized cost as of
December 31, 2021.
Equivalence to
external ratinga
2021
of December 31,
Creditworthiness as
Accounts receivable, trade
Million €
Consolidated Financial Statements - Notes
Precious metal trading items primarily comprise physical items,
precious metal accounts as well as long positions in precious
metals, which are largely hedged through forward sales or
derivatives.
The rise in current other receivables and assets, which represent
financial instruments, was due to higher deposits on commodity
derivatives and increased receivables for other refunds.
ΚΣΕ 248
BASF Report 2021
The change in current tax refund claims was largely attributable to
the rise in value-added tax receivables in Germany as well as the rise
in income tax/other tax receivables at South American Group
companies.
As in the previous year, defined benefit assets were recognized in
2021 mainly at Group companies in Switzerland and the United
Kingdom.
rating
Prepaid expenses in 2021 mainly included prepayments of
€41 million related to operating activities compared with €28 million
in 2020, as well as €93 million in prepayments for insurance in 2021
compared with €79 million in 2020. Prepayments for license costs
decreased from €70 million in 2020 to €49 million in 2021. Prepaid
expenses in 2021 included higher advance payments for received
precious metal catalysts to be refurbished.
The rise in noncurrent derivatives with positive fair values primarily
affected the market valuation of combined interest rate and currency
swaps. The change in current derivatives with positive fair market
values was largely attributable to the increase in fair values of
commodity derivatives for precious metals.
Bank acceptance drafts are used as an alternative form of payment
in China. Bank acceptance drafts are issued at a discount from their
par value. They can be held to maturity, traded or redeemed
prematurely at a discount. If BASF discounts a bank acceptance
draft with recourse, a liability toward the credit institution is
recognized in the amount of the payment received. The increase
relates to higher sales and broader use of this form of payment.
Expected losses of trade accounts receivable at BASF are
calculated primarily on the basis of internal or external customer
ratings and the associated probability of default.
from BB- to D
Releases
a Standard & Poor's rating
52
47
The changes in noncurrent loans and interest receivables were
predominantly due to reimbursements of loans to nonconsolidated
subsidiaries. Current loan receivables increased because of the sale
of assets to a joint venture partner in North America.
42
310
1
110
120
As of
December 31,
2021
Low credit rating
Translation
effect
Additions
January 1, 2021
299
As of
of which stage 2
Accounts receivable, trade
Valuation allowances on receivables (financial instruments) 2021
Million €
There are currently no significant credit risks (or a concentration
thereof) associated with other financial instruments. BASF generally
monitors the credit risk associated with counterparties with which
receivables exist representing financial instruments. In accordance
with IFRS 9, impairments for expected credit losses on receivables
are recognized based on this.
4,707
7,325
Reclassification
between stages
21
198
Current
Tax refund claims
126
661
Defined benefit assets
257
79
327
77
Prepaid expenses
1,610
1,211
1,692
738
Other receivables and assets that qualify as financial instruments
261
287
376
270
Other
47
560
104
1,158
Employee receivables
< > 247
4,673
912
5,568
1,722
Other receivables and miscellaneous assets
3,462
3,876
984
Other receivables and assets that do not qualify as financial instruments
422
43
361
48
Other
1,604
1,554
Precious metal trading items
0
24
0
123
stage 3
814
68
37,010
37,911
40,365
39,407
901
958
2020
2021
December 31,
December 31,
Legal reserves rose by €57 million in 2021 and by €70 million in
2020 due to reclassifications from retained earnings.
Other retained earnings
Retained earnings
Retained earnings
Million €
The acquisition of shares in companies that BASF already controls
or that are included in the Consolidated Financial Statements as a
joint arrangement is treated as a transaction between shareholders,
as long as this does not lead to a change in the consolidation
method. There were no material transactions of this type in 2021, as
in the previous year.
Retained earnings
Capital reserves include effects from BASF's share program,
premiums from capital increases and consideration for warrants and
negative goodwill from the capital consolidation resulting from
acquisitions of subsidiaries in exchange for the issue of BASF SE
shares at par value.
Capital reserves
Subscribed capital remained unchanged year on year at
€1,176 million and comprises 918,478,694 qualifying shares.
Subscribed capital
On January 4, 2022, the Board of Executive Directors approved a
share buyback program with a maximum volume of €3 billion to be
implemented between January 2022 and December 2023. The
share buyback program is based on the previously described
authorization from May 12, 2017. A proposal to renew the
authorization to buy back own shares is planned for the 2022 Annual
Shareholders' Meeting, which would authorize the continuation of
the share buyback program already underway.
By way of a resolution of the Annual Shareholders' Meeting of
May 12, 2017, the Board of Executive Directors was authorized to
buy back shares until May 11, 2022, in accordance with section 71(1)
no. 8 of the German Stock Corporation Act (AktG). The buyback
may not exceed 10% of the company's share capital at the time the
resolution was passed and can take place via the stock exchange,
a public purchase offer addressed to all shareholders, or a public
invitation to the shareholders to submit sales offers. This authoriza-
tion has not been exercised.
Legal reserves
Authorization of share buybacks
Other retained earnings include, among other things, earnings
generated in the past by companies included in the Consolidated
Financial Statements. Because of the disposal of the pigments
business on June 30, 2021, the amount of €48 million for the
remeasurement of defined benefit plans, plus an additional €6 mil-
lion resulting from the disposal of the operational companies held
Consolidated Financial Statements - Notes
288
98
For more information on cash flow hedge accounting, see Note 26.5 from page 274 onward
Changes in the fair value of derivatives designated in hedging
relationships (cash flow hedges) adjusted for deferred taxes in the
amount of -€10 million (2020: €24 million) reduced equity by a total
of €329 million (2020: €108 million). In 2021, -€381 million (2020:
-€163 million) was attributable to the hedging of future cash flows at
shareholdings accounted for using the equity method.
Cash flow hedges
Furthermore, as a result of divestitures and other changes in the
scope of consolidation, €52 million after taxes was reclassified to
the income statement in 2021 and €71 million after taxes in 2020.
Differences resulting from currency translation increased equity by a
total of €2,205 million and decreased equity by €2,598 million in the
previous year. This included deferred taxes in the amount of
-€19 million in 2021 (2020: €19 million). At-equity investments
accounted for €697 million (2020: -€1,125 million). The differences
resulted primarily from the appreciation of the U.S. dollar and the
Chinese renminbi relative to the euro in 2021.
Currency translation
For more information on the remeasurement of defined benefit plans, see Note 22 from page 254
onward
BASF Report 2021
Because of the disposal of the pigments business on June 30, 2021,
the amount of €48 million for the remeasurement of defined benefit
plans, plus an additional €6 million resulting from the disposal of the
operational companies of Solenis UK International Ltd., London,
United Kingdom, which had been accounted for using the equity
method until that date, was reclassified, in equity, from other
comprehensive income to retained earnings. Moreover, deferred
taxes in the amount of -€18 million arising from an adjustment in
connection with the introduction of IAS 19 were offset against
retained earnings in equity.
Remeasurement of defined benefit plans
The expenses and income shown in other comprehensive income
are divided into two categories: Items that will be recognized in the
income statement in the future (known as "recycling") and items that
will not be reclassified to the income statement in the future. The first
category includes gains and losses from currency translation, the
measurement of certain securities classified as debt instruments,
and changes in the fair value of derivatives held to hedge future cash
flows. Items that will not be reclassified to the income statement at
a future date include effects from the remeasurement of defined
benefit plans.
Accounting policies
20 Other comprehensive income
In accordance with the resolution of the Annual Shareholders'
Meeting on April 29, 2021, BASF SE paid a dividend of €3.30 per
qualifying share from the retained profit of the 2020 fiscal year. With
918,478,694 qualifying shares, this represented total dividends of
€3,030,979,690.20. The remaining €914,882,378.80 in retained
profits was allocated to retained earnings.
Payment of dividends
by Solenis UK International Ltd., London, United Kingdom, which
had been accounted for using the equity method until that date, was
reclassified, in equity, from other comprehensive income to retained
earnings. Moreover, deferred taxes in the amount of -€18 million
arising from an adjustment in connection with the introduction of
IAS 19 were offset against retained earnings in equity.
250
< >
Changes in the value of defined benefit plans led to an increase in
other comprehensive income of €2,709 million in 2021 and to a
decrease of €973 million in the previous year (after taxes in both
years). Of that, €44 million was attributable to investments
accounted for using the equity method in 2021 (2020: -€19 million).
Deferred taxes amounted to -€811 million in 2021 and to €422 mil-
lion in 2020.
In this connection, the share capital was increased conditionally by
up to €117,565,184 by issuing a maximum of 91,847,800 new
registered BASF shares. The conditional capital increase will only be
carried out to the extent to which holders of convertible bonds, or
warrants attached to bonds with warrants issued, exercise their
conversion or option rights. This authorization had not been
exercised as of the end of the 2021 fiscal year.
convertible bonds and/or bonds with warrants, or combinations of
these instruments, with or without maturity limitations up to a
nominal value of €10 billion until May 11, 2022. The notional interest
in the share capital attributable to the BASF shares to be issued in
connection with the debt instruments issued under this authorization
may not exceed 10% of the share capital.
By way of a resolution of the Annual Shareholders' Meeting of
May 12, 2017, the Board of Executive Directors was authorized,
with the approval of the Supervisory Board, to issue, on a one-off
basis or in portions on more than one occasion, bearer or registered
0
0
0
0
stage 2
stage 3
3
0
14
15
0
2
112
2
40
28
122
Other receivables
263
1
63
of which stage 1
120
13
26
Conditional capital
In accordance with the resolution of the Annual Shareholders'
Meeting on May 3, 2019, the Board of Executive Directors was
authorized, with the consent of the Supervisory Board, to increase,
until May 2, 2024, on a one-off basis or in portions on a number of
occasions, the company's share capital by a total of up to €470 mil-
lion by issuing new shares against contributions in cash or in kind. In
principle, shareholders are entitled to a subscription right. However,
the Board of Executive Directors is authorized, with the approval of
the Supervisory Board, to exclude shareholders' statutory subscrip-
tion rights in the cases specified in the authorizing resolution. The
Board of Executive Directors is authorized, with the consent of the
Supervisory Board, to lay down the further contents of the share
rights and the details of the execution of the capital increase. The
total shares issued on the basis of the above authorization with the
exclusion of the shareholders' subscription right in the case of
capital increases in return for contributions in cash or in kind must
not exceed 10% of the share capital at the time that this authoriza-
tion comes into effect or - if this value is lower - at the time of its
exercise. The proportionate amount of the share capital of those
shares that are to be issued on the basis of conversion or option
bonds granted during the term of this authorization under the
exclusion of the subscription right, must be credited against the
aforementioned ceiling of 10%. This authorization has not been
exercised to date.
BASF SE has only issued fully paid-up registered shares with no par
value. There are no preferential voting rights or other restrictions.
BASF SE does not hold any treasury shares.
Authorized capital
19 Capital, reserves and retained earnings
249
< >
Consolidated Financial Statements - Notes
BASF Report 2021
Additions included valuation allowances of €1 million due to a
change in valuation parameters. Additions primarily included
valuation allowances of loans to former and current Group
companies.
In 2021, valuation allowances of €28 million were recognized for
other receivables representing financial instruments, and valuation
allowances of €40 million were reversed. In the previous year,
valuation allowances of €98 million were recognized and valuation
allowances of €13 million were reversed.
Payment terms are generally agreed upon individually with custom-
ers and, as a rule, are within 90 days. In 2021, valuation allowances
of €120 million (2020: €142 million) were added for trade accounts
receivable, and valuation allowances of €110 million (2020:
€124 million) were reversed.
At BASF, a comprehensive, global credit insurance program covers
accounts receivable, trade. Under a global excess of loss policy,
future bad debts are insured for essentially all BASF Group
companies excluding joint ventures. The program has no impact on
the calculation of valuation allowances in accordance with IFRS 9.
No compensation claims were incurred in either 2021 or 2020.
422
3
150
148
421
Total
109
2
257
387
352
122
1,123
1
282
5
Transfers
-1,198
-216
-36
-145
-13
-590
6
-53
-13
-3
Disposals
559
48
1
3
10
400
3
82
-129
77
-1
-1,515
10,749
451
947
As of December 31, 2020
-2,401
-98
-26
-167
-44
-1,567
-42
-404
-14
-39
Currency effects
18
60
-2
-4
-34
-3
-2
Receivables from bank acceptance drafts
Transfers to disposal groups
-28
12
Additions from acquisitions
3,516
1,842
Κ ΣΕ 243
progress
Advance
payments and
construction in
fixtures
fixtures
Right-of-use
miscellaneous
equipment and
equipment and
technical
equipment
technical
equipment
Right-of-use
buildings
Buildings
land
Land
Right-of-use
Miscellaneous
Right-of-use
machinery and
Machinery and
Cost
Development of property, plant and equipment including right-of-use assets arising from leases in 2020
Million €
Consolidated Financial Statements - Notes
BASF Report 2021
< > 242
In 2021, impairments of €155 million and reversals of impairments
of €13 million were included in accumulated depreciation.
Impairments of €49 million related to machinery and technical
equipment as well as buildings at a production site in Asia in the
Industrial Solutions segment. The value in use of €2 million was
calculated applying a pre-tax cost of capital rate of 6.89%. This
corresponds to a cost of capital rate of 9.05%. Furthermore, there
was a complete write-down in the amount of €17 million due a plant
closure at a production site in North America in the Materials
segment, which related almost entirely to machinery and technical
equipment. Impairments to construction in progress mainly related
to discontinued investment projects. Reversals of impairments in the
amount of €13 million resulted primarily from an increase in the fair
value of plants impaired at a site in North America in 2020.
Currency effects raised property, plant and equipment by
€798 million and resulted mainly from appreciation of the U.S. dollar
and the Chinese renminbi against the euro.
For more information on divestitures, see Note 3 from page 207 onward
Advance
payments
for right-of-use
assets
834
Total
950
202
199
147
787
120
161
40
18
Additions
41
37
1
2
1
Changes in the scope of consolidation
65,508
6
3,006
551
4,808
399
43,783
808
10,757
440
As of January 1, 2020
Transfers to disposal groups related largely to reclassified amounts
in connection with the divested kaolin minerals business.
43,902
4,773
34,882
292
6,689
100
66
As of December 31, 2020
-1,467
-1
-11
-108
-13
229
-1,124
-187
-4
Currency effects
23
10
3
-1
7
2
2
Transfers to disposal groups
-15
3,576
357
177
BASF exercises the exemption for lease agreements with a
maximum term of 12 months from the date of provision and
low-value assets. Low-value assets are generally defined as
leased assets worth a maximum of €5,000.
-
As lessee, BASF accounts for nearly all leases, recognizing right-of-
use assets for leased assets and liabilities for lease agreements. The
following principles are considered:
Leases can be embedded within other contracts. If separation is
required under IFRS, the embedded lease is recorded separately
from its host contract and each component of the contract is
accounted and measured in accordance with the applicable
regulations.
Leases in which BASF is a lessee mainly relate to real estate and
transportation and technical equipment.
A lease is an agreement that conveys the right to control the use of
identified asset for a defined period of time in return for a payment.
Accounting policies
Leases
16
244
< >
Consolidated Financial Statements - Notes
BASF Report 2021
19,647
2,987
333
1,197
276
9,020
542
4,060
351
881
Net carrying amount as of December 31, 2020
46,368
-24
-10
-1
-45
106
3,401
188
614
40
19
Additions
1
1
Changes in the scope of consolidation
43,716
158
196
3,472
144
33,110
144
6,374
65
53
As of January 1, 2020
Accumulated depreciation
66,015
3,164
690
392
505
195
5,189
34
-2
Transfers
-1,070
-214
-25
-135
-8
-546
-27
-112
-1
-2
Disposals
2,059
234
14
49
25
1,396
50
250
23
18
of which impairments
234
- Lease liabilities are measured at the present value of the remaining
lease payments, taking into account the incremental borrowing
Transfers related mainly to the reclassification of operation-ready
assets from construction in progress to other asset categories.
For more information on acquisitions, see Note 3 from page 207 onward
-1,723
118
1,392
310
10
-5
Transfers
-1,168
-140
-134
-171
102
-12
-49
-97
-1
-8
Disposals
332
38
3
149
104
39
-556
Transfers to disposal groups
-59
0
982
11,495
544
905
As of December 31, 2021
2,193
104
20
150
33
1,442
31
350
37
25
Currency effects
-510
0
-9
-5
-15
0
-360
-2
-60
Additions from acquisitions
4,078
150
2,301
947
451
10,749
834
43,902
505
4,773
690
3,164
66,015
Changes in the scope of consolidation
0
-2
-2
0
-2
-2
-1
0
-10
Additions
7
11
141
168
As of January 1, 2021
46,781
Total
progress
186
203
BASF Report 2021
Consolidated Financial Statements - Notes
Development of property, plant and equipment including right-of-use assets arising from leases in 2021
Million €
Cost
Κ ΣΕ 241
Right-of-use
Land
land
Buildings
Right-of-use
buildings
Machinery and
technical
equipment
Right-of-use
machinery and
Miscellaneous
Right-of-use
miscellaneous
Advance
Advance
payments and
payments
technical
equipment
equipment and
fixtures
equipment and
fixtures
construction in for right-of-use
assets
Disposals of property, plant and equipment mainly included the
sale of the production site in Kankakee, Illinois, and the disposal of
BASF's share in the condensate splitter in Port Arthur, Texas.
624
756
5
11
104
14
1,058
16
174
9
4
Currency effects
-409
1,395
0
-11
-336
-1
-45
0
-13
Transfers to disposal groups
102
-32
-1
131
-3
As of December 31, 2021
54
125
Additions from acquisitions resulted from the acquisition of the 51%
share in BASF Shanshan Battery Materials Co., Ltd.
Additions to property, plant and equipment arising from investment
projects (excluding leases) amounted to €3,465 million in 2021.
Investments were made at the following sites in particular:
Ludwigshafen, Germany; Antwerp, Belgium; Zhanjiang, China;
Geismar, Louisiana; and Freeport, Texas. Material investments
included engineering services and the procurement of technical
equipment in connection with development of the new Verbund site
in Zhanjiang, China, as well as construction and expansion of
ethylene oxide and polyethylene oxide production plants in Antwerp,
Belgium, and Ludwigshafen, Germany. Investments also included
modernization measures, particularly at the Ludwigshafen site.
Government grants for funding investment measures reduced asset
additions by €5 million. The additions to advance payments for
right-of-use assets related only to the acquisition of land use rights
at the new Verbund site in Zhanjiang, China.
Consolidated Financial Statements - Notes
BASF Report 2021
December 31, 2021
21,553
150
3,681
321
1,225
308
9,642
574
4,380
419
852
Net carrying amount as of
49,477
53
435
3,833
316
37,138
408
7,115
-1
3
2
Transfers
Additions
-9
0
-1
-3
-1
0
-2
-2
Changes in the scope of consolidation
46,368
177
357
3,576
229
34,882
292
6,689
100
66
As of January 1, 2021
Accumulated depreciation
71,030
150
3,735
-3
5,058
17
129
-1,033
-132
-103
-163
-8
-517
-27
-83
-1
0
Disposals
142
35
3
72
8
27
-3
of which impairments
3,064
35
173
331
80
1,921
380
rate.
3
-27
BASF Report 2021
1,634
273
1,361
1,712
298
1,414
Total
606
Consolidated Financial Statements - Notes
151
699
167
532
2027 and thereafter
92
18
74
94
20
455
74
2021
Interest expenses for lease liabilities
2022
172
190
48
49
92
106
32
35
2020
December 31, 2020
Future lease payments to BASF from operating lease contracts
Million €
Expenses and income in the statement of income from leases for BASF
as lessee
Million €
1
Income from sublease agreements
-13
-30
Expenses for variable lease payments not included in the
measurement of lease liabilities
-36
-36
December 31, 2021
2023-2026
2026
24
366
30
336
2022
- A right-of-use asset is generally recognized at the same amount
as the lease liability. Differences may arise from the lease payments
made prior to the provision of the leased asset, less any lease
incentives received.
Future lease
payments
Interest portion
Lease liabilities
Future lease
payments
334
Interest portion
December 31, 2021
BASF presents the interest component of lease payments in cash
flows from operating activities and the repayment portion in cash
flows from financing activities. Lease payments under short-term
agreements, agreements with low-value assets or variable payments
are presented in cash flows from operating activities.
plan) or the scope (either quantitatively or time-related) of use of
the asset.
Lease liabilities
Million €
BASF as lessee
If an existing lease contract is modified, the lease liability and
right-of-use asset must be remeasured, provided the modification
changes the payment profile (pursuant to the interest and principal
A number of leases, particularly for real estate and barges, include
extension and termination options. Extension and termination
options are taken into account on recognition of the lease liability
only if BASF is reasonably certain that these options will be
exercised in the future. When contract terms are being deter-
mined, consideration is given to all facts and circumstances that
offer an economic incentive for exercising extension options or
not exercising termination options. Changes in lease terms arising
from the exercise of an extension option or non-exercise of a
termination option are only considered if sufficient certainty exists.
Estimates and expectations which are asserted at the
commencement date of the lease liability and the right-of-use
asset and pertain to future payments not yet determined on the
date of provision are assessed continuously during the lease
term. If subsequently improved or changed knowledge influences
the expected payment profile over time, the lease liability is
remeasured.
-
As a general rule, BASF separates non-lease components, such
as services, from lease payments.
Lease liabilities
133
29
2023
109
125
25
100
2025
After capitalization at commencement date, whereby the right-of-
use asset is measured at cost, the right-of-use asset is generally
depreciated over the lease term using the straight-line method.
-
179
23
363
156
29
153
2024
261
28
233
246
27
219
182
2027 and thereafter
December 31, 2020
Expenses for short-term leases
Consolidated Financial Statements - Notes
BASF Report 2021
246
< >
Write-downs on inventory were recognized in the amount of
€97 million in 2021, and in the amount of €65 million in 2020.
Cost of sales included inventories recognized as an expense
amounting to €44,244 million in 2021, and €30,379 million in 2020.
Work in progress, finished goods and merchandise are combined
into one item due to production conditions in the chemical industry.
Services in progress mainly relate to services not invoiced as of the
balance sheet date.
10,010
13,868
18
121
6,784
9,337
3,105
4,414
2020
2021
Dec. 31,
Dec. 31,
Inventories
117
Work in progress, finished goods and merchandise
Advance payments and services in progress
Receivables and miscellaneous assets
December 31, 2021
Total
167
Receivables from capital equipment of nonconsolidated subsidiaries
3
41
4
Receivables from finance leases
414
105
Other receivables and miscellaneous assets
Million €
610
Derivatives with positive fair values
127
149
93
Loans and interest receivables
Noncurrent
Current
Noncurrent
December 31, 2020
335
Raw materials and factory supplies
40
The exception made by IAS 2 for traders is applied to the
measurement of precious metals. Accordingly, inventories held
exclusively for trading purposes are measured at fair value less costs
to sell and recognized in the precious metal trading item (carrying
amount as of December 31, 2021: €1,554 million; as of
December 31, 2020: €1,604 million) under miscellaneous current
assets. All changes in value are immediately recognized in the
statement of income.
2020
2021
Income from operating leases
income from variable lease payments not
included in measurement of net investment
financial income from net investment
in the lease
of which gains and losses from sales
Income from finance leases
-222
-222
BASF as lessor
A rental agreement for a building representing a volume of €60 mil-
lion was concluded in December 2021. The rental term begins at
the end of 2022.
In 2021 and 2020, no material sale and leaseback transactions
occurred.
Total
Gains and losses from sale and leaseback transactions
Income from leases for BASF as lessor
Million €
-129
Expenses for leases for low-value assets
-131
Inventories
Million €
3
25
-43
24
1
In addition to direct costs, cost of conversion includes an appropriate
allocation of production overhead costs based on normal utilization
rates of the production plants, provided that they are related to the
production process. Pensions, social services and voluntary social
benefits are also included, as well as allocations for administrative
costs, provided they relate to the production. Borrowing costs are
not included in cost of conversion.
Inventories are measured at acquisition cost or cost of conversion
based on the weighted average method. If the market price or the
fair value of the sales products, which are based on the net realizable
values, is lower, then the sales products are written down to this
lower value. The net realizable value is the estimated price in the
ordinary course of business less the estimated costs of completion
and the estimated selling costs.
Accounting policies
17 Inventories
Consolidated Financial Statements - Notes
BASF Report 2021
245
< >
56
Inventories may be impaired if the prices for the sales products
decline, or in cases of a high rate of days sales of inventory (DSI).
Write-downs on inventories are reversed if the reasons for them no
longer apply.
Total
Claims arising from operating leases amounted to €190 million in
2021 (2020: €172 million). As in the previous year, there were no
material operating leases for property, plant and equipment.
BASF acts as a lessor for finance leases to a minor extent only.
Receivables on finance leases were €44 million in 2021 (2020:
€44 million). The leased assets pertained primarily to buildings and
production facilities.
of which income from variable lease payments not
dependent upon an index or interest rate
38
31
35
2
|
1
700
4.11%
4.43%
570
U.S. private placement series C 2013/2034
USD
617
USD
221
4.09%
203
3.92%
250
USD
300
3.89%
79
U.S. private placement series B 2013/2028
U.S. private placement series A 2013/2025
Bonds and other liabilities to the capital market
264
497
0.88%
500
EUR
163
176
3.69%
200
4.45%
USD
Liabilities to credit institutions
Other bonds
Bond 2016/2026
0.75%
Bond 2018/2025
3.625%
BASF Finance Europe N.V.
244
Financial indebtedness
77
4.24%
10,000
4%
198
198
2.96%
200
EUR
Bond 2013/2033
2.875%
Bond 2018/2033
493
3.15%
500
EUR
Bond 2013/2033
3%
December 31, 2021
496
December 31, 2020
493
1.03%
AUD
100
JPY
Bond 2018/2048
1.025%
199
200
3.27%
200
EUR
160
Bond 2013/2043
738
739
1.73%
750
EUR
Bond 2017/2037
1.625%
98
3.25%
110
21
13,737
Other provisions are recognized when there is a present obligation
as a result of a past event and when there is a probable outflow of
resources whose amount can be reliably estimated. Provisions are
recognized at the probable settlement value.
Provisions for environmental protection and remediation costs
are recognized for expected costs for rehabilitating contaminated
sites, recultivating landfills, removal of environmental contamination
at existing production or storage sites and similar measures.
In addition, other provisions also cover expected costs for
restoration obligations for dismantling existing plants and
buildings. If BASF is the only responsible party that can be identified,
the provision covers the entire expected obligation. At sites operated
together with one or more partners, the provision generally covers
only BASF's share of the expected obligation. The amount of the
provision is determined based on the available technical information
on the site, the technology used, legal regulations, and official
requirements. The calculation accounts for expected significant
changes in obligations.
Provisions for restructuring measures include severance payments
to departing employees or similar personnel expenses as well as
expected costs for site closures, including the costs for demolition
and similar measures. Provisions are recognized for these expenses
when the relevant measures have been planned and announced by
management.
Provisions for employee obligations primarily consist of variable
compensation including associated social security contributions, as
well as obligations for granting long-service bonuses. The latter are
predominantly calculated based on actuarial principles.
Provisions for obligations from sales and purchase contracts
largely comprise obligations arising from rebates granted and other
price discounts in the Agricultural Solutions segment, warranties
and product liabilities, sales commissions and expected losses on
contracts.
Provisions for litigation, damage claims, warranties and similar
obligations contain anticipated expenses from lawsuits in which
BASF is the defendant party, as well as obligations under damage
claims against BASF and fines. In order to determine the amount of
the provisions, the company takes into consideration the facts
related to each case, the size of the claim, compensation awarded
in similar cases and independent expert advice as well as
assumptions regarding the probability of a successful claim and the
range of possible claims. Actual costs can deviate from these
estimates.
For more information, see Note 24 on page 262
The probable amount required to settle noncurrent provisions is
discounted if the effect of discounting is material. In this case, the
provision is recognized at present value. Assumptions must be
made in determining the discount rate (2021: 1.25%; 2020: 1.5%)
used for calculating noncurrent provisions. Financing costs related
to unwinding the discount of provisions in subsequent periods are
shown in other financial result.
Other provisions
Million €
Restoration obligations
December 31, 2021
December 31, 2020
Of which
current
Of which
current
158
21
Accounting policies
23 Other provisions
<>=260
Consolidated Financial Statements - Notes
Pension
assets
Effective interest rate
Unfunded pension plans
Funded pension plans
2,121
1,840
26,508
23,130
28,000
148
21,400
28,629
23,130
29,840
21,400
Defined contribution plans and government pensions
The contributions to defined contribution plans recognized in
income from operations amounted to €308 million in 2021 and
€306 million in 2020.
Contributions to government pension plans were €578 million in
2021 and €557 million in 2020.
BASF Report 2021
Total
Environmental protection and
remediation costs
926
94
Other
Total
486
279
541
290
5,717
3,935
161
4,309
Breakdown of financial indebtedness by currency
Million €
Consolidated Financial Statements - Notes
BASF Report 2021
19,214
17,184
3,735
3,447
15,479
2,825
102
205
79
693
114
Employee obligations
2,368
1,907
1,174
754
Obligations from sales and
purchase contracts
26
1,423
1,134
1,114
Restructuring measures
279
229
414
371
Litigation, damage claims,
warranties and similar
obligations
1,379
currency of issue)
499
Nominal value (million,
EUR
Bond 2020/2023
0.101%
673
739
0.83%
850
USD
Bond 2017/2023
0.925%
1,252
1,251
1.93%
1,250
EUR
Bond 2012/2022
2%
1,000
0.14%
999
999
300
GBP
Bond 2017/2025
1.750%
Defined
benefit
obligation
499
2.60%
500
277
EUR
2.5%
277
297
1.06%
250
GBP
Bond 2016/2023
0.875%
Bond 2014/2024
297
1.52%
250
USD
Commercial paper
December 31, 2020
December 31, 2021
Effective interest rate
Nominal value (million,
currency of issue)a
Currency
Carrying amounts based on
effective interest method
280
251
BASF SE
Million €
Financial indebtedness
Liabilities
21
Consolidated Financial Statements - Notes
BASF Report 2021
Maturities of financial indebtedness
Million €
< >
1.87%
248
Commercial paper
GBP
Bond 2018/2022
1.375%
407
441
2.65%
500
USD
178
Bond 2017/2022
1,000
1.47%
1,000
EUR
Bond 2013/2021
1.875%
1,112
GBP
2.5%
356
332
0.875%
493
494
1.01%
500
EUR
Bond 2016/2031
0.875%
199
2.37%
199
200
EUR
Bond 2016/2031
1.5%
495
495
1.63%
500
1.58%
EUR
Bond 2016/2031
1,300
Carrying amounts based on
effective interest method
ΚΣΕ 252
Consolidated Financial Statements - Notes
Financial indebtedness
Million €
Continued from previous page
BASF Report 2021
Continued on next page
a As of the balance sheet date
HKD
296
1.57%
300
EUR
Bond 2017/2032
1.450%
137
147
2.37%
297
Currency
Bond 2018/2030
247
0.32%
1,000
EUR
Bond 2020/2027
0.250%
138
145
3.70%
996
1,450
Bond 2013/2025
3.675%
747
748
0.97%
750
EUR
Bond 2018/2025
NOK
1.5%
996
Bond 2017/2027
248
1.01%
250
EUR
Bond 2019/2029
0.875%
153
160
0.875%
2.69%
NOK
Bond 2017/2029
2.670%
989
990
1.04%
1,000
EUR
1,600
Pension
assets
Dec. 31,
2021
2020
points
-60
-21
Plan settlements
430
423
Expenses for defined benefit plans
6
1
Past service cost
2020
2021
419
419
28,423
29,840
Defined benefit obligation as of January 1
Current service cost
2020
2021
Development of defined benefit obligations
Million €
Million €
Composition of expenses for pension benefits
Explanation of the amounts in the statement of income and
balance sheet
Increase by 0.5 percentage
Sensitivity of the defined benefit obligation as of December 31
Million €
A change in the material actuarial assumptions would have the
following effects on the defined benefit obligation:
Sensitivity analysis
ΚΣΕ 257
Consolidated Financial Statements - Notes
Decrease by 0.5 percentage
points
Expenses for defined contribution plans
308
306
2,131
-1,496
Actuarial gains/losses
Net interest expense from underfunded pension plans and
similar obligations
-1,411
-1,267
1,666
1,533
Projected pension
increase
41
37
Employee contributions
2,553
2,420
BASF Report 2021
-2,221
Discount rate
-1,095
-1,084
Benefits paid
736
731
Expenses for pension benefits (recognized in income
from operations)
2020
2021
2020
2021
395
276
Interest cost
-2,115
85
S2PXA (standard actuarial mortality tables for
self-administered plans (SAPS))
RP-2018 (modified) with MP-2018 generational
projection
Assumptions used to determine the defined benefit obligation as of
December 31
The valuation of the defined benefit obligation is based on the
following key assumptions:
Actuarial assumptions
For Group companies in other countries, defined benefits are
covered in some cases by pension provisions, but mainly by external
insurance companies or pension funds.
Other countries
The financing of the pension plans is determined by the provisions
of the regulatory authority for pensions and the relevant social and
labor law requirements. The defined benefit plans are administered
by a trust company, whose Board of Trustees, according to the
trustee agreement and law, represents the interests of the
beneficiaries and ensures that the benefits can be paid in the future.
The required funding is determined using technical valuations
according to local regulations every three years.
The BASF Group also maintains defined benefit plans in the United
Kingdom, which have been closed for further increases based on
future years of service. Adjustments to compensate for increases in
the cost of living until the beginning of retirement are legally required
for beneficiaries of defined benefit plans.
Employees are granted benefits based on a defined contribution
plan.
United Kingdom
The employees of the BASF Group in Switzerland receive a company
pension, which is financed through a pension fund by employer and
employee contributions as well as the return on plan assets. The
pension plans are accounted for as defined benefit plans, as the
obligatory minimum pension guaranteed by law under the Swiss
Pension Fund Act (BVG) is included in the scheme. All benefits vest
immediately. According to government regulations, the employer is
obligated to make contributions, so that the pension funds are able
to grant the minimum benefits guaranteed by law. The pension
funds are managed by boards, where employer and employees are
equally represented, which steer and monitor the benefit plans and
asset allocation.
Switzerland
256
< >
Consolidated Financial Statements - Notes
BASF Report 2021
Additional similar obligations arise from plans that assume the
healthcare costs and life insurance premiums of retired employees
and their dependents. Such plans have been closed to new entrants
since 2007. In addition, the amount of the benefits for such plans
has been frozen.
The legal and regulatory frameworks governing the plans are based
on the U.S. Employee Retirement Income Security Act (ERISA),
which requires the plan sponsor to ensure a minimum funding level.
Any employer contributions necessary to meet the minimum funding
level are based on the results of an actuarial valuation. Furthermore,
there are unfunded pension plans that are not subject to ERISA
requirements.
Effective 2010, the existing defined benefit plans were closed to
further increases in benefits based on future years of service, and
benefits earned in the past were frozen. There is no entitlement to
pension adjustments to compensate for cost-of-living increases.
Employees are granted benefits based on defined contribution
plans.
United States
by BASF Pensionstreuhand e.V.; at German Group companies,
these benefits are financed primarily via pension provisions. The
benefits are largely based on cash balance plans. Furthermore,
employees are given the option of participating in various deferred
compensation schemes.
For BASF SE and German Group companies, a basic level of
benefits is provided by BASF Pensionskasse WaG, a legally
independent plan, which is financed by employer and employee
contributions as well as the return on plan assets. BASF SE ensures
the necessary contributions to adequately finance the benefits
promised by BASF Pensionskasse WaG. Some of the benefits
financed via BASF Pensionskasse WaG are subject to adjustments
that must be borne by its member companies to the extent that
these cannot be borne by BASF Pensionskasse WaG due to the
regulations imposed by the German supervisory authority. In 2004,
the basic benefit plan was closed for newly hired employees at
German BASF companies and replaced by a defined contribution
plan. A new defined contribution plan was introduced as of
July 1, 2021, for new hires in the German BASF companies. At
BASF SE, occupational pension promises that exceed the basic
level of benefits are financed under a contractual trust arrangement
Germany
The following section describes the typical plan structure in the
individual countries. Different arrangements may exist, in particular
due to the assumption of plans as part of acquisitions; however,
these do not have any material impact on the description of plans in
the individual countries.
The obligations and the plan assets used to fund the obligations are
exposed to demographic, legal and economic risks. Economic risks
are primarily due to unforeseen developments on commodity and
capital markets. They affect, for example, pension adjustments
based on the level of inflation in Germany and in the United Kingdom,
as well as the impact of discount rates on the amount of the defined
benefit obligation. In previous years, measures taken to close plans
with defined benefits for future service, especially benefits based on
final pay promises and the assumption of healthcare costs for former
employees, led to a reduction in risk with regard to future benefit
levels.
In some countries - especially in Germany, in the United States, in
the United Kingdom and in Switzerland - there are pension
obligations subject to government supervision or similar legal
restrictions. For example, there are minimum funding requirements Description of the defined benefit plans
to cover pension obligations, which are based on actuarial
assumptions that differ from those pursuant to IAS 19. Furthermore,
there are qualitative and quantitative restrictions on allocating plan
assets to certain asset categories. This could result in annual
fluctuations in employer contributions, financing measures and the
assumption of obligations in favor of the pension funds to comply
with regulatory requirements.
In some countries, pension benefits were granted for which the
employer has a subsidiary liability. Pension benefits in a number of
countries include minimum interest guarantees to a limited extent. If
the pension fund cannot generate the income needed to provide the
minimum guarantee, this must be provided by the employer under
the subsidiary liability. To the extent that recourse to the employer is
unlikely based on the structure and execution of the pension benefits
as well as the asset situation of the pension fund, these plans are
treated as defined contribution plans.
Economic and legal environment of the plans
Actuarial gains and losses from changes in estimates relating to the
actuarial assumptions used to calculate defined benefit obligations,
the difference between standardized and actual returns on plan
assets, as well as the effects of the asset ceiling are recognized
directly in equity as other comprehensive income.
The valuation of the defined benefit obligation is generally performed
using the most recent actuarial mortality tables as of December 31
of the respective business year, which in Germany and the United
States are derived from the BASF Group population and were last
updated in 2019 for the pension obligations in Germany and in 2018
for the pension obligations in the United States. The actuarial
mortality tables for the pension obligations in Switzerland were
adjusted in 2021.
Actuarial mortality tables (significant countries) as of December 31, 2021
Germany
Discount rate
Projected pension
increase
Heubeck Richttafeln 2018G (modified)
A Group-wide, uniform procedure is used to determine the discount
rates applied for valuation of material pension obligations of the
BASF Group. Accordingly, the discount rates were derived from the
yields on corporate bonds in the respective currency zones with an
issue volume of more than 100 million units of the respective
currency with a minimum rating of AA- to AA+ from at least one of
the following three rating agencies: Fitch, Moody's, or Standard &
Poor's.
The assumptions used to ascertain the defined benefit obligation as
of December 31 are used in the following year to determine the
expenses for pension plans.
Discount rate
3.00
3.10
1.50
1.50
Projected pension
increase
1.50 2.20
0.10 0.20
0.70 1.10 2.30 3.10
2021 2020
2021 2020
BVG 2020 generational with CMI 2018 mortality
improvement
2021 2020 2021 2020
Switzerland
United States
Germany
United Kingdom
Assumptions used to determine expenses for pension benefits in the
respective business year
United States
3.10
3.50
1.50
1.60
Germany
United
Kingdom
Switzerland
United States
2021 2020 2021 2020 2021 2020 2021 2020
1.10 0.70 2.70 2.30 0.40 0.10 2.00 1.50
United
Kingdom
108
of which adjustments relating to financial assumptions
-1,505
-52
45
615
151
326
132
-2,131
1,496
765
1,935
Deviation between actual and standardized return on plan
assets
Effects from acquisitions and divestitures
Employer contributions
Actuarial gains/losses of the defined benefit obligation
Benefits paid by unfunded plans
Standardized return on plan assets
Plan settlements
Interest cost
Past service cost
286
194
-395
-276
0
0
-6
-1
-419
-419
-8,440 -7,560
Net defined benefit liability as of January 1
Current service cost
Other changes
-245
-7
Currency effects
2021
2020
2021
Net defined benefit
liability
Plan assets
Pension
obligations
Million €
2020
Regional allocation of defined benefit plans as of December 31
Effects from plan settlements resulted in 2021 primarily from the
transfer of benefit entitlements and the corresponding assets from
the pension plan in Canada to an external insurer.
BASF SE made pension payments which are covered by the assets
of BASF Pensionstreuhand e.V. BASF Pensionstreuhand e.V.
reimbursed BASF SE in 2021 with €250 million in pension payments
relating to 2020. This transaction is presented in other changes in
plan assets.
The standardized return on plan assets is calculated by multiplying
plan assets at the beginning of the year with the discount rate used
for existing defined benefit obligations at the beginning of the year,
taking into account benefit and contribution payments to be made
during the year.
21,400
23,130
2020
-332
-11
-264
-60
-21
8,566
6,160
provisions for pensions and similar obligations
126
661
-8,440
-5,499
Net defined benefit liability as of December 31
of which defined benefit assets
138
-71
434
2021
Development of net defined benefit liability
Million €
Through continuous monitoring of financing requirements of its
pension plans, BASF strives to achieve the necessary yields to fill
financing gaps over the course of time. Company contributions for
2022 are currently expected to be around €130 million.
Consolidated Financial Statements - Notes
BASF Report 2021
29,840
28,629
-470
505
-4
-19
54
171
17
126
Effects from acquisitions and divestitures
Other changes
Currency effects
experience adjustments
Development of plan assets
108
62
8
-117
adjustments relating to demographic
assumptions
0
-3
BASF tendered and reissued the mandate for the actuarial valuation
of indirect obligations at BASF Pensionskasse WaG and of direct
obligations of the German group, effective as of May 1, 2021. In this
context, some of the previous assumptions and valuation methods
were modified. This led to actuarial losses totaling €8 million, which
were included in adjustments relating to financial assumptions.
As of December 31, 2021, the weighted average duration of the
defined benefit obligation amounted to 16.6 years (previous year:
16.6 years).
Defined benefit obligation as of December 31
Net interest expense of the respective fiscal year is based on the
discount rate and the defined benefit obligation at the beginning of
the year.
The interest on the net defined benefit liability at the beginning of the
year is recognized in the financial result. This is the difference
between the interest cost of the defined benefit obligation and the
standardized return on plan assets as well as the interest cost for
the asset ceiling. The expected contribution payments and benefits
paid over the course of the fiscal year are taken into account when
determining net interest.
Net interest income from overfunded pension plans
Expenses for pension benefits (recognized in the
financial result)
An alternative valuation of the defined benefit obligation was
performed to determine how changes in the underlying assumptions
influence the amount of the defined benefit obligation. A linear
extrapolation of these amounts based on alternative changes in the
assumptions as well as an addition of combined changes in the
individual assumptions is not possible.
2,106
82
Actuarial reports are used to calculate the amount of pension The strategy of the BASF Group with regard to financing pension
provisions.
commitments takes into account country-specific supervisory and
tax regulations.
Million €
2021
BASF's remaining obligations and the proportional plan assets of
benefit recipients in Switzerland relating to the divestiture of the
pigments business are presented in effects from acquisitions and
divestitures. This item also includes the amount of €43 million,
which was deposited into Swiss plan assets in the same context.
Employer contributions were €151 million in 2021. In 2020,
BASF's employer contributions totaled €615 million, including
special contributions to BASF Pensionstreuhand e.V. in the amount
of €401 million and €58 million to American plan assets.
41
258
< >
Plan assets as of December 31
Currency effects
Other changes
Plan settlements
Past service cost
2
216
Effects from acquisitions and divestitures
-769
Plan assets as of January 1
-952
37
Employee contributions
615
151
Employer contributions
765
1,935
Deviation between actual and standardized return on plan
assets
Standardized return on plan assets
286
194
20,863
21,400
2020
Benefits paid
< > 255
Switzerland
BASF Report 2021
1,280
Following year 3
1,998
950
Pound sterling
2,310
2,208
Consolidated Financial Statements - Notes
3,166
3,255
U.S. dollar
3,395
3,420
Following year 1
12,684
11,611
Euro
Dec. 31,
2020
Dec. 31,
2021
Dec. 31,
2020
Defined
benefit
obligation
2021
2020
Germany
United States
20,400
3,563
Switzerland
1,812
21,535 15,498
3,596 2,610
1,816 2,212
14,426
2,121
Norwegian krone
305
291
99
Argentinian peso
Other bonds
98
100
Australian dollar
136
119
Japanese yen
19,214
17,184
Total
137
147
2,404
Hong Kong dollar
7,207
Following year 6 and maturities beyond this year
86
154
Indian rupee
1,787
1,177
Following year 5
250
168
Chinese renminbi
1,351
1,892
Following year 4
8,250
-4,902 -7,109
-953
-1,192
1,851
26
28
Debt instruments
45
47
of which for government debtors
18
19
for other debtors
27
28
Real estate
6
Alternative investments
Equities
21
3
100
100
Cash and cash equivalents
Total
5
17
The asset class debt instruments comprises promissory notes and
debentures (Pfandbriefe) as well as corporate and government
bonds. Government bonds primarily relate to bonds from countries
with very high credit ratings, such as the United States, the United
Kingdom, Germany and Switzerland. Government bonds from
emerging countries are also held to a limited extent. Corporate
bonds mainly comprise bonds from creditworthy debtors, although
particular high-yield bonds are also held to a limited extent. In
connection with the continuous monitoring of default risk based on
a given risk budget and on the observation of the development of
the creditworthiness of issuers, the plan asset allocation may be
adjusted in the case of a revised market assessment. Alternative
investments largely comprise investments in private and
infrastructure equity, absolute return funds and senior secured
loans.
Almost all of the equities are priced on active markets. The category
debt instruments includes promissory notes and debentures
(Pfandbriefe) acquired through private placements with a market
value in the amount of €188 million as of December 31, 2021, and
€110 million as of December 31, 2020. For such securities,
especially those held by domestic pension plans, there is no active
market. There is also no fungible market price for the additional
amount of €387 million, especially in the category of alternative
investments and real estate. The capital market compensates for
this lack of fungibility with yield premiums depending on the maturity.
Plan assets as of the balance sheet date contained securities issued
by BASF Group companies with a market value of €0 million in 2021
and €1 million in 2020. The market value of the properties of legally
independent pension funds rented to BASF Group companies
remained unchanged from the previous year at €112 million.
Since 2010, an agreement has existed between BASF SE and
BASF Pensionskasse WaG on the granting of profit participation
capital with a nominal value of €80 million to strengthen the financing
of the BASF Pensionskasse WaG. The existing profit participation
capital was paid back to BASF SE in 2021. To enable Pensions-
kasse WaG to meet future regulatory solvency requirements and
strengthen its risk-bearing capacity, BASF SE temporarily provided
the pension fund with capital in the form of a retrospective initial fund
loan with a nominal value of €220 million in 2021. The pension fund
utilized €80 million of that amount in 2021. Furthermore, BASF Pen-
sionstreuhand e.V. reimbursed BASF SE in 2021 with €250 million in
pension payments relating to 2020.
The funding of the plans was as follows:
Current funding situation of the pension plans as of December 31
Million €
2021
2
66
2020
%
400
35
United Kingdom
1,967
1,986
2,178
2,026
211
40
Other
887
907
632
693
2021
-255
Total
28,629
29,840
23,130
21,400 -5,499
-8,440
BASF Report 2021
Consolidated Financial Statements - Notes
< >
259
Explanations regarding plan assets
The target asset allocation has been defined by using asset liability
studies and is reviewed regularly. Accordingly, plan assets are
aligned with the long-term development of the obligations, taking
into consideration the risks associated with the specific asset
classes and the regulations relating to the investment of plan assets.
The existing portfolio structure is based on the target asset
allocation. In addition, current market assessments are taken into
consideration. In order to mitigate risks and maximize returns, a
widely spread global portfolio of individual assets is held.
Liability-driven investment (LDI) techniques, such as hedging the risk
of changes in interest rates and inflation, are used in some pension
plans, especially for U.K. and U.S. plans.
Structure of plan assets
-214
Turkish lira
Following year 2
34
Liabilities from precious metal trading positions
Employee liabilities
3,440
1,711
3,679
1,600
706
323
701
330
29
56
28
26
7
32
17
210
40
201
200
201
238
22
294
22
55
79
63
Contract liabilities
Deferred income
Miscellaneous liabilities
Other liabilities that do not qualify as financial instruments
Other liabilities
Similar obligations, especially those arising from commitments by
North American Group companies to pay the healthcare costs and
life insurance premiums of retired staff and their dependents, are
reported under provisions for similar obligations.
Provisions for pensions are calculated on an actuarial basis in
accordance with the projected unit credit method. Assumptions
relating to the following valuation parameters, among others are
used: future developments in compensation, pensions and inflation,
employee turnover, and the life expectancy of beneficiaries.
Obligations are discounted based on the market yields on high-
quality corporate fixed-rate bonds.
The accounting policies presented in the following relate to defined
benefit pension obligations.
The Group Pension Committee monitors the risks of all pension
plans of the Group with regard to the financing of pension
commitments and the portfolio structure of existing plan assets. The
organization, responsibilities, strategy, implementation and reporting
requirements are documented for the units involved.
In addition to state pension plans, most employees are granted
company pension benefits from either defined contribution or
defined benefit plans. Benefits generally depend on years of service,
contributions or compensation, and take into consideration the legal
framework of labor, tax and social security laws of the countries
where the companies are located. To limit the risks of changing
financial market conditions as well as demographic developments,
employees have, for a number of years now, been almost exclusively
offered defined contribution plans for future years of service.
Accounting policies
22 Provisions for pensions and similar obligations
Liabilities to credit institutions were secured primarily with
registered land charges. Secured other liabilities relate primarily to
derivatives with negative fair values that are secured with other
receivables and miscellaneous assets.
279
245
264
170
2
11
Liabilities related to social security
13
Dec. 31,
2020
Dec. 31,
2021
114
52
76
63
other liabilities
accounts payable, trade
liabilities to credit institutions
To secure
Carrying amounts of assets used to secure liabilities
Million €
For more information on financial risks and derivative instruments, see Note 26 from page 263 onward
For more information on liabilities arising from leases, see Note 16 from page 244 onward
Contract liabilities include mainly customer payments entitling
them to access licenses over an agreed period of time. The majority
of existing contracts have terms of up to six years. Of the contract
liabilities reported as of December 31, 2021, €40 million are
expected to be recognized as revenue in 2022.
Other liabilities
64
1,388
Carrying amounts of assets used
1,270
ΚΣΕ 254
Consolidated Financial Statements - Notes
BASF Report 2021
BASF SE had committed and unused credit lines with variable
interest rates amounting to €6,000 million as of December 31, 2021,
and €9,000 million as of December 31, 2020.
Unused credit lines
< > 253
Liabilities to credit institutions decreased from €3,735 million as of
December 31, 2020 to €3,447 million as of December 31, 2021.
The weighted average interest rate on loans amounted to 2.7% in
2021, compared with 2.1% in 2020.
19,214
17,184
Total
28
10
Other currencies
38
Other liabilities
9
Liabilities to credit institutions
95
South African rand
18
45
Indonesian rupiah
Other bonds consisted primarily of a bond issued by BASF Corpo-
ration that was used to finance investments in the United States.
Both the nominal interest rate and effective interest rate of this bond
were 6.95% in 2021. Its remaining term to maturity is 78 months.
27
55
Thai baht
62
61
Brazilian real
2,978
Ukrainian hryvnia
Million €
33
Liabilities from leases
Other liabilities that qualify as financial instruments
Derivatives with negative fair values
464
41
753
26
Miscellaneous liabilities
Advances received on orders
583
37
505
35
1,026
334
1,078
949
284
334
Loan and interest liabilities
674
679
2,734
December 31, 2021
Noncurrent
December 31, 2020
Current
Noncurrent
Current
131
438
17,345
2,388
2,388
22,710
17,850
2,388
AC
456
14,617
80
13,489
13,489
AC
12,819
1,798
236
248
248
1,294
236
260
236
0
AC
0
Securities
260
260
FVTPL
207
53
Cash equivalents
Cash and cash equivalents
Total assets
Bonds
Commercial paper
Liabilities to credit institutions
Liabilities from leases
Accounts payable, trade
Derivatives no hedge accounting
236
FVTPL
248
29,258
3,447
1
1
3,298
2,267
AC
2,267
30,289
30,375
12,821
2,365
-11
a In general, only significant shareholdings are measured at fair value. All insignificant shareholdings are measured at cost (carrying amount: €514 million). Fair value level 1 is applied to publicly listed shareholdings. Level 2 is applied to shareholdings for which valuation is based on parameters observable in the market to the greatest extent
possible. These may be adjusted to reflect valuation-relevant characteristics of the respective shareholding in the fair value.
b AC: amortized cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in Note 26.1 from page 263 onward.
c Fair value was determined based on quoted, unadjusted prices on active markets.
d Fair value was determined based on parameters for which directly or indirectly quoted prices on active markets were available.
e Fair value was determined based on parameters for which there was no observable market data.
f Does not include separately shown derivatives
fair value.
receivables and liabilities from finance leases. If miscellaneous receivables are valued at fair value through profit or loss, their valuation is generally based on parameters observable on the market. These are adjusted to reflect valuation-relevant characteristics of the respective assets in the
g The carrying amount of the physical PPAs reported in the balance sheet under assets of disposal groups is €71 million after subtracting the differences of €14 million and -€5 million described on page 269.
h The carrying amount of the contract for difference for electricity reported in the balance sheet under other liabilities is €1 million after subtracting the difference of €12 million described on page 269.
FVTOCI
n/a
3,447
1
Total liabilities
AC
3,447
1,412
1,412
n/a
1,412
7,826
7,826
AC
7,826
568
568
FVTPL
557
2
566
-11h
Derivatives hedge accounting
Other liabilities*
1
0
+10%
Securities
BASF Report 2021
Consolidated Financial Statements - Notes
The following measurement categories are used for financial
liabilities:
-
-
Financial liabilities measured at amortized cost generally
include all financial liabilities, provided these do not represent
derivatives. They are generally measured at fair value at the time
of initial recognition, which usually corresponds to the value of the
consideration received. Subsequent measurement is recognized
in profit or loss at amortized cost using the effective interest
method. At BASF, for example, bonds and liabilities to banks
reported under financial indebtedness are measured at amortized
cost.
Financial liabilities at fair value through profit or loss contain
derivative financial liabilities. These are likewise measured at the
value of the consideration received as the fair value of the liability
on the date of initial recognition. Fair value is also applied as a
measurement basis for these liabilities in subsequent
measurement. The option to subsequently measure non-derivative
financial liabilities at fair value is not exercised.
Derivative financial instruments can be embedded within other
contracts, creating a hybrid financial instrument. If IFRS policies
require separation, the embedded derivative is accounted for
separately from its host contract and measured at fair value. If
IFRS 9 does not provide for separation, the hybrid instrument is
accounted for at fair value in its entirety.
Financial guarantees of the BASF Group are contracts that require
compensation payments to be made to the guarantee holder if a
debtor fails to make payment when due under the terms of a
transaction entered into with the holder of the guarantee. Financial
guarantees issued by BASF are measured at fair value upon initial
recognition. In subsequent periods, these financial guarantees are
carried at the higher of amortized cost or the best estimate of the
present obligation as of the reporting date.
In cash flow hedges, future cash flows and the related income and
expenses are hedged against the risk of changes in fair value. To this
end, future underlying transactions and the corresponding hedging
instruments are designated in a cash flow hedge accounting
relationship for accounting purposes. The effective portion of the
change in fair value of the hedging instrument, which often meets
the definition of a derivative, and the cost of hedging are recognized
directly in equity under other comprehensive income over the term
of the hedge, taking deferred taxes into account. The ineffective
portion is recognized immediately in the income statement. In the
case of future transactions that lead to recognition of a nonfinancial
asset or a nonfinancial liability, the cumulative fair value changes of
the hedge in equity are generally charged against the cost of the
hedged item on its initial recognition. For hedges based on financial
assets, financial liabilities or future transactions, cumulative fair value
changes of the hedges are transferred from equity to the income
statement in the reporting period in which the hedged item is
recognized in the income statement. The maturity of the hedging
instrument is aligned with the effective date of the future transaction.
When fair value hedge accounting is used, the asset or liability
recognized is hedged against the risk of a change in fair value. The
hedging instruments used, which often take the form of a derivative,
are measured at fair value and changes in fair value are recognized
in the statement of income. The carrying amounts of the assets or
liabilities designated as the underlying transaction are also measured
at fair value through the statement of income.
< >
265
BASF Report 2021
Impairments on financial assets measured at fair value through
other comprehensive income are calculated in the same way as
impairments on financial assets measured at amortized cost and
recognized in profit or loss.
Consolidated Financial Statements - Notes
266
26.2 Financial risks
Market risks
Foreign currency risks: Changes in exchange rates could lead to
losses in the value of financial instruments and adverse changes in
future cash flows from planned transactions. Foreign currency risks
from financial instruments result from the translation at the closing
rate of financial receivables, loans, securities, cash and financial
liabilities into the functional currency of the respective Group
company. Foreign currency contracts in various currencies are used
to hedge foreign exchange risks from nonderivative financial
instruments and planned transactions.
The foreign currency risk exposure corresponds to the net amount
of the nominal volume of the primary and the derivative financial
instruments that are exposed to currency risks. In addition, planned
purchase and sales transactions of the respective following year are
included if they fall under the currency risk management system.
Long and short positions in the same currency are offset against
each other.
The sensitivity analysis was conducted by simulating a 5% and 10%
appreciation of the respective functional currency against the other
currencies. A 5% appreciation of the respective functional currency
I would have reduced BASF's income before income taxes by
€174 million as of December 31, 2021. A 10% appreciation of the
respective functional currency would have resulted in a negative
effect on BASF's income before income taxes in the amount of
€326 million. A 5% appreciation of the respective functional currency
resulted in an effect on BASF's income in the amount of -€203 mil-
lion as of December 31, 2020 (-€390 million with a 10% apprecia-
tion). The effect from the items designated under hedge accounting
would have decreased shareholders' equity before income taxes by
€3 million applying 5% appreciation to the functional currency, and
increased it by €2 million applying 10% appreciation to the functional
currency as of December 31, 2021 (2020: increase of €36 million
applying 5% appreciation to the functional currency and increase of
€78 million applying 10% appreciation to the functional currency).
This only refers to transactions in U.S. dollars.
Exposure and sensitivity by currency
Million €
USD
ber 31, 2021, a change in interest rates would not have had an effect
on shareholders' equity. There were also no interest derivatives
designated in a hedge accounting relationship as of Decem-
ber 31, 2020.
Carrying amounts of nonderivative interest-bearing financial instruments
Million €
December 31, 2021
December 31, 2020
Exposure
< >
Sensitivity
Assets measured at fair value through other comprehensive
income are initially measured at fair value, which usually
corresponds to the transaction price of the securities allocated to
this category at the time of acquisition. Subsequent measurement
is likewise at fair value. Changes in the fair value are recognized in
other comprehensive income and reclassified to the statement of
income when the asset is disposed of.
A decrease in impairment due, for example, to a reduction in the
credit risk of a counterparty or an objective event occurring after
the impairment is recorded in profit or loss. Reversals of
impairments may not exceed amortized cost, less any expected
future credit losses.
3,419
BASF SE provides a guarantee to Abu Dhabi National Oil Corpora-
tion covering all obligations of Wintershall Dea Middle East GmbH
related to the Ghasha concession in the United Arab Emirates.
Furthermore, BASF SE assumed guarantees to the Danish Energy
Agency covering all obligations of Wintershall Dea Inter-
national GmbH and Wintershall Noordzee B.V. related to licenses for
exploration and production of hydrocarbons in the Danish
concession area. The guarantees do not stipulate a maximum
amount. The risk of a claim being exercised against the guarantees
is classified as low. In addition, guarantees by BASF SE existed until
January 12, 2022, for restoration obligations of Wintershall Dea
Norge AS for various oil and gas facilities acquired from Equinor.
The rise in obligations from initiated investment projects is mainly
attributable to large-scale projects which began in 2021.
Following year 4
1,716
1,317
Following year 5
1,720
1,238
Following year 6 and maturities beyond this year
Total
11,823
4,165
31,741
23,489
Financial assets at fair value through other comprehensive
income include all assets with contractual terms that give rise to
cash flows on specified dates that are solely payments of principal
and interest on the principal amount outstanding, in accordance
with the cash flow condition in IFRS 9. Furthermore, the assets in
this measurement category may not just be held with the intention
of collecting the expected contractual cash flows over their term,
but also generating cash flows from their sale. At BASF, certain
securities that are reported as other financial assets or marketable
securities are allocated to this category. BASF does not exercise
the option to subsequently measure equity instruments through
other comprehensive income.
The fair value of a financial instrument is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
If pricing on an active market is available, for example in the form of
exchange prices, these are used as the basis for the measurement.
Otherwise, the measurement is based on either internal measure-
ment models using current market parameters or external measure-
ments, for example, from banks. These internal measurements rely
predominantly on the net present value method and option pricing
models. These models incorporate, for example, expected future
cash flows as well as discount factors adjusted for term and,
potentially, risk. Depending on the availability of market parameters,
BASF assigns financial instruments' market values one of the three
levels of the fair value hierarchy pursuant to IFRS 13. Reassignment
to a different level during a fiscal year is only carried out if the
availability of observable market parameters for identical or similar
items changes.
Consolidated Financial Statements - Notes
< >
264
The classification and measurement of financial assets is based on
the one hand on the cash flow condition (the "solely payments of
principle and interest" criterion), that is, the contractual cash flow
characteristics of an individual financial asset. On the other hand, it
also depends on the business model used for managing financial
asset portfolios. Based on these two criteria, BASF uses the
following measurement categories for financial assets:
-
Financial assets at fair value through profit or loss include all
financial assets whose cash flows are not solely payments of
principal and interest in accordance with the cash flow condition
established in IFRS 9. At BASF, derivatives, for example, are
allocated to this measurement category. In general, BASF does
not exercise the fair value option in IFRS 9, which permits the
allocation of financial instruments not to be measured at fair value
through profit or loss on the basis of the cash flow condition or the
business model criterion to the above category under certain
circumstances.
Financial assets measured at amortized cost include all assets
with contractual terms that give rise to cash flows on specific
dates, provided that these cash flows are solely payments of
principal and interest on the principal amount outstanding in
accordance with the cash flow condition in IFRS 9, to the extent
that the asset is held with the intention of collecting the expected
contractual cash flows over its term. At BASF, this measurement
category includes trade accounts receivable, as well as receivables
reported under other receivables and miscellaneous assets and
certain securities.
Initial measurement of these assets is generally at fair value,
which usually corresponds to the transaction price at the time of
acquisition or, in the case of trade accounts receivable, to the
transaction price pursuant to IFRS 15. Subsequent measurement
effects are recognized in income using the effective interest
method.
Impairments are recognized for expected credit losses in both
initial and subsequent measurement, even before the occurrence
of any default event. Counterparties are generally considered to
default when they become insolvent, become a debtor in a
creditor protection program or are in a finance-related legal
dispute with BASF, or more than half of BASF's receivables
portfolio with them is more than 90 days overdue. In these cases,
individual impairments are recognized for the financial assets
measured at amortized cost that are then considered to be credit
impaired.
The extent of expected credit losses is determined based on the
credit risk of a financial asset, as well as any changes to this
credit risk: If the credit risk of a financial asset has increased
significantly since initial recognition, expected credit losses are
generally recognized over the lifetime of the asset. If, however, the
credit risk has not increased significantly in this period, impair-
ments are generally only recognized as 12-month expected
credit losses. By contrast, under the simplified approach for
determining expected credit losses permitted by IFRS 9,
impairments for receivables such as lease receivables and trade
accounts receivable always cover the lifetime expected credit
losses of the receivable concerned.
At BASF, the credit risk of a financial asset is assessed using both
internal information and external rating information on the
respective counterparty. A significant increase in the counterparty's
credit risk is assumed if its rating is lowered by a certain number
of notches. It is generally assumed that the credit risk for a
counterparty with a high credit rating will not have increased
significantly.
Regional and, in certain circumstances, industry-specific factors
and expectations are taken into account when assessing the
extent of impairment as part of the calculation of expected credit
losses and individual impairments. In addition, BASF uses internal
and external ratings and the assessments of debt collection
agencies and credit insurers, when available. Individual
impairments are also based on experience relating to customer
solvency and customer-specific risks. Factors such as credit
insurance, which covers a portion of receivables measured at
amortized cost, are likewise considered when calculating
-
impairments. Bank guarantees and letters of credit are used to an
immaterial extent. Expected credit losses and individual
impairments are only calculated for those receivables that are not
covered by insurance or other collateral. Impairments on
receivables whose insurance includes a deductible are not
recognized in excess of the amount of the deductible.
BASF Report 2021
Exposure
Sensitivity
December 31, 2021
51
206
Financial
indebtedness
14,446
2,738
17,742
1,472
Due to the use of options to hedge currency risks, the sensitivity
analysis is not a linear function of the assumed changes in exchange
rates.
Interest rate risks: Interest rate risks arise from changes in prevailing
market interest rates, which can lead to changes in the fair value of
fixed-rate instruments and in interest payments for variable-rate
instruments. Interest rate swaps and combined interest rate and
currency derivatives are used in individual cases to hedge these
risks. The derivatives are presented in Note 26.5. Interest rate risks
are relevant to BASF's financing activities but are not of material
significance for BASF's operating activities.
The variable interest risk exposure, which also includes fixed rate
bonds maturing in the following year, amounted to -€2,408 million
as of December 31, 2021 (2020: -€1,659 million). An increase in all
relevant interest rates by one half of a percentage point would have
lowered income before income taxes by €4 million as of
December 31, 2021. An increase in all relevant interest rates by one
percentage point would have lowered income before income taxes
by €9 million as of the same date. An increase in all relevant interest
rates by one half of a percentage point would have lowered income
before income taxes by €5 million as of December 31, 2020 (an
increase of one percentage point would have lowered income before
income taxes by €10 million). Because no interest derivatives were
designated in hedge accounting relationships as of Decem-
Nominal and fair values of combined interest rate and currency swaps
Million €
December 31, 2021 December 31, 2020
Nominal
Fair Nominal
209
Fair
value
value
value
Combined interest rate and
currency swaps
4,183
102
4,183
-163
4,183
102
4,183
-163
of which fixed rate
Central benchmark interest rates are being comprehensively revised
as part of what is known as the IBOR reform. Accordingly, the
interest rates affected by the reform will be phased out and replaced
by new ones. The publication of all GBP, EUR, CHF and JPY LIBORS
as well as USD LIBORS with maturities of one week and two months
was discontinued as of December 31, 2021. Publication of the
remaining USD LIBORS is expected to continue until June 30, 2023.
value
60
Securities
-313
+5%
+10%
+5%
+10%
1,712
-128
-231
1,965
-101
-190
Fixed
Variable
interest rate interest rate
December 31, 2020
Fixed
interest rate
Variable
interest rate
Other
1,011
-49
-94
-167
3,082
-324
-177
2,723
Total
1,832
115
129
109
Loans
-123
-66
1,117
75
Following year 3
5,347
8,003
1,943
-687
-60
-2
2,368
Obligations from sales and purchase contracts
1,134
1,142
-894
-83
125
1,423
Restructuring measures
414
1,174
90
-167
34
279
Litigation, damage claims, warranties and
205
29
-128
-37
9
79
similar obligations
Other
541
184
-93
Employee obligations
926
34
0
BASF Report 2021
Consolidated Financial Statements - Notes
ΚΣΕ 261
The increase in provisions for employee obligations was mainly
attributable to higher accruals for variable compensation
components.
The increase in provisions for obligations from sales and purchase
contracts resulted from higher accruals for rebate programs.
The increase in provisions for environmental protection and
remediation costs resulted primarily from additions for contamina-
tion at several discontinued sites in North America.
Other includes interest on noncurrent tax provisions.
The following table shows the development of other provisions by
category. Other changes include reclassifications to disposal
groups, changes in the scope of consolidation, acquisitions,
Development of other provisions in 2021
Million €
January 1,
2021
Additions
148
26
divestitures, currency effects and the reclassification of obligations
to liabilities when the amount and timing of these obligations become
known.
Unwinding of
discount
December 31,
-8
-64
3
268
693
Environmental protection and remediation.
costs
-139
Restoration obligations
-9
-8
2
2021
Releases Other changes
Utilization
158
BASF is continuously monitoring developments arising from the
IBOR reform to ensure the timely adjustment of existing contracts as
well as to identify potential financial risks at an early stage. Particular
consideration is given to the carrying amounts or nominal values
(derivatives) of contracts that reference an interest rate affected by
the reform and therefore may still have to be converted to an
alternative interest rate (contracts yet to be adjusted). As of
-66
486
79
Collateral granted on behalf of third-party liabilities
1
Initiated investment projects
4,761
3,921
of which purchase commitments
1,481
1,052
Obligations arising from purchase contracts
Million €
for the purchase of intangible assets
10
15
Dec. 31,
58
2021
263
75
Following year 1
9,686
Following year 2
4,963
Dec. 31,
Obligations arising from purchase contracts
26 Supplementary information on financial
instruments
Obligations from purchase contracts resulted primarily from
long-term purchase obligations for raw materials as well as supply 26.1 Accounting policies
agreements for renewable energy. The increase is mainly due to
long-term energy supply agreements concluded in 2021, including
about €3.5 billion for green energy from the Hollandse Kust Zuid
wind farm.
For more information on long-term energy supply agreements, see the chapter on Energy and climate
protection in the Management's Report from page 126 onward
Firm purchase obligations as of December 31, 2021, were as
follows:
Dec. 31,
2020
Financial assets and financial liabilities are recognized in the
consolidated balance sheet when the BASF Group becomes a
party to a financial instrument. Financial assets are derecognized
when BASF no longer has a contractual right to the cash flows from
the financial asset or when the financial asset is transferred together
with all material risks and rewards of ownership and BASF does not
have control of the financial asset after it has been transferred. For
example, receivables are derecognized when they are definitively
found to be uncollectible such as in the event of concluded
insolvency proceedings. Financial liabilities are derecognized when
the contractual obligations expire, are discharged or cancelled.
Regular-way purchases and sales of financial instruments are
accounted for using the settlement date; in precious metal trading,
the trade date is used.
Payment and loan commitments and other financial
obligations
Warranties
347
383
Total
4,309
3,681
7
-2,013
-421
154
5,717
BASF Report 2021
Consolidated Financial Statements - Notes
24
Risks from litigation and claims
BASF Corporation has potential liability under the Comprehensive
Response, Compensation and Liability Act of 1980, as amended,
and related state laws for investigation and cleanup at certain sites.
The Lower Passaic River Study Area (LPRSA) is one such site
comprising the lower 17 miles of the Passaic River in New Jersey.
BASF Corporation and more than 60 other companies (collectively,
the Lower Passaic River Study Area Cooperating Parties Group or
CPG) agreed to complete a remedial investigation / feasibility study
(RI/FS) of the LPRSA. In 2016, the United States Environmental
Protection Agency (USEPA) selected a final remedy for the lower
eight miles of the LPRSA. A decision from USEPA on a targeted
approach for the upper portion of the LPRSA was issued on
September 30, 2021. BASF Corporation established a provision
covering BASF's currently estimated share of the remediation costs.
Since August 2019, BASF Corporation has been served in various
U.S. federal and state lawsuits alleging property and resource
damages and personal injuries from possible exposure to per- and
polyflouroalkyl substances (PFAS). In December 2018, a multi-
district litigation (MDL) was created to coordinate claims brought
against manufacturers, distributors, and suppliers of Aqueous Film
Forming Foam (AFFF) in particular, which plaintiffs allege contains
toxic levels of certain PFAS compounds including perfluorooctanoic
acid (PFOA) and perfluorooctane sulfonate (PFOS). Plaintiffs typically
allege that exposure to AFFF has caused loss of use and enjoyment
of property, diminished property value, remediation costs, and
personal injuries including various types of cancers. The complaints
name BASF as a defendant in connection with its 2009 acquisition
of Ciba Specialty Chemicals Inc. and the legacy Ciba/BASF Lodyne
fluorochemical product lines. BASF has been named in over
1,200 suits as of January 2022 and is defending all litigation.
Furthermore, BASF SE and its affiliated companies are defendants
in or parties to a variety of legal or regulatory proceedings on a
recurring basis. To our current knowledge, none of these proceed-
ings will have a material effect on the economic situation of BASF.
< >
262
Guarantees
2
3
Bills of exchange
2020
Dec. 31,
2021
-37
Million €
The figures listed below are stated at nominal value:
Other financial obligations
25
ΚΣΕ 263
Consolidated Financial Statements - Notes
BASF Report 2021
Other financial obligations
BASF Report 2021
At this time, BASF cannot predict the outcomes of resolving these
matters or what potential actions may be taken by regulatory
agencies. An adverse outcome in any one or more of these matters
could be material to BASF's financial results.
ΚΣΕ 267
Sensitivities virtual PPA contract for difference for electricity
(United States)
Million €
Change in expected
electricity prices
Change in expected
production volumes
-10%
+10%
5
-5
1
-10%
-1
At the time of initial recognition, the fair value of the contract for
difference, which was calculted using a valuation model, was higher
than the transaction price. As this is a level 3 fair value, the difference
of €12 million is deferred and reported in the balance sheet together
with the positive or negative fair value of the contract for difference,
according to the valuation model, under other receivables and
miscellaneous assets or other liabilities. The difference is reversed
using the straight-line method over the term of the contract. Income
from the reversal of the difference will be recognized in profit or loss
under other operating income. The changes in fair value according
to the valuation model are recognized in profit or loss as other
operating income or other operating expenses.
The financial instruments reported under Derivatives hedge
accounting, of which fair value level 3, in the table "Carrying
amounts and fair values of financial instruments" relate to two
physical power purchase agreements (physical PPAs) concluded in
Europe. The physical PPAs are based on wind turbines in the
Netherlands with an expected proportional capacity of 35 mega-
watts each. The wind farm is scheduled to go into operation in 2022
or 2023. Unlike virtual PPAs, physical PPAs provide for actual supply
of electricity volumes to BASF. In addition to electricity, BASF
receives certificates verifying the "green properties" of the electricity,
known as guarantees of origin (GoOs). BASF purchases both the
electricity and the GoOs at a fixed price under the physical PPAs.
Because the physical PPAs described here are not eligible for the
own use exemption, they are to be recognized in the balance sheet
as derivatives and measured at fair value. Level 3 fair value is
determined as the present value of the difference between the
agreed fixed price and the expected market prices for electricity or
GoOs. The key valuation parameters are the expected electricity
and GoO prices as well as the expected production volumes.
Sensitivities physical PPAs (Europe)
The financial instruments reported under Derivatives - no hedge
accounting, of which fair value level 3, in the table "Carrying
amounts and fair values of financial instruments" relate to a
contract for difference for electricity embedded in a virtual power
purchase agreement (virtual PPA). The expected contractual
capacity of the solar power plant in Texas, United States, is
50 megawatts. The solar park is scheduled to go into operation in
2023. The level 3 fair value is determined as the present value of the
expected cash flows from the contract for difference. The key
valuation parameters are the expected electricity prices and
expected production volumes. A change in the key valuation
parameters as of December 31, 2021 would have affected the fair
value of the contract for difference as follows:
Million €
Change in expected
GOO prices
Change in expected
production volumes
+10%
-10%
+10%
-10%
+10%
-10%
42
-42
1
-1
8
-8
Change in expected
electricity prices
At the time of initial recognition, the physical PPAs' fair values, which
were calculated using a valuation model, were higher or lower,
respectively, than the transaction prices. As these are level 3 fair
values, the differences amounting to €14 million and -€5 million
were deferred and recognized in the balance sheet together with the
positive fair values of the contracts, according to the valuation
model, under assets of disposal groups. The differences are
reversed over the term of the contract using the straight-line method.
The resulting gains and losses are reported in profit or loss under
other operating income or other operating expenses.
The fair value of financial indebtedness is determined on the basis of
interbank interest rates. The difference between carrying amounts
and fair values results primarily from changes in market interest
rates.
26.4 Classes and categories of financial instruments
178
2,735
2024
673
868
28
132
1,701
2025
1,749
215
70
91
2,125
For trade accounts receivable, other receivables and miscellaneous
assets, cash and cash equivalents, as well as trade accounts
payable and other liabilities, the carrying amount approximates the
fair value.
2026 and thereafter
1,035
80
605
9,853
Total
17,397
3,842
5,291
644
2,022
29,196
BASF Report 2021
Consolidated Financial Statements - Notes
ΚΣΕ 269
8,133
The physical PPAs were designated in a cash flow hedge accounting
relationship. Accordingly, the effective portion of the change in fair
value of the hedging instruments is recognized directly in equity
(other comprehensive income). Possible ineffectiveness is recog-
nized in profit or loss as other operating income or other operating
expenses.
BASF Report 2021
Consolidated Financial Statements - Notes
729
FVTPL
729
13
716
Derivatives hedge accounting
287
287
n/a
296
0
216
809
Other receivables and miscellaneous assets
729
6,211
AC
1,351
Other receivables and miscellaneous assets
90
90
FVTPL
90
90
Securities
9
9
Consolidated Financial Statements - Notes
9
AC
1,351
219
219
FVTPL
Carrying amounts and fair values of financial instruments as of December 31, 2021
Million €
<>=270
Carrying amount
Shareholdingsa
Receivables from finance leases
Accounts receivable, trade
Accounts receivable, trade
Derivatives no hedge accounting
514
514
Total
carrying amount
within scope of
application of IFRS 7
Valuation category
in accordance
with IFRS 9b
Fair value
Of which
fair value level 1°
Of which
Of which
219
219
11,723
AC
11,723
11,723
103
44
44
0
0
FVTPL
fair value level 3°
fair value level 2d
n/a
3
44
2,150
388
7
37
0
The exposure corresponds to the net amount of all long and short
positions of the respective commodity category.
For more information on BASF's financial risks and risk management, see Opportunities and Risks
from page 151 onward
Default and credit risk
Default and credit risks arise when customers and debtors do not
fulfill their contractual obligations. BASF regularly analyzes the
creditworthiness of the counterparties and grants credit limits on the
basis of this analysis. Due to the global activities and diversified
customer structure of the BASF Group, there is no significant
concentration of default risk. The carrying amount of all receivables,
loans and interest-bearing securities plus the nominal value of
financial obligations stemming from contingent liabilities not to be
recognized represents the maximum default risk for BASF.
For more information on credit risks, see Note 18 from page 247 onward
Liquidity risks
BASF promptly recognizes any risks from cash flow fluctuations as
part of liquidity planning. BASF has ready access to sufficient liquid
funds from the ongoing commercial paper program and confirmed
lines of credit from banks.
BASF Report 2021
Consolidated Financial Statements - Notes
26.3 Maturity analysis
о
The interest and principal payments as well as other payments for
derivative financial instruments are relevant for the presentation of
the maturities of the contractual cash flows from financial liabilities.
Future cash flows are not discounted here.
2022
ΚΣΕ 268
Maturities of contractual cash flows from financial liabilities as of December 31, 2021
Million €
Bonds and other
liabilities to the
capital market
Accounts
Liabilities to
payable,
credit institutions
trade
Derivative
liabilities
Miscellaneous
liabilities
Total
2,462
Derivatives are included using their net cash flows, provided they
have negative fair values and therefore represent a liability. Derivatives
with positive fair values are assets and are therefore not taken into
account.
58
1
88
Commodity price risks: Some of BASF's divisions are exposed to
strong fluctuations in raw materials prices. These result primarily
from raw materials (for example naphtha, benzene, natural gas, LPG
condensate) as well as from precious metals. BASF takes the
following measures to reduce price risks associated with the
purchase of raw materials:
-
301
December 31, 2021, financial liabilities related to contracts yet to be
adjusted were identified in the amount of €302 million. These are
mainly variable-rate bank loans referenced to a USD LIBOR
(€187 million) or EONIA (€115 million). Furthermore, financial assets
related to contracts yet to be adjusted were identified in the amount
of €85 million. These are mainly short-term loans, particularly to
nonconsolidated subsidiaries, that are referenced to a USD LIBOR
(€85 million). No derivatives were identified that are associated with
contracts yet to be adjusted.
-
BASF uses commodity derivatives to hedge risks from the vola-
tility of raw materials prices. These are primarily options on crude
oil, oil products and natural gas.
The Catalysts division enters into both short-term and long-term
purchase contracts with precious metal and battery metal
producers. It also buys precious metals on spot markets from
various business partners. The price risk from metals purchased
to be sold on to third parties, or for use in the production of
catalysts and battery materials, is hedged using derivative
instruments. This is mainly performed using forward contracts,
which are settled by either entering into offsetting contracts or by
delivering the precious metal.
- In the Agricultural Solutions division, the sales prices of products
are sometimes pegged to the price of certain agricultural
commodities. To hedge the resulting risks, derivatives on
agricultural commodities are concluded.
In addition, BASF holds limited unhedged precious metal and oil
product positions, which can also include derivatives, for trading on
its own account. The value of these positions is exposed to market
price volatility and is subject to constant monitoring.
By holding commodity derivatives and precious metal trading
positions, BASF is exposed to price risks. The valuation of
commodity derivatives and precious metal trading positions at fair
value means that adverse changes in market prices could negatively
affect the earnings and equity of BASF.
BASF concluded several physical power purchase agreements
(physical PPAs) in Europe with terms of up to 25 years in 2021.
Under the physical PPAs, BASF procures electricity and associated
green electricity certificates, known as guarantees of origin (GoOs),
at a fixed price. Some physical PPAs are not eligible for the own use
exemption and are therefore recognized as derivatives in the bal-
ance sheet. In addition, BASF concluded what is known as a virtual
power purchase agreement (virtual PPA) with a term of 15 years in
the United States in 2021. The virtual PPA contains an embedded
contract for difference for electricity that is recognized separately as
a derivative in the balance sheet.
BASF performs value-at-risk analyses for all commodity derivatives
and precious metal trading positions. Using the value-at-risk analysis
enables continual quantification of market risk and forecasting of the
maximum possible loss within a given confidence interval over a
defined period. The value-at-risk calculation is based on a confidence
interval of 95% and a holding period of one day. BASF uses the
variance-covariance approach.
BASF uses value at risk in conjunction with other risk management
tools. Besides value at risk, BASF sets volume-based limits as well
as exposure and stop-loss limits.
Exposure due to commodity derivatives
Million €
December 31, 2020
December 31, 2021
1
51
5
56
18
97
1,200
Electricity and
green electricity
certificates
natural gas
Crude oil, oil
products and
Value at risk
Exposure
Value at risk
Exposure
Precious metals
7,820
Agricultural
commodities
762
3,510
7,826
608
2,121
29,481
Maturities of contractual cash flows from financial liabilities as of December 31, 2020
Million €
Bonds and other
Accounts
liabilities to the
Liabilities to
capital market
credit institutions
2021
2,531
1,128
payable,
trade
5,276
Derivative
liabilities
3,022
267
459
287
2023
12
8,753
295
2022
9,760
749
76
Total
liabilities
2,161
706
Miscellaneous
382
675
2,712
251
37
4
190
796
2,230
2027 and thereafter
2026
57
2024
2023
12,703
Total
2
2025
182
3
94
1,407
0
684
629
2,248
126
7,608
15,416
52
258
1,812
1,658
-53
activities
changes in
the scope of
consolidation
Additions
-8
Currency from lease
6
effects
contracts
in fair
value
-63
19,214
-2,575
Cash effective in
97
411
37
559
Other
effects
441
Acquisitions/
divestitures/
2021a
In 2020, payments received for divestitures resulted in the amount.
of €2,520 million from the sale of the construction chemicals
1,369
In 2020, BASF SE transferred securities in the amount of €401 mil-
lion to BASF Pensionstreuhand e.V., Ludwigshafen am Rhein,
Germany. This transfer was not cash effective and therefore had no
effect on the statement of cash flows.
Cash and cash equivalents consist primarily of cash on hand and
bank balances with maturities of less than three months.
The cash and cash equivalents presented in the statement of cash
flows may deviate from the figures in the balance sheet if the relevant
amounts were reclassified to assets of disposal groups. As of
January 1, 2021, cash and cash equivalents in the amount of
€4,335 million reported in the statement of cash flows consisted of
the balance sheet value (€4,330 million) and the value reclassified to
the pigments business disposal group (€5 million). No cash and
cash equivalents were reclassified to the disposal groups as of
December 31, 2021; their balance in the statement of cash flows
is therefore identical to that in the balance sheet. As of Janu-
ary 1, 2020, cash and cash equivalents in the amount of €2,455 mil-
lion reported in the statement of cash flows consisted of the balance
sheet value (€2,427 million) and the values reclassified to the dis-
posal groups for the construction chemicals business (€21 million)
and the pigments business (€7 million).
As in the previous year, cash and cash equivalents were not subject
to any utilization restrictions.
The reconciliation according to IAS 7 breaks down the changes in
financial and similar liabilities and their hedging transactions into
cash-effective and non-cash-effective changes. The cash-effective
BASF Report 2021
Consolidated Financial Statements - Notes
17,184
278
Million €
Financial indebtedness
Loan liabilities
Lease liabilities
Dec. 31,
2020a
cash flows
from financing
Non-cash-effective changes
Changes
Dec. 31,
Reconciliation according to IAS 7 for 2021
-551b
19,386
52
471
622
-26
56
80
60
342
a Balances as of December 31, 2021 and 2020 also include contributions reclassified to the disposal groups and therefore deviate from balance sheet values.
b Lease payments totaled €437 million in 2021. The principal component in the amount of €401 million is presented in cash flows from financing activities. BASF reports interest payments in cash flows from operating activities;
these items amounted to €36 million. Advance payments for land use rights at the new Verbund site in Zhanjiang, China, in the amount of €150 million are also included in cash flows from financing activities.
c Includes mainly disposals from lease contracts.
5
-3,145
changes presented on the left correspond to the figures in cash
flows from financing activities.
Other financing-related liabilities primarily comprise liabilities from
accounts used for cash pooling with BASF companies not included
in the Consolidated Financial Statements. They are reported in
miscellaneous liabilities within the balance sheet item other liabilities
that qualify as financial instruments.
Assets/liabilities from hedging transactions form part of the
balance sheet items derivatives with positive and negative fair values
respectively and include only those transactions which hedge risks
arising from financial indebtedness and financing-related liabilities
secured by micro hedges.
For more information on receivables and miscellaneous assets, see Note 18 from page 247 onward
For more information on liabilities, see Note 21 from page 251 onward
For more information on the statement of cash flows, see the Management's Report from page 65
onward
Reconciliation according to IAS 7 for 2020
Million €
Payments received for divestitures in the amount of €1,030 million
were mainly from the sale of the pigments business. That included
project-related tax payments of €65 million and special contributions
to Swiss pension plan assets of €43 million. Payments received from
the disposal of the equity-accounted investment in Solenis
(€1,066 million) are reported in cash flows from investing activities
under payments received from the disposal of noncurrent assets
and securities. Gains on divestitures in the amount of €589 million
was reclassified from cash flows from operating activities to cash
flows from investing activities via gains (-) / losses (+) from the
disposal of noncurrent assets and securities.
Dec. 31,
2019a
Non-cash-effective changes
Loan liabilities do not contain any interest components.
-17
21,327
56
622
-61°
1,414
Other financing-related liabilities
228
52
54
2
6
Total
Financial and similar liabilities
-3,137
80
471
622
-26
19,381
Assets/liabilities from hedging transactions
-43
-8
21,370
In 2021, cash flows from investing activities included €600 million in
payments made for acquisitions in connection with the purchase of
BASF Shanshan Battery Materials Co., Ltd. (2020: €1,240 million for
the acquisition of Solvay's polyamide business).
920
Dividends received
0
0
n/a
income
Other receivables and
miscellaneous assets
Other financial
5
-48
94
4
90
n/a
income
7
0
Other receivables and
miscellaneous assets /
other liabilities
65
5
9
n/a
102
5
-3
Interest
Other receivables and
miscellaneous assets
Dec. 31,
2020a
1,142
income
recognized
in other
comprehensive
Amounts
reclassified to
profit or loss for
realized hedging
transactions
Income
statement
item for
recognition
of reclassifi-
cation
Hedging
instrument
Other liabilities
Hedged
transaction
Income
statement item
27
114
-77
Other
operating
27
27
n/a
income
Ineffective-
ness amount
5
n/a
Combined interest/
Income taxes
of which income tax refunds
2021
-1,707
2020
-595
95
273
income tax payments
-1,802
Statement of cash flows
Million €
-868
-318
-341
of which interest received
151
146
interest paid
-469
-487
711
Interest payments
Cash flows from operating activities contained the following Payments made for property, plant and equipment and intangible
payments:
assets amounted to €3,532 million, €403 million higher than in the
previous year.
business. These included tax payments in the amount of €150 mil-
lion that were directly associated with the transaction. Further tax
payments were accounted for in the amount of €31 million in 2021.
For more information on acquisitions and divestitures, see Note 3 from page 207 onward
Statement of cash flows
90
foreign currency risks
Commodity price risks
Total
a
132
0
2,127
€6 million was derecognized from the cash flow hedge reserve against the cost of inventories and recognized in profit or loss upon consumption.
37
72
21
122
134
BASF Report 2021
Consolidated Financial Statements - Notes
< >
277
The occurrence of all forecasted transactions was considered to be
highly probable at all times during fiscal years 2021 and 2020.
Amounts accumulated in the cash flow hedge reserve for com-
modity price risks are derecognized against the carrying amount of
acquired assets once the hedged transaction occurs. Thus, there is
no immediate reclassification of the amounts recognized in the cash
flow hedge reserve to profit or loss in these cases.
In connection with its catalyst production, BASF is exposed to
commodity price risks associated with holding physical precious
metal items. These production-related precious metal inventories
are hedged with forward contracts in accordance with a defined
hedging strategy. In 2021, a portion of these precious metal
inventories was designated in a fair value hedge accounting
relationship with forward contracts on the precious metals. Changes
in the forward rate were considered costs of hedging, and €2 million
was recognized in other comprehensive income and reclassified
successively to profit or loss, being a time-period-related hedge. All
hedging instruments expired in 2021. The hedged precious metals
were sold. Cash flows in connection with the hedging instruments
were recognized in profit or loss in 2021. All hedging relationships
were fully effective.
27 Statement of cash flows and capital structure
management
244
559
of which Germany
Capital structure management
10,576
Personnel expenses
BASF Report 2021
Consolidated Financial Statements - Notes
<>= 280
Number of employees
As of December 31, 2021, the number of employees increased to
111,047 employees compared with 110,302 employees as of
December 31, 2020. The rise was primarily due to staff increases in
Asia Pacific, especially in connection with the formation of
BASF Shanshan Battery Materials Co., Ltd., as well as for the new
Verbund site in Zhanjiang, China. The divestiture of the pigments
business, which comprised around 2,500 employees, had an
offsetting impact.
As of December 31, 2021, a total of 1,175 employees (2020:
1,137 employees) worked at joint operations.
The development of the number of employees was distributed over
the regions as follows:
11,097
Number of employees as of December 31
North America
2020
2021
67,532
51,026
68,849
51,961
16,753
16,948
Asia Pacific
Europe
19,976
736
Pension expenses
A
A-1
stable
Moody's
stable
BASF strives to maintain a solid A rating, which ensures unrestricted
access to financial and capital markets.
For more information on BASF's financing policy, see the Management's Report from page 64 onward
28 Personnel expenses and employees
Personnel expenses
732
The BASF Group's expenses for wages and salaries, social security
contributions and assistance, as well as for pensions in 2021 totaled
€11,097 million. In 2020, these expenses amounted to €10,576 mil-
lion and included personnel expenses from the disposal group for
the construction chemicals business in the amount of €291 million
until the date of the divestiture. The rise in personnel expenses in
2021 was mainly due to higher bonus provisions. Particularly the
lower average number of employees had an offsetting impact.
2021
2020
Wages and salaries
8,847
8,416
Social security contributions and
1,519
1,424
assistance expenses
Personnel expenses
Million €
Standard & Poor's
17,753
6,786
South America, Africa, Middle East
BASF Group
6,799
109,815
of which apprentices and trainees
temporary staff
2,750
2,400
2,821
2,518
7,326
115,973
18,719
The average number of employees decreased to 109,815 employ-
ees in 2021 (2020: 115,973 employees). This decline was primarily
due to the divestiture of the construction chemicals business in the
previous year and to the divestiture of the pigments business in the
year under review. Employees from joint operations are included in
the average number of employees relative to BASF's share in the
company. On average, these had a total of 1,143 employees (2020:
1,055 employees).
29 Share price-based compensation programs
and BASF incentive share program
Share price-based compensation programs
In 2021, the BASF Group continued offering its share price-based
compensation program (the long-term incentive (LTI) program),
known as Strive!, which was launched in 2020. The share price-
based compensation program known as "BOP" (BASF Option
Program), which had existed since 1999, was offered for the last
time in 2020. All option rights granted during the BOP program
years remain valid until the end of their respective exercise periods.
Generally, members of the Board of Executive Directors and all
senior executives are entitled to participate in the LTI programs.
Strive!
Strive! is based on a performance share plan and takes into account
the achievement of strategic goals and the development of the
BASF share and dividend (total shareholder return) over a period of
four years.
Participation in Strive! is voluntary for senior executives and is linked
to a share ownership obligation. Strive! offers rolling eligibility,
without a deadline for participation. Approximately 700 people were
eligible to participate in Strive! in 2021. About 90% of eligible senior
executives and the Members of the Board of Executive Directors
participated. Unlike for senior executives, participation is not
voluntary for the members of the Board of Executive Directors and
is outlined in their service contracts. The same plan conditions
generally apply to members of the Board of Executive Directors.
A Strive! plan includes a four-year performance period with a fixed
disbursement date. A target amount is determined at the beginning
of each new Strive! plan for every participant. This target amount is
converted into a preliminary number of virtual performance share
units (PSUs) by dividing it by the average BASF share price in the
fourth quarter of the previous year. The number of PSUs that are
continuing
hedging
relationships
For more information on acquisitions and divestitures, see Note 3 from page 207 onward
South America, Africa, Middle East
18,464
71,329
53,080
18,599
6,752
BASF Group
111,047
110,302
of which apprentices and trainees
3,028
3,120
temporary staff
2,329
Asia Pacific
2,128
Average number of employees
2021
2020
Europe
67,788
of which Germany
51,144
North America
16,765
The average number of employees was distributed over the regions
as follows:
stable
P-2
A3
-3
1
1,478
-415b
-54
-85
519
-74°
1,369
-10
Other financing-related liabilities
-36
-19
2
-3
228
Financial and similar liabilities
20,680
1,209
-90
284
-875
45
19,214
The aim of capital structure management is to maintain the financial
flexibility needed to further develop BASF's business portfolio and
take advantage of strategic opportunities. The objectives of the
company's financing policy are to ensure solvency, limit financial
risks and optimize the cost of capital.
Capital structure management focuses on meeting the requirements
needed to ensure unrestricted access to the capital market and a
solid A rating. The capital structure is managed using selected
financial ratios, such as dynamic debt ratios, as part of the company's
financial planning.
The equity of the BASF Group as reported in the balance sheet
amounted to €42,081 million as of December 31, 2021 (Decem-
ber 31, 2020: €34,398 million); the equity ratio was 48.2% on
December 31, 2021 (December 31, 2020: 42.8%).
Cash effective in
cash flows
from financing
activities
Acquisitions/
divestitures/
changes in
the scope of
consolidation
Additions
Changes
Currency from lease
effects contracts
526
Other
in fair
value
Financial indebtedness
Loan liabilities
Lease liabilities
18,392
1,615
-7
-789
3
effects
519
-73
21,370
stable
A3
P-2
Standard & Poor's
A
A-1
negative
Fitch
BASF prefers to access external financing on the capital markets. A Ratings as of December 31, 2020
commercial paper program is used for short-term financing, while
corporate bonds are used for financing in the medium and long
term. These are issued in euros and other currencies with different
maturities. The goal is to create a balanced maturity profile, achieve
a diverse range of investors and optimize BASF's debt capital
financing conditions. Since 2020, BASF has employed green
corporate bonds to finance the development of sustainable products
and projects with a clear environmental benefit.
F1
BASF currently has the following ratings, which were most recently
confirmed by Fitch on June 11, 2021, and by Moody's on
January 5, 2022. Standard & Poor's adjusted its outlook for the
A rating from "negative" to "stable" on July 16, 2021, and confirmed
the rating on January 6, 2022.
Noncurrent
financial
indebtedness
Current
financial
indebtedness
Outlook
Fitch
A
F1
stable
Moody's
Ratings as of December 31, 2021
A
Outlook
financial
indebtedness
Assets/liabilities from hedging transactions
-49
371
-365
Total
20,631
1,580
-90
-875
519
-73
-365
21,327
a Balances as of December 31, 2020 and 2019 also include contributions reclassified to the disposal groups and therefore deviate from balance sheet values.
b Lease payments totaled €453 million in 2020. The principal component in the amount of €415 million is presented in cash flows from financing activities. BASF reports interest payments in cash flows from operating activities;
these items amounted to €38 million.
c Includes mainly disposals from lease contracts.
BASF Report 2021
Consolidated Financial Statements - Notes
ΚΣΕ 279
Noncurrent
Current
financial
indebtedness
-43
Nominal
value
< >
Financial
assets liabilities
5,291
5,291
AC
5,291
Derivatives no hedge accounting
957
957
FVTPL
957
1,360
25
Derivatives hedge accounting
Other liabilities
Total liabilities
1
1
n/a
1
1
2,833
932
1,804
n/a
1,360
15,918
446
738
14,189
14,189
AC
15,500
15,500
Commercial paper
1,360
Liabilities to credit institutions
Accounts payable, trade
1,290
1,290
AC
1,290
3,735
3,735
AC
3,735
Liabilities from leases
16,357
AC
29,656
Offset amounts
Potential netting volume
Due to global netting
Amount offset
Net amount
agreements
Relating to financial collateral
Potential net amount
-12
<>=272
447
112
-12
447
-209
-116
121
Offset amounts
Potential netting volume
Amount offset
-209
1,804
563
Gross amount
28,627
29,938
25
16,433
a In general, only significant shareholdings are measured at fair value. All insignificant shareholdings are measured at cost (carrying amount: €439 million). Fair value level 1 is applied to publicly listed shareholdings. Level 2 is applied to shareholdings for which valuation is based on parameters observable in the market to the greatest extent
possible. These may be adjusted to reflect valuation-relevant characteristics of the respective shareholding in the fair value.
b AC: amortized cost; FVTOCI: fair value through other comprehensive income; FVTPL: fair value through profit or loss; a more detailed description of the categories can be found in Note 26.1 from page 263 onward.
c Fair value was determined based on quoted, unadjusted prices on active markets.
d Fair value was determined based on parameters for which directly or indirectly quoted prices on active markets were available.
e Fair value was determined based on parameters for which there was no observable market data.
415
f Does not include separately shown derivatives or receivables and liabilities from finance leases. If miscellaneous receivables are valued at fair value through profit or loss, their valuation is generally based on parameters observable on the market. These are adjusted to reflect valuation-relevant characteristics of the respective assets in the
fair value.
Consolidated Financial Statements - Notes
Offsetting of derivative assets and liabilities as of December 31, 2021
Million €
Derivatives with positive fair values
Derivatives with negative fair values
Gross amount
459
459
Offsetting of derivative assets and liabilities as of December 31, 2020
Million €
Derivatives with positive fair values
Derivatives with negative fair values
BASF Report 2021
20,171
Bonds
Total assets
44
44
n/a
44
Accounts receivable, trade
9,422
9,422
AC
9,422
93
Accounts receivable, trade
44
FVTPL
44
44
Derivatives no hedge accounting
387
387
FVTPL
387
44
1
94
533
Balance sheet item
BASF Report 2021
Consolidated Financial Statements - Notes
Carrying amounts and fair values of financial instruments as of December 31, 2020
Million €
ΚΣΕ 271
Total
Valuation category
Carrying amount
within application
scope of IFRS 7
FVTPL
in accordance
with IFRS 9b
Of which
Of which
Fair value
fair value level 1°
fair value level 2d
fair value level 3e
Shareholdingsa
Receivables from finance leases
533
Of which
386
Derivatives-hedge accounting
132
0
0
Securities
249
249
FVTPL
249
207
42
FVTOCI
Cash equivalents
145
FVTPL
145
145
Cash and cash equivalents
4,185
4,185
AC
4,185
145
0
0
Securities
132
n/a
132
0
132
Other receivables and miscellaneous assets
4,889
1,075
AC
1,075
Other receivables and miscellaneous assets
133
133
FVTPL
133
133
Securities
8
8
AC
8
Net amount
Due to global netting
agreements
-125
Potential net amount
recognized
in other
comprehensive
income
Amounts
reclassified to
profit or loss for
realized hedging
transactions
Change in fair values for assessing
ineffectiveness
Recognized ineffectiveness
Income
statement
item for
recognition
of reclassifi-
cation
Hedging
Hedging effects
instrument
Ineffective-
ness amount
Income
statement item
1
-1
Other receivables and
miscellaneous assets /
other liabilities
508
0
83
-125
Hedged
transaction
Other
operating
income
Cash flow hedge reserve
Accumulated
Furthermore, BASF SE's fixed-rate U.S. private placement of
$1.25 billion, issued in 2013, was converted to euros using
cross-currency swaps, as the private placement exposes BASF to a
combined interest/currency risk. The hedged interest rate was
4.13% in the fiscal years 2021 and 2020. The hedged foreign
exchange rate in both years was $1.3589 per euro. This hedge was
designated as a cash flow hedge.
Furthermore, BASF was exposed to foreign currency risks in 2021
through U.S. dollar-denominated commercial paper. These risks are
hedged with foreign currency forward contracts and designated in a
cash flow hedge accounting relationship. The changes in the value
of the hedging instruments in the amount of €11 million resulting
from the change in the forward rate were recognized as time-period-
related hedging costs. Because all underlying transactions and
hedging instruments had expired by December 31, 2021, the
amount of €11 million, which was initially recognized in equity, was
reclassified in full as an increase in earnings. There was no
ineffectiveness at any time during the year.
The expected sales price associated with the disposal of the
pigments business was partially hedged against exchange rate
fluctuations in 2021 and 2020. The occurrence of the hedged
transactions was, due to contractual agreements, considered highly
probable; and the transaction and derivatives used for hedging were
designated in a cash flow hedge accounting relationship. The hedge
was initially achieved through foreign currency forward contracts
and, following the discontinuation of this hedging relationship, with
foreign currency options. This was a transaction-related hedge. The
change in the forward rate and the change in the time value
component were recognized as hedging costs at a point in time.
This reduced equity by €3 million in 2021, and by €8 million in 2020.
Upon disposal of the pigments business as of June 30, 2021,
€11 million was reclassified as a reduction in earnings and included
in disposal losses from the global pigments business. There was no
ineffectiveness at any time during the year.
BASF used currency options in 2021 to hedge the foreign currency
risk resulting from the U.S. dollar-denominated sales price for the
sale of the shares in Solenis. These were designated in a cash flow
hedge accounting relationship. As this was a transaction-related
hedge, the change in the time value component was recognized as
hedging costs at a point in time. Accordingly, €10 million was initially
recognized as a reduction in equity. Upon disposal of the shares in
Solenis in November 2021, the amount recognized in equity was
reclassified to profit or loss and reported under net income from
shareholdings. There was no ineffectiveness at any time during the
year.
Furthermore, BASF used foreign currency options in 2021 to hedge
the Chinese renminbi denominated purchase price for 51% of the
shares in BASF Shanshan Battery Materials Co., Ltd. The options
used for hedging were designated in a cash flow hedge accounting
relationship. This was a transaction-related hedge; accordingly, the
change in the time value component was recognized as hedging
costs at a point in time. For this purpose, €2 million was recognized
as a reduction in equity. Upon closing of the transaction in
August 2021, the amount recognized in equity as hedging costs
was derecognized thereby increasing the purchase price. There was
no ineffectiveness at any time during the year.
The effects of the hedging relationships on the balance sheet, the
cash flow hedge reserve, hedged nominal value and ineffectiveness
to be determined are presented in the following tables by fiscal year.
BASF Report 2021
Consolidated Financial Statements - Notes
amounts for
Cash flow hedge accounting effects in 2021
Foreign currency risks
ΚΣΕ 276
Carrying amount of hedging instruments
Financial
assets
Financial
liabilities
Nominal
Balance sheet item
value
continuing
hedging
relationships
Million €
Due to planned sales in U.S. dollars, BASF is exposed to foreign
currency risks, which are partially hedged with currency options and
designated in a cash flow hedge accounting relationship. The
hedged transaction - the designated share of expected sales in
U.S. dollars - is calculated based on internal thresholds. The hedged
volume is always below the total amount of expected sales in
U.S. dollars for the following fiscal year. The average hedged rate
was $1.1630 per euro as of December 31, 2021, and $1.1583 per
euro in the previous year. The impact on earnings from designated
transactions in 2021 will be recognized in the following year. The
decrease in the options' time value component arising in the amount
of €14 million in 2021 was recognized separately in equity as the
cost of hedging and resulted in a reduction in equity. Due to the
maturity of hedged items, accumulated changes in the options' time
values were reclassified as a reduction in earnings in the amount of
€19 million. In 2020, €30 million was recognized as a change in the
options' time value component, thereby reducing equity; and
€34 million was reclassified as a reduction in earnings.
0
n/a
326
-210
279
287
Combined interest/
179
foreign currency risks
Commodity price risks
Total
69
a €59 million was derecognized from the cash flow hedge reserve against the cost of inventories and recognized in profit or loss upon consumption.
Foreign currency risks
Interest risks
Carrying amount of hedging instruments
Cash flow hedge reserve
Change in fair values for assessing
ineffectiveness
Recognized ineffectiveness
35
Accumulated
amounts for
Relating to financial collateral
Cash flow hedge accounting effects in 2020
Million €
0
1,916
287
Other receivables and
miscellaneous assets
920
-4
89
-85
Other financial
income
179
187
n/a
-1
Other receivables and
0
miscellaneous assets/
assets of disposal
groups/other liabilities
488
73
154
n/a
100
100
n/a
107
The physical power purchase agreements that were reported as
derivatives in the balance sheet were designated as hedging
instruments to a cash flow hedge accounting relationship. The aver-
age price hedged using these instruments was €45.44 per MWh of
electricity and €1.83 per GoO as of December 31, 2021. The real-
ized hedging results are recognized in profit or loss upon occurrence
of the hedged underlying transactions in the years 2022 to 2048.
Hedging effects
< > 275
of which interest result
Financial liabilities measured at amortized cost
of which interest result
Κ ΣΕ 273
2021
2020
318
-282
19
Financial assets at fair value through other comprehensive income
32
691
58
65
2
2
2
1
-726
-326
608
of which interest result
Financial instruments at fair value through profit or loss
of which interest result
-18
-18
BASF's planned soybean procurement is also exposed to commod-
ity price risks. These commodity price risks are hedged with soybean
futures. The contractual conditions for these hedging transactions
correspond to the respective hedged item, and some are desig-
nated in cash flow hedge accounting relationships. The average
price hedged using these instruments was $13.35 per bushel as of
December 31, 2021 (December 31, 2020: $12.52 per bushel). Cash
flows from these futures and the hedged expected future transac-
tions are generally recognized in profit or loss for the following year.
397
-134
-61
202
545
-134
-233
178
The table "Offsetting of derivative assets and liabilities" shows the
extent to which assets and liabilities were offset in the balance sheet,
as well as potential effects from the offsetting of derivatives subject
to a legally enforceable global netting agreement (primarily in the
form of an ISDA agreement) or similar agreement. For positive fair
values of combined interest rate and currency swaps, the respective
counterparties provided cash collaterals in an amount comparable
to the outstanding fair values.
Deviations from the derivatives with positive fair values and
derivatives with negative fair values reported in other receivables
and other liabilities at the end of 2021 and 2020 arose from
derivatives not subject to any netting agreements as well as from
embedded derivatives. These are not included in the table above.
In addition to the offsetting of derivatives presented in the table
above, trade accounts receivable in 2021 were offset against trade
accounts payable and advance payments received on orders, which
were included in current other liabilities, provided specific netting
agreements with customers existed. As a result, trade accounts
receivable were reduced by €805 million. The reduction in trade
accounts payable was €36 million and the reduction in advance
payments received on orders was €769 million. Accordingly, the net
amount for trade accounts receivable was €11,942 million (gross
amount before offsetting: €12,747 million). The resulting net amount
for trade accounts payable was €7,826 million (gross amount before
offsetting: €7,862 million). The net amount for advance payments
received on orders was €949 million (gross amount before offsetting:
€1,718 million). In 2020, trade accounts receivable were also offset
against trade accounts payable and the advance payments received
on orders included in current other liabilities. This reduced trade
accounts receivable by €616 million. The reduction in trade accounts
payable was €45 million and the reduction in advance payments
received on orders was €571 million. Accordingly, the net amount
for trade accounts receivable was €9,466 million (gross amount
before offsetting: €10,082 million). The resulting net amount for
trade accounts payable was €5,291 million (gross amount before
offsetting: €5,336 million). The net amount for advance payments
received on orders was €679 million (gross amount before offsetting:
€1,250 million).
BASF Report 2021
Consolidated Financial Statements - Notes
The net gains and losses from financial instruments shown in the
following table comprise the results of valuations, the amortization of
discounts, the recognition and reversal of impairments, results from
the translation of foreign currencies as well as interest, dividends
and all other effects on the earnings resulting from financial
instruments. The line item financial instruments at fair value through
profit or loss contains only gains and losses from instruments that
are not designated as hedging instruments in a hedging relationship
in accordance with IFRS 9.
Gains and losses from the valuation of securities recognized in equity are shown in development of
income and expense recognized in equity attributable to shareholders of BASF SE on page 195
For more information, see the Statement of Changes in Equity on page 199
Net gains and losses from financial instruments
Million €
Financial assets measured at amortized cost
-324
-403
Financial
Consolidated Financial Statements - Notes
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Interest derivatives
179
90
102
-163
Commodity derivatives
324
-321
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Derivative financial instruments
-163
107a
447
-439
Hedge accounting
BASF is exposed to commodity price risks in the context of procuring
naphtha. Some of the planned purchases of naphtha are hedged
using swaps and options on oil and oil products. The main
contractual elements of these items are aligned with the
characteristics of the hedged item. Cash flow hedge accounting
was employed for a portion of these hedging relationships in 2021
and 2020. The average exercise price of the designated options
was $675.54 per metric ton as of December 31, 2021 (Decem-
ber 31, 2020: $454.45 per metric ton). Cash flows from designated
hedging instruments and hedged transactions occur in the following
year and are also recognized in profit or loss for that year.
Furthermore, cash flow hedge accounting continued to be employed
to a minor extent for procuring natural gas, which is likewise exposed
to commodity price risks. Commodity price-based options serve as
hedging instruments, for which contract terms are defined to reflect
the risks of the hedged item. Depending on where trading took
place, the average exercise price of the designated options was
€32.60 per MWh or $3.74 per mmBtu as of December 31, 2021.
The average exercise price of the designated options was €13.35
per MWh or $2.74 per mmBtu as of December 31, 2020. Cash
flows from the hedging transaction and hedged item are generally
recognized in profit or loss for the following year.
The change in the options' time value is recognized separately in
equity as costs of transaction-related hedging and, in the year
during which the hedged items mature, it is initially derecognized
against the carrying amount of the procured assets and recognized
in profit or loss when the assets are consumed. In 2021, a decrease
in fair value of €27 million was recognized in equity, and €24 million
was initially derecognized against the carrying amount of the
inventories procured and then recognized upon consumption in
profit or loss. In 2020, a decrease in fair value of €17 million was
recognized as a reduction in equity, and €13 million was derecog-
nized against the carrying amount of the assets.
a Of which €71 million reported in the balance sheet under assets of disposal groups
BASF Report 2021
Consolidated Financial Statements - Notes
7
102
BASF Report 2021
0
35
<>=274
26.5 Derivative financial instruments and hedging
relationships
The use of derivative financial instruments
BASF is exposed to foreign currency, interest rate and commodity
price risks during the normal course of business. These risks are
hedged using derivative instruments as necessary in accordance
with a centrally determined strategy. Hedging is employed for
existing underlying transactions from the product business, cash
investments and financing as well as for planned sales, raw material
purchases and capital measures. Furthermore, hedging may also be
used for cash flows from acquisitions and divestitures. The risks
from the hedged items and the derivatives are continually monitored.
Where derivatives have a positive market value, BASF is exposed to
credit risks from derivative transactions in the event of nonperfor-
mance of the other party. To minimize the default risk on derivatives
with positive market values, transactions are exclusively conducted
with creditworthy banks and partners and are subject to predefined
credit limits.
Fair value of derivative instruments
Million €
Foreign currency forward contracts
Foreign currency derivatives
of which designated hedging instruments as defined by IFRS 9 (hedge accounting)
Combined interest rate and currency swaps
Foreign currency options
The fair values of derivative financial instruments are calculated
using valuation models that, if available, use input parameters
observable on the market. Exceptions to this are some commodity
derivatives, whose valuation is based directly on market prices.
45
To ensure efficient risk management, risk positions are centralized at
BASF SE and certain Group companies. The contracting and
execution of derivative financial instruments for hedging purposes
are conducted according to internal guidelines, and subject to strict
control mechanisms.
35
1
10
22
December 31, 2020
December 31, 2021
In addition to the derivative instruments presented in the following
table, BASF also had derivatives that were embedded in other
financial instruments. This primarily related to options embedded in
a loan on the borrower's equity instruments. The fair value of these
derivatives was €33 million as of December 31, 2020. The options
were exercised in 2021.
21
2018
Income from operations (EBIT)
Sales
Statement of income
2021
2020
2019
2017
BASF Report 2021
2015
2014
2013b
2012a
<>=287
Million €
Ten-Year Summary
Overviews - Ten-Year Summary
289
2016
Income before income taxes
78,598
73,973
7,203
287
5,977
7,677
-191
4,201
5,974d
7,587c
6,275
72,129
6,248
7,160
6,742
59,149
59,316
60,220d
61,223°
57,550
70,449
74,326
7,626
6,600
of which domestic
Ten-Year Summary.
0.2
Tax consultation services
0.8
0.5
of which domestic
1.0
0.7
Audit-related services.
7.1
0.2
6.8
19.6
19.2
2020
2021
Annual audit
Services provided by the external auditor
Million €
BASF Group companies used the following services from KPMG:
32 Services provided by the external auditor
<>=285
of which domestic
of which domestic
0
0
Overviews
To Our Shareholders
Management's Report
Corporate Governance
Consolidated Financial Statements
Contents
Q<>286
Overviews
BASF Report 2021
5
The line item annual audit relates to expenses for the audit of the
Consolidated Financial Statements of the BASF Group, the legally
required financial statements of BASF SE and of the subsidiaries
and joint operations included in the Consolidated Financial
Statements as well as the review of subgroups. Fees for audit-
related services primarily include audits in connection with regulatory
demands as well as other confirmation services. Domestic tax
consultation services related primarily to tax declaration adjustments
for the Chemetall companies until the 2015 tax period.
The services provided by the external auditor mainly include services
for the annual audit and, to a lesser extent, confirmation services
and tax consultation services.
For more information on the share buyback program, see Note 19 from page 249 onward
On January 4, 2022, the Board of Executive Directors approved a
share buyback program with a maximum volume of €3 billion to be
implemented between January 2022 and December 2023. The
share buyback program is based on the authorization from
May 12, 2017. A proposal to renew the authorization to buy back
own shares is planned for the 2022 Annual Shareholders' Meeting,
which would authorize the continuation of the share buyback
program already underway.
date
34 Non-adjusting events after the balance sheet
For more information, see basf.com/en/corporate governance
The annual Declaration of Conformity with the German Corporate
Governance Code according to section 161 AktG was submitted by
the Board of Executive Directors and the Supervisory Board of
BASF SE in December 2021 and is published online.
Declaration pursuant to section 161 of the German Stock
Corporation Act (AktG)
33 Declaration of Conformity with the German
Corporate Governance Code
20.8
20.1
Total
Other services
Glossary and Trademarks
5,548
5,492
6,882°
10,735
4,364
7,258
6,013
7,285
7,726
5,263
Additions to property, plant and equipment and intangible assets
Capital expenditures, depreciation and amortization
7,768
3,560
4,643
6,281d
7,645°
6,309
6,739
7,357
7,077
6,647
4,097
4,869
4,881
of which property, plant and equipment
Consolidated Financial Statements - Notes
4,146
3,750d
4,202
4,251
4,401
3,417
3,272
3,267
EBIT before special items
Depreciation and amortization of property, plant and equipment and intangible assets
of which property, plant and equipment
4,075
3,842
5,040
4,028
4,377
5,742
6,369
6,428
4,084
4,410
11,355
6,494
8,185
4,301
5,113
5,067
Income after taxes
-36
396
5,945
863d
760
4,255
Income after taxes from discontinued operations
-1.471
2,546
4,116d
5,592
Income after taxes from continuing operations
7,448
-1.562
3,302
5,233d
6,018
5,395
6,352
8,491
8,970d
10,526
10,649
11,043
10,432
10,009
Income from operations before depreciation and amortization (EBITDA)
5,523
-1.060
4,979
8,421
6,078
4,056
3,987
5,155
4,792
4,819
Net income
5,982
-1.075
4,707
10,765°
In 2021, members of the Board of Executive Directors were
allocated 187,618 performance share units (PSUs) under the LTI
performance share program (2020: 151,247 PSUs). Market
Ovaluation of the PSUs of members of the Board of Executive
Directors resulted in an expense totaling €9.6 million in 2021
(2020: €2.9 million).
BASF had obligations from guarantees and other financial obligations
in favor of nonconsolidated subsidiaries in the amount of €21 million
as of December 31, 2021 (December 31, 2020: €8 million), and in
favor of associated companies in the amount of €389 million as of
December 31, 2021 (December 31, 2020: €28 million). Furthermore,
there were obligations from guarantees in the amount of €341 mil-
lion favoring a joint venture as of December 31, 2020.
30
<>=283
Consolidated Financial Statements - Notes
BASF Report 2021
Personnel expenses for BASF's "plus" incentive share program
totaled €27 million in 2021 and €28 million in 2020.
The fair value of the free shares to be granted is recognized as an
expense with a corresponding increase in capital reserves over the
term of the program.
weighted-average fair value on the grant date amounted to €67.71
for the 2021 program, and €45.30 for the 2020 program.
The free shares to be provided by the company are measured at the
fair value on the grant date. Fair value is determined on the basis of
the BASF share price, taking into account the present value of
dividends, which are not paid during the term of the program. The
3,251,576
Compensation of the Board of Executive Directors and Supervisory Board
3,079,123
-123,258
-490,050
942,685
498,765
-547,960
3,025,462
3,251,576
2020
2021
As of December 31
-226,521
As of January 1
Newly acquired entitlements
Bonus shares issued
Lapsed entitlements
Compensation of the Board of Executive Directors and Supervisory Board
Million €
Fair value of options and performance share units allocated to the Board of Executive Directors in the fiscal year
as of allocation datea
14.3
3.3
2.9
3.7
3.6
21.8
43.4
12.1
12.3
Non-performance-related and performance-related cash compensation of the Board of Executive Directors
9.7
2020
2021
Market valuation of the option rights of active and former members
of the Board of Executive Directors resulted in income totaling
€0.8 million in 2021. In 2020, option rights led to an expense in the
amount of €1.1 million.
In the final allocation of options under the BOP LTI program in 2020,
166,272 option rights were allocated to the Board of Executive
Directors.
The STI performance bonus is based on the performance of the
Board of Executive Directors as a whole and the return on capital
employed (ROCE) of the BASF Group. Subject to certain conditions,
ROCE is adjusted for special items from acquisitions and divesti-
tures. The conditions for a ROCE adjustment were not met in 2021.
a Members of the Board of Executive Directors were allocated option rights under the long-term incentive (LTI) program for the last time in 2020.
Total compensation of former members of the Board of Executive Directors and their surviving dependents
Pension provisions for former members of the Board of Executive Directors and their surviving dependents
Guarantees assumed for members of the Board of Executive Directors and the Supervisory Board
Compensation of the Supervisory Board
Total compensation of the Board of Executive Directors
Service costs for members of the Board of Executive Directors
31.1
12.5
Number of free shares to be granted
Shares
Employees who participate in BASF's "plus" incentive share program
and acquire shares in BASF as a personal investment from their
variable compensation. For every 10 BASF shares purchased in the
program, a participant receives one BASF share at no cost after
one, three, five, seven and 10 years of holding these shares. As a
rule, the first and second block of 10 shares entitles the participant
to receive one BASF share at no extra cost in each of the next
10 years.
89.04
88.83
€
82.06
78.59
€
362,203
223,037
724,405
%
892,146
2021
Strive! program of the year
Fair value of PSUs and parameters used as of December 31, 2021
Number of PSUs granted
A personal investment in BASF shares is the prerequisite for
participation in Strive!. Participants are required to own BASF shares
amounting to a predetermined percentage of their base salary for
the duration of the performance period. A set-up phase applies to
first-time participants. During this period, they are required to hold a
percentage of shares as their predetermined personal investment.
The set-up phase for the 2021 Strive! program ends on Decem-
ber 31, 2024. The 2021 Strive! program has the same fundamental
structure as the 2020 Strive! program.
Achievement of each strategic target is calculated for each year of
the four-year performance period. Upon conclusion of the perfor-
mance period, the average degree of target achievement for each
strategic goal is equal to the arithmetic mean of the degrees of target
achievement for the four years. The total target achievement for the
respective Strive! plan is determined by adding the target achieve-
ment degree for the three strategic targets after having multiplied
each by the corresponding weighting factor. To calculate the final
number of PSUs, this weighted target achievement is multiplied by
the preliminary number of PSUs. The payment amount upon
conclusion of the four-year performance period is calculated by
multiplying the final number of PSUs by the average BASF share
price for the fourth quarter of the last year of the performance period,
plus the accumulated dividend payments in the four fiscal years. The
payment occurs in May of the following year and is capped at 200%
of the target amount. The payment amount therefore not only
reflects achievement of the strategic targets, but performance of
BASF's dividend and share price as well (total shareholder return).
ultimately paid out at the end of the performance periods for
Strive!2021 and Strive!2020 depends on the achievement of the
three strategic targets: growth (volume growth compared with
global chemical production), profitability (increase in EBITDA before
special items) and sustainability (CO2 emissions).
ΚΣΕ 281
Consolidated Financial Statements - Notes
2020
The right to receive free BASF shares lapses if a participant sells the
individual investment in BASF shares, if the participant stops working
for a Group company or one year after retirement. The number of
free shares to be granted has developed as follows:
158.3
€
The "plus" incentive share program was introduced in 1999 and is
currently available to employees in Germany, other European
countries and Mexico. Simultaneous participation in both the "plus"
program and an LTI program is not permitted.
BASF "Plus" Incentive Share Program
The exercisable options had no intrinsic value as of Decem-
ber 31, 2021, or December 31, 2020.
The LTI provision for BOP decreased from €115 million as of
December 31, 2020, to €110 million as of December 31, 2021, due
to lower fair values and a lower number of outstanding option rights.
No utilizations were recognized in 2020, whereas €3 million was
utilized in 2021 due to senior executives leaving the company.
Income from the reduction in provisions totaled €2 million in 2021.
The expense from the addition of provisions totaled €25 million in
2020. €1 million was attributable to the disposal group for the
pigments business as of December 31, 2020.
As a result of a resolution by the Board of Executive Directors in
2002 to settle option rights in cash, all outstanding option rights
under the 2014 to 2020 programs were valued at fair value as of
December 31, 2021. A proportionate provision is recognized for
programs in the vesting period.
The models used in the valuation of the option plans are based on
the arbitrage-free valuation model according to Black-Scholes. The
fair values of the options were determined using the binomial model.
Volatility was determined on the basis of the monthly closing prices
over a historical period corresponding to the remaining term of the
options.
exercising an option is limited to five times the original individual
investment. Option rights are nontransferable and are forfeited if the
option holders no longer work for the BASF Group or have sold part
of their individual investment before the expiry of the two-year
vesting period. They remain valid in the case of retirement. For the
members of the Board of Executive Directors, the long-term
orientation of the program was significantly strengthened compared
with the conditions applying to the other participants. Members of
the Board of Executive Directors were required to participate in the
BOP program with at least 10% of their actual annual variable
compensation. In view of this binding personal investment (in the
form of BASF shares), an extended holding period of four years
applies. Members of the Board of Executive Directors may only
exercise their option rights four years after they have been granted
at the earliest (vesting period).
ΚΣΕ 282
Consolidated Financial Statements - Notes
137.5
BASF Report 2021
Participation in BOP was voluntary. In order to take part in the
program, a participant had to make a personal investment:
Participants were required to hold BASF shares representing
between 10% and 30% of their respective variable compensation
for a two-year period from the granting of the option (holding period).
The number of shares to be held was determined by the amount of
variable compensation and the volume-weighted average share
price on the first trading day after the Annual Shareholders' Meeting.
The "BOP" LTI program last offered in 2020, grants virtual option
rights. When exercised, the option rights are settled in cash.
BASF Option Program (BOP)
The LTI provision for Strive! rose from €11 million as of Decem-
ber 31, 2020, to €48 million as of December 31, 2021, due to the
increased number of vested PSUs and higher fair values. The
expense from the addition of provisions totaled €37 million in 2021
and €11 million in 2020. No provisions were attributable to the
disposal groups as of December 31, 2021, or December 31, 2020.
In 2021, the number of PSUs granted under the 2021 Strive!
program amounted to 892,146 and under the 2020 Strive! program
to 724,405. PSUs vested by the deadline totaling 223,037 for the
2021 Strive! program and 362,203 for the 2020 Strive! program
were measured at fair value. Fair value is determined using the BASF
share price of €61.78 on the balance sheet date plus expected
dividend payments during the term of the program. The weighted
target achievement degrees of 158.3% for the 2021 Strive! program
and 137.5% for the Strive! program 2020 are also taken into
account. A fluctuation rate of 4% is assumed in the fair value
calculation for senior executives.
Fair value including fluctuation / PSU
Fair value excluding fluctuation / PSU
Weighted target achievement
Base price
Number of PSUs vested
67.85
57.15
Participants received four option rights per invested share. Each
option consists of two parts, right A and right B, which may be
exercised if defined thresholds have been met: The threshold of
right A is met if the price of the BASF share has increased by more
than 30% in comparison with the base price on the option grant
date (absolute threshold). The value of right A is the difference
between the market price of BASF shares on the exercise date and
the base price; it is limited to 100% of the base price. Right B may
be exercised (relative threshold) if the cumulative percentage
performance of BASF shares exceeds the percentage performance
of the MSCI World Chemicals Index SM (MSCI Chemicals). The value
of right B is the base price of the option multiplied by twice the
percentage by which the BASF share outperforms the MSCI
Chemicals Index on the exercise date. It is limited to the closing
price on the date of exercise less the calculated nominal value of the
BASF share. Right B may only be exercised if the price of the BASF
share equals at least the base price. When a two-year vesting period
is over, options granted can be exercised until the end of the
respective exercise period. During the exercise period, there are
certain times (closed periods) during which the options may not be
exercised. Each option can only be exercised in full, and one of the
thresholds must be exceeded. If the other threshold is not exceeded,
the other option right lapses. A participant's maximum gain from
BASF Report 2021
196.9
6,685
34
136
189
149
210
98
136
213
266
64
December 31, 2020
December 31, 2020
December 31, 2021
Accounts
payable, trade
Accounts
receivable, trade
The Compensation Report is available at basf.com/compensationreport
see Management and Supervisory Boards from page 174 onward
For more information on the members of the Board of Executive Directors and the Supervisory Board,
For more information about defined benefit plans, the division of risk between Group companies, see
Provisions for pensions and similar obligations from page 254 onward
For more information on subsidiaries, joint ventures and associated companies, see the 2021
BASF Group list of shares held on page 213
December 31, 2021
There were no reportable related party transactions with members
of the Board of Executive Directors or the Supervisory Board and
their related parties in 2021.
221
Other receivables
The balance of valuation allowances on trade accounts receivable
from nonconsolidated subsidiaries was, as in the previous year,
€3 million as of December 31, 2021.
The balance of valuation allowances on other receivables from
nonconsolidated subsidiaries declined from €105 million as of
December 31, 2020, to €100 million as of December 31, 2021.
Balances outstanding to related parties were generally not hedged
and were settled in cash.
240
106
55
4
62
35
43
47
198
214
192
237
December 31, 2020
December 31, 2021
December 31, 2020
December 31, 2021
Other liabilities
19
209.0
BASF SE had other finance-related receivables from BASF Pen-
sionskasse WaG in the amount of €83 million as of Decem-
ber 31, 2021, and €3 million as of December 31, 2020.
Obligations arising from purchase contracts with joint ventures
amounted to €4 million as of December 31, 2021, and €6 million as
of December 31, 2020.
December 31, 2021
Services received
Services rendered
Associated companies
Joint ventures
Nonconsolidated subsidiaries
Million €
Sales to related parties
Consolidated Financial Statements - Notes
December 31, 2020
BASF Report 2021
The increase in other receivables from nonconsolidated subsidiaries
as well as the decrease from associated companies resulted
primarily from other finance-related receivables.
Other receivables and liabilities primarily arose from financing
activities, from accounts used for cash pooling, outstanding dividend
payments, profit and loss transfer agreements, and other finance-
related and operating activities and transactions.
Sales and trade accounts receivable from and trade accounts
payable to related parties mainly included business with own
products and merchandise, agency and licensing businesses, and
other operating businesses.
The following tables show the volume of business with related
parties that are included in the Consolidated Financial Statements at
amortized cost or accounted for using the equity method. The
values include sales, receivables, other receivables, liabilities and
other liabilities with respect to the disposal groups and/or
discontinued operations.
Related parties are legal or natural entities that can exert influence
on the BASF Group or over which the BASF Group exercises control
or joint control, or a significant influence. These primarily include
nonconsolidated subsidiaries, joint ventures and associated
companies.
Related party transactions
31
For more information on the members of the Supervisory Board and Board of Executive Directors,
including their memberships on other boards, see page 174 onward
The Compensation Report is available at basf.com/compensationreport
The decline in other liabilities to associated companies resulted from
other finance-related liabilities and contract liabilities.
Annual minimum rental payments for an office building including a
parking area payable by BASF SE to BASF Pensionskasse VaG for
the nonterminable basic rental period until 2029 amounted to
€7 million.
December 31, 2021
872
935
<>= 284
Associated companies
Joint ventures
Nonconsolidated subsidiaries
Other receivables from liabilities to related parties
Million €
Associated companies
Joint ventures
Nonconsolidated subsidiaries
December 31, 2020
Trade accounts receivable from / trade accounts payable to related parties
Million €
1,294
432
459
1,703
921
1,386
295
340
691
586
3,678
16,610
2,631
Appropriation of profits
13.5
1.7
7.7
12.0d
15.4
%
Return on capital employed (ROCE)
15.6
-2.8
21.6
14.1
18.9
13.3
14.4
19.7
19.2
19.9
%
Net income of BASF SE
Dividend
Dividend per share
Number of shares at year-end
3,031
3,031
2,939
2,847
2,755
2,664
2,572
2,480
2,388
Return on equity after tax
3,928
3,899
2,982
3,130
2,808
2,158
5,853
2,826
2,880
million
3,946
9.5
-1.2
4.5
7,939
8,785
7,717
9,446
6,958
8,100
6,602
Cash flows from operating activities
6.76
7,474
3.21
5.87
6.44°
4.83
5.00
5.44
5.31
5.64
€
Adjusted earnings per share
4.00
3,123f
5,413
EBITDA margin
7.1
9.5°
8.2
8.7
11.7
11.5
11.0
%
Return on assets
7,245
14.4
13.8
14.9d
17.6°
18.3
15.1
14.9
14.1
13.9
%
11.0
2.60
2.70
2.80
BASF Report 2022
October 26, 2022
Quarterly Statement Q3 2022
July 27, 2022
Half-Year Financial Report 2022
April 29, 2022
Quarterly Statement Q1 2022 / Annual Shareholders' Meeting 2022
a Trademarks are not registered/used in all countries.
All other trademarks referred to in the BASF Report are
registered trademarks of the BASF Group (identified with the
symbol), trademarks pending (identified with the TM symbol),
or trademarks used by the BASF Group.
February 24, 2023
Registered trademark of the European Chemical Industry
Council
Registered trademark of Bain & Company, Inc.
Net Promoter System®
Trademarksa
In the BASF Verbund, plants are intelligently connected. In this
system, chemical processes consume less energy, produce higher
product yields and conserve resources. The by-products of one
plant serve as feedstock elsewhere, creating efficient value chains -
from basic chemicals to high value-added solutions such as coat-
ings or crop protection products. Our Verbund concept - realized
in production, technologies, the market and digitalization - enables
innovative solutions for a sustainable future.
Verbund
A value chain describes the successive steps in a production
process: from raw materials through various intermediate steps,
such as transportation and production, to the finished product.
Value chain
V
Traits are commercial plant characteristics, such as an inherent
resistance to certain herbicides or an inherent defense against
certain insects.
Responsible Care®
Traits
Quarterly Statement Q1 2023 / Annual Shareholders' Meeting 2023
Further information
COMS 2201 E
Papler aus verantwor-
tungsvollen Quellen
FSC® C021366
MIX
FSC
www.fsc.org
BASF supports the chemical industry's global Responsible Care initiative.
OUR COMMITMENT TO SUSTAINABILITY
Responsible Care*
basf.com
Internet
April 27, 2023
Dr. Stefanie Wettberg, phone: +49 621 60-48002
Thorsten Pinkepank, phone: +49 621 60-41976
Sustainability Relations
Jens Fey, phone: +49 621 60-99123
Media Relations
Phone: +49 621 60-0, email: global.info@basf.com
General inquiries
Contact
You can find this and other BASF publications
online at basf.com/publications
Published on February 25, 2022
Investor Relations
6.01
T
Steam cracker
d Figures for 2018 were restated with the presentation of the construction chemicals activities as discontinued operations. For more information, see Note 1.4 to the Consolidated Financial Statements from page 203 onward
e Calculated in accordance with German GAAP
c Figures for 2017 were restated with the presentation of the oil and gas activities as discontinued operations. For more information, see Note 1.4 to the Consolidated Financial Statements from page 203 onward
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
918.5
918.5
918.5
918.5
918.5
918.5
f Based on the number of outstanding shares as of December 31, 2021 (918,478,694)
918.5
918.5
918.5
3.40
3.30
3.30
3.20
3.10
3.00
2.90
918.5
A steam cracker is a plant in which steam is used to "crack" naphtha
(petroleum) or natural gas. The resulting petrochemicals are the raw
materials used to produce most of BASF's products.
BASF Report 2021
Glossary and Trademarks
in an integrated product assessment tool.
SEEbalance is the Socio-Eco-Efficiency analysis developed by
BASF. It can be used to evaluate and compare the environmental
impact, costs and social aspects of products and manufacturing
processes. SEEbalance® makes sustainable development measur-
able and manageable for companies by combining the three
dimensions of sustainability - economy, environment and society -
SEEbalance®
S
The peak sales potential of the Agricultural Solutions pipeline
describes the total peak sales forecast for individual products in the
research and development pipeline. Peak sales are the highest sales
value to be expected from one year. The pipeline comprises innova-
tive products that have been on the market since 2021 or will be
launched on the market by 2031.
Peak sales potential
P
Genome editing refers to a series of new molecular biological
methods to make specific changes in the genome. Naturally occurr-
ing processes are used to make small changes to an organism's
genes to modify a specific characteristic. Such techniques have
great potential for innovative solutions in healthcare, agriculture and
industrial applications, for example.
Genome editing
Overviews - Glossary and Trademarks
G
Formulation
F
The Eco-Efficiency Analysis is a method developed by BASF for
assessing the economic and environmental aspects of products
and processes. The aim is to compare products with regard to
profitability and environmental compatibility.
Eco-Efficiency Analysis
E
CO2 equivalents are units for measuring the impact of greenhouse
gas emissions on the greenhouse effect. A factor known as the
global warming potential (GWP) shows the impact of the individual
gases compared with CO2 as the reference value.
CO2 equivalents
C
<>=289
Formulation describes the combination of one or more active sub-
stances with excipients like emulsifiers, stabilizers and other inactive
components in order to improve the applicability and effectiveness
of various products, such as cosmetics, pharmaceuticals, agricul-
tural chemicals, paints and coatings.
2,594
-1.15
6.62°
86,556
78,768
76,496
70,836
71,359
64,204
62,726
Total assets
2021
2020
2019
2018
2017
2016
2015
2014
2013b
2012a
<>= 288
86,950
80,292
87,383
Noncurrent assets
13,145
14,525
16,554
13,594
15,162
12,537
12,967
12,324
12,193
Balance sheet (IFRS)
of which intangible assets
50,424
55,960
43,335
47,623
50,550
46,270
43,939
38,253
35,259
52,332
Million €
Overviews - Ten-Year Summary
BASF Report 2021
111,047
110,302
117,628
122,404
115,490
113,830
112,435
113,292
112,206
8,963
110,782
Employees at year-end
3,064
5,189
3,408
3,155d
3,586
3,691
3,600
2,770
Personnel expenses
13,499
9,285
9,982
d Figures for 2018 were restated with the presentation of the construction chemicals activities as discontinued operations. For more information, see Note 1.4 to the Consolidated Financial Statements from page 203 onward
c Figures for 2017 were restated with the presentation of the oil and gas activities as discontinued operations. For more information, see Note 1.4 to the Consolidated Financial Statements from page 203 onward
a We have applied International Reporting Standards IFRS 10 and 11 as well as International Accounting Standard 19 (revised) since January 1, 2013. Figures for 2012 have been restated; no restatement was made for 2011 and earlier.
b Figures for 2013 have been adjusted to reflect the dissolution of the natural gas trading business disposal group.
2,216
2,086
2,158
1,994d
1,843°
1,863
9,224
1,953
1,849
1,732
Research and development expenses
11,097
10,576
10,924
10,659
10,610
10,165
1,884
of which property, plant and equipment
19,229
23,496
39,291
43,164
36,531
37,105
42,081
34,398
42,350
36,109
34,756
43,928
32,568
28,195
27,673
25,621
of which financial indebtedness
Total liabilities
Equity
2,624
4,330
2,427
31,545
2,300
44,012
44,600
4.42
4.34
5.61
5.22
5.25
€
Earnings per share
Key data
17,184
50,447
19,214
20,841
18,032
16,312
15,197
15,384
14,407
12,798
45,301
45,894
18,377
9.17
6,495
2,241
9,581
of which inventories
35,051
29,868
30,990
43,221
31,145
25,946
24,566
10,160
27,420
27,467
Current assets
21,553
19,647
21,792
20,780
25,258
26,413
25,260
25,951
1,375
11,266
10,005
1,718
1,827
1,647
of which cash and cash equivalents
11,942
9,466
9,093
10,665
10,801
9,693
10,952
10,385
10,233
9,506
of which accounts receivable, trade
13,868
10,010
11,223
12,166
10,303
9,516
5.12
BASF Report 2021
Direct customers
Operations
Inputs
Safety, quality, and reliability
are key to excellence in our
production and plant operations.
Environment
** Employees
Everything we do is based
on the expertise, knowledge,
motivation and conduct of
our employees.
Partnerships
We develop innovative
solutions for and with our
customers to expand our
leading position.
Trust-based relationships
are crucial to our license to
operate and our reputation.
€87.4 billion
Total assets
48.2%
Equity ratio
~10,000
R&D employees
€2.2 billion
R&D expenses
We use a wide range of
resources to implement our
customer-focused strategy
**Innovation
Our aim is to ensure solvency,
limit financial risks and optimize
the cost of capital.
Financial
Management's Report - How We Create Value
How We Create Value
The following overview provides examples of how we create value for our stakeholders.
It is modeled on the framework of the International Integrated Reporting Council (IIRC).
The content of the graphic has been audited within the scope of the relevant sections of
the Management's Report in which they appear.
Discover the interactive How
We Create Value graphic in the
BASF Online Report at
basf.com/how-we-create-value
1
Inputs
< >
2
24
24
3
Outputs
Business
model
5
Impact
+
Outcomes
€3.4 billion
Capex
BASF Report 2021
~60 million MWh
Electricity and steam demand
Renewable raw materials
■ Our customers are at the core of our strategy.
■ Sustainability and innovation is at the center of everything we do and a driver for growth and value.
■ Safety is always our number one priority.
■BASF's Verbund structure is the backbone of our efficient and reliable production.
■ Our six segments are aligned with value chains and address customer needs with differentiated solutions
and business strategies.
■We have a global, customer-focused presence.
■ Effective corporate governance ensures responsible conduct.
■We value our stakeholders and treat them with respect.
How we operate
We implement our
corporate purpose
€78.6 billion
Sales
*Innovation
~820
New patents worldwide
€7.8 billion
€24.1 billion
Financial
■ Employee engagement and diversity
■ Resource-efficient and safe production
-
1,695 million m³
Total water usage
111,047
Employees around the world
€11.1 billion
Personnel expenses
~280
Research collaborations
>70,000
Suppliers
Business model
2
Corporate purpose
We create chemistry
for a sustainable future
Our targets
■ Profitable growth
-
Effective climate protection
■ Product portfolio geared to innovation and sustainability
Responsible procurement
1.3 million metric tons
EBIT before special items
2 BASF considers all direct suppliers of the BASF Group in the business year concerned as Tier 1 suppliers. These are suppliers that provide us with raw materials, investment goods, consumables and services. Suppliers can be natural persons, companies or legal persons under public law.
For more information, see Note 2 to the Consolidated Financial Statements from page 205 onward
The map shows the production sites and research and development sites
of the BASF Group according to the scope of consolidation for this report.
Sites not shown on the map include office and warehouse locations as
well as sites of companies outside the scope of consolidation.
Verbund sites / planned Verbund site
Research and development sites
Production sites
Regional centers
n
BASF sites
Florham Park
São Paulo
Antwerp
Ludwigshafen
Nanjing
Zhanjiang
Hong Kong
Kuantan
Geismar
Freeport
Management's Report - BASF Group
BASF Report 2021
For more information on the segment structure, see Note 5 to the Consolidated Financial Statements
from page 213 onward
BASF Report 2021
Management's Report - BASF Group
☑
21
21
Organization of the BASF Group
We take a differentiated approach to steering our businesses
according to market-specific requirements and the competitive
environment. We provide a high level of transparency around the
results of our segments and show the importance of the Verbund
and value chains to our business success. BASF aims to differen-
tiate its businesses from their competitors and establish a high-
performance organization to enable BASF to be successful in an
increasingly competitive market environment.
The operating divisions, the service units, the regions and the corpo-
rate center form the cornerstones of the BASF organization, in line
with the corporate strategy. As part of the implementation of our
strategy, we streamlined our administration, sharpened the roles
of services and regions, and simplified procedures and processes.
The organizational realignment created the conditions for greater
customer proximity, increased competitiveness and profitable
growth.
The divisions bear strategic and operational responsibility here and
are organized according to sectors or products. They manage the
50 global and regional business units and develop strategies for
75 strategic business units.
The regional and country units represent BASF locally and support
the growth of business units with local proximity to customers. For
financial reporting purposes, we organize the regional divisions into
four regions: Europe, North America, Asia Pacific, and South America,
Africa and Middle East.
Our research is currently divided into three global divisions: Process
Research & Chemical Engineering, Advanced Materials & Systems
Research and Bioscience Research. To strengthen our innovation
capabilities, we will reorganize our global research activities in 2022
and align them even more closely with the needs of our customers.
To this end, we will integrate downstream research into the divisions
and bundle activities with broad relevance in a research unit. This
unit will continue to be globally positioned with research centers in
Europe, North America and Asia Pacific.
Five service units provide competitive services for the operating divi-
sions and sites: Global Engineering Services, Global Digital Services,
Global Procurement, European Site & Verbund Management, Global
Business Services (finance, human resources, environmental pro-
tection, health and safety, intellectual property, communications,
procurement, supply chain and inhouse consulting services).
Following the bundling of services and resources and the imple-
mentation of a wide-ranging digitalization strategy, the number of
employees in the Global Business Services unit worldwide will
decline by up to 2,000 by the end of 2022 compared with base-
line 2019. From 2023 onward, the division expects to achieve
annual cost savings of over €200 million.
The Corporate Center supports the Board of Executive Directors in
steering the company as a whole. These include central tasks from
the following areas: strategy, finance and controlling, compliance
and law, tax, environmental protection, health and safety, human
resources, communications, investor relations and internal audit.
Our Excellence Program aimed to contribute €2 billion to EBITDA
annually until the end of 2021 onward compared with baseline 2018.
We met this target in 2021. As planned, this was partly due to the
reduction of more than 6,000 positions worldwide until the end of
2021. This decrease resulted from the organizational simplification
and from efficiency gains in administration, the service units and the
operating divisions.
For more information on the products and services offered by the segments, see pages 72, 76, 79, 82,
85 and 88 onward
22
1 The number of customers refers to all external companies (sold-to parties) that had contracts with the BASF Group in the business year concerned under which sales were generated.
22
Management's Report - BASF Group
North America
BASF supplies products and services to around 90,000 customers¹
from various sectors in almost every country in the world. Our cus-
tomer portfolio ranges from major global customers and small and
medium-sized enterprises to end consumers.
We work with over 70,000 Tier 1 suppliers² worldwide. They supply
us with important raw materials, chemicals, investment goods and
consumables, and perform a range of services. Important raw
materials (based on volume) include naphtha, liquid gas, natural
gas, benzene and caustic soda.
For more information on customers, see page 28 onward; for more information on suppliers, see
page 109 onward
Construction | Electronics | Energy and resources | Health and
nutrition (respectively)
Business and competitive environment
BASF's global presence means that it operates in the context
of local, regional and global developments and a wide range of
conditions. These include:
27%
Global economic environment
- International trade agreements
- Industry standards
Environmental agreements (such as the E.U. Emissions Trading
System)
· Social aspects (such as the U.N. Universal Declaration of Human
Rights)
BASF holds one of the top three market positions in around 80%
of the business areas in which it is active. Our most important
global competitors include Arkema, Bayer, Clariant, Corteva,
Covestro, Dow, Dupont, DSM, Evonik, Huntsman, Lanxess, SABIC,
Sinopec, Solvay, Sumitomo Chemical, Syngenta, Wanhua and
many hundreds of local and regional competitors. We expect com-
petitors from Asia and the Middle East in particular to continue to
grow in significance in the years ahead.
Corporate legal structure
As the publicly listed parent company of the BASF Group, BASF SE
takes a central position: Directly or indirectly, it holds the shares in
the companies belonging to the BASF Group, and is also one of
the largest operating companies. The majority of Group companies
cover a broad spectrum of our business. In the BASF Group Con-
solidated Financial Statements, 258 companies including BASF SE
are fully consolidated. We consolidate nine joint operations on a
proportional basis and account for 27 companies using the equity
method.
- Legal and political requirements (such as European Union regula-
tions)
Procurement and sales markets
27%
Asia Pacific
< >
23
23
BASF sales by region 2021
Location of customer
7%
South America, Africa,
Middle East
BASF sales by industry 2021
Chemicals and plastics | Transportation (respectively)
> 20%
39%
10%-20%
Agriculture | Consumer goods (respectively)
Europe
<10%
€78,598 million
BASF Report 2021
Accelerator sales
We use natural resources to
manufacture products and
solutions with high value added
for our customers.
Operations
Management's Report - Our Strategic Action Areas
Our Strategic Action Areas
< > 28
28
Our customers are our number one priority and are at the heart
of our strategy. We want to be their most attractive partner for chal-
lenges that can be solved with chemistry. BASF supplies products
and services to around 90,000 customers' from almost all sectors
and countries around the world. Our customer portfolio ranges from
major global customers and small and medium-sized enterprises to
end consumers. Our comprehensive product portfolio means that
we are active in many value chains and value creation networks. We
use various business strategies, which we adapt to the needs of
individual industries and markets. These range from cost leadership
in basic chemicals to tailored system solutions for specific customer
applications.
Selected awards
Ford: World Excellence Award
Dulux: Supplier of the Year Award
3M: Supplier of the Year Award
BASF Report 2021
We continue to drive forward our customer focus. We have refined
our organizational structure to enable our operating divisions to
flexibly address specific market requirements and differentiate them-
selves from the competition.
innovation and growth potential together with them. For instance,
we established interdisciplinary teams in our business units to even
better and more quickly address the needs of our most important
customers.
BASF's strategic orientation is founded on a comprehensive
analysis of our markets and competitors. We continuously monitor
global trends and anticipate the resulting growth opportunities and
risks. The following six strategic focus areas enable us to focus on
our customers while strengthening our leading position in an increas-
ingly volatile and competitive environment.
[Innovation]
Innovation is the bedrock of our success. BASF is a leader in the
chemical industry with around 10,000 employees in research and
development and R&D spending of around €2.2 billion. We are
expanding this position by strengthening specific research activities,
for example in battery materials, polymer technologies, catalyst
processes or biotechnological methods. In addition, we are bringing
research and development even closer together, incorporating our
customers' requirements into our innovation processes even earlier
and more intensively, and expanding cooperation with customers,
universities, research institutions and other partners. To further
strengthen our innovation power, we will reorganize our global
research activities in 2022 and bundle them in a global research unit
based in Ludwigshafen, Germany.
Our innovation pipeline is geared to sustainability - especially
climate protection and the circular economy. This lays the founda-
tion for future growth: We are working intensively on fundamental
innovations for products, processes and business models, for
example in the chemical recycling of plastics, battery and catalyst
technologies, low-carbon production of basic chemicals, and digital,
Good to know
The virtual car
We are also improving our customer relationships with a range of
measures. For example, since 2019 we have been using the Net
Promoter SystemⓇ worldwide to systematically record and optimize
our problem-solving skills, product quality and delivery reliability
based on direct customer feedback. We have been using a new
IT-based customer relationship management system, Salesforce,
since 2020. The application helps our sales employees to provide
customer support and simplifies their work. Above and beyond this,
we have intensified cooperation with our customers to leverage
Greenhouse gas emissions by
2050 (Scope 1 and 2)
Net zero
Reduction in our greenhouse gas
emissions by 2030 compared
with 2018 (Scope 1 and 2)
The new Net Zero Accelerator unit started work on January 1,
2022. It bundles the extensive cross-company activities with
which we want to achieve our ambitious climate protection
targets. The unit will initially have around 80 employees and
report directly to the Chairman of the Board of Executive
Directors. It will focus on accelerating and implementing
projects relating to low-CO2 production technologies, circular
economy and renewable energies - driving forward BASF's
transformation to a climate-neutral company. In parallel, our
operating divisions will continue to work on divisional-specific
carbon reduction projects.
For more information on climate neutrality, see pages 27 and 126 to 132
In focus:
Our Journey to Climate Neutrality
Climate change is the greatest challenge of the 21st century. Swift and resolute action is needed to
ensure that the targets agreed in the Paris Climate Agreement can be achieved. We stand by this
responsibility. In many areas, products and innovations based on chemistry are the key to a climate-
neutral future. At the same time, we are working intensively to significantly reduce the carbon
footprint of our production and thus of our products.
BASF Report 2021
Management's Report - In Focus: Climate Neutrality
27
27
Renewable energy is a central building block on BASF's journey to
climate neutrality. To enable us to meet our growing demand in the
future, we are gradually switching our supply agreements to green
power and investing in our own plants. Find out more about how we
are driving forward the transformation of our energy supply in the
online report at report.basf.com.
[Our target: net zero emissions by 2050. We have set ourselves an
ambitious milestone on this path. By 2030, we want to reduce the
greenhouse gas emissions from our production sites and our energy
purchases by 25% compared with 2018 - while growing production
volumes. This corresponds to a decrease of around 60% compared
with 1990. We are intensely pursuing our climate protection targets
with investments of up to €4 billion by 2030. Our focus here is on
five strategic levers: We are increasingly meeting our energy
needs from renewable sources (gray-to-green lever). We are
increasingly relying on energy recovery to produce steam (power-
to-steam lever). We are working to further improve the energy and
process efficiency of our plants (continuous opex lever). We are
increasingly replacing fossil resources with bio-based raw materials
(bio-based feedstocks lever). And together with partners, we are
pioneering nearly carbon-free production processes, especially for
emission-intensive basic chemicals (new technologies lever).
We want to play an active and responsible role in shaping the
transition toward a climate-neutral society. This calls for new ways
of thinking and working together. And it needs a political and regu-
latory environment that promotes innovation in climate protection,
makes it possible to develop new, climate-smart processes that are
competitive internationally and, above all, resolutely drives forward
the expansion of renewable energies - including through the appro-
priate land use designations, rapid planning and approval proce-
dures and the swift expansion of grid infrastructure.
One thing is clear: The transformation will require significantly more
energy from renewable sources. Initial estimates suggest that at the
Ludwigshafen site in Germany alone, we would need to roughly
triple or quadruple our current electricity use (2021: 6.0 TWh) to
fully implement new, low-carbon electricity-based production pro-
cesses. To meet this demand, we are investing in our own power
assets, especially for wind power, and are increasingly buying green
electricity on the market (make & buy approach).
Also critical to success are prices for renewable energy. Substi-
tuting fossil fuels is only economically feasible at production costs of
4 to 5 cents/kWh. Consequently, there is an urgent need to expand
supply and reduce the levies and fees on electricity prices. In addi-
tion, globally comparable carbon pricing - or at least at G20 level - is
needed to ensure that climate-friendly processes are competitive
internationally.J
For more information on energy and climate protection, see page 126 onward
For more information on raw materials, see page 112 onward
Our global climate protection targets
-25%
The automotive industry is one of our most important customer
sectors. In February 2021, we launched an interactive platform
that showcases BASF's wide range of solutions and innovation
expertise in mobility: Customers can explore over 500 application
areas in a new virtual car - from high-performance plastics and
coatings to automotive fluids, catalysts, cathode materials and
more. Detailed information is provided on all products and solu-
tions. The virtual car offers a selection of different powertrain
technologies: combustion engine, plug-in hybrid, battery electric
vehicle and fuel cell vehicle. E-mobility solutions can also be filtered
by material properties such as battery efficiency, corrosion protec-
tion or thermal protection.
Discover the virtual car at basf-vcar.com
1 The number of customers refers to all external companies (sold-to parties) that had contracts with the BASF Group in the business year concerned under which sales were generated.
BASF Report 2021
Management's Report - Our Strategic Action Areas
Κ Σ
30
30
member of the Quantum Technology and Application Consortium
(QUTAC) industry consortium launched in 2021.
For more information on digitalization in production, see page 119
Portfolio
The acquisitions and divestitures made in the past few years
have oriented our portfolio even more strongly toward innovation-
driven growth areas. In 2021, we successfully integrated the poly-
amide business acquired from Solvay, further strengthening our
position in engineering plastics. We closed the divestiture of our
pigments business to the fine chemicals company DIC as planned in
the first half of 2021. The sale of our shareholding in Solenis to
Platinum Equity was also completed as planned in November 2021.
We intend to close the divestiture of our kaolin minerals business to
KaMin, announced in November 2021, in the second half of 2022,
subject to the approval of the relevant merger control authorities.
We steer our six segments along our value chains. Our operating
divisions drive forward our industry and customer orientation with
differentiated strategies.
The Asian market will play a key role in our future growth. With a
share of more than 45%, China is already the world's largest chemi-
cal market and will be an even stronger driver of growth in global
chemical production in the future. Our strong innovation, production
and sales base in Asia, and in particular in China, enables us to
respond to the needs of our customers in a differentiated way. To
further strengthen our position in this dynamic growth market, we
plan to build a second Verbund site in China, in Zhanjiang in the
southern Chinese province of Guangdong. Construction on the first
plants continued as planned in 2021. They are scheduled for startup
in 2022. We will also expand the Verbund site we operate together
with Sinopec in Nanjing, China, by 2023. This investment includes
new production plants for selected products in the Petrochemicals
and Intermediates divisions.
Our employees are key to BASF's success. That is why we believe
that it is important to have an inspiring working environment that
fosters and develops employees' individual talents and enables
them and their teams to perform at their best. We are pursuing three
action areas to make our high-performance organization even more
so: empowerment, differentiation and simplification. At the same
time, we encourage and promote a leadership culture that empow-
ers our employees to respond to customer needs quickly and effi-
ciently with a solution orientation. We value diversity in people,
opinions and experience as being crucial to creativity and innovation.
We embrace bold ideas, help our employees to implement them
and learn from setbacks. It is founded on an open feedback and
leadership culture based on mutual trust, respect and dedication to
top performance.
We are expanding our battery materials business with further [Employees]
investments and strategic partnerships and are developing inno-
vative recycling concepts, in particular to supply the fast-growing
global e-mobility market with sustainable solutions. We are currently
building a precursor plant for cathode active materials¹ in Harjavalta,
Finland, and a production plant for cathode materials² in Schwarz-
heide, Germany. Both plants are scheduled for startup in 2022. In
Schwarzheide, we are also building a prototype plant for battery
recycling, which is expected to start up in 2023.2 We also reached
another important milestone in the development of a global value
chain for battery materials with the formation of BASF Shanshan
Battery Materials Co., Ltd. in China at the end of August 2021. With
production facilities in all key regions and a global capacity of 160
metric kilotons of cathode materials from 2022 onward, we are able
to serve cell manufacturers and OEM customers in all relevant mar-
kets with tailored and sustainable solutions. We also entered into a
number of cooperative agreements in 2021, including with battery
cell manufacturers such as CATL and SVOLT and automotive manu-
facturers such as Porsche. The aim is to jointly drive forward the
development of innovative cathode materials and recycling
technologies.
The transition to electromobility is leading to fundamental changes in
the automotive industry. As a leading chemical supplier to the auto-
motive industry, we will further strengthen our focus on battery
materials and battery recycling. To this end, in January 2022, we
started the carve-out process for our mobile emissions catalysts
business, automotive catalysts recycling and the associated pre-
cious metal services unit. The new, standalone organizational
structure prepares the business for the upcoming changes in the
internal combustion engine market.
For more information on material investments and portfolio measures, see page 38 onward
For more information on employees, see page 97 onward
1 The investment in Finland is co-financed by Business Finland, the Finnish government organization for innovation funding and trade, travel and investment promotion.
2 Our investment and research activities in Schwarzheide and Ludwigshafen, Germany, receive funding from the German Federal Ministry for Economic Affairs and Climate Action and the Ministry for Economic Affairs, Labor and Energy of the German state of Brandenburg under the IPCEI on Batteries (funding code 16BZF101A/B).
BASF Report 2021
Net Zero Accelerator
1 In March 2021, we replaced our previous target of CO2-neutral growth until 2030 (baseline 2018: 21.9 million metric tons of CO₂e) with a new, more ambitious climate protection target to reduce absolute CO2 emissions by 25% compared with 2018 (new target: 16.4 million metric tons of CO₂e).
Digitalizing our plants and systematically analyzing data enables us
to further automate processes and in this way, increase the capacity,
availability and efficiency of our plants, for example with predictive
maintenance. Linking data from different sources and using artificial
intelligence for smart data analysis opens up numerous opportuni-
ties for us to manage our business more efficiently and improve our
processes, for example in logistics.
Management's Report - Our Strategic Action Areas
29
29
more environmentally friendly agriculture. At the same time, we are
driving forward product improvements in all business units that offer
our customers sustainability and competitive advantages, such as in
lightweight construction and surface solutions for the automotive
industry, bio-based and biodegradable active ingredients for the
cosmetics, detergent and cleaner industries, and energy-efficient
building materials.
For more information on innovation, see page 49 onward
[Sustainability]
the Hollandse Kust Zuid offshore wind farm, which Vattenfall expects
to commission in 2023. Together with RWE, we are developing
a project concept for an offshore wind farm in the North Sea. In
addition, we have signed long-term purchase agreements for
renewable energy with suppliers such as Ørsted and Engie.
We plan to invest €25.6 billion worldwide between now and 2026
to expand capacities based on market demand and to further
increase the availability, efficiency and flexibility of our plants. Our aim
here is to be close to our customers and to grow together with them.
For more information on our production sites and the Verbund structure, see page 20
Another focus is our product portfolio. We already met our 2025 [Digitalization]
target of generating Accelerator sales of €22 billion in 2021. In the
future, we want to align our product portfolio even more strongly
with climate protection, carbon neutrality and circularity in order to
meet the growing sustainability demands in our markets with inno-
vative solutions. Consequently, we will update our product portfolio
steering target in 2022.
For more information on energy and climate protection, see page 126 onward
For more information on circular economy, see pages 44 and 142
Mi Economic
We believe that the economy, environment and society are inextri-
cably linked and interrelated. We want to create value in all three
areas with our products, solutions and technologies. We pledged
our commitment to sustainability in 1994 and since then, have
systematically aligned our activities with the principles of sustain-
ability. We want to further strengthen our position as a thought
leader in sustainability. We see sustainability as an integral part of [Production]
our strategy as well as our targets, steering processes and business
models. This establishes us as a responsible and attractive partner
supporting our customers, opens up new growth areas and secures
the long-term success of our company. Our approach covers the
entire value chain - from responsible procurement and safety and
resource efficiency in production to sustainable solutions for our
customers.
Since 1990, we have almost halved our carbon emissions while
simultaneously doubling sales product volumes. By 2030, we want
to reduce our absolute CO2 emissions by 25% compared with
2018 and will invest up to €4 billion to this end. By 2050, we aim to
achieve net zero emissions from our production sites and our energy
purchases. We are pursuing ambitious climate protection targets
with our carbon management. This comprises five strategic levers
that we are systematically driving forward to reduce our greenhouse
gas emissions (see page 27). To increase the share of renewables
in our energy supply, for instance, we entered into pioneering
cooperation agreements in 2021. For example, we hold a share in
Our core business is the production and processing of chemicals.
Our strength here lies - both now and in the future – in the Verbund
and its integrated value chains. The Verbund offers us many tech-
nological, market, production-related and digital advantages. Our
comprehensive product portfolio, which ranges from basic chemi-
cals to tailored system solutions, enables us to meet the increasingly
diverse needs of our customers with a differentiated offering. This
is complemented by our global presence, coupled with our many
decades of experience, which have allowed us to develop an
in-depth understanding of the needs and landscape of local
markets.
Our integrated Verbund structure enables efficient, reliable and
carbon-optimized steering of our production activities. In 2021, for
example, we avoided 7.3 million metric tons of CO2 worldwide
through the intelligent networking of our plants and combined heat
and power generation.
We want to leverage the diverse growth potential of digitalization
and seize the associated opportunities to the benefit of our custom-
ers. To achieve this, we promote digital skills among our employees,
cooperate with partners and make digital technologies and ways
of working an integral part of our business. For example, we had
introduced augmented reality solutions at 340 plants worldwide
as of the end of 2021. We plan to implement these at more than
80 other plants by the end of 2022.
The combination of products, services and digital offerings also
opens up new business models and advantages for our customers,
such as in agriculture or 3D printing. In addition, digitalization enables
us to further strengthen our innovative power. BASF has one of the
most powerful supercomputers in the chemical industry - Quriosity.
It can be used to significantly accelerate complex computational
processes such as the simulation of molecules, enabling new
chemical products to be developed more quickly, for example.
At the same time, we are already working on groundbreaking
technologies such as quantum computing, including as a founding
Good to know
For more information on Accelerator products und Sustainable Solution Steering, see pages 45 and 141
We also see these disruptive changes as an opportunity. As the
world's largest chemical company, we want to lead the way and
actively and responsibly shape the change. That is why we are
gradually switching our energy and raw material supplies to renew-
able sources. We are strengthening our Verbund structure as the
basis for resource-efficient, safe and reliable production. We are
developing pioneering low-carbon production processes for our
products. We are accelerating our innovation processes and deep-
ening cooperation with partners to develop high-performance
products that also require fewer resources and have a lower carbon
footprint. We are harnessing the many opportunities of digitalization.
We are systematically aligning our portfolio with growth areas and
future technologies, and are integrating sustainability into our value
chains even more strongly. We create a working environment in
which our employees can thrive and contribute to BASF's long-term
success. This is how we live our corporate purpose.]
77
Internal audits on our
compliance standards
We focus on material
sustainability topics and
evaluate the opportunities and
risks of our actions
We make positive contributions by
■ Driving forward growth, progress and value creation
■ Strengthening our customers' competitiveness and innovative
strength
■ Accelerating the digital transformation of the industry
■ Offering our investors an attractive dividend yield
Potential negative impacts
■ Weaker growth stimulus due to the coronavirus pandemic, the
ongoing trade conflict between the United States and China,
and an escalation of geopolitical conflicts
■■A weaker share performance
Our countermeasures
■ Disciplined implementation of our corporate strategy
■ Active portfolio management
■ Systematic cost management
■ Optimizing the cost of capital
We make positive contributions by creating products that
■Contribute to climate protection
Suppliers screened through
Together for Sustainability
■Conserve resources, avoid waste and strengthen circularity
Pave the way for climate-friendly mobility
787
3
For more information on our strategic action areas, see page 28 onward
~45,000
Sales products
Outputs
7.3 million metric tons
CO2 avoided by the Verbund
and combined heat and power generation
Environment
** Employees
47.0%
Share of our waste recycled or
thermally recovered
78.5%
25.6%
Women in leadership positions
82%
Water demand
recirculated
Outcomes¹
Environmental
Social
Partnerships
■ Are environmentally friendly and safe to use
Engagement index according to
2020 employee survey
■The emission of CO2 and other gases that affect the climate
■Resource consumption and non-recyclable waste
■■Potential misuse or spillage of products
We aim to increase our positive
contributions, minimize negative
impacts and carefully assess
conflicting goals
5
BASF Report 2021
Management's Report - Our Strategy
26
Our Strategy
GRI 102
[Chemistry is our passion. As an industry leader, we want to be the most attractive partner for challenges that can be solved
with chemistry. That is why our customers are at the center of everything we do. We want to grow profitably and at the same
time, create value for society and the environment. We help to change the world for the better with our expertise, our innovative
and entrepreneurial spirit, and the power of our Verbund integration. This is our goal, embedded in our corporate purpose:
We create chemistry for a sustainable future.
Strategic Action Areas
Values and Global Standards
Business Models of the Segments
Targets and Target Achievement 2021
Investments and Portfolio Measures
Steering Concept
Sustainability Concept
Innovation
The world is changing at a rapid pace - more and more urgently
than ever, solutions are needed for a more sustainable future.
Chemistry plays a key role here. In almost all areas of life, it can help
overcome pressing global challenges with innovative products
and technologies - from climate change and using resources more
sparingly to feeding the world's population. This belief is expressed
in our corporate purpose and is what motivates us day in and day
out: We create chemistry for a sustainable future.
Our corporate purpose
We create chemistry for a sustainable future
Our mission and motivation is to grow profitably and make a positive
contribution to society and the environment. For example, BASF's
solutions contribute to climate protection and help to prevent or
recycle waste, produce healthy and affordable food, and enable
climate-smart mobility.
Negative impacts
At the same time, as an energy and resource-intensive company, we
are facing what is probably the biggest transformation in our over
150-year history: The shift toward a carbon-neutral and circular
economy and the associated landmarks such as the European
Green Deal demand from us new concepts and approaches - for the
way we produce, for our raw material base and for our energy supply.
1 The outcomes category shows examples of positive contributions as well as negative impacts and the measures we take to mitigate them.
We achieve long-term business success by creating value for our shareholders, our company,
the environment and society (see page 47 and basf.com/en/value-to-society)
In this section:
■ Employee training program
■ Carbon management
Our countermeasures
Impact
■ Circular Economy Program
■ Sustainable water and energy management
Responsible Care management (including product stewardship)
We make positive contributions because we
■ Provide attractive jobs and promote diversity
■ Offer products that improve people's quality of life
■ Projects to improve sustainability in the supply chains
■Compliance Program and Code of Conduct
■ Promote integration and help overcome social challenges
Potential negative impacts
■Risk of violation of labor, environmental and social standards
in the production of the raw materials we procure
■Lower demand for employees in some areas
■ Careful selection, evaluation and development of suppliers
■ Pay taxes and competitive wages and salaries
Our countermeasures
Grow sales volumes
20.2
2030
Effective climate protection
2021
Most important key performance indicator
Achieve a return on capital
employed (ROCE) considerably above the
cost of capital percentage every year
target
faster than global chemical
production every year
status
million
2021
16.4
million
metric
tons
Most important key performance indicator
Reduce our absolute
CO2 emissions² by 25% by 2030
Sustainable product portfolio
status
2025
target
SDG
AND INFRASTRUCTURE
€22.0
€24.1
metric
tons
INDUSTRY INNOVATION
[We also pursue broad sustainability targets. In this context, we
significantly raised our CO2 reduction target in 2021.2 We want to
strengthen the sustainability focus of our product portfolio and will
update our portfolio steering targets in 2022.3 We also strive to
strengthen the sustainability of our supply chains and use resources
responsibly. We want to further improve safety in production. In
addition, we aim to promote diversity within the company and create
a working environment in which our employees feel that they can
thrive and perform at their best.
2021
target
>6.1%
☑
We leverage our expertise in research and development and our
deep understanding of the way individual growers manage their
farms to provide offers across technologies. These include novel
solutions for seeds, traits, crop protection and digital products,
which we link intelligently. This enables us to offer farmers solutions
tailored to their region and crop systems to safeguard yields, miti-
gate risks and fulfill societal requirements.
billion
35
BASF Report 2021
Management's Report - Targets and Target Achievement 2021
36
36
Targets and Target Achievement 2021
Business success tomorrow means creating value for the environ-
ment, society and business. That is why we have set ourselves
ambitious targets along our entire value chain. We report transpar-
ently on our target achievement so that our stakeholders can track
our progress. In order to grow profitably, we want to grow sales
volumes faster than global chemical production, further increase our
profitability, achieve a return on capital employed (ROCE) consider-
ably above the cost of capital percentage and increase the dividend
per share every year based on a strong free cash flow.
The objective of these targets is to steer our business into a sustain-
able future, and at the same time, contribute to the implementation
of the United Nations' Sustainable Development Goals (SDGs). We
are focusing on issues where we as a company can make a signifi-
cant contribution, such as climate protection, sustainable consump-
tion and production, and fighting hunger. ]
For more information on financial indicators, see page 52 onward
For more information on sustainability along the value chain, see page 96 onward
Profitable growth
2021
status
13.5%
2021
target
>9%
SDG
DECENT WORK AND
PESTRY ON
AND INFRASTRUCTURE
2021
status
10.6%
SDG
CLEAN WATER
BASF Report 2021
2 HUNGER
per share every year based
on a strong free cash flow
Most important key performance indicator
Achieve €22 billion in
Accelerator sales by 20253
Reduction target
1 Dividend proposed by the Board of Executive Directors
2 Includes Scope 1 and Scope 2 emissions. In March 2021, we replaced our previous target of CO2-neutral growth until 2030 (baseline 2018: 21.9 million metric tons
of CO₂e) with a new, more ambitious climate protection target to reduce absolute CO2 emissions by 25% compared with 2018 (new target: 16.4 million metric tons
of CO₂e).
3 We already reached our 2025 sales target for Accelerator products in 2021. Consequently, we will update our product portfolio steering target over the course of
2022.
Management's Report - Targets and Target Achievement 2021
Responsible procurement
2021
status
2025
target
90%
85%
Limited assurance
SDG
DECENT WORK AND 12
Cover 90% of our relevant
spend with sustainability
evaluations by 2025
2021
status
2025
target
80%
74%
SDG
As one of the world's leading agricultural solutions companies, we
are committed to making a positive impact on sustainable agricul-
ture and food systems. Our innovation-driven strategy for agricul-
ture focuses on selected crops and their appropriate cultivation
systems in specific regions. We integrate sustainability criteria into all
business and portfolio decisions. In doing so, we help farmers
achieve better yield - yield that is produced in ways that are recog-
nized as valuable by society, are kind to the planet and enable
farmers to produce economically.
Increase the dividend
billion
M
DECENT WORK AND
SDG
13
ACTION
10 RESPONSIBLE
CLIMATE
12 CONSUMPTION
13 A
AND PRODUCTION
2021
status
53%
2021
target
3%-5%
Increase EBITDA
before special items
by 3%-5% per year
SDG
DEPENT WORK AND
O MOUSTRY JEWI
GROWTH
NINFRASTRUCTURE
M
2021
2021
status
target
€3.40'
>€3.30
SDG
ECONOMIC GROWTH
Management's Report - Business Models of the Segments
Antwerp, Belgium
Kuantan, Malaysia
Nanjing, China
1 Source: U.N. World Population Prospects 2019
For more information on what we expect from our leaders, see page 98
BASF Report 2021
In focus:
Global Trends and
Growth Opportunities for BASF
It is important for us to understand which global trends will shape the future.
On this basis, we can identify opportunities, align our strategies and
operations, monitor risks and create value added for our stakeholders.
< >
32
32
BASF is conducting research globally on innovative battery materials.
Kathrin Michel's team, for example, is looking at how charging times
can be shortened, ranges increased and battery life improved. Find
out more about how BASF is contributing to climate-smart mobility in
the online report at report.basf.com.
[The transition to a climate-neutral society is the greatest
challenge of the coming decades. Many of our products and tech-
nologies are key to this transformation. For example, we are
developing innovative battery materials, lightweight materials, and
additives for climate-smart mobility. Catalysts and other emission
control technologies from BASF reduce emissions in many applica-
tions. Materials from BASF make buildings more energy efficient and
generating power from wind and solar energy possible. We help
farmers reduce carbon emissions with our integrated offering of
seeds, crop protection and digital solutions. We are continuously
expanding our portfolio of climate protection products. At the same
time, we are working hard to significantly reduce the carbon foot-
print of our production and our products in our carbon management.
We support our leaders at every stage of their careers in fulfilling
their responsibilities and acting as role models. One component of
this is the CORE Leadership Upskilling program launched in 2021.
It comprises a range of virtual training modules and learning
resources that encourage self-reflection and provide opportunities
for global dialog.
Population growth and rising prosperity will increase demand
for food, household and personal care products, drugs, clothing
and much more. At the same time, consumer behavior is changing.
Sustainability aspects are playing an increasingly important role in
our value chains. Our innovative solutions for agriculture enable
higher yields from the same land area, contributing to a food supply
that meets diverse economic, environmental and social require-
ments. We offer food and feed manufacturers and customers in the
pharmaceutical, cosmetics, detergents and cleaners industries a
product portfolio focused on sustainability, which we are continually
expanding with bio-based and biodegradable solutions.
Digitalization and connectivity offer many opportunities to opti-
mize our processes: maintenance work can be planned in advance,
innovation processes accelerated or logistics concepts and cus-
tomer relationships improved. In addition, new business models are
opening up, for example in agriculture or with products for the
electronics and semiconductor industries.
In the emerging countries of Asia and South America, we have
an innovation, production and sales base that has grown over
several decades. We are strengthening this position with further
investments.]
BASF Report 2021
Management's Report - Business Models of the Segments
Business Models of the Segments
Markets and consumer behavior are moving faster than ever, presenting our customers from a variety of industries and
regions with a wide range of challenges. These include managing limited natural resources amid rising demand and the
trend toward sustainable products. Our segments' business models help to solve these challenges and show how we
implement our corporate strategy in practical terms.
☑
Chemicals
The Chemicals segment is at the heart of the Verbund. It reliably
supplies BASF's other segments with chemicals to produce higher
value-added products. It also markets high-quality basic chemicals
and intermediates to customers in downstream industries. In this
way, the Chemicals segment makes a significant contribution to
BASF's organic growth.
We create value through process and product innovation and invest
in research and development to implement new, sustainable tech-
nologies and make our existing technologies even more efficient.
Technological leadership, operational excellence and a clear focus
on individual value chains are among our most important competi-
tive advantages. We concentrate on the critical success factors of
the traditional chemicals business: leveraging economies of scale
and the advantages of our Verbund, high asset reliability, continuous
optimization of access to raw materials, lean and energy efficient
processes, and reliable, cost-effective logistics. We continuously
improve our value chains and are expanding our market position
especially in Asia - with investments and collaborations in growth
markets.
-
Growing resource scarcity means that resources and materials
must be used responsibly. We develop and market innovative tech-
nologies and products in a wide variety of areas to keep recyclable
materials in circulation for as long as possible. Going forward, we will
align our business models, products and processes even more
strongly with the circular economy. For example, we are driving for-
ward the chemical recycling of plastics and improving mechanical
recycling with new products and technologies. Other action areas
include the use of renewable and recycled raw materials and the
recovery of metals from spent batteries and catalytic converters.
Leaders have a special responsibility for our success, especially in
challenging and changing times. Good leadership provides sup-
port and is vital to our employees' motivation and performance.
That is why we have derived specific leadership skills from each
CORE corporate value - our CORE Leadership Values. They serve
as guiding principles and describe our expectations of leadership
behavior - such as living optimism, inspiring teams, promoting
diversity and making even difficult decisions.
BASF
CORE Leadership Values
BECENT WORK AND
[Our Values and Global Standards
How we act is critical to the successful implementation of our strategy and how our stakeholders perceive us. This is what our
four corporate values represent: creative, open, responsible, entrepreneurial (CORE). They are binding for all employees worldwide.
Together with our Code of Conduct and our global standards and guidelines, they provide the framework for responsible conduct.
31
Our CORE values define how we want to work together - as a team,
with our customers and our partners.
Creative: We make great products and solutions for our customers.
This is why we embrace bold ideas and give them space to grow.
We act with optimism and inspire one another.
Open: We value diversity, in people, opinions and experience. This
is why we foster feedback based on honesty, respect and mutual
trust. We learn from setbacks.
Responsible: We value the health and safety of people above all
else. We make sustainability part of every decision. We are commit-
ted to strict compliance and environmental standards.
Entrepreneurial: We focus on our customers, as individuals and
as a company. We seize opportunities and think ahead. We take
ownership and embrace personal accountability.
Our standards fulfill and in some cases, exceed existing laws and
regulations and take internationally recognized principles into
account. We respect and promote:
- The 10 principles of the U.N. Global Compact
-
-
The Universal Declaration of Human Rights and the two U.N.
Human Rights Covenants
The core labor standards of the ILO and the Tripartite Declaration
of Principles Concerning Multinational Enterprises and Social
Policy (MNE Declaration)
The OECD Guidelines for Multinational Enterprises
The Responsible Care® Global Charter
- The German Corporate Governance Code
We stipulate binding rules for our employees with standards that
apply throughout the Group. We set ourselves ambitious goals with
voluntary commitments and regularly monitor our performance in
environmental protection, health and safety with our Responsible
Care Management System. We mainly approach our adherence to
international labor and social standards using three elements: the
Compliance Program including our Code of Conduct and compli-
ance hotlines, close dialog with our stakeholders, and the global
management process to respect international labor norms. Our
business partners are expected to comply with prevailing laws and
regulations and to align their actions with internationally recognized
principles. We have established appropriate monitoring systems to
ensure this.
For more information on the Responsible Care Management System, see page 117 onward
For more information on compliance, see page 171 onward
For more information on stakeholder engagement, see pages 47 and 106
For more information on our expectations of our suppliers, see page 109 onward
Good to know
Furthermore, we are constantly improving our global production
structures and aligning these with regional market requirements.
For example, we closed a production plant for butanediol in Kuantan,
Malaysia, in 2021. We also plan to expand our 2-ethylhexanoic acid
plant there, which is scheduled for startup in 2024.
Strategic alignment of the segments
Verbund synergies
Strategic focus
Active ingredients,
seeds and traits,
digital solutions
Additional differentiators are our products that contribute to the
circular economy and our more sustainable production processes.
BASF is active in substantial parts of plastic value chains, from
monomers to polymers and their formulated specialties. Combined
with our specific technology knowledge, this offers us the unique
ability to shape and close cycles ourselves. One concrete example
is our pilot projects for recycling used mattresses: Based on a wet
chemical process developed by BASF, precursors recovered from
old mattresses can be used to produce new mattress-sized
blocks of flexible polyurethane foam. Other examples include our
ChemCycling TM project, biomass balanced products and certified
☑
33
33
BASF Report 2021
Management's Report - Business Models of the Segments
34
compostable bioplastics. This also enables us to meet growing products and technologies in close collaboration with our customers
customer needs in all key markets.
Tailor-made service and product offerings enable us to continu-
ously expand the range of applications in our portfolio. We operate
close to our customers with our global production network.
Industrial Solutions
The Industrial Solutions segment markets and develops ingredients
and additives for industrial applications. These include fuel and
lubricant solutions, ingredients for paints and coatings, electronic
materials and plastic additives. We concentrate on research and
development and invest in the creation of innovations with the aim
of enabling more efficient resource use. This is why we develop
more sustainable products and processes, for example, in polymer
dispersions, resins and plastic additives, and enable our customers
to contribute to sustainability through their applications and
processes. Other focus areas are efficient production setups, back-
ward integration in our Production Verbund's value chains, capacity
management, and technology and cost leadership.
Our global presence enables us to operate close to our customers
and their industries. As a reliable partner, we offer high-quality
products at good value. We work on new solutions together with
our customers and strive for long-term partnerships that create
profitable growth opportunities for both parties. To achieve this,
we draw on our innovative strength and our many years of experience
and in-depth industry expertise. Through our in-depth application
knowledge and technological innovations, we strengthen customer
relationships in key industries such as the automotive, plastics and
electronics industries.
Surface Technologies
In the Surface Technologies segment, our focus is on the protection,
modification and development of surfaces. We develop innovative
from the catalysts, coatings and battery materials sectors. We also
offer precious and base metal as well as surface treatment services.
Our aim is to drive growth by leveraging our portfolio of technologies
to find the best solution for our customers in terms of functionality
and cost. This in turn helps our customers to drive forward inno-
vation in their industries and contribute to sustainable development.
Key growth drivers for us are the positive medium-term develop-
ment of the automotive market, especially in Asia, the trend toward
sustainable, low-emission mobility, and the associated rise in
demand for battery materials for electromobility. Together with
our customers, we are developing customized, more sustainable
solutions in these growth areas for battery materials, emission con-
trol, recycling and functional coatings. Our specialties and system
solutions in these areas enable customers to stand out from their
competition.
biodegradable products. In this connection, BASF has entered
into partnerships to further strengthen its position in the bio-based
surfactants and actives market. One example is the technology
cooperation with Holiferm Ltd, Manchester, United Kingdom. The
focus here is on the development of fermentatively accessible
glycolipids for home and personal care and industrial formulator
applications.
Our enzymes business enables us to pursue a targeted, accelerated
marketing strategy and expand our portfolio for natural and bio-
technological products. Furthermore, we are investing in natural and
biological substances. BASF's biopharma business supports the
biopharmaceutical industry by supplying the raw materials used to
produce biological drugs.
In addition, acquisitions complement our focus on emerging
markets, new business models and sustainability trends in
consumer markets. Future growth in our markets will be driven by
trends like growing consumer awareness and the resulting demand
for sustainable product solutions, natural and organic ingredients
and their traceability. Moreover, the shift toward individualization
and local production supports new players and business models.
Digitalization, a focused technology and product portfolio, and close
cooperation with our customers is crucial to meeting these dynamic
market requirements both now and in the future.
The above trends mean that the automotive industry is currently
undergoing a fundamental transformation. As one of the largest
chemicals suppliers to this industry, we will, as announced in
December 2021, further strengthen our focus on battery materials
and recycling and pursue an ambitious growth plan. We will also
establish a new entity (BASF Automotive Catalysts and Recycling)
within the Catalysts division for mobile emissions catalysts, auto-
motive catalysts recycling and associated precious metal services.
The carve-out process started in January 2022. The new organiza- Agricultural Solutions
tional structure will prepare the business for the upcoming changes
in the internal combustion engine market and allow for future
strategic options.
Nutrition & Care
In the Nutrition & Care segment, we strive to expand our position as
a leading provider of nutrition and care ingredients for consumer
applications. We aim to enhance our capabilities in areas such
as biotechnology and broaden our portfolio with bio-based and
Farming is fundamental given that by 2050, the world's population is
expected to increase by two billion people. In the Agricultural Solu-
tions segment, we believe that the way forward for agriculture is to
find the right balance and create value for the environment, society
and business. While the demand for food, feed, fiber and energy is
growing, natural resources are limited. Agriculture is a key enabler
in providing enough healthy, affordable food and responding to
changing consumer behavior while reducing the impact on the
environment.
Connected offer
across technologies
for farmers
BASF Report 2021
The Materials segment develops new plastics applications,
high-performance materials, systems and digital solutions. Our
product portfolio is unique in the industry. We aim to grow mainly
organically by differentiating ourselves from our competitors with our
systems-oriented application expertise and industry knowl-
edge, and creating maximum value in our isocyanate and polyamide
value chains. Our advanced material simulation capabilities are a
unique selling proposition in the industry and enable us to operate
close to our customers.
Polymer dispersions, Battery materials,
resins
coatings
Innovation and
sustainability focus
Materials
Industrial
Chemicals
Materials
Solutions
Surface
Technologies
Nutrition &
Care
Agricultural
Solutions
Catalysis
Process technology
Automotive industry
Recycling and renewable raw materials
Biosciences
Formulation
Digitalization and artificial intelligence
Economies of scale in High-performance
basic chemicals and
plastics
Additives
platform
Surface technology
platform
Ingredients for
consumer products
intermediates
Improved and
new processes
Applications,
recycled and bio-
based materials
Biotechnology,
natural active
ingredients,
formulations
12 RESPONSE
2021
Have 80% of our suppliers
2024
Geismar, Louisiana
Capacity expansion: MDI plants
2026
Zhanjiang, China
Construction: engineering plastics plant
2022
Capacity expansion: production plant for sulfuric acid
2023
Capacity expansion: synthetic esters
2022
Construction: world-scale production plant for HMD
Capacity expansion: antioxidants (IrganoxⓇ)
Pasir Gudang, Malaysia
Pontecchio Marconi, Italy
Capacity expansion: production plant for acrylics dispersions
Capacity expansion: antioxidants (IrganoxⓇ)
2021
Management's Report - Our Values and Global Standards
Materials
In the Materials segment, production capacities at the methylene
diphenyl isocyanate (MDI) plants in Geismar, Louisiana, were suc-
cessfully increased by one third following the construction of a new
MDI synthesis unit, which was completed with the start of opera-
tions in 2020. In the final phase, we plan to increase capacities to
around 600,000 metric tons per year by 2026. With this gradual
capacity expansion, we are supporting the continuing growth of our
North American MDI customers.
Surface Technologies
Chennai, India
Harjavalta, Finland
Pinghu, China
Schwarzheide, Germany
Capacity expansion: light stabilizers (TinuvinⓇ NOR® 356)
Capacity expansion: plant for mobile emissions catalysts
Construction: precursor plant for cathode active materials
New surface treatment site
2022
Chalampé, France
2025
Construction: neopentyl glycol plant
39
Chemicals
Strategically, our investments concentrate on the growth markets
to support the growth of our customers in China. In 2021, for exam-
ple, we increased the production capacity for tertiary butylamine.
Together with our partner Sinopec, we are pushing ahead with plans
to further expand the site in Nanjing, China, to strengthen the joint
production of chemical products in China. For instance, we plan to
further expand our production capacities for propionic aldehyde,
propionic acid, purified ethylene oxide, ethanolamines and ethylen-
eamines, and build a new tert-butyl acrylate plant. The expanded
and new plants are scheduled to come onstream in 2023.
At our Verbund site in Antwerp, Belgium, we are significantly
expanding our ethylene oxide plant. The project also includes
several downstream plants, for example, to produce surfactants.
The expansion is scheduled to come onstream in 2022.
Overview of material investments
Segment
Chemicals
Materials
Industrial Solutions
Jiaxing, China
Jinshan, China
Jurong, Singapore
Location
Project
Capacity expansion: ethylene oxide plant
Start-up
2022
Capacity expansion: 2-ethylhexanoic acid planta
2024
Capacity expansion: tertiary butylamine plant
2021
Capacity expansion: propionic aldehyde, propionic acid, purified ethylene oxide,
2023
ethyleneamines and ethanolamines plantsb
Construction: tert-butyl acrylate plant
2023
Zhanjiang, China
2021
2022
2022
2021
2022
2021
BASF Report 2021
Management's Report - Material Investments and Portfolio Measures
< >
40
40
new plant will increase BASF's annual HMD production capacity to
260,000 metric tons. Production is expected to start in 2024.
Industrial Solutions
In the Industrial Solutions segment, we are increasing global pro-
duction capacity for the antioxidant Irganox® 1010 through a project
to expand production at the site in Jurong, Singapore. With the
completion of the project in 2022, BASF aims to better serve the
growing demand from customers in Asia, Europe, the Middle East
and Africa. In addition, we increased production capacity for the
antioxidant Irganox® 1520L by 20% at the site in Pontecchio
Marconi, Italy, in the first quarter of 2021.
To meet the increasing demand for high-quality dispersions solu-
tions in the growing ASEAN, Australian and New Zealand markets,
we have doubled the production capacity for acrylics dispersions in
Pasir Gudang, Malaysia. The additional capacities started up in the
first quarter of 2021. We are currently building our third electronic-
grade sulfuric acid plant in Jiaxing, China. This investment will more
than double BASF's existing sulfuric acid production capacity in the
country to serve the rapidly growing semiconductor industry. The
site expansion is scheduled for completion in 2023.
Surface Technologies
production capacities in what are currently the main markets: China,
Japan, North America and Europe.
In addition, BASF announced in 2021 that it will build a battery
recycling prototype plant in Schwarzheide, Germany. Startup is
planned for 2023. The prototype plant will allow for the development
of operating procedures and optimization of technology to deliver
superior returns of lithium, nickel, cobalt and manganese from end-
of-life lithium-ion batteries.
Nutrition & Care
In Ludwigshafen, Germany, we started up the expanded vitamin A
production facilities for the Nutrition & Care segment in July 2021.
We also invested in the expansion of alkoxylate capacities at the
Verbund site in Antwerp, Belgium.
By mid-2022, BASF will increase its capacities for methane sulfonic
acid by around 65% in response to growing cross-industry demand,
strengthening its position as a leading global producer. To this end,
we are investing in the construction of a new methane sulfonic acid
plant at the Ludwigshafen site in Germany. Methane sulfonic acid
is an organic acid used in numerous applications ranging from
chemical and biofuel synthesis to industrial cleaning and metal
surface treatment in the electronics industry.
We aim to expand our position as a leading and innovative provider Agricultural Solutions
of battery materials and benefit from the strong growth in this market
segment. A global, customer-focused production network for bat-
tery materials is crucial here. Construction of our new production
plant for cathode materials in Schwarzheide, Germany, continued
as planned in 2021. The new plant will use precursors from the
production facility under construction in Harjavalta, Finland. The two
plants are scheduled for startup in 2022 and will produce cathode
active materials for around 20 gigawatt hours of cell capacity per
year. With these investments in Finland and Germany, BASF aims
to become the first cathode active materials supplier with local
The investment in a formulation hub for crop protection products in
Singapore will, from 2022 onward, ensure that multiple formulation
technologies are produced in close proximity to farmers in Asia
Pacific. We also invested in the expansion of our production site
in Sparks, Georgia, establishing a new formulation plant for seed
treatment products, which came into operation in 2021. At the
Nunhem site in the Netherlands, we continued the expansion of
our breeding facilities for vegetable seeds with a state-of-the-art
tomato greenhouse, which has been available since 2021. Further
investments were made in the modernization of site infrastructure in
North America. To meet continuing high demand for our innovative
solutions in the future, between 2022 and 2026, we will invest more
than €950 million in developing and expanding our infrastructure,
including state-of-the-art R&D facilities, and in our production and
formulation capacities for active ingredients as well as for seed
solutions.
For more information on our segments, see page 72 onward
Good to know
New Verbund site in Zhanjiang
Based on its goal of net zero emissions by 2050, BASF has
made further progress toward reducing its carbon footprint. In
June 2021, we signed a purchase agreement for renewable
electricity with China Resources Power, Hong Kong, China,
under the new Guangdong renewable energy trading rules in
China. This will enable us to run the first plants at BASF's new
Verbund site in Zhanjiang entirely on renewable energy. The new
plants are scheduled for startup in late 2022. This is a significant
step toward transforming of our energy supply in China.
Discover the smart Verbund site in Zhanjiang, China, at basf.com/zhanjiang
2021
Management's Report - Material Investments and Portfolio Measures
2022
Modernization of site infrastructure
Construction: cathode active materials plant
Construction: battery recycling prototype plant
2022
2023
Nutrition & Care
Antwerp, Belgium
Capacity expansion: alkoxylates
2018-2022
Düsseldorf, Germany
Jinshan, Chinac
Ludwigshafen, Germany
Gradual upgrade of production plants in accordance with the Good Manufacturing
Practice Standard issued by the European Federation for Cosmetic Ingredients (EFFCI)
New production line: UV filters
2023
2023
Capacity expansion: production plant for methane sulfonic acid
2022
The construction of the first plants at our smart Verbund site in
Zhanjiang, China, is in progress. The new plants are scheduled to
come onstream in 2022. They will produce engineering plastics and
thermoplastic polyurethane (TPU) to serve the increasing needs of
various growth industries in the southern China market and in other
Asian markets.
BASF is investing in a new world-scale production plant for
hexamethylenediamine (HMD) at the Chalampé site in France. The
Agricultural Solutions
Sparks, Georgia
Modernization of site infrastructure
Expansion of breeding facilities for vegetable seeds
New formulation hub for crop protection products
New facility for seed treatment formulations
a Operated by a fully consolidated joint venture with Petronas Chemicals Group Berhad
b Operated by a joint venture with Sinopec
с This project was relocated from Kaohsiung, Taiwan, to Jinshan, China.
Capacity expansion: production plant for vitamin A
2021
Beaumont, Texas
Hannibal, Missouri
Nunhem, Netherlands
Singapore
2022
Limited assurance
BASF Report 2021
1 Additions to property, plant and equipment excluding acquisitions, restoration obligations, IT investments and right-of-use assets arising from leases
RESPONSIBL
АНО ЗАМЕТАЛЛОН
QO
Limited assurance
Reduce the worldwide lost-time
injury rate per 200,000 working
hours to ≤0.1 by 2025
Introduce sustainable water management
at our production sites in water stress areas
and at our Verbund sites by 2030
2021
2021
status
target
12 REPORELE
82%¹
SDG
SDG
37
32
Limited assurance
Increase the proportion of women in
leadership positions with disciplinary
responsibility to 30% by 2030
Limited assurance
More than 80% of our employees
feel that at BASF, they can thrive
and perform at their best
7
Reduction target
>80%
6 CLEAN WATER
SDG
100%
improve their sustainability
performance upon re-evaluation
Resource efficiency and safe production
2021
status
0.3
2021
status
0.3
2025
target
SDG
8 DECENT WORK AND
AND SANITATION
<0.1
Limited assurance
Reduce worldwide process safety
incidents per 200,000 working
hours to ≤0.1 by 2025
Employee engagement and diversity
2030
target
2021
30%
status
25.6%
8
2025
target
<0.1
SDG
2021
status
53.5%
2030
target
1 We regularly calculate the employee engagement level. The most recent survey was conducted in 2020. The next survey is planned for spring 2022.
BASF Report 2021
Management's Report - Material Investments and Portfolio Measures
Material Investments and Portfolio Measures
53%
Europe
Invest-
ments
Acquisi-
tions
Total
Intangible assets
78
392
470
of which goodwill
254
254
Property, plant and equipmenta
4,078
332
4,410
Total
4,156
725
4,881
a Including restoration obligations, IT investments and right-of-use assets arising from leases
Investments in the segments and regions
Investments in property, plant and equipment amounted to
€4,078 million in 2021 (2020: €3,516 million). Capex accounted for
€3,363 million of this amount (2020: €2,878 million). Our invest-
ments in 2021 focused on the Chemicals, Materials, Surface
Technologies and Nutrition & Care segments.
21%
North America
a Including restoration obligations, IT investments and right-of-use assets arising from leases
€4,078 million
2 Major growth projects are the construction of our future Verbund site in Zhanjiang, China, as well as our battery materials activities.
Asia Pacific
South America, Africa, Middle East
In addition to innovations, investments make a decisive contribution toward achieving our ambitious growth and climate
protection goals. We use targeted acquisitions to supplement our organic growth. Our focus is on innovation-driven growth
areas and sustainable technologies.
☑
38
38
At a glance
€3.4 billion
Capex¹ in 2021
€25.6 billion
Capex planned for 2022 to
2026
By investing in our plants, we create the conditions for the profitable
growth we strive for and continuously improve the efficiency of exist-
ing production processes. Investments in new technologies and in
the transformation of our energy supply will help to achieve our
growth targets and our ambitious climate targets. For the period
from 2022 to 2026, we are planning capital expenditures (capex)1
totaling €25.6 billion, including €12.9 billion for our major growth
projects.²
For more information on our investments from 2022 onward, see page 150
Investments and acquisitions 2021
Million €
With a world market share of over 45%, China is already the largest
chemical market and will drive growth in global chemical production
to an even greater extent in the future. We expect China's share to
increase to over 50% by 2030. To further strengthen our position in
Asia, we plan to build a new integrated Verbund site in Zhanjiang
in the southern Chinese province of Guangdong. The first plants
started construction in 2020, and we made further progress on
these in 2021. They are scheduled for startup in 2022. We will
also expand the Verbund site we operate together with Sinopec in
Nanjing, China, by 2023.
In addition, we are refining our portfolio through acquisitions that
promise above-average profitable growth as part of the BASF Ver-
bund to help reach a relevant market position. A key consideration
is that these are innovation-driven or offer a technological differen-
tiation, and make new, sustainable business models possible.
Investments and acquisitions alike are prepared by interdisciplinary
teams and assessed using various criteria. In this way, we ensure
that economic, environmental and social concerns are included in
strategic decision-making.
Additions to property, plant and equipment by segment in 2021
28%
Chemicals
17%
Materials
9%
Industrial Solutions
16%
Nutrition & Care
€4,078 million
8%
Agricultural Solutions
4%
Others (infrastructure, R&D)
18%
Surface Technologies
Additions to property, plant and equipment by region in 2021
2%
24%
BASF Report 2021
Management's Report - In Focus: Global Trends
We strengthen existing research focus areas and continually develop
new key technologies that are of central significance for our operat-
ing divisions, such as polymer technologies, catalyst processes or
biotechnological methods.
Sustainability is at the core of what we do and a driver for growth
and value. Analyzing our contributions to sustainability also enables
us to manage risks effectively. We pursue a holistic sustainability
approach that covers the entire value chain – from our suppliers and
our own activities to our customers. We have formulated commit-
ments for our conduct along the value chain and underpinned these
with corresponding targets and measures (see page 36).
■ Strategic guidelines on stakeholder management and our
societal engagement
■ Sustainability aspects integrated into corporate steering
■ Targets for climate protection, product portfolio, circular
economy, procurement, safety and employees
At a glance
Our strategic approach
45
< >
We implement our corporate purpose - We create chemistry for a sustainable future - by systematically incorporating sustainability
into our strategy, our business, and into our assessment, steering and compensation systems. We secure our long-term success
with products, solutions and technologies that create value added for the environment, society and the economy.
102, 103, 203, 304, 412, 413, 415, 416
GRI
Our Sustainability Concept]
Management's Report - Our Sustainability Concept
BASF Report 2021
Sales of solutions for the
circular economy by 2030
€17 billion
Recycled and waste-based raw
materials processed every year
from 2025
250,000 metric
tons
Our circular economy targets
For more information on sustainable solutions and the circular economy, see page 141 onward
For more information on recycled raw materials, see page 115 onward
In addition, we are developing innovative products and tech-
nologies in many areas that will increase the service life of materials
or their recyclability and compostability. One example is additives for
the mechanical recycling of plastics. A Group-wide co-funding pro-
gram supports our employees in developing new business models
for the circular economy - from the initial idea to market launch. Our
target: By 2030, we want to double our sales of solutions for the
circular economy to €17 billion. These are products that are based
on alternative raw materials, that close material loops or increase the
resource efficiency and durability of products. ]
the recovery of valuable metals from spent batteries and catalytic
converters.
For example, we already use bio-based and renewable raw mate-
rials in our production (see page 113). To further reduce the resource
and carbon footprints of our products and solutions, we will align
our raw material base even more strongly toward recycled and
renewable raw materials. For instance, we aim to process
250,000 metric tons of recycled and waste-based raw mate-
rials in our production plants annually from 2025. Together with
partners, we are analyzing waste streams and raw material sources
to find the best solution and develop suitable, innovative processes
(see page 115). This is the case, for example, in the chemical recy-
cling of used tires and different types of plastics, where we can feed
recovered raw materials such as pyrolysis oil or monomers back
into our Verbund structure at different points. Another example is
[The concept of conserving resources, recycling and feeding waste
back into the system is not new for BASF. As early as 1865, it under-
pinned the foundation of our company: At that time, Friedrich
Engelhorn pursued the idea of producing synthetic dyes from coal
tar - a waste product - and organizing production efficiently in an
integrated Verbund structure. We are still committed to this tradi-
tion today and are aligning our actions more strongly than ever with
circularity. The chemical industry is doubly important for the transi-
tion to a circular economy. Firstly because many value chains start
here. And secondly because many products and technologies
based on chemistry help to close loops. That is why both aspects
- switching to renewable raw materials and innovations for more
circularity are core elements of our Circular Economy Program.
Together with partners, BASF is developing innovative products
and technologies to improve recyclability and enable resources to
be fed back into the system in the future. One example is chemical
recycling. Find out more about how used tires and mixed plastic
waste are converted into new raw materials in the online report
at report.basf.com.
44
44
Based on our corporate strategy and the global targets derived from
this, we steer the sustainability targets (reduce absolute CO2
emissions by 25% by 2030 compared with baseline 2018 and
achieve €22 billion in Accelerator² sales by 2025) as most important
key performance indicators. To this end, we have established the
necessary steering mechanisms and control systems at Group level.
Our global activities to reduce greenhouse gas emissions include
using renewable energies for both electricity and steam production,
developing and applying new low-carbon production processes,
< >
using renewable raw materials, and ongoing measures to further
increase energy and resource efficiency in our production (see
page 126). We use the Sustainable Solution Steering method to
improve the sustainability contributions of our product portfolio
along the value chain (see page 141). To assess the sustainability
performance of our products and identify solutions with a substantial
sustainability contribution in the value chain, we regularly reassess
our product portfolio. We already reached our 2025 sales target for
Accelerator products in 2021. Consequently, we will update our
product portfolio steering target over the course of 2022.
We have also set up a project organization to achieve our climate
protection targets. The new Net Zero Accelerator unit concentrates
on implementing and accelerating projects on low-carbon produc-
tion technologies, the circular economy and renewable energies.
- Monetization of positive and
Value to Society method:
our stakeholders
Relevance for
Prioritization and grouping in
internal workshops
Impact on BASF
Impact of BASF
- External inquiries
- Value to Society results
- Prior materiality analyses
Complete list of potentially relevant
topics (around 100) based on
BASF evaluation approach
Materiality
dimension
Identifying and assessing sustainability topics¹, 2
We systematically evaluate sustainability criteria, including the
effects of climate change, as an integral part of decisions on acqui-
sitions and investments in property, plant and equipment or financial
assets. In this way, we not only assess economic dimensions, but
also the potential impacts on areas such as the environment, human
rights or the local community. We evaluate both the potential
impacts of our activities here as well as which effects we are
exposed to.
The Board of Executive Directors and the Supervisory Board are
regularly briefed on the current status of individual sustainability
topics. The Board of Executive Directors incorporates the results
and recommendations from sustainability evaluations of business
processes into its decisions, for example, on proposed investments
and acquisitions. It makes decisions with strategic relevance for the
Group and monitors the implementation of strategic plans and tar-
get achievement. The Corporate Sustainability Board, which is
composed of heads of business and Corporate Center units and
regions, supports the Board of Executive Directors on sustainability
topics and discusses operational matters. A member of the Board
of Executive Directors serves as chair.
The new Net Zero Accelerator project organization has reported
directly to the Chairman of the Board of Executive Directors since
January 2022. It focuses on the further acceleration and implemen-
tation of existing and new projects to achieve CO2 reduction targets
at company level worldwide and drives them forward.
We are constantly working to broaden our contributions to key
sustainability topics and reduce the negative impact of our busi-
ness activities. Together with decentrally organized specialists, the
Corporate Strategy & Sustainability unit in the Corporate Center
is responsible for integrating sustainability into core business
activities and decision-making processes. This unit's tasks include
the global steering of climate-related matters.
Our organizational and management structures
Management's Report - Our Sustainability Concept
BASF Report 2021
1 The target includes Scope 1 and Scope 2 emissions. Other greenhouse gases are converted into CO₂ equivalents in accordance with the Greenhouse Gas Protocol. In March 2021, we replaced our previous target of CO2-neutral growth until 2030 (baseline 2018: 21.9 million metric tons of CO₂e) with a new, more ambitious climate protection
target to reduce absolute CO2 emissions by 25% compared with 2018 (new target: 16.4 million metric tons of CO₂e).
2 Accelerator products make a substantial sustainability contribution in the value chain.
For more information on the metastudy on sustainability trends, see basf.com/sustainability-trends
For more information on our materiality analysis, see basf.com/materiality
We identify key sustainability topics with our comprehensive mate-
riality analysis. The graphic on page 46 shows how we assess
relevant topics. Here, we take into account topics that we have an
impact on, topics that have an impact on us, and topics that our
stakeholders consider important to us. The topics identified based
on these three dimensions of materiality are: climate and energy,
health and safety / product stewardship, water, emissions to air
and soil, resource efficiency and waste, biodiversity, human rights,
employment and diversity.
especially SDG 2 (Zero hunger), SDG 5 (Gender equality), SDG 6
(Clean water and sanitation), SDG 7 (Affordable and clean energy),
SDG 8 (Decent work and economic growth), SDG 12 (Responsible
consumption and production) and SDG 13 (Climate action). To
prioritize these, internal experts assessed the impacts and positive
contributions of our products, our corporate targets and strategic
action areas. The Value to Society method is used to measure the
contribution of our activities along the value chain. This assesses our
positive and negative impacts on the environment, society and the
economy (see page 47).
As a co-founder of the U.N. Global Compact and a recognized
LEAD company, we contribute to the implementation of the United
Nations' Agenda 2030. Our products, solutions and technologies
help to achieve the U.N. Sustainable Development Goals (SDGs),
In addition to the climate protection and Accelerator sales targets,
we have set ourselves further sustainability goals. A particular focus
is the circular economy due to its strong connection to climate pro-
tection. We have defined further targets on water management,
responsible procurement, engaged employees, women in leadership
positions, occupational health and safety, and process safety.
As the world's population grows, so does demand for limited natural resources. At the same time,
many recyclable materials end up in landfill or in waste incineration. New concepts are needed to
decouple growth from resource consumption. Reduce, reuse and recycle are the keywords of this
transition to a system of more sustainable product cycles with less resource consumption and
lower carbon emissions.
Thinking and Acting Circular
In focus:
42
< >
Creating long-term value as a company means more than generating earnings that cover the cost of capital employed. Our steering concept encourages
and supports all employees in thinking and acting entrepreneurially. Our key financial management indicator is the return on capital employed (ROCE).
The BASF Group's most important nonfinancial key performance indicators are CO2 emissions and Accelerator sales.
Our Steering Concept
Management's Report - Our Steering Concept
BASF Report 2021
1 The transaction is not reported as an acquisition in the Notes to the Consolidated Financial Statements as according to IFRS 3.2b, it does not fall within the scope of IFRS 3.
On December 28, 2021, BASF reached an agreement to divest its
production site in Quincy, Florida, and the associated attapulgite
business to Clariant for a purchase price of $60 million. The Quincy
facility employs around 75 employees and manufactures clay-based
mineral products used in a variety of industrial applications. The
transaction affects the Dispersions & Resins division and is expected
to close in the summer of 2022, subject to the approval of the
relevant antitrust authorities.
On December 6, 2021, BASF and Allianz Capital Partners, on behalf
of Allianz Insurance Companies (Allianz), announced that they had
reached an agreement on the purchase of 25.2% of the Hollandse
Kust Zuid (HKZ) wind farm by Allianz. This follows a transaction
between Vattenfall and BASF under which BASF acquired 49.5% of
HKZ from Vattenfall on September 1, 2021. BASF will continue to
receive most of the power produced by its originally acquired share
of 49.5% of HKZ under a long-term fixed-price corporate power
purchasing agreement. The transaction is expected to close in the
first quarter of 2022, subject to the approval of the relevant merger
control authorities.
BASF's Performance Chemicals division and has approximately
440 employees in North America, Europe and Asia. The divestiture
comprises the production hub with sites in Daveyville, Toddville,
Edgar, Gordon and related mines, reserves and mills in Toomsboro
and Sandersville in Georgia. The refinery catalysts operations located
at the same site are not part of the divestiture. Pending approval by
the relevant authorities, closing of the transaction is expected in the
second half of 2022.
On November 18, 2021, BASF and KaMin LLC. / CADAM S.A.
(KaMin) signed an agreement to sell BASF's kaolin minerals business
to KaMin, a global performance minerals company headquartered in
Macon, Georgia. Currently, the kaolin minerals business is part of
Agreed transactions
On November 30, 2021, we completed the sale of the precision
microchemicals business to Entegris. The transaction included fixed
assets and inventories. The purchase price amounted to $90 million.
The precision microchemicals business was part of the Surface
Treatment business unit of BASF's Coatings division, operating
under the Chemetall brand.
On November 9, 2021, BASF and Clayton, Dubilier & Rice sold their
shares in Solenis to Platinum Equity, a private equity company
based in Beverly Hills, California. With over 5,200 employees,
Solenis serves customers in water-intensive industries by helping
them solve complex water treatment and process improvement
challenges. BASF held a 49% share in Solenis after transferring its
paper and water chemicals business to the company in February
2019. This was reported as a non-integral investment accounted
for using the equity method. The remaining 51% of the shares
were held by funds managed by Clayton, Dubilier & Rice, and by
Solenis management. The purchase price attributable to BASF was
€1.1 billion.
For more information on this divestiture, see Note 3 to the Consolidated Financial Statements from
page 209 onward
On June 30, 2021, we closed the divestiture of our global pigments
business to the Japanese fine chemical company DIC, Tokyo,
Japan. The business transfer agreement, which affected around
2,500 employees, was signed on August 29, 2019. The purchase
price on a cash and debt-free basis was €1.15 billion. The Disper-
sions & Pigments division was renamed Dispersions & Resins
following the transaction closing.
On May 31, 2021, BASF completed the sale of its production site in
Kankakee, Illinois, to a subsidiary of One Rock Capital Partners, LLC.
The agreement also includes the vegetable-oil-based sterols and
natural vitamin E business as well as the anionic surfactants and
esters produced at the Kankakee site. The purchase price was
€177 million. The transaction affected the Nutrition & Health and
Care Chemicals divisions.
Divestitures
Following approval of the relevant authorities, we completed the
purchase of 49.5% of Vattenfall's Hollandse Kust Zuid wind farm on
September 1, 2021.1 The purchase price was €0.3 billion. Wind
farm construction began in July 2021. Once fully operational in
2023, the wind farm will be the largest commercial offshore wind
farm in the world. This wind farm does not receive any subsidies for
the power produced. On December 6, 2021, BASF and Allianz
Capital Partners announced that they had reached an agreement
on the purchase of a 25.2% interest by Allianz Capital Partners
(see "Agreed transactions").
For more information on this acquisition, see Note 3 to the Consolidated Financial Statements from
page 207 onward
On August 31, 2021, BASF and Shanshan announced the formation
of BASF Shanshan Battery Materials Co., Ltd. The newly formed
entity is majority-owned by BASF (BASF 51%; Shanshan 49%).
It has four sites in Hunan and Ningxia, China, with more than
1,600 employees. BASF Shanshan Battery Materials Co., Ltd. will
focus primarily on the rapidly growing electric vehicle (EV) market
while serving global consumer electronic and energy storage market
segments. The business is a part of the Catalysts division.
Acquisitions
41
Κ Σ
Management's Report - Material Investments and Portfolio Measures
BASF Report 2021
50
42
Our financial targets follow a steering concept that is aligned with
our values. The return on capital employed (ROCE) is used as the
key target and management indicator for the BASF Group. As
stated in our strategic goals, we aim to achieve a ROCE consider-
ably above the cost of capital percentage every year. With ROCE,
the same logic and data is used for our value-based management,
external communication with the capital markets and variable
compensation. This means we use the same yardstick for internal
management, employee incentivization and our shareholders'
expectations.
As part of our corporate strategy and the sustainability targets
derived from this, we have also used CO2 emissions and Accelerator
sales as the most important nonfinancial key performance indicators
since the 2020 business year. Two targets are based on these
indicators: sustainability-oriented portfolio management with our
Sustainable Solution Steering method and reducing absolute CO2
emissions. We reached our Accelerator sales target in 2021, earlier
than planned. Consequently, we will adjust our portfolio steering
target over the course of 2022.
Calculating ROCE and cost of capital
Management's Report - In Focus: Circular Economy
BASF Report 2021
33
43
< >
1 The definition of the relevant portfolio and further information can be found in the Sustainable Solution Steering manual at basf.com/en/sustainable-solution-steering
EBIT before special items is used to steer profitability at Group
and segment level. This is calculated by adjusting the EBIT
reported in the Consolidated Financial Statements for special
items, making it especially suitable for assessing economic
development over time. Special items arise from the integration
of acquired businesses, from restructuring measures, certain
impairments, gains or losses resulting from divestitures and sales
of shareholdings, and other expenses and income that arise out-
side of ordinary business activities.
-
In addition to ROCE as the BASF Group's most important financial
key performance indicator, we use EBIT before special items and
capex (capital expenditure) as key performance indicators that have
a direct impact on ROCE and as such, support its management.
An important part of our value management is the target agreement
process, which aligns individual employee targets with BASF's
targets. The most important financial performance indicator in the
operating units is ROCE. The other units' contribution to value is
also assessed according to effectiveness and efficiency on the basis
of quality and cost targets. To assess this, we use metrics such as
BASF's internal service score in the service units.
Value-based management throughout the company
For more information on the development of these indicators, see Results of Operations from
page 56 onward
Furthermore, we comment on and forecast sales at Group and
segment level in our financial reporting as a significant driver for EBIT
before special items and thus ROCE.
negative effects along the value chain
- Topics with impacts that cannot be
expressed in monetary terms included
based on relevance for external
stakeholders and on assessments of
internal experts
Capital expenditures (capex) are used to manage capital
employed in the BASF Group. These comprise additions to
property, plant and equipment excluding additions from acquisi-
tions, IT investments, restoration obligations and right-of-use
assets arising from leases. Capex is not just relevant to ROCE
management, but also supports our long-term goal of increasing
our dividend each year based on a strong free cash flow.
Calculation of Accelerator sales¹
Management's Report - Our Steering Concept
BASF Report 2021
1 In March 2021, we replaced our previous target of CO2-neutral growth until 2030 (baseline 2018: 21.9 million metric tons of CO₂e) with a new, more ambitious climate protection target to reduce absolute CO2 emissions by 25% compared with 2018 (new target: 16.4 million metric tons of CO₂e).
For more information on CO2 emissions and our climate protection targets, see page 126 onward
We set ourselves even more ambitious targets with our roadmap
to climate neutrality, which we presented in March 2021: Compared
with the 2018 baseline, we want to reduce greenhouse gas
emissions by 25% by 2030.1 We aim to achieve net zero emissions
(Scope 1 and Scope 2) by 2050.
We calculate our absolute CO2 emissions on the basis of green-
house gas emissions, which are the sum of direct emissions from
production processes and the generation of steam and electricity
(Scope 1), as well as indirect emissions from the purchase of energy
(Scope 2). Direct emissions from the generation of energy for third
parties are not considered here. Relevant emissions include other
greenhouse gases according to the Greenhouse Gas Protocol,
which are converted into CO2 equivalents.
Calculation of CO2 emissions
based on the financing costs of the BASF Group. The cost of capital
percentage for 2022 is 9% (2021: 9%).
We have integrated the cost of capital percentage into our
ROCE target as a comparative figure. This is determined using the
weighted cost of capital from equity and borrowing costs (weighted
average cost of capital, WACC). To calculate a pre-tax figure similar
to EBIT, the cost of capital is adjusted using the projected tax rate
for the BASF Group for the business year. In addition, the projected
net expense of Other is already provided for by an adjustment to the
cost of capital percentage. The cost of equity is ascertained using
the capital asset pricing model. Borrowing costs are determined
The cost of capital basis is calculated using the month-end figures
and consists of the operating assets of the segments. These com-
prise the current and noncurrent asset items of the segments,
including tangible and intangible fixed assets, integral investments
accounted for using the equity method, inventories, trade accounts
receivable, other receivables and other assets generated by core
business activities and, where appropriate, the assets of disposal
groups. The cost of capital basis also includes customer and sup-
plier financing.
To calculate the EBIT of the segments, we take the BASF Group's
EBIT and deduct the EBIT of activities recognized under Other,
which are not allocated to the divisions.
ROCE is calculated as the EBIT of the segments as a percentage of
the average cost of capital basis.
For more information on sustainability-oriented portfolio management, see page 141 onward
- Business units surveyed as part of
strategy development
Accelerator sales refer to sales generated by the BASF Group from
products in our strategic portfolio to third parties in the business
year concerned. Accelerator products make a substantial sustain-
ability contribution in the value chain. In line with our corporate
strategy, we set ourselves the global target of achieving €22 billion
in Accelerator sales by 2025. This target was already achieved in
2021. Consequently, we will adjust our portfolio steering target over
the course of 2022.
Material topics
41%
Agricultural Solutions
Corporate research, Other
Research and development expenses by segment 2021
Million €
17%
We will continue to use corporate funding to finance research of
broad relevance to the BASF Group that goes beyond the industry-
specific focus of the individual operating divisions.
We have already brought our research and development units closer
together over the past few years. We will reorganize our global
research activities in 2022 to further strengthen our innovation
performance and respond to our customers' industry-specific
requirements even better and more quickly going forward. Business
and application-driven research units that are currently allocated to
the three corporate research divisions will be integrated into the
operating divisions, aligning them even more closely with the needs
of our customers. The aim is to further shorten the time to market
for new products and accelerate BASF's organic growth. Research
activities that are relevant to several operating divisions will be
bundled in a central research division steered from Ludwigshafen,
Germany. This unit will continue to be globally organized with
research centers in Europe, North America and Asia Pacific.
Together with the development units in our operating divisions, it
forms the core of our global Know-How Verbund.
Our central research is currently divided into three global divisions,
run from Europe, Asia Pacific and North America: Process
Research & Chemical Engineering (Ludwigshafen, Germany);
Advanced Materials & Systems Research (Shanghai, China); and
Bioscience Research (Research Triangle Park, North Carolina).
[In 2021, we generated sales of over €11 billion with products
launched on the market in the past five years that stemmed from
research and development activities.] In the long term, we aim to
continue significantly increasing sales and earnings with new and
improved products - especially with products that make a substan-
tial sustainability contribution in the value chain (see page 141).
Our innovation focus is on developing sustainable solutions for
our customers. We ensure our long-term competitiveness by helping
our customers reduce their carbon footprint, use resources more
efficiently, or manufacture products in a more environmentally friendly
way and to recycle them, to name a few examples.
Our research and development expenses amounted to
€2,216 million in 2021 (2020: €2,086 million). Research and
development activities in our operating divisions, which is mainly
application and customer-related, accounted for 83% of this figure.
Corporate research, in which we bundle cross-divisional and long-
term topics, was responsible for 17% of these expenses.
Innovation has always been the key to BASF's success. The knowl-
edge and skills of our highly qualified employees is our most valuable
resource here and the source of our innovative strength. We had
approximately 10,000 employees involved in research and devel-
opment worldwide in 2021.
Close cooperation with universities, research institutes and
companies
Close cooperation between research and business units
Focus on customers' needs and requirements
■
New patents filed
Research and development
expenses
~820
€2.2 billion
At a glance
< > 49
40
Protecting our climate and making the best use of limited natural resources while supplying the fast-growing
global population with food, energy and clean water are among the greatest challenges of our time. Innovations
based on chemistry play a pivotal role in overcoming these. That is why we are working together with our
customers on innovative processes, technologies and products for a more sustainable future.
102, 302, 305
GRI
Innovation
Management's Report - Innovation
BASF Report 2021
48
€2,216 million
48
4%
Chemicals
Materials
8%
Industrial Solutions
13%
Surface Technologies
We promote creative and agile research approaches. We are driving
forward the development of new business areas. For example, we
are developing innovative coating technologies and materials that
make innovative surfaces and functions possible. Functional films
can be used to reduce the frictional resistance of surfaces or improve
UV protection and weather resistance, for example. Our innovative
solutions help our customers to achieve their sustainability goals.
- Positive and negative effects of individual
As part of our Carbon Management R&D Program, we are carrying
out intensive research into pioneering, low-carbon production pro-
cesses for basic chemicals such as hydrogen (see page 132). This
will enable us to offer our customers products with a lower carbon
footprint in the future.
Employees in research and development
-
~10,000
Our global research and development presence - and its effec-
tiveness is vital to our long-term success. This enables us to
respond to the needs and requirements of the regional markets in a
differentiated way and leverage growth potential.
The Ludwigshafen site in Germany is and will remain the largest in
our Research Verbund. Investments there include a combined labo-
ratory building for cleanroom and elemental analysis. The new
building's modern digitalization and automation solutions set new
standards in safety and efficiency. It is scheduled to open in 2022.
In addition, we will build a new Catalyst Development and Solids
Processing Center in Ludwigshafen, Germany, by 2024 to bring
process innovations and new chemical catalysts to market faster.
We want to continue advancing our research and development
activities, especially in Asia. For instance, in 2021 we started the
third expansion phase for the BASF Innovation Campus in Shanghai,
China. With this expansion, BASF will strengthen its research and
development capabilities for advanced materials and systems as
well as for chemical engineering. Construction is expected to be
completed by the end of 2022.
A strong presence outside Europe creates new opportunities for
developing and expanding our customer relationships and scientific
collaborations as well as for gaining access to talented employees.
This strengthens our Research and Development Verbund and
makes BASF an even more attractive partner and employer.
The number and quality of our patents also attest to our power of
innovation and long-term competitiveness. In 2021, we filed around
820 new patents worldwide. The Patent Asset Index, a method that
compares patent portfolios, once again ranked us among the lead-
ing companies in the chemical industry in 2021.
For more information on innovation, see basf.com/innovations
Global network
Our global network of top universities, research institutes and com-
panies forms an important part of our Know-How Verbund. It gives
us direct access to external scientific expertise, talented minds from
various disciplines as well as new technologies - and helps us to
quickly develop targeted, marketable innovations, strengthen our
portfolio with creative new projects, and in this way, reach our
growth targets.
Our eight academic research alliances bundle partnerships with
several research groups in a region or with a specific research focus.
Eight Academic Research Alliances
Access to scientific expertise,
talented minds and new technologies
The Northeast Research Alliance (NORA) and the California
Research Alliance (CARA) are located in the United States. NORA
focuses on materials science and biosciences, catalysis research,
digitalization and cooperation with startups. Teams at the interdisci-
plinary CARA research center are working on new functional mate-
rials, formulations, digital methods, catalysis, chemical synthesis,
and in engineering sciences and biosciences.
The Joint Research Network on Advanced Materials and Systems
(JONAS) is active in Europe and concentrates on supramolecular
chemistry, polymer chemistry and the incubation of sustainable
technologies. We are working on innovative components and mate-
rials for electrochemical energy storage with the Karlsruhe Institute
of Technology (KIT) at the Battery and Electrochemistry Laboratory
(BELLA). At the joint Catalysis Research Laboratory (CaRLa), BASF
is researching homogeneous catalysis in cooperation with the Uni-
versity of Heidelberg. BasCat is a joint laboratory operated by the
UniCat cluster of excellence and BASF at the Technical University of
Berlin, where new heterogenous catalysis concepts are being
explored together with the Fritz Haber Institute of the Max Planck
Society, also based in Berlin. The iL (Innovation Lab) in Heidelberg,
Germany, focuses on functional printing, printed sensors and loT
(internet of things) applications.
At the Network for Asian Open Research (NAO) in the Asia Pacific
region, research focuses on polymer and colloid chemistry, cataly-
sis, machine learning and smart manufacturing.
[The Academic Research Alliances are complemented by coop-
erative partnerships with around 280 universities and research insti-
tutes as well as collaborations with a large number of companies.]
For more information on our collaboration initiatives, see basf.com/innovate-with-us
50
Κ Σ
BASF Report 2021
Nutrition & Care
8%
9%
< >
Management's Report - Innovation
Health protection
Our stakeholder management
For more information on our sustainability tools, see basf.com/en/measurement-methods
For more information on value balancing alliance e.V., see value-balancing.com
For more information on this method and the results of Value to Society,
see basf.com/en/value-to-society
be piloted by all member companies and the results will be fed back
to the VBA for further development.
The method developed by the VBA was enhanced and refined on
the basis of feedback from the scientific community and member
companies. Amendments include the addition of two social indica-
tors and the calculation of downstream impacts, as well as revisions
to financial indicators, for example. This enhanced method will again
We are a founding member of the value balancing alliance e.V. (VBA)
and have contributed our knowledge and experience to this cross-
industry initiative. We support the development of an accounting and
reporting standard that makes the value companies provide to
society transparent and comparable. The aim is to present the finan-
cial, ecological, and social impacts of business activities on the basis
of a standardized framework. The VBA is supported by major audit-
ing firms, the Organisation for Economic Co-operation and Develop-
ment (OECD), leading universities and other partners. Together with
the OECD and the Business for Inclusive Growth (B4IG) coalition, we
are pushing to further expand the social indicators. Here, BASF
leads the Impact Measurement working group together with
partners. Through the VBA, we are involved in the E.U.'s Platform on
Sustainable Finance. Together with the VBA and other partners, we
supported the establishment of the International Sustainability
Standard Board (ISSB), are involved in the work of the World Eco-
nomic Forum (WEF) and are part of the G7 Impact Taskforce. Our
Corporate Finance unit is also involved in the work of the European
Financial Reporting Advisory Group's (EFRAG) Project Task Force on
European sustainability reporting standards.
Overall, the Value to Society method helps us to continually monitor
our progress. It complements existing concepts for assessing risks
and business opportunities by providing a macro perspective and
enables us to derive the necessary business steps.
We want to holistically capture the value we contribute to society
along the value chain and make this transparent. However, there are
still no uniform, global standards for measuring and reporting on
companies' overall impact that cover economic, environmental and
social aspects of business activities along the value chain. This is
why we developed the Value to Society method in 2013 together
with external experts. We can use this methodological approach to
compare the significance of financial and sustainability-related
impacts of our business activities on society and show their interde-
pendencies. The results illustrate the positive contributions and
negative effects, both at BASF and in our value chains. Positive fac-
tors include taxes paid, wages, social benefits, employee training
and our net income.1 Negative contributions include environmental
impacts such as carbon emissions, land use and emissions to air,
soil and water, as well as health and safety incidents. The positive
impacts of our economic activities declined in 2020,² primarily due to
the economic conditions caused by the coronavirus pandemic,
which led to lower economic value added. In addition, higher water
consumption and increased land use in supplier and customer
industries had a greater impact on the environment.
We already have many years of experience in this area from evaluat-
ing our products and processes using methods such as Eco-
Efficiency Analyses, the SEEbalance® Socio-Eco-Efficiency Analysis,
our Sustainable Solution Steering portfolio analysis, BASF's corpo-
rate carbon footprint or the calculation of Product Carbon Footprints.
We are aware that our business activities can have both positive and
negative impacts on the environment and society. We aim to
increase our positive contributions and minimize the negative
impacts of our business activities. To achieve this, we need to under-
stand how our actions and our products impact society and the
environment.
Measuring sustainable value added
47
< >
Management's Report - Our Sustainability Concept
46
46
< >
For more information on compensation structures, see the compensation report at
basf.com/compensationreport
For more information on the organization of our sustainability management, see
basf.com/sustainabilitymanagement
developing recommendations on how the SDGs should be consid-
ered in financial decisions and in interactions with investors.
For more information on our financial and sustainability targets, see pages 36 and 37
For more information on our risk management, see pages 151 to 160
In 2018, we established our Sustainable Finance Roundtable, which
discusses topics related to sustainable finance. Here, experts from
departments such as Finance, Corporate Strategy, Investor Rela-
tions and Communications discuss upcoming new legal require-
ments. The interdisciplinary group analyzes the steadily growing
requirements, assesses the impact on BASF and drives forward the
necessary change processes as well as the concrete implementa-
tion of measures. In a U.N. Global Compact task force, we are
1 Our stakeholders also confirmed the materiality of the nonfinancial topics that the Value to Society method identified as having an impact along the value chain.
2 Quantitative thresholds for defining material topics have not been set due to the complexity of the assessment methods used for each dimension of materiality. The final list of topics is based on an expert comparison of the
results of all the assessment approaches described.
by surveys and interviews with
external experts
- Results complemented and confirmed
- Big data analysis based on
external publications
Opportunities for professional development
sustainability trends on the businesses
analyzed based on meta-study
Our stakeholders include customers, employees, investors, sup-
pliers, the communities surrounding our sites, and representatives
from industry, academia, politics and society. Parts of our business
activities, such as the use of certain new technologies or our envi-
ronmental impacts, are often viewed by stakeholders with a critical
eye. We take these questions seriously, initiate dialogs and partici-
pate in discussions. Such ongoing exchange with our stake-
holders helps us to even better understand what matters to groups
of society, what they expect of us and which measures we need to
pursue in order to establish and maintain trust, build partnerships,
and increase societal acceptance for and the sustainability of our
business activities. In doing so, we want to harness potential for
mutual value creation and strengthen societal acceptance of our
business activities. For important topics, we systematically identify
key stakeholders at an early stage to discuss critical questions
with them. Relevant considerations here include their topic-specific
expertise and willingness to engage in constructive dialog.
We established an external, independent Stakeholder Advisory
Council (SAC) in 2013 and the Human Rights Advisory Council
(HRAC) in 2020. In the SAC, which is led by the Chairman of the
Board of Executive Directors, international experts from academia
and society contribute their perspectives to discussions with BASF's
Board of Executive Directors. The HRAC is an advisory body com-
prising external human rights specialists and internal experts. This
helps us to critically reflect on our positions and address potential for
improvement.
BASF Report 2021
BASF Report 2021
- Attractive and fair employer
Employees and management
1 The net income of BASF's production presented in the Value to Society is calculated using the BASF Group's net income, adjusted for the interest result, the other financial result and noncontrolling interests.
2 Value to Society results are calculated annually following the publication of the BASF Report. Accordingly, the statements on this in the BASF Report 2021 refer to the evaluation conducted for the 2020 business year.
- Fair and reliable business relationships
Support in complying with our Supplier Code of
Conduct (environmental and social requirements)
Suppliers
- Attractive dividend yield
Transparency and risk minimization
Strong long-term share performance
Investors
For more information on our societal engagement, see page 106
In this way, societal engagement is an important part of the imple-
mentation of our sustainability strategy and our corporate social
responsibility. Our societal engagement policy provides the guard-
rails for our activities in this area. It stipulates that all engagement
measures worldwide must be conducted in line with our compliance
policy, BASF's strategy and our sustainability commitments.
Through our societal engagement, we want to help disadvantaged
groups tackle their specific challenges - whether through initiatives
in our immediate communities or around the world in cooperation
with global organizations. We want to foster societal cohesion by
supporting and protecting health, skills and resources. We support
projects that aim to have a lasting impact on specific target groups
and offer learning opportunities for participating cooperation part-
ners and BASF (see page 106).
Our societal engagement approach
- Support for local communities
· Safe, disruption-free operations
- Attractive jobs
Community
- Responsible and trustworthy partner
Production of safe products in compliance
with environmental and social standards
Jobs and taxes
(within the meaning of section
289c HGB or relevant under
the Global Reporting Initiative)
Management's Report - Our Sustainability Concept
Our political advocacy is conducted in accordance with trans- Stakeholder demands and expectations of BASF
parent guidelines and our publicly stated positions. The same
applies to our activities in associations. For instance, we again
published an Industry Associations Review in 2021 comparing
the energy and climate protection positions of BASF and the
most important associations of which we are a member, with
explanations on our approach.
Cost effectiveness
Innovative and sustainable solutions
Reliable partner
For more information on the Stakeholder Advisory Council, see
basf.com/en/stakeholder-advisory-council
For more information on the Human Rights Advisory Council, see basf.com/human-rights-council
For more information on the Industry Associations Review, see basf.com/corporate governance
For more information on our guidelines for responsible lobbying, see
basf.com/guidelines_political_communication
For more information on dialog with our stakeholder groups, see page 106
Customers
We have a particular responsibility toward our production sites'
neighbors. With the established community advisory panels, we
promote open exchange between residents and our site manage-
ment and strengthen trust in our activities. Our globally binding
requirements for community advisory panels are based on the
grievance mechanism standards in the United Nations' Guiding
Principles on Business and Human Rights. We keep track of
their implementation through the existing global database of the
Responsible Care Management System.
BASF does not financially support political parties, for example
through donations in cash or in kind. This is codified in a global
guideline. In the United States, employees at BASF Corporation
have exercised their right to establish a Political Action Committee
(PAC). The BASF Corporation Employee PAC is an independent,
federally registered employee association founded in 1998. It
collects donations from employees for political purposes and
independently decides how these are used, in accordance with
U.S. law.
Society: politics, NGOs, media
Economic Environment¹
The global economy recovered more quickly in 2021 from the previous year's severe slump in economic
activity than had been expected at the beginning of the year. Many governments' aid programs and rising
vaccination rates were key contributing factors to the recovery. Nevertheless, the economic upturn was
repeatedly hampered by measures to contain the pandemic and supply chain disruptions.
For the outlook on the economic environment in 2022, see page 145 onward
Net Assets
Economic Environment
Results of Operations
Financial Position
In this section:
The BASF Group's Business Year
53
BASF Report 2021
Animal-free testing methods: The European Union wants to sig-
nificantly improve the safety of chemical products. BASF supports
this goal and has been actively working to make it a reality for many
years. For example, in order to meet expanded requirements and
additional testing obligations under the E.U.'s Chemicals Strategy
for Sustainability in the future, we are developing innovative in vitro
methods with our own laboratory team and together with partners.
Among other things, they will help us to efficiently and reliably detect
and evaluate potential hormonal effects of substances - even with-
out animal testing. BASF has been researching alternative methods
for many years and recently reached an important milestone: In
2021, the OECD approved the world's first toxicology testing
strategy without animal testing - a joint project between BASF and
Givaudan (see page 123). It can be used to reliably predict whether
a substance causes allergic reactions in the skin without animal
testing. We make all methods developed by us and approved freely
available to interested companies and authorities.
Actual Development Compared With Outlook for 2021
Business Review by Segment
Other
Bio-based and biodegradable ingredients: Circular economy
and sustainability are also playing an increasingly important role for
our customers in the detergent and cleaner industry. That is why
interdisciplinary teams at BASF have been working hard on the
question of how to optimize cleaning performance and environ-
mental compatibility. The focus here is on new ingredients that can
be produced from renewable raw materials and biodegraded at the
end of their productive life cycle. This calls for new approaches
in research and development. We are developing a funda-
mental understanding of how biodegradation occurs under different
Recycling industrial off-gases: Industrial off-gases are usually
incinerated or thermally recovered. In both cases, CO2 is emitted. To
avoid this and to recycle the main components of the off-gases so
they can be used in chemical production, BASF has been research-
ing an innovative process, gas fermentation, with the U.S. startup
Lanza Tech since 2018. The interdisciplinary team achieved an
important breakthrough in 2021: using special bacteria, they were
able to produce n-octanol from carbon monoxide and hydrogen for
the first time. The molecule is an alcohol and is used in cosmetics,
for example. Normally, microorganisms cannot produce n-octanol,
which is toxic to them. However, using biotechnological methods,
LanzaTech was able to program the organisms to produce and tol-
erate n-octanol as part of a gas fermentation process. In parallel,
BASF researchers developed a process that enables the continuous
separation and purification of n-octanol. Following successful imple-
mentation in the laboratory, the team is now working on further
process improvements. Integrating gas fermentation technology
into the BASF Verbund could contribute to a carbon-neutral circular
economy in the future.
54
51
Our aim is to quickly turn ideas into innovations for a sustainable future. To achieve this, we bring
together the creativity, experience and expertise of our employees with the know-how of our
partners from academia and industry.
Management's Report - Economic Environment
conditions in joint projects with academic partners and closely
coordinated laboratory and field research. The additional integra-
tion of new digital tools and faster screening and testing methods
enables us to shorten our development times and develop high-
performance, environmentally compatible ingredients - not only for
cleaning purposes, but also for cosmetics and industrial applications
such as agrochemicals.
Increase in global industrial
and chemical production
2021 at a glance
From the Lab to Real-World Applications
Gross domestic product
Management's Report - Economic Environment
BASF Report 2021
52
59
1 All information relating to past years in this section can deviate from the previous year's report due to statistical revisions. Where available, calendar-adjusted macroeconomic growth rates are reported. Figures for 2021 not yet available in full are estimated.
Non-Integral Oil and Gas Business
Regional Results
E.U. Taxonomy
The recovery of the global economy varied from region to region in
2021. There were severe restrictions on public life in the first half of
the year, particularly in Europe. In the second and third quarters,
many Asian countries struggled with coronavirus outbreaks and
took corresponding countermeasures. China maintained its zero-
Covid strategy throughout the year and responded to the emer-
gence of any infections with strict containment measures. In the
United States, most restrictions were eased after the first quarter
despite sharply rising infection numbers over the course of the year.
The steady reopening of economies was facilitated by increasing
vaccination rates. Vaccination rates increased significantly during
the year in Western Europe and the United States, followed by
the advanced Asian countries and China with some delay. Other
advanced emerging economies, for example in South America, now
also have high vaccination rates. In contrast, vaccination rates are
still low in large parts of the poorer countries of Africa and Asia, as
well as in Russia.
Global gross domestic product (GDP) grew by 5.8% year on year
(2020: -3.4%). Industrial production expanded by 6.5% (2020:
-3.0%). Global chemical production grew by 6.1% (2020: -0.1%).
The average price for a barrel of Brent crude oil increased to $71 per
barrel (2020: $42 per barrel).
■ Sharp increase in prices for crude oil and naphtha,
drastic rise in gas prices
Dynamic growth in global industrial production despite fragile
supply chains and stagnating automotive industry
Strong growth in the global chemical industry
■ Economic recovery in Europe and the United States, slowing
momentum in Asia
Global GDP growth
>6%
+5.8%
Trends in the global economy in 2021
GDP rates in 2021 were strongly influenced by base effects. China's
GDP grew at a double-digit rate in the first quarter year on year. In
the second quarter, the United States and the European Union then
recorded very high growth rates. Global growth slowed down, how-
ever, in the second half of the year. Bottlenecks in global supply
chains increasingly limited industry growth. Added to this were the
dampening effects of very high energy prices and a further sharp
rise in infection rates in individual countries.
Million €
_ 100-1000 pl
BASF Report 2021
Management's Report - Results of Operations
60
60
Sales and earnings
Sales and earnings by quarter in 2021a
Million €
2021
59
2020
Q1
Q2
Q3
Q4
2020
Full year
Sales
+/-
In focus:
59
3.21
Management's Report - In Focus: From the Lab to Real-World Applications
BASF Report 2021
Adjusted income after taxes
6,695
2,999
- Adjusted noncontrolling interests
483
a Includes special items in net income from shareholdings of €90 million for 2021 and €855 million for 2020
54
6,212
2,945
Weighted average number of outstanding shares (in thousands)
918,479
918,479
Adjusted earnings per share
6.76
Adjusted net income
Real change compared with previous year
6.4%
World
9.0%
Consumer goods
-1.1%
3.9%
Construction
-3.5%
3.3%
12.0%
Energy and resources
2.5%
Of which: automotive industry
-16.6%
2.5%
Transportation
-3.0%
6.5%
-15.9%
3.2%
Electronics
Health and nutrition
BASF Report 2021
78,598 59,149
By contrast, significant petrochemical capacities were temporarily
unavailable in the United States, in particular. After the cold spell in
the first quarter, production on the U.S. Gulf Coast was negatively
impacted by hurricanes Ida and Nicholas as well. In total, production
Chemical production growth in the European Union was also
extraordinarily high at 6.0%. A contributing factor was the low basis
in the previous year (2020: -2.1%). In addition, the European chemi-
cal industry benefited from the fact that availability of global produc-
tion capacities for basic chemicals was intermittently limited. The
Middle East (+6.2%) also recorded solid production growth.
Chemical production in China, the world's largest chemical market,
saw especially strong expansion (+7.7%). However, growth slowed
at a high level during the course of the year. Electricity cuts had a
negative effect on production, particularly in the third and fourth
quarters. Growth in other emerging markets of Asia was also high at
around 6.9%.
Global growth in the chemical industry was 6.1% in 2021, almost as
high as growth for the industry as a whole, despite only a minimal
decline in chemical production in the previous year unlike in many
other industries. While the stronger performance in the previous year
had mainly been due to extraordinary pandemic-related demand for
disinfectants, cleaning agents and single-use plastics, as well as to
the early recovery in China, in 2021, the global upswing in many
consumer goods industries contributed to growth.
Trends in the chemical industry
Also above average, agricultural production grew by 3.2%, as the
overall negative impact of extreme weather events on yields was
minor relative to recent years and global demand for agricultural
goods increased dynamically due to economic recovery. Growth
was driven primarily by Asia (+5.3%). By contrast, production growth
was only weak in South America (+1.2%) and even declined slightly
in North America and Europe.
Global demand for energy and industrial raw materials rose sharply
in 2021. Production in the energy and raw materials sector, how-
ever, only increased by 3.3% (2020: -3.5%), which resulted in sig-
nificant price increases. The health and nutrition sector achieved
growth of 6.4%, which was above average for recent years due to
15% growth in the pharmaceuticals industry resulting from vaccine
production. Production in the food industry grew by 3.7%, which, by
contrast, was just slightly better than the long-term average.
The electronics sector saw above-average growth of 12%. It
benefited from the general trend toward digitalization and connec-
tivity, as well as from demand for consumer electronics and elec-
tronic control of household appliances and motor vehicles. Growth
was slowed by capacity bottlenecks in the production of computer
chips.
After a decline of 2.7% in the previous year, consumer goods pro-
duction grew by a total of 9.0%. High growth rates between around
9% and 13% were recorded in the furniture and textile industries as
well as in the production of electrical appliances. Expansion in the
care products sector was, by contrast, more modest at 4.3%. This
industry had not contracted in the previous year and was therefore
less able to benefit from base effects.
The construction industry expanded by around 4% (2020: -1.1%)
despite a sharp rise in prices for scarce building materials. Growth
was strongest in residential construction at almost 6%. Here, the
rising demand for housing during the pandemic played a key role;
furthermore, government transfers and persistently low interest
rates strengthened the purchasing power of private households.
Growth in residential construction was particularly high in the United
States. Residential construction in Europe grew only slightly above
the overall market average. In China, on the other hand, residential
construction cooled significantly in the wake of the government's
efforts to limit real estate prices and debt. Commercial construction
investments remained weak with growth of less than 3%. Growth in
the less volatile infrastructure segment was also below average at
around 3%.
Global automotive production was particularly affected by supply
problems with semiconductors. Although base effects ensured
strong growth at the beginning of the year, the shortage in semicon-
ductors worsened so significantly in the second half of the year that
many automotive manufacturers had to respond by cutting produc-
tion or even temporarily shutting down entire plants. As a result,
automotive production grew only slightly overall by 2.5% in 2021
after contracting by 15.9% in the previous year. Production levels
remained exceptionally low, with a total of around 76 million vehicles
produced worldwide. Similarly low production volumes had last
been recorded in the early 2010s. Moderate growth was achieved in
Asia (+5.1%). The North American market stagnated (+0.1%). In the
E.U., by contrast, production decreased by 6.2% in 2021, following
a decline of nearly 25% in 2020. Of all the regions, South America
achieved the highest growth rate; however, it saw the strongest
decrease in the previous year (2021: +16.1%; 2020: -31.1%).
2.0%
0.2%
-2.7%
3.2%
Agriculture
Industry total
2021
2021
2020
Economic trends by region
6.8%
South America
1.7%
Japan
0.0%
7.3%
-4.5%
-6.2%
Emerging markets of Asia²
5.7%
United States
-6.1%
5.2%
E.U.1
-3.4%
5.8%
-3.4%
In the European Union (E.U.), GDP grew by 5.2% (2020: -6.1%).
At the beginning of the year, restrictions in stationary retail, hospi-
tality, tourism, and the cultural and entertainment sectors negatively
impacted economic recovery. In the course of the second quarter,
the restrictions were successively relaxed as a result of falling infec-
tion rates. At the same time, the vaccination campaign, which got
off to a slow start due to a shortage of vaccines, gained momentum.
Due to base effects, GDP growth in the second quarter was in the
double digits compared with the previous year. There was, however,
also a significant upturn in the second and third quarters of 2021
compared with the first quarter, especially in European tourist
destinations. In France (+7.0%), Italy (+6.4%) and Spain (+5.0%),
GDP grew especially dynamically in 2021. By contrast, Germany
I was hit harder by bottlenecks in intermediate inputs for the invest-
ment goods and automotive industries. At 2.8%, Germany's
economy thus grew at a below-average rate in 2021. Despite lower
vaccination rates and higher infection rates, growth in the eastern
E.U. countries (+5.3%) was at a similar level to that in the western
E.U. countries (+5.2%).
Despite the end of the Brexit transition period at the beginning of the
year, the United Kingdom's economy (2021: +7.5%) recovered
substantially from its major slump in the previous year (2020: -9.4%).
Rapidly rising vaccination rates, as well as the complete reopening
of the U.K. economy from mid-July, contributed to this. However,
the consequences of Brexit were felt over the course of the year,
particularly due to the shortage of labor in logistics chains and skilled
trades.
Growth in key customer industries
In the E.U., industrial production also increased significantly by 6.6%
(2020: -7.1%). After the sharp decline in the previous year, the
United Kingdom saw growth of 8.3% (2020: -10.4%). By contrast,
North America's industrial growth was below average at 5.0%
(2020: -4.8%). South America recorded an increase just above the
global average (2021: 7.0%; 2020: -6.5%).
54
54
Management's Report - Economic Environment
BASF Report 2021
2 We define the emerging markets of Asia as Greater China, the ASEAN countries (Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos, the Philippines, Singapore, Thailand, Vietnam), India, Pakistan and Bangladesh.
1 In this chapter, "E.U." refers to the E.U. 27.
Global industrial production grew by 6.5% in 2021 (2020: -3.0%).
The advanced economies saw somewhat lower growth of 5.3%
overall than the emerging markets, which saw a rise of 7.4%. The
largest contribution to global industrial production growth came
from China (2021: +8.4%; 2020: +3.7%). Around 30% of global
industrial value creation and almost 40% of its growth were gener-
ated there. In total, over 50% of global industrial growth came from
Asia. The region's production expanded by 7.5% in 2021 (2020:
-0.1%).
Growth in industrial production was negatively impacted by supply
difficulties in 2021. In many areas, existing orders could not be pro-
cessed due to a lack of intermediate goods. Transport capacities,
especially ship and container capacities in overseas trade, were not
sufficient to meet the sharp rise in demand for industrial goods.
Furthermore, manufacturing disruptions in Asia due to regional
lockdowns were also a factor.
Trends in key customer industries
The South America region recorded a rapid economic recovery,
supported by rising prices for agricultural goods and industrial raw
materials. Domestic demand in some countries was, however,
dampened by currency devaluations and rising inflation rates. Brazil
was able to increase its GDP by 4.7% (2020: -4.2%), bolstered by a
considerable rise in exports and investments as well as moderate
growth in private consumption. Argentina's economic output grew
by a strong 9%, though the previous year's decline had been signifi-
cantly larger at nearly -10%. For the region as a whole, GDP rose by
6.8% in 2021, after a decline of approximately the same magnitude
in the previous year.
the automotive industry. Japan's GDP only grew by 1.7% (2020:
-4.5%). South Korea saw significantly higher growth of 4.0% (2020:
-0.9%).
The economies of Japan and South Korea were also significantly
impacted by the pandemic. Japan temporarily declared a state of
emergency. Private consumption was thus only able to increase
slightly. Although exports rose considerably, they were negatively
affected by the decline in growth in China and supply bottlenecks in
In the emerging markets of Asia, growth weakened significantly in
the course of the year. China's dynamic recovery that began in the
previous year continued initially. However, mobility restrictions and
selective lockdowns, even with only few occurrences of coronavirus
infections, as well as more restrictive financing conditions in the
construction sector, negatively affected domestic demand growth.
In addition, energy was rationed. By contrast, export demand grew
significantly. In total, the Chinese economy expanded by 8.1%
(2020: 2.2%). Many other emerging markets in Asia, including India,
Malaysia and Thailand, were forced to temporarily adopt restrictive
measures to contain waves of infection. All in all, the region grew by
7.3% in 2021.
Economic development in the United States was volatile. Govern-
ment stimulus programs bolstered household demand considerably
early in the year, which resulted in strong GDP growth in the first two
quarters. However, due to the expiration of aid benefits and a further
rise in infection rates coupled with increasing supply problems due
to congestion in the country's largest ports, growth in private con-
sumption was more sluggish in the second half of the year. In total,
GDP in the United States grew by 5.7% in 2021 (2020: -3.4%).
Russia's GDP grew by 4.3% (2020: -2.9%). Increased oil and gas
prices led to rising trade surpluses and bolstered growth, while high
infection rates and lockdowns weighed on the economy.
Real change compared with previous year
32.9%
Q4
19,400
1.56
1.17
6.76
Net income
5,523
-1,060
Earnings per share
2.03
€
-1.15
Sales and earnings by quarter in 2020ª
Million €
Adjusted earnings per share
€
6.76
3.21 110.6%
Q1
6.01
Q2
2.00
Adjusted earnings per share
1,718
1,654
1,253
898
5,523
Income after taxes from discontinued
Earnings per share
€
€
1.80
1.36
0.98
6.01
-36
396
operations
1.87
Q3
Management's Report - Economic Environment
Full year
1,020
6,685
Income from operations (EBIT)
Special items
EBIT before special items
Income before income taxes
Income after taxes from continuing operations
3,682
1,456
-2,638
932
-191
-184
-167
-3,219
-181
59
1,011
972
6,494
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments
and reversals of impairments)
Sales
16,753
12,680
13,811
15,905
59,149
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
Depreciation and amortizationb
2,579
1,229
1,542
2,085
7,435
2,428
1,070
1,044
1,952
Net income
-36
7
-43
11,355
6,494
74.9%
Depreciation and amortization
865
883
907
Income from operations before depreciation
and amortization (EBITDA)
1,023
EBITDA margin
%
14.4
11.0
Income from operations (EBIT)
2,311
2,316
3,678
11,355
2,250
2,729
19,753
19,669
19,776
78,598
Income from operations before depreciation,
amortization and special items
11,348
7,435
52.6%
Income from operations before depreciation, amortization and special items
3,181
3,217
2,771
2,179
11,348
Income from operations before depreciation and amortization (EBITDA)
3,176
3,199
1,822
Sales
1,227
Depreciation and amortization
1,777
1,235
7,448
EBIT before special items
Income before income taxes
Income after taxes from continuing operations
6,018
2,189
7,768
7,448 -1,562
-1,471
Income after taxes from continuing operations
1,810
1,794
1,424
990
6,018
Income after taxes from discontinued operations
3,560 118.2%
2,247
Income before income taxes
97.6%
Income from operations (EBIT)
Special items
3,678
7,677
-91 -3,751
6,685 -45.0%
Special items
-10
-39
-43
1
-91
-191
EBIT before special items
2,321
2,355
1,865
1,227
7,768
7,677
in the United States thus only grew by 1.8% in 2021. Chemical
production in South America increased by 4.6%.
3,534
$/t
1.7
2021
2020
Intangible assets
13,143
14,249
+ Property, plant and equipment
13.5
19,280
+ Integral investments accounted for using the
equity method
1,682
1,395
+ Inventories
11,459
10,469
+ Accounts receivable, trade
20,210
11,588
%
61,579
Capital employed
Million €
We use the indicator return on capital employed (ROCE). ROCE
was 13.5%, after 1.7% in the previous year. The increase in ROCE
was primarily due to considerably higher EBIT.1
For more information on the calculation of ROCE, see page 42
The calculation of EBIT as part of our statement of income is shown in the Consolidated Financial
Statements on page 194
1 For more information on net assets, see page 61 onward
567
60,111
57
2020
7,677
-191
-641
-1,203
8,317
1,012
2021
9,379
+ Current and noncurrent other receivables
3,908
BASF Report 2021
Management's Report - Results of Operations
Net income from shareholdings, financial result and income
after taxes
Net income from shareholdings was above the prior-year figure,
rising by €1,116 million to €207 million in 2021 (2020: -€909 million).
The increase was mainly due to special income from the sale of our
shares in Solenis (€589 million) as well as the improved earnings
contribution from Wintershall Dea AG (-€344 million). This included
impairments in the amount of €581 million, less than in the prior
year.
The financial result amounted to -€436 million, compared with
-€462 million in the previous year. The interest result improved by
€59 million overall, due in part to lower interest expenses for financial
indebtedness. The other financial result amounted to -€122 million
after -€89 million in 2020, primarily driven by higher net expenses in
connection with bonds in foreign currency and the corresponding
hedging instruments. Lower write-downs on securities and loans, as
well as a lower net interest expense from pension plans and similar
obligations had an offsetting effect.
Income before income taxes amounted to €7,448 million in 2021,
after -€1,562 million in 2020.
Income tax expenses were €1,430 million, after the negative pre-tax
result had led to tax income of €91 million in the previous year.
a Including customer/supplier financing and other adjustments
Compared with 2020, income after taxes from continuing opera-
tions rose by €7,489 million to €6,018 million. Income after taxes
from discontinued operations amounting to -€36 million resulted
from purchase price adjustments for the divestiture of the construc-
tion chemicals business. The prior-year figure of €396 million
included the book gain from the sale of the former Construction
Chemicals division and its operating income after taxes until
divestiture.
In 2021, earnings per share amounted to €6.01, compared with
-€1.15 in the previous year.
For more information on the items in the statement of income, see the Notes to the Consolidated
Financial Statements from page 200 onward
For more information on the tax rate, see Note 12 to the Consolidated Financial Statements from
page 231 onward
Additional indicators for results of operations
We also use alternative performance measures (APMs) to steer the
BASF Group. Investors, analysts and rating agencies use them to
assess our performance. These are not defined by IFRS. As such,
the methods of calculation can differ from those used by other
companies. Alternative performance measures for the results of
operations are EBIT before special items, EBITDA before special
items, EBITDA, the EBITDA margin and adjusted earnings per share.
Other APMs are net debt, 1 free cash flow¹ and capital expenditure
(capex).2
Income from operations before depreciation, amortization and
special items (EBITDA before special items) and income from
operations before depreciation and amortization (EBITDA) are
indicators that describe operational performance independent of
age-related depreciation and amortization of assets and any impair-
ment or reversal of impairment. Both figures are therefore particularly
useful in cross-company comparisons. EBITDA before special items
251
Income after taxes in the amount of €5,982 million (2020:
-€1,075 million) included €5,523 million attributable to shareholders
of BASF SE (2020: -€1,060 million). Noncontrolling interests
amounted to €459 million, after -€15 million in the prior year. This
mainly resulted from a higher earnings contribution from BASF
TotalEnergies Petrochemicals LLC in Port Arthur, Texas, and a
positive earnings contribution from BASF Petronas Chemicals Sdn.
Bhd. Petaling Jaya, Malaysia, where earnings in the prior year had
been impacted by impairments.
80,292
87,383
Assets of the BASF Group as of December 31
3,149
and other assetsa
+ Assets of disposal groups
520
1,260
Cost of capital basis of segments,
61,579
60,111
average of month-end figures
+ Deviation from cost of capital basis at
2,688
closing rates as of December 31
Factors influencing sales of the BASF Group
-3,948
+ Assets not included in cost of capital
23,115
24,129
b EBIT before special items for 2018 was reduced by the share attributable to construction chemicals
activities due to their presentation as discontinued operations. Figures for 2017 have not been restated.
C EBIT for 2017 was reduced by the share attributable to oil and gas activities due to their presentation as
discontinued operations.
a EBIT for 2019 has been restated to reflect the reclassification of income from non-integral companies
accounted for using the equity method to net income from shareholdings. Figures for the years 2017
and 2018 have not been restated.
At €7,677 million, EBIT for the BASF Group in 2021 was consider-
ably above the previous year, which was impacted by high impair-
ments. This figure includes income from integral companies
accounted for using the equity method, which rose by €455 million
to €675 million. This was mainly attributable to the business-related
increase in the earnings contributed by BASF-YPC Company Ltd.,
Nanjing, China, which rose by €343 million.
-3,751
-495
-0.8
Changes in the scope of consolidation
Total change in sales
-1
0.0
19,449
7,768
Divestitures
3,560
6,281
7,645
a EBIT for 2019 has been restated to reflect the reclassification of income from non-integral companies
accounted for using the equity method to net income from shareholdings. Figures for the years 2017
and 2018 have not been restated.
b EBIT before special items for 2018 was reduced by the share attributable to construction chemicals
activities due to their presentation as discontinued operations. Figures for 2017 have not been restated.
C EBIT before special items for 2017 was reduced by the share attributable to oil and gas activities due to
their presentation as discontinued operations.
Sales rose by €19,449 million compared with the previous year to
€78,598 million in 2021. This was mainly driven by higher prices and
volumes in all segments. Price levels increased in the Chemicals,
Surface Technologies and Materials segments in particular. Sales
volumes grew primarily in the Surface Technologies and Materials
segments. Currency effects, mainly relating to the U.S. dollar, had an
offsetting effect. Sales performance was also weighed down by
negative portfolio effects, especially in the Industrial Solutions seg-
ment following the divestiture of the global pigments business. This
could only be partly offset by positive portfolio effects, mainly from
the acquisition of a majority shareholding in BASF Shanshan Battery
Materials Co., Ltd. in the Surface Technologies segment.
32.9
Income from operations (EBIT) before special items rose by
€4,208 million to €7,768 million, largely due to considerably higher
earnings in the Chemicals and Materials segments. Earnings devel-
opment in the Chemicals segment was primarily driven by higher
margins, higher sales volumes and an improvement in equity-
accounted income. Earnings growth in the Materials segment was
mainly attributable to higher margins in isocyanates and polyamides,
as well as positive volume development. EBIT before special items
also improved considerably in the Surface Technologies and Indus-
trial Solutions segments, largely as a result of higher volumes. By
contrast, the Nutrition & Care and Agricultural Solutions segments
4,643
0.7
431
Acquisitions
-3,751
2020
2019
Change
Change
in million €
in %
2018
Volumes
6,279
10.6
2017
14,673
24.8
Currencies
-1,439
-2.4
Special items in EBIT totaled -€91 million in 2021, compared with
-€3,751 million in the previous year, which was strongly impacted by
impairments on property, plant and equipment and intangible assets
in the total amount of around €2.9 billion. In 2021, restructuring
measures gave rise to expenses of €99 million (2020: expenses of
€952 million), mainly in the Agricultural Solutions and Materials
segments and in Other. The release of provisions in connection with
the restructuring of the Global Business Services unit had an off-
setting effect. Integration costs amounted to €85 million (2020: inte-
gration costs of €157 million) and primarily related to the integration
of the acquired BASF Shanshan companies and the polyamide
business acquired from Solvay in 2020. Divestitures, which also
included the disposal of the global pigments business, gave rise to
EBITDA before special items rose by €3,913 million year on year to
€11,348 million in 2021. At €11,355 million, EBITDA was €4,861 mil-
lion above the prior-year figure. The EBITDA margin was 14.4% in
2021, compared with 11.0% in the previous year.
BASF Report 2021
ROCE
Restructuring measures
Integration costs
Divestitures
Other charges and income
Total special items in EBIT
2021
2020
Million €
-99
-85
-157
120
-76
-27
-2,566
-91
-952
Special items
2021
EBITa, b, c
Million €
Million €
7,677
EBIT of BASF Group
2020
-191
- EBIT of Other
2019
4,201
EBIT of the segments
2018
5,974
Cost of capital basis of segments,
average of month-end figures
2017
7,587
ROCE
special income totaling €120 million, especially from the sale of our
production site in Kankakee, Illinois, the Coatings division's precision
microchemicals business and our share in the condensate splitter in
Port Arthur, Texas. Other items led to special charges in the total
amount of €27 million.
For the definition of special items, see page 43
Management's Report - Results of Operations
Price trends for crude oil (Brent) and naphtha
$/barrel, $/metric ton
EBITDA before special items
Million €
- Special items
BASF Report 2021
20
30
40
50
60
70
Management's Report - Results of Operations
80
2020: $42/bbl
100
© 2021: $71/bbl
110
Crude oil
Naphtha
2021: $635/t
2020: $355/t
120
90
130
56
Results of Operations
For more information on the development of Accelerator sales, see page 141 onward
For more information on the development of CO2 emissions, see page 127
b Sales for 2017 were reduced by the share attributable to oil and gas activities due to their presentation as
discontinued operations.
a Sales for 2018 were reduced by the share attributable to construction chemicals activities due to their
presentation as discontinued operations. Figures for 2017 have not been restated.
78,598
61,223
60,220
59,316
56
59,149
2018
2019
2020
2021
Salesa, b
Million €
Business reviews by segment can be found from page 69 onward
The global economy recovered much more strongly than we
expected in 2021 following the severe slump in the previous
year due to the effects of the coronavirus pandemic. Many
governments' aid programs and rising vaccination rates were
key contributing factors to this. In this market environment,
growth in global industrial production and in the global
chemical industry (excluding pharmaceuticals) was also
significantly above the prior-year level and the long-term
average. BASF's business also developed favorably: We
considerably increased sales and earnings.
2017
$/bbl
55
level ($1.99 per mmBtu). Gas prices in China averaged around
$6.72 per mmBtu nationally (2020: $6.29 per mmBtu), while the
average price in the coastal provinces was $7.99 per mmBtu
(2020: $7.48 per mmBtu).
600
-2.1%
6.0%
European Union
700
800
-0.1%
United States
6.1%
900
2020
2021
1,000
1,100
Real change compared with previous year
Chemical production (excluding pharmaceuticals)
World
1.8%
-3.5%
500
High demand from Asia, cold weather and low storage levels in
Western Europe, as well as a limited supply of liquid natural gas
led to sharp increases in gas prices. At $16.02 per mmBtu, the
average price of gas on the European spot market in particular was
significantly higher than in 2020 ($3.17 per mmBtu). It rose from an
average price of $6.56 per mmBtu in the first quarter to $31.92 per
mmBtu in the fourth quarter. The average price of gas in the United
States was $3.89 per mmBtu, likewise well above the prior-year
Over the course of the year, the average monthly price for the
chemical raw material naphtha ranged between $501 per metric ton
in January and $764 per metric ton in October. At $635 per metric
ton, the annualized average price of naphtha in 2021 was signifi-
cantly higher than in 2020 ($355 per metric ton).
Following the slump in 2020, raw materials prices rose sharply over
the course of 2021. Global oil demand increased significantly again,
but supply was only augmented modestly by OPEC+. As a result,
the average price for reference Brent crude oil increased to
$71 per barrel (2020: $42 per barrel). The price of oil fluctuated over
the course of the year between around $55 per barrel in January
and around $84 per barrel in October.
Price trends for key commodities
100
0
200
-0.6%
4.6%
South America
300
-12.7%
3.7%
Japan
400
2.4%
7.6%
Emerging markets of Asia
recorded considerably lower EBIT before special items. The decline
in earnings in the Nutrition & Care segment was mainly attributable
to lower margins on the back of higher raw materials and energy
prices, as well as an increase in fixed costs. EBIT before special
items was lower in the Agricultural Solutions segment, largely due to
higher fixed costs, higher raw materials prices and logistics costs,
and a low-margin product mix. The segment's earnings were addi-
tionally weighed down by negative currency effects.
For an explanation of the indicator EBIT before special items, see page 43
EBIT before special items a, b, c
Million €
At a glance
2 For more information on capex, see Our Steering Concept on page 43 and Material Investments and Portfolio Measures on page 38
58
59
BASF Report 2021
Management's Report - Results of Operations
EBITDA
Million €
1 For more information on these indicators, see the Financial Position from page 63 onward
2020
2,880
Compared with earnings per share, adjusted earnings per share is
firstly adjusted for special items. Amortization, impairment and
reversal of impairment on intangible assets are then eliminated.
Amortization of intangible assets primarily results from the purchase
price allocation following acquisitions and is therefore of a temporary
nature. The effects of these adjustments on income taxes and on
noncontrolling interests are also considered. This makes adjusted
earnings per share a suitable measure for making comparisons over
time and predicting future profitability.
In 2021, adjusted earnings per share amounted to €6.76, compared
with €3.21 in the previous year.
For more information on the earnings per share according to IFRS, see Note 6 to the Consolidated
Financial Statements on page 220
2021
EBIT
7,677
-191
7,435
11,348
3,875
EBIT before special items
+ Depreciation and amortization
+Impairments and reversals of impairments
on property, plant and equipment and intangible
assets before special items
Depreciation, amortization, impairments and
reversals of impairments on property, plant and
equipment and intangible assets before special
items
EBITDA before special items
2021
2020
7,677
-191
-91
-3,751
7,768
3,560
3,534
3,805
45
70
3,580
+ Depreciation and amortization
EBIT
3,805
144
+ Amortization, impairments and reversals of impairments on
intangible assets
614
1,496
- Amortization, impairments and reversals of impairments on
intangible assets contained in special items
0
819
- Adjustments to income taxes
-4,606
116
2021
Prices
Net income from shareholdings improves by €1,116 million
Earnings per share of €6.01; adjusted earnings per share
of €6.76
■
■Considerable increase in ROCE to 13.5%
Sales and EBIT before special items considerably above
prior year
■
958
-181
- Special itemsa
-1,075
Depreciation, amortization, impairments and
reversals of impairments on property, plant
and equipment and intangible assets
3,678
6,685
EBITDA
Sales revenue
EBITDA margin
Adjusted earnings per share
Million €
11,355
78,598
6,494
59,149
%
14.4
11.0
2021
2020
Income after taxes
5,982
+Impairments and reversals of impairments on
property, plant and equipment and intangible
assets
1,640
is also highly useful in making comparisons over time. The EBITDA
margin is a relative indicator and is calculated as the ratio of EBITDA
to sales revenue, enabling operational performance to be compared
independent of the size of the underlying business.
581
1,055
-1,060
€
0.97
-0.96
-2.31
1.15
-1.15
€
1.26
0.25
0.60
1.10
3.21
Adjusted earnings per share
a Quarterly results not audited
b Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
226
- Adjustments to income after taxes from discontinued
operations
-2,122
-878
-36
Earnings per share
885
1,113
1,200
-923
-2,786
947
-1,562
881
-888
3,560
713
Net income
-2,177
347
13
396
22
Income after taxes from discontinued operations
-1,471
14
2,382
Cash and cash equivalents at the end of the year
2,624
4,335
a In 2021 and 2020, cash and cash equivalents presented in the statement of cash flows deviate from the figures in the balance sheet. For explanations and other disclosures on the statement of cash flows, see Note 27 to the
Consolidated Financial Statements from page 277 onward.
BASF Report 2021
Management's Report - Actual Development Compared With Outlook for 2021
Sales, earnings and ROCE forecast for the BASF Group
Forecast/actual comparison
Κ Σ
67
20
We increased sales to €78.6 billion in 2021, considerably above our
forecast at the beginning of the year of sales growth to between
€61 billion and €64 billion. Sales in the Surface Technologies,
Chemicals, Industrial Solutions, Agricultural Solutions and Nutri-
tion & Care segments rose more strongly than initially expected. This
was driven primarily by significantly higher prices, especially in the
Surface Technologies and Chemicals segments. We increased sales
volumes as expected. Currency and portfolio effects had an off-
setting impact, in line with our assumptions.
4,458
Actual Development Compared With Outlook for 2021
At €7.8 billion, EBIT before special items likewise significantly
exceeded the forecast range of between €4.1 billion and €5.0 billion.
The Industrial Solutions, Nutrition & Care and Agricultural Solutions
segments in particular did not develop as expected. Industrial Solu-
tions increased EBIT before special items considerably, contrary to
the forecast of a slight decline. EBIT before special items in the
Agricultural Solutions and Nutrition & Care segments declined con-
siderably; in both segments, we had expected a slight improvement
in earnings.
-3,312
-1,834
1,580
2017
2018
2019
2020
2021
Cash flows from operating activities
We considerably increased ROCE in almost all segments. ROCE
increased only slightly in the Agricultural Solutions segment, while
the Nutrition & Care segment saw a considerable decline. Overall,
the degree of improvement exceeded our expectations: ROCE for
the BASF Group amounted to 13.5%, considerably above the range
we had forecast of between 8.0% and 9.2%.
-3,139
Payments made for property, plant and equipment and intangible assets
-6,457
-1,556
Free cash flow
Cash-effective changes in cash and cash equivalents
Cash and cash equivalents at the beginning of the period and other changesal
1,953
We revised the outlook provided in February 2021 in April, July and
October 2021. In October 2021, we projected sales of between
€76 billion and €78 billion. We expected EBIT before special items
of €7.5 billion to €8.0 billion. For ROCE, we forecast a range of
13.2% to 14.1%.
Chemicals
EBIT before special items
€7.8 billion
8.0%-9.2%ª
13.5%
At prior-year level: no change (+/-0.0%)
Slight increase/decrease: "slight" represents a change of 0.1% -5.0% for sales; 0.1% -10.0% for earnings; 0.1 to 1.0 percentage points for ROCE
Considerable increase/decrease: "considerable" represents a change of 5.1% or higher for sales; 10.1% or higher for earnings; more than 1.0 percentage points for ROCE
a We updated our outlook in April, July and October 2021. We most recently updated it in October 2021, forecasting sales of between €76 billion and €78 billion, EBIT before special items of between €7.5 billion and €8.0 billion,
and a ROCE of between 13.2% and 14.1%.
Accelerator sales and CO2 emissions forecast for the
BASF Group
We increased Accelerator sales to €24.1 billion in 2021, consider-
ably above the range forecast in February of between €18 billion and
€19 billion. The range forecast in October - between €21.5 billion
and €22.5 billion - was likewise exceeded. This was due to the
BASF Group's extremely positive business performance, which
was also reflected in Accelerator sales. The decline caused by the
divestiture of the global pigments business and the resulting outflow
of Accelerator products only had a slight offsetting effect overall.
CO2 emissions amounted to 20.2 million metric tons, slightly below
the range we forecast in February of between 20.5 million metric
tons and 21.5 million metric tons. BASF significantly increased pro-
duction volumes in 2021 in response to stronger demand. To reduce
the additional emissions resulting from this, we made procuring
energy from renewable sources a focus. To this end, BASF converted
energy supply agreements, acquired renewable energy certificates
and signed long-term supply agreements for green power. A project
to reduce nitrous oxide emissions in Ludwigshafen, Germany, was
successfully implemented. Divestitures such as the disposal of the
global pigments business led to a slight decline in emissions. In
addition, emissions were significantly reduced by the lower capacity
utilization of the ammonia plant due to the sharp rise in natural gas
prices.
BASF Report 2021
Management's Report - Actual Development Compared With Outlook for 2021
Capex forecast for the BASF Group
In 2021, we invested a total of €3.4 billion in capital expenditures
(capex), excluding additions from acquisitions, IT investments, res-
toration obligations and right-of-use assets arising from leases. The
figure forecast in February 2021 was €3.6 billion.
Sales, earnings and ROCE forecast for the segments
€4.1 billion-
€5.0 billiona
Sales
€78.6 billion
+
ROCE
2021 forecast
2021 actual
2021 forecast
2021 actual
2021 forecast
2021 actual
-3,145
Materials
Industrial Solutions
Surface Technologies
Nutrition & Care
Agricultural Solutions
Other
BASF Group
€61 billion-
€64 billiona
H
-1,904
Cash flows from financing activities
66
2021
2020
2021
2020
Net income
66
5,523
Cash flows from operating activities
7,245
5,413
Depreciation and amortization of property, plant and equipment and intangible assets
3,687
6,751
-1,060
Million €
Free cash flow
Million €
BASF Group's most important financial contracts contain no side
agreements with regard to specific financial ratios (financial cove-
nants) or compliance with a specific rating (rating trigger).
To minimize risks and leverage internal optimization potential within
the Group, we bundle the financing, financial investments and
foreign currency hedging of BASF SE's subsidiaries within the
BASF Group where possible. Foreign currency risks are primarily
hedged centrally using derivative financial instruments in the market.
Our interest risk management generally pursues the goal of reducing
interest expenses for the BASF Group and limiting interest risks.
Interest rate hedging transactions are therefore conducted with
banks in order to turn selected liabilities to the capital market from
fixed to variable interest rates or vice versa.
For more information on the financing tools and hedging instruments used, see Note 21 from
page 251 onward and Note 26 from page 263 onward in the Notes to the Consolidated Financial
Statements
Statement of cash flows
Cash flows from operating activities amounted to €7,245 million,
compared with €5,413 million in the previous year. The considerable
increase was primarily due to the improvement in net income, which
had included high impairments in the previous year. Accordingly,
depreciation and amortization of property, plant and equipment and
intangible assets was significantly below the prior-year figure in
2021, at €3,687 million. An offsetting factor was cash tied up in net
working capital, which rose by €1,166 million to €1,566 million in
2021. This mainly resulted from the significant increase in inventories
by €3,304 million due to higher business volumes and prices after a
reduction in inventories had supported operating cash flows in the
previous year.
Cash of €1,272 million was tied up in receivables, €904 million less
than in the prior year. The improvement was due in particular to the
reduction in precious metal trading exposures. Trade accounts
receivable rose by €1,799 million, €805 million more than in the
previous year. By contrast, the €3,010 million rise in liabilities
increased operating cash flows. This was largely attributable to the
increase in trade accounts payable and current provisions. This
effect was less pronounced in the previous year at €927 million.
Miscellaneous items led to cash tied up of €398 million in 2021, after
cash released of €122 million in the previous year. This was due in
particular to the elimination of equity-accounted income and the
reclassification of income from divestitures, including the gain on the
disposal of the shareholding in Solenis, to cash flows from investing
activities.
Cash flows from investing activities totaled -€2,622 million in
2021, after €1,904 million in the previous year. Payments received
for divestitures and the disposal of the shareholding in Solenis in
2021 were below the figure from the disposal of the construction
chemicals business in the previous year. By contrast, payments
made for acquisitions amounted to €600 million in 2021, around half
the prior-year figure. The €403 million increase in payments made
for property, plant and equipment and intangible assets also con-
tributed to the decrease in cash flows from investing activities.
Cash flows from financing activities amounted to -€6,457 million.
In addition to the payment of dividends in the amount of €3,312 mil-
lion (2020: €3,139 million), financial and similar liabilities were
reduced by €3,145 million.
Free cash flow, which remains after deducting payments made for
property, plant and equipment and intangible assets from cash
flows from operating activities, represents the financial resources
remaining after investments. It amounted to €3,713 million in 2021,
after €2,284 million in the previous year.
BASF Report 2021
Management's Report - Financial Position
Statement of cash flows
- Payments made for property, plant
3,532
3,129
and equipment and intangible assets
Cash flows from investing activities
430
1,280
10
480
-55
8
-2,622
We considerably increased sales in the Chemicals segment in
2021, after only forecasting a slight increase in sales at the begin-
ning of the year. Both divisions raised prices, significantly exceeding
the price increases assumed in February as a result of extraordinary
supply bottlenecks in the markets. We increased volumes as
expected. The segment considerably increased EBIT before special
items and ROCE, in line with the forecast.
6
4
2
Capital increases/repayments and other equity transactions
Changes in financial and similar liabilities
Dividends
Changes in financial assets and miscellaneous items
3
Acquisitions/divestitures
-3,129
Changes in net working capital
-1,566
-400
Free cash flow
3,713
2,284
Miscellaneous items
-398
122
Cash flows from operating activities
7,245
5,413
Cash flow
Payments made for property, plant and equipment and intangible assets
-3,532
Billion €
The Materials segment recorded a considerable improvement in
sales, EBIT before special items and ROCE as forecast.
BASF Report 2021
The Surface Technologies segment achieved significant sales
growth, exceeding our forecast from February, in which we had
assumed only a slight increase in sales. This primarily resulted from
higher precious metal prices, which rose more strongly than
expected. The significant recovery in EBIT before special items and
ROCE materialized as expected.
7,768
3,560
Chemicals
Materials
Industrial Solutions
Surface Technologies
Nutrition & Care
Agricultural Solutions
Other
BASF Group
Income from operations (EBIT)
Assets
Investments including acquisitionsa
Contributions to assets by segment
2021
6,494
2020
11,355
78,598
Agricultural Solutions
8,162
7,660
1,358
1,582
715
970
Other
3,666
2,360
-484
-1,032
-643
-769
BASF Group
59,149
773
2021
2021
6,302
6,402
361
331
Industrial Solutions
7%
761
-587
13,769
11,691
1,469
585
Surface Technologies
16%
554
630
2020
965
Materials
2020
2,997
-192
10,369
7,896
1,157
871
Chemicals
12%
2,345
-109
11,286
9,118
709
1,957
13%
497
1,152
967
Income from operations
before depreciation and
amortization (EBITDA)
Income from operations (EBIT)
Chemicals
33%
before special items
Materials
28%
2021
2020
2021
2020
2021
2020
Industrial Solutions
12%
Sales
Chemicals
Nutrition & Care
Agricultural Solutions
Materials
Industrial Solutions
Sales in the Nutrition & Care segment were considerably above the
prior-year figure, exceeding our forecast of slight growth. This was
mainly due to higher price levels, after we had assumed lower prices
in February. We increased volumes in both divisions as expected.
EBIT before special items declined significantly in 2021, falling short
of our expectations of a slight increase. The decrease was attri-
butable to lower earnings contributions from both divisions. This
was mainly due to lower margins as a result of higher raw materials
and energy prices as well as higher fixed costs, primarily from higher
bonus provisions. ROCE also declined considerably in line with
earnings development in the segment. Our forecast had assumed a
considerable increase.
Sales in the Agricultural Solutions segment rose considerably, not
just slightly as forecast. Higher sales volumes and prices exceeded
negative currency effects to a greater extent than we had anticipated.
Contrary to our forecast of a slight increase, EBIT before special
items was considerably below the prior-year level. The positive sales
development was unable to compensate for an increase in fixed
costs, mainly from higher bonus provisions, higher raw materials
prices and logistics costs, and a low-margin product mix. Based on
the development of earnings, we were only able to increase ROCE
slightly, against our assumption of a considerable increase.
We significantly improved sales and EBIT before special items in
Other as forecast.
For more information on our forecast for 2022, see page 148 onward
For more information on investments, see page 38 onward
88
68
13,489
Bonds and other
liabilities to the capital market
Management's Report - Business Review by Segment
Business Review by Segment
Segment overview
Million €
Contributions to EBITDA by segment
69
69
Segments:
Chemicals
Surface Technologies
13,579
8,071
3,764
822
Agricultural Solutions
12%
Surface Technologies
22,659
16,659
1,243
900
800
484
Other
-4%
Nutrition & Care
6,442
6,019
1,006
1,099
1,344
7,644
1,237
2,974
445
Surface Technologies
11%
Materials
15,214
Sales in the Industrial Solutions segment rose considerably in
2021, exceeding our expectations of a slight decline. This was
largely driven by volume growth. Against our assumptions, this more
than compensated for the negative effects from the divestiture of the
global pigments business. The segment's volume growth also led to
considerably higher EBIT before special items, contrary to our fore-
cast of a slight decline. ROCE was significantly above the prior-year
level, as expected.
10,736
1,556
2,418
835
Nutrition & Care
8%
Industrial Solutions
8,876
3,162
€17,184 million
BASF Report 2021
3,447
100.0
Total assets amounted to €87,383 million as of December 31, 2021,
€7,091 million above the prior-year level.
Noncurrent assets rose by €1,908 million to €52,332 million. This
I was mainly attributable to the €1,906 million increase in property,
plant and equipment. Additions to property, plant and equipment
amounted to €4,410 million and included €332 million in connection
with the formation of BASF Shanshan Battery Materials Co., Ltd.
Currency effects of €798 million also contributed to the increase.
Depreciation amounted to €2,922 million. Intangible assets amounted
to €13,499 million, €354 million above the prior year-end figure. The
increase was due in particular to currency effects in the amount
of €572 million. Additions to intangible assets totaled €470 million
and included €392 million from the formation of BASF Shanshan
Battery Materials, of which goodwill was €254 million. Amortization
of €612 million had an offsetting effect.
For more information on the above transactions see page 41 of this Management's Report and
Note 3 to the Consolidated Financial Statements from page 207 onward
BASF Report 2021
Management's Report - Net Assets
Noncurrent other receivables and miscellaneous assets amounted
to €1,722 million, up €810 million from the prior-year level. This pri-
marily resulted from higher defined benefit assets and derivatives
with positive fair values.
Integral investments accounted for using the equity method rose by
€662 million year on year to €2,540 million, mainly due to positive
after-tax earnings at BASF YPC-Company Ltd., Nanjing, China, and
positive currency effects.
The €1,031 million decline in the carrying amounts of non-integral
shareholdings accounted for using the equity method compared
with December 31, 2020, was largely attributable to dividend pay-
ments by and negative after-tax earnings at Wintershall Dea AG and
to the disposal of the shareholding in Solenis.
Other financial assets decreased by €7 million compared with the
prior year-end figure.
Deferred tax assets declined by €786 million, primarily as a result of
lower pension provisions.
Current assets rose by €5,183 million to €35,051 million. This was
driven by the €3,858 million increase in inventories compared with
the prior year-end as a result of higher raw materials prices and the
stronger business performance in 2021. The €2,476 million increase
in trade accounts receivable was also mainly due to strong business
development.
Other receivables and miscellaneous assets rose by €895 million,
primarily due to higher tax refund claims and positive fair values of
derivatives.
The €1,706 million decrease in cash and cash equivalents compared
with the figure as of December 31, 2020, to €2,624 million had an
offsetting effect.
Assets of disposal groups amounted to €840 million as of Decem-
80,292
ber 31, 2021. These include the assets of the shareholding in the
Hollandse Kust Zuid wind farm and the kaolin minerals business,
which is held for sale.
100.0
Total assets
Cash and cash equivalents
2,624
3.0
4,330
5.4
Assets of disposal groups
840
1.0
1,182
1.5
Current assets
35,051
40.2
29,868
37.3
87,383
0.3
For more information on the composition and development of individual asset items, see the Notes to
the Consolidated Financial Statements from page 200 onward
62
5.3
40,365
46.2
37,911
47.2
-3,855
-4.4
-8,474
-10.6
■
1,289
1.5
670
0.8
42,081
4,291
62
4.9
%
BASF Report 2021
Management's Report - Financial Position
Financial Position
Equity and liabilities
Subscribed capital and capital reserves
Retained earnings
Other comprehensive income
Noncontrolling interests
Equity
Equity and liabilities
December 31, 2021
December 31, 2020
Million €
%
Million €
4,282
48.2
207
208
13,145
16.4
■
21,553
24.7
19,647
24.5
Integral investments accounted for using the equity method
2,540
2.9
1,878
2.3
Non-integral investments accounted for using the equity method
9,843
11.3
15.4
10,874
13,499
Intangible assets
BASF Report 2021
Management's Report - Net Assets
Net Assets
Assets
Assets
< > 61
At a glance
Increase in total assets to €87,383 million mainly due to higher
current assets
■ Intangible fixed assets and property, plant and equipment around
€2.3 billion above the prior year-end figure overall
December 31, 2021
December 31, 2020
Million €
%
Million €
%
Property, plant and equipment
0.2
13.5
575
13,868
15.9
10,010
12.5
Accounts receivable, trade
11,942
13.7
9,466
11.8
Other receivables and miscellaneous assets
5,568
6.4
4,673
5.8
Marketable securities
Inventories
Other financial assets
62.7
59.9
0.7
582
0.7
Deferred tax assets
2,600
3.0
3,386
4.2
Other receivables and miscellaneous assets
1,722
2.0
912
1.1
Noncurrent assets
52,332
50,424
34,398
42.8
Provisions for pensions and similar obligations
Net debt
Million €
Noncurrent financial indebtedness
+ Current financial indebtedness
Maturities of financial indebtedness
Million €
December 31,
December 31,
2022
3,420
2021
2020
2023
2,208
13,764
15,819
For more information on the development of the balance sheet, see the Ten-Year Summary
on page 288
2024
For more information on the composition and development of individual asset items, see the Notes to
the Consolidated Financial Statements from page 200 onward
Liabilities of disposal groups amounted to €61 million.
100.0
Equity rose by €7,683 million compared with the previous year to
€42,081 million. Retained earnings rose by €2,454 million, mainly
because net income significantly exceeded the dividend payments
of €3,031 million disbursed in the second quarter of 2021. Other
comprehensive income increased equity by €4,619 million, primarily
as a result of actuarial gains and currency effects.
The equity ratio improved from 42.8% to 48.2%.
Compared with the 2020 year-end, noncurrent liabilities declined
by €4,394 million to €25,220 million. This was primarily attributable
to the €2,406 million decrease in provisions for pensions and similar
obligations, mainly as a result of higher interest rates in all relevant
currency zones and returns on plan assets.
Furthermore, noncurrent financial indebtedness declined by
€2,055 million. This was primarily due to the reclassification of three
bonds with an aggregate carrying amount of €1,936 million and a
loan in the amount of €240 million to current financial indebtedness.
Exchange rates and interest had an offsetting effect.
Tax provisions declined by €172 million year on year to €415 million.
By contrast, deferred tax liabilities were slightly above the prior year-
end figure, at €1,499 million.
63
89
BASF Report 2021
Management's Report - Financial Position
The €111 million decrease in other noncurrent liabilities largely
resulted from lower negative fair values of derivatives.
Other provisions rose by €298 million, mainly due to higher environ-
mental provisions.
At €20,081 million, current liabilities were €3,801 million above the
figure as of December 31, 2020. This was primarily due to the
€2,535 million increase in trade accounts payable, largely as a result
of positive business development. In addition, current provisions
rose by €1,110 million compared with the previous year, primarily
from higher provisions for bonus payments and for rebates. Other
liabilities increased by €239 million.
Current financial indebtedness was on a level with the prior year-
end. This was attributable to the above-mentioned reclassification of
three bonds and a loan in the aggregate amount of around €2.2 bil-
lion from noncurrent to current financial indebtedness. The reduction
in commercial paper at BASF SE (around €1 billion) and the sched-
uled repayment of a eurobond (€1 billion) and a loan (€150 million)
had an offsetting effect.
Tax liabilities rose by €173 million compared with the previous year.
Net debt declined by €325 million compared with December 31,
2020, to €14,352 million.
20.3
1,280
3,395
Our financing policy aims to ensure our solvency at all times, limiting
the risks associated with financing and optimizing our cost of capi-
tal. We preferably meet our external financing needs on the interna-
tional capital markets.
We strive to maintain a solid A rating, which ensures unrestricted
access to financial and capital markets. Our financing measures are
aligned with our operational business planning as well as the com-
pany's strategic direction and also ensure the financial flexibility to
take advantage of strategic options.
7,207
BASF enjoys good credit ratings, especially compared with com-
petitors in the chemical industry. Standard & Poor's most recently
confirmed its rating for BASF of A/A-1/outlook stable on January 6,
2022. Moody's most recently confirmed BASF's A3/P-2/outlook
stable rating on January 5, 2022. Fitch's rating of A/F1/outlook
stable from June 11, 2021, also remained unchanged.
We have solid financing. Corporate bonds form the basis of our
medium to long-term debt financing. These are issued in euros and
other currencies with different maturities as part of our €20 billion
debt issuance program. The goal is to create a balanced maturity
profile, diversify our financing and optimize our debt capital financing
conditions.
For short-term financing, we use BASF SE's global commercial
paper program, which has an issuing volume of up to $12.5 billion.
As of December 31, 2021, commercial paper with a carrying amount
of €248 million was outstanding under this program. A firmly com-
mitted, syndicated credit line of €6 billion with a term until 2026
covers the repayment of outstanding commercial paper. It can also
be used for general company purposes. The credit line, as well as a
short-term credit line of €3 billion that expired in the second quarter
of 2021, were not used at any point in 2021. Our external financing
is therefore largely independent of short-term fluctuations in the
credit markets.
99
64
Management's Report - Financial Position
65
69
Financing instruments
Million €
248
Commercial paper
Financing policy and credit ratings
3,420
For more information, see Note 25 to the Consolidated Financial Statements on page 263 and the
forecast from page 145 onward
Net debt
2025
1,892
17,184
19,214
208
207
- Cash and cash equivalents
2,624
4,330
2026
2027 and beyond
1,177
14,352
14,677
Financial indebtedness
- Marketable securities
Off-balance sheet obligations mainly relate to long-term purchase
obligations for raw materials. We also concluded long-term supply
agreements for green power in 2021. In addition, obligations exist in
connection with initiated or planned investment projects.
Rated A by Standard & Poor's, Moody's and Fitch
Cash flows from operating activities and free cash flow higher
year on year
Net debt slightly reduced to €14,352 million
Equity ratio of 48.2% after 42.8% in previous year
Financial indebtedness
Other liabilities
Noncurrent liabilities
13,764
15.8
15,819
19.7
1,600
1.8
1,711
2.1
25,220
28.8
29,614
36.9
1.8
Accounts payable, trade
1,484
1,782
6,160
7.0
8,566
10.7
Deferred tax liabilities
1,499
1.7
1,447
1.8
Tax provisions
415
0.5
587
0.7
Other provisions
2.0
7,826
9.0
5,291
4.3
Liabilities of disposal groups
61
0.1
341
0.4
Current liabilities
20,081
23.0
16,280
Total equity and liabilities
87,383
100.0
80,292
At a glance
3,440
4.2
3,679
Other liabilities
6.6
Provisions
3,935
4.5
2,825
3.5
Tax liabilities
Liabilities to banks
1,161
988
1.2
Financial indebtedness
3,420
3.9
3,395
4.3
1.3
Off-balance sheet obligations
7,231
-191
5,892
4,328
5,947
Surface Technologies
8%
Nutrition & Care
1,883
2,204
1,844
2,205
1,819
2,359
2,098
2,108
Industrial Solutions
Surface Technologies
3,062
4,052
2,657
3,973
2,143
3,743
2,874
3,447
Materials
3,099
5,631
4,142
5,189
702
783
Other
1,601
1,760
1,474
1,593
1,766
1,963
2,819
2,846
Agricultural Solutions
11%
5%
1,455
1,727
1,427
1,598
1,555
1,584
1,582
1,533
Nutrition & Care
11%
Agricultural Solutions
5,090
Other
793
19%
Industrial Solutions
4,881
80,292
87,383
7,677
26%
Other
156
183
24,131
23,121
-1,203
-641
18%
Agricultural Solutions
459
347
14,840
15,305
582
696
8%
Nutrition & Care
510
654
688
4,869
a Additions to property, plant and equipment (of which from acquisitions: €332 million in 2021 and €559 million in 2020) and intangible assets (of which from acquisitions: €392 million in 2021 and €691 million in 2020)
BASF Report 2021
Management's Report - Business Review by Segment
2,147
3,731
1,783
3,693
1,791
3,419
2,350
2,736
Chemicals
Materials
2020
2021
17%
2020
2020
2021
2020
2021
Chemicals
Q4
Q3
Q2
Q1
Contributions to total sales by segment
Million €
Salesa
2021
507
6,214
484
120
37
143
104
256
138
254
218
Nutrition & Care
9%
Agricultural Solutions
215
32
200
119
-151
289
220
360
Surface Technologies
7%
Nutrition & Care
200
171
186
Other
-8%
Agricultural Solutions
807
a Quarterly results not audited
976
1,113
1,227
581
1,865
226
2,355
1,640
2,321
BASF Group
-153
262
-237
-80
-236
-299
-560
Other
15
-77
26
-90
120
75
809
-11
163
165
273
2020
2021
2020
2021
38%
Chemicals
Q4
Q3
Q2
Q1
29%
70
2021
70
Income from operations (EBIT) before special itemsa
Million €
15,905
19,776
13,811
12,680
19,753
16,753
19,400
BASF Group
307
1,113
667
Contributions to EBIT before special items by segment
2020
19,669
2020
10%
2021
Industrial Solutions
266
Surface Technologies
489
323
631
-80
792
209
672
Materials
217
Industrial Solutions
Materials
31%
13%
558
174
990
Chemicals
850
46
576
-2
227
EBIT before special items
€2,974 million
Depreciation and amortizationa
Income from operations (EBIT)
Special items
2020: €445 million
BASF Report 2021
Management's Report - Chemicals
Business review
Segment data - Chemicals
Million €
At a glance
Sales rise 68.2% to €13,579 million, mainly due to higher prices
EBIT before special items improves by 568.3% to €2,974 million
of which Petrochemicals
Intermediates
At €13,579 million, sales to third parties in the Chemicals segment
were €5,508 million above the prior-year figure in 2021. Both divi-
sions contributed to the increase with considerable sales growth.
The Petrochemicals division increased sales by €4,248 million to
€9,674 million, while sales in the Intermediates division rose by
€1,259 million to €3,904 million.
Factors influencing sales - Chemicals
Chemicals Petrochemicals Intermediates
Intersegment transfers
Sales including transfers
EBIT before special items.
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Sales to third parties
2020 €8,071 million
Management's Report - Chemicals
Sales
BASF Group
2,311
Return on capital employed (ROCE)
Assets
1,456
2,316
59
1,822
-2,638
1,227
932
a Quarterly results not audited
BASF Report 2021
ΚΣ
72
12
Chemicals
The Chemicals segment consists of the Petrochemicals
and Intermediates divisions. It supplies the other segments
with basic chemicals and intermediates, contributing to the
organic growth of our key value chains. Alongside internal
transfers, our customers mainly come from the chemical and
plastics industries. We aim to further expand our competi-
tiveness through technological leadership and operational
excellence.
For more information on the Chemicals segment's business model, see page 33 onward
Electrically heated
steam cracker furnace
We have signed an agreement with SABIC and Linde
to develop and pilot electrically heated steam cracker
furnaces. Together, we developed concepts to replace the
fossil fuels used in the heating process with renewable
energy. We want to make a significant contribution to
reducing carbon emissions in the chemical industry with this
innovative and promising solution. If energy from renewable
sources is used, the new technology has the potential to
almost completely avoid CO2 emissions.
Discover our carbon management at basf.com/carbon-management
€13,579 million
73
767
2020
1,429
-46.3%
2,997
-192
23
-637
2,974
445
568.3%
15.3
%
-2.2
10,369
7,896
31.3%
1,157
871
32.9%
-109
97
32.9
27.7
%
204.3%
+/-
13,579
8,071
68.2%
9,674
5,426
78.3%
3,904
2,645
47.6%
4,269
2,861
49.2%
17,848
10,932
63.3%
3,724
1,305
185.4%
3,764
1,237
2021
262
762
-42
Chemicals
605
170
981
-18
850
-504
561
160
30%
Industrial Solutions
Materials
648
119
-102
620
-546
315
420
Surface Technologies
13%
10%
Materials
2021
96
BASF Report 2021
Management's Report - Business Review by Segment
Income from operations (EBIT)a
Million €
Contributions to EBIT by segment
< >
71
Q1
2020
Q2
Q4
Chemicals
39%
2021
2020
2021
2020
2021
2020
Q3
-645
Industrial Solutions
240
105
86
40
103
Other
-8%
Agricultural Solutions
804
787
255
35
-44
-304
-99
4
Other
-576
-321
-285
-128
95
259
194
215
340
133
229
78
136
179
Nutrition & Care
7%
Surface Technologies
244
356
289
-176
104
-803
12
175
Agricultural Solutions
9%
Nutrition & Care
217
Sales were also reduced by slightly negative currency effects in both
divisions, mainly relating to the U.S. dollar.
1.1%
9.6%
Isocyanates
1,765,000
Annual capacity
(metric tons)
South America,
Africa, Middle East
Asia Pacific
North America
Europe
Urea
Chlorine
Ammonia
Polyamides 6 and 6.6
Product
Monomers
For the outlook for 2022, see page 148 onward
EBIT rose by €2,454 million year on year to €2,345 million. Special
items amounted to -€73 million in 2021, after -€944 million in
2020. The special charges in the previous year were primarily
attributable to impairments.
Income from operations (EBIT) before special items rose by
€1,583 million compared with 2020 to €2,418 million. Both divi-
sions considerably increased EBIT before special items. Earnings
growth in the Monomers division was primarily due to higher mar-
gins in isocyanates and polyamides. In the Performance Materials
division, EBIT before special items was above the prior-year level,
mainly driven by positive volume development.
Use in the BASF Verbund
Industries such as plastics, woodworking, furniture, packaging, textile,
construction and automotive
Automotive manufacture, electrical engineering, packaging, games, sports
and leisure, household, mechanical engineering, construction, agriculture,
medical technology, sanitation and water industry, solar thermal energy and
photovoltaics
Customer industries and applications
Isocyanates (MDI, TDI), ammonia, caprolactam, adipic acid,
chlorine, urea, glues and impregnating resins, caustic soda,
polyamides 6 and 6.6, standard alcoholates, sulfuric and nitric
acid
Engineering plastics, biodegradable plastics, foam specialties,
polyurethanes
Production capacities of selected products in the regionsa
Polyamide precursors
Propylene
Sulfuric acid
2020: €822 million
EBIT before special items
€1,006 million
2020: €7,644 million
€8,876 million
Sales
Discover acResinⓇ at basf.com/acresin
acResinⓇ is a high-performance UV-curable hotmelt
made of 100% acrylic. We want to play a key role in
making the self-adhesives market more sustainable
with this product, which is why we have steadily
expanded the range of applications for acResinⓇ
and plan to continue to do so in the future. An eco-
efficiency analysis certified by TÜV, an independent
testing services provider, showed that compared
with traditional solvent-based adhesives, acResinⓇ
enables a significant reduction in CO2 emissions of
around 60%. Due to the consistent rise in market
demand and range of applications, BASF expects
to continue to grow by around 8% annually with
acResinⓇ until 2026.
FacResinⓇ for more
sustainable self-adhesives:
For more information on the Industrial Solutions segment's business model, see page 33 onward
The Industrial Solutions segment consists of the Disper-
sions & Resins and the Performance Chemicals divisions. It
develops and markets ingredients and additives for industrial
applications, such as fuel and lubricant solutions, polymer
dispersions, resins, electronic materials, antioxidants, light
stabilizers, oilfield chemicals, and mineral processing and
hydrometallurgical chemicals. We aim to grow organically
in key industries such as automotive, plastics, electronics,
and energy and resources, and expand our position by
leveraging our comprehensive industry expertise and
application know-how.
Industrial Solutions
19
< > 79
Management's Report - Industrial Solutions
BASF Report 2021
920,000
675,000
1,420,000
925,000
2,620,000
545,000
595,000
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Products
BASF Report 2021
7,292
7,922
29%
BASF Report 2021
Currency effects, primarily relating to the U.S. dollar, had a slightly
negative impact on sales development in both divisions.
Portfolio effects from the acquisition of the integrated polyamide
business from Solvay, which closed as of January 31, 2020, had a
slightly positive impact on sales.
Volumes rose significantly as a result of strong demand and contrib-
uted to sales growth. The Performance Materials division recorded
higher sales volumes in the transportation and consumer goods
industries, especially in Asia Pacific and Europe. In the second half
of 2021, volume development was however negatively impacted
by the semiconductor shortage in the automotive market and the
resulting production outages. Overall, sales volumes in the con-
struction industry were slightly above the prior-year level. Higher
volumes in Europe more than compensated for lower volumes in
North America. The Monomers division increased volumes, espe-
cially of polyamide 6.6 following the slight recovery in automotive
production in 2021 after the weak prior year due to the pandemic.
Sales volumes of methylene diphenyl diisocyanate (MDI) were
also higher.
Sales growth was due mainly to significantly higher prices resulting
from strong demand alongside low product availability and increased
prices for raw materials. Production and supply chain disruptions
associated with extreme weather conditions and raw material short-
ages negatively impacted product market availability. The Mono-
mers division achieved higher prices primarily in isocyanates and
polyamides, while the Performance Materials division raised price
levels mainly in polyurethane systems and engineering plastics.
55.3%
29.4%
41.7%
Sales
-0.3%
Management's Report - Materials
-1.5%
Currencies
0.9%
0.6%
0.7%
Portfolio
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
45.2%
16.2%
30.0%
Prices
-0.9%
Materials - sales
By division
€7,292 million
19%
47%
5%
39%
20%
36%
(million €)
Total
South America,
Africa, Middle East
Asia Pacific
North America
Europe
78
Performance Materials
Division, products, applications
Monomers
Performance Materials
€7,922 million
Monomers
Share of sales: 52%
Divisions
(Location of customer)
Division sales by region
€15,214 million
Performance Materials
Share of sales: 48%
5%
6.1%
Management's Report - Industrial Solutions
Segment data - Industrial Solutions
Million €
11.4%
Volumes
-1.1%
177
175
Research and development expenses
Performance
Chemicals
Resins
Dispersions &
Industrial
Solutions
11.4%
9.1%
361
-1.6%
6,402
6,302
9.3
15.2
%
22.4%
822
1,006
331
11.5%
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
Prices
Portfolio effects in the Dispersions & Resins division following the
disposal of the global pigments business as of June 30, 2021, had
an offsetting impact.
The higher price level was driven primarily by increased raw materi-
als prices. Both divisions raised prices in almost all business areas
and all regions.
The positive sales performance was attributable to higher volumes
and prices in both divisions. The increase in sales volumes mainly
resulted from the global economic recovery from the coronavirus
pandemic. Volume growth in the Dispersions & Resins division was
mainly driven by the dispersions business. The Performance Chemi-
cals division recorded higher sales volumes in all business areas.
Share of sales: 36%
€3,195 million
Performance Chemicals
€8,876 million
€5,681 million
Dispersions & Resins
Share of sales: 64%
15.1%
16.7%
16.1%
Sales
Industrial Solutions - sales
By division
-1.8%
-1.3%
-1.5%
Currencies
0.0%
-7.9%
-5.0%
Portfolio
5.4%
14.5%
11.2%
78.4%
Business review
-192
53.1%
420
15.1%
2,775
3,195
16.7%
4,869
5,681
16.1%
7,644
8,876
375
Intersegment transfers
Sales to third parties
Considerable increase in EBIT before special items to
€1,006 million
Sales of € 8,876 million; considerable growth mainly driven by
higher volumes and prices
At a glance
■
+/-
2020
2021
60
80
of which Dispersions & Resins
Performance Chemicals
11.9%
Sales influences - Industrial Solutions
Sales to third parties in the Industrial Solutions segment rose
by €1,232 million year on year to €8,876 million in 2021. This was
attributable to considerably higher sales in both divisions. The
Dispersions & Resins division increased sales by €812 million to
€5,681 million. Sales in the Performance Chemicals division
amounted to €3,195 million, €420 million above the prior-year
figure.
630
965
-19.0%
469
380
14.4
15.1
%
22.3%
1,099
1,344
13.0%
1,189
1,343
15.9%
8,019
9,296
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Sales including transfers
Investments including acquisitionsb
Return on capital employed (ROCE)
Assets
EBIT before special items
Depreciation and amortizationa
Income from operations (EBIT)
Special items
-42
Volumes
182
Research and development expenses
Production capacities of selected products in the regionsa
Management's Report - Chemicals
BASF Report 2021
Use in the BASF Verbund
Chemical, plastics, coatings, construction, automotive, wind energy,
pharmaceutical and agricultural industries; production of detergents and
cleaners as well as crop protection products and textile fibers
Use in the BASF Verbund
Chemical, plastics, construction, detergent, hygiene, automotive, packaging
and textile industries; production of paints, coatings, cosmetics, oilfield and
paper chemicals
Customer industries and applications
Specialties: Specialty amines such as tertiary butylamine and
polyetheramine, gas treatment chemicals, vinyl monomers, acid
chlorides, chloroformates, chiral intermediates
Basic products: butanediol and derivatives, alkylamines and
alkanolamines, neopentyl glycol, formic and propionic acid
Product
Ethylene, propylene, butadiene, benzene, alcohols, solvents,
plasticizers, alkylene oxides, glycols, acrylic monomers, styrene
and polystyrene, styrenic foams, superabsorbents
3%
45%
15%
37%
9,674
5%
11%
28%
56%
(million €)
3,904
Acrylic acid
Alkylamines
Formic acid
550,000
680,000
910,000
305,000
250,000
1,510,000
(metric tons)
Annual capacity
South America,
Africa, Middle East
Asia Pacific
North America
Europe
Propylene
Propionic acid
PolyTHFⓇ
Oxo-C4 alcohols (calculated as butyraldehyde)
Neopentylglycol
Ethylene oxide
Ethylene
Ethanolamines and derivatives
Butanediol equivalents
Butadiene
Benzene
Africa, Middle East
440,000
Asia Pacific
Europe
Sales performance was mainly driven by significantly higher price
levels. This was largely due to strong demand alongside low prod-
uct availability, mainly caused by extreme weather conditions such
as Winter Storm Uri in North America, supply chain disruptions, as
well as significantly higher feedstock and energy costs. As a result,
the Petrochemicals division increased prices in all business areas,
especially for steam cracker products, styrene monomers and along
the entire propylene value chain. The Intermediates division raised
prices in the butanediol and derivatives business in particular, as
well as in the acids and polyalcohols business.
47.6%
78.3%
68.2%
Sales
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
-0.4%
-2.6%
-1.9%
Currencies
Sales growth was supported by a significant increase in volumes
due to strong demand. Volumes in the Petrochemicals division
grew mainly in steam cracker products and styrene monomers. The
Research and development expenses
-1.0%
-0.7%
Portfolio
Investments including acquisitionsb
40.2%
71.5%
61.2%
Prices
7.9%
10.5%
0.0%
Intermediates division increased volumes primarily in the butanediol
and derivatives business and in the acids and polyalcohols busi-
ness. The amines business in Europe also posted significant volume
growth. In the previous year, volume development was significantly
weighed down by the impact of the coronavirus pandemic and the
unplanned outage of the steam cracker in Port Arthur, Texas.
Sales growth was curbed by negative currency effects, mainly
relating to the U.S. dollar.
Sales development was slightly dampened by portfolio effects in
the Petrochemicals division from the disposal of our share in the
condensate splitter in Port Arthur, Texas, to Total Petrochemi-
cals & Refining USA, Inc.
Total
South America,
Products
Intermediates
Petrochemicals
Division, products, applications
Intermediates
Petrochemicals
Divisions
Division sales by region
(Location of customer)
For the outlook for 2022, see page 148 onward
EBIT amounted to €2,997 million, an improvement of €3,189 mil-
lion compared with the previous year. This included special income
from the disposal of our share in the condensate splitter in the first
quarter of 2021. In the previous year, special items were mainly
impacted by impairments.
Compared with 2020, income from operations (EBIT) before
special items rose by €2,529 million to €2,974 million as a result
of considerable earnings growth in both divisions. In both the
Petrochemicals and Intermediates divisions, this was primarily
attributable to significantly higher margins, higher sales volumes
and improved income from investments accounted for using the
equity method.
74
< >
Management's Report - Chemicals
BASF Report 2021
Share of sales: 29%
€3,904 million
Intermediates
€13,579 million
Petrochemicals
Share of sales: 71%
€9,674 million
Chemicals - sales
By division
North America
193
3,480,000
255,000
1,665
817
14.5
20.8
%
103.2%
1,556
3,162
87.2%
1,714
-50.9%
3,208
11,456
16,464
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Sales including transfers
Assets
Return on capital employed (ROCE)
EBIT before special items
Depreciation and amortizationa
Income from operations (EBIT)
Special items
Factors influencing sales - Materials
The Materials segment increased sales to third parties by
€4,478 million year on year to €15,214 million in 2021. This was due
to considerable sales growth in both divisions. The Monomers
division increased sales by €2,821 million to €7,922 million. At
€7,292 million, sales in the Performance Materials division were
€1,657 million above the prior-year figure.
43.7%
2,345
-109
-73
9.6%
14.1%
12.0%
Volumes
-63.8%
1,957
709
Investments including acquisitionsb
Monomers
Materials
Materials
Performance
23.8%
9,118
11,286
-1.1
22.8
%
189.6%
835
2,418
92.3%
-944
73.6%
1,445,000
720
Intersegment transfers
Discover Haptex® at basf.com/haptex
Haptex® is a more environmentally friendly, water-soluble polyurethane solution used in the pro-
duction of synthetic leather. Among other things, HaptexⓇ's solvent-free production process cuts
greenhouse gas emissions by around 50%. It also reduces energy consumption by more than
20% per kilo of chemicals in synthetic leather production. Moreover, Haptex® offers a wide range
of applications and meets the demand for products that are eco-conscious, durable and high
quality. BASF expects to grow faster than the market for solvent-based products with Haptex®.
The company aims to achieve annual growth of more than 50% with the product by 2025.
Haptex®
For more information on the Materials segment's business model, see page 33 onward
The Materials segment comprises the Performance Materials
and Monomers divisions. The segment's portfolio comprises
advanced materials and their precursors for new applications
and systems such as isocyanates, polyamides and inorganic
basic products as well as specialties for the plastics and
plastics processing industries. We aim to grow mainly orga-
nically, differentiate ourselves from our competitors through
specific technology expertise, industry knowledge and
customer proximity, and create maximum value in the iso-
cyanate and polyamide value chains.
Materials
< > 76
Management's Report - Materials
BASF Report 2021
75
Sales
< >
565,000
545,000
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Plasticizers
Superabsorbents
StyroporⓇ/NeoporⓇ
2,630,000
180,000
350,000
1,625,000
595,000
€15,214 million
2020: €10,736 million
EBIT before special items
€2,418 million
55.3%
5,101
7,922
29.4%
5,635
7,292
Monomers
of which Performance Materials
41.7%
10,736
15,214
Sales to third parties
■ EBIT before special items of €2,418 million; considerable
increase as a result of higher earnings in both divisions
■Sales growth of 41.7% to €15,214 million, mainly driven by
higher prices
At a glance
+/-
2020
2021
77
Segment data - Materials
Million €
Business review
Management's Report - Materials
BASF Report 2021
1,250
2020: €835 million
It is the first herbicide since 1985 to
receive a new mode of action classifi-
cation from the global industry organi-
zation HRAC.* With more than 50%
carbon content of the active ingredient
coming from renewable sources and
no known cross-resistance, LuximoⓇ
offers farmers in Australia and, in the
future, in the E.U. and U.K. a new solu-
tion for sustainable weed resistance
management. We anticipate a peak
sales potential for this product in the
low three-digit million euro range.
Smart stewardship: Our stewardship tools and services are tailored
to farmers' daily work. Farmers get the support they need to use our
products safely: access to tools and services, protective equipment,
customized training, digital solutions and new and future-oriented
application technologies such as drones.
EBIT before special items
€6,442 million
2020: €6,019 million
Sales
variants at their fingertips
the whole array of sensory
the right emollient, and places
Identify...
Emollient Jockey
Start here
you from the idea generation to product
design
.
A digital and agile experience that helps
we delight you?
What's D'lite
and 
how can
Cations.
We chemistry
D-BASF
For more information on the Nutrition & Care segment's business model, see page 33 onward
29%
15%
3,440
Automotive catalysts, process catalysts and technologies,
battery materials, precious and base metal services
Coatings solutions for automotive applications, technology and
system solutions for surface treatments, decorative paints
Customer industries and applications
€497 million
Automotive, chemical and pharmaceutical industries, refineries, battery
manufacturers, solutions for the protection of air quality as well as the production
of fuels, chemicals, plastics and battery materials, battery material recycling
Automotive industry, body shops, steel industry, aviation, aluminum applications
in the architecture and construction industries, household appliances, painting
businesses and private consumers
Management's Report - Nutrition & Care
D'lite
Keeping on top of rapidly changing consumer trends in a fast-moving cosmetics market is a major
challenge for traditional market analyses and product development processes. BASF developed a new
digital platform to address precisely this: D'lite helps customers to identify the best cosmetic offerings and
ingredients. This service combines the Care Chemicals division's industry knowledge with a wide range of
data from multiple internal and external sources, including analyses of social media sites, blogs, forums
and review portals. D'lite supports BASF's customers along the entire product development chain - from
consumer and market understanding, concept and strategy development to formulation design - and
enables them to speed up the formulation process by up to 50%.
Discover D'lite at dlite-global.basf.com
Nutrition & Care
In the Nutrition & Care segment, consisting of the Care
Chemicals and Nutrition & Health divisions, we serve the
growing and increasingly sophisticated demands for fast-
moving consumer goods. Our customers include food and
feed producers as well as the pharmaceutical, cosmetics,
detergent and cleaner industries. We also offer solutions for
technical applications and for crop protection and nutrition.
We strive to expand our position as a leading provider of
ingredients and solutions for consumer goods in the areas
of nutrition, home and personal care. Our goal is to drive
organic growth. We focus on emerging markets, new busi-
ness models and sustainability trends in consumer markets,
supported by acquisitions.
BASF Report 2021
23%
2020: €773 million
85
6,933
Sales including transfers
14.4%
429
491
Intersegment transfers
-1.3%
2,030
2,003
Nutrition & Health
11.3%
3,989
4,439
7.0%
6,019
6,442
of which Care Chemicals
BASF Report 2021
Management's Report - Nutrition & Care
Business review
Segment data - Nutrition & Care
Million €
96
86
85
2021
+/-
At a glance
■Sales growth of €423 million to €6,442 million due to higher
volumes and raised prices
■
EBIT before special items declines €276 million to €497 million
as a result of lower contributions from both divisions
Sales to third parties
2020
6,448
33%
4%
11.4%
41.6%
36.0%
Sales
-2.4%
-3.9%
-3.6%
Currencies
-0.1%
2.6%
2.1%
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
3.2%
30.4%
25.3%
10.7%
12.5%
Investments including acquisitionsb
1,469
585
151.2%
Catalysts
Coatings
ongoing shortage of semiconductors in the automotive market and
production and supply chain disruptions.
Research and development expenses
246
20.4%
Volumes
Prices
Portfolio
12.2%
296
19,219
Surface Technologies - sales
By division
€22,659 million
33%
34%
29%
(million €)
Total
South America,
Africa, Middle East
Asia Pacific
North America
Products
For the outlook for 2022, see page 148 onward
Coatings
EBIT rose by €1,348 million to €761 million. In 2021, we recorded
special items of -€39 million after -€1,071 million in 2020, mainly in
connection with special charges for impairments.
Catalysts
Division, products, applications
Coatings
Catalysts
Division sales by region
(Location of customer)
Divisions
€3,440 million
Coatings
Share of sales: 85%
Share of sales: 15%
Sales growth was driven by the strong increase in precious metal
prices in the Catalysts division. This also led to considerably higher
sales in precious metal trading, at €10,376 million (2020: €7,612 mil-
lion). The Coatings division recorded slightly higher prices in all
business areas.
Considerably higher sales volumes on the back of the global
economic recovery from the coronavirus pandemic and following
stronger demand also contributed to the positive sales develop-
ment. Both divisions increased volumes in all business areas.
Volume development in the segment was dampened by the
€19,219 million
Catalysts
Portfolio effects in the Catalysts division following the acquisition of
our majority shareholding in BASF Shanshan Battery Materials
Co., Ltd. had a slightly positive impact on sales.
BASF Report 2021
Management's Report - Surface Technologies
84
54
At €800 million, income from operations (EBIT) before special
items was €316 million above the 2020 figure due to considerably
higher earnings in the Catalysts division. This was driven by growth
in sales volumes and the considerably higher earnings contribution
from precious metal trading.
EBIT before special items in the Coatings division declined con-
siderably compared with the previous year. The significant rise in
volumes was unable to compensate for higher fixed costs, primarily
from higher bonus provisions, and a weaker margin due to increased
raw materials prices.
Sales performance was weighed down by negative currency effects,
mainly relating to the U.S. dollar.
7.5%
Sales to third parties in the Nutrition & Care segment rose by
€423 million year on year to €6,442 million in 2021. This was attri-
butable to the Care Chemicals division, which recorded sales growth
of €450 million to €4,439 million. By contrast, in the Nutrition & Health
division, sales declined by €27 million compared with 2020 to
€2,003 million.
Factors influencing sales - Nutrition & Care
35%
18%
37%
4,439
9%
20%
18%
53%
(million €)
Total
South America,
Africa, Middle East
Asia Pacific
North America
Europe
Products
Nutrition & Health
Care Chemicals
€6,442 million
Nutrition & Health
Share of sales: 31%
BASF Report 2021
Management's Report - Nutrition & Care
80
87
10%
Compared with the prior-year figure, income from operations
(EBIT) before special items declined by €276 million to €497 mil-
lion due to lower earnings contributions from both divisions. The
decline in earnings in the Nutrition & Health division resulted from
lower margins, driven by higher prices for raw materials and energy,
the lower availability of vitamin A, and higher fixed costs, primarily
from higher bonus provisions. EBIT before special items in the Care
Chemicals division decreased due mainly to higher fixed costs,
largely as a result of higher bonus provisions.
For the outlook for 2022, see page 148 onward
Division sales by region
(Location of customer)
Divisions
Care Chemicals
Nutrition & Health
Division, products, applications
EBIT declined by €134 million year on year to €554 million. It
included special income from the sale of the production site in
Kankakee, Illinois, in the second quarter of 2021. In the previous
year, EBIT included special charges, mainly for impairments and
provisions, primarily for the optimization of production structures in
the Nutrition & Health division.
€2,003 million
2,003
Ingredients for detergents and cleaners in household, institution or
industry, such as surfactants, enzymes, chelating agents, water-
soluble polymers, biocides and products for optical effects
Discover Luximo at basf.com/luximo
LuximoⓇ controls a broad range of
resistant and difficult-to-control grass
weeds in wheat and other cereal crops.
LuximoⓇ: novel
herbicide active
ingredient
88
Management's Report - Agricultural Solutions
BASF Report 2021
650,000
30,000
170,000
78,000
550,000
Annual capacity
(metric tons) :
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Nonionic surfactants
Methane sulfonic acid
Chelating agents
Citral
Chemical ingredients and processing additives, for example for crop
protection, excipients for chemical processes such as emulsion
polymerization, metal surface treatments or textile processing,
as well as products for concrete additives, biofuels and other
industrial applications
Additives for the food and feed industries, such as vitamins,
carotenoids, sterols, enzymes, emulsifiers, omega-3 fatty acids.
Industrial enzymes for bioethanol and food production, natural and
synthetic flavors and fragrances, such as citral, geraniol, citronellol,
L-menthol and linalool, Isobionics® Santalol, valencene and
nootkatone
Excipients for the pharmaceutical industry and selected, high-volume
active pharmaceutical ingredients, such as ibuprofen and omega-3
fatty acids
Customer industries and applications
Cosmetics, detergent and cleaner industry, agrochemical industry, technical
applications for various industries
Ingredients for skin and hair cleansing and care products, such as
emollients, cosmetic active ingredients, polymers and UV filters
Food and feed industries, flavor and fragrance industry, pharmaceutical
industry and bioethanol industry
Product
Europe
North America
Asia Pacific
South America,
Africa, Middle East
Anionic surfactants
Production capacities of selected products in the regionsa
€4,439 million
Care Chemicals
Share of sales: 69%
Portfolio effects from the sale of the production site in Kankakee,
Illinois, had a negative impact on sales in both divisions.
Slightly negative currency effects, mainly relating to the U.S. dollar,
had an offsetting effect.
6,214
7,231
10.6
8.2
%
-35.7%
773
497
-85
57
-19.5%
688
554
-10.9%
464
413
19.1
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
Depreciation and amortizationa
Income from operations (EBIT)
Special items
EBIT before special items.
Return on capital employed (ROCE)
Assets
16.4%
909
-23.6%
967
1,152
-16.0%
%
15.0
1,190
Nutrition & Care
Care Chemicals Nutrition & Health
Investments including acquisitionsb
-1.5%
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
Currencies
-1.9%
-1.9%
-1.8%
-1.2%
7.0%
-1.3%
Nutrition & Care - sales
By division
Sales
The sales increase at segment level was primarily due to higher
volumes. The Care Chemicals division increased its volumes mainly
in the home care, industrial and institutional cleaning and industrial
formulators business and in the personal care solutions business.
Volumes rose slightly in the Nutrition & Health division, especially in
the pharmaceutical and aroma ingredients businesses. This more
than compensated for reduced volumes due to the lower availability
of vitamin A.
Sales were positively impacted by higher prices overall due to signifi-
cantly higher price levels in the Care Chemicals division, especially in
the oleo surfactants and fatty alcohols business as well as in the
home care, industrial and institutional cleaning and industrial
formulators business, mainly as a result of higher raw materials
prices. This more than compensated for slightly lower prices in the
Nutrition & Health division.
11.3%
Surface
Technologies
-1.3%
7.4%
654
510
28.3%
Volumes
Prices
Portfolio
-1.2%
5.7%
3.2%
Research and development expenses
172
160
7.7%
4.5%
6.9%
17.8%
Europe
13,769
16.6
20.7
At €8,162 million, sales to third parties in the Agricultural Solutions
segment were €502 million above the prior-year level in 2021. The
main drivers were higher volumes in all regions and higher prices.
Negative currency effects had an offsetting impact.
Factors influencing sales - Agricultural Solutions
Volumes
Prices
Depreciation and amortizationa
Income from operations (EBIT)
Special items
EBIT before special items
Return on capital employed (ROCE)
Assets
662
1,000
-33.8%
696
582
19.6%
-19
347
Investments including acquisitionsb
8.1%
3.1%
14,840
15,305
%
3.6
%
-26.3%
970
715
95.1%
-388
11,691
459
-14.2%
1,358
2020: €970 million
BASF Report 2021
Management's Report - Agricultural Solutions
Business review
Segment data - Agricultural Solutions
Million €
89
99
2021
2020
+/-
At a glance
■
■
Sales above prior-year level at €8,162 million due to volume
growth and higher prices
EBIT before special items of €715 million, 26.3% below 2020
figure, mainly from higher costs and negative currency effects
Sales to third parties
Intersegment transfers
-18.2%
1,680
1,375
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
5.8%
7,751
1,582
8,202
91
40
6.6%
7,660
8,162
Sales including transfers
-56.5%
-24.3%
2.5%
Research and development expenses
Fungicides
Herbicides
Insecticides
Seed Treatment
Seeds & Traits
EBIT amounted to €696 million, €114 million higher than in the
previous year. This figure included special income from the sale of
non-capitalized know-how. Special charges in connection with
streamlining the global glufosinate-ammonium production network
had an offsetting effect but were well below the special charges
incurred in the previous year.
For the outlook for 2022, see page 148 onward
Europe
North America
Asia Pacific
South America,
Africa, Middle East
26%
38%
12%
24%
Selected products
Total
(million €)
Digital farming: Digitalization has the power to transform agriculture
and make it more efficient and sustainable. Our digital solutions help
farmers to produce more with less and grow their business profitably
while reducing their environmental footprint.
Sustainable solutions: We systematically steer our innovation
pipeline according to sustainability criteria from an early stage on.
This enables us to continually develop innovations that offer added
value for farmers, the environment and society. We also assess each
product in our existing portfolio with respect to its contribution to
sustainability. In this way, we systematically steer our portfolio to
annually increase the sales share from solutions that make a sub-
stantial sustainability contribution.
Climate-smart farming: We help farmers tackle pressing climate
challenges with the right combination of technologies designed to
increase yield, make farm management easier and more effective,
and reduce the impact on the environment. Our technologies include
nitrogen management products to improve fertilizer efficiency and
lower greenhouse gas emissions, no-till herbicides, seeds and traits
for more stress-resilient crops, digital solutions and bacteria that
improve nitrogen availability to plants.
We are committed to sustainable farming and focus on four areas to
help farmers not only produce more, but also better.
Good to know
CredenzⓇ, FiberMax®, InVigor®, LibertyLink®, NunhemsⓇ,
StonevilleⓇ
Applications
Flo Rite®, ILEVO®, Integral®, Nodulator® PRO, PonchoⓇ,
Serifel®, SystivaⓇ, VaultⓇ HP, VelondisⓇ
Seeds and traits for key field crops such as canola (oilseed rape), cotton,
soybean and wheat, as well as vegetable seeds
Improving seeds' potential with chemical and biological protection as well as
inoculants
Combating insect pests in agriculture and beyond with chemical and
biological solutions, such as in the areas of public health, professional pest
control and landscape maintenance
Protecting crops against harmful fungal diseases; improving plant health,
securing yield and harvest quality with chemical and biological solutions
Reducing competition from weeds for nutrients, water and sunlight to secure Basta®, dimethenamid-p, EngeniaⓇ, FinaleⓇ, imazamox,
yield and harvest quality
8,162
Boscalid, dimethomorph, F500®, Initium®, metiram,
metrafenone, Revysol®, Serifel®, Xemium®
KixorⓇ, Liberty, pendimethalin, TirexorⓇ, topramezone
Alpha-cypermethrin, Broflanilide, chlorfenapyr, fipronil,
InscalisⓇ, Interceptor®, NealtaⓇ, teflubenzuron, TermidorⓇ
Indications and sectors
Products and applications
Agricultural Solutions
Agricultural Solutions - sales
Sales in the region South America, Africa, Middle East amounted
to €1,990 million, €213 million above the previous year, and were
driven by significantly higher price levels and considerable volume
growth in all sectors, especially in Brazil. This more than offset
negative currency effects, especially in Argentina and Brazil.
In Asia, we increased sales by €114 million to €958 million. This was
I mainly due to higher sales volumes, especially in fungicides and
insecticides, primarily in China. Slightly higher price levels contrib-
uted to the positive sales development, while negative currency
effects had a dampening impact.
Sales in North America rose by €81 million to €3,085 million. Higher
sales volumes, especially for herbicides, more than compensated
for negative currency effects and slightly lower prices.
In Europe, sales rose by €93 million year on year to €2,128 million.
This was primarily attributable to higher volumes, especially in fungi-
cides and herbicides. Slightly higher prices contributed to sales
performance. Sales were reduced by negative currency effects,
mainly in eastern Europe and Turkey.
€8,162 million
By indication and sector
a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
b Additions to property, plant and equipment and intangible assets
Sales
Currencies
Portfolio
7.7%
840
904
-4.0%
6.6%
€715 million
€1,641 million
€926 million
Division
(Location of customer)
Agricultural Solutions sales by region
At €715 million, income from operations (EBIT) before special
items was €255 million below the 2020 figure. This was primarily
attributable to significantly higher fixed costs, mainly from much
higher bonus provisions, significantly higher raw materials prices
and logistics costs, and a low-margin product mix. Earnings were
also weighed down by negative currency effects.
90
90
Seeds & Traits
Share of sales: 20%
€620 million
Seed Treatment
Share of sales: 8%
< >
BASF Report 2021
Herbicides
Share of sales: 31%
€2,526 million
Share of sales: 30%
€2,449 million
Fungicides
Insecticides
Share of sales: 11%
Management's Report - Agricultural Solutions
EBIT before special items
4.5
€8,162 million
203
171
11.4%
3,089
3,440
41.6%
13,570
19,219
36.0%
16,659
22,659
Intersegment transfers
Coatings
of which Catalysts
Sales to third parties
EBIT before special items rises 65.3% to €800 million due to
increase in the Catalysts division
Sales growth of 36.0% to €22,659 million, mainly as a result of
significantly higher precious metal prices
2020: €16,659 million
EBIT before special items
€800 million
2020: €484 million
BASF Report 2021
Management's Report - Surface Technologies
Business review
-15.7%
Segment data - Surface Technologies
Million €
33
2021
2020
+/-
At a glance
■
83
€22,659 million
Sales to third parties in the Surface Technologies segment rose by
€6,000 million compared with the previous year to €22,659 million.
Both divisions contributed to the increase. The Catalysts division
recorded sales growth of €5,649 million to €19,219 million. The
Coatings division increased sales by €351 million year on year to
€3,440 million.
Depreciation and amortizationa
Income from operations (EBIT)
Special items
Assets
-4.8
5.6
%
65.3%
484
800
96.3%
2020: €7,660 million
-39
-587
761
-67.6%
1,487
483
5.4
5.5
EBIT before special items
Return on capital employed (ROCE)
Sales including transfers
Income from operations before depreciation, amortization and special items
Income from operations before depreciation and amortization (EBITDA)
EBITDA margin
22,831
16,862
Factors influencing sales - Surface Technologies
35.4%
966
32.2%
1,243
900
38.1%
%
1,277
Sales
-1,071
BASF's innovative Tri-Metal Catalyst tech-
nology enables the partial substitution of
palladium with platinum in production pro-
cesses. Although slightly more palladium
is produced every year than platinum,
demand for palladium is currently around
three times higher. Tri-Metal Catalysts help
to reduce costs for automotive manufac-
turers and partially alleviate deficits in the
platinum metals market. With this tech-
nology, BASF expects to expand its market
share and anticipates a total annual sales
potential of around €175 million by 2026.
Dispersions & Resins
Performance Chemicals
Products
Europe
North America
Asia Pacific
Division, products, applications
South America,
Africa, Middle East
(million €)
40%
40%
24%
30%
6%
5,681
Total
23%
Performance Chemicals
Division sales by region
(Location of customer)
Divisions
Discover Tri-Metal Catalysts at catalysts.basf.com
Sales
1 Peak sales describes the highest sales value to be expected in one year. For more information, see the Glossary on page 289.
*Herbicide Resistance Action Committee
For more information on the Agricultural Solutions segment's business model, see page 33 onward
Agricultural Solutions
Dispersions & Resins
BASF Report 2021
81
54
Income from operations (EBIT) before special items rose consid-
erably compared with 2020. This was attributable to considerably
higher EBIT before special items in the Dispersions & Resins division,
mainly as a result of volume growth.
By contrast, EBIT before special items declined slightly in the Perfor-
mance Chemicals division. This was primarily due to the increase in
fixed costs mainly from higher bonus provisions, lower margins due
to higher raw materials prices, and negative currency effects. This
could not be offset by the division's positive volume performance.
At €965 million, EBIT was €335 million above the prior-year figure.
Special items amounted to -€42 million in 2021 after -€192 million
in 2020. Special charges in the previous year related mainly to the
carve-out of the pigments business and impairments.
For the outlook for 2022, see page 148 onward
Management's Report - Industrial Solutions
27%
In the Agricultural Solutions segment, we aim to further
strengthen our market position as an integrated provider. Our
offer comprises seeds and seed treatment products, as well
as fungicides, herbicides, insecticides and biological solu-
tions, complemented by digital products to help farmers
achieve better yield. Our strategy is based on innovation-
driven organic growth and targeted portfolio expansion
through acquisitions. Customer needs, societal expectations
and reducing environmental impacts are what motivate us to
innovate.
3,195
Tri-Metal Catalyst
technology:
For more information on the Surface Technologies segment's business model, see page 33 onward
10%
The Surface Technologies segment comprises the Catalysts
and Coatings divisions, which offer chemical solutions for
surfaces. Its portfolio serves industries such as the auto-
motive and chemical sectors and includes automotive OEM
and refinish coatings, surface treatment, catalysts, battery
materials, and precious and base metal services. We
improve our customers' applications and processes with
tailored products, technologies and solutions, and support
them through geographical proximity across all regions. The
aim is to drive BASF's growth by leveraging our portfolio of
technologies and expanding our position as a leading and
innovative provider of battery materials and surface coatings
solutions.
62
82
< >
Management's Report - Surface Technologies
BASF Report 2021
265,000
67,000
1,783,000
a All capacities are included at 100%, including plants belonging to joint operations and joint ventures.
Polyisobutene
Formulation additives
Surface Technologies
Annual capacity
(metric tons) :
Acrylics dispersions
Process chemicals for the extraction of oil, gas, metals and
minerals; chemicals for enhanced oil recovery
Fuel and refinery additives, polyisobutene, brake fluids and engine
coolants, lubricant additives and basestocks, components for
metalworking fluids and compounded lubricants
Kaolin minerals
Customer industries and applications
Antioxidants, light stabilizers and flame retardants for plastic
applications
Chemicals, plastics, consumer goods, automotive and transportation
industries, as well as energy and resources
Coatings, construction, paper, printing and packaging, adhesives and
electronics industries
Production capacities of selected products in the regionsa
Product
Europe
North America
Asia Pacific
South America,
Africa, Middle East
Polymer dispersions, resins, additives, electronic materials
232
Statement of Changes in Equity
231
Statement of Cash Flows
.227
Balance Sheet
228
Statement of Income and Expense Recognized in Equity
184
Statement of Income
229
Notes
ΚΣΕΙ 7
BASF Report 2023
About This Report
About This Report]
GRI 2,305
At a glance
■ Integrated BASF Report serves as U.N. Global Compact
progress report
■
Financial reporting in accordance with IFRS, HGB and GAS
Nonfinancial reporting in accordance with HGB and additional
sustainability reporting in accordance with GRI
External audit by KPMG AG Wirtschaftsprüfungsgesellschaft
- Editorial deadline: February 19, 2024
Integrated reporting
This integrated report documents BASF's economic, environmental
and social performance in 2023. We show how we as a company
create value for our stakeholders and how sustainability contributes
to BASF's long-term success as an integral part of our corporate
purpose and our strategy.
Disclosures on BASF SE in Accordance with the
German Commercial Code (HGB)
Content and structure
The BASF Report, which is published each year in English and
German, combines the major financial and sustainability-related
information necessary to comprehensively evaluate the company's
performance. We select the report's topics based on the following
principles: materiality, completeness, sustainability context, balance
and stakeholder inclusion. In addition to this report, we publish further
information online. The relevant links can be found at the end of each
chapter.
234
221
23
167
Management and Supervisory Boards
WE SUPPORT
205
Glossary, Trademarks and Image Sources
320
Report of the Supervisory Board
209
Declaration of Conformity Pursuant to Section 161 AktG
217
Declaration of Corporate Governance
218
2❘ Combined Management's Report
18
Overview
19
The BASF Group
Our Strategy
27
4 | Consolidated Financial Statements
219
The BASF Group's Business Year
56
Environmental, Social and Governance
100
Statement by the Board of Executive Directors
220
Forecast
Independent Auditor's Report
UN GLOBA
To Our
IFRS Sustainability
Alliance
Q<>=9
Contents
To Our Shareholders
Combined Management's Report
Corporate Governance
Consolidated Financial Statements
Overviews
Letter from the Chairman of the Board of Executive
Directors
10
The Board of Executive Directors of BASF SE
BASF on the Capital Market
13
14
BASF Report 2023
To Our Shareholders - Letter from the Chairman of the Board of Executive Directors
< >
10
10
Dear shareholder,
-
At BASF, we are accustomed to working under pressure and not just in our
plants. The year 2023 once again required enormous effort on our part, as
the entire chemical industry is in upheaval. Our markets, our competitors and
the needs of our customers are changing rapidly. The world is still experiencing
geopolitical conflicts, weak economic growth and high interest rates due to
ongoing inflation. In Europe, structurally higher energy price levels, extremely
sluggish growth and overregulation are especially challenging for the
competitiveness of local European producers. This difficult environment is
demanding everything from us and is reflected in our figures.
However, we accept these challenges. We are taking action to maintain our
competitiveness, especially in Germany. We want to grow profitably worldwide
and become climate-neutral. We worked hard on this in 2023. I am convinced:
We will succeed in all these areas because we are a strong company. We have
the will to change and a concrete plan, which we are systematically implementing.
And we will emerge even stronger from these tough times, just as we have done
repeatedly over our 158-year history.
Clear focus on strengthening competitiveness and profitability
"E
BASF supplies products and services to around 78,000 customers from various
sectors in almost every country in the world. We want to further strengthen these
relationships and win new customers too. The operating environment has
changed significantly in recent years for our Battery Materials, Coatings and
Agricultural Solutions businesses. Our competitors in these sectors are making a
more focused push into the market and are thus
increasingly challenging us. At the same time, these
business areas are not integrated so deeply into the
BASF Verbund. That is why we will be giving them
more space so they can tailor their business models
and processes more precisely to the needs of their
customers and perform even more successfully on
the market. Despite these changes, BASF remains an integrated company with a
broad portfolio. Particularly in a year such as 2023, this structure proved its value
once again. The Coatings and Agricultural Solutions divisions generated record
earnings, which partly offset weak results in other segments.
We have the will to change
and a concrete plan.
In Germany in particular, we are working systematically on our competitiveness
and profitability. We are reducing our costs by adapting our production
structures, among other measures. We acted promptly, but we must not let up.
Given the extremely difficult market environment and structural challenges, we
need targeted measures at our site in Ludwigshafen in particular to make it fit for
the future. And we will continue to be under enormous pressure here owing to the
weak demand compared with other regions, high energy prices and increasingly
far-reaching regulatory requirements. This is why we are implementing changes
where we need to. We are altering where it makes us better. But we are also
investing where we see opportunities.
14
Shareholders
BASF Report 2023
1
Captions are not part of the audit. Unless otherwise stated, page
numbers relate to pages within the Combined Management's
Report or in the Notes to the Consolidated Financial Statements.
The management's reports for the BASF Group and BASF SE have
been combined for the first time in this annual report. The reporting
period is from January 1, 2023, up to and including December 31.
Unless otherwise stated, the presentation of the results of
operations, financial position and net assets as well as the expected
development with its significant opportunities and risks relate to the
BASF Group. Information relating exclusively to BASF SE is marked
as such and is dealt with in a separate section (Disclosures on BASF
SE in accordance with the German Commercial Code (HGB)). The
combined Nonfinancial Statement (NFS) is integrated into the
Combined Management's Report and includes, as far as possible,
the disclosures for the BASF Group and BASF SE as the parent
company. Material topics for BASF SE are largely congruent with the
topics identified for the BASF Group. Deviations are presented
in the separate nonfinancial section on BASF SE on page 189.
The NFS disclosures can be found in the relevant sections of the
Combined Management's Report and have been prepared in
accordance with the appropriate frameworks: the Global Reporting
Initiative (GRI) Standards and the reporting requirements of the
U.N. Global Compact.
The information on the financial position and performance of the
BASF Group complies with the requirements of the International
Financial Reporting Standards (IFRS) and, where applicable, the
German Commercial Code (HGB), German Accounting Standards
(GAS) and the guidelines on alternative performance measures from
the European Securities and Markets Authority (ESMA). Internal
control mechanisms ensure the reliability of the information presented
in this report.
The information contained in this report also serves as a progress
report on BASF's implementation of the 10 principles of the U.N.
Global Compact. KPMG AG Wirtschaftsprüfungsgesellschaft has
performed an independent limited assurance of the disclosures in
the online GRI Index. The results of this assurance are also available
in the online report in the form of an assurance statement. We also
publish additional information on sustainability online in accordance
with the industry-specific requirements of the Sustainability
Accounting Standards Board (SASB). BASF's Report addresses
elements of the framework of the former International Integrated
Reporting Council (IIRC), which is now incorporated into the work of
the International Sustainability Standards Board (ISSB) to develop
internationally recognized standards for sustainability reporting. Our
involvement in networks and in national and international
standard-setting bodies gives us the opportunity to share our
experiences of integrated reporting with stakeholders and, at
the same time, give and receive inspiration for enhancing our
reporting.
Material topics along the value chain form the focal points of our
reporting and define the limits of this report. In identifying, prioritizing
and validating material, sustainability-related topics, we are guided
by the principle of double materiality, taking into consideration
financial materiality and impact materiality. General information on
the materiality analysis can be found under "Our Sustainability
Concept" from page 48 onward. Material topics are explained in the
"Material Topics in Focus" sections.
For more information on the results of operations, net assets and financial position,
see page 61 onward
For more information on our sustainability reporting, see page 48 and 100 onward
The 2023 BASF Online Report can be found at basf.com/report
The GRI and Global Compact Index can be found at basf.com/en/gri-gc
The SASB index can be found at basf.com/sasb
BASF Report 2023
About This Report
00
8
Data
COMPACT
All information and bases for calculation in this report are founded on
national and international standards for financial and sustainability
reporting. The data and information for the reporting period were
sourced from the expert units responsible using representative
methods. Due to rounding, individual figures may not add up exactly
to the totals shown and percentages may not correspond exactly to
the figures shown. The reporting period is the 2023 business year.
We include relevant information made available up to the preparation
of this report by the Board of Executive Directors at the accounts
meeting on February 19, 2024 (editorial deadline).
indicated, data on social responsibility and transportation safety Symbols used and captions
refers to the BASF Group's scope of consolidation.
External audit
Π
You can find more information in this report.
You can find more information online. This information is
voluntary and was not audited by the auditor.
has undergone a separate limited assurance by our auditor.
☐☐☐The content of this section is voluntary, unaudited information,
which was critically read by the auditor.
Our reporting is independently audited by third parties.
KPMG AG Wirtschaftsprüfungsgesellschaft has audited the BASF ( ) The content of this section is not part of the statutory audit but
Group Consolidated Financial Statements and the Combined
Management's Report and has approved them free of qualification.
The limited assurance of the sustainability information contained in
the Management's Report was conducted in accordance with ISAE
3000 (Assurance Engagements other than Audits or Reviews of
Historical Financial Information) and ISAE 3410 (Assurance
Engagements on Greenhouse Gas Statements), the relevant
assurance standards for sustainability reporting. KPMG conducted
a reasonable assurance of all disclosures on the most important
nonfinancial key performance indicator "absolute CO2 emissions"
(Scope 1 and 2). KPMG also conducted a limited assurance of the
combined Nonfinancial Statement (NFS).
The Independent Auditor's Report can be found on page 221 onward
An assurance statement on the sustainability information in the BASF Report 2023
can be found at basf.com/sustainability_information
An assurance statement of the NFS can be found at basf.com/nfs-audit-2023
The section "Employees" refers to employees active in a company
within the BASF Group's scope of consolidation as of December 31,
2023. Our data collection methods for environmental protection and
safety are based on the recommendations of the International Council
of Chemical Associations (ICCA) and the European Chemical Industry Forward-looking statements and forecasts
Council (CEFIC). We report all data of the worldwide production sites
of BASF SE, its fully consolidated subsidiaries and proportionally
consolidated joint operations in the sections "Environmental" and
"Social." BASF SE subsidiaries that are fully consolidated in the
Group financial statements in which BASF holds an interest of less
than 100% are included in full in environmental reporting. The
emissions of proportionally consolidated joint operations are
disclosed pro rata according to the respective shareholding.
Work-related accidents at all sites of BASF SE and its subsidiaries
as well as joint operations and joint ventures in which we have
authority in terms of safety management are compiled worldwide
regardless of our interest and reported in full. Unless otherwise
This report contains forward-looking statements. These statements
are based on current estimates and projections of the Board of
Executive Directors and currently available information.
Forward-looking statements are not guarantees of the future
developments and results outlined therein. These are dependent on
a number of factors: they involve various risks and uncertainties and
they are based on assumptions that may not prove to be accurate.
Such risk factors include in particular those discussed in
Opportunities and Risks on pages 173 to 183. We do not assume
any obligation to update the forward-looking statements contained
in this report above and beyond the legal requirements.
BASF Group's scope of consolidation for its financial reporting
comprises BASF SE, with its headquarters in Ludwigshafen,
Germany, and all of its fully consolidated subsidiaries and
proportionally consolidated joint operations. Shares in joint ventures
and associated companies are accounted for, if material, using the
equity method in the BASF Group Consolidated Financial
Statements and are thus not included in the scope of consolidation.
BASF on the Capital Market
7
Selected Key Figures Excluding Precious Metals
EBITDA before
special items
€68.9 billion
(2022: €87.3 billion)
€3.8 billion
(2022: €6.9 billion)
€7.7 billion
ROCE
4.5%
(2022: 10.0%)
Free cash flow
€2.7 billion
(2022: €3.3 billion)
Sales by segment and Other
Chemicals
€10.4 billion
(2022: €14.9 billion)
Materials
€14.1 billion
(2022: €18.4 billion)
Industrial Solutions
€8.0 billion
(2022: €10.0 billion)
Other
€3.2 billion
(2022: €4.4 billion)
€68.9 billion
(2022: €87.3 billion)
Surface Technologies
€16.2 billion
Greenhouse gas
emissionsa
EBIT before special items
Employees
7,176
Sales (billion €)
319
Rethinking
chemistry
BASF Report 2023
BAS
O-BASF
We create chemistry
BASF Group
2023 at a glance
Our integrated reporting combines financial and
sustainability reporting. We inform you how we
are developing as a company and how we create
value for our stakeholders.
Sales and employees by region (by location of company)
EUROPE
NORTH AMERICA
ASIA PACIFIC
(million metric tons of
SOUTH AMERICA,
AFRICA, MIDDLE
EAST
27.6
Sales (billion €)
67,562
Employees
19.0
Sales (billion €)
16,060
Employees
17.1
Sales (billion €)
21,193
Employees
5.1
(2022: €10.8 billion)
CO₂ equivalents)
Sales
Capital expenditures (capex)
Rutger, 27, is an expert in carbon management at
our Verbund site Antwerp, Belgium. Inspired by his
grandfather, a chemistry professor, Rutger decided
to become a chemical engineer. It all starts with
chemistry. Chemistry is the industry of industries.
Rutger is convinced that a significant contribution
to society and environmental protection can be
made here, at the beginning of the value chain.
As part of the team, he is working to reduce
greenhouse gas emissions such as CO2 and
nitrogen dioxide in production. Coordination
between different production plants and supply
units is crucial here – Rutger wants to reuse the
energy that one plant releases as a resource
elsewhere. These optimization measures help
BASF to continuously reduce the carbon footprint
and use resources efficiently.
Rethinking
chemistry
Zi Ming Yang
Process Engineering
Research Assistant
Zi Ming, 30, works as a researcher at BASF's
Innovation Campus in Shanghai, China. She
comes from the Chinese province of Shanxi, an
area that is primarily characterized by coal mining.
She realized early on that she wanted to work in
sustainable technology research. Her passion for
innovation in chemistry led her from her hometown
to Oxford University and back to Shanghai. Today,
she works with a team on pioneering technologies
for advanced heating concepts, hydrogen
recovery and CO2 efficiency. Zi Ming focuses in
particular on technology scouting, benchmarking
and process modeling to accelerate the transition
of cutting-edge technologies from the lab to the
production line.
BASF Report 2023
Contents
About This Report
Q< >= 6
Contents
To Our Shareholders
Corporate Governance
Consolidated Financial Statements
Overviews
1 | To Our Shareholders
Expert
9
191
5❘ Overviews
316
Letter from the Chairman of the Board of Executive Directors
The Board of Executive Directors of BASF SE
.10
Corporate Governance Report
192
Ten-Year Summary
317
13
Compliance
202
40.1
3| Corporate Governance
Rutger Leenknecht
Carbon Management
Combined Management's Report
(2022: €4.1 billion)
€5.2 billion
chemistry
Employees
at year-end
111,991
(2022: 111,481)
(2022: €21.3 billion)
21.9
18.4
Nutrition & Care
€6.9 billion
(2022: €8.1 billion)
Research and development
expenses
Personnel expenses
Agricultural Solutions
€10.1 billion
(2022: €10.3 billion)
16.9
sale of energy to third parties)
Rethinking
a Scope 1 and Scope 2 (excluding the
Gabriela, 28, works in Technical Service at the site
Technical Service
Representative
dos Santos
Gabriela Uchôna
in São Paulo, Brazil. She is passionate about our
customers. She works closely with them to
develop innovative solutions tailored to their
needs. As part of a project to produce more
eco-friendly cleaning agents, she worked in a
team on a preservative of natural origin - one of
the few ingredients that has mainly been produced
synthetically until now. The basis: terpenes
extracted from orange peel. No other country
produces more oranges than Brazil. So why not
use the peel? The preservative LutensitⓇ EcoCitrus
can be used in a variety of household cleaners
and detergents to effectively counteract bacteria
and fungi in an environmentally friendly way. By
using recycled and renewable raw materials
instead of fossil ones, Gabriela wants to contribute
to more sustainability and environmental
compatibility in the home care industry.
€11.0 billion
(2022: €11.4 billion)
(2022: €2.3 billion)
1990 2018 2022 2023
€2.1 billion
Rethinking
chemistry
Social
22
Net Assets
66
Governance
E.U. Taxonomy
68
Environmental, Social and Governance
100
101
61
Financial Position
Results of Operations
Combined Management's Report
Environmental
56
Economic Environment
20
Sites and Verbund
The BASF Group
Nonfinancial Statement Disclosures
TCFD Recommendations Index.
Material Topics in Focus
56
The BASF Group's Business Year
19
Overview
Corporate Governance
Consolidated Financial Statements
Overviews
131
21
153
Nutrition & Care
22
To Our Shareholders
90
37
Our Steering Concept.
87
Surface Technologies
34
Business Models of the Segments
173
170
167
167
84 Opportunities and Risks
Industrial Solutions
30
Outlook 2024
81
Materials
27
Our Strategic Action Areas
Our Strategy
Economic Environment in 2024
77
Chemicals
Forecast
74
72
23 Actual Development Compared with Outlook for 2023
Business Review by Segment
23
161
Contents
6.76
Report
10.3
7.3
Price-earnings ratio (P/E ratio)b
BASFY (ADR)
57
36
%
Payout ratio
BAS
6.97
7.33
5.50
5.10
195.1
4.90
Dividend yieldb
3.40
3.40
3.40
3.30
3.30
€
Dividend per share
2.78
6.96
Disclosures on BASF SE in Accordance with HGB
3.21
4.00
%
BAS GY
a Average, Xetra trading
BASFn.DE
Combined
Management's
BASF Report 2023
2
2 Other greenhouse gases are converted into CO2 equivalents in accordance with the Greenhouse Gas Protocol.
1 Morningstar Sustainalytics provides institutional investors and companies with ESG and corporate governance research, ratings and analytics.
For more information on the Investor Update in December 2023, see basf.com/investor-update
Register for the newsletter with current topics and dates at basf.com/share/newsletter
Contact the Investor Relations team by phone at +49 621 60-48230 or email ir@basf.com
For more information on the 2022-2023 share buyback program, see basf.com/sharebuyback
For more information on the Investor Update in February 2023, see basf.com/FY2022
For more information on BASF shares, see basf.com/share
Analysts and investors have again confirmed the quality of our
financial market communications. At the Investors' Darling awards
ceremony, Manager Magazin presented BASF with special prizes
for sustainability communications and digital communications.
In addition, NetFed, a consultancy specializing in digital
communications, awarded the BASF Investor Relations website
second place in the IR Benchmark 2023.
For more information on our climate protection targets, see page 29
For more information on the Differentiated Steering concept, see page 37 onward
As part of an Investor Update in the presence of analysts and
investors in Ludwigshafen, Germany, in December 2023,
Dr. Martin Brudermüller and Dr. Dirk Elvermann announced a more
strongly differentiated approach to steering BASF operations and
the new financial key performance indicators in the reporting and
steering for the BASF Group, which will be used from 2024 onward.
Furthermore, the progress made toward the corporate targets for
Scope 1 and 2 emissions was presented and the targets for
Scope 3.1 emissions were announced for the first time.2
In February 2023, Dr. Martin Brudermüller and Dr. Hans-Ulrich Engel
presented concrete measures to increase BASF's competitiveness
in Europe as part of a virtual Investor Update. Detailed information
was provided on a cost savings program in nonproduction units with
a focus on Europe and on the adaptation of production structures at
the Verbund site in Ludwigshafen, Germany.
Regular and transparent communication with the capital market
is key to increasing long-term value. We engage with institutional
investors and rating agencies in numerous one-on-one meetings, as
well as at roadshows and conferences worldwide, and give private
investors an insight into BASF at informational events. In 2023, we
increasingly offered physical formats again in addition to virtual
formats such as video and conference calls.
Investor Updates in February 2023 and December 2023
Increased number of in-person investor events, complemented
by virtual formats
At a glance
Around 25 financial analysts regularly publish reports on BASF. The
latest analyst recommendations for our shares as well as the
average target share price ascribed to BASF by analysts can be
found online at basf.com/analystestimates.
Analysts' recommendations
For more information on biodiversity, see page 116 onward
For more information on emissions to air, waste and remediation, see page 110 onward
For more information on water, see page 112 onward
For more information on the key sustainability indexes, see basf.com/sustainabilityindexes
For more information on energy and climate protection, see page 102 onward
BASF is a founding member of the United Nations Global Compact.
This means we consistently support the U.N. Global Compact
and its 10 principles of responsible business conduct and the
Sustainable Development Goals.
risk and was recognized for its risk management, for example, in
the areas of CO2 emissions, wastewater and waste, and
occupational health and safety.
In the Morningstar Sustainalytics¹ ESG Risk Ratings, BASF belongs Close dialog with the capital market
to the best category for "diversified chemicals" with a medium ESG
17
ΚΕ
To Our Shareholders - BASF on the Capital Market
BASF Report 2023
b Based on year-end share price
Q< >= 18
184
Combined Management's Report - Overview
40
Employee engagement
Supplier management
Learning and development
International labor and social standards
What we expect from our leaders
Health protection
Dialog with employee representatives
Inclusion of diversity
Occupational safety
Water
Management of waste and contaminated sites
Transportation and storage
Steering of product portfolio
Resource efficiency
Product stewardship
Competition for talent
Emissions to air
Emergency response and corporate security
Energy and climate protection
Biodiversity and ecosystems
Process safety
E.U. taxonomy
BASF Group
NFS of BASF SE
Anti-corruption and bribery matters
Respect for human rights
Social matters
Employee-related matters
Environmental matters
E.U. taxonomy
Supplier management
Compensation and benefits
Societal engagement
International labor and social standards
Pages 202-204 (targets, measures, results)
Page 41 (targets) /pages 158-160 (targets, measures, results)
Pages 154-157 (targets, measures, results)
Pages 155-156 (targets, measures, results)
Pages 51 and 141-142 (targets, measures, results)
Pages 135-136 (targets, measures, results)
Pages 133-134 (targets, measures, results)
Page 41 (targets) / page 133 (targets, measures, results)
Page 41 (targets) /pages 158-160 (targets, measures, results)
Pages 134-135 (targets, measures, results)
Pages 155-156 (targets, measures, results)
Pages 131 and 143–145 (targets, measures, results)
Page 133 (targets, measures, results)
Page 41 (targets) /pages 138-139 (targets, measures, results)
Page 41 (targets) /pages 131 and 143–144 (targets, measures, results)
Page 137 (targets, measures, results)
Page 41 (targets) /pages 101 and 112-115 (targets, measures, results)
Pages 101 and 110-111 (targets, measures, results)
Pages 101 and 130 (targets, measures results)
Pages 101 and 110-111 (targets, measures, results)
Pages 131 and 149-151 (targets, measures, results)
Pages 46-47 and 110-111 (targets, measures, results)
Pages 48-49 (targets, measures, results)
Page 41 (targets) /pages 158-160 (targets, measures, results)
Page 41 (targets) /pages 101 and 102-109 (targets, measures, results)
Pages 129 and 152 (targets, measures results)
Page 41 (targets) /pages 101 and 127-128 (targets, measures, results)
Pages 116-120 (targets, measures, results)
Pages 161-166
Pages 23-26
Concepts and results
Employees, innovation, purchasing, health, safety, environment
Supplier management
Compliance
Responsibility for human rights
Supplier management
Topics
Targets and Target Achievement 2023
Business model
Combined Nonfinancial Statement (NFS) disclosures in the relevant chapters of the integrated report
19
Combined Management's Report - Overview
BASF Report 2023
189
188
186
Net Assets and Financial Position of BASF SE
Forecast, Opportunities and Risks of BASF SE
Nonfinancial and Other Disclosures of BASF SE
54
54
Innovation
99
Regional Results
52
Overview
How We Create Value
Non-Integral Oil and Gas Business
48
Our Sustainability Concept
185
Results of Operations of BASF SE
96
Other
42
Material Investments and Portfolio Measures
184
Corporate Structure
93
Agricultural Solutions
97
Combined Management's Report
GRI 2
The Combined Management's Report comprises the content
on pages 18 to 190, as well as the disclosures required by
takeover law and the Declaration of Corporate Governance.
The combined Nonfinancial Statement (NFS) is also integrated
into the Combined Management's Report.
20
20
€
BASF Report 2023
Captions and quotes are not part of the audit. Unless otherwise stated,
page numbers relate to pages within the Combined Management's
Report or in the Notes to the Consolidated Financial Statements.
The content of this section is voluntary, unaudited information,
which was critically read by the auditor.
The Combined Declaration of Corporate Governance of BASF SE
and the BASF Group in accordance with sections 289f and 315df HGB
can be found in the Corporate Governance chapter from page 218
onward and is a component of the Combined Management's Report.
It comprises the Corporate Governance Report, including the
description of the diversity concept for the composition of the Board ☐☐
of Executive Directors and the Supervisory Board (excluding the
disclosures required by takeover law), compliance reporting, and the
Declaration of Conformity pursuant to section 161 AktG. Pursuant to
section 317(2) sentence 6 HGB, the auditor checked that the
[ ] The content of this section is not part of the statutory audit but
has undergone a separate limited assurance by our auditor.
You can find more information online. This information is
voluntary and was not audited by the auditor.
You can find more information in this report.
୮
Symbols used and captions
BASF supports the recommendations of the Task Force on Climate-
related Financial Disclosures (TCFD). Disclosures recommended by the
TCFD are presented in a number of places throughout this report. The
table on page 21 shows the sections and subsections in which the
relevant information can be found.
Financial Disclosures
Recommendations of the Task Force on Climate-related
In the BASF Report 2023, we present the Management's Reports
for the BASF Group and BASF SE - where possible and not
otherwise stated - in combined form for the first time in accordance
with GAS 20.22. Information relating exclusively to BASF SE is dealt
with in the section "Disclosures on BASF SE in accordance with the
German Commercial Code (HGB)."
Combined Management's Report in accordance with
GAS 20.22
disclosures according to section 315d HGB in accordance with
section 289f(2) HGB with were made.
Declaration of Corporate Governance in accordance with
sections 289f and 315d HGB
The Compensation Report is available at basf.com/compensationreport
The Compensation Report in accordance with section 162 of the
German Stock Corporation Act (AktG) is publicly available on
the BASF website together with the assurance statement of the
substantive and formal audit issued by the auditor.
Compensation Report
The disclosures required by takeover law in accordance with sections
289a and 315a of the German Commercial Code (HGB) can be found
in the Corporate Governance chapter starting on page 218. They
form part of the Combined Management's Report, which is audited as
part of the annual audit.
Disclosures required by takeover law in accordance with
sections 289a and 315a HGB
a limited assurance of the NFS. An assurance statement of the
limited assurance can be found online at basf.com/nfs-audit-2023.
The audit was conducted in accordance with ISAE 3000
(Assurance Engagements other than Audits or Reviews of Historical
Financial Information) and ISAE 3410 (Assurance Engagements on
Greenhouse Gas Statements), the relevant international auditing
standards for sustainability reporting.
Within the scope of the annual audit, KPMG checked pursuant to
section 317(2) sentence 4 HGB that the NFS was presented in
accordance with the statutory requirements. KPMG also conducted
In accordance with the E.U. Taxonomy Regulation and the
supplementary delegated acts, the NFS includes the proportion of
the Group's taxonomy-eligible and our Group-wide taxonomy-aligned
turnover, capital expenditures (including acquisitions and excluding
goodwill in accordance with the E.U. taxonomy) and operating
expenditures for the 2023 business year for the two climate targets.
For the four new environmental targets, we are reporting the
taxonomy-eligible shares for the first time for 2023.
The NFS disclosures are located in the relevant sections of the
Combined Management's Report and have been prepared in
accordance with the appropriate frameworks: the Global Reporting
Initiative Standards and the reporting requirements of the U.N.
Global Compact. In addition to a description of the business
model, the NFS includes disclosures on the environment,
employee-related and social matters, respect for human rights, and
anti-corruption and bribery matters to the extent that these are
required to understand the development and performance of the
business, the Group's position and the impact of business
development on these aspects.
NFS in accordance with sections 289b, 289c, 315b and 315c
of the German Commercial Code (HGB)
NFS disclosure
Adjusted earnings per share
68.29
0.25
70
Weighting of BASF shares in important indexes as of December 31, 2023
80
■ EURO STOXX 50 ■ MSCI World Chemicals
■BASF share ■ DAX 40
90
7.6%
6.4%
100
5.8%
0.1%
2013-2023
110
70
10.3%
9.7%
1.8%
120
2018-2023
130
80
90
90
100
110
120
130
Long-term performance of BASF shares compared with indexes
Average annual increase with dividends reinvested
11.1%
Assuming that dividends were reinvested, BASF's share
performance increased by 12.9% in 2023. The benchmark indexes
of the German and European stock markets - the DAX 40 and the
Jan
Mar
3.30
3.40
3.40
3.40
By region, rounded
Shareholder structure
Dividend per share
€ per share
To Our Shareholders - BASF on the Capital Market
BASF Report 2023
3.9%
MSCI World Chemicals.
MSCI World Chemicals 14.3%
EURO STOXX 50 22.2%
Feb
DAX 40 20.3%
1.4%
EURO STOXX 50
3.6%
DAX 40
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
― BASF share 12.9%
weakening of the economy, continued high inflation, higher interest
rates and increasing geopolitical tensions; these led to significant
uncertainty on the global markets and dampened demand in many
sectors.
After BASF's share price reached an annual high of €54.04 on
February 3, 2023, it initially declined over the year. During the last
two months of 2023, the stock market was supported by
expectations of future interest rate cuts. BASF shares recovered in
line with the overall market and closed the year at €48.78. Share
performance in the course of the year was mainly attributable to the
BASF share performance
For the chemical industry, Europe will continue to be the most challenging market
due to its low growth and structurally higher energy prices compared with other
regions. In addition, there are increasingly far-reaching regulatory requirements.
BASF and large parts of our customer industries are drowning in this sea of red
tape. Nevertheless, I remain an optimist! We can successfully maintain and
strengthen our industrial basis in Europe if there is widespread willingness to
embrace change among society, business and policymakers. But this will also
require a new regulatory framework. One that promotes innovations for climate
protection, enables the international competitiveness of new processes and
accelerates the expansion of renewable energies at competitive prices. We need
an "Industrial Deal" to again foster more entrepreneurship, creativity and profitable
growth for the chemical industry and our customer industries in Europe.
Positive change requires a team effort
The framework conditions will remain difficult in 2024. We expect the subdued
momentum in the global economy seen in 2023 to continue into the first half
of 2024. Global economic growth will likely only pick up slightly as the year
progresses.
BASF continues to have a
high equity ratio and a strong
balance sheet.
Yet, a glance at our figures also shows that we are working effectively on our cost
base. We considerably reduced our inventory levels and achieved a strong cash
flow from operating activities. BASF therefore continues to have a high equity
ratio and a strong balance sheet. This is all good news for you, dear shareholders.
It is our goal to increase our dividend per share
each year, or at least maintain it at the previous
year's level. We will therefore propose a dividend
of €3.40 per share, matching the prior-year level,
to the Annual Shareholders' Meeting in April
2024. Based on the 2023 year-end share price
of €48.78, the BASF share again offers a high
dividend yield of 7.0%.
To Our Shareholders - Letter from the Chairman of the Board of Executive Directors
BASF Report 2023
All these successes cannot hide the fact that 2023 was an economically tough year
for BASF. We did not reach our targets or meet analyst estimates for sales and
income from operations (EBIT) before special items. Our sales in 2023 amounted
to €68.9 billion (2022: €87.3 billion), a decrease of around 21% versus the prior
year. The downward sales trend was driven by significantly lower prices and
volumes, while currency effects also had a dampening effect on sales. EBIT before
special items declined to €3.8 billion (2022: €6.9 billion). This year-on-year decline
of nearly 45% resulted from lower margins due to decreased sales. These could
not be offset by the reduction in fixed costs we achieved.
Framework conditions remain difficult
Furthermore, we are steadily expanding our portfolio of low-emission products. As
part of this, we are also advancing the circular economy. With loopamidⓇ, BASF
launched a solution for greater circularity in the textile industry in early 2024. Textile
waste is recycled as a valuable raw material to produce polyamide 6. This idea
strikes a chord with our customers: Fashion company Zara recently presented a
jacket made entirely of recycled polyamide. All its components - from the fabrics
and filling to the hook-and-loop fastener and zipper - are made of loopamidⓇ, so
the garment is also 100% recyclable. This is a fantastic achievement!
reduce our specific Scope 3.1 emissions by 15% compared with 2022. In the
future, we want to source raw materials with a smaller carbon footprint than today's
level from our suppliers.
purchased from our suppliers. By 2030, we intend to
Moreover, we have committed to reducing the
"G
I am excited to see how
the entire BASF team
greenhouse gas emissions from raw materials is pulling together.
already pursuing two other major wind farms: 66
growing. We are getting ever closer to this target. We
inaugurated the offshore wind farm Hollandse Kust Zuid in the Dutch North Sea
in 2023. This is an incredible success! And we are
officially
By 2050, we aim to achieve net-zero CO2 emissions for our production (Scope 1)
and our energy purchases (Scope 2). Despite the difficult economic times, we are
firmly committed to this ambitious goal. I am excited and proud to see how
the entire BASF team is pulling together to make this a reality. We are changing
how we produce. With new electrified technologies, such as the world's first
electrically heated steam cracker furnace, we are testing what is possible. We are
transitioning our energy supply from grey to green. Whether through investments
in wind farms, solar parks or green electricity contracts, we already meet
20% of our electricity demand from renewable sources. By 2030, this proportion
should rise to at least 60% worldwide - even though our demand for electricity is
Pioneer on the path to climate neutrality
As we decided in 2018, we will be divesting the oil and
gas business. At the end of 2023, BASF, LetterOne
and Harbour Energy signed an advantageous
agreement to combine the businesses of Wintershall
Dea and Harbour Energy. It is planned to transfer the
exploration and production business, excluding Russia-related activities, to the
publicly listed firm Harbour Energy in the fourth quarter of 2024.
We are altering where
it makes us better and
investing where we
see opportunities.
Our strategy is to produce locally for local markets. We want to be close to
our customers, and we focus on innovation-driven growth areas. In 2023, we
opened Europe's first colocated center for battery material production and
battery recycling in Schwarzheide, Germany. We are the first global producer of
battery materials with production in all three core markets: Europe, the United
States and Asia. In Geismar, Louisiana, the expansion of our MDI plant is
well underway. This enables us to serve the growing demand from our
North American customers in industries such as construction, automotive and
furniture. And construction at our new Verbund site in
Zhanjiang, China, is proceeding at an impressive pace
on a site the size of 550 soccer fields. This project is
fully on schedule and on budget.
Focus on future industries and growth markets
11
< >
To Our Shareholders - Letter from the Chairman of the Board of Executive Directors
BASF Report 2023
in the German North Sea and off the coast of
Zhanjiang in China.
Our colleagues are
rethinking chemistry
every day.
At BASF, chemistry is our passion. At every site around the globe, our colleagues
pursue this passion with dedication and creativity. They are rethinking chemistry
every day, just like the three young employees shown
on the cover of this report. I also joined BASF as a
young person in 1988, and I have had the opportunity
to help shape the development of our company in
various roles for the past six years as Chairman of
the Board of Executive Directors. After 36 years at
BASF, I will hand over the Chairmanship to Markus
Kamieth following the Annual Shareholders' Meeting
on April 25, 2024. I am certain: The company is in great hands with him and the
new Board team. I am honored to have spent my entire career devoting all my
strength and passion to the prosperity and future of our BASF. I am proud of what
we have changed and achieved together, in what were not easy times. From the
bottom of my heart, I thank the entire BASF team for their drive, perseverance
and motivation. And I thank you, dear shareholders, for your trust.
Yours,
With dividends reinvested; indexed
Change in value of an investment in BASF shares in 2023
Proposed dividend of €3.40 per share at prior-year level
Dividend yield of 7.0% based on the 2023 year-end share price
■
BASF share price increased by 5.2% in 2023
■
At a glance
14
< >
In 2023, stock markets were characterized by a weakening of the global economy. Continued high inflation, higher interest rates and increasing geopolitical
tensions led to economic uncertainty and dampened demand in many sectors. A dividend at prior-year level of €3.40 per share will be proposed to the Annual
Shareholders' Meeting. Based on the year-end share price for 2023, BASF shares offer a high dividend yield of 7.0%.
GRI 2
BASF on the Capital Market
To Our Shareholders - BASF on the Capital Market
BASF Report 2023
1 The Supervisory Board of BASF SE made the following personnel changes to the Board of Executive Directors of BASF SE on December 20, 2023: Dr. Markus Kamieth will succeed Dr. Martin Brudermüller as Chairman of the Board of Executive Directors of BASF SE, effective as of the end of the Annual Shareholders' Meeting on April 25, 2024.
Dr. Katja Scharpwinkel succeeds Dr. Melanie Maas-Brunner as member of the Board of Executive Directors, effective February 1, 2024. Anup Kothari will be appointed as a further member of the Board of Executive Directors, effective March 1, 2024.
13
Dr. Melanie Maas-Brunner
Dr. Stephan Kothrade
Dr. Markus Kamieth
Michael Heinz
Dr. Dirk Elvermann
Chairman of the Board of Executive Directors
Dr. Martin Brudermüller
The Board of Executive Directors of BASF SE1
To Our Shareholders - The Board of Executive Directors of BASF SE
BASF Report 2023
12
Martin Brudermüller
Marten Burdeniller
3.30
3.20
3.10
3.00
million €
Reuters (Xetra trading)
Bloomberg (Xetra trading)
Pink Sheets / OTCQX
Deutsche Börse
International ticker symbols
ISIN International Securities Identification Number
United States (CUSIP number)
Germany
Securities code numbers
Further information on the BASF share
46.71
49.90
187.6
66.20
64.77
€
40.59
38.85
57.88
39.04
56.20
€
54.04
68.69
72.61
74.49
€
53.31
219.2
170.8
183.0
-0.70
6.01
-1.15
9.17
€
Earnings per share
055262505
BASF11
43.5
41.5
56.7
59.4
61.9
billion €
Market capitalization December 31
892.5
893.9
918.5
918.5
918.5
million shares
Number of shares December 31
2.5
3.7
2.6
4.1
2.9
million shares
117.3
48.78
DE000BASF111
46.39
64.72
Share buyback program
With this proposed dividend, BASF shares offer a high dividend yield
of 7.0% based on the year-end share price for 2023. BASF is part of
the DivDAX share index, which contains the 15 companies with the
highest dividend yield in the DAX 40.
It is to be proposed to the Annual Shareholders' Meeting that
a dividend of €3.40 per share, at the same level as in the
previous year, be resolved, and thus €3.0 billion¹ be paid out to the
shareholders of BASF SE.
Proposed dividend
EURO STOXX 50 - rose by 20.3% and 22.2% over the same period,
respectively. The global industry index MSCI World Chemicals
gained 14.3%.
United States/Canada
Not identified
18%
10%
Rest of world
3%
Rest of Europe
10%
United Kingdom/Ireland
BASF ended its share buyback program on February 24, 2023, earlier
than planned. This was done in line with the company's priorities for
the use of cash and in view of the profound changes in the global
economy over the course of 2022. From January 11, 2022, until
8%
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
51%
Germany
2.80
2.90
15
1 Based on the number of outstanding shares as of December 31, 2023 (892,522,164)
February 23, 2023, 25,956,530 own shares were repurchased; this
corresponds to 2.8% of the share capital at the time the program was
announced. The purchase price for these own shares was around
€1.4 billion. Originally, the share buyback program had been planned
to reach a volume of up to €3 billion and to be completed by the end
of December 2023 at the latest.
Broad base of international shareholders
67.35
€
2023
2022
2021
2020
2019
BASF again achieved Prime status (B-) in the ISS ESG rating
developed by Institutional Shareholder Services, placing it in the top
10% of the companies assessed.
MSCI ESG Research awarded BASF an A rating in 2023. The
analysts highlighted BASF's presence in clean technology markets
and its clearly defined strategy to reduce CO2 emissions and water
consumption.
Daily trade in sharesa
Year average
Year low
Year high
Year-end price
Key BASF share data
The CDP assessment for sustainable water management takes
into account how transparently companies report on their water
management activities and how they reduce risks such as water
scarcity. BASF continues to implement its sustainable water
management target at all relevant production sites. CDP also
evaluates the extent to which product developments can contribute
to sustainable water management for customers. BASF also
participated in the CDP's "Forests" assessment for the fourth time in
2023. The assessment is based on detailed insights into the palm
value chain and on activities that impact ecosystems and natural
habitats.
In February 2024, CDP once again awarded BASF Leadership
status in the categories of climate protection, water management
and forest protection for the 2023 business year. BASF achieved a
rating of A in each category. In the climate protection category,
CDP assesses, among other things, the transparency of emissions
reporting, the handling of opportunities and risks arising from climate
change, the climate protection strategy and measures to reduce
CO2 emissions.
BASF has participated in the program established by the
international organization CDP for reporting on data relevant to
climate protection since 2004. CDP represents more than
740 investors with over $136 trillion in assets and more than
330 major organizations with $6.4 trillion in purchasing power.
BASF again achieved "Prime" status in ISS ESG rating
CDP again awards BASF Leadership status
At a glance
BASF - a sustainable investment
16
To Our Shareholders - BASF on the Capital Market
BASF Report 2023
For more information on employee share purchase opportunities, see page 132 onward
In many countries, we offer share purchase programs that turn
our employees into BASF shareholders. In 2023, around 26,700
employees (2022: around 27,100) purchased BASF shares worth
€68.1 million (2022: €92.8 million).
Employees becoming shareholders
With over 900,000 shareholders, BASF is one of the largest
publicly owned companies with a high free float. An analysis of the
shareholder structure carried out at the end of 2023 showed that, at
around 18% of share capital, the United States and Canada made
up the largest regional group of institutional investors. Institutional
investors from Germany accounted for around 4%. Institutional
investors from the United Kingdom and Ireland hold 8% of BASF
shares, while investors from the rest of Europe hold a further 10% of
capital. Approximately 47% of the company's share capital is held
by private investors, nearly all of whom reside in Germany. BASF is
therefore one of the DAX companies with the largest percentage of
private shareholders.
61.78
Page 41 (targets) /pages 158-160 (targets, measures, results)
Pages 189-190 (results)